Chapter 7: 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.) In a Chapter 7 bankruptcy, individuals can wipe out many types of unsecured debt. Unsecured debt is debt that you did not put up collateral for, such as a debt incurred from a credit card, or medical bills. Before you can file for Chapter 7 bankruptcy, you must go through credit counseling with an agency approved by the Untied States Trustee, and complete a debtor education course. While you are allowed to keep some of your assets, other assets are sold by the interim trustee to repay some of your creditors. The interim trustee is an individual appointed by the United States Trustee, and many times will oversee the entire bankruptcy process. It is important to know that not all debt is discharged under Chapter 7 bankruptcy. Mortgages typically survive bankruptcy, as do car payments. This means that while you will not be forced to sell your home when you file for Chapter 7, it may still be foreclosed on. Child support, spousal support, back taxes that are less than three years old, and any judgments from a court are generally not discharged either. Student loans may be discharged, but only if the debtor is able to show extreme hardship, which is difficult to prove.
Chapter 11: Bankruptcy under Chapter 11 of the Bankruptcy Code is often referred to as “business reorganization.” Chapter 11 allows qualified individuals and businesses to reorganize their obligations and pay their debts over time. Businesses that choose to take advantage of Chapter 11 relief continue to operate their business while paying their debts. Once the debtor files its Chapter 11 petition, an “automatic stay” goes into effect which prohibits the business’ creditors from making any attempt to collect their debt, including attempting foreclosure and repossession. The also debtor files various written “schedules” and “statements” to inform the Court of its outstanding debts, its current revenue and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. The debtor normally then has 120 days to propose a repayment plan to the Court. Under Chapter 11 Bankruptcy, the creditors are able to vote on the debtor’s proposal. It can take anywhere from six months to a year or more before a repayment schedule is approved and in place. Under the schedule, the debtor must generally pay all tax obligations and secured debts in full, plus interest, and at least a portion of unsecured debts. Once approved, the debtor may have up to six years to repay its obligations. Chapter 11 bankruptcies are very complex, time consuming, oftentimes expensive and allow the Court and the creditors to be actively involved in the debtors’ financial affairs. Businesses considering seeking bankruptcy relief under Chapter 11 must utilize an bankruptcy attorney experienced in handling Chapter 11 cases.
Chapter 13: Chapter 13 allows individual wage earners and small businesses proprietors to restructure their debts so that the payments are affordable. Those filing for Chapter 13 are allowed between three and five years to repay as much of their debts as is feasible from their disposable income and obtain a discharge for the balance. The interest and penalties cease on credit cards, medical bills and other unsecured debts while you are in the repayment plan. Even if you are not able to pay all of your debts in full, you may still be entitled to receive a discharge of those balances remaining. Chapter 13 is also very beneficial if you are facing the foreclosure of your home, a repossession of your vehicle, or if you owe non-dischargeable debts such as income taxes, alimony or child support collection. These types of obligations normally can’t be discharged in a Chapter 7, but often can be repaid over time at a level that you can afford in a Chapter 13 Bankruptcy.
Creditor representation. We also represent creditors in bankruptcy proceeds to ensure that their rights are protected and that they receive a fair portion of any bankruptcy estate distribution. We handle Automatic Stay litigation, Proof of Claim filing, and appearances at Creditor Meetings and Court hearings. Our creditor client often include individuals and businesses who hold liens or security interests in the bankruptcy Debtor’s home, vehicle or other assets and former spouses who are attempting to enforce child support orders and property settlement awards.