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What is difference between Chapter 7, 11 and 13?

If you’re contemplating bankruptcy, it can be a stressful and frustrating time. You may not know where to turn, which type of bankruptcy to consider, or who you can trust. That’s why we, at Nathan A. Berneman, APC in Los Angeles, CA, offer a full and comprehensive consultation to help you better understand your situation and what your options are. Here’s a quick overview of the most common bankruptcy types, and how you might qualify.

What qualifies you for Chapter 11?
Chapter 11 is also known as a “reorganization” bankruptcy. In most cases, we’ll work with you to present a plan for how you will repay your debtors over time. You can typically qualify for Chapter 11 bankruptcy whether you’re filing as an individual or as a small business. It’s typically more flexible, but it can be more expensive and time-consuming. Chapter 11 also doesn’t have an income requirement. It can be a good solution if:
• You need extended-payment terms. (Chapter 11 can feature new contract terms between you and the creditor. The terms can be as long as needed, provided that both parties agree.)
• You plan to discharge the debt.
• You don’t want to turn over your disposable income to a trustee.

What qualifies you for Chapter 13?
Chapter 13 bankruptcy is an option for you as an individual, and you could qualify with your small business if you file your petition as a sole proprietorship. Your business would not qualify if you formed it as a partnership or corporation. Chapter 13 also places a debt limitation not-to-exceed $1,257,850 in secured debt and $419,275 in unsecured debt. It can be a good solution if:
• You’re looking for an option that’s cheaper than Chapter 11.
• You need to process your bankruptcy quickly.
• You want to include more types of debt.
• You’d like the court to shorten the commitment period.
• You have a regular income.
• You want to keep your property.

As your Chapter 13 bankruptcy attorney in Ventura, we’ll review all the reasons why you may qualify for Chapter 13, and we’ll discuss whether this is the best solution for your situation.

What qualifies you for Chapter 7?
Chapter 7 is also known as a “straight bankruptcy” or a “liquidation bankruptcy.” It can be an option for individuals, married couples, or small businesses. In this scenario, the court appoints a trustee to take your assets, sell them off, and distribute the money to those debtors who have filed claims. You can still keep “exempt property.” The idea here is that you have the opportunity to make a fresh start, free from debt. You can be disqualified for Chapter 7 bankruptcy protection if you failed to appear in court or if your bankruptcy petition was dismissed.
As your Chapter 7 bankruptcy attorney in Los Angeles, we’ll review all the reasons why you may qualify for Chapter 7, and we’ll discuss whether this is the best solution for your situation.

Key Difference between Chapter 7, 11 & Chapter 13 bankruptcy?
Chapter 11 is similar to Chapter 13 in that both plans include a proposal for repayment of the debt; with the difference being that Chapter 13 has a not-to-exceed limit on the debt you can owe to be eligible. Chapter 13 is the second most common form of bankruptcy, and it offers more repayment flexibility for individuals and small companies.

Chapter 11 is a more complex and expensive option, and it can be reverted to a Chapter 7 “liquidation” plan if a small business is not able to make the agreed-upon payments. When a small business is just coming out of a difficult business situation, and trying to make the agreed upon payments to the trustee, it’s a challenging time.

Chapter 7 could be seen as a nuclear option. If you file as a business, Chapter 7 means that you’re closing your doors. For an individual, Chapter 7 means that you could lose non-exempt property and assets, but it can be a fast way to eliminate debt. Of the three types, Chapter 7 is the most common. It’s designed to allow people who are drowning in debt, and who have a limited income.

Next Step: Contact Nathan A. Berneman, APC in Los Angeles, CA
It’s not the end of the world, and the bankruptcy options allow you to move forward. We’ll go over all your options with you, and recommend the solutions that should work best for you. Then, we’ll discuss the process, which files and records we will need, as well as what you can expect depending on the type of bankruptcy that will be meet your financial requirements.

Call 805-492-7045 to Schedule Your Consultation with Nathan A. Berneman, APC in Los Angeles, CA.

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