This chapter of the bankruptcy code is liquidation or sometimes referred to as straight bankruptcy. Under most circumstances, assets such as one’s house or car, up to the limit of our personal exemptions, even if secured by a lien or mortgage, can be retained by maintaining the payments. Unsecured debts such as credit cards and signature loans are typically discharged. Under certain circumstances, the court appointed trustee may seize and sell certain assets if they are not under lien and not subject to protection by the state exemption laws wherein the proceeds are distributed to one’s creditors. It is critical to have a thorough and candid discussion of all of one’s assets and debts with your attorney so that a proper chapter of the bankruptcy code can be chosen.
This chapter of the bankruptcy code is a reorganization chapter sometimes referred to as a wage earner plan. The reorganization of one’s debts, including bringing a mortgage current, can occur over a period of up to 60 months. To retain an asset secured by a lien, provisions in the plan of reorganization are made for monthly payment to any secured creditors through and under the auspices of a Chapter 13 trustee. There are legal and strategic reasons why one would choose a Chapter 13 over a Chapter 7 and the attorney will be able to strategize over which chapter better suits your needs.
This chapter is the only reorganization chapter for corporations but can also be used by individuals or married couples either when its unique rules make it beneficial or when an individual or married couples debts exceed the Chapter 13 limits. In most cases, the debtor, whether a corporation or individual, continues to operate their business or work their job. On occasion, when the court deems it necessary, a trustee or examiner can be appointed to oversee the business. Typically Chapter 11 affords a longer period of time in order to reorganize and pay back all or a portion of the debts. Chapter 11s, however, require far more paperwork and monthly reporting than a Chapter 13 which also makes them significantly more expensive to represent. All bankruptcy chapters offer an immediate or automatic stay of civil actions and lawsuits against the debtor which can lead to saving ones’ home or business.