Bankruptcy Law

There are two options under the bankruptcy laws: liquidation or a repayment plan.

In liquidation, also called a Chapter 7 bankruptcy, you sell your property and use whatever cash is generated to fully satisfy creditor claims. You will be allowed to keep certain kinds of property under the exemptions allowed by federal and state bankruptcy laws. The definition of "exempt property" differs in each state, and it can include clothing, furniture, and household appliances, tools of your trade and perhaps your home or car. The trustee will also determine which of your property is exempt from sale to pay your debts. In a repayment plan, sometimes called a Chapter 13 bankruptcy, you pay a portion of your monthly income to a trustee for distribution to your creditors. A repayment plan is useful when you are behind on your home or car loan. The repayment plan can be used to extend, for up to 5 years, the time period for paying your bills and might allow you to pay less than you owe. The extended payment period has the advantage of allowing you to make smaller payments. You will be allowed to keep part of your monthly income to pay for living expenses like food, clothing, rent and medicine.

To qualify for a Chapter 13 Repayment Plan, you must have regular income and your secured debts must not exceed $291,000.00. If your unsecured debts exceed $871,000.00, you may qualify for a repayment plan under Chapter 11. Bankruptcy proceedings under Chapter 11 are more complicated than those available under Chapter 13.