Continuing from Bankruptcy Glossary: Overview of Bankruptcy Terms (Pt. 1), below are some more commonly used terms, along with easy-to-understand definitions, that can help clarify the bankruptcy process for people who may be considering it.
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- Chapter 7 bankruptcy – Also referred to as liquidation bankruptcy, Chapter 7 is typically used by individual borrowers to discharge debt like medical bill-related debt, credit card debt, mortgage debt, etc. As part of this type of bankruptcy, debtors’ assets will become part of a bankruptcy estate, which is then liquidated (sold off), and the proceeds of this liquidation are used to pay creditors. Debtors will, however, get to keep some of their assets per the state’s (or federal) bankruptcy exemptions.
- Chapter 11 bankruptcy – Also referred to as business or corporate bankruptcy, this type of bankruptcy case is reserved for businesses or partnerships that are struggling financially. Under this type of bankruptcy, businesses can reorganize themselves to streamline operations and cut back costs (in some cases, this can involve the partial liquidation of some of the business’ holdings). Additionally, with Chapter 11 cases, businesses will develop a repayment plan that lays out the specifics regarding how and when creditors will be repaid (these plans have to be approved by both the creditors and the courts).
- Chapter 13 bankruptcy – This type of bankruptcy is typically reserved for people who earn too much money to file for Chapter 7 bankruptcy and/or who don’t qualify for Chapter 7 because of a recent past bankruptcy filing. With this bankruptcy, borrowers will set up a repayment plan that outlines specifically how and when their creditors will be repaid. These repayment plans generally have timelines for repayment that are between 3 and 5 years.
Stay posted for the last installment of this blog for some additional bankruptcy terms defined.
Denver Bankruptcy Lawyer at Lindquist-Kleissler & Company, LLC
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For more than 34 years/since 1979, Mr. Lindquist-Kleissler and the other legal professionals at Lindquist-Kleissler & Company, LLC have been providing both individuals and businesses with the highest quality of legal services when it comes to debt relief and bankruptcy. From simple to complex bankruptcy cases, Mr. Lindquist-Kleissler can always be trusted to:
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