CHAPTERS 7, 11 & 13

Generally, individuals might consider filing bankruptcy under Chapters 7 or 13, although they can also file under Chapter 11.  Businesses can consider Chapter 7 or 11. For the individual, Chapter 7 results in a discharge, wiping out debts.  It is not an easy process and many people are no longer eligible as a result of the 2005 changes to the Bankruptcy Code that added the “means test.  If your income is too high you will not qualify for Chapter 7 but you may be able to file under Chapter 13 (discussed below).   In Chapter 7, valuable assets are not protected and the trustee has the right to collect and sell things like your home, car or accounts.  The trustee also can commence litigation against your friends and family members to recover transferred assets and can sue to block your discharge under certain circumstances. Most of our individual clients prefer Chapter 13 which involves a 3 to 5 year repayment plan and protects all assets.  In 13, the debtor repays part or all of the debts by paying a trustee a monthly payment which is determined based on their income and expenses, assets and liabilities.  Clients interesting in Chapter 13 can schedule a budget analysis with our office where we will review this in detail and calculate the monthly payment that they can expect in  a Chapter 13 case.  Chapter 13 is usually best for the homeowner in foreclosure because it gives you a chance to reinstate a mortgage loan and to resolve all other debt problems in one place while freezing all creditor collection action. Businesses can also file Chapter 7 and liquidate their assets – this is for the company that wants to close down in an orderly fashion.  An alternative is to simply file for dissolution of the business.  Our firm can assist with either of these alternatives.  A business that wants to reorganize debts in a repayment plan, or an individual who exceeds the debt ceilings for Chapter 13 eligibility, might consider Chapter 11, a complex and lengthy proceeding that ultimately depends on getting creditors to vote in favor of a plan.