When people think of bankruptcy they often think of it as being one thing, a bankruptcy. However there are actually six different “Chapters” in the bankruptcy code, four of which are available to individuals in the United States. The other two being for non-residents who want to file an international bankruptcy case or for a municipality that needs to reorganize.
The most common bankruptcy to file is Chapter 7. Chapter 7 is the liquidation form of bankruptcy. You are allowed to keep a certain amount of exempt property, the remainder of your assets are liquidated and dispersed to your creditors on a pro rata basis. Your unsecured creditors are generally discharged and your case is usually closed in four to five months. This can be limited by how much money you make per month. If you make too much money, you may not be able to file this chapter.
The next most common bankruptcy is Chapter 13. This is a reorganization bankruptcy where your debts are characterized and given priority based on those characterizations. Debtors in this kind of bankruptcy have to make payments toward their unsecured debts of their disposable monthly income for three to five years. There is a so called, “debt ceiling” to file this kind of bankruptcy, i.e. if you owe too very much money, you cannot file.
Chapter 12 is a special bankruptcy available only to fishermen and farmers. It works much the same as Chapter 13, but has an even higher debt ceiling (multiple millions).
Finally, Chapter 11 is a different form of reorganization that has no debt ceiling or income limitation, however it does require that your creditors vote on your repayment plan based on how many of them there are and how much is owed to them individually. This is the most expensive chapter to file and is typically associated with businesses and Hollywood celebrities.
Finding out which chapter may be right for you is not always a simple task as some chapters deal with debts differently than others. contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 and we can talk about these differences during a free initial consultation.