Bankruptcy is Federal law that provides relief from debts. There are four chapters of the United States Bankruptcy Code applicable to an individual. The specific chapter pursuant to which a Bankruptcy is filed is dependent upon the specific needs of the individual Debtor. The four chapters are as follows:

Chapter 7, otherwise known as Liquidation - Generally, a Chapter 7 Liquidation provides the Debtor relief from payment of his or her obligations. These obligations include credit cards, medical bills, utility bills, auto loans, and mortgage loans. However, a Debtor that desires to keep a home or vehicle may, in many circumstances, enter into a reaffirmation agreement (agree to continue payment of the debt) subsequent to the Bankruptcy filing and may then retain the related home or automobile.

Chapter 13, otherwise known as Adjustment of Debts of an Individual with Regular Income - A Chapter 13 Bankruptcy is a payment plan. Pursuant to such plan a Debtor must contribute all of his or her net income in excess of a reasonable budget to the Plan. These contributions will be paid to the Creditors in a specific statutory order. A Chapter 13 Bankruptcy is generally used to save a home from foreclosure, to save an automobile from repossession, or when Debtors do not otherwise qualify for a Chapter 7 Liquidation.

Chapter 11, otherwise known as Reorganization - This chapter is often used by businesses having financial difficulty and needing relief to continue operating. This type of bankruptcy allows the Debtor to reorganize and continue in business. Although this Chapter is available to individuals, most Debtors are not engaged in business or a type of business that requires reorganization. Accordingly, this Chapter is rarely used for individual Debtors.

Chapter 12, otherwise known as Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income - This is similar to a Chapter 13 and only applicable to family farmers and fishermen. Accordingly, it is of no use for most Debtors.

The Bankruptcy process is started by the filing of a Bankruptcy Petition. In a Chapter 7 matter, the Court will assign a Bankruptcy Trustee and set a date for the First Meeting of Creditors. Notices will be sent to all Creditors listed in the Bankruptcy Schedules. The Debtor and his or her counsel appear before the Bankruptcy Trustee for the First Meeting of Creditors. Creditors are invited to attend as well. Generally, the Debtor is sworn in and the Bankruptcy Trustee asks various questions about the Bankruptcy Petition including whether or not it is a true and correct copy of the Bankruptcy Petition and Schedules, whether all assets have been included, all debts have been disclosed, and the Petition, Schedules and other documents are complete and accurate. At the conclusion of the First Meeting of Creditors, the Trustee generally makes a determination or whether or not there are sufficient assets to gather and liquidate to pay Creditors. If the Trustee determines that there are no such assets, he will file a report with the Court indicating so and shortly thereafter the Debtor will receive a discharge.

In a Chapter 13 action, a Trustee is similarly appointed, the First Meeting of Creditors is scheduled and Notices sent. The Debtor also appears before the Trustee and is subject to examination and questioning. The Chapter 13 Trustee is often most concerned about the Debtor’s income and expenses which determine the payment to the Plan. Once satisfied that this Plan is appropriate, the Trustee will recommend confirmation by the Court. The Debtors will make monthly payments pursuant to the terms of the Plan until all of the unsecured Creditors are paid in full or 60 payments have been made pursuant to the Plan at which time they will receive a discharge.

Upon the filing of any Bankruptcy Petition the Automatic Stay is triggered. This prohibits Creditors from making any contact with the Debtor to collect the debt without specific permission from the Bankruptcy Court. Violations by the Creditors are punishable generally through monetary sanctions. This will stop the Creditors from calling, garnishing wages, foreclosing on homes and otherwise attempting to collect the amounts due during the pendency of the case. Upon discharge, the Creditors are forever barred from further collection action.

Spouses often file jointly. This allows both to have their debts discharged at the same time within to the same proceeding. This is often most economical because they only incur one attorney fee and one filing fee with the Bankruptcy Court. Each of the spouses will have to sign the bankruptcy petition and appear at the First Meeting of Creditors.

Important notice required by Federal Law
We are a debt relief agency pursuant to Federal Law §528 of Title 11 of the US Code. We provide legal assistance and help people file for bankruptcy relief under the Bankruptcy Code.