Chapter 7 – Liquidation Under the Bankruptcy Code

Chapter 7, of the Bankruptcy Code provides for the “liquidation” or sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. It is also commonly known as the “fresh start” type bankruptcy. In the case of an individual, the debtor is allowed to claim certain property as exempt. In exchange for this, the debtor gets a discharge, which means that the debtor does not have to pay certain types of debts. Corporations and partnerships do not receive a discharge.

Chapter 13 – Individual Debt Adjustment

Chapter 13, also known as a “wage earner’s plan,” enables individuals with regular income to develop a plan to repay all or part of their debts over a three to five year period. Payments are made to a chapter 13 standing trustee, who makes distributions to creditors according to the provisions of a confirmed plan. Filing a chapter 13 case allows debtors to keep valuable property – especially a home and car – which might otherwise be lost to foreclosure or repossession, if the debtor can make the payments which the bankruptcy law requires to be made to creditors.

Chapter 11 – Reorganization Under the Bankruptcy Code

Chapter 11, usually filed by businesses, but occasionally are utilized by individuals with significant assets. While the debtor maintains control of the day-to-day operations of the business or the individual’s estate, the creditors and the court work to approve a plan to repay the debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of the business and/or property.

Chapter 12 – Family Farmer Bankruptcy

Chapter 12 – Like chapter 13, but it is only for family farmers and family fishermen.

While it is possible for an individual debtor to file a bankruptcy case pro se, that is, without the assistance of an attorney, it may be difficult to do so. You may lose property or other rights if you do not know the law. Chapter 13 is quite complicated, and most people filing Chapter 13 cases without an attorney do not successfully complete them. It is strongly recommended that a person considering bankruptcy consult with a bankruptcy attorney prior to filing a case.

The Fair Credit Reporting Act, Section 605, is the law that regulates credit reporting agencies. The law states that credit reporting agencies may not report a bankruptcy case on a person’s credit report after ten years from the date the bankruptcy case is filed.

Debtors must directly contact credit reporting agencies to discuss information on a credit report. Under the Fair Credit Reporting Act the credit reporting agency (and the creditor) are required to correct inaccurate or incomplete information on a credit report. The credit bureau will re-verify the item in question with the creditor at no cost to the consumer.

The Bankruptcy Court has no jurisdiction over credit reporting agencies and does not report to any of the agencies. The bankruptcy petition, schedules, and other documents are public records. Credit reporting agencies regularly collect information from the petitions filed and report the information on their credit reporting services.

Only attorneys, trustees and examiners can register to file pleadings electronically through CM/ECF. Institutional creditors can register for an account that allows a limited number of documents to be filed electronically. Contact our office for further information.

Individual debtors must complete two instructional courses to be entitled to a discharge – one before filing and one after filing. If spouses file a joint bankruptcy case, each spouse must take each class and obtain separate certificates of completion.

The Bankruptcy Code requires individual debtors to complete a course in credit counseling within 180 days before the bankruptcy filing. The briefing may be in-person, over the phone, or on the internet, and must be provided by a credit counseling agency approved by the United States Trustee. Once completed, the agency that provides the credit counseling service will provide you with a certificate for filing with your petition. The counseling agencies charge a small fee for their services which may be waived on a case-by-case basis; consult with the counselor about the availability of a waiver.

After filing a bankruptcy case, you must also complete a financial management instructional course (debtor education) in order to receive a discharge. Failure to complete the course and file proof of completion will result in your case being closed without a discharge. As with the pre-bankruptcy counseling, there is a small fee for the course which may be waived on a case-by-case basis. Consult with the agency about the availability of a waiver.

If you are incapacitated or disabled (as defined by the 11 U.S.C. §109(h)(4)), or are on active military duty in a military combat zone, the requirement for both credit counseling and financial management may be waived.

The court will deny a discharge in a later chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the second petition is filed.

The court will also deny a chapter 7 discharge if the debtor previously received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless (1) the debtor paid all “allowed unsecured” claims in the earlier case in full, or (2) the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor’s plan was proposed in good faith and the payments represented the debtor’s best effort.

A debtor is ineligible for discharge under chapter 13 if he or she received a prior discharge in a chapter 7, 11, or 12 case filed four years before the current case or in a chapter 13 case filed two years before the current case.

For additional information on all chapters, please contact our office

Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.