What is Bankruptcy? What type of Bankruptcy should I file?
To determine what type of Bankruptcy you should file, your entire situation must be taken into account.
At River City Law, we do not just help people with Chapter 7 Bankruptcies nor do we push our clients into Chapter 13 Bankruptcy, we help individuals and businesses with the chapter of Bankruptcy that is right for their situation. Many attorneys funnel their clients towards one type of Bankruptcy to help with their bottom line, or their client flow. At River City Law we discuss with you each type of Bankruptcy and we give you options. We help you with the chapter of Bankruptcy that is right for your unique situation, whether it be Chapter 7, 11, 12 or 13. We understand the benefits and draw backs that any particular type of Bankruptcy might have in your unique circumstance. With this in mind, we create an action plan and options for you based upon your particular goals and your particular situation.
To understand what type of Bankruptcy you may want to file, there are a few basics to review.
WHAT IS BANKRUPTCY?
Bankruptcy is a process that allows consumers (individuals) and businesses to eliminate part or all of their debt. Bankruptcy is generally referred to as either a reorganization or a liquidation Bankruptcy. Bankruptcy is a federal court procedure that is governed by the Bankruptcy Code, case law, the rules of civil procedure and the federal rules of evidence.
PURPOSE OF BANKRUPTCY
Each type of Bankruptcy has the benefit of helping debtors obtain financial relief. Bankruptcy is designed to give debtors, as the Supreme Court said in the case of Local Loan Co. v. Hunt (1934), "...a new opportunity at life and a clear field of future effort, unhampered by the pressure and discouragement of preexisting debt".
There is a long history of Bankruptcy in society and in the United States and it was established to help consumers and businesses. Although it can be difficult to make the decision to file for Bankruptcy, the relief it can offer can truly help get individuals "back on their feet".
In order to determine if Bankruptcy is an option for you and what type of Bankruptcy is the best option in your situation, you should consult with an attorney.
TYPES OF BANKRUPTCY
There are several different types of Bankruptcies, and different qualification factors for each type of Bankruptcy. Chapter 7 and Chapter 13 Bankruptcies are the most common types of consumer Bankruptcy.
A Chapter 7 Bankruptcy is often referred to as a liquidation Bankruptcy. Read more
A Chapter 13 Bankruptcy is sometimes referred to as a "wage earner" or a reorganization Bankruptcy. Read more
A less common type of Bankruptcy for the average consumer is a Chapter 12 Bankruptcy. This is because a Chapter 12 Bankruptcy is basically for family farmers or fishermen and the debtor (the person filing Bankruptcy) must qualify under specific criteria in order to file a Chapter 12 Bankruptcy.
A Chapter 11 Bankruptcy is a reorganization Bankruptcy that is typically for businesses, however, it can also be for individuals. If a Chapter 11 Bankruptcy is used in the case of an individual, it is most commonly because the individual's debts exceed the limits for a Chapter 13 Bankruptcy or the individual has a substantial amount of non-exempt assets.
TREATMENT OF DEBTS
In Bankruptcy, many unsecured debts can be 'wiped out' or discharged. Unsecured debts are debts such as credit cards. Some debts that are unsecured, like child support, alimony payments and some taxes cannot be discharged. Knowing what type of debts that you have can make a significant difference in deciding what type of Bankruptcy to file.
Secured debts are debts such as mortgages and car loans. Secured debts are treated differently in Bankruptcy. In a Chapter 7 Bankruptcy you must decide whether to keep your secured debts, or surrender the asset to your creditor so you can discharge the debt. If you decide to keep the secured debt, you must get and keep current on that debt on your own.
In a Chapter 13 Bankruptcy you can choose to surrender the asset, but you may also in some cases choose to keep the secured debt, even if you are behind on the payments. One of the great things about a Chapter 13 Bankruptcy is that you can create a plan that pays off the debt, or gets you current on the payments.
TREATMENT OF ASSETS
Another important factor is knowing your assets and their value. So many people say they are a "non-asset" case, or that they do not have any assets. Just as many times after talking with them I find they do have assets. Failure to have listed those assets, or create an exemption plan for them could have resulted in significant losses to those individuals. Do not be fooled into thinking that you can just fill in the blanks in Bankruptcy. No case is simple, and every case is unique. There are many laws, court cases, and jurisdictional issues to keep in mind when filing Bankruptcy, just like any other area of law.
Do not underestimate the importance of having a knowledgeable attorney on your side to help you through your Bankruptcy.
As mentioned above, a Chapter 7 Bankruptcy is a liquidation Bankruptcy. This means that your assets could be at risk if you have more equity than can be protected using what are called exemptions. Exemption planning is an important part of filing Bankruptcy, and it can be critical to have an attorney on your side helping you to protect your assets. Read more here about what can happen to your assets.
If there are assets that are unprotected, sometimes that can be a major reason to decide to file a Chapter 13 Bankruptcy. In a Chapter 13 Bankruptcy you often keep all of your assets. Sometimes you may decide to surrender a car (for example) that you do not want. In general though, a Chapter 13 Bankruptcy is referred to as a repayment plan or reorganization. Unlike in a Chapter 7 Bankruptcy, you can keep assets that have unprotected equity. You will, however, need to pay that amount back over the life of your plan. Creating a feasible plan that meets all of the elements of the law can be extremely tricky. Most debtors that file a Chapter 13 on their own are unsuccessful as a result. Having an attorney help you with a Chapter 13 can be the difference between a successful case, and a case that either fails or results in lost assets.