With all the talk about Bankruptcy, you may be wondering what options are available. There are four types of Bankruptcy cases-Chapters 7, 11, 12, and 13. Chapter 12 is one that is seldom used in Orlando. However, this Chapter is very often utilized in the Mid-West. Chapter 12 is reserved for Family Farmers and Fisherman, and we don’t have too many farmers and fisherman in Orlando!
Chapter 11 is another option. This complex Chapter in Bankruptcy is for Corporations or individual people who have a huge amount of debt. Chapter 11 is usually filed by corporations trying to stay in business. Few individual people fall under Chapter 11, but some people who own their home and a few rental properties may be over the limit in debt to file another type of Bankruptcy. These folks may be forced into Chapter 11 which is very expensive and not easy for individuals to successfully complete.
Most ordinary people, whether it is one spouse filing Bankruptcy alone or a husband and wife filing jointly, fall into either Chapter 7 or Chapter 13.
Chapter 7 is probably the most common Chapter in Bankruptcy. Chapter 7 is known as a “Liquidation.” Most all of the debts are simply "wiped out" in a Chapter 7. In exchange for the “fresh start” with a clean financial slate, some debtors (people filing Bankruptcy) must give up some assets. Some assets could be auctioned with the proceeds going to pay down some of the debt. This is how the Chapter received its name of “Liquidation.” Most people who file Chapter 7, however, do not have their property taken away. In fact, in a Chapter 7 most people keep all of their assets owned free and clear.
A Chapter 13 is known as a “Reorganization” for individuals. It helps consolidate their debts into one monthly payment. Creditors (people to whom money is owed) are paid either in full or partially over a three or five year period. At the end of the repayment period, most debts not paid off in full, are discharged anyway. A Discharge relieves you of the legal obligation to pay a debt. The debtor files a plan to pay all of the debt or part of the debt from current income. Most people file Chapter 13 if they are behind on their mortgage or car notes or if they have a lot of property over their limits allowed by law (“exemptions”) and they do not want to give up the property in a Liquidation (Chapter 7).
It is important to provide your attorney with complete information about the property you own, the debts you owe, and your income and expenses. That way, the attorney can properly analyze your individual situation and make a recommendation as to which Bankruptcy option is best for you.