BANKRUPTCY & DEBT SETTLEMENT

The firm represents clients in consumer (individual) Chapter 7 and Chapter 13 Bankruptcy and debt settlement matters. 

Debt Settlement

Some people either are not eligible to file bankruptcy or simply refuse to file bankruptcy because of the stigma attached to it.  We can help those clients get out of debt without going through bankruptcy by negotiating debt restructuring and settlement arrangements with their creditors.  We have successfully assisted clients settle or restructure credit card debt, money judgments, pending litigation claims, and mortgage loan debt. 

Chapter 7 – Liquidation

In a Chapter 7 Bankruptcy, the debtor’s (the person owing the debt) “non-exempt” assets are gathered by the bankruptcy trustee and sold.  The proceeds from the sale of non-exempt assets are then used to pay the creditors (the people owed the debt) in accordance with the Bankruptcy Code.  The debtor’s goal is to have as much of its debt “discharged” as possible by the bankruptcy court.  It typically takes about four months from the date the bankruptcy petition is filed for a debtor to obtain a discharge in bankruptcy under Chapter 7. 

The debtor may retain certain “exempt” assets and is not required to pay discharged debts.  However, not all debts are discharged in bankruptcy and a discharge does not extinguish liens on property (for example, a mortgage loan on a home).  Therefore, the debtor will remain liable for non-discharged debts and property that is subject to liens may be repossessed or foreclosed upon by lien holders, notwithstanding the bankruptcy discharge. 

If the debtor’s “current monthly income” is more than the state median, the Bankruptcy Code requires application of a “means test” to determine whether the Chapter 7 filing is presumptively abusive.  If the debtor fails the means test and is unable to overcome the presumption of abuse, then the case will generally be converted to Chapter 13 (with the debtor’s consent) or will be dismissed by the bankruptcy court. 

A husband and wife may file a joint petition or individual petitions for Chapter 7. 

Filing a petition under Chapter 7 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property.  

The Chapter 7 filing fee is generally $306.00. 

Chapter 13 – Individual Debt Adjustment

Under Chapter 13 of the Bankruptcy Code, a debtor proposes a repayment plan to the bankruptcy court to make installment payments to creditors over a three to five year period.  Like Chapter 7, the debtor’s goal is to have as much of its debt “discharged” as possible by the bankruptcy court upon completion of the plan.  The greatest advantage of Chapter 13 versus Chapter 7 is that the debtor has an opportunity to save his or her home from foreclosure.  By filing under Chapter 13, a debtor can halt foreclosure proceedings and cure delinquent mortgage payments over time.

Within 30 days after filing the bankruptcy case, even if the repayment plan has not yet been approved by the bankruptcy court, the debtor must start making plan payments to the bankruptcy trustee.  If the plan is confirmed (approved) by the bankruptcy court, the Chapter 13 trustee will distribute funds already received under the plan to the creditors and the debtor will continue to make payments to the trustee in accordance with the plan, who will then distribute those payments to the creditors.  In this sense, a Chapter 13 repayment plan is like a consolidation loan.  Under the plan, the debtor may not incur new debt without consulting the trustee.

If the bankruptcy court declines to confirm the plan, the debtor may file a modified plan or convert the case to a liquidation case under Chapter 7.  If the bankruptcy court declines to confirm the plan or the modified plan and instead dismisses the case, the bankruptcy court may authorize the Chapter 13 trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors). 

A Chapter 13 debtor is generally entitled to a “discharge” upon completion of all payments under the Chapter 13 repayment plan.  The discharge generally releases the debtor from all debts included in the plan. Creditors provided for in full or in part under the plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations. 

A husband and wife may file a joint petition or individual petitions for Chapter 13. 

Filing a petition under Chapter 13 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property.  

The Chapter 13 filing fee is generally $281.00. 

Bankruptcy filing forms can be found by clicking here.