If you’re a business owner or simply an individual going through a financially difficult time, one of the many options at your disposal will include bankruptcy. However, because there are a variety of bankruptcies, you may understandably be confused about the process. Two of the most popular include chapter 7 and chapter 13 bankruptcy. However, to truly make the best decision for yourself and or your business, it is important to understand the differences between those two. Thus, the following includes further information on the various differences between chapter 7 and 13 bankruptcy.
What Is Chapter 7?
Chapter 7 bankruptcy is often used by both individuals and businesses alike. Those in heavy debt will often use this version because it allows personal assets to be sold to pay off creditors. This selling of assets is also known as going through liquidation. One of the biggest benefits that chapter 7 offers to individuals or companies is that it allows them to start fresh without any debts to their name. Although the process takes between three to four months to complete, it is often the most feasible route if huge financial obligations need to be taken care of.
What Is Chapter 13?
Chapter 13, also known as reorganization, can only be filed by individuals. In this type of bankruptcy, individuals can work with their creditors to form a payment plan, with many of those plans lasting between three to five years. One of the biggest benefits of this is that it helps a bankruptcy attorney protect an individuals’ most personal assets. For example, if you have a car or home that is considered a family heirloom, you may be able to protect it in exchange for agreeing to a payment plan.
Difference Between Chapters 7 & 13
One of the biggest differences between chapters 7 and 13 includes the property of the individual or company and the protection they receive. If you’re a business owner, losing a few assets may not be a huge deal, as there is no emotional connection to them, nor will they bring your business to a screeching halt. It is ultimately up to the individual as to which option will be better for their specific situation.
No matter your position, understanding the types of bankruptcies available to you is incredibly important. However, before making a final decision, it is highly recommended to work with an attorney experienced in bankruptcy in order to receive the best possible outcome.