What is Bankruptcy?

Austin, Texas, Board Certified Bankruptcy Lawyer

Bankruptcy is a procedure that allows people who owe more money to creditors than they can pay to either work out a plan to repay the money over time or completely eliminate ("discharge") most of their debt. There are two types of bankruptcy. You may file a “liquidation” proceeding under Chapter 7 or a “reorganization” proceeding under Chapters 11, 12, or 13 of the Bankruptcy Code. One of the most important initial decisions in a consumer or small business bankruptcy filing is to determine which type of bankruptcy proceeding will accomplish the best result. Most consumer bankruptcy cases are filed under either Chapter 7 or Chapter 13. Certain goals can be achieved under Chapter 7 that can not be accomplished in Chapter 13, and vice versa. Bankruptcy laws are complicated so you should determine whether you should declare bankruptcy and which type of bankruptcy you should file only after consulting with a board certified bankruptcy attorney.

Chapter 7 is referred to a liquidation proceeding because the bankruptcy trustee liquidates (sells) non-exempt assets and distributes the proceeds to creditors in accordance with the priorities established under the Bankruptcy Code. Most people who file bankruptcy are able to keep everything they own because they do not have any non-exempt assets. Usually there is nothing in a Chapter 7 for the Bankruptcy Trustee to liquidate but it is called a liquidation bankruptcy nevertheless. Chapter 7 is usually the most appropriate type of bankruptcy proceeding to file if you need to eliminate unsecured debt and are current on payments to secured creditors that are secured with liens against property you want to keep.

Chapter 11 Bankruptcy Reorganization is usually filed by businesses seeking to reorganize their debts but may be used by individual consumer debtors also. An individual needing to restructure his debt may be eligible for relief under Chapter 11 but not under Chapter 13 because his unsecured debt is too high or because not enough time has elapsed since he received a discharge in a prior case.

Chapter 12 Bankruptcy Reorganization is reserved for farmers, ranchers and fishermen that need to restructure their operations.

Chapter 13 Bankruptcy Reorganization is the most typical type of reorganization bankruptcy used by consumer debtors and may be used to stop home foreclosures, car repossessions, IRS garnishments and levies.

Recent bankruptcy reform legislation has made it more difficult to qualify for Chapter 7, but most people can still obtain the relief available under Chapter 7 with effective planning.

Free Consultation: Contact Board Certified bankruptcy attorney Fred E. Walker in Austin, Texas, for a debt relief consultation. There is no cost or obligation.