Types of Bankruptcy
Chapter 7 Bankruptcy is for debtors in financial difficulty that do not have the ability to pay their existing debts. Debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be allowed to proceed under chapter 7 bankruptcy. If the debtor income is greater than the median income for your state of residence and family size, in some cases, creditors have the right to file a motion requesting that the court dismiss your case. The court makes the final decision if the case should be dismissed.
Under chapter 7 bankruptcy the debtor you may claim certain of your property as exempt. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors.
The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court could deny your debt discharge.
Even with a debt discharge, some debts are not discharged under the bankruptcy laws. This, you could still be responsible for most taxes and student loans domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; etc. Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court could determine that the debt is not discharged.
Under Chapter 13 Bankruptcy it is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. You are only considered eligible for chapter 13 bankruptcy if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.
Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you owe them. This plan integrates using your future earnings. The period allowed by the court to repay your debts may be three years or five years, depending upon your income and other factors. The bankruptcy court must approve your plan before it can take effect.
After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts which are not properly listed in your bankruptcy papers; etc.
Under Chapter 11 Bankruptcy is designed for the reorganization of a business but is also available to consumer debtors. Its provisions are complicated, and of decision an individual to file a chapter 11 Bankruptcy petition should be reviewed with an attorney.
Under Chapter 12 Bankruptcy is designed mainly to permit family farmers to repay their debts over a period of time from future earnings and is similar to chapter 13 bankruptcy. The eligibility requirements are restrictive, limiting its use to those whose income arises primarily from a family-owned farm
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