What is Bankruptcy?
The Different Types of Bankruptcy
Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions”, so the property can be sold to pay creditors. In most cases, our clients are able to exempt all of their assets and keep all of their property and get rid off all of their debt.
Chapter 11 known as “reorganization”, is used by businesses and a few individual debtors whose debts are very large.
Chapter 12 is reserved for family farmers.
Chapter 13 is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income. Exemptions also apply in a Chapter 13.
What Will Happen to My Home and Car After Bankruptcy?
Can I Own Anything After Bankruptcy?
What Can Bankruptcy Do for Me?
Do the Bankruptcy Laws Change?
Will I Have to Go to Court?
Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.
Most people and small business file either a Chapter 7 or Chapter 13 Bankruptcy. From beginning to end, most Chapter 7 cases take between 90 to 120 days to complete. Chapter 13 cases, however, take longer because there is either a 3 year or 5 year repayment plan which has to be completed. Most of your involvement as a client will be at the beginning of the case and going to typically one meeting of creditors, which is explained in the next paragraph.
You and your attorney will fill out an “intake” which is how we get information from you to include in your bankruptcy petition. A bankruptcy petition is the document that is filed with the court that has all of your financial information, including a list of all of your debts and all of your assets and other property, as well as a list of all your income and expenses.
There is a legally required “means test” that every person filing bankruptcy must go through, which our office handles. The means test determines if someone can file a Chapter 7 or Chapter 13 bankruptcy. To complete the means test, in most cases, we need the client’s last 2 years of federal tax returns and last 2 pay-stubs.
Before the bankruptcy can be filed, the client has to take a “credit counseling” course and obtain the “certificate of credit counseling”. This takes about an hour and can be done over the telephone or over the internet. Our office can provide a list of credit counseling agencies.
Before the bankruptcy is concluded, each person must take a “financial management” course that will assist the client in future financial planning and money management. Our office can provide a list of the agencies that provide this service.