Chapter 7 bankruptcy
A Chapter 7 bankruptcy, also known as a straight bankruptcy, allows you to eliminate most of your unsecured debt (credit cards, personal loans, lines of credit, delinquent utility bills etc.) without having to pay anything toward them. A Chapter 7 case normally lasts four to five months from the date that the case is filed to when the case is closed. A Chapter 7 can also help eliminate mortgage debt or a vehicle loan if you decide to give up the house or car. This type of bankruptcy cannot eliminate student loans, some tax debt, criminal restitution, mortgage debt or vehicle loans (if you intend to keep your house and car).
In order to qualify for a Chapter 7 bankruptcy, you must fall within certain income limitations. For most people, the Bankruptcy Court allows you to keep all of your property. If there is any chance you would lose your property, we would discuss this before making the decision to file bankruptcy papers.
Chapter 13 bankruptcy
A Chapter 13 is a repayment plan that usually lasts between three and five years. This type of bankruptcy gives you the opportunity to restructure your debt and pay back what you can afford on debts like personal loans, credit cards and medical bills. A Chapter 13 bankruptcy can also help you catch up on delinquent mortgage payments, car payments or taxes. It can even stop a sheriff’s sale, repossession or tax sale. A Chapter 13 allows you to keep more assets than a Chapter 7, since you will be paying something back to your creditors.
There are certain requirements that you must meet in order to have a Chapter 13 Plan approved by the Court:
- The Plan must be proposed in good faith.
- The Plan must be feasible (you must be able to afford to make the payments).
- The Plan must be your best effort to repay your creditors.
- The Plan must provide for you to pay at least as much money to the creditors as they would receive in a Chapter 7 bankruptcy. In other words, if you have more property than what the court considers reasonable, you will have to pay money back to your creditors to be allowed to keep that property.
Chapter 11 bankruptcy
Chapter 11 is the type of bankruptcy often filed by corporations and sole proprietors who wish to reorganize their debt and stay in business. You have read about major corporations filing for reorganization under this chapter, but did you know that this is also available to small businesses and individuals?
In fact if your business is incorporated, this is the only type of bankruptcy that the corporation can file and continue to operate. Individuals and sole-proprietors with large amounts of debt may be able to benefit by filing a bankruptcy under this Chapter. Again, this is a reorganization, which means the repayment of all or part of the debt. However, there is often a period of four to six months between the filing of a Chapter 11 and the filing of a repayment plan. This allows a bit of breathing room for the business to operate while under bankruptcy protection.
This type of bankruptcy is generally more costly than Chapter 7 or Chapter 13, but the benefits far outweigh the initial cost. We have represented many businesses and individuals who have reorganized successfully under Chapter 11.
Feel free to contact one of our Pittsburgh bankruptcy attorneys to discuss the possibility of bankruptcy in further detail.