Bankruptcy is a legal process aimed to help individuals and businesses manage overwhelming debt. U.S. bankruptcy law provides different types of bankruptcy filings, known as “chapters,” each with distinct rules and eligibility requirements. Here is a brief overview of Chapters 7, 11, and 13.
Chapter 7 Bankruptcy
To qualify for Chapter 7 Bankruptcy, one must pass the “means test.” The “means test” simply means a person’s income is less than the median income in the state they reside in, and they can show that they don’t have sufficient income to repay their debts. When one files for Chapter 7 Bankruptcy, the court appoints a trustee who liquidates all non-exempt property and distributes the proceeds to the appropriate creditors.
Chapter 11 Bankruptcy
Under Chapter 11 Bankruptcy, a debtor is allowed to restructure their finances through a plan of reorganization approved by the bankruptcy court. Chapter 11 bankruptcy is commonly utilized by large businesses to restructure their debts. Corporations, partnerships, and limited liability companies (LLCs) are ineligible to file for relief under Chapter 13; therefore, Chapter 11 is their sole option for reorganizing and continuing business operations.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals with a steady income to create a repayment plan for all or a portion of their debts. If a person has a regular income and has money left after covering basic living expenses, the court may approve a debt restructuring and allow a repayment plan lasting up to five years.
Filing for bankruptcy can be overwhelming not to mention an emotional process. Our attorneys at The Law Offices of Todd Cushner & Associates can help make the bankruptcy process easy and painless. Call us today at 914-600-5502.
