The Bankruptcy Process

Dealing with financial uncertainty can be stressful for you and your family. When contemplating a bankruptcy filing, it is important to remember that there are many ways honest, hard-working people can find themselves in financial dire straits and that bankruptcy law exists to help these people.

The bankruptcy process allows debtors to eliminate debt so that they can move forward with their lives and obtain a "fresh start". In the 1934 Supreme Court case Local Loan Co. v. Hunt, the court said that bankruptcy "gives to the honest but unfortunate debtor a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

The elimination of your debt in bankruptcy is accomplished through the bankruptcy “discharge” which releases you from personal liability to pay the debts and bars creditors from taking collection actions against you. You can learn more about specific bankruptcy issues by clicking the Legal Articles link above.

Chapter 7

The most common form of bankruptcy for individuals is Chapter 7. To qualify for a Chapter 7 bankruptcy, a debtor must pass the “means test” which analyzes your income and expenses to determine if you have any ability to pay creditors.

If you do not, then you can proceed with a Chapter 7 and your nonexempt assets will be liquidated to repay your debts. Once this is done, you will receive a discharge of all debts. Keep in mind that a significant portion of your property can be exempted from the bankruptcy estate so not all property will necessarily be taken from you and liquidated. It is important that you consult with an attorney to maximize your exemptions.

Chapter 13

A Chapter 13 bankruptcy allows you to keep your property but in exchange you must make payments to your creditors in a Chapter 13 Plan which lasts from three (3) to five (5) years. The amount that you must pay is based on a review of your income and expenses to determine how much disposable income you have to pay each month.

If you obtain court approval of a plan and make all payments that are required in the plan, you will receive a discharge of all debts. There is a debt limit for filing Chapter 13 bankruptcy so filers must have unsecured debts not exceeding $383,175 and secured debts not exceeding $1,149,525 in order to qualify.

Chapter 11

A Chapter 11 filing is used by businesses and individuals to restructure debts and reorganize assets. Chapter 11’s are generally pursued by companies that want to remain in business or individuals that have property they want to protect but do not qualify for Chapter 13 because they have large amounts of secured or unsecured debt which exceed the Chapter 13 debt limit.

A Chapter 11 provides more flexibility then a Chapter 13 in creating a plan to pay creditors, and can give a debtor alot more time, sometimes even years, before they have to file and obtain approval of a plan.

How We Can Help

In order to get the most out of your bankruptcy and ensure that you will obtain a discharge, you should consult with an attorney. Jonathan B. Vivona, PLC is here to help you review all available options and choose the best strategy for your situation. You can rest assured knowing that an attorney will be with you every step of the way to make sure the bankruptcy filing is correct and your goals are met.