Debtors who are considering the possibility of Chapter 7 or Chapter 13 bankruptcy often want to understand their options. For example, is it possible to choose between a liquidation or reorganization bankruptcy if you are a consumer or individual (as opposed to a business)? Do all types of bankruptcy require a liquidation of your non-exempt assets? Our Nashville and Cookeville bankruptcy lawyers can tell you more about the differences between Chapter 7 and Chapter 13 bankruptcy.
Both Types of Bankruptcy are Generally Available for Individuals
Both Chapter 7 and Chapter 13 bankruptcy are types of bankruptcy for which consumers or individuals generally can be eligible. Although Chapter 7 is also available to businesses, it is a common type of bankruptcy for individual debtors who can meet the eligibility requirements. Chapter 13 bankruptcy is also generally available for individuals, but not corporations.
Chapter 7 Bankruptcy is a Type of Liquidation Bankruptcy
Under the U.S. Bankruptcy Code, Chapter 7 bankruptcy is a type of liquidation bankruptcy. This means that all non-exempt assets of an individual debtor will be liquidated to repay creditors, and the debtor will be eligible to have debts discharged. It is important to know that you certainly will not lose all of your assets in a Chapter 7 case. A wide variety of assets are “exempt,” which means they cannot be liquidated in a Chapter 7 bankruptcy case, and a lot of Chapter 7 bankruptcy cases are “no-asset” cases as a result, which means no assets were liquidated to repay creditors.
Chapter 13 Bankruptcy is a Type of Reorganization Bankruptcy
Chapter 13 bankruptcy is a kind of reorganization bankruptcy. What this means is that a debtor creates a repayment plan through which debts are reorganized and paid over a period of three to five years. After that point, if the debtor fulfills the terms of the repayment plan, remaining debt can generally be discharged. Since this is not a type of liquidation bankruptcy, debtors have more options for keeping their non-exempt assets.
The Impact of the Means Test for Chapter 7 or Chapter 13 Bankruptcy
Typically, to be able to successfully file for Chapter 7 bankruptcy, you must pass the “means test” to show that your disposable income is low enough that a Chapter 7 bankruptcy is appropriate. Otherwise, if you have sufficient disposable income to pay on your debts over time, you might be required to file Chapter 13 bankruptcy.
Contact a Middle Tennessee Bankruptcy Attorney
If you have any questions about Chapter 7 versus Chapter 13 bankruptcy, or you need assistance determining your eligibility and filing for bankruptcy, our Middle Tennessee bankruptcy attorneys are here to assist you. We have offices in Nashville and Cookeville, and we serve all of Middle Tennessee’s bankruptcy needs. Contact Lefkovitz & Lefkovitz online today, or call us in our Nashville office at 615-256-8300 or in our Cookeville office at 931-528-5297.