Bankruptcy Law Basics

There are several types of bankruptcy provided for in title 11, but those available to an individual are limited to Chapter 7, Chapter 11, Chapter 12 and Chapter 13 (each gets its name from its specific chapter in title 11 of the United States Code). Although there are four types of bankruptcy an individual may use Chapter 7 and Chapter 13 are used far more often to obtain relief from debts and obtain a “fresh start.” Chapter 12 is designed for family farmers and family fisherman, Chapter 11 is often very expensive, and is primarily geared towards businesses or individuals that exceed the debt limits of Chapter 13. William can assist you as your attorney for Chapter 7 bankruptcy and Chapter 13 bankruptcy in the Raleigh, NC area. 

Chapter 7 Bankruptcy

Chapter 7 is the most commonly filed form of bankruptcy — it is a liquidation proceeding, available to individuals, married couples, partnerships and corporations. The phase “liquidation proceeding” seems frightening, however, the vast majority of cases are “no asset” cases where there are no non-exempt assets for the trustee to liquidate. In fact, in the vast majority of cases individuals discharge all their debts and keep all of their property, including houses, cars, boats, furniture etc. In order to keep houses and cars you must generally be current on your payments when your case is filed, and you must continue to make your payments on such assets. If you cannot get current and you want to keep such property you may need to consider filing a Chapter 13 bankruptcy, not Chapter 7.

 

Who may be a debtor under Chapter 7?

 

  1. Individuals, Married Couples, Partnerships and Corporations.
  2. No Debt Limits.
  3. Individuals whose debts are primarily business debts
  4. Individuals whose debts are primarily consumer debts that “pass” the means test. 

The whole Chapter 7 process takes approximately 3- 4 months and your credit starts improving from there. Although it will stay on your credit report for 10 years from the filing date, clients nearly universally report improved credit availability. In addition, immediately upon the filing of your case, your creditors (with certain very limited exceptions) will be prohibited by the “automatic stay” from continuing their collection activity –– stopping their attempts to collect from you by phone, letter, invoice, litigation, garnishment, etc.

Chapter 13 Bankruptcy

Chapter 13 allows a person to keep property that is in danger of repossession or foreclosure. It allows you to get current on payments such as house payments, car payments, alimony payments, child support payments, and tax obligations. Chapter 13 allows you to get current over a period of 3 to 5 years, even when creditors have refused to accept any further payments (even if they have started the foreclosure, garnishment, or repossession process). Often Chapter 13 can eliminate or reduce tax obligations, reduce car payments, and even eliminate second and third mortgages in certain circumstances. Moreover, the attorney’s fees necessary to file the Chapter 13 can be paid over the life of your Chapter 13 plan, making it very affordable to file a Chapter 13 case assisted by a lawyer specializing in bankruptcy. 

Who may be a debtor under Chapter 13?

  1. Only Individuals with Regular Income
    1. Only Individuals, Including Sole Proprietorships (not Corporations).
    2. Regular Income, Can Be from Any Source (e.g., a Job, Gifts, Unemployment Benefits).
  2. Secured Debts of less than $1,257,850 and Unsecured Debts of less than $419,275
    1. Limits Applied Only to Debts That Are Noncontingent and Liquidated.
    2. Limits Apply to Each Debtor Individually in Joint Cases (as long as each spouse qualifies separately under the limits, they are eligible to file jointly even if the debts of both spouses would exceed the limits).

A common misconception about Chapter 13 is that you must pay back all your unsecured debt (e.g., credit cards, personal loans, medical bills, etc.) along with the debts secured by property you wish to keep. In most Chapter 13 cases, unsecured creditors receive little if any distribution. When unsecured creditors are required to be paid, usually they receive only a small fraction of what they are owed. They are paid only if they choose to participate in your bankruptcy by filing a proof of claim. If a creditor does not file a proof of claim they receive no payments on their claim, and the debt owed to them is generally discharged upon the completion of the Chapter 13 plan.

 

Distributions to unsecured creditors may be required if you are above the median income for your family size, and have very low expenses of the type that are allowed to be deducted from your income (for a complete discussion of this see our discussion of the “means test”). Distributions to unsecured creditors may also be required if there are unexempt assets (i.e., the individual has property with equity above the applicable exemption amounts), that a debtor desires to retain. In such a case the so-called “liquidation test” requires that the unsecured creditors receive the dollar amount of the unexempt property (less certain deductions) which is distributed over the length of your plan pro rata among all the unsecured creditors.

Get Professional Guidance Today

Let William help you find your way out! As your Chapter 7 or 13 bankruptcy attorney, William will take the time to thoroughly guide you through all of your options. We understand that this time may be overwhelming and confusing for you. Let us put you on the path towards financial freedom, whether you decide to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you are in Raleigh, NC or surrounding areas Apex, Cary, Garner, Morrisville, and Fuquay Varina, call us today at (919) 875-8773 to schedule your free initial consultation!

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The information contained on this website is presented for informational and marketing purposes only and is not to be understood as legal advice. You should consult an attorney for advice respecting your individual needs. Berggren Law Offices, PLLC looks forward to speaking with you about your particular needs. Please note, however, that the mere act of contacting our firm does not create an attorney-client relationship. As a result, you should never send any confidential information to our office until a Representation Agreement has been signed by both you and Berggren Law Offices, PLLC.

11 USC Sec. 528 Disclosures
We are bankruptcy attorneys assisting clients file for bankruptcy relief under the Bankruptcy Code.
The information provided on this website is intended for use by individuals seeking general information about bankruptcy. No Attorney client relationship is created by use of this website or the information contained herein. It is provided as a service and does not constitute legal advice. It is an attempt to provide quality information, but no claims, promises or guarantees are made about the accuracy, completeness, or adequacy of the information contained in or linked to this web site. As legal advice must be tailored to the specific circumstances of each case, and laws, including the common law, are constantly changing, nothing provided herein should be used as a substitute for the research and advice of competent counsel. Also, no representation is made that the information provided is current as of any particular date.
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