In today's economy, bankruptcy is often the only way for many people and businesses to take control of their financial circumstances and get a fresh start. Although bankruptcy should not be taken lightly, the bankruptcy laws were established to protect you from financial ruin.
You need an experienced law firm to help you determine which bankruptcy option is best for you.
Key Bankruptcy Points:
You will not lose all of your property when you file for bankruptcy. The bankruptcy laws were designed to protect certain property, such as your house, car, household goods, clothing, and some retirement funds.
You may qualify for credit in the future. Filing for bankruptcy allows you to start fresh.
Filing for bankruptcy does not eliminate all debts. For example, taxes, student loans, and child or family support debts are not dischargeable.
By law, the harassment from creditors must stop when you file bankruptcy. The moment you file for bankruptcy, the court issues an automatic stay. This requires your creditors immediately to stop collection actions against you—no more phone calls and no more threats.
There are two options when it comes to personal bankruptcy: Chapter 7 and Chapter 11.
A Chapter 7 bankruptcy, otherwise known as a liquidation plan, is for people with little or no assets. This type of bankruptcy can eliminate most unsecured debts, including credit cards and medical bills.
In order to qualify for Chapter 7 bankruptcy, you must satisfy a two-part means test. Under the first part of the test, if your monthly income is lower than the median monthly income for a similar-sized family in Maryland or D.C., you qualify for Chapter 7 bankruptcy. If your income is higher than the median income, you must meet the second part of the test.
Under the second part of the means test, your disposable income, after you pay all of your bills, cannot be more than $100 per month over the next five years. If your disposable income is more, you do not qualify for a Chapter 7 bankruptcy.
A Chapter 13 bankruptcy is a good option if you:
- Want to avoid foreclosure on your home
- Want to avoid repossession on your car or vehicle
- Have significant equity in your home
- Have regular income but are unable to keep up with all of your bills
Under a Chapter 13 bankruptcy, you establish a repayment plan to pay off your debts over three to five years. You can keep more of your property and assets under a Chapter 13 bankruptcy than under a Chapter 7.
There are limitations on the amount of secured and unsecured debt that you can have to qualify for a Chapter 13 bankruptcy. These limitations change to adjust to the change in the consumer price index.
Businesses, corporations, partnerships, and other commercial entities can file Chapter 7 or Chapter 11 bankruptcy.
In a Chapter 7 bankruptcy, a business ceases operations. The business' assets and property are sold, and the proceeds are distributed to the creditors.
A Chapter 11 bankruptcy is a reorganization rather than a liquidation. Under a Chapter 11 bankruptcy, a business is permitted to remain in control of its operations as a debtor in possession.
Within 120 days after filing a Chapter 11 bankruptcy petition, a business is permitted to file a reorganization plan, which must be approved by the creditors. If the business does not file a reorganization plan within this exclusivity period, the business' creditors can file a reorganization plan for the debtor.
Contact us today. The Law Office of Ronald L. Schwartz has over 25 years of experience handling bankruptcy matters. Let bankruptcy attorney Ronald Schwartz assist you with your financial problems.