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Photo of attorneys Shelley Slafkes and Bruce Levitt

Understanding the Different Types of Bankruptcies

On Behalf of | Oct 1, 2021 | Bankruptcy Basics, Chapter 11 Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

Filing for bankruptcy means you are unable to pay your existing debts. If you successfully file for bankruptcy, your existing debts are cancelled, which allows you to rebuild your finances and move forward. 

However, unless you have filed for bankruptcy previously or are an experienced bankruptcy attorney, you probably have many questions about the types of bankruptcy chapters  available and what they mean. Below, we summarize the differences between Chapter 7, Chapter 11, and Chapter 13 bankruptcies, the 3 main types of bankruptcies in NJ, to help you decide whether one would be right for your situation.

Chapter 7 Bankruptcy

If your income is low enough for you to qualify for Chapter 7 (see our recent blog, ‘Bankruptcy: What is the Means Test–And What if I Don’t Pass?), you can look forward to quick relief from your debts. Also referred to as the liquidation bankruptcy, Chapter 7 allows for a discharge of most debts within three to six months. 

There are some debts which cannot be discharged, such as family support, some tax debts, or any penalties for criminal actions. Our team can provide more advice on this. 

Chapter 11 Bankruptcy

The Chapter 11 bankruptcy is famously known as the business bankruptcy, allowing corporations, and in certain cases individuals, time to reorganize their debts, while having the option to keep their doors open at the same time. 

Considered a ‘debtor in possession,’ the business must put together a repayment plan which is then voted upon by the creditors and company stockholders. While some businesses may file for Chapter 11 and then never be seen or heard from again, others really do use that time to re-strengthen and continue successfully later.

Chapter 13 Bankruptcy

In terms of personal bankruptcy, Chapter 13 proceedings are more complex. However, if you are not eligible for Chapter 7 and want to keep all your property, Chapter 13 may help you wipe the slate clean-after three to five years. 

It is known as an income-based bankruptcy where debts are discharged at the end. Both unsecured debts such as credit cards, and secured debts such as mortgages or car loans can all be included in Chapter 13. 

If your home is in threat of foreclosure, this bankruptcy chapter may allow you to save it by rolling the delinquent payments into the plan; however, monthly mortgage payments must be kept current. This is the same for a car that may have been in danger of repossession-and you may even be able to negotiate better terms with the lender. 

In Chapter 13, you may also roll delinquent family support payments into the plan.

For more advice on the types of personal bankruptcies which may be open to you, contact Levitt & Slafkes. 

Bankruptcy Claims in NJ | Other Bankruptcy Chapters for Businesses

We have explored the 3 types of bankruptcies in NJ that we see most often. However, these processes are not appropriate for all businesses – here’s a breakdown of other types of bankruptcy claims for businesses in NJ. 

Chapter 9 – Chapter 9 claims are meant for municipalities ready to file for bankruptcy.

Chapter 12 – If you are a farmer or commercial fisherman looking to reorganize your finances, for example, a Chapter 12 bankruptcy claim may be an option.

Chapter 15 – Chapter 15 claims concern jurisdiction and are normally associated with foreign entities filing for bankruptcy.

Let Us Help You With Your Bankruptcy Case

At  Levitt & Slafkes, P.C., we understand exactly what you are going through, and just how stressful the bankruptcy process can be for businesses and individuals. If you are in financial distress and you need advice on how to resolve your situation, our team has the knowledge, expertise, and compassion to assist you through the bankruptcy or insolvency process.

If you need more help figuring out the types of personal bankruptcies in NJ, or if you need information on types of bankruptcies for businesses in NJ, the team at Levitt & Slafkes P.C. can answer  all your questions. Call us at 973-323-2953, or contact us online to schedule a free consultation.

We are proudly designated as a debt relief agency by an act of Congress.

Originally published Nov 14, 2017, updated since.

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