Bankruptcy

The choice to file for bankruptcy is a difficult and complex decision. It may be the best solution for financial woes, or other solutions may be better. Let us help you decide what's best for you.

Chapter 7: Gaining the Fresh Start you need and deserve.

Who is eligible?

· Individuals and Married Couples
· Corporations
· Business Entities (Sole Proprietors/
Partnerships)

A Chapter 7 Bankruptcy is liquidation (sale) of your non-exempt assets (property) to pay off creditors. Although it is called liquidation, many times thereare no assets to sell and you simply gain approval to no longer pay back debts. Many or even all of your assets (like your car, home furnishings and clothing) may be exempt and not subject to sale.

You are only eligible for a personal Chapter 7 bankruptcy if you earn less than a certain amount, determined by "means testing" which takes into account your household size and income as well as some expenses. This is on a case-by-case basis and needs to be evaluated by your attorney.

Corporations or LLCs that file for Chapter 7 bankruptcy do not face a means test, but unlike Chapter 11 filings you cannot continue the business after discharging debts. A Chapter 7 for a business is only used when you plan to close your doors for good.

Filing for bankruptcy has the immediate effect of halting collection activities and staying any collection lawsuits, bringing you immediate emotional and financial relief.

When there is high debt and little ability to pay back creditors, Chapter 7 may be your best choice. After a Chapter 7 Bankruptcy is completed, people usually have most of their debts eliminated or discharged.

If eligible, a person or business has a great opportunity to eliminate debts and move forward in a relatively short time. You get a "fresh start" and can begin rebuilding your life and credit without the debt that has burdened you for so long.

Keep in mind, there are some debts that are non-dischargeable, such as child support, alimony and some tax debts.


Chapter 11: Creating a Plan to repay debts and save assets.

Who is eligible?

· Individuals
· Corporations
· Business Entities (Sole Proprietors/Partnerships

A Chapter 11 Bankruptcy is a reorganization of debt.

Individuals who have debt which exceeds the dollar limits for a Chapter 13 ($360,475 of unsecured debt like credit cards and $1,081,400 of secured debt like mortgages) must file a Chapter 11 if they want to reorganize. This allows them to develop a plan to spread their debts over a period of time without losing all their assets. Typically a Chapter 11 individual debtor is someone who has millions of dollars in debt and assets. However, with home prices and mortgages what they are in the Bay Area, these limits are not as high as they might initially seem. Chapter 11 is the sole option for business entities that wish to reorganize and continue in business, such as corporations, partnerships and limited liability companies.

Chapter 11 allows businesses to remain in operation while giving them the opportunity to seek new financing as well as streamline their financial operations.

Chapter 11 Bankruptcy allows the business bankruptcy protection while it carries on business and stays open for business. Customers may not even be able to see any difference in the business operations which keeps customer relations intact and the business is still able to earn money.


Chapter 13: A Plan to repay an affordable amount each month.

Who is eligible?

· Individuals and Married Couples Only, no business entities

A Chapter 13 Bankruptcy is a reorganization where people develop a Plan to pay back a portion or all of their debts over a set period of time not to exceed 5 years. People are eligible for a Chapter 13 bankruptcy if they owe less than $360,475 of unsecured debt (such as credit cards) and $1,081,400 of secured debt (such as mortgages or home equity lines of credit). Many people are able to pay backsome of their debts but not all. Sometimes interest rates are so high that outstanding balances continually increase to unreasonable minimum monthly payments. The hole of debt gets deeper and deeper with no way out.

A Chapter 13 might be filed instead of Chapter 7 if you got behind on your mortgage payments and want to prevent foreclosure and keep your house. Past due mortgages payments can be spread over a period of time not to exceed 5 years and foreclosure is stopped.

You also might have net income that barely exceeds your basic (allowable) living expenses. For example, you have disposable income of $1,000 per month after you pay your basic living expenses but your minimum monthly credit card payments are $2,500 per month. In this situation, you have the ability to pay back the creditors something, just not all of what you owe.

At the end of the Plan Period, you receive a discharge/release for all the amounts that you were not able to pay.