Bankruptcy Law

Chapter 7 Bankruptcy

Chapter 7 of the Bankruptcy Code provides for "liquidation," ( i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.). Most debtors do not have any non-exempt assets for creditors and file a “No Asset” Bankruptcy. As an attorney, I must review all necessary documents to make sure that the debtor qualifies for this bankruptcy pursuant to federal Bankruptcy Law. A Bankruptcy Petition must be carefully prepared and include all necessary information. Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 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. Once the Bankruptcy is completed, which is approximately 3 months from the filing of the petition, and presuming there are no adversarial pleadings filed (which is very rare), the debtor receives a discharge. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. A chapter 7 discharge is subject to many exceptions, and therefore, debtors should be apprised of those exceptions prior to filing.

Chapter 11 Bankruptcy

A chapter 11 bankruptcy is the most commonly used form of debt recovery for individuals with excessive debt they cannot pay off. Individuals and corporations can both use chapter 11 bankruptcy. Businesses that declare it may be able to continue operate, if the courts find that it is being run properly and won't create further debt while operating. They must submit a plan to the court, which is then put into place to allow the business to continue operating without creditors taking control of its assets. You must gather all financial information and documentation prior to filing for chapter 11 bankruptcy, with a list of all liabilities, assets, income, and expenditures. After all information has been filed, you'll meet with creditors and make your repayment plans.

Chapter 13 Bankruptcy

A chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. Chapter 13 enables individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. During this time the law forbids creditors from starting or continuing collection efforts. Chapter 13 also allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. During a Chapter 13 plan, individuals make monthly payments to the Bankruptcy Trustee, who then distributes payments to creditors.

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