Bankruptcy Overview
San Diego, California, Bankruptcy Law Firm
There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:
- Chapter 7: basic liquidation for individuals and businesses;
- Chapter 9: municipal bankruptcy;
- Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets;
- Chapter 12: rehabilitation for family farmers and fishermen;
- Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income;
- Chapter 15: ancillary and other international cases.
The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. Corporations and other business forms file under Chapters 7 or 11.
In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt; however, the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior (e.g. concealing records relating to financial condition) and certain debts (e.g. spousal and child support, student loans, some taxes) will not be discharged even though the debtor is generally discharged from his or her debt. Many individuals in financial distress own only exempt property (e.g. clothes, household goods, an older car) and will not have to surrender any property to the trustee. The amount of property that a debtor may exempt varies from state to state. Chapter 7 relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is discharged. For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged.
In Chapter 13, the debtor retains ownership and possession of all of his or her assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The amount of payment and the period of the repayment plan depend upon a variety of factors, including the value of the debtor's property and the amount of a debtor's income and expenses. Secured creditors may be entitled to greater payment than unsecured creditors.
Home Foreclosures
Filing either Chapter 7 or Chapter 13 will stop any foreclosure on your home. If you are interested in keeping your home but are behind on payments, then Chapter 13 will give you up to 5 years to become current on your home.
Credit Card Debt
Contrary to what many people have been told about the new bankruptcy laws, credit card debt can still be eliminated in Chapter 7, and included in Chapter 13. Credit Card Debt is unsecured debt and is not treated any differently from any other unsecured debt.
Free Bankruptcy Consultation, Call 858-240-2566 and set up a consultation with Jeffery R. Menard to discuss your individual options.