Bankruptcy Attorney

What is Bankruptcy?

Bankruptcy law allows for the development of a plan that will allow a debtor unable to pay his or her creditors, to resolve his or her debts by supervised division of his or her assets equally among the creditors. Some forms of bankruptcy proceedings allow the debtor to stay in business, using the revenue from the business to resolve the owed debts. Additionally, bankruptcy law is in place to grant certain debtors the chance to discharge (free themselves) of the financial obligations they have accumulated through distribution of their assets. This discharge can occur even if the debts have not been paid in full.

Bankruptcy is Federal Law

Bankruptcy law is a federal statutory law that is contained in the Title 11 of the United States Code. The Bankruptcy Code was passed by Congress under its Constitutional grant of authority to “establish…uniform laws on the subject of Bankruptcy throughout the United States." States are not able to regulate bankruptcy, but they are able to pass laws governing other aspects of the debtor-creditor relationship. Some sections of the Title 11 incorporate the debtor-creditor laws of those individual states.

Types of Bankruptcy Proceedings

The five most common types of bankruptcy are:

Chapter 7 – Chapter 7 Bankruptcy, also known “liquidation” or “straight liquidation,” is typically the fastest and easiest form of bankruptcy. Individuals, married couples, and businesses often use Chapter 7 bankruptcy protection to get rid of unsecured debts and various financial obligations such as back rent, medical bills, and credit card debt. A trustee is appointed to collect the non-exempt property of the debtor. The trustee sells it and then distributes the proceeds to the creditors

Chapter 13 – Rehabilitation of the debtor in order to allow him or her to use future earnings to pay off creditors.

Chapter 13 is typically for those who do not qualify for Chapter 7. Unlike Chapter 7, which wipes out your debt, is a way to reorganize your finances so that you are able to pay off some or all of your debts over a period of three to five years. Chapter 13, also known as a “wage earner’s plan,” requires an individual to have a regular income and be able to provide a plan to the court demonstrating they will be able to repay all or part of his/her debts.

Chapter 11 -  Chapter 11 is a provision under the United States Bankruptcy Code that primarily applies to businesses seeking financial restructuring. Unlike Chapter 7, which involves liquidation, or Chapter 13, designed for individuals with a regular income, Chapter 11 allows businesses to continue operating while developing and implementing a plan to reorganize and repay creditors. This reorganization process involves negotiating with creditors, proposing a repayment plan, and obtaining court approval. Chapter 11 bankruptcy is a complex and resource-intensive process, often used by larger corporations or businesses aiming to regain financial stability and avoid complete liquidation.

Chapter 12 - Chapter 12 is designed for family farmers and fishermen facing financial distress. Similar to Chapter 13, Chapter 12 allows eligible debtors to create a reorganization plan to repay their creditors over time. This chapter provides unique advantages tailored to the economic challenges of family farming and fishing operations, including accommodating seasonal income variations. Chapter 12 bankruptcy offers a structured framework for family agricultural businesses to manage debts, restructure obligations, and work towards long-term financial stability while preserving their operations.

Chapter 20 - Chapter 20" is an informal term used in bankruptcy to describe a strategic combination of Chapter 7 and Chapter 13 filings. In a Chapter 20 bankruptcy, an individual or business initially files for Chapter 7 liquidation to discharge unsecured debts, followed by a subsequent Chapter 13 filing to create a repayment plan for remaining debts that cannot be discharged under Chapter 7. While the Bankruptcy Code does not officially recognize Chapter 20, this sequential approach allows debtors to benefit from the advantages of both chapters, strategically managing their financial obligations and working towards a comprehensive debt resolution strategy.