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Monday, July 2, 2018

What are the different chapters of Bankruptcy?

Chapter 7

Chapter 7 bankruptcy is filed by individuals and businesses unable to pay their existing debts. It is the simplest and quickest form of bankruptcy available. Unsecured debts, including credit cards, medical bills and personal loans, are discharged in a Chapter 7 bankruptcy. Certain debts, including mortgages, car loans, student loans, and child support arrears, may not be discharged.  An individual is allowed to protect certain assets from being liquidated and disbursed to creditors in a Chapter 7 bankruptcy. A business that files for Chapter 7 must liquidate all of its assets.  Not everyone can qualify for Chapter 7 bankruptcy protection.

Chapter 9 

Chapter 9 is only filed by municipal governments seeking to resolve their debts.

Chapter 11

Chapter 11 bankruptcy is usually filed by companies, but is also sometimes filed by individuals as a means of restructuring debt when those individuals do not qualify for Chapter 13 protection.  It allows businesses to continue operating while they reorganize their debt.

Chapter 12 

Chapter 12 bankruptcy protection is reserved for farmers and fishermen. It is similar to chapter 13, but allows more debt to be included in the bankruptcy and allows more advantageous exemptions.

Chapter 13

Chapter 13 bankruptcy is also called a bankruptcy reorganization, or court-ordered debt consolidation. This chapter of bankruptcy is designed to consolidate the entirety of a petitioner’s debt into a pool. The bankruptcy trustee creates a repayment plan that usually lasts between three and five years, giving priority to some debts over others. A portion of the debt may be discharged. The payments are simplified into a single payment, often made via wage garnishment. In this way, the repayment of debt becomes much more manageable. Chapter 13 can be used to address debts that cannot be discharged in Chapter 7. In order to qualify for Chapter 13 protection, an individual must have a regular source of income. There are limits to how much debt the court will allow an individual to consolidate in a Chapter 13 bankruptcy action.

Because of the significant differences among the varying chapters of bankruptcy, it is necessary to consult with an attorney experienced in bankruptcy law in order to make an informed decision about the matter. An attorney experienced in bankruptcy protection can evaluate personal situations and decide which chapter of bankruptcy protection is best suited to individual needs.  


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Serving Southeastern Wisconsin, with offices in Milwaukee and West Bend, Affliated Attorneys, LLC represent clients throughout Milwaukee County, Washington County, Waukesha County, Dodge County, Ozaukee County, Racine County, Sheboygan County, Jefferson County, Fond du Lac County and Walworth County.



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