What types of Bankruptcy are there?


There are four types of bankruptcy proceedings available to individual debtors, each of which is highly dependent upon your financial circumstances:

  1. Chapter 7 Liquidations – Chapter 7 is often referred to as “straight” or “liquidation” bankruptcy. In this give-and-take process, debtors are relieved of their debt obligations in exchange for the forfeiture of any non-exempt property to the Trustee. In this connection, please note that most cases we file involve assets that are entirely exempt such that our clients are not obligated to give up any property. These cases are called “no asset” cases because no assets are available for distribution to the creditors.
  2. Chapter 11 Reorganizations – This Chapter is primarily reserved for large scale business debtors and is not discussed here.
  3. Chapter 12 Farmer Repayment Plans – This Chapter creates a special repayment plan for farmers and is not discussed here. Please consult our office with specific questions about Chapter 12 petitions.
  4. Chapter 13 Wage Earner Plans – Chapter 13 is often referred to as a “wage earner plan” because debtors are required to demonstrate that their gainful employment will enable them to make suitable payments under their proposed repayment plan. In addition, you must demonstrate that you have sufficient income to pay all of your current living expenses (e.g., rent, food, utilities, transportation, clothes, etc.) such that you have money left over to apply to the repayment of your debts. At the end of your plan, you will receive a discharge relieving you of your obligation to pay the unpaid balance on unsecured debts. Our office will prepare a Chapter 13 plan based on the difference between your take-home pay and necessary monthly living expenses. As simple as it may seem, determining the amount that you are required to pay to your unsecured creditors in a Chapter 13 plan is a complicated process that usually depends on a variety of factors in your case. Here are some general rules to consider:
    • The term of the plan can be no more than sixty (60) months.
    • The amount paid over the term of the plan must be enough to pay certain debts in full. These include the following: (1) income tax debt less than three years old; (2) property tax debt less than one year old; (3) business trust fund taxes (withholdings & sales taxes); and (4) back child support and alimony.
    • If you are filing to stop a foreclosure, the amount necessary to bring the loan current over a sixty (60) month period as well as pay the regular monthly mortgage payment.
    • The payment of all secured debts, such as vehicle loans, that you proposed to pay “through the plan.”
    • Any balance on attorney’s fees not paid prior to filing the case.