What Is The Reason For Different Bankruptcy Chapters?
When Congress enacted bankruptcy law, the legislators understood not all debtors would fit into the same category. Some debtors would have the ability to repay a portion of their debts while other debtors would be unable to repay any of their debts. The legislators also knew there would be a need for a bankruptcy chapter that allowed businesses to reorganize or systematically liquidate and close. Therefore, Congress created different bankruptcy chapters within the Bankruptcy Code to accommodate the needs of various types of debtors.
What Are The Different Bankruptcy Chapters?
In order to determine the correct bankruptcy chapter to file, you need to consult with an experienced bankruptcy lawyer in Okaloosa County. The Marsteller Law Office, LLC has experience filing bankruptcy cases under all bankruptcy chapters and can assist you in choosing the bankruptcy chapter that is best for your specific financial situation.
Most individuals file bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. Corporations and other business entities may also file under Chapter 7 but companies are not permitted to file under Chapter 13. If a company wishes to reorganize its debts, it must do so under Chapter 11.
The Most Common Bankruptcy Chapters
- Filing Bankruptcy Under Chapter 7
Chapter 7 is a liquidation bankruptcy that is available to both individuals and businesses. A business that files Chapter 7 is closed and liquidated. The funds from the liquidation are used to pay the company’s creditors on a pro-rata basis.
Individuals who file Chapter 7 must meet certain income requirements to be eligible to file under this bankruptcy chapter. Chapter 7 is reserved for individuals who have no disposable income to pay their debts after they pay their normal living expenses.
Some debtors fear Chapter 7 because they have heard that people who file Chapter 7 lose “everything” but this is not always the case. Many Chapter 7 cases filed in Okaloosa County are “no asset” cases meaning the debtor keeps all of his or her exempt assets while eliminating most, if not all, debts. After discussing your specific financial situation, an experienced bankruptcy lawyer in Okaloosa County can advise you if you are at risk of losing any of your assets if you file a Chapter 7 case.
- Filing Under Chapter 13
Chapter 13 is a reorganization bankruptcy option available to individuals who have a reliable source of income (i.e. wages from a job, self-employment income, retirement income, etc.). Individuals who do not meet the income requirements to file under Chapter 7 can still find relief from debt problems by filing a Chapter 13 case.
In a Chapter 13 case, the debtor proposes a bankruptcy plan to the court detailing how the debtor proposes to repay his or her debts. Most debtors only repay a small percentage of their unsecured debts back to their creditors under the plan. Under some plans, debtors are able to void or value liens to decrease the secured debt and filing Chapter 13 stops foreclosures and repossessions so that debtors can keep their assets. Each Chapter 13 case and plan are different; therefore, you need to consult with an experienced bankruptcy lawyer in Okaloosa County to discuss your specific financial situation before deciding if Chapter 13 is the best option for you.
- Filing Under Chapter 11
Chapter 11 is a reorganization similar to a Chapter 13 case; however, it is designed for corporations and business entities that are in financial trouble and need the assistance of the bankruptcy court to continue operating. The debtor submits a plan to its creditors proposing terms to reorganize its debts. The creditors must vote to approve the terms of the plan before the court will approve the plan. Individuals who owe more than the maximum amount permitted for Chapter 13 can file under Chapter 11.
Contact an Experienced Bankruptcy Attorney in Okaloosa County
The Marsteller Law Office, LLC wants to help you resolve your debt problems in the most efficient and affordable manner possible. Filing bankruptcy is often the best alternative when you are facing debts that you cannot pay, especially if you are in jeopardy of losing your home, vehicle, or other assets. We will discuss the pros and cons of each bankruptcy chapter and determine which bankruptcy chapter you qualify for and is best for you.
Contact our office at (850) 497-2500 or use our convenient online form to complete an online intake form and submit that to our office so we can begin reviewing your information immediately.