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- Types of Bankruptcies
Types of Bankruptcies
The most common types of personal or consumer bankruptcies (sometimes called "non-business bankruptcies") include:
- personal bankruptcy under Chapter 7 - requires a debtor to give up property which exceeds certain limits called "exemptions" so the property can be sold to pay creditors (also known as "straight" bankruptcy or "liquidation");
- personal bankruptcy under Chapter 13 - requires a debtor to file a plan to pay the debts or at least part of the debts (also known as "debt adjustment").
Both individuals and businesses can file for bankruptcy. Most individuals filing for bankruptcy file either Chapter 7 or Chapter 13. Under either of these types of bankruptcy, the case can be filed individually or by a married couple filing jointly.
The law provides for three types of bankruptcy proceedings for small business owners including:
- small business bankruptcy under Chapter 7 - used by corporations and partnerships when the business is closing its doors (also known as "liquidation");
- bankruptcy under Chapter 13 - a sole proprietorship is a legal extension of its owner who is responsible for all of the assets and liabilities of the firm, so a sole proprietorship is the only business classification that is permitted to file for bankruptcy under Chapter 13.
Attorneys for All Types of Bankruptcies in Dallas, TX
The attorneys at Littlefield Law Firm in Dallas, TX, can help you determine if you might be eligible to file for bankruptcy. An experienced bankruptcy attorney can also help you understand the eligibility requirements for each type of bankruptcy.
Contact us to find out more about the difference between Chapter 7 and Chapter 13. Call (972) 812-0900.
What are the Benefits of Filing for Bankruptcy?
The term "bankruptcy" refers to a legal proceeding filed in a federal court to provide relief from debt. Filing bankruptcy will immediately stop, temporarily, creditors from attempting to collect on its debts until the court approves a plan. The benefits of filing for bankruptcy include:
- to eliminate some or all of your debt;
- to stop foreclosure on your house or condo until you can catch up on missed payments;
- to prevent repossession of your vehicle or other property;
- to force a creditor to return your property after it has been repossessed;
- to stop wage garnishment, harassment from creditors, or other attempts to collect a debt;
- to prevent or restoring utility services; or
- to be able to challenge the claims of creditors who have committed fraud or are otherwise trying to collect more than they are owed.
Although filing for bankruptcy has benefits, it cannot solve all of your financial problems. For example, bankruptcy does not eliminate the rights of “secured” creditors. A "secured creditor" has a mortgage or another type of lien on the property that was acquired by the loan, or on some other property as collateral for the loan.
Additionally, some types of debts cannot be discharged in bankruptcy including child support, alimony, some student loans, court-ordered restitution, criminal fines, and some taxes.
If you had a cosigner on loan, filing for bankruptcy would not protect a cosigner who might still have to repay all of the loans.
Time Restrictions on a Second Filing for Bankruptcy
In a Chapter 7 case, you cannot receive a discharge if you have had one under any Chapter 7 case filed in the last eight years or any Chapter 13 filed in the last six years. In a Chapter 13 case, you cannot receive a discharge if you received a discharge under a Chapter 7 case filed in the last four years or a Chapter 13 filed in the last two years.
These time restrictions may not necessarily apply if you did not receive a discharge in the previous bankruptcy case, but your eligibility to file a second petition for bankruptcy will depend, in part, on the reason that the discharge was not previously granted.
New Deadline for Creditors to File a Proof of Claim
The deadline for creditors to file a proof of claim was revised in an amendment to Federal Rules of Bankruptcy Procedure 3002 that became effective on December 1, 2017. The new rules apply to bankruptcies filed under Chapter 7, Chapter 12, and Chapter 13. Prior to the rules being amended, creditors had 90 days after an initial meeting of creditors was held.
Under the new deadline, a proof of claim must be submitted within 70 days of the filing of a bankruptcy petition. These recent amendments to the federal rules were imposed following a three-year process, which included multiple layers of review and extensive public comment.
This article was last updated on Friday, March 6, 2018.