C is for Chapter
Chapter 7 bankruptcy is the most common bankruptcy that people file. This is the chapter that gets rid of most consumer debts in about 90 days. Most credit cards, medical bills, repossessions, personal loans are dischargeable in a chapter 7 bankruptcy. Some debts, like parking tickets, some taxes, student loans, and child support do not discharge in a chapter 7.
Further, mortgages and car loans are either surrendered, reaffirmed, or redeemed in a chapter 7 case. Finally, the chapter 7 trustee can sell any un-exempt assets to pay to the unsecured creditors, but in a majority of chapter 7 cases, assets are exempt and there is no liquidation.
Chapter 11 bankruptcy is for corporations, or for individuals who don’t qualify for another chapter. These are major restructurings, and these are the ones you hear in the news, chain stores, department stores, airlines and such. I don’t do chapter 11 cases, but I can get you a referral as needed.
Chapter 12 Bankruptcy is for family farmers. I do not practice chapter 12 bankruptcy law, so you should contact a chapter 12 bankruptcy attorney. The Chicago Bar Association has referrals.
Last, is chapter 13 bankruptcy, or wage earners bankruptcy. People who don’t qualify for chapter 7 file chapter 13. In Chapter 13, a debtor repays a portion of their debts, based on their ability to pay and based on their assets. Furthermore, a chapter 13 plan can pay back as little as 0% to the unsecured creditors, and up to 100% of the debt back. This is based on any un-exempt equity in the debtor’s assets, and based on the debtor’s monthly income and means test calculations.
Consequently, a debtor’s repayment plan pays back enough of the debt to protect the un-exempt assets, and a percentage of the debt back, based on the disposable monthly income on the means test, whichever is higher. Any remaining unpaid debts get discharged at the completion of a confirmed chapter 13 case. Lastly, chapter 13 can help with tickets, taxes, child support too.
Contact us today for a free consultation about chapter 7 or chapter 13 bankruptcy. We’ll be happy to discuss the differences with you and help show you which chapter would be best based on your specific situation.