Bankruptcy & Debt Management:
the Basics of bankruptcy

Why Bankruptcy?

Bankruptcy is an important and personal decision.  Based on the type and amount of your debt, you may qualify as a candidate for Chapter 7, 13, or 11.  If you seek a fresh start and want to avoid life-long debt, bankruptcy may be ideal for you.   This page covers the pros and cons of each type of bankruptcy. The other pages in this section are listed on the menu and in the box on the right. These pages cover each step of a bankruptcy, bankruptcy paperwork, and how to select the best type of bankruptcy for your situation.

Chapter 7

  Bankruptcy Page Index:

1. Basics of Bankruptcy
2. Getting Started
3. Pre-Filing Timeline
4. Post-Filing Timeline
5. Paperwork
6. Chap. 7 or 13?
7. More Information

Anyone who qualifies can file for Chapter 7 Bankruptcy.  Chapter 7 lets the debtor maintain certain assets including most basic personal belongings (referred to as exempt property) while all non-exempt property of the debtor is eventually sold.  In each Chapter 7 case, a trustee is appointed to determine a debtor’s non-exempt property.  The trustee sells off the non-exempt property, proceeds from the sales are distributed to creditors.  Generally a Chapter 7 proceeding takes 6 months to complete.  The court will determine whether or not to grant your case based upon factors including the amount of money you make, your outstanding debt, and your expenses.  

To qualify for Chapter 7, a debtor’s net income, which is income after deducting expenses, cannot exceed $100 per month.  Otherwise, the court may dismiss your case or you may have to convert your case to a Chapter 13 proceeding.  This results because the court deems a debtor able to repay a greater portion of outstanding debt where a debtor maintains certain levels of income after expenses. 

Pro:

• Where the debtor has little to no assets to lose, the benefits of filing for Chapter 7 are high.  This is because the debtor avoids paying the balance on all unsecured debt such as credit card debt, medical bills, utility bills, certain judgments and lawsuits, and other unsecured personal loans.  

Con:

• Certain debts are simply non-dischargeable meaning even if a debtor successfully files for Chapter 7, the debtor will continue to be liable for those debts after bankruptcy.  Non-dischargeable debts include any mortgage loan, secured debt, student loan, alimony, child support, and back taxes dating back three years.

Fees:

Attorney's fees for a general Chapter 7 filing are $2500.00.  Filing fees with the court are an additional $299. 

Chapter 13

Chapter 13 is an opportunity to restructure debts and allows a debtor to pay down their debts in full via a payment plan that pays creditors on a pro-rata basis.  Chapter 13 Bankruptcy is only for individuals who have a regular stream of income.  Debtors can either file for Chapter 13 directly or have their case converted to Chapter 13 if they do not qualify under Chapter 7.   A court appointed trustee takes each payment from the debtor and turns over the payments accordingly to outstanding creditors.  A Chapter 13 repayment plan typically lasts for 3 to 5 years.    

Chapter 13 protects individuals from the collection efforts of creditors; permits individuals to keep their real estate and personal property; and provides individuals the opportunity to repay their debts through reduced payments.  You may also be able to discharge debts in a Chapter 13 that would be non-dischargeable under other chapters, for example, fraud judgments and certain tax obligations.

Again Chapter 13 is a debt repayment plan for individuals, and depending on the outcome, allows a debtor to repay anywhere between 0 -100% of outstanding unsecured debt.

Pro:

• Chapter 13 is particularly useful for overdue house payments or car payment issues (arrearages) and is better for taking care of tax debt, student loan debt, and court fines.  When protecting assets that cannot be fully exempted, Chapter 13 bankruptcy is a better alternative than Chapter 7.
• Consolidate all unsecured debt into 1 monthly payment plan that a debtor can afford.

Con:

• Business entities cannot file for Chapter 13, only individuals. 
• If a debtor misses payments, the case will be converted to a Chapter 7 or dismissed by the court.
• Most debtors do not make enough monthly income to file for Chapter 13.  A debtor’s monthly net income must be at least greater than $110 per month after expenses.

Fees

Attorney's fees for a standard Chapter 13 filing are $3000.00.  Filing fees with the court are an additional $274. 

Chapter 11

Chapter 11 Bankruptcy allows an individual with significant debt (unsecured debts of at least $336,900 or secured debts of at least $1,010,650) who cannot file under Chapter 13 or a business, including corporations and partnerships, to reorganize.  Chapter 11 is particularly useful where a debtor wants to keep his business running or make up late payments. 

Chapter 11 allows the debtor to remain in possession of all assets.   Thus, the debtor is the Trustee (or debtor in possession) for the estate unlike a Chapter 7 case in which a trustee is appointed and takes control over all a debtor’s non-exempt assets.  However, there are limitations to this advantage and certain duties that must be met to protect a debtor’s creditors who would otherwise be entitled to certain assets.  

Take note that a Chapter 11 can be an expensive and long process. Administrative responsibilities and fees are constant throughout the process. Reports must be filed with the court and the U.S. Trustee's Office.  Chapter 11 can last up to several years before a court determines the outcome so attorney and accounting fees potentially add up through time. 

Planning the steps of a Chapter 11 filing is particularly important when seeking a successful petition.  Consultation with an attorney is imperative to a successful case because only an attorney will explore all avenues to improve your business and financial position.

  Bankruptcy Page Index:

1. Basics of Bankruptcy
2. Getting Started
3. Pre-Filing Timeline
4. Post-Filing Timeline
5. Paperwork
6. Chap. 7 or 13?
7. More Information

Pro:

Con:

Fee

In general, Chapter 11 attorney’s fees vary substantially.  Court filing fees are $1039. 
 

Bankruptcy Resources

U.S. Trustee

For information on the requirements of the U.S. Trustee's Office, including forms and deadlines,  please visit http://www.usdoj.gov/ust/r15/san_diego_home.html. 

Bankruptcy Court

For more general information regarding the Bankruptcy process, please consult http://www.casb.uscourts.gov. 

Credit Counseling

Check the U.S. Trustee website for information regarding required credit counseling before and after filing for bankruptcy: http://www.usdoj.gov/ust/eo/bapcpa/ccde/index.htm. 

-------------------------------------------------------------------------------

For more information about bankruptcy, please see the other pages in this section:

1. Basics of Bankruptcy (you are on this page)
2. Getting Started
3. Pre-Filing Timeline
4. Post-Filing Timeline
5. Paperwork
6. Chap. 7 or 13?
7. More Information

 

How to Contact Bruce A. Wilson, APLC

I make an effort to accommodate urgent matters, and new clients are always welcome. For more information or to make an appointment, please contact me either by:

Telephone: (619) 497-0627

E-mail:

I can be reached by telephone Monday through Friday, 9:00 a.m. to 5:30 p.m. You may also use the form below to contact me. This form is answered Monday through Friday during the work day. Please remember that for me to become your attorney, we must first have a written attorney-client agreement signed by both of us, so please do not email any confidential information at this point. After I have reached an agreement with you, we can then exchange information freely. I look forward to helping you.

Contact Information:
Name:	(Required)
E-mail:	(Required)
Home or Cell Phone:
Work Phone:
How may I help you?