Bankruptcy Xml

Bankruptcy is the legal remedy available to individuals and businesses that become insolvent and are unable to repay debts. Insolvent businesses often file for Chapter 11 reorganization when their financial situation has become untenable, but not insurmountable. By the time that an individual files for bankruptcy, however, the situation often has progressed past the point of salvaging.

There are three primary types of bankruptcy available to individuals and businesses. Chapter 7 is a liquidation bankruptcy available only to individuals. Chapter 11 is a reorganization bankruptcy most often used by businesses, but in some cases also is used by individuals. Chapter 13 is the most common reorganization form of bankruptcy used by individuals. It is not available to businesses.

Chapter 7 Bankruptcy

The Chapter 7 bankruptcy is the most common type of bankruptcy proceeding filed by individuals. Chapter 7 essentially wipes the slate clean so that the individual, married couple or separately - filing married individual can start fresh. It is known as a liquidation approach to discharging debts, but in most cases, the filer is able to retain all personal property. In some cases, the filer can exclude debts for a mortgage or a car loan so that he can retain those items and continue paying the debt owed on them.

Generally, the "clean slate" applies only to consumer or medical debt. Federal student loans cannot be discharged through bankruptcy, and neither can most delinquent tax situations. How clean the clean slate is primarily depends on the types of debt held by the bankruptcy filer. In most cases, a Chaper 7 bankruptcy can be completed in four to six months' time. It remains on the filer's credit report for ten years, and the filer cannot file for Chapter 7 again for at least eight years.

Chapter 11 Bankruptcy

Chapter 11 is highly uncommon among individuals, but it is the most common form of bankruptcy taken by businesses. Whereas Chapter 7 focuses on liquidation, the purpose of a Chapter 11 bankruptcy is to reorganize debts so that the filer is able to pay them. Chapter 11 also allows the business to continue operations during the reorganization period. Neither creditors nor the bankruptcy trustee can take property from the debtor who has filed for protection under Chapter 11. Thus the business retains the ability to continue to conduct its business, and retains the tools that it needs in that effort.

Chapter 11 is available for individuals as well, but it is uncommon that individuals enter into Chapter 11 proceedings. Where individuals file under Chapter 11, it generally is because their debts are higher than the limits permitted in Chapter 13.

Whether the Chapter 11 filer is a business or an individual, the process is that the debtor proposes a debt repayment plan, one that generally includes significant concessions on the part of creditors. Creditors vote on whether they will accept the debtor's proposals. The bankruptcy court orders a plan that creditors have had a say in creating, binding both creditors and the debtor to the terms of the plan ordered by the court.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy often is referred to as the wage-earner's bankruptcy, because it requires that the individual filing for bankruptcy under Chapter 13 has a regular, disposable income. The filer also must have less than $336,900 unsecured debt and less than $1,010,650 in secured debt. The bankruptcy court establishes what the debtor can afford to repay on a monthly basis, and groups creditors into a hierarchy in which they will be paid. Repayment plans extend from three to five years. Creditors can expect to be paid between zero and 100 percent of what the debtor owes them, but neither creditors nor the bankruptcy trustee can take property away from the debtor. A Chapter 13 bankruptcy also can remain on the debtor's credit report for up to ten years.

Penachio Malara LLP is a law firm in White Plains New York specializing in Chapter 7 bankruptcy law. Since 1991 they have helped hundreds of clients protect from foreclosure and insolvency. Visit us at http://www.whiteplainsnybankruptcyattorney.com/

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