Bankruptcy: An Overview

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A brief overview of Bankruptcy Chapter 7, Chapter 11, and Chapter 13.

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Bankruptcy: An Overview

  1. 1. Bankruptcy: An Quick Overview<br />by<br />BFD Lawyers<br />Albuquerque Bankruptcy Lawyers<br />
  2. 2. Definitions<br />Debt – is an obligation to pay someone.<br />Creditor – the person to whom the obligation is owed. <br />Secured Debt – debt that is backed by some sort of collateral (home mortgage). <br />Unsecured Debt – debt that is not backed by collateral (medical bills, credit cards).<br />
  3. 3. Bankruptcy Rationale<br />Created so debtors could have a fresh start.<br />Higher income individuals have to file bankruptcy under Chapter 13 as opposed to Chapter 7. <br />Included in the United States Constitution.<br />Available to individual persons and businesses alike.<br />Businesses cannot file for Chapter 13 however. <br />
  4. 4. Different Types of Bankruptcy<br />Chapter 7: commonly known as the liquidation chapter, can be used for both businesses (although there are some exceptions) and individuals.<br />Chapter 11: reorganization, typically used for businesses.<br />Chapter 13: repayment, used for debtors who cannot meet the means test (because they make too much money).<br />Note that bankruptcy can be voluntary or involuntary (where a creditor initiates the bankruptcy)<br />
  5. 5. Chapter 7 – Overview<br />The bankruptcy process consists of gathering the individual’s assets, excluding assets according to state or federal exemptions, liquidating the remaining assets and paying creditors.<br />Chapter 7 bankruptcy allows debtors to discharge their most of their unsecured debt, because secured creditors are first to get asset proceeds. <br />
  6. 6. Chapter 11 – Overview<br />Chapter 11 is typically used for struggling businesses. Reorganization requires a bankruptcy attorney with experience in Chapter 11 bankruptcies. Any business also needs to be represented by an attorney as a business cannot file a pro se bankruptcy. <br />
  7. 7. Chapter 13 - Overview<br />Chapter 13 bankruptcy is used for those debtors with higher income. Debtors that cannot qualify for Chapter 7 bankruptcy are pushed into Chapter 13. <br />Basically Chapter 13 bankruptcy sets up a payment plan where the debtor pays creditor back (interest free) over a 3 – 5 year period.<br />
  8. 8. Other Considerations<br />Creditor collections (wage garnishments, phone calls, etc) usually generate a rapid desire to initiate a bankruptcy. As an Albuquerque bankruptcy attorney, I have seen how a bankruptcy can give debtors peace of mind by stopping creditor collections. <br />Having a local bankruptcy attorney is also important because the attorney will assist the debtor in choosing the right exemptions to allow the debtor to keep most of their property. <br />

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