Chapter 7 is the “straight” bankruptcy. It is used by individuals to get debt free simply and inexpensively. A trustee is appointed whose task it is to gather the debtor’s non-exempt assets and liquidate them to pay (sometimes) a portion of the creditors’ claims. Businesses that wish to liquidate and terminate their operations also can use Chapter 7 to close up shop. Partnerships can also use Chapter 7 for debt relief.
Bankruptcy is about giving the debtor a “fresh financial start.” Individual debtors can receive a discharge in Chapter 7. This will ordinarily wipe out the debtor’s personal liability on dischargeable debts. A discharge is not absolutely certain and will not extinguish a lien on property. You should consult with a qualified attorney to be properly advised on the issues of different types of debt.
Chapter 11 is the “reorganization” bankruptcy. If you are interested in reorganizing a business, or if you are facing large federal or state tax problems, you may use Chapter 11 because an extended period of time may be available to you for the repayment of the taxes. Chapter 11 generally allows businesses to continue operations if a feasible Plan of Reorganization can be proposed and confirmed by the court. Since the value of an ongoing business is ordinarily worth more than if its assets were liquidated, it is more economically efficient in the long run to reorganize than to liquidate. Cooperation among the various interests is a must to a successful reorganization. You should obtain a qualified professional to assist you in this type of proceeding since every step of the Chapter 11 proceeding is critical to its measured success.
There are circumstances when a Chapter 7 is not advisable, usually when the Debtor has assets subject to liquidation at a discount that would unfairly depreciate the Debtor’s estate. When the debtor owes debts in excess of the limits of a Chapter 13, and a Chapter 7 is not an option, a Chapter 11 Bankruptcy may be filed to reorganize and the Debtor be allowed to retain his valuables . A Chapter 11 Bankruptcy is also a viable option where there is a reorganizable business that has the assets and cash flow to propose a plan acceptable to its creditors which will allow the business to reorganize by the restructuring of its debt so it can continue in operation pursuant to the terms of its confirmed bankruptcy Plan.
The ultimate goal of the filing of a Chapter 11 is to emerge as a reorganized business that will be successful and profitable enough to pay out the proposed terms to creditors. In a successful Chapter 11, debtors generally reduce expenses and try to generate excess sales in an effort to provide more payments to creditors that would otherwise be received if the business were liquidated in a Chapter 7 proceeding. Individuals may also use the benefits of Chapter 11 if they can propose and confirm a Plan that will pay dividends to their creditors in an amount greater than what the creditors would have received from a Chapter 7 liquidation.
A Chapter 11 is more complicated, and therefore more expensive, for the reason that the services of the attorneys and other professionals are involved, complicated and time intensive. Usually Chapter 11 proceedings require more time in court, more motions and legal papers to be filed, and more review of the Debtor’s day to day operation by the Debtor’s counsel. In order to emerge as a confirmed debtor, the legal requirements of Chapter 11 must be met. The plan as proposed must be approved by the required number and type of creditors, or approved by Court Order.
Chapter 12 is the agricultural bankruptcy. It specifically is designed to meet the needs of financially distressed family farmers and ranchers to keep their farms and ranching enterprises. Your annual income must be sufficiently stable and regular to be able to make payments under a Chapter 12 plan, but allowances are made for income that is seasonal in nature. Similar in nature to a Chapter 11 proceeding, you should seek out a qualified attorney and preferably one with a working knowledge of the nuances of the agricultural economy.
If you are a rancher or a farmer and your annual income is primarily derived by agricultural means, a Chapter 12 Bankruptcy may be filed to reorganize and stay in business. A Chapter 12 Bankruptcy is a viable option where there is a reorganizable agricultural business that has the assets and cash flow to propose a plan acceptable to its creditors which will allow the business to reorganize by the restructuring of its debt so it can continue in operation pursuant to the terms of the proposed plan.
The ultimate goal of the filing of a Chapter 12 is to emerge as a reorganized agri-business that will be successful and profitable enough to pay your creditors under revised terms set out in your confirmed Plan. In a successful Chapter 12, farmers and ranchers generally reduce expenses and try to generate income in sufficient amounts to provide payments to creditors that would be greater than they would otherwise receive if the assets of the farm were liquidated in a Chapter 7 proceeding. Similar to a Chapter 11 reorganization, the procedural demands of Chapter 12 make the exercise more expensive. However, the costs are often offset by the saving benefits of reorganization.
A budget is prepared showing all of your necessary living expenses, and your farm and/or ranching operation payments and other principal obligations. The net sums from your monthly income after taxes and current living and operational expenses are basically offered to creditors over a 3- to 5-year period. You may not be required to pay 100% of your debts to satisfy the requirements of Chapter 12. Upon successful completion of a Chapter 12 Plan, in whatever amount the Court approves, you will receive a discharge of all debts paid off pursuant your confirmed Plan. And you will be able to continue farming and ranching.
Chapter 13 is the “wage earner” bankruptcy. It is also available to small uncorporated businesses owned and operated by individuals. If you have regular income and a desire to pay your debts, (or a portion of them) but currently are unable to do so, you may be able to propose and carry out a repayment plan under which creditors are paid over an extended period of time under court supervision and protection. It is possible that you could have a five year period to adjust your debts in this way while creditors are prohibited from starting or continuing collection efforts.
Any individual is eligible for Chapter 13 relief as long as the individual’s unsecured debts and secured debts are less than certain amounts. Contact a qualified attorney to determine if this chapter is right for you.
A Chapter 13 bankruptcy is generally known as a wage-earner’s bankruptcy. It provides a way for you to repay your debts pursuant to the terms of a Chapter 13 plan. An individual or an individual and spouse with regular income that is owing, on the date of the filing of the petition, unsecured debts of less than $290,525. and secured debts of less than $871,550. may be a debtor under a Chapter 13.
In a Chapter 13 it is possible to obtain court approval of a Plan that allows you to retain your non-exempt assets, if you repay your debts as proposed in your Plan, and none of the assets are “luxury” items.
In general, a Chapter 13 bankruptcy is most commonly used to avoid the repossession of an automobile, the foreclosure of a home or the repayment of tax obligations. The basic benefit of a Chapter 13 plan is that it allows you to pay money back at a rate that you can afford.
A budget is prepared showing all of your necessary living expenses, including your house payment and other principal obligations. The net sums from your monthly income after taxes and current living expenses are basically offered to creditors over a 3- to 5-year period.
You may not be required to pay 100% of your debts to satisfy the requirements of Chapter 13. Upon successful completion of a Chapter 13 Plan, in whatever amount the Court approves, you will receive a discharge of all debts paid off pursuant your confirmed Plan.