What is Bankruptcy?
A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts.
There are many types of bankruptcy cases provided for under the Bankruptcy Code. The two most common cases are Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7, entitled Liquidation involves a trustee who takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no asset cases”. A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires the application as a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.
Chapter 13 Bankruptcy
Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.
Don’t get confused, get a lawyer.
The bankruptcy process is complex and relies on legal concepts like the “automatic stay,” “discharge,” “exemptions,” and “assume.” Therefore, an attorney should be invoked to help you.
Business bankruptcy and personal bankruptcy attorneys at the law firm of Reese, Samley, Wagenseller, Mecum and Longer, P.C. can help you successfully navigate through chapter 13, chapter 7 or corporate bankruptcy. Our attorneys will consult with you to find out what options are available to you. In some cases, there will be more than one option in filing for bankruptcy. Having an experienced attorney on your side will give you an edge in what could quickly become a confusing matter. We will be there for you from the time that you decide to file until your time of final discharge. Our clients are very important to us. If you are looking for a bankruptcy attorney to help you file for the property type of bankruptcy, call us. We handle business as well as personal bankruptcy, and can help with chapter 13, corporate and chapter 7 bankruptcy cases. Do not attempt to handle filing for bankruptcy without a business or personal bankruptcy lawyer. Our lawyers can take the confusion out of filing for chapter 13, chapter 7 or any other type of bankruptcy.