Filing for bankruptcy can be a beneficial way for individuals or businesses to seek relief from debts, but choosing the right type of bankruptcy to file is crucial in protecting your rights and assets. Each chapter of bankruptcy offers different benefits and is accompanied by different requirements and implications. If you are considering bankruptcy, you may wonder whether you are allowed to choose which type to file. Continue reading and consult with a knowledgeable Bergen County bankruptcy lawyer today for more information and skilled representation.
Can I Choose Which Type of Bankruptcy to File?
You may be able to choose the type of bankruptcy that you file under. However, while the choice is sometimes available, you may be required to file under a specific type depending on the details of your situation and your goals.
There are eligibility requirements for each type of bankruptcy, so it is important that you understand whether you meet the criteria depending on your income, whether you are an individual or business, whether enough time has passed if you have previously filed for bankruptcy, and more.
What Types of Bankruptcy Exist?
There are many types of bankruptcy that may be relevant in your situation but the most common are Chapter 7 and Chapter 13. Understanding the details of each type is important to determine which will work best for your situation.
Chapter 7
Chapter 7 is a type of bankruptcy that allows you to retain possession of certain assets that are exempt. Often referred to as liquidation bankruptcy, this process includes the bankruptcy trustee liquidating certain assets in order to repay creditors.
Assets are divided into exempt and nonexempt property, depending on your personal situation and the property. You are generally permitted to keep a certain amount of equity in your home, vehicles up to a certain value, reasonable home furnishings and appliances, and other necessities. Nonexempt assets include extraneous things like boats, luxury vehicles, secondary homes, and other valuable property that can be sold to repay debts.
This is a popular choice, especially for individuals who do not have a significant amount of income or assets that they want to protect. Once nonexempt assets are sold and the value is repaid to creditors, most of your remaining debts will be forgiven or discharged.
Chapter 13
Chapter 13 bankruptcy is often recommended for individuals who have a regular and sufficient income but who are struggling to pay off their debts. Instead of liquidating assets, Chapter 13 allows you to create a repayment plan that lasts three or five years, depending on your income and the circumstances of your financial situation. Through the repayment plan, you will make monthly payments toward your debts to repay creditors. This is a good option to protect your assets.
Filing for bankruptcy under the appropriate chapter is crucial in protecting your rights and financial future. Consult with a skilled attorney to learn what type of bankruptcy you are eligible for and whether or not you have the right to choose how to file.
