Brezine Law Offices

Bankruptcy

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. Individuals and businesses use bankruptcy as a way to obtain relief from debts owed to creditors.
Six basic types of bankruptcy cases are provided for under the Bankruptcy Code. Our office represents debtors in Chapter 7 and Chapter 13 cases.
Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.
Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect.
If you choose to file a bankruptcy petition without the assistance of an attorney, you can obtain the required forms at most stationery stores or at www.uscourts.gov/bkforms/index.html.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, you will need to provide the following information:

  1. A list of all creditors and the amount and nature of their claims;
  2. The source, amount, and frequency of your income;
  3. A list of all of your property, including your home, automobiles, bank accounts, personal property, etc.; and
  4. A detailed list of your monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Our office also requires that debtors obtain a copy of their credit reports to ensure that all debts are accounted for in your bankruptcy petition. You can obtain a free credit report from all three credit reporting agencies at www.annualcreditreport.com or you can phone 1-877-322-8228 to request copies.

We will also need a copy of your tax returns for the previous four years. If you do not have them, you can request a transcript of your return at www.irs.gov or by calling 1-800-829-1040.

Types of bankruptcy

A Chapter 7 is often referred to as “straight ” bankruptcy or ”liquidation”. In a Chapter 7 bankruptcy you would agree to turn over all of your non-exempt assets to a Chapter 7 trustee. The trustee will then sell your assets and distribute the money to your creditors. The overwhelming majority of consumer Chapter 7 cases are considered to be “no asset” cases and the creditors without security, like a house or a car, get nothing.
Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. You do not have to repay all of your debt. You pay only as much as you can afford, but the minimum payment may be affected by property you want to keep. When you complete the payments, debt not paid is discharged.
The Chapter 13 bankruptcy is considered a reorganization of the debtor’s obligations. This type of bankruptcy is available if your secured and unsecured debts fall within a certain range; currently you can have no more than $922,975 in secured debt and $307,675 in unsecured debt to qualify. You would propose a plan based on your available disposable income to pay your creditors over a thirty-six (36) to sixty (60) month period. The secured creditors usually get most of their debt repaid while the unsecured can get anywhere from 0% to 100% of their debt. Once the plan is approved you would make a single monthly payment to the Chapter 13 trustee who in turn distributes the funds to your creditors. This works much the same way as a credit counseling debt repayment plan.

Other Practices