Bankruptcy Options
Chapter 7
Chapter 7 is also referred to as liquidation bankruptcy and is the most popular form of the three major types of bankruptcy filing. If you are married, the bankruptcy may be filed by both spouses or just one spouse may file. Even if you file separately from your spouse, you may still be required to state information related to your spouse’s income or financial situation.
If Chapter 7 is right for you, the process begins by gathering documents in relation to your finances, assets and debt. After you provide these documents to Groth & Associates, a Chapter 7 bankruptcy petition will be filed with the bankruptcy court in the proper jurisdiction. The court requires any debtor filing for Chapter 7 bankruptcy to take an approved credit counseling course which must be completed prior to filing. Along with your petition, a schedule of your assets, liabilities, income, expenditures, contracts, leases, tax returns and a statement of financial affairs will also be filed with the court.
Once the Chapter 7 petition is filed with the court, the automatic stay is now imposed. The automatic stay means that in most cases, creditors may not contact you or try to collect on a debt while you are in bankruptcy. Creditors cannot file lawsuits or initiate wage garnishments, repossess or foreclose on property as well. The automatic stay in not permanent and may not apply to certain debts. Groth & Associates can answer any questions that you may have regarding what creditors cannot contact you, the time period in which they cannot make contact and what you can do if you are still being harassed by creditors while you are in bankruptcy.
Twenty to forty days after the bankruptcy petition is filed, the Trustee will hold a meeting of creditors, which is also known as the 341 meeting. This is the only court appearance that a debtor is required to attend during bankruptcy in most instances. Prior to attending the meeting of creditors, the debtor needs to take a second counseling course. During the meeting of creditors, the bankruptcy Trustee will ask you a series of questions related to your situation and your debt. The meeting normally lasts only a few minutes. If you have to turn over assets or property to the court, this is also done during the meeting of creditors. Most creditors will not appear during the meeting, but they have a right to do so if they wish. If any creditor does choose to appear, they are allowed to ask you questions relating to your case.
There is a myth that if you file Chapter 7 bankruptcy that you will lose all of your property. This myth has partially been formed due to the fact that Chapter 7 is also known as liquidation bankruptcy. Simply, in some cases, the debtor’s property or assets are turned over to the Trustee. The Trustee will then sell the property to pay off the creditors in which the debtor owes. Depending on the debt you have, your income and your assets, you may be eligible to file what is commonly known as a “no asset” Chapter 7 bankruptcy. There is also property exemptions on a state and federal level which can let you keep some or most of your property.
After the meeting of creditors is held, creditors have 60 days to object to the debtor’s discharge of bankruptcy. If no objections are entered, the debtor is then granted a discharge. Once the discharge is entered, debts that can be discharged are forgiven. Creditors can no longer try and collect these debts or file legal actions against the debtor.
There are some debts which cannot be discharged from Chapter 7 bankruptcy. Groth & Associates will inform you of which debts can be discharged and once ones cannot. In most instances, debts such as student loans, back taxes and child support cannot be discharged. A typical Chapter 7 bankruptcy case lasts anywhere from three months to six months from the date of filing the petition with the court.
Filing for Chapter 7 can be a stressful and confusing time for a debtor. Groth & Associate’s experienced attorneys will be there to any all of your questions along the way. Groth & Associates takes pride in working with each of our clients in finding the best solution which will work for them and making sure that each client is well informed throughout the bankruptcy process.
Chapter 13
Filing for Chapter 13 starts with the debtor filing a petition with their local bankruptcy court. Items filed with the court include; the bankruptcy petition, statement of financial affairs, list of assets and liabilities, tax returns, income, expenditures and a certificate of credit counseling. A husband and wife may file the petition together or they may file separately. If a one person in a marriage decides to file for Chapter 13 bankruptcy, they will still be required to provide income, asset and liability information to the court for the non filing spouse. This is done so that that court can get an accurate picture of the family’s financial situation.
After the petition is filed with the court, the Trustee will then hold a meeting of creditors twenty to fifty days later. The debtor(s) must attend the meeting of creditors and answer any questions that the Trustee asks. Creditors are also allowed to attend this meeting and ask the debtor(s) questions related to the case.
The debtor must file with the court a proposed repayment plan no later than 15 days after the petition was filed. The repayment plan has to include how often the debtor(s) will repay their debt (usually bi-weekly or monthly). In a Chapter 13 case, funds will be distributed to creditors on a priority basis. The bankruptcy laws dictate which debts are a priority and which ones are not. The three types of claims are; priority, secured and unsecured. Priority claims generally include items such as taxes and bankruptcy administrative costs. Secured claims are debts which are secured by a property such as an automobile or a home. Unsecured debts include credits cards, personal loans and lines of credit where there is no collateral.
The debtor(s) have to start making payments to the Trustee 30 days after the bankruptcy filing even if the repayment plan has not yet been approved. After the meeting of creditors, the Judge has to hold a hearing no later than 45 days later to decide whether or not the repayment plan is approved. If the plan is approved, the Trustee will then start distributing funds to the creditors.
A debtor is granted a discharge in Chapter 13 bankruptcy when the debtor has completed all payments under the repayment plan and; all child support payments have been made and up to date, has not received a discharge in another bankruptcy proceeding within a certain time period and has completed an approved course in financial management. The discharge process of a Chapter 13 bankruptcy case can be a complex situation. Groth & Associate’s experienced attorneys will walk you through the process and answer any questions that you may have.
The Chapter 13 process takes longer than a Chapter 7 bankruptcy. The debtor(s) are normally in Chapter 13 bankruptcy for three to five years before their case is discharged from the court. Rather than the debt being forgiven or liquidated, debts are paid over the course of the Chapter 13 bankruptcy through the Trustee. Payment plans are proposed which is typically less than what the debtor currently pays to their creditors making the monthly payment more affordable. After the Chapter 13 case is discharged, any debt left over is discharged in most instances. There are however certain types of debts which cannot be discharged in bankruptcy.
Groth & Associates has years of experience in Chapter 13 bankruptcy cases. From deciding whether or not Chapter 13 is right for you, all the way through the discharge process, Groth & Associates ensures that our clients are well informed and prepared through the entire process.
Chapter 11
Chapter 11 bankruptcy is commonly referred to as reorganization. Like Chapter 7 and Chapter 13 bankruptcy, Chapter 11 begins by the debtor filing a petition with the court which includes information related to income, assets, liabilities, expenditures, tax returns and a statement of financial affairs. A Chapter 11 petition can also be filed by the creditors of a debtor and this is referred to as an involuntary petition. There are no income limits on the debtor like there is in a Chapter 7 and Chapter 13 filing.
Unlike Chapter 7 and 13, Chapter 11 is filed voluntarily or involuntarily by businesses. Any business can file for relief under Chapter 11 bankruptcy and can include business listed as a corporation, sole proprietorship or even individuals. However, due to Chapter 7 and Chapter 13 being available to individuals, those who choose to file Chapter 11 are typically corporations or partnerships. Groth & Associates will help you determine which bankruptcy filing is right for you.
Before filing a Chapter 13 petition, the debtor(s) have to complete an approved credit counseling course. With the court, information has to be filed which pertains to a plan of reorganization and disclosure statement. The disclosure statement has to include business affairs, income, liabilities and assets. The information provided has to enable the creditors to be able to make informed decisions regarding the debtor(s) plan or reorganization.
Chapter 11 is a complicated Chapter as there are many different variables which are involved in the filing. In simple terms, businesses file Chapter 11 bankruptcy in most instances to reorganize their debt and become profitable again. Reorganization can take months or several years to complete. During the course of the Chapter 11 proceedings, most significant business decisions are made by the court even though owners and management still continue to operate the business.
Groth & Associates can answer any questions you may have regarding Chapter 11 bankruptcy or the other bankruptcy chapters. The attorneys at Groth & Associates will work with you to find a bankruptcy solution that will best suit your needs. Contact Groth & Associates for your free bankruptcy consultation.