Bankruptcy is a complicated issue that can vary from state to state but each chapter of bankruptcy uses the same terminology and follows the same basic process. There is the debtor, which is the person who has debt or owes money to a creditor. The debtor can either be an individual person or a company. The creditor is a company or organization that claims that the debtor owes property, service, or money.
A debtor can have two different types of debt, secured and unsecured:
- Secured debt – creditors have a right to something you own if you fail to make a payment(s), for example a car loan or a mortgage.
- Unsecured debt – a debt that is not tied to any item or property
Types of Bankruptcy
- Chapter 7 – is what most people think of when they hear the term bankruptcy. “This chapter of the Bankruptcy Code provides for “liquidation” – the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.” And the portion of debt that cannot be repaid through the liquidation process is discharged.
- Chapter 11 – Is the most complex bankruptcy filing, usually very troubled businesses file Chapter 11. “This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.”
- Chapter 12 – this Chapter is specifically for farm owners. “The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.” This chapter is similar to Chapter 11, but Chapter 12 is for individuals.
If you’ve been wondering whether filing for bankruptcy is right for you and live in
Wauwatosa, WI and are in need of legal representation or advice, please give our law firm a call today. We offer free consultations and will be more than happy to review your case.