Bankruptcy for Individuals
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is appropriate for most individuals seeking debt relief. Chapter 7 enables consumers to completely eliminate most types of debt, and to obtain a true fresh start in as little as 4 months. After the 4 month period, clients can begin rebuilding credit. While Chapter 7 is considered a “liquidation” process, State law provides exemptions that protect property and personal belongings from being sold to satisfy debts.
Certain income qualifications do exist for Chapter 7. However, a high income will not necessarily disqualify you from filing. Many factors are involved in analyzing each case for eligibility, including household size, charitable contributions, medical expenses, and mandatory payroll deductions. Income may be completely irrelevant for clients with primarily business debts.
Most Chapter 7 cases are no-asset cases, meaning that no assets are liquidated. We perform a thorough analysis, prior to filing the case, in order to determine whether clients may risk losing an asset in Chapter 7. If an asset cannot be protected by exemptions, we can often negotiate with the Chapter 7 trustee in order for the client to retain ownership of the asset.
In some cases, it will be necessary to schedule a personal in-office consultation in order to determine eligibility for Chapter 7. For this meeting, you will likely need a recent tax return and 6-month income history. These consultations are always free.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a method of financial reorganization for individuals and sole proprietorships. Chapter 13 can be an effective means of stopping foreclosure, preventing repossession, and eliminating debts that are not dischargeable in Chapter 7. Chapter 13 can also be an excellent solution when Chapter 7 relief is unavailable due to high income or other reasons. Chapter 13 does not involve liquidation of assets, unless it is voluntary liquidation. In Chapter 13, some of your creditors will likely receive full repayment, but others may receive as little as ten cents on the dollar.
Many clients carry vehicle loans with high interest rates which can be lowered in Chapter 13. In some cases, clients will only repay the blue book value of the vehicle during the case, and a small percentage of the remaining balance of the loan beyond the blue book value. We set up our plans to pay off vehicle loans as early as possible, in order to minimize the amount of interest paid to the finance company.
In Chapter 13, we will file a debt consolidation proposal called a Plan. The Plan specifies many details with regard to treatment of creditors: the amount of repayment, length (between 3 and 5 years), order of payment, whether interest will be paid, and other details. A trustee will be appointed to accept one fixed payment from you each month and distribute money to creditors.
In many situations, we have found Chapter 13 to be an enormous relief to clients. Juggling payments to many different creditors can be an enormous burden to families. Simply consolidating the debts into one affordable monthly payment can alleviate anxiety and inject much needed simplicity into the lives of consumers. Fortunately, Chapter 13 can provide many other benefits besides just consolidation, including lower interest rates, extending terms of secured loans to make it easier to pay for them, and stopping creditor collection activity such as foreclosures and repossessions.
Chapter 11 Bankruptcy
We often utilize Chapter 11 bankruptcy for individuals who are not eligible for Chapter 13 or Chapter 7 relief. Because certain debt limits exist for Chapter 13 cases, Chapter 11 may be the only option for certain clients who need debt relief. Chapter 11 frequently makes sense for individuals with high incomes and large debt burdens.
Chapter 11 Bankruptcy carries certain benefits that are not present in Chapter 13. In Chapter 11, there is no trustee appointed to be in charge of your case who may oppose your reorganization Plan. Because there is no trustee, we have been successful in confirming Plans with very reasonable payment terms in Chapter 11 cases involving high-income clients.
Unlike Chapter 13 Plans, Chapter 11 Plan terms are not limited to 5 years. Further, payments are not required to be made each month. We often set up our Chapter 11 Plans to have one annual distribution to creditors.
In contrast to Chapter 13, Chapter 11 clients are not required to begin paying creditors immediately after filing. Often, there is a substantial window before payments must be made.
While many other bankruptcy firms do not handle these cases, the Law Office of Peter L Berk specializes in Chapter 11 for individuals, and has been tremendously successful in this practice area.