Archive for August, 2009

If you live are under tremendous financial pressure and unable to pay off your outstanding debts, then filing bankruptcy may be the only viable option that you have.

As an individual you have a choice of filing for bankruptcy under two chapters. An explanation of both the chapters – and how to choose the chapter more suitable for you – is given below.

Chapter 7

You can file for bankruptcy under Chapter 7 only if you pass the “Means Test”.

This test involves calculating your gross income and assets and deducting your liabilities and your expenses during the past 6 months prior to you having filed for bankruptcy. These numbers are then compared with the average median income of a similar sized family in Texas.

If your net income is lower, then you qualify for filing under Chapter 7; otherwise, you may have to file under Chapter 13. Once you file under Chapter 7, the court will appoint a trustee, who will sell off your unprotected or non-exempt assets to pay off your creditors.

Your case can be discharged within 6 months if you file for bankruptcy under this Chapter. Since normally your home and cars will be exempt, you will be able to retain these assets.

Chapter 13 Explained

Unlike Chapter 7, filing under Chapter 13 will give you the chance to repay your outstanding debts over a longer period of time, usually between 3 to 5 years. You also have the chance to keep all your property.

As with Chapter 7, once your attorney files for bankruptcy under Chapter 13 on your behalf, your creditors will no longer be able to foreclose on your home or take your possessions. By law, they must also stop harassing you immediately.

Once you file under Chapter 13, you will need to submit a repayment plan to the court, detailing your plan to pay off your debts. Your bankruptcy attorney can even try to get a part of your loan discharged, so that you can pay off the rest.

If your plan is approved, the court will appoint a trustee, who will monitor your repayment schedule to ensure that you stick to it.

Chapter 13 or 7?

Usually (depending on the situation), individuals try to file for bankruptcy under Chapter 7 in order to get most of their outstanding debts discharged. The time taken to do this is also quite less as compared to filing under Chapter 13.

The problem is that with the new, stricter laws put into place after October 2005, you might find it difficult to file under Chapter 7 and might have to file under Chapter 13. Most of your assets may also be disposed of by the court trustee in order to satisfy your creditors.

This might not happen under Chapter 13.

Therefore, Chapter 13 allows you to stay in control as you chart out a repayment plan stretching between 3 to 5 years. If you are wary of losing many of your assets and do not mind a longer repayment plan, then you could ask your bankruptcy attorney if you can file under Chapter 13.

However, if you want your case to get discharged within a short time and are unable to come up with a long-term plan to raise money to pay off your creditors, then filing under Chapter 7 would be a better option.

So, compare both chapters with your bankruptcy attorney before deciding on which chapter is the better option.

How To Survive Bankruptcy

Chapter 11 bankruptcy is available to any business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. Whereas, Chapter 7 governs the process of a liquidation bankruptcy, and Chapter 13 provides a reorganization process for the majority of private individuals.

When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11.

In Chapter 7 the business ceases operations, a trustee sells all of its assets, and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company. In Chapter 11, in most instances the debtor remains in control of its business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court.

This Chapter is by and large used for business bankruptcies and restructuring. It not considered as a viable option for individual consumers given that it is far more complex and expensive to pursue. Chapter 11 permits businesses an opportunity to reorganize themselves, allowing them a chance to restructure their debt and get out from beneath specific troublesome deeds and agreements. Normally, a business is permitted to carry on functioning at the same time as it is in Chapter 11 under the watchful eye of the Bankruptcy Court and its appointees.

Another option that can be utilized under is Chapter 11 is to liquidate the assets of the business and reimburse the creditors from the realization. Chapter 11 bankruptcy is almost certainly the most flexible of all the chapters, and the same time the hardest to generalize. Its flexibility makes it generally more expensive to the debtor. However, the success rate of Chapter 11 reorganizations is miserably low, estimated at only 10% or less. Therefore, filing for Chapter 11 Bankruptcy should only be used as a last resort.

A much better solution is Debt Settlement. Often referred to as Debt Negotiation, Debt Settlement is a direct and ambitious approach to debt reduction and it is best suited for individuals that have considered filing for Bankruptcy protection.

File Bankruptcy

Chapter 13 Bankruptcy is a legal process that differs from traditional debt consolidation in many important ways. If you are trying to decide between these two processes, this article will help you make your decision.

While a Chapter 13 bankruptcy is actually a type of debt consolidation, it differs a lot from traditional debt consolidation in certain important legal aspects. The most glaring and important difference is the power it wields. When you File Bankruptcy Chapter 13 of the Federal Bankruptcy Code you are protected, which can be a huge advantage when you are needing relief from debt.

Chapter 13 will Protect You Immediately

An automatic stay will lock into place as soon as you file a Chapter 13 bankruptcy. It’s in the form of a Bankruptcy Court injunction which effectively stops most recovery efforts that have been launched against you. Garnishments, repossessions, foreclosures, creditor harassment and license suspensions will cease. Your creditors will be forced to stop all such actions because this injunction has the legal chops to back it up. In reality it’s a court order that mere debt consolidation services cannot provide.

Chapter 13 Severely Reduces The Total Debt

With the power of a Federal judge ordering your creditors to stick to the repayment plan, you may be allowed to pay as little a 10% of any unsecured debts. Of course there are certain qualifications you must meet. If you can meet these qualifications the other 90% will be eliminated. You’ll be able to pay off your debts much more quickly because of the severe reduction in principal owed. This is something that traditional debt consolidation plans cannot do. They can only ask the creditor to lower the interest rates and reduce the balances owing.

Chapter 13 Covers Most Debt

In Chapter 13 bankruptcy, such specific debts as tax debt, child support arrears, car payments, and mortagage arrears can be rolled into one monthly payment. This is good news because the majority of traditional debt consolidation services allow only specific debts in the settlement plan. Wouldn’t you rather have protection from every one of your creditors?

Chapter 13 Bankruptcies Will not Drag and Take Months to Complete

You’ll only have to wait between 3 and 5 years for Chapter 13 bankruptcy to conclude, at which time all dischargeable debts are eliminated. Conversely, a more traditional consolidation could drag on indefinitely while you struggle with balances that remain high and continue to accumulate additional interest and finance charges.

Chapter 13 Protects Your Property

You won’t be required to post any collateral in order to proceed with Chapter 13 bankruptcy if you cannot afford the proposed monthly payments. Many home equity loans and traditional debt consolidation companies force you to risk losing your home and your property.

Chapter 13 Applies No Late Fees or Interest

With Chapter 13 bankruptcy, the payments you make towards your unsecured debt will usually be put against the principal, thus drastically shortening the amount of time it will take you to repay that debt. In fact, debts that exist before filing bankruptcy will not accrue late fees, and in most cases will be repaid free of interest, unlike the usual debt consolidation process.

Chapter 13 Requires the Creditor to File A Proof OF Claim

Under Chapter 13 bankruptcy all unfiled claims are eliminated if the creditor fails to file a proof of claim with the Bankruptcy Court. It happens fairly frequently that a creditor may be listed in the Chapter 13 bankruptcy file, but forget to do the proper paperwork, thus effectively eliminating themselves from the consolidation. If you complete the terms of your Chapter 13 repayment plan, such claims are ruled invalid, and you never have to pay them back.

Chapter 13 Takes Care of Your Important Debts First

Most of your secured loans will be paid off first at the conclusion of a Chapter 13 bankruptcy plan. This includes such things as mortgage and automobile payment defaults. Unsecured debt payments such as credit cards and medical bills are taken care of after secured and other important claims have been paid. You will probably incur penalty charges under a normal debt consolidation company in return for delaying payments to unsecured creditors. These companies also give preferential consideration to home finance companies and car payments, which leaves little for the remaining claims. The bigger the balance owing, the bigger the penalty charges.

How To Survive Bankruptcy

Answerer asked:


If I have stock in company that goes through bankruptsy, what happens to the stock owned by shareholders?

I’m not talking about an Enron-style collapse, I mean a company that goes through bankruptcy, but survives and hopefully will eventually recover.

How To Survive Bankruptcy

aikon56 asked:


In recent news, companies could be forced to Bankruptcy. Is this the same as “companies can be forced into Bankruptcy Protection”?

I thought Bankruptcy protection is “PROTECTION” against Bankruptcy?

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