You may qualify to file a bankruptcy under one or more Chapters of the Bankruptcy Code. However, we can tell you which Chapter will bring you the best result.
Chapter 7 Bankruptcy: liquidation for both individuals and business entities.
Under Chapter 7 Bankruptcy, you discharge all unsecured debts (such as credit cards, medical debt, debts not tied to any specific property), by liquidating your personal assets that have value exceeding the exemptions available to everyone under California or Federal law.
Chapter 7 is attractive for people with modest incomes and who lack any significant personal property. While you can run the risk of losing property in order to pay off your creditors, we structure your case so that for most clients, they are able to retain all of their personal property while discharging all the debt they are authorized by law to discharge. Only individuals receive a discharge under Chapter 7; while a business entity does not receive a discharge, the filing of a Chapter 7 will stop lawsuits and collection activity againt the company.
PLEASE NOTE: IF YOU ARE AN OWNER OR A SHAREHOLDER OF A BUSINESS THAT FILES A CHAPTER 7, OR HAVE PERSONALLY GUARANTEED PAYMENT OF ITS DEBTS, BE PREPARED FOR CREDITORS OF THE BUSINESS TO SEEK REPAYMENT OF THE BUSINESS' DEBT FROM YOU PERSONALLY.
Many are reluctant to file a Chapter 7, believing that they will lose all of their assets in exchange for getting a discharge of debt.
Here's a brief article that explains how Chapter 7 debtors usually keep their major assets: Here's What You Can Protect in Bankruptcy
Chapter 13 Bankruptcy
For reorganizing, and then paying off personal/consumer debt only (non-business). If Chapter 7 liquidation and discharge is not available or right for you, consider filing a Chapter 13 consumer reorganization case. You must have a steady income, and after paying your monthly necessary/reasonable expenses, there must be some income left after payment of those expenses so that you can fund your Chapter 13 repayment plan for unsecured creditors. Working with the court under Chapter 13, you reorganize your consumer debts, often only repaying a small percentage to unsecured creditors. This plan can stop home foreclosures, car repossessions, and any other creditor collection proceedings.
The difference with Chapter 13 is after a careful examination of your income and expenses, you must agree to pay to the Chapter 13 Trustee all non-essential or diposable income. This amount is used by the Trustee to pay off your unsecured debts over a 3 to 5 year period. Even if you only finish paying creditors a portion of their claims, your successful turnover of disposable income during the plan period will get you a discharge of the balance left on all unsecured debts. To qualify for Chapter 13 bankruptcy, it must be feasible to reorganize your debts, and you must act in good faith.
Chapter 11 Bankruptcy
For a business or an individual conducting business. While a Chapter 11 is more costly and time consuming than either a Chapter 7 or Chapter 13, it may be the only option for an individual who owns more than one piece of real property, or several income producing properties. This is because both the amount and value of real property and even the amount of debt you have are limited in a Chapter 13 proceeding, and may require that you file a Chapter 11. Chapter 11 cases allow you to strip junior real estate liens on non-residential property. However, on motion of the United States Trustee's Office, the Court may require liquidation of your assets if the debtor does not strictly comply with the stringent laws, rules and procedures required of Chapter 11 debtors.
We evaluate which Bankruptcy chapter is best for you, and help structure a plan to come out of bankruptcy in a better position than you are in today. We call upon a network of professional contacts, such as appraisers and brokers to provide the necessary assistance to comply with both the Bankruptcy Court and the office of the United States Trustee, who plays a very important role in monitoring and qualifying a Chapter 11 debtor.
Creditor Rights and Protections: On the other side of the equation, like many people and businesses today, there may be several of your vendors, clients or customers who are having trouble abiding by their previous payment obligations or who may have filed for Bankruptcy protection under one of the chapters described above. How do you protect your right to be paid what you are owed? What critical steps do you need to take, and when do you have to take them to avoid the possibility of receiving nothing on your claim? Do you have the ability to "undo" the effect of that bankruptcy case on your rights or claims? We can help you find the answers to these questions.
The Bankruptcy Code and the Bankruptcy Abuse Protection and Consumer Protection Act (BAPCPA) of 2005 is complex and intricate. While it is still very possible to obtain a discharge in a Chapter 7 case, the primary purpose of the BAPCPA was to discourage bankruptcy filing abuse, keeping the process for those deemed truly entitled to receive a discharge. The changes to the Bankruptcy Code have increased the burdens on debtors to ensure full disclosure, and now require the debtors take financial management classes and credit counseling both prior to and after filing their petitions.
Whether you need to consider filing for Bankruptcy, or need protection against a filing if you are a creditor, we can make sure you get the assistance you need.
Bankruptcy Articles of Interest
Two Required Classes