Alternatives to Chapter 7 Bankruptcy

Chapter 7 bankruptcy involves a liquidation of nearly all assets. When filing for Chapter 7 bankruptcy in Montgomery, AL, almost everything a debtor owns is placed into an estate. The only exceptions are limited personal property allowing the debtor to continue to live such as a home, a vehicle, clothing, and household necessities. All non-exempt property that is placed into the estate is sold off in order to repay the debts. If the debtor is a business entity such as a corporation or operates a sole proprietorship, this will mean the end of their business. If the debtor does not want this to happen, Bankruptcy Attorneys in Montgomery, AL can suggest a few alternatives.

Chapter 11 bankruptcy is a form of bankruptcy available to business entities. If the debts are a result of business losses, the debtor can elect this form. In a Chapter 11 bankruptcy, the business is reorganized to improve its financial situation and is relieved from certain burdensome obligations. A new repayment arrangement is also made with all creditors so that payments are at a sustainable level for the business.

Chapter 13 bankruptcy is an individual form of bankruptcy similar to Chapter 11 bankruptcy. If an individual has personal debts and a regular income, they can choose this option. In Chapter 13 bankruptcy the debtor, with the assistance of the court, enters into a repayment agreement with all creditors. This arrangement may be less than the full amount of the debt, but will discharge the debt entirely at the end of the agreement. The length of the repayment plan depends on the debtor’s median income. If they make more than the state’s median, it will last five years. If they make less, it will last three.

A final option is contacting individual creditors and making out of court repayment arrangements. This will avoid bankruptcy altogether and the long term damaging effects on the debtor’s credit that go with it. Creditors are often willing to take pennies on the dollar to get sure payment at the present instead of risking getting nothing if the debtor files for bankruptcy. Similarly, debt counseling services help with repayment arrangements, but their fees should be considered carefully to determine if they are worth it. Visit the website for more information.

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