Chapter 7 

This is a liquidation bankruptcy or has been called the “straight bankruptcy.”   The liquidation means that your non exempt assets are sold for the benefit of creditors. 

A debtor's assets can be saved from liquidation by using the bankruptcy exemptions.  This is generally the case for most chapter 7 debtors, and is known as a “no-asset” chapter 7 bankruptcy.

In order to be eligible for a chapter 7 you must not have received a discharge in the eight years prior and you must meet what is called the "means test."  Please call our office for your free initial consult and discuss whether you are eligible for a Chapter 7 and what your options are.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

Chapter 13 

This is called the wage earner bankruptcy.  This bankruptcy is designed for people with regular income to propose a plan to pay their creditors over a period of time.  The length of time for this plan can range from three to five years.  A debtor who does not qualify for a Chapter 7 bankruptcy may be able to file a Chapter 13 bankruptcy.  The Chapter 13 discharge is broader than a Chapter 7 bankruptcy and can discharge some debts that cannot be discharged in a Chapter 7.

The Chapter 13 Plan allows a debtor to propose to pay past-due amounts on mortgages and cure defaults on secured debts. Generally, a Chapter 13 Plan is the only way to get a driver’s license reinstated after the license has been suspended due to failure to pay on criminal and civil fines. 

If you are behind on your mortgage and want to find out how to pay it back over time, or your driver’s license has been suspended due to failure to pay fines, please call our offices to see how we can help.

Chapter 12

Chapter 12 is designed for "family farmers" or "family fishermen" with "regular annual income." It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. Under chapter 12, debtors propose a repayment plan to make installments to creditors over three to five years. 

Chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either chapter 11 or 13 of the Bankruptcy Code. For example, chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which is better suited to large corporate reorganizations. In addition, few family farmers or fishermen find chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers. 

The Bankruptcy Code provides that only a family farmer or family fisherman with "regular annual income" may file a petition for relief under chapter 12. The purpose of this requirement is to ensure that the debtor's annual income is sufficiently stable and regular to permit the debtor to make payments under a chapter 12 plan. But chapter 12 makes allowance for situations in which family farmers or fishermen have income that is seasonal in nature. Relief under chapter 12 is voluntary, and only the debtor may file a petition under the chapter.

Chapter 11

A case filed under Chapter 11 is called a "reorganization" bankruptcy.  This is typically filed by businesses such as: a corporation, sole proprietorship, or partnership. The chapter 11 bankruptcy case of a corporation (corporation as debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company's stock. 

This chapter of bankruptcy allows the "debtor in possession" to propose pay creditors under a chapter 11 plan ("Plan") which the creditors must vote on. The debtor has a 120-day period during which it has an exclusive right to file a plan. After the exclusivity period has expired, a creditor may file a competing plan. 

Section 1107 of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a chapter 11 trustee, and it requires the debtor to perform all but the duties of a trustee. 

After the Plan is approved, the debtor continues to operate the business according to the terms of the Plan and pays creditors accordingly. 

Chapter 11 bankruptcies are the most complex. Our office will explain the process and help your business pay creditors and continue operation. 


Bankruptcy Basics, (Accessed January 6, 2016).