It all happened so quickly. You lost your job, or your second job, or your overtime was cut, or your tenant moved out without warning and you can't find a replacement, and now the financial house of cards that you struggled so hard to keep standing has come crashing down around you. Mortgage payments, credit cards, medical bills, the car loan, your kids' tuition... You are deeper in debt every week and there is no relief in sight.
How I Can Help
The first thing I will do for you as your attorney is interview you and review your finances closely to see if bankruptcy is appropriate for your situation. If it is, I will educate you on the differences between the two kinds of bankruptcy available to most consumers: Chapter 7 and Chapter 13, as well as Chapter 11 for individuals if your debt limit exceeds certain limits established in the Bankruptcy Code. Together, we will figure out which would be most helpful and which is most likely to erase as much of your debt as possible and get you the fresh financial start in life that you deserve.
To determine which type of bankruptcy is appropriate, I always start my consultations with two questions: What do you own, and what do you owe? Starting with what you own, the bankruptcy trustee by default will be looking to take your possessions, sell them, and use the proceeds to pay off at least some of your creditors. However, state and federal laws hold that some of your possessions "exempt" from the trustee's grasp.
Chapter 7 Bankruptcy
If all or the majority of your property is exempt, if your debt is mostly unsecured debt such as credit cards, medical debt and certain unsecured loans, and if your household income (the combined income of you and your married spouse) is under or close to the state median average for a family your size, I will most likely be able to steer you into a Chapter 7 bankruptcy. If all goes well, your unsecured debt will be discharged, you will keep your possessions, and your case will be closed in just a few months.
Chapter 13 Bankruptcy
If your household income is well above the state median average, or if you have assets that are not exempt - a house with hundreds of thousand of dollars in equity, for example - which you don't want to lose to the trustee, then a Chapter 13 bankruptcy might be in order. In a Chapter 13, instead of the trustee selling your non-exempt assets to pay your creditors, you keep those assets and pay your creditors yourself through a three-year or five-year repayment plan, in which your unsecured debt may be reduced sharply according to your ability to pay. Be advised though, that there is a debt limit in Chapter 13. If your unsecured debt (credit card debt or medical debt, for example) is over $394,725 or your secured debt (house mortgages, for example] is over $1,184.200 then you may have to file a Chapter 11 instead of a Chapter 13,
Chapter 11 Bankruptcy for Individuals
If you have assets that you would like to protect and therefore hope to choose a Chapter 13 bankruptcy instead of a Chapter 7, but your debt exceeds the Chapter 13 limits, you may have to file a Chapter 11 for individuals instead. The typical individual Chapter 11 filer is a person who owns more than one house, has fallen on hard times and who now is at risk of losing their properties in foreclosure proceedings. Nowadays, yellow cab medallion owners often have to file a Chapter 11 bankruptcy because years ago they took out massive loans to finance their medallion purchase but now, thanks to Uber, they are unable to make their loan payments and are at risk of losing their home because of the loan's personal guaranty provision.
Because of the large amount of debt involved, Chapter 11s for individuals can be fairly intrusive. For example, you will have to submit monthly income and expense reports to the supervising trustee, you will have to add the trustee as a notice party on your insurance policies, and you will also have to close your personal bank accounts and open new accounts - only available in certain banks - called "Debtor in Possession" accounts, that the trustee will be able to monitor. Ultimately, however, the advantages of a Chapter 11, can far outweigh these inconveniences, as the Bankruptcy Code will give you the time and in many cases the resources to reorganize complex debt situations, modify and even reduce some of that debt and emerge in a far better financial situation than you were before.