What is bankruptcy law?
Although there are a number of bankruptcy chapters, the three that are most relevant to individuals and small business debtors are Chapter 7, Chapter 11, and Chapter 13.
The most common type of bankruptcy. Essentially a Chapter 7 bankruptcy eliminates or discharges a person’s unsecured debt. It may also eliminate secured debt as well. There are exceptions to the rule which will be discussed with you. A Chapter 7 is referred to as a liquidation for good reason. In a few cases, debtors will be required to surrender property to a trustee who will then liquidate them to pay something towards the creditors. Chapter 7 is available to all qualified individuals and businesses.
The second most common form of bankruptcy. It is often referred to as a wage earner plan. In a Chapter 13 a debtor will pay a portion of his or her wages on a monthly basis to a trustee for up to five years. The trustee will then allocate that money to creditors in accordance with a plan approved by the bankruptcy court. Chapter 13 is available for individuals and sole proprietorships. It is not available for partnerships, limited liability companies, or corporations. There is also a debt limit. Unsecured debts, including taxes, cannot exceed approximately $420,000 and the secured debt limit is approximately $1,250,000. The Plan may pay all or, more often, only a portion of the unsecured debt.
A Chapter 13 is the only or preferred option in four situations: (1) the debtor filed a prior Chapter 7 in the previous 8 years; (2) the debtor owes significant non-dischargeable debts, such as taxes, domestic support, divorce-related debt or court fines; (3)the debtor wants to protect at-risk assets from seizure or foreclosure; (4) debtor’s income is too high to qualify for Chapter 7.
A debt reorganization. Although it is available for individuals as well as businesses, it really was written with the traditional Corporation in mind. Traditionally, it is very paper intensive and expensive. Recently, however, Congress created a small business version of Chapter 11 that is intended to be much more efficient for individuals and small businesses. It is kind of a hybrid between a traditional Chapter 11 and Chapter 13.
How can Richmond |Hill PLLC help?
Here at Richmond Hill PLLC, we have a combined total of over 40 years of bankruptcy experience. It's important to have a lawyer walk with you through the bankruptcy process. According to the American Bankruptcy Institute, lawyers represented consumers in 91.5% of the 486,347 Chapter 7 cases filed in 2017. Lawyers had their clients’ debt discharged – meaning eliminated – in 96.2% of the cases. Put another way: 428,097 people walked out of court debt free.
By contrast, people who represented themselves in Chapter 7 bankruptcy cases were successful just 66.7% of the time.
The stats are even more dramatic for consumers who chose Chapter 13 bankruptcy. Consumers representing themselves succeeded just 2.3% of the time. That number soared to a 41.5% success rate — debts were discharged after completing a repayment plan – when a lawyer represented a client in a Chapter 13 case.
Simply put, a bankruptcy lawyer will dramatically increase your odds of walking away completely debt free!