Filing a Chapter 11 bankruptcy is a way for businesses to restructure their finances and to eliminate debt. This is the only option for businesses who want to continue operations. Also, this may be the only option for businesses and individuals who have too much debt or income to qualify for Chapter 7 or 13 filings. It is more cost efficient and comes with less risk to file a Chapter 7 or 13 if possible.
Chapter 13 bankruptcy is a way to restructure your debt as opposed to Chapter 7 which wipes away debt. A means test is required to determine which type of bankruptcy you may file. If it is found that you have the means to pay off your debt within 5 years, then you will need to file a Chapter 13 bankruptcy. Even if you qualify for a Chapter 7 bankruptcy filing, you may find it in your best interest to file for Chapter 13 bankruptcy instead. Some reasons to choose Chapter 13 bankruptcy include:
The most common type of bankruptcy that is filed is a Chapter 7 bankruptcy. Chapter 7 bankruptcy is known as the “fresh start” or “liquidation” bankruptcy because most of your unsecured debt will be wiped away while some of your assets may be sold (liquidated).