Is There a Difference Between Consumer and Personal Bankruptcy?

If you are considering bankruptcy in South Florida and you (or your business) have never had any experience with bankruptcy law before, understanding the distinctions among different kinds of bankruptcy can be confusing. Not only are multiple different terms used to refer to the same subject or issue in some cases, but there are also various chapters of bankruptcy that can add to the complications of understanding exactly what your options are and what type of bankruptcy you can consider. One question that debtors often ask, after conducting some initial research themselves, is this: is there a difference between consumer and personal bankruptcy?

In short, “consumer bankruptcy” and “personal bankruptcy” are essentially interchangeable — these are both types of bankruptcy filings where the debtor has primarily consumer debt (as opposed to business debt). Our West Palm Beach bankruptcy attorneys can explain in more detail.

Personal or Consumer Bankruptcy Versus Business or Corporate Bankruptcy 

Generally speaking, types of bankruptcy that an individual or a consumer can file for may be described as either “personal bankruptcy” or “consumer bankruptcy.” These two terms refer to certain types of bankruptcy filings where the debtor filing has primarily consumer debt. It is important to know that these terms also refer to cases where a married couple is filing jointly, with primarily consumer debt.

Differently, you will hear about “business bankruptcy” or “corporate bankruptcy.” These terms are also used interchangeably in many circumstances, although not all businesses that file for types of business bankruptcy are structured as corporations (although some are). The difference between these types of bankruptcy and consumer/personal bankruptcy is that the debtor has primarily business debt.

Types of Personal or Consumer Bankruptcy Filings

 What types of bankruptcy are included in personal or consumer bankruptcy cases? There are two general types of bankruptcy that are typically filed in consumer or personal bankruptcy cases: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy in which non-exempt assets are liquidated so that the debtor can receive a debt discharge in a relatively short period of time, while Chapter 13 bankruptcy is a reorganization bankruptcy in which the debtor makes regular payments over several years on a repayment plan to catch up with creditors.

Both types of bankruptcy have eligibility requirements. When an individual or consumer debtor cannot qualify for Chapter 13 bankruptcy because their debts are too high and surpass the debt ceiling or threshold, then that individual or consumer will often file for Chapter 11 bankruptcy instead.

Individuals Who Also Own Businesses?

 What do individuals or consumers do when they also own businesses? The answer to the question will depend on the type of business structure and whether the debt is primarily consumer or business debt. A bankruptcy lawyer can discuss the details of your situation with you to help you understand options.

Contact a West Palm Beach Bankruptcy Attorney Today 

If you have any questions or concerns about filing for consumer bankruptcy or business bankruptcy, one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can speak with you today and can help you with your bankruptcy case. Our firm regularly represents both individuals and businesses in a range of bankruptcy matters, and we can begin working with you on your case. Contact us to find out more about how we can assist you or your company.

Sources:

law.cornell.edu/uscode/text/11

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics