What Is Bankruptcy Law?

Filing bankruptcy is more than a way to get out of debt. It is a legal tool that has helped countless families and businesses reorganize and rebuild in the wake of severe financial hardship. Choosing bankruptcy for yourself, your family, or your business can be a stressful decision, but the process of gathering the information and help you need doesn’t have to be.

Understanding bankruptcy and other debt relief options can help position you or your business for future growth. Whether that is knowing which chapter you should file or what kinds of debts you can and cannot eliminate, the information on this page is designed to help you get started with some bankruptcy basics. Speak with a qualified bankruptcy law attorney for specialized legal advice.

Types of Bankruptcy

Bankruptcy is a process that helps individuals and businesses find relief from debt. There are different kinds of bankruptcy. Not all are available in all circumstances.

The various types of bankruptcy, referred to as “chapters” due to their placement in the U.S. Bankruptcy Code, can also handle debt differently. They can remove the debt entirely in some cases or allow for a restructured payment plan in others.

Which type of bankruptcy you might file under can be influenced by many factors, such as whether you are a person or a business, whether you have reasonable means to pay back your debt or not, and the amount of debt you might be facing.

Get Experienced Legal Guidance for Your Bankruptcy

You do not have to go through bankruptcy alone. Use the Super Lawyers directory to find the top bankruptcy attorneys near you to protect your rights and finances.

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Chapter 7 Bankruptcy

Chapter 7 is the most common form of bankruptcy in the United States. It lets both individuals and businesses sell their assets to pay their creditors.

You have probably heard this type of bankruptcy referred to generally as “liquidation.” Some property is exempt from liquidation. Exempt and non-exempt property varies by state law.

While Chapter 7 can discharge credit card debt, medical bills, and personal loans, it will not discharge taxes, student loans, child support, or alimony.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is an alternative to Chapter 7. It is most commonly used by businesses. Individuals typically only file for Chapter 11 when they don’t want to liquidate all their assets but don’t meet the debt requirements of Chapter 13. Chapter 11 bankruptcy may also affect corporate partnerships and stakeholders.

Chapter 11 allows business debtors to remain in business and adjust their debt. This type of bankruptcy is thought of as a restructuring or reorganization of the business. Companies may file for Chapter 11 bankruptcy voluntarily, or creditors may file a petition with the bankruptcy court to force Chapter 11 on a business. The business will create a reorganization plan that will allow it to pay its bills over time.

Chapter 12 Bankruptcy

Chapter 12 bankruptcy allows family farmers or family fishers to create and carry out a plan to repay their debts, much like Chapter 11.

Qualifying debtors will be given a specific amount of time to complete their payment plan — usually five years. Still, allowances are often made because farming and fishing are seasonal in nature. Bankruptcy courts have a strict definition of who qualifies for Chapter 12.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is an alternative to Chapter 7 available to individuals. Sole business proprietors may also be eligible for Chapter 13 in some cases. Chapter 13 allows debtors to create a repayment plan under which they will repay all or part of their debts over a period of time — usually three to five years.

Filing a Chapter 13 bankruptcy petition automatically stops most collection actions in a process known as a “stay,” but this does not apply to all collection actions. To qualify for Chapter 13 bankruptcy, a debtor must meet specific income and debt requirements.

How Much Will It Cost?

From chapter to chapter, state to state, and case to case, bankruptcies vary in cost. It is advisable to speak with multiple attorneys before you decide which to hire, and all of them should estimate the price in that initial meeting.

“Generally, in Nevada, for example, a Chapter 7 ranges from $2,000 to $3,000,” says Nedda Ghandi, an attorney at Ghandi Deeter Blackham in Las Vegas. “A Chapter 13 is a little bit less out of the gate. You pay less upfront, between $1,000 and $2,000. But the overall cost is between $5,000 and $7,000 over the course of five years.”

Should I Talk to a Lawyer?

Each chapter of bankruptcy has specific requirements that must be met, including income and debt requirements, filing requirements, and evidence requirements. Because each bankruptcy chapter protects you and your assets differently, it will be crucial to make sure you file under the chapter that best fits your situation.

A lawyer will anticipate potential problems with your case and advise you on approaching them. Your lawyer will also keep track of deadlines and file all the paperwork with the necessary courts and agencies, giving you one less thing to worry about.

Common Questions To Ask a Bankruptcy Attorney

Below are some common questions you might want to consider when meeting with an attorney.

1. What types of bankruptcy cases have you worked on in the past?
2. Are there alternative debt relief measures I can take?
3. Will I lose my personal property if I file for bankruptcy?
4. What are my state exemptions and non-exempt assets?
5. Which bankruptcy forms do I need?
6. How does bankruptcy filing affect my credit rating?
7. Are there debts that can’t be discharged in bankruptcy?

Finding the Right Attorney for Your Needs

It is essential to approach the right type of attorney so that you can make sure you hire someone who can help you through your entire case. To do so, visit the Super Lawyers directory and look for an attorney specializing in bankruptcy law.