A brief overview of Bankruptcy Chapter 7, Chapter 11, and Chapter 13.

1. Bankruptcy: An Quick Overview by BFD Lawyers Albuquerque Bankruptcy Lawyers

2. Definitions Debt – is an obligation to pay someone. Creditor – the person to whom the obligation is owed. Secured Debt – debt that is backed by some sort of collateral (home mortgage). Unsecured Debt – debt that is not backed by collateral (medical bills, credit cards).

3. Bankruptcy Rationale Created so debtors could have a fresh start. Higher income individuals have to file bankruptcy under Chapter 13 as opposed to Chapter 7. Included in the United States Constitution. Available to individual persons and businesses alike. Businesses cannot file for Chapter 13 however.

4. Different Types of Bankruptcy Chapter 7: commonly known as the liquidation chapter, can be used for both businesses (although there are some exceptions) and individuals. Chapter 11: reorganization, typically used for businesses. Chapter 13: repayment, used for debtors who cannot meet the means test (because they make too much money). Note that bankruptcy can be voluntary or involuntary (where a creditor initiates the bankruptcy)

5. Chapter 7 – Overview The bankruptcy process consists of gathering the individual’s assets, excluding assets according to state or federal exemptions, liquidating the remaining assets and paying creditors. Chapter 7 bankruptcy allows debtors to discharge their most of their unsecured debt, because secured creditors are first to get asset proceeds.

6. Chapter 11 – Overview Chapter 11 is typically used for struggling businesses. Reorganization requires a bankruptcy attorney with experience in Chapter 11 bankruptcies. Any business also needs to be represented by an attorney as a business cannot file a pro se bankruptcy.

7. Chapter 13 - Overview Chapter 13 bankruptcy is used for those debtors with higher income. Debtors that cannot qualify for Chapter 7 bankruptcy are pushed into Chapter 13. Basically Chapter 13 bankruptcy sets up a payment plan where the debtor pays creditor back (interest free) over a 3 – 5 year period.

8. Other Considerations Creditor collections (wage garnishments, phone calls, etc) usually generate a rapid desire to initiate a bankruptcy. As an Albuquerque bankruptcy attorney, I have seen how a bankruptcy can give debtors peace of mind by stopping creditor collections. Having a local bankruptcy attorney is also important because the attorney will assist the debtor in choosing the right exemptions to allow the debtor to keep most of their property.