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Bankruptcy - Plans To Pay Off Debts
By: Skye Liversea
The purpose of a chapter 11 bankruptcy is to allow a business a limited amount
of time free from creditors collection efforts to restructure its finances so it
may continue to operate in a normal fashion under a court approved "plan".
Creditors of a business filing a chapter 11 vote on the plan, and the plan must
be approved by the court. A business may choose to liquidate under this type of
bankruptcy also. If a business obtains approval from the court for its plan, all
pre-bankruptcy debts will be discharged. A business will not receive a discharge
if it simply liquidates its assets under a plan. Advantages of a chapter 11 is
that the business may retain control of its property during the bankruptcy and
can deal with all of the debts.
Individual debtors may also choose to file a chapter 11, however this type of
bankruptcy is complicated and there may be advantages to filing under a
different chapter. An individual should consult with an attorney before making
the decision to file a chapter 11. Generally, you may file a chapter 11 petition
anytime after a previous bankruptcy filing.
A chapter 13 bankruptcy provides less leeway than chapter 11 bankruptcies, but
has the advantage of earlier finalization. Chapter 13 is called "debt
adjustment." It requires a debtor to file a plan to pay debts (or parts of
debts) from current income. With a chapter 13 bankruptcy filing, a debtor must
promptly file a repayment plan and obtain the court's approval of the plan. Any
creditor may object to the plan. The debtor, along with the appointed trustee,
must work out any objections to the plan before the court will approve it. The
typical repayment time of chapter 13 plan is 3 to 5 years. The debtor makes
regular payments to the trustee and the trustee then distributes these monies to
creditors according to the terms of the plan. After completion of a plan, the
debts listed in the bankruptcy are discharged (again with some exceptions) and
the debtor is no longer obligated to pay them. You must not have been granted a
Chapter 7 discharge within the last 6 years or completed a Chapter 13 plan.
A chapter 12 bankruptcy was created to help family farmers who need to
reorganize their debts, while keeping their land. The rules of a chapter 12
bankruptcy are modeled closely after those of a chapter 13. The purpose of this
type of bankruptcy is to assist farmers who have the potential to reorganize
their finances, but at the same time to allow them relief from a heavy debt
burden. Farmers pay their creditors what is deemed reasonable. A trustee is
appointed, but the farmer usually remains in possession of the farm while
formulating a plan. A chapter 12 bankruptcy, like a chapter 13 bankruptcy,
normally proceeds more quickly than a chapter 11 and may have the added
attraction of being less expensive.
About the Author:
Skye Liversea writes on various topics, including bankruptcy related issues. For
Part 2 of this article, go to - www.article-portal.com/individual-bankruptcy.htm
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