Bankruptcy Overview

If you are facing bankruptcy as an individual, it can be a very frightening prospect. And bankruptcies for businesses ultimately affect the livelihoods and lifestyles of each business' employees. But filing for bankruptcy isn't something to fear for its own sake — it can be a useful tool to help you gain a firmer footing and repair your finances.

Bankruptcy is a procedure under federal law which allows debtors — both households and businesses — to eliminate some bills and repay others over a period of time, usually 60 months.

There are five chapters of bankruptcy, each for certain situations.

Chapter 7

Is the most common and is used by consumers and businesses. Chapter 7 eliminates many debts such as credit card and medical bills not secured by collateral, also known as unsecured debts, in exchange for the liquidation of assets not protected by federal or state exemption laws. Debtors may retain certain exempt property.

Debtors may also pick and choose which debts he/she would like to eliminate and which debts he/she would like to reaffirm. There is no repayment plan in a Chapter 7. To qualify for Chapter 7 an individual must be under the state median income levels.

Chapter 13

Is a debt reorganization plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. The repayment plan typically lasts between three and five years. During the duration of the plan creditors are forbidden from continuing collection efforts. Chapter 13 is akin to a court-protected repayment plan. The filing of a Chapter 13 stops accruing interest and penalties. One advantage of a Chapter 13 over a Chapter 7 is the ability to cure delinquent mortgage payments over the duration of the plan and save a home from foreclosure.

Chapter 11

Is similar to a Chapter 13 plan but is a debt reorganization and pay-back plan for businesses, and also by some consumers with too much debt to qualify for Chapter 13.

Chapter 12

Is similar to Chapter 13, designed for family farmers and fishermen.

Chapter 15

Applies to bankruptcy cases involving parties in more than one country.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.