What are the basic bankruptcy plans?

Florida residents considering bankruptcy should learn about the facts and differences between Chapter 7, Chapter 11 and Chapter 13 bankruptcies.

Residents in the greater Orlando, Florida area have certainly experienced their fair share of economic challenges over the past decade or so. While the general global economy is better today than in the middle portion of the prior decade, it is still all too easy to find consumers who continue to struggle with the aftereffects of the downturn.

People who are under a crushing debt load deserve help. Bankruptcy can be a good option for many consumers and offer a true opportunity for a fresh financial start. When considering bankruptcy, it is important to understand the different plans available to make it easier to choose the right one.

Chapter 7-the liquidation bankruptcy plan

A Chapter 7 bankruptcy is perhaps one of the most commonly heard of by most people. This option is generally quicker and simpler than others per the United States Court website. Many debtors can have their bankruptcies complete in just a few months.

Assets are allowed to be seized and sold in order to pay creditors but there are laws that allow consumers to keep some assets valued up to certain thresholds. It is also important to know that there are some forms of debt that cannot be handled under a Chapter 7 plan. The American Bankruptcy Institute indicates that child support and student loan payments are among these.

In general, a Chapter 7 bankruptcy is considered to be a good option for people with large amounts of unsecured debt. This helps to avoid the loss of special items.

Chapter 13 and Chapter 11-the repayment bankruptcy plans

In many ways, a Chapter 13 bankruptcy and a Chapter 11 bankruptcy are similar. This is because under both bankruptcy options, debts are consolidated and a plan is created to ensure repayment to creditors. In most cases, Chapter 13 bankruptcies would be the option utilized by individual consumers. A Chapter 11 bankruptcy would only be utilized by an individual if the debt amounts were greater than what was allowable under the law for a Chapter 13 plan. Most Chapter 11 bankruptcies are utilized by businesses because of the complexity of reorganizing larger amounts of debts.

In a chapter 13 case the standing chapter 13 trustee accepts payments from the debtors and in turn, pays creditors based upon previously made agreements. Chapter 13 plans can extend as long as 60 months total. In a chapter 11 case the debtor acts as the trustee, proposes a plan of reorganization to be voted upon by creditors and if the plan is accepted, disburses payments to creditors based upon the terms of the plan.

What should debtors facing bankruptcy do?

It is critical to work with an attorney when considering bankruptcy. There are many nuances in these processes which make it important to have the right legal guidance.

Keywords: bankruptcy, Chapter 7, Chapter 13