Virginia residents have probably heard about how rapper 50 Cent filed for bankruptcy on July 13. Although there have been many famous entertainers who have had to take this course, his filing under Chapter 11 makes his case somewhat unique. Individuals typically file under either Chapter 7 or Chapter 13, and Chapter 11 bankruptcy is generally used by businesses.
One reason a person may need to file for Chapter 11 bankruptcy is that they have an amount of personal debt that is higher than that allowed by Chapter 13, which is the form of bankruptcy that allows a consumer to pay off obligations under a court-approved plan. However, Chapter 11 is in some ways similar in that it provides debt relief by allowing debtors to restructure their obligations while remaining in business.
Chapter 7 bankruptcy is much different from Chapter 11 bankruptcy in that it usually results in most unsecured debts being discharged. There are certain assets that are exempt from liquidation, but those that are not will be liquidated by the trustee, with the proceeds being used to repay creditors. Collection efforts by creditors are subject to a temporary halt once a person files for Chapter 7 bankruptcy.
A lawyer may be able to help a person to decide what type of bankruptcy they should file based on their unique financial circumstances. If a person files for Chapter 7 bankruptcy, a lawyer may be able to help them to maximize their exemptions so that they can keep their house, car and other important assets.