Is Bankruptcy an Option?

Bankruptcy allows you to make a fresh start.  Alternatives to bankruptcy need to be explored in detail, but people who ultimately do file find that they get back peace of mind when the process is complete.

It’s possible to file for bankruptcy under a number of different “chapters” of the Bankruptcy Code, depending on circumstances. Bankruptcy cases are typically referred to by the chapter under which the petition is filed.

CHAPTER 7 – Most individuals filing for bankruptcy file under Chapter 7 which is known as a “bankruptcy in complete liquidation.”  Here’s how it works:

* People are allowed to keep certain property.  Now, you can’t keep the Hope Diamond or exceptionally valuable items, but clients are often surprised by what they are allowed to keep.

* The person filing completes a bankruptcy petition.  This can be done without an attorney, but most people hire a lawyer to help them complete the petition.

* Upon receipt of the petition, the court appoints a “bankruptcy trustee.”  The trustee is just another lawyer who reviews the petitions and ensures that the person submitting the petition is not trying to hide property or income.

* The individual filing for bankruptcy usually receives a discharge, which means that he or she is relieved of paying certain types of debts. From the filing of the petition, in most cases, it generally take 3-4 months before the discharge is granted, and most of that time is usually simply waiting.

* It is possible to save a house in a Chapter 7 bankruptcy if the individual filing is current on the mortgage payment.

* It is possible to save a car(s) in a chapter 7 bankruptcy if the individual filing is current on the car payment.

* Only people who pass a “means test” may file a Chapter 7 bankruptcy.  Steve can tell you whether you pass the means test or not before you make any commitment. To learn more about Steve’s bankruptcy services, visit the Bankruptcy Practice Area.

CHAPTER 13 – This is the debt repayment chapter for individuals who have regular income and whose debts fall within certain ranges.  It is sometimes know as a “workout” because individuals can work their way out of their debt over time.  Here’s how it works:

*   Individuals can keep their property by repaying creditors out of future income.

*  The individual filing under Chapter 13 creates a repayment plan that must be approved by the Bankruptcy Court.

* If the plan is approved, the individual pays the plan amounts to a chapter 13 trustee who distributes the funds to creditors.

* The individual receives a discharge of most debts after the debtor completes the payments required under the plan.

* A downside of Chapter 13 bankruptcy is that you need regular disposable income.

CHAPTER 11 – When people refer to Chapter 11, you almost always hear “re-org” because it is the reorganization chapter of bankruptcy.  Businesses and individuals with assets and/or income use Chapter 11 to restructure their debts. Creditors vote on whether to accept or reject a plan of reorganization, which must be approved by the Bankruptcy Court.


Please feel free to contact the Stephen Mooney Law Offices, PC to review your specific legal needs.  To get started, contact Steve today, and he will help you with all your legal needs.

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