Being in debt is overwhelming, depressing, frightening. It can creep up on you over a long period of time-based on a number of different factors or be the result of a single devastating incident from which you are unable to recover. Either way, the mere thought of filing for bankruptcy can cause tremendous anxiety and stress. If you have found yourself in this difficult situation, it may be made even more challenging by confusion about what type of bankruptcy is most appropriate for your situation. There is a significant difference between bankruptcy Chapters 7 and 11, and it is important for you to understand each in order to help you determine which is most appropriate for you. At Reinherz and Reinherz Law Offices, we are able to provide you with the guidance and legal representation that you need to make the right decision about whether and how to proceed.

Chapter 7 bankruptcy is often referred to as either “straight bankruptcy” or a “liquidation bankruptcy”. It is most appropriate for those debtors that have no nonexempt assets or such a small amount of nonexempt assets that creditors are unlikely to force their distribution. A Chapter 7 bankruptcy provides debtors with the ability to wipe out all of their debts other than most taxes, most school loans, child support or alimony. If, however, the debtor wants to hold on to assets on which they carry debt – such as a home or a vehicle – then they are required to continue making payments on those items. Otherwise, they have to surrender them to the creditor holding the lien, whether that is a bank holding a mortgage or a lender holding title to a car. When businesses choose Chapter 7 bankruptcy, their creditors are paid off based on their “absolute priority”. All secured assets are sold and the money is used to pay off creditors.

Chapter 11 bankruptcies are generally quite complex and are usually used by large businesses that want to continue operating but that need to reorganize their debt. Though they bear some similarity to Chapter 13 bankruptcies, which allow debtors to pay all or part of their debt from future income over a three to five-year period, Chapter 13 relief is not available to corporations, limited liability companies or partnerships. Similarly, if a corporation were to attempt to file for bankruptcy under Chapter 7, they would not be permitted to continue operations.  Though Chapter 11 is far more complex than Chapter 7, it is designed to rehabilitate a company so that it can continue to operate, and hopefully become financially viable again in the future.

If you are faced with mounting debt and want assistance in determining whether bankruptcy is the right option for you, or whether Chapter 7 or Chapter 11 are more appropriate for your situation, contact the lawyers at Reinherz & Reinherz Law Offices. We will take all the time you need to analyze your situation and provide you with the answers you need.

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