This page contains general information. Call us at (715) 832-1800 for specific advice.
Your Christianson & Freund attorney will help you look at other debt relief options in addition to bankruptcy. If you should file a bankruptcy then your attorney will help you choose the right type. Your attorney can also assist you to maximize the benefits – and avoid the pitfalls – of this complex area of law.
The person who files a bankruptcy is called a “debtor.” The amount or nature of a person’s debts may limit that person’s ability to file some types of bankruptcy. The amount of a debtor’s income may also affect access to bankruptcy relief. However, almost everyone can file some type of bankruptcy – even if they already have judgments.
In most bankruptcies the debtor seeks a discharge that wipes out debt. A bankruptcy discharge does not wipe out all types of debt. One example of a “non-dischargeable” debt is child support. To complicate matters, some debts are dischargeable under one type of bankruptcy but not another. And some debts are dischargeable only if a certain period of time has gone by before the bankruptcy filing.
Preparing to file. Before starting a bankruptcy the debtor must prepare a lot of paperwork, including a list of all of the debtor’s debts and assets. During this time a debtor may engage in exemption planning to protect assets.
The bankruptcy begins when the debtor files a “petition.” Shortly before filing individual debtors take a brief credit counseling course.
Chapter 7. A month or so after filing Chapter 7 bankruptcy the debtor meets with a Trustee. The Trustee’s primary goal is to determine whether the debtor has any assets the Trustee can sell to pay the debtor’s creditors. The law allows debtors to keep exempt property from the Trustee. In most cases the debtor has only exempt property and can keep everything (subject to the payment of any mortgages or other liens).
Unless a creditor objects (which rarely happens), a few months later the bankruptcy court issues a discharge. The debtor may not file another Chapter 7 petition for eight years. So a person considering Chapter 7 bankruptcy must take care to time the filing for maximum advantage.
Read more about Chapter 7 here.
Chapter 11. Designed for businesses, Chapter 11 can be used by individuals as well. An expensive and complex proceeding, Chapter 11 is only useful in limited situations. Chapter 11 debtors develop a plan to restructure – and, in many cases, reduce – debts. Creditors then vote on the plan. If enough creditors vote “yes” then the debtor can submit the plan to the bankruptcy judge. If the judge approves then the debtor must make payments as set forth in the plan.
Chapter 12. Only farmers can use Chapter 12 to adjust debts. In many respects, Chapter 12 is similar to Chapter 11. One difference is that creditors do not vote on the debtor’s proposed plan. Another is that there are special tax benefits available for Chapter 12 debtors. A major drawback is that for the first three to five years after the Chapter 12 plan is approved the debtor must make payments through the Chapter 12 trustee, who charges a fee of up to 10% over and above the creditor payment amounts.
Chapter 13. Only individuals (not corporations or other entities) may file a Chapter 13 bankruptcy. The debtor proposes a three to five year payment plan. Chapter 13 plans often provide for partial payment of debts. If the judge approves the plan and the debtor makes all payments then the court will issue a discharge of remaining debts. Examples of circumstances in which debtors choose Chapter 13 over Chapter 7 include: (a) debtor filed a prior Chapter 7 within eight years, (b) debtor wants to stop a foreclosure and catch up on home mortgage payments, and (c) a particular debt is dischargeable in Chapter 13 but not Chapter 7. Read more about Chapter 13 here.
Contact us for a debt relief consultation to determine the best course of action in your particular situation.
Among other things, we help people file for bankruptcy relief under the Bankruptcy Code.