WHAT ARE THE DIFFERENT TYPES OF

BANKRUPTCY CASES?

Reviewing the different types of bankruptcy is one of the things we cover in a Free Debt Consultation. If you would like some help in managing your debts and you want to see ALL the options available to you, then call my office at 210-930-7000 to schedule a Free Debt Consultation.

There are four types of bankruptcy cases provided under the law, but most people filing bankruptcy will only be able to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

Chapter 7 is most easily understood as the form of bankruptcy in which the case is only open for 90 days after the case is filed in bankruptcy court, and there are NO payments made to a trustee on a monthly basis. The reason why there are no payments made to trustee is because the person filing bankruptcy has no money to pay creditors, except the secured debts the person wants to keep paying, which are typically the house and the car. Chapter 7 is also known as "straight" bankruptcy or "liquidation." (There is never a liquidation because if I determine that a client has property that he wants to keep and that is not exempt and would be liquidated in Chapter 7 bankruptcy, the client always chooses to file a Chapter 13 bankruptcy to protect the non-exempt property .) Chapter 7 is typically not advisable for those people that want to keep a home or a car and they are behind on the payments on the house or car. There are several reasons why Chapter 7 is not advisable in those situations, but for now, please note that you have to be current on the house and car as of the date of the filing and during the 90 days that the case is pending. If you are behind on house or car payments and are considering a Chapter 7, then you have to add the cost of getting current on the house and car to the other costs of a Chapter 7 bankruptcy to determine the total cost of a Chapter 7 bankruptcy.

Chapter 13 is most easily understood as the form of bankruptcy where the person filing bankruptcy makes a payment to the Chapter 13 Trustee for 3 to 5 years to repay creditors. The main reason that someone would have to file a Chapter 13 over a Chapter 7 is that they have over $100 left over after they have covered their living expenses, house payment and car payment. Chapter 13 bankruptcy is also called "debt adjustment" or "Debt Consolidation."  In a Chapter 13 case, you are required to make a monthly payment to the Chapter 13 Trustee, to repay some portion of the debt you have. You file a "plan" showing how you will pay off some of your past-due and current debts over three to five years.

Chapter 11 , known as "reorganization," is used by businesses and a few individual debtors whose debts are very large. This probably won't apply to you.

Chapter 12 is reserved for family farmers. This probably won't apply to you.

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