Under bankruptcy laws, there are four general types of bankruptcies (called “Chapters”) you can file for. A Michigan bankruptcy lawyer can help clarify the differences between these chapters.
Chapter 7 bankruptcy. Also called “straight” or “liquidation” bankruptcy, debtors filing for this type will be required to give up properties and assets that exceed your state’s limit or exemptions. The bankruptcy court will assign a trustee who will manage your properties under the bankruptcy estate, sell them, and use the proceeds to pay back your lenders.
Chapter 13 bankruptcy. Also called a “debt adjustment” bankruptcy, this type allows you to catch up on late payments by proposing a new repayment plan which usually spans for a period of three to five years. However, the court will need to check that you are financially capable of meeting the terms under the new agreement with your creditors.
Chapter 11 bankruptcy. This bankruptcy chapter is reserved for businesses facing the threat of closure or those who have not been making profits. A few individual debtors may be allowed to declare bankruptcy under this type if their debts are very large.
Chapter 12 bankruptcy. This is a special type of bankruptcy reserved for family farmers.