Bankruptcy

One of the primary purposes of bankruptcy is to discharge certain debts in order to give a debtor a “fresh start.” Laws, both federal and state, are in place to protect not only the debtor, but the creditor as well. Bankruptcy is a legal and viable option available to debtors to help solve seemingly unsolvable financial difficulty. Debt management companies, although also a viable first option, sometimes cannot help solve the problem, and frequently become another creditor on the list.

Chapter 7
(Individual)

The chapter of the Bankruptcy Code providing for “liquidation,” (i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.)
Click here for more information about Chapter 7 Bankruptcy.

Chapter 11
(Reorganization)

The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
Click here for more information about Chapter 11 Bankruptcy.

Chapter 12
(Family Farmer or Family Fisherman)

The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.
Click here for more information about Chapter 12 Bankruptcy.

Chapter 13
(Individual Debt Adjustment)

The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)
Click here for more information about Chapter 13 Bankruptcy.

Call today for a free consultation to determine whether bankruptcy is a viable option for you.

FAQ:

Do I qualify for a chapter 7?

If the debtor's “current monthly income” is more than the state median, the Bankruptcy Code requires application of a “means test” to determine whether the chapter 7 filing is presumptively abusive. If the debtor passes the means test, Chapter 7 is a viable option.

Can I file bankruptcy while being sued by a creditor?

Yes, filing a petition under chapter 7 “automatically stays“ (stops) most collection actions against the debtor or the debtor’s property. (11 U.S.C. § 362) The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.

What is the “means test”?

When considering Chapter 7 bankruptcy, you may be required to pass the Chapter 7 means test. If your monthly income is less than or equal to your state’s median income you may qualify to file. If it’s greater, you will have to fill out an additional form to see if Chapter 7 bankruptcy is an option for you. See Form 122A-1: Chapter 7 Statement of Your Current Monthly Income and Form 122A-2: Chapter 7 Means Test Calculation

Are all of the debtor's debts discharged or only some?

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy.

What is the credit counseling requirement?

Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

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