Chapter 7
Chapter 7 is the most common form of bankruptcy. It is a liquidation proceeding in which the debtor's non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities among creditors established in the Code.

Chapter 7 is available to individuals, married couples, corporations and partnerships. Individual debtors get a discharge within 4-6 months of filing the case.

If there are assets which are not exempt, the trustee takes control of those assets, sells them and pays creditors as much as the proceeds permit.

Any wages the debtor earns after the case is begun are the debtor's; the creditors have no claim on those earnings.

Chapter 11
Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. Individuals, especially those whose debts exceed the limits of Chapter 13, may file Chapter 11.

In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court and the creditors committee.

The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization.

Chapter 12
Chapter 12 is a simplified reorganization for family farmers, modeled after Chapter 13, where the debtor retains his property and pays creditors out of future income.

Chapter 13
Chapter 13 is a repayment plan for individuals with regular income and unsecured debt less than $307,675 and secured debt less than $922,975.

The debtor keeps his property and makes regular payments to the Chapter 13 trustee out of future income to pay creditors over time (3-5 years).

Repayment in Chapter 13 can range from 10% to 100% depending on the debtor's income, his assets, and the make up of the debt.

Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts.

The Alternatives:
Can you avoid bankruptcy on your own: To explore non bankruptcy alternatives, create a budget for your realistic, monthly expenditures for current living. Include mortgage and car payments, but exclude all other existing debt service. Try these nifty online budgeting tools to help.

Can you reduce expenses, increase income, negotiate rates or sell assets to make that possible?
Consider long and hard before resorting to liquidating IRA's or 401K plans to pay creditors: These assets are generally protected from collection actions by creditors; they are hard to replenish once spent; but most importantly, using retirement savings to pay creditors may create new debt in the form of income taxes and penalties for early withdrawal. Your good intentions to repay creditors may just end up substituting Uncle Sam as a tax creditor in place of your existing creditors.

Who to pay when money is tight.
Can you avoid bankruptcy with outside help: If you can't pay off your debt within three years on the present terms, contact Consumer Credit Counselors, or a similar organization; they can help you make a budget and negotiate a repayment plan that may include a reduced or even zero interest rate on your existing debt. Creditors generally cease collection actions against those participating in CCC plans.

These plans usually work best when the debt is primarily credit card debt. CCC counselors sometimes exclude non dischargeable tax debt from the repayment plan, leaving the consumer paying unsecured, dischargeable credit card debt while non-dischargeable taxes or back support go unpaid. That approach seldom gets the debtor the relief needed. Debt settlement plans seldom work.

Consider Bankruptcy:
If these repayment alternatives are not feasible, consider bankruptcy.

There is no magic formula that tells you whether bankruptcy is the best choice for you.

In general, the older you are, the greater the number of your dependents; the larger your debt; the smaller your cash reserves or retirement savings; and the greater the amount of non dischargeable debt, the more likely that bankruptcy is appropriate for you.

You don't need bankruptcy protection now if you have nothing that a creditor with a judgment could take from you:

If everything you have is exempt under the law of your state, you have nothing to lose to a creditor and no need for bankruptcy protection now. What's Exempt

On the other hand, if your financial situation causes such stress that it interferes with your ability to work, parent, or sleep, perhaps you should consider bankruptcy as appropriate for your mental health rather than financial health. Particular thoughts on debt and the elderly.

Contact the Office to schedule a Consultation to discuss how Robert Spitz, Esq. can assist you with your Bankruptcy Law issues.

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