Types of Bankruptcy

Chapter 7 Bankruptcy is the most common type of Bankruptcy, and is the form that most people are familiar with when people discuss Bankruptcy.

Chapter 7 is a liquidation. This is the case wherein an individual approaches the court and states: “Your honor, this is all I own and owe, and if you’d like to sell anything I have to pay off my debts your honor, you can.”

A Chapter 7 case lasts approximately 4-6 months for most individuals. Most of the activity in a Chapter 7 case occurs prior to filing. If the case goes well, the filing individual does little more than watch as his case is processed and attend one hearing called the 341a hearing.

This hearing that the Debtor must attend is called the 341A hearing or the “Meeting of the Creditors”. It takes place during a given hour but lasts usually about 3-5 minutes. At this hearing, an individual known as the Chapter 7 Trustee will interview the Debtor and determine if the Debtor has accurately testified to all the information in his filing paperwork. The Trustee may ask questions about the Debtor’s life and the Debtor must answer these questions truthfully and to the best of his or her ability to do so.

The Debtor’s creditors may also appear and ask questions in the Bankruptcy Court concerning the Debtor’s case. Most of the time Creditors do not appear because there is little for the Creditors to ask of the Debtor. Before we file your case, as long as you have honestly discussed your case with us, we are aware if there will be any problems with any of your creditors.

Once the 341A hearing is over, there is little for the Debtor to do other than wait for the case to be closed and await discharge.

Chapter 11 Bankruptcy is the largest Chapter of bankruptcy for which an individual person is eligible, and is the Chapter of bankruptcy that most companies file unless they seek to liquidate or shut down.

A Chapter 11 Bankruptcy is a Chapter of Bankruptcy known as a reorganization. In a Chapter 11, an entity, either an individual or business, will propose a plan of reorganization of its assets, debts, contracts and legal obligations in a manner that complies and is agreeable with Federal Law.

This plan may propose a great multitude of options including liquidating assets, paying back debts, suspending contracts, employing new individuals, securing new financing or assets or any number of other activities.

The plan, once proposed, may then be voted upon by the unsecured creditors of the filing entity who can then object to, oppose, or consent the filer or plan.
However, if the plan is approved by the court, then the filing entity has a chance to reorganize its assets and debts.

Chapter 11 cases are difficult and sometimes hazardous to the filing entity. Chapter 11 cases can be converted to Chapter 7 matters wherein the assets of the filing party are liquidated against the wishes of the filing entity. Further, the United States Trustee monitors all Chapter 11 cases in detail and can object to plans that are illogical or without a reasonable basis.

A Chapter 11 should never be filed without consultation with an attorney.

Chapter 13 Bankruptcy is a debt payment plan by an individual with regular income.

Chapter 13 is a far cry from Chapter7 ad is entered into by an individual for completely different reasons. A Chapter 13 preserves the status quo and makes sure that the Debtor can maintain their assets during the case. In return, the Debtor makes payments to the Chapter 13 Trustee who then distributes these assets for the benefit of the Debtor’s creditors.

At the end of a 3-5 year period, the Debtor may receive a discharge of those debts that weren’t paid off during the Chapter 13 case, In this way, the Debtor can pay less than the full amount of his or her debts.

The Debtor can also choose to prioritize his debts and pay off those debts that are either non-dischargeable otherwise first, or pay off debts that allow him or her to maintain their real property

Chapter 13 Bankruptcies are creatures of statute and negotiation with the Chapter 13 Trustee in order to determine a viable Chapter 13 plan.

For this reason, experience counts, and Debtors should never file a Chapter 13 by themselves.