Chapter 7, also known as liquidation, is the most common form of personal and corporate bankruptcy. To be eligible for Chapter 7, a debtor's income must be less than the state's median income. This type of bankruptcy permits individuals and businesses to liquidate non-exempt assets in order to repay as much of their debt as feasible. Any debt remaining following the liquidation process is discharged. During the liquidation procedure, companies that file for Chapter 7 bankruptcy are unable to conduct business.
Chapter 11 is typically filed by large businesses that need to devise a debt repayment plan. Before creditors can take matters into their own hands, businesses are given 120 days to submit a restructuring plan. Positive aspect of this form of bankruptcy is that, in contrast to Chapter 7, corporations can continue to operate throughout the process. However, Chapter 11 is a complex form of bankruptcy, which in turn makes it very expensive.
Chapter 12 is dedicated to cultivators and fishermen. This type of bankruptcy allows individuals with regular incomes to devise a plan to restructure their debt prior to creditor involvement.
Individuals can reorganize their finances under the supervision of a federal bankruptcy court through Chapter 13 bankruptcy. Individuals retain ownership of their assets, but are prohibited from obtaining additional credit without the permission of the bankruptcy court overseeing their case. In addition, a 3- to 5-year payment plan is established to repay creditors.
The term bankruptcy by itself is relatively meaningless. In order to have a comprehensive comprehension of the financial situation, it is essential to know which type of bankruptcy is being filed.""
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