What Are the Different Types of Bankruptcy?

Bankruptcy can provide a fresh start for individuals and businesses struggling with overwhelming debt. At the Law Office of Carl M. Barto in Laredo, TX, we’re here to help you understand your options. The most common types of bankruptcy include Chapter 7, Chapter 11, and Chapter 13, each with unique qualifications and benefits.

Chapter 7 Bankruptcy: Liquidation

Chapter 7, often referred to as liquidation bankruptcy, is designed for individuals or businesses with limited income and significant unsecured debt, such as credit card balances or medical bills.

Who Qualifies?

• Must pass the means test to show your income is below the state median or demonstrate insufficient disposable income.

Key Features:

• Non-exempt assets may be sold to pay creditors, but many personal assets are protected through exemptions.
• Stays on your credit report for 10 years.
• The process typically takes 4-6 months.

Chapter 11 Bankruptcy: Reorganization

Chapter 11 is primarily used by businesses but can also apply to high-debt individuals. It allows debtors to reorganize their financial obligations while continuing operations.

Who Qualifies?

• Businesses or individuals with substantial debt and assets who want to avoid liquidation.

Key Features:

• A reorganization plan must be proposed and approved by creditors and the court.
• Complex process often lasting several months to years.
• Stays on your credit report for 10 years.

Chapter 13 Bankruptcy: Repayment Plan

Chapter 13 bankruptcy allows individuals to reorganize debt through a structured repayment plan over 3-5 years.

Who Qualifies?

• Individuals with a regular income and unsecured debts under $2.75 million (as of 2024).

Key Features:

• Prevents foreclosure and allows debtors to keep their property.
• Stays on your credit report for 7 years.

Call for a Personalized Consultation

Bankruptcy can be a powerful tool for those seeking financial relief, but choosing the right chapter depends on your unique circumstances. If you’re considering bankruptcy, the Law Office of Carl M. Barto in Laredo, TX, is ready to guide you every step of the way. Call us at (956) 267-5596 to schedule a consultation and explore your options.