Chapter 7
The potential Chapter 7 debtor should understand that a direct bankruptcy case does not involve the filing of a payment plan as in Chapter 13, but rather provides for the collection and sale by the bankruptcy trustee of the debtor’s non-exempt assets. , from which the claim holders (creditors) will receive distributions in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to bonds and mortgages that pledge the property to other creditors. Also, under Chapter 7, the individual debtor can retain certain “exempt” property. The remaining assets of the debtor are liquidated by a trustee. Consequently, potential debtors must realize that filing a petition under chapter 7 can result in the loss of property.
To qualify for relief under Chapter 7 of the Bankruptcy Code, the debtor must be an individual, a partnership, or a corporation. 11 USC §§ 109 (b); 101 (41). Relief is available under Chapter 7 regardless of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. However, a person cannot file an application under chapter 7 or any other chapter if a previous bankruptcy petition was dismissed during the previous 180 days because the debtor intentionally failed to appear in court or did not comply with orders. of the court or if the debtor voluntarily dismissed the request. previous case after creditors sought relief from bankruptcy court to repossess property they held bonds on. 11 USC §§ 109 (g), 362 (d) and (e).
One of the main purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The discharge has the effect of extinguishing the personal responsibility of the debtor on the dischargeable debts. However, in a Chapter 7 case, discharge is available only to individual debtors, not partnerships or corporations. 11 USC § 727 (a) (1). Although filing an individual Chapter 7 petition generally results in a discharge of debts, a person’s right to discharge is not absolute and some types of debts are not discharged. Also, a bankruptcy discharge does not extinguish a lien on the property.
Chapter 11
A case filed under Chapter 11 of the United States Bankruptcy Code is often referred to as a “reorganization” bankruptcy.
How Chapter 11 Works
A bankruptcy case begins when a bankruptcy petition is filed with the bankruptcy court. Fed. R. Bankr. Q. 1002. A petition can be a voluntary petition, which is filed by the debtor, or it can be an involuntary petition, which is filed by creditors who meet certain requirements. 11 USC §§ 301, 303. A voluntary petition must adhere to the format of Form 1 of the Official Forms prescribed by the United States Judicial Conference. Official forms can be purchased at legal stationers or downloaded from the Internet at http://www.uscourts.gov. The voluntary petition will include standard information on the debtor’s name, social security number or tax identification number, residence, location of major assets (if business), debtor’s plan, or intention to file a plan and a request for relief. under the corresponding chapter of the Bankruptcy Code. In addition, the voluntary petition will indicate whether the debtor qualifies as a small business as defined in 11 USC § 101 (51C) and if the debtor elects to be considered a small business under 11 USC § 1121 (e).
Upon the filing of a voluntary petition for relief under Chapter 11 or, in an involuntary case, the entry of an order for such relief, the debtor automatically assumes an additional identity as the “debtor in possession.” 11 USC § 1101. The term refers to a debtor who maintains possession and control of his assets while undergoing a reorganization under chapter 11, without the appointment of a case manager. A debtor will remain a debtor in possession until the debtor’s reorganization plan is confirmed, the debtor’s case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally, the debtor, as a “debtor in possession,” operates the business and performs many of the functions that a trustee performs in other chapter cases. 11 USC § 1107 (a).
A written disclosure statement and reorganization plan must be filed with the court. 11 USC § 1121. The disclosure statement is a document that must contain information about the debtor’s assets, liabilities, and business affairs sufficient to allow a creditor to make an informed judgment about the debtor’s reorganization plan. 11 USC § 1125. The information required is governed by judicial discretion and the circumstances of the case. The content of the plan must include a classification of claims and must specify how each class of claims will be treated under the plan. 11 USC § 1123. Creditors whose claims are “impaired,” that is, those whose contractual rights must be modified or who will be paid less than the full value of their claims under the plan, vote on the plan by ballot. 11 USC § 1126. Once the disclosure statement is approved and the ballots are collected and counted, the bankruptcy court will conduct a confirmation hearing to determine whether the plan should be confirmed. 11 USC § 1128.
Chapter 12
By adapting Chapter 12 to meet the economic realities of family farming, this law has removed many of the barriers that family farmers had faced when seeking to reorganize successfully under Chapter 11 or 13 of the Bankruptcy Code. For example, Chapter 12 is simpler, less complicated, and less expensive than Chapter 11, which is better suited to the major corporate reorganization. Additionally, few family farmers find Chapter 13 advantageous because it was designed for wage earners who have smaller debts than family farmers face. In Chapter 12, Congress tried to combine the features of the Bankruptcy Code that can provide a framework for successful family farm reorganizations. At the time of the enactment of Chapter 12, Congress could not be sure whether Chapter 12 relief would be required indefinitely for the family farmer. Accordingly, the law (which first provided that chapter 12 cases could not be filed after September 30, 1993) currently provides that chapter 12 cases cannot be filed after July 1, 2000.
The Bankruptcy Code states that only a family farmer with “regular annual income” can file a petition for redress under chapter 12. 11 USC §§ 101 (18), 109 (f). The purpose of this requirement is to ensure that the debtor’s annual income is stable and regular enough to allow the debtor to make payments under a chapter 12 plan. However, chapter 12 makes an allowance for situations in which the debtor Family farmers may have income of a seasonal nature. Relief under this chapter is voluntary; therefore, only the debtor can file a petition under chapter 12.
Chapter 13
Chapter 13 is designed for people with regular income who want to pay off their debts but are currently unable to do so. The purpose of Chapter 13 is to allow individual debtors in financial distress, under brief supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time. Under this chapter, debtors can repay creditors, in whole or in part, in installments over a period of three years, during which creditors are prohibited from initiating or continuing collection efforts. A plan that provides for payments for more than three years must be “for good cause” and approved by the court. In no case can a plan foresee payments over a period of more than five years. 11 USC § 1322 (d).
Any individual, even if he is self-employed or operates an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $ 269,250 and the secured debts are less than $ 807,750. 11 USC § 109 (e). A corporation or partnership cannot be a Chapter 13 debtor. Identification.
A person cannot file an application under chapter 13 or any other chapter if, during the previous 180 days, a previous bankruptcy petition was dismissed because the debtor did not intentionally appear in court or did not comply with the orders of the court. court or was voluntarily terminated after creditors were sought. bankruptcy court relief to regain property to which they are attached. 11 USC §§ 109 (g), 362 (d) and (e).
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