BANKRUPTCY SERVICES   |   For the Debtor: What to Plan Ahead For

What are the Different Types of Bankruptcy?
What are the Different Types of Bankruptcy?
Chapter 7: Liquidation

Chapter 7 bankruptcy is available to individuals as well as businesses. Under the bankruptcy code a “person” for the purposes of filing bankruptcy is defined as an individual, partnership, and/or corporation. A Chapter 7 bankruptcy requires the collection of the individual’s non-exempt property for sale or liquidation and the cash proceeds from its sale is paid on a pro rata basis to creditors with claims against the estate. The reality is that most people filing for bankruptcy have no non-exempt property to sell. As a result, Chapter 7 bankruptcy generally eliminates all of an individual’s unsecured debt and unsecured creditors generally receive no payment. Secured creditors continue to be paid in full if the individual wishes to keep the secured property. If the individual does not want to keep the secured property, the individual may return the secured property/collateral (for example, a vehicle or house). Once the secured property is returned, the secured creditor may take no further action against the individual for collection. The return of the property is considered full and final payment no matter how much is owed and no matter how much the property is worth.

Chapter 11: ????????

Should definition of 11 be included here since it's included in the Creditor info?????????

Chapter 13: Reorganization

Chapter 13 bankruptcies are designed to restructure the debts of an individual.

In a Chapter 13 bankruptcy case, individuals file a Plan to repay some or all of their debts over a period of time (usually 60 months). The amount that must be paid to creditors is determined by the individual’s specific income and expenses.

When individuals file a Chapter 13 case, they will begin to make one monthly payment to the Chapter 13 trustee as determined by their Plan. The trustee will distribute the payment to the creditors.

Once all of the Plan payments are made, the individual will be granted a discharge.

How do I Know What Type of Bankruptcy to File?
How do I Know What Type of Bankruptcy to File?

The type of bankruptcy an individual may file is based on the individual’s income and expenses and how it compares to what is considered the “median” annual income for the individual’s state. It also depends on the size of the individual’s household and specific expenses. At the initial bankruptcy consultation, an attorney will discuss what type of bankruptcy is available for the particular situation. In some cases, it is necessary for an individual to provide your financial documentation before the attorney can accurately determine the type of bankruptcy that is appropriate.

What Does a Bankruptcy Include?
What Does a Bankruptcy Include?

Individuals who file for bankruptcy relief get to breathe again. Foreclosure, lawsuits, calls from creditors, garnishments and any other collection activity against the individual will end or be “stayed”. Harassment ends and creditors may no longer contact the individual who has filed for bankruptcy. Upon filing a bankruptcy case, the bankruptcy court imposes what is called an “automatic stay” which prohibits creditors from taking any further action against the debtor without express permission of the bankruptcy court. The stay is automatic and creditors that violate it may be sanctioned by the bankruptcy court. At the time of filing a Chapter 7 or Chapter 13 bankruptcy, the individual will be appointed a “trustee” that will administer the bankruptcy estate. The “bankruptcy estate” is all the property that an individual owns at the time of filing. The trustee will require that individuals provide documentation of their financial situation to prove the accuracy of their statements regarding their financial affairs.

What Bills Can I Keep Paying?
What Bills Can I Keep Paying?

After an individual decides to file bankruptcy, the individual may not purposely incur additional debt. For example, an individual that is going to file for bankruptcy must not continue to use credit cards or takeout new loans. An individual that is going to file bankruptcy may also not treat any creditors preferentially. For example, the individual may not pay family members back for loans instead of paying a credit card debt. All unsecured creditors must be treated equally. Continuing to pay for living expenses and insurance is always appropriate.

Will filing for bankruptcy help me?

This information will address what you might be facing now as you consider bankruptcy.

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How do I prepare for bankruptcy?

Wondering if you're eligible or what else needs to be considered before applying for debt relief?

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What should I expect next?

Learn more about the process of filing and what to expect after.

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