Bankruptcy Types

Under the Bankruptcy Code, there are six basic types of bankruptcy, each of which is discussed in this blog. Traditionally, the cases are given the names of the chapters that describe them thoroughly. Over the past 31 years, our office has assisted over 2,700 Florida clients in filing for Chapter 7 and Chapter 13 bankruptcy protection in order to organize their lives and Get a Fresh Start!

Our Bankruptcy attorneys in Miami Gardens, FL are here to help you thoroughly according to your situation. We assist people in filing for bankruptcy relief under Chapter 7 of the Bankruptcy Code, which provides for an orderly, court-supervised procedure in which a trustee takes over the assets of the debtor’s estate, converts them to cash, and distributes them 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, the debtor’s assets may not be liquidated. These are known as “no-asset cases.”

If the case is an asset case and the creditor files a proof of claim with the bankruptcy court, the creditor will receive a distribution from the bankruptcy estate. If the debtor is an individual, he or she receives a discharge in most chapter 7 cases, which releases him or her from personal liability for certain dischargeable debts. Typically, the debtor receives a discharge only a few months after filing the petition. Bankruptcy Code amendments 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 chapter 7 relief. If a debtor’s income exceeds certain thresholds, he or she may be ineligible for chapter 7 relief.

Chapter 13, entitled Adjustment of Debts of an Individual with Regular Income, is intended for a debtor with a regular source of income. Chapter 13 is frequently preferred over Chapter 7 because it allows the debtor to keep a valuable asset, such as a house, and it allows the debtor to propose a “plan” to reconsider creditors over time – typically three to five years. Chapter 13 is also used by consumer debtors who do not meet the means test for Chapter 7 relief. The court either approves or disapproves the debtor’s repayment plan at a confirmation hearing, depending on whether it meets the Bankruptcy Code’s confirmation requirements.

Chapter 13 differs from Chapter 7 in that the chapter 13 debtor usually keeps the estate’s property and makes payments to creditors by trust based on the debtor’s anticipated income over the life of the plan. Unlike in Chapter 7, the debtor does not receive an immediate debt discharge. Before receiving the discharge, the debtor must complete the payments required by the plan. The discharge under Chapter 13 is also slightly broader than the discharge under Chapter 7.

Chapter 11, Reorganization, is typically used by commercial enterprises that want to continue operating a business while repaying creditors through a court-approved plan of reorganization. For the first 120 days after filing the case, the chapter 11 debtor usually has the exclusive right to file a plan of reorganization and must provide creditors with a disclosure statement containing sufficient information to allow creditors to evaluate the plan. The court ultimately approves (confirms) or rejects the reorganization plan. The confirmed plan allows the debtor to reduce its debts by repaying some obligations and discharging others. In order to return to profitability, the debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations. Under Chapter 11 bankruptcy, the debtor typically goes through a consolidation period and emerges with a reduced debt load and a reorganized business.

The process under Chapter 12 is very similar to that of Chapter 13, in that the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period of no more than five years unless the court approves a longer period of no more than five years. Every chapter 12 case also has a trustee whose duties are very similar to those of a chapter 13 trustee. The disbursement of payments to creditors by the chapter 12 trustee under a confirmed plan is similar to the procedure under chapter 13. Chapter 12 permits a family farmer or fisherman to continue operating the business while the plan is implemented.

Chapter 9, entitled Adjustment of Municipal Debts, essentially provides for reorganization, similar to chapter 11 reorganization. Only a “municipality,” which includes cities and towns as well as villages, counties, taxing districts, municipal utilities, and school districts, may file under Chapter 9.

Ancillary and Other Cross-Border Cases, Chapter 15, is intended to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the application of Chapter 15 in situations where a debtor or its property is subject to the laws of the Florida and one or more foreign countries.

In addition to the fundamental types of bankruptcy cases, Bankruptcy Basics covers the Service Members’ Civil Relief Act, which, among other things, protects military members from default judgements and gives the court the authority to stay proceedings against military debtors.

The bankruptcy process is complicated and depends on legal concepts such as the automatic stay, discharge, and exemptions,” and assume. As a result, the final chapter of this publication is a glossary of Bankruptcy Terminology, which explains most of the legal concepts that apply in cases filed under the Bankruptcy Code in layman’s terms.

We are a debt relief agency (Lee Law Firm) for clients who are having financial difficulties. Our attorneys assist individuals in filing for bankruptcy relief under the Bankruptcy Code.