Knowing the type of bankruptcy that’s best for you

Feb 18

Filing for bankruptcy has never been quite appealing for most people. Some are hesitant to file for bankruptcy because of the stigma it may possibly bring. However, bankruptcy can be your best option in getting back on track. Furthermore, filing for bankruptcy can be your only way in securing your assets while trying to rebuild your finances.

According to the website of Hong Law, PLC, bankruptcy could be your way to re-establish your life and obtain financial freedom. Depending on your circumstances, there are different types of bankruptcy filings that would best suit your needs. We can group bankruptcy types into two: personal and business.

Personal bankruptcy

When you file for a personal type of bankruptcy, you are trying to deal with debts that affect you or your family. It can be student loans, credit card debts, car payments, home mortgages, and other personal debts. Personal bankruptcy offers two reliefs that you may choose from:

  • Chapter 7 – The main objective of a Chapter 7 bankruptcy filing is to discharge or wipe-out unsecured debts, such credit card and personal loans. Chapter 7 is perfect for those with no stable source of income, or for those with a monthly income that’s within or below the median
  • Chapter 13 – Individuals with a stable source of income and with assets higher than the median may benefit more from Chapter 13 than from Chapter 7 filing. Chapter 13 offers wider range of protection than Chapter 7, and can protect the applicant from wage garnishment, foreclosure, and repossession.

Business bankruptcy

Businesses that are experiencing great financial hardships may benefit the most from business bankruptcy. There are three different business bankruptcy options: Chapter 7, Chapter 11, and Chapter 12.

  • Chapter 7 – This type of filing is effective in discharging or eliminating small business debts.
  • Chapter 11 – Chapter 11 bankruptcy filing may help large companies and businesses who are operating in the red to reconstruct their finances while doing business as usual.
  • Chapter 12 – Chapter 12 bankruptcy is particularly designed for family fishermen and family farmers to re-establish their finances. This is pretty much like Chapter 13 bankruptcy, but with additional benefits that are tailor-fitted for those engaged in farming and fishing operations.

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