There are times that financial problems can become simply overwhelming for either an individual or a business. When a person’s or business’s financial position becomes truly untenable federal bankruptcy law provides several types of possible relief. The type of relief and its availability will vary based upon the financial problems you are facing.

Individual Bankruptcy Relief
There are two types of bankruptcy protection available to individuals. An individual may either seek to have his debt structure reorganized under Chapter 13 so that he pays off his secured debts over a specific period of time or he may seek complete relief from his debts by liquidation under Chapter 7.

Regardless of whether the individual files for bankruptcy protection under Chapter 7 or 13 the following things will happen. From the moment he files, his creditors can do nothing to try to collect debts. This means they cannot contact him, threaten him, or sue him. The individual must appear at a first meeting of creditors. Bankruptcies will be reported on your credit history and report for ten years. Any payments made within 90 days of filing are subject to being set aside, longer if the payment is to a family member. Once a debtor is discharged in bankruptcy he cannot thereafter file for bankruptcy protection under Chapter 7 for seven years.

Trustees are appointed under all Chapter 7 and Chapter 13 cases to evaluate the debtors assets and liabilities, and to assure that creditors receive all that they are allowed under the law.

Chapter 13 Bankruptcy
Prior to the first meeting of creditors, the debtor submits a proposed plan to retire the arrearage on any secured debt over a period of time not to exceed five years. The Court must approve the plan. The plan must pay off the secured debt and a percentage of the unsecured debt within the life time of the plan.

If the plan is successfully completed, the secured debts are brought current and the remaining unsecured debts are discharged. If the individual fails to make the payments required under the plan the case may be dismissed. If payments due to secured creditors which accrue after the bankruptcy filing are not paid, the secured creditors can obtain relief from the Bankruptcy Stay and can once again seek to collect the debt.

Chapter 7 Bankruptcy
Both individuals and corporations may file for Chapter 7 bankruptcy protection. Chapter 7 bankruptcy, unlike Chapter 13 for individuals or Chapter 11 for corporations, allows the debtor to discharge all of his or its debts but at the price of liquidation of most of his or its assets. A Chapter 7 bankruptcy usually affords the debtor a "clean start."

As with Chapter 13, a Trustee is appointed by the court. The debts owed to unsecured creditors are either discharged or paid by the Trustee through the liquidation of the debtor’s assets.

Chapter 11 Bankruptcy
A Chapter 11 bankruptcy is the corporate version of a Chapter 13 bankruptcy. It allows a corporation to reorganize its debt structure so that it can pay its debts while continuing to operate the business. A Chapter 11 filing is very expensive.

The U.S. Trustee’s office oversees all Chapter 11 filings. Once filed all professionals hired by the business must be approved by the court, including their attorney and their accountant. The debtor must submit monthly reports to the court, Trustee and creditors and must pay all fees. The debtor has the exclusive right to submit a plan within 90 days of the filing. Unlike a Chapter 13 filing, there is no time limit for completion of the plan. Upon completion, the corporation, if the plan was successful, will have regained its economic health and the ability to persevere economically.

If you have further questions involving bankruptcy, please feel free to contact us.

Home : About Us : Attorneys :  Resources : FAQ's : Contact Us