Legal News

15-Sep-2022

Types of Bankruptcy Courts: Which One Is Right for You?

Bankruptcy is a life event that can feel like the end of the world. You’re overwhelmed with stress, fear, and anxiety about how you will pay your bills and continue to provide for your family. However, you don’t have to let bankruptcy be the final straw. Bankruptcy may be your last resort for discharging debt and rebuilding your financial future. Bankruptcy is a serious legal process that should not be taken lightly. It is best to explore other non-bankruptcy options first before filing for bankruptcy. Keep in mind that bankruptcy stays on your record for 10 years, so it’s important to choose the right option for your situation.

If you are considering bankruptcy, it’s important to understand what each type of bankruptcy can do for you. If you’re struggling with unmanageable debts and you’ve explored other solutions without success, then filing for bankruptcy could be right for you. Whether or not you choose to file for Chapter 7 or Chapter 13 bankruptcy will depend on several factors. You must also find out which court has jurisdiction over your case. In this blog post, we break down the different types of bankruptcy courts and explain how to determine which one is right for you.

What is a Bankruptcy Court?

To put it simply, a bankruptcy court is a government-run court with jurisdiction over bankruptcy cases. The type of bankruptcy court you choose largely depends on your case type. A Chapter 7 bankruptcy case is a means of liquidating assets to repay creditors. On the other hand, a Chapter 13 bankruptcy case is a form of reorganization that allows you to keep your assets. Generally, if you file for Chapter 7 bankruptcy, you’ll need to go to a federal bankruptcy court. State courts typically handle Chapter 13 bankruptcy cases. If you owe money to a state or local government agency, you have a state case.

Chapter 7 Bankruptcy

If you’re not able to repay your debt, then Chapter 7 bankruptcy could be the right option for you. Chapter 7 bankruptcy is also known as liquidation bankruptcy. With this type of bankruptcy, you’ll likely need to sell assets, repossess property, and/or cancel contracts in order to repay your debt. A Chapter 7 bankruptcy can be filed by individuals, corporations, and partnerships. If you file for this type of bankruptcy, the court will order the liquidation of your assets and use the proceeds to repay your creditors. It’s important to note that not all of your debts will be discharged. Specifically, certain types of debts are not discharged under a Chapter 7 bankruptcy. This includes student loans, child support, taxes, and previous Chapter 7 bankruptcy payments.

Chapter 13 Bankruptcy

If you owe more than you own, then Chapter 13 bankruptcy could be a good option for you. Chapter 13 bankruptcy is also known as repayment bankruptcy. This type of bankruptcy allows you to restructure your debts so that you can repay them over time. Chapter 13 bankruptcy is sometimes referred to as a “wage earner plan” because the court will require you to make monthly payments towards your debt. These payments are taken out of your paycheck before you even see them. This type of bankruptcy is available to both individuals and corporations. Filing a Chapter 13 bankruptcy will allow you to restructure your debt and retain your assets. Here are some of the most popular reasons why people choose to file for Chapter 13 bankruptcy: 

• You have a lot of equity in your home and are underwater on your mortgage. 
• You have a lot of equity in your car. 
• You have valuable property that you want to keep.

Automatic Stay and Repeating Installments

The automatic stay is a court-ordered halt on all debt collection efforts. With this in place, creditors will no longer be able to pursue you for payment or attempt to repossess your assets. You may need to wait 30 days after filing for Chapter 13 bankruptcy to receive the automatic stay. In addition to the automatic stay, you may also be required to make payments on your debts. Repetition of installments (RAP) is a standard option in Chapter 13 bankruptcy. If you don’t qualify for RAP, then a trustee will be appointed to review your payments. This trustee will be responsible for determining the number of your payments.

Chapter 12 Corporate Reorganization

Corporate reorganization under Chapter 12 bankruptcy is allowed for corporations. You may file this type of bankruptcy if you are a shareholder or officer in a corporation. With Chapter 12 bankruptcy, you form a new corporation, and the old corporation is liquidated. The new corporation will take over the old corporation’s debts. You will be responsible for repaying these debts. However, Chapter 12 bankruptcy allows you to receive fresh start relief. This means you can discharge the debts of the old corporation. If a creditor successfully challenges the discharge, that creditor will be repaid through a payment plan.

Chapter 11 Individual Resolutions

If you’re a large corporation, Chapter 11 bankruptcy could be a solution for restructuring your debt. Chapter 11 bankruptcy is also referred to as a reorganization bankruptcy. This is the most complicated type of bankruptcy, and it requires you to hire a bankruptcy attorney. Chapter 11 bankruptcy lets you restructure your debt and negotiate with creditors. You can ask the bankruptcy court to approve a payment plan for repaying your debts. If a creditor refuses to accept the payment plan, then that creditor can challenge the repayment terms in court. If the court rules in favor of the creditor, then you’ll need to pay that amount in addition to the payment plan.

Conclusion

Bankruptcy is not something that should be taken lightly. It can get your finances back on track, but it is a long and complicated process. It is a serious legal process that will have a major impact on your financial future. If you are considering bankruptcy, you need to make sure you are doing everything you can to avoid it. You should pursue all other options before filing for bankruptcy. If you are currently facing bankruptcy and are considering another option, you need to make sure you are doing everything you can to keep bankruptcy at bay. You will be expected to follow a very strict set of rules, which can be difficult if you are under a lot of stress.

If you are struggling with unmanageable debt and you’ve explored other solutions without success, then filing for bankruptcy could be right for you. One of the most important things to consider is which court has jurisdiction over your case. Generally, if you file for Chapter 7 bankruptcy, you’ll need to go to a federal bankruptcy court. State courts typically handle Chapter 13 bankruptcy cases. If you owe federal taxes, are in default on federal student loans, or have been bringing a lawsuit against the federal government, you may have a federal case.