Understanding Bankruptcy Options

Positioning Yourself for a Fresh Start through Bankruptcy

Under Title 11 of the United States Code, bankruptcy laws were established to assist financially distressed individuals and organizations with debt relief. After a bankruptcy has been granted and debts have been discharged, debtors are positioned to gain stronger financial footing, and repay debts, such as mortgage and vehicle loans, on more affordable terms. The bankruptcy positions them to make a fresh start.

Bankruptcy provides for the reduction or discharge (elimination) of various types of debt. Depending on individual circumstances involved, the Court may discharge the entire consumer debt (as in a Chapter 7 filing) or provide a plan for repayment of non-dischargeable debts over time (as in a Chapter 13 filing).

To determine the chapter of bankruptcy for which you qualify, you must fill out a form called the “Means Test” and provide details about your income and expenses, based on your personal records. Some information needed to complete the form comes from the Census Bureau and the Internal Revenue Service (IRS). For questions related to the means test, contact Solomita Law or email the United States Department of Justice at ust.mt.help@usdoj.gov

ABOUT THE BANKRUPTCY CHAPTERS

The bankruptcy chapters address the financial needs of different types of entities and employ different qualification criteria. While Solomita Law focuses our practice on reducing stress and uncertainty associated with Chapter 7 and Chapter 13 bankruptcy filings for our clients, we are happy to share information about other bankruptcy chapters, as well. Below are short summaries of issues and options addressed by each bankruptcy chapter.

Chapter 7 enables full discharge of unsecured debts, such as credit cards and personal loans. Secured debt, such as a real estate loan or vehicle loan, typically remains unaltered, meaning that the property remains in the borrower’s possession as long as timely payments are being made. Primarily, Chapter 7 is available to individuals with business debts as well as corporations when they meet certain income requirements.

Chapter 9 deals with reorganizing of municipalities and government owned entities.

Chapter 11 was designed to help a business entity reorganize debts to maintain business viability and pay creditors over time. This is the most comprehensive chapter of the Bankruptcy Code, with reorganization options such as discharging some debts, repaying others, and restructuring the remainder. Although individuals may file for Chapter 11 relief, the relatively high filing fees and administrative costs lead most individuals to favor Chapter 7 or Chapter 13 bankruptcies,

Chapter 12 facilitates restructuring of debts for family farmers. Only family farmers are eligible and this chapter functions in a similar way (but not exactly comparable) to Chapter 13.

Chapter 13 is reserved for individual debtors (not businesses). It permits the discharge of some debts, as well as the repayment of others across a three-to-five year time frame. In some cases, a Chapter 13 filing will restructure principle payments of secured debts, or may enable discharge certain debts in full. Only individuals who meet income and debt qualifications (according to the Means Test) are permitted to file under this chapter.

Finding Bankruptcy Services in Your Area

For general assistance in filing for bankruptcy relief, the clerk of your local bankruptcy court or your local state Bar Association may have information regarding attorneys and/or organizations offering bankruptcy related services on a reduced fee or pro bono basis. However, we are prohibited from providing specific legal advice before conducting a private consultation about your individual case.

The Official Bankruptcy Forms can be found on the Administrative Office of the U.S. Courts Web site.

For more information, contact Solomita Law at (407) 305-5599 or send email to Staff@SolomitaLaw.com. We will respond to your questions as soon as possible.