The Basics: Proceedings of Chapter 7 and Chapter 13 Bankruptcies
The process of filing bankruptcy can be incredibly complicated, and if you’re considering filing for personal bankruptcy, it can seem like you are faced with a lot of confusing decisions and requirements all on your own. In reality, over 97% of the 936,000 bankruptcy cases in the U.S. in 2014 were personal bankruptcies, leaving business bankruptcy taking up less than 3%.
Having an experienced bankruptcy lawyer by your side is always the smartest decision you can make if you’re considering filing for Chapter 7 or Chapter 13 bankruptcy. In the meantime, here are just a few important points you should know about the process of filing for bankruptcy:
- There are six types of bankruptcy cases in the U.S.: Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15. For the moment, we’ll only be focusing on Chapter 7 and Chapter 13 because these two sections apply to personal bankruptcy cases.
- According to the United States Courts, every bankruptcy filing goes through a judicial district in the state where it was filed, and a federal bankruptcy case is subject to final decisions made by the designated U.S. bankruptcy judge.
- Even though this judge has a lot of power over your case, you likely won’t spend much time discussing the case with the judge face-to-face; in fact, it’s common for debtors to visit the courtroom only once during the entire filing process.
- Chapter 7 refers to a liquidation process where certain debts are erased entirely. Debtors can hold onto certain exempt property if it’s deemed essential for daily activities, but any other valuable assets will be confiscated by the court and used to pay off debts before anything is liquidated. Many people consider Chapter 7 to be the best option because it provides the fastest fix; it only takes around four to six months to complete.
- Chapter 13 bankruptcy doesn’t involve the liquidation of debts; instead, it works on structuring a reasonable repayment plan. This option is often the ideal choice for anyone who has a steady paycheck and knows that he/she will be able to make payments on time; it’s also considered the ideal option by many because the debtor is able to retain possession of most items (which would have otherwise been taken away, had the person been filing for bankruptcy under Chapter 7).
- Within just a couple of weeks, you’ll begin receiving paperwork in the mail that will be used throughout the proceedings and which prove that you are unable to pay back your debts without help. The court will typically have separate discussions with the creditors to discuss reasonable negotiations and repayments, although it doesn’t hurt to have a bankruptcy attorney representing you when necessary.
Keep in mind that the exact process of filing for bankruptcy largely depends on which Chapter you file under and on your individual circumstances; and also try to remember that you never have to go through a bankruptcy case completely on your own.