Chapter 7 vs Chapter 13 Bankruptcy: Which is right for you?

December 2, 2023

Chapter 7 vs Chapter 13 Bankruptcy: Which is right for you?

Bankruptcy can be a scary and overwhelming experience for anyone, but it’s important to remember that it’s a tool for financial relief and a chance to restart your financial life. If you find yourself in a position where you can’t afford to pay your debts, there are different options available. Chapter 7 and Chapter 13 are two types of bankruptcy that individuals often file. In this blog post, we’ll be discussing the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy, who should file for Chapter 13 bankruptcy, and how we can assist Chattanooga residents with their bankruptcy matters at Kenneth C. Rannick P.C.



Chapter 7 bankruptcy:


Chapter 7 bankruptcy, also known as a “straight” bankruptcy, involves the liquidation of non-exempt assets to repay creditors. In most cases, a debtor is allowed to keep their primary residence, car, and other essential property. Chapter 7 bankruptcy is a good option for those who have little or no income and want to eliminate all debts. 


To file for Chapter 7 bankruptcy, the debtor must pass the means test, which determines if the debtor’s income is below the median income level in their state. If the debtor’s income is above the median level, there may be restrictions placed on their eligibility to file for Chapter 7 bankruptcy. It’s important to note that certain debts, such as student loans and taxes, cannot be discharged through Chapter 7 bankruptcy.


Chapter 13 bankruptcy:


Chapter 13 bankruptcy, also known as a “reorganization” bankruptcy, allows debtors to create a repayment plan to pay off their debts over a period of three to five years. This type of bankruptcy is a good option for those who have a regular income, can afford to pay some of their debts, and want to keep their non-exempt assets. 


To file for Chapter 13 bankruptcy, the debtor’s unsecured debts cannot exceed $394,725, and secured debts cannot exceed $1,184,200. The debtor must also have a reliable source of income to make the scheduled payments. It’s important to note that all debts must be paid off during the repayment period by the debtor, and any remaining debts will be discharged at the end.


Who should file for Chapter 13 bankruptcy:


Chapter 13 bankruptcy may be a good option for individuals who have a regular income but are struggling to pay their debts. This type of bankruptcy allows you to create a repayment plan without being forced to sell your assets. Additionally, Chapter 13 bankruptcy may be a good option for those who can’t qualify for Chapter 7 bankruptcy, as there are no income restrictions. 


At Kenneth C. Rannick P.C. we can assist the Chattanooga residents with bankruptcy matters. We can advise you on which type of bankruptcy may be right for you. Our team will help you through every step of the process, from filing paperwork to establishing eligibility and completing repayment plans. Depending on your situation, we may also be able to negotiate with your creditors and settle debts outside of bankruptcy.


If you are considering bankruptcy, it’s important to understand that it’s not the end of the world. Bankruptcy is a tool that can help you escape overwhelming debt and start fresh. Both types of bankruptcy have their unique advantages, and the right choice for you will depend on your individual circumstances. At Kenneth C. Rannick P.C., we are committed to helping Chattanooga residents take control of their financial lives. Our team is ready to guide you through the process of filing for bankruptcy and ensure that your financial future is as bright as ever.

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Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

January 30, 2024
Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

A Comprehensive Guide to How Chapter 11 Bankruptcy Works in Minnesota

December 21, 2023
Filing for bankruptcy can be a scary and confusing decision, but it is a necessary step for individuals and businesses who are struggling with their finances. In Minnesota, one of the most common types of bankruptcy is Chapter 11 bankruptcy, which allows a business to reorganize its debts and continue operating while paying off its creditors. If you're considering Chapter 11 bankruptcy, it's important to understand how it works and what benefits it can offer. In this post, we'll delve into the process of filing for Chapter 11 bankruptcy, highlight its advantages, and discuss how you can get started.  1. Understanding Chapter 11 Bankruptcy Chapter 11 bankruptcy is a form of bankruptcy that allows businesses to reorganize their debts while continuing to operate. The goal of this process is to give businesses a chance to become profitable again by restructuring their debt payments. During Chapter 11 bankruptcy, a business is protected from creditors by an automatic stay that prevents them from pursuing collection activities. The debtor then works with a bankruptcy court and creditors to create a repayment plan that will allow them to pay off their debts over time. 2. Benefits of Chapter 11 Bankruptcy There are several benefits to filing for Chapter 11 bankruptcy. One of the primary benefits is that it allows the debtor to maintain control of their business operations while repaying their debts. This means that the debtor can continue to generate revenue and will not be forced to liquidate their assets to pay off their creditors. Additionally, Chapter 11 bankruptcy can give the debtor more time to negotiate with their creditors and reach a repayment agreement that is more favorable to them. 3. How to File for Chapter 11 Bankruptcy Filing for Chapter 11 bankruptcy can be a complex and time-consuming process, but it is possible with the help of a knowledgeable bankruptcy attorney. The first step is to file a petition with the bankruptcy court, which will initiate the automatic stay and prevent creditors from taking any further collection actions. Next, the debtor will need to provide the court with a comprehensive list of their assets, liabilities, and creditors. From there, the debtor will work with their attorney to create a repayment plan that is feasible and fair to all parties involved. 4. Working with a Bankruptcy Attorney Filing for Chapter 11 bankruptcy can be an overwhelming process, and it is important to work with a qualified bankruptcy attorney who can guide you through the process. A bankruptcy attorney can help you prepare and file the necessary paperwork, negotiate with creditors on your behalf, and create a repayment plan that is tailored to your unique financial situation. Additionally, an attorney can give you advice on how to protect your assets and maintain control of your business operations during the bankruptcy process. Filing for Chapter 11 bankruptcy can be a complicated and stressful process, but it can also be a valuable tool for businesses that are struggling with their finances. By reorganizing their debts and negotiating with creditors, businesses can get a fresh start and work towards profitability once again. If you're considering filing for Chapter 11 bankruptcy in Minnesota, it's important to work with a qualified attorney who can guide you through the process and help you achieve the best outcome.
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