In a Chapter 11 or 13 reorganization bankruptcy, the court will approve a repayment plan that typically provides for the partial repayment of debts owed to various creditors over a period of 2 to 5 years. At the conclusion of the repayment period, any remaining balance may be discharged. With the help of an experienced attorney, individuals and businesses can file a petition for bankruptcy with the US Bankruptcy Court.
After filing for bankruptcy protection, debtors are protected from creditors in various ways:
- Pending lawsuits are typically postponed and new lawsuits may not be filed
- Creditors must stop all attempts to collect unpaid bills or collect existing liens
The type of bankruptcy filed for depends on the unique circumstance of a bankruptcy case – there are three main chapters, all with different requirements and purposes.
- A Chapter 7 liquidation is appropriate for individuals with few assets and limited income AND companies of all sizes that wish to go completely out of business. There are a number of exemptions that a debtor may be eligible for, while other assets are sold and used to pay off as many debts as possible. For individuals, any remaining debt is discharged.
- Chapter 13 bankruptcy is available to individual and small businesses, allowing filers to enter into a repayment plan. Filers do not give up current assets and property to pay debts. They use future income to pay creditors over time. At the conclusion of the repayment plan some debt may be discharged.
- Chapter 11 is a reorganization bankruptcy for individuals or businesses who do not qualify for Chapter 13. Chapter 11 allows individuals or businesses to retain control of their assets rather than turning them over to a trustee. They must provide the court with a reorganization plan that often includes a plan to pay off some debt while other debt is discharged. Creditors can vote on whether to accept the proposed plan, although a court can override them and approve the plan if it meets certain standards.
Information is empowering and can help you to determine what is the right strategy for your unique financial situation. Whether you are an individual or company considering chapter 11 or 13 bankruptcy, it is important to seek professional guidance. Contact the Peoria bankruptcy law offices of Charles E. Covey for immediate assistance today at 309-674-8125.