Nobody loves the idea of filing for bankruptcy. In fact, it’s the last thing many would do when facing money problems. But we at Davis, Ermis & Roberts, P.C. understand the bankruptcy laws and have used them to help countless people. While the word “bankruptcy” may sound bad, it’s sometimes a necessity and could be the only option to get you back on the right track. There’s a reason why our country has provided this option to its citizens and businesses. Meeting with us in person or over the phone is the best way to understand your options, but here’s a brief explanation of what we practice.
Chapter 7
Chapter 7 is the most common form of bankruptcy in the United States and can also be called “liquidation” or “straight bankruptcy.” Individuals and businesses, if eligible, can file a Chapter 7 action. After filing, an appointed trustee sells the nonexempt assets and uses the funds from those assets to pay off creditors. Unlike businesses, which are discussed below, individuals are eligible for a discharge after completing a Chapter 7 action.
Like individuals, businesses may be faced with a Chapter 7 action when they are unable to pay their debts. Creditors of a business may also start a Chapter 7 action without the consent of the business. Once the action is completed, the business is dissolved.
Chapter 11
Chapter 11 bankruptcy is also known as “reorganization” and is the most common choice for businesses seeking to restructure debt. Under Chapter 11, the debtor usually retains controls of all assets, and manages the business under the supervision of a creditors committee appointed by the U.S. Trustee from among the largest unsecured creditors. The debtor negotiates a reorganization plan which must approved by the creditors committee. Chapter 11 bankruptcy has the advantage of being the most flexible of the chapters.
Chapter 13
Chapter 13 bankruptcy is a powerful tool for the individual fallen on hard times or facing a temporary financial setback. This is designed for individuals with an overwhelming amount of debt but a steady income and a wish for a brighter financial future. This form of bankruptcy requires filing a repayment plan with creditors, but protects the debtor from any collection action for the duration of the plan and discharges any unpaid balance or dischargeable debts at the end of the plan. This plan does not have to pay all debts in full; it can provide for only fractional payment.