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What are the Different Bankruptcy Chapters?

What are the Different Bankruptcy Chapters?Written by Craig D. Robins, Esq.
 
There are essentially three bankruptcy chapters that consumers and businesses will consider:  Chapter 7, Chapter 13 and Chapter 11
 
Chapter 7 Bankruptcy:  This is the most common and simplest type of bankruptcy and the one most utilized by consumers.  Chapter 7 gives a debtor the opportunity for a fresh new financial start by discharging most debt, such as credit card debt and medical bills.  Over 99% of Our Long Island Chapter 7 Bankruptcy Clients Eliminate All of Their Credit Card Debt [1].
 
Most assets are protected, but if the consumer has a lot of assets, such as more than $100,000 of equity in a home, then Chapter 7 would not be the best choice.  Bankruptcy Exemptions in New York [2].
 
Also, because of the 2005 Bankruptcy Amendment Act, a consumer must demonstrate eligibility by passing the means test.  The Means Test is Often the Key to a Successful Chapter 7 Bankruptcy Case [3].
 
Chapter 13 Bankruptcy:  This is a payment plan bankruptcy.   It is most often used by homeowners who have fallen behind on their mortgages and need a payment plan to stop foreclosure and catch up with the missed mortgage payments.
 
It is also used by those consumers who have relatively high incomes and do not qualify for Chapter 7 because they do not pass the means test.  Even so, it is often possible to file Chapter 13 and pay credit card companies as little as 10%.
 
Finally, Chapter 13 is used by consumers who have a large amount of non-exempt assets and want to keep and protect those assets.
 
Chapter 11 Bankruptcy:  This is a plan of reorganization and is usually used by businesses who desire to resolve their debts and continue in business.  In addition, some individual consumer debtors who may not qualify for Chapter 7 or Chapter 13, can use Chapter 11 for consumer debts.
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Considering Bankruptcy?  Then please read my post:  Should I File Bankruptcy? [4]
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