The decision to declare bankruptcy is a challenging one. Whether you’re struggling with crushing debt or can’t seem to make ends meet, filing for bankruptcy can be a difficult step to take. Fortunately, those in need of financial relief do have options available. With the help of an experienced San Diego bankruptcy lawyer, clients can explore and understand different types of bankruptcy and determine which type – if any – is best suited for their current situation.
What Is Bankruptcy?
Bankruptcy is a legal process that allows individuals and businesses who cannot pay their debts to obtain relief from creditors. When someone files for bankruptcy, they are essentially making an agreement with their creditors that outlines how or if they will repay the debt owed. Depending on the type of bankruptcy filed, some may be able to discharge all or some portion of their debt.
Types of Bankruptcy
When deciding which type of bankruptcy is most appropriate for your needs, consulting with a qualified San Diego bankruptcy lawyer is key. Here’s a brief overview of the different types available:
1 – Chapter 7 Bankruptcy
Chapter 7 bankruptcies are commonly known as liquidation bankruptcies because they allow filers to discharge most – if not all – unsecured debt by liquidating certain assets held by the debtor such as property or bank accounts. This form provides immediate protection against creditor collections while allowing qualifying filers to completely eliminate unsecured debts like credit card bills, medical bills, personal loans, and income tax obligations within three-to-five months after filing.
2 – Chapter 13 Bankruptcy
For those who don’t qualify for Chapter 7 because they have too much disposable income each month or above-average levels of secured debt (such as mortgages), there is Chapter 13 bankruptcy, which allows filers (typically wage earners) with a regular income to set up manageable payment plans over a 3-5 year period instead of discharging all or part of the debt owed outright. Both parties must accept the repayment plan before it can officially take effect.
3 – Reorganisation Bankruptcy
Companies that cannot stay afloat financially may file for reorganization through either Chapter 11 or Chapter 12 bankruptcy, depending on specific circumstances such as size and ownership structure (for-profit/non-profit). In this situation, companies typically enter into agreements with creditors that allow them more flexibility in repaying outstanding debts while operating without interruption until repayment terms can be finalized between the parties involved.
4 – Other types of bankruptcy
In addition to Chapters 7, 13 & 11/12, there are several other forms of bankruptcy that are usually reserved for much rarer cases, such as maritime cases (Chapter 9), railway reorganizations (Chapter 15), and special provisions within each chapter solely for military personnel serving overseas (Chapter 16).
5 – An experienced solicitor can help
No matter what kind of financial difficulties you may currently be facing, working closely with an experienced San Diego bankruptcy attorney will ensure that any decisions made regarding filing for bankruptcy fully protect your rights while helping you get back on track financially speaking down the line. Taking advantage of the free consultations offered by many of the city’s law firms is an excellent way for clients to understand their options better so that they can make informed decisions about declaring bankruptcy in order to regain control of their finances.
