Bankruptcy Process

During the bankruptcy process, the debtor's unprotected and/or unsecured property is inventoried and itemized by the trustee to be distributed to the unsecured creditors or sold and the proceeds split amongst them.

One type of Bankruptcy filing, available to consumer debtors and corporations, is a Chapter 7 petition. In a Chapter 7 filing, once the property distribution occurs, the court will most likely discharge the debtor from further repayment obligations to the unsecured creditors. However, there are some exceptions to this general rule. The discharge of the debt may not be allowed by the court if evidence shows the debtor used fraudulent behavior to incur the debt.

In the case of fraud, (for example, charging up credit cards with the intent to file a bankruptcy), the court may deny the discharge of the debt. For the court to take such drastic measures to limit or deny the discharge in a Chapter 7 proceeding, the creditor has the burden of proving that the debtor obtained credit by fraudulent practices or has engaged in other prohibited behavior.

There are also certain specific statutory exceptions and remedies available to the unsecured creditor of non-dischargeable debts. Statutory exceptions of non- dischargeable debt generally includes back taxes less than three years old, student loans, alimony, and child support.

Call (877) 444-0985 toll-free or complete the confidential case evaluation below and talk with an experienced attorney for free:

In addition to Chapter 7 filings, the Bankruptcy Code allows both consumer debtors and corporate debtors to file a petition seeking financial reorganization. Debt reorganization filings, such as Chapter 13 filings, have several benefits over a Chapter 7 filings. A financial reorganization allows the debtor forgiveness of some of the debt while mandating a scheduled plan of repayment for the remainder of the debt.

When a human being selects this type of bankruptcy filing he or she files a Chapter 13 petition with the Bankruptcy Court. When a corporation of business entity selects this type of bankruptcy filing it files a Chapter 11 petition with the Bankruptcy Court. A business' Chapter 11 filing differs from a Chapter 13 filed by an actual person in that the business' reorganization proposal may call for both payments from sales of some business assets and payments using future business income. Stockholder interests must also be addressed by a business filing a Chapter 11. The plan may ask the court to restructure the stockholders' interests and modifying the company's obligation of payment on a stockholders secured and unsecured debts.

An individual person can file a chapter 11, but this should be done only in rare cases where there are many assets. The legal fees associated with the more complex Chapter 11 filings can be astounding!
(Editor's note: This article focuses primarily on "personal" or Chapter 13 debt reorganization and alludes to Chapter 11 debt reorganization for comparison purposes only.)

Exactly how much debt will be forgiven under a Chapter 13 repayment plan and how much debt must be repaid depends on the financial circumstances and ability to of the debtor to repay the debt. The repayment is generally classified in terms of percentage, for example 70%, 80%, 90%, and 100% forgiveness of unsecured debt. The remaining percentage is paid through a court ordered payment plan monitored by the court appointed trustee. The debtor's secured debt is generally monitored by the plan and must continue to be paid by the debtor. Primarily, this type of filing prevents the distribution and/or sale of many nonexempt assets such as consumer goods purchased with a credit card.

The draw back of a Chapter 13 filing, unlike a Chapter 7 filing, is that the debtor is required to follow a rigid repayment schedule making payments on both unsecured and secured debt for years to come. During this period of repayment, the bankruptcy proceeding remains open and it is often difficult for the debtor to get a credit card or even open a checking account!

About Us    Privacy Policy    Terms And Conditions    Contact Info