• You are not alone, and it is not necessarily your fault.
• Your initial consultation is free of charge and carries no obligation.
• Bankruptcy can be a positive step toward gaining control of your finances.

Bankruptcy is about enabling people who have more debt than they can repay to get out from under that debt and get a fresh financial start.  Oftentimes a person's debt can get out of control through no fault of their own, such as due to a job loss, medical calamity, or a catastrophic loss.

Whatever the reason, if you have more debt than you can handle and are considering bankruptcy, please contact my office today for a free consultation.

There are two primary types of bankruptcy available to consumers (I also handle business filings under Chapter 7 or 13).  These are known as Chapter 7 and Chapter 13 bankruptcies, a reference to the chapter in which they appear in the U.S. Bankruptcy Code.

Chapter 7 Bankruptcy

This type of bankruptcy is also known as a "straight bankruptcy", "liquidation bankruptcy", or "fresh start bankruptcy."  The general idea is that the trustee who is assigned by the bankruptcy court will liquidate or sell all of the debtor's assets and use the proceeds to pay debts, and whatever debt remains is forgiven or discharged. 

However, the trustee is prevented from selling all of the debtor's assets.  The law recognizes that in order to provide a fresh start, a person needs certain basic necessities.  The law handles this through what are know as "exemptions".  Certain property is exempt from liquidation in a Chapter 7 bankruptcy.  Usually, these exemptions enable a debtor to retain all of his or her property and obtain a discharge of his or her debts.

Another important benefit of a bankruptcy filing is what is know as the "automatic stay".  The automatic stay applies when the bankruptcy petition is filed and prevents creditors from taking any further steps to collect their debt.  Collection calls must cease, attempts to attach the debtor's assets or garnish his or her wages must stop, and repossession or foreclosure actions must cease.

A debtor must meet certain eligibility requirements in order to file for bankruptcy under Chapter 7.  Generally speaking, to be eligible to file under Chapter 7, the debtor must be able to demonstrate that he or she does not have sufficient disposable income to pay creditors.  The debtor must pass what is known as a "means test."  Your bankruptcy attorney can explain this test to you, and frequently determine very quickly whether you are eligible to file under Chapter 7.  In practice, this means tests disqualifies only a small number of Chapter 7 candidates from filing under that chapter.

It is important for bankruptcy candidates to understand that certain debts cannot be discharged in a Chapter 7 bankruptcy.  For example, it is extremely difficult to get a student loan discharged.  Other types of non-dischargable debt includes alimony, certain taxes, pre-petition fines and restitution orders, debts from injury or death due to alcohol or drug use, and certain condo and coop fees.

Chapter 13 Bankruptcy

In a Chapter 13 Bankruptcy, the debtor's assets are not liquidated.  Chapter 13 is only appropriate for debtors who have a regular income and can pay a portion of their debt.  Under Chapter 13, a three or five year repayment plan is established whereby the debtor makes payments to a bankruptcy trustee who then remits payment to creditors.  At the successful conclusion of the plan, debts that remain are subject to discharge.

Chapter 13 is available for those few Chapter 7 candidates who do not pass the means test.  Chapter 13 may also be the best choice in cases where the debtor has certain assets which are not fully exempted but which the debtor wants to retain, such as an automobile or home.  Chapter 13 can also be appropriate for someone who is behind on his or her mortgage or car loan, or owes back taxes.  The Chapter 13 plan can be crafted to enable the consumer to repay, over time, the past due loan amounts, and back taxes may be restructured or eliminated.

The automatic stay applies in Chapter 13 cases as well.

A bankruptcy attorney can assist you in determining whether bankruptcy is the right choice for you, and which chapter under the Bankruptcy Code would provide you with the most relief.  To schedule a free consultation, please call my office today at 415-865-0212.

Return to Top of Page