We represent individual debtors in bankruptcy cases administered under Chapters 7, 11, and 13 of the Bankruptcy Code. These chapters differ vastly, as do our legal services in each type of case. During our free initial consultation, we will discuss which type of bankruptcy case will best serve your needs.
Chapter 7. In chapter 7, your valuable property will be liquidated by a chapter 7 trustee for the benefit of unsecured creditors. Most debtors can use exemptions to protect all of their property from bankruptcy administration, meaning these debtors retain all of their property after the bankruptcy case. This is the cheapest and quickest chapter with most cases concluding in 4 to 6 months. However, it is not available to everyone. Chapter 7 bankruptcy is usually only available to those who pass the means test--who are (i) those with primarily consumer debts and earn less than the median income, or (ii) those with primarily business debts. Chapter 7 is ideal for those who pass the means test and do not want to try reorganizing.
Chapter 11. In chapter 11, you remain in control of your property and propose a plan to reorganize or liquidate your bankruptcy estate. You owe fiduciary duties to your creditors and must propose a plan that is in their best interests. The plan must be voted on by creditors and confirmed by the bankruptcy court. This is labor intensive and increases the cost of chapter 11 cases. However, chapter 11 debtors have considerable latitude in proposing repayment terms and powerful tools to assist their reorganization, including the ability to strip off liens and restructure long-term debt obligations (including mortgages and car loans). The length of any chapter 11 case depends upon the terms of your confirmed plan. Chapter 11 debtors receive their bankruptcy discharge upon completion (or substantial consummation) of the confirmed plan. Chapter 11 is ideal for high-net worth individuals (and businesses) who want to retain their property, avoid liens, or restructure their long-term debt obligations.
Chapter 13. In chapter 13, you remain in control of your property and propose a plan of reorganization. In a lot of ways, a chapter 13 case resembles an abbreviated and simplified chapter 11 case. Chapter 13 is tailored for and limited to individual debtors with less than $394,725 in unsecured debt and less than $1,184,200 in secured debt. Chapter 13 plans are usually proposed and confirmed with court forms, which significantly reduces the cost of chapter 13 cases in comparison to chapter 11 cases. Chapter 13 debtors have many of the same powers as chapter 11 debtors but must propose a plan that contributes all of their disposable income to the plan for 3 or 5 years. Plan payments are made to a chapter 13 trustee who then makes distributions to creditors according to the plan's terms. Chapter 13 debtors receive their bankruptcy discharge upon completing all plan payments. Chapter 13 is best suited for individuals who do not pass the chapter 7 means test and have relatively simple reorganization needs. It allows people to cure payment arrears, strip off junior liens on real property and personal property, and restructure long-term debt obligations.
There are exceptions to every rule, so please ask us if you are interested in learning more about a particular topic.