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Bankruptcy Facts & FAQs

What is Bankruptcy?
Federal bankruptcy proceedings provide a fresh start for individuals and businesses dealing with an overwhelming debt load by providing them with a mechanism to repay at least some of their unsecured debts and discharging the remainder. Bankruptcy also ensures that similarly situated creditors receive equal treatment when distributing the debtor’s assets.
What are the Different Types of Bankruptcy?
The U.S. Bankruptcy Code provides for six types of bankruptcy filings that are usually referred to by the code chapter in which the procedures for that type of bankruptcy may be found. While most bankruptcies are filed under Chapters 7, 11, and 13, the following is a complete list of bankruptcy types:

  • Chapter 7 is known as a “liquidation bankruptcy” and provides for the liquidation of an individual’s or business’s non-exempt assets to repay creditors.
  • Chapter 9 provides for what is known as “municipal bankruptcy” and gives financially distressed municipalities protection from creditors while negotiating a plan to reorganize their debts.
  • Chapter 11 allows viable businesses and some individuals to reorganize and restructure their debts utilizing a payment plan.
  • Chapter 12 allows family farms and fisherman to reorganize their debt to avoid the liquidation of their assets or foreclosure.
  • Chapter 13 allows individuals earning a regular income to reorganize their debts by developing a payment plan for creditors.
  • Chapter 15 provides for international cross-border bankruptcies.
What is Chapter 7?
Chapter 7 is a form of bankruptcy available to individuals and businesses who need a fresh start. The individuals and businesses are referred to as “debtors” during the bankruptcy proceedings, and Chapter 7 debtors will have their unsecured debts discharged by the Bankruptcy Court at the conclusion of the bankruptcy.

Continue reading “What is Chapter 7?” »

What is Chapter 11?
Chapter 11 bankruptcy allows businesses that are still viable, but experiencing financial difficulties, to continue operating while negotiating a plan to restructure their debts and operations and return to profitability. Corporations and limited liability companies most often utilize chapter 11 bankruptcy, but some individuals are eligible to reorganize their affairs under Chapter 11.

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What is Chapter 13?
Chapter 13 bankruptcy allows individuals that have a regular income to develop a plan that will enable them to repay part–or all–of their debts. The plan will lay out the installment payments the debtor must pay to creditors over a period that usually runs between three and five years. While the plan is in effect, creditors are barred from pursuing any collection efforts against the debtor. After the Chapter 13 payment plan has been completed, most unsecured debts (debts for which the debtor has given no collateral) will be discharged by the Bankruptcy Court.

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Chapter 7 vs 11 vs 13
When a business or individual is considering filing for bankruptcy, they should understand what the differences are between the three most common forms of bankruptcy: Chapter 7, Chapter 11, and Chapter 13. All three types of bankruptcy provide the debtor with an automatic stay that immediately stops all collection activities, but each offers debtors different benefits and obligations.

Continue reading “Chapter 7 vs 11 vs 13” »

Who Should File for Bankruptcy?
Filing for bankruptcy will harm the debtor’s credit and, in bankruptcies involving repayment plans, can require adhering to the plan for years. Bankruptcy should be carefully considered by businesses and individuals unable to pay their bills or are dealing with disruptive creditor collection efforts. Filing for bankruptcy provides a company or individual with an automatic stay that will stop all creditor collection efforts, including home foreclosures and car repossessions during the bankruptcy proceedings.
What Debts are Eliminated in Bankruptcy?
It is usually possible for a business or individual to eliminate some or all of their unsecured debt obligations through bankruptcy. Unsecured debts include such things as credit card debt, unpaid medical bills, and most court judgments. However, there are 19 categories of debt that cannot be discharged through bankruptcy, such as tax debts, child support, alimony, criminal restitution, and debts stemming from drunk driving accidents.

Additionally, while a debtor can eliminate most debts through bankruptcy, the proceedings do not remove any liens creditors may have on the debtor’s property. Therefore if the debtor has debt secured by a lien on the property, the debt may be discharged through bankruptcy, but the creditor will still have the right to recover its collateral.

Will Filing for Bankruptcy Hurt my Credit?
A bankruptcy filing will remain on the debtor’s credit score for seven to 10 years and significantly impact the credit scores of individuals with good credit. However, most individuals considering filing for bankruptcy are having trouble paying their bills and are likely to have bad credit already. Those with bad credit will see a smaller drop in their credit scores.

More About Effects on Credit Reports »

What is Chapter 15?
Chapter 15 bankruptcy allows foreign debtors, trustees and other estate representatives with insolvency cases pending in other countries access to the U.S. Bankruptcy Courts if the debtor has assets, property, or requires other relief in the United States. One of the goals of Chapter 15 bankruptcy is to promote cooperation and communication between the U.S. Bankruptcy Courts and parties involved in foreign or cross-border insolvency proceedings.

Chapter 15 also grants foreign creditors the right to participate in cases before the U.S. Bankruptcy Courts and bars the courts from discriminating against foreign creditors. Finally, it requires that foreign creditors be notified of U.S. bankruptcy cases and of their right to file claims.

Continue reading “What is Chapter 15?” »

How Can Thomas H. Curran Associates Help?
Filing for bankruptcy can have long-term financial and legal consequences, so any business or individual considering doing so should work with an experienced attorney from Thomas H. Curran Associates to guide them through the process. Our highly qualified bankruptcy attorneys help clients took at the facts and decide whether filing for bankruptcy is the best option, which type of bankruptcy to use, and resolve other issues that must be addressed before filing. Once the client has filed their bankruptcy petition Thomas H. Curran Associates’s attorneys will ensure their client receives the guidance necessary to steer them through the often complex process to ensure their bankruptcy case is successful.

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