What are the different types of bankruptcy?

There are several different types of bankruptcy available for individuals in North Carolina. The most common forms are Chapter 7, Chapter 11, and Chapter 13 bankruptcies. Chapter 7 bankruptcy is sometimes referred to as liquidation bankruptcy and is used most commonly by individuals filing for bankruptcy. In this type of bankruptcy, the debtor’s non-exempt assets are sold off in order to pay off the creditor. The debtor is then allowed to keep certain exempt assets. Chapter 11 bankruptcy is often used by businesses, as it allows the business to restructure its debt and continue operations while avoiding liquidation. This type of bankruptcy is also sometimes used by individuals who have too much income or too many assets to qualify for a Chapter 7 bankruptcy but still need protection from creditors. Finally, Chapter 13 bankruptcy is also known as a wage earners’ plan and is used primarily by individuals who are able to pay off their debts over a period of time, typically three to five years. The debtor is able to keep their assets while making regular payments to the creditors in accordance with a plan approved by the court. No matter which form of bankruptcy is chosen, debtors should understand that bankruptcy does not erase all debt. Certain debts, such as fines, taxes, and student loans, are not typically discharged under any type of bankruptcy. Additionally, creditors still have the ability to file a claim and try to recover some of the debt owed to them. Talking to an attorney is always a good idea before filing for bankruptcy.

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