Common Types of Bankruptcy Cases
Here are some of the most common types of bankruptcy cases:
Chapter 7
This is a liquidation bankruptcy and the frequently kind of bankruptcy filed in Minnesota. These are often the shortest opportunity available, and requires the bankruptcy trustee to review your assets and determine if any of your assets can be liquidated to pay your creditors. We work with our clients to determine whether your assets are partially or entirely protected from liquidation based on upon what assets you have.
Chapter 11
This is a business reorganization. Chapter 11 bankruptcies are very complicated and have a lot of nuance.
Chapter 12
This kind of bankruptcy is reserved for debtors who are involved in farming or fishing. This is a very niche area of bankruptcy that provides a lot of relief for distressed farmers. As we are located in the heart of farm country, our office has a lot of experience in leading distressed farmers throughout the state through this process to provide a relief for financially distressed farmers. This type of bankruptcy usually lasts between 3-5 years.
Chapter 13
This is an individual reorganization bankruptcy. This bankruptcy requires the debtor to file a plan whereby they make a payments on their debt over 3-5 years. This form of bankruptcy can be very helpful for debtors who are behind on their mortgage payments, as it can allow the debtor to opportunity to catch up on late payments. It also is allows a debtor to protect some of their assets that might otherwise be subject to liquidation in a Chapter 7 bankruptcy.
The Basics
What Does a Bankruptcy Attorney Do?
Bankruptcy is the process in which a debtor is legally able to discharge various debts, meaning that the obligation to pay that debt is legally waived. Bankruptcy can be a complicated and daunting process. The bankruptcy team at Stermer & Sellner, Chtd. is well-equipped to guide both consumers and businesses through the issues and stages of bankruptcy proceedings. In all bankruptcy cases, our firm emphasizes clear, open communication and comprehensive understanding. Bankruptcy requires debtors to make full and thorough disclosures of their financial situation, including all their assets, debts, income, and transfers.
Useful Information
Frequently Asked Questions: Bankruptcy
Read below to find answers to some frequently asked questions.
Will filing a bankruptcy affect my credit?
Filing for bankruptcy will negatively impact your credit score, and will remain on your credit report for 10 years after you have filed. Even after the bankruptcy has been removed from your credit score, it can still be found in the public record.
What are the different types of bankruptcies?
Chapter 7 (liquidation) – Where the Trustee liquidates all property that is not protected and pays any proceeds to creditors.
Chapter 13 (individual reorganization) – Where the Debtor sets up a payment plan with the Trustee that lasts for a period of 3 to 5 years. The Trustee then pays the creditors from these payments.
Chapter 11 (business reorganization) – Operates similar to a chapter 13, but is used by businesses and not individuals.
Chapter 12 (family farmer/fisherman reorganization) – Operates similar to a chapter 13, but is available only to farmers and fisherman, who are still operating and generating income from farming and fishing.
Chapter 9 (municipality reorganization) – Operates similar to a chapter 13, but is available only to municipalities, such as towns and counties.
There are benefits and disadvantages to filing for bankruptcy under each Chapter; you should consult a bankruptcy attorney before deciding which Chapter best suits your current interests.
How do I qualify to file a chapter 7 bankruptcy?
The first factor to look at when qualifying for a chapter 7 is the income of the Debtor(s). The income must be below the median family income for a family of that size in whatever state the Debtor(s) is filing. In Minnesota the median family income is as follows:
1 Person – $47,122
2 People – $62,363
3 People – $75,350
4 People – $87,319
If your household income exceeds the above amounts, you may still qualify for a Chapter 7 under the “means test.” This is a complicated procedure, and you should consult an experienced bankruptcy attorney before proceeding with a Chapter 7 bankruptcy under the means test.
How long does a bankruptcy usually take?
The length of a bankruptcy will vary depending on the Chapter under which you file, and whether you have any property that is not protected. Some bankruptcies may only take a few months to complete while other may exceed 5 years. An experienced bankruptcy attorney may be able to provide an approximate time for the length of your bankruptcy by looking at the specific facts of your case.
Will I have to go to court?
Not necessarily. However, every Debtor must attend a Meeting of Creditors, where the Trustee will put the Debtor under oath and the Debtor must testify as to the information listed in his/her bankruptcy petition.
How does filing bankruptcy affect my spouse?
Married parties may choose to file jointly, separately, or one may file and the other may choose not to file. If one spouse files and the other does not, then the bankruptcy filing should not be listed on the credit score of the non-filing spouse and it should not adversely affect that spouses credit. However, the non-filing spouse must still pay for any joint debts, such as a mortgage or a joint credit card.
What debts are not erased by a bankruptcy?
Spousal and child support payments will still need to be paid. In addition, tax debts and school loans can only be erased under limited circumstances. Please see an attorney to see if your tax debts or student loans qualify to be discharged.
Will a bankruptcy save my house from going into foreclosure?
A bankruptcy can temporarily halt a foreclosure proceeding. However, if the mortgage payments are still delinquent then the mortgage company can still foreclose the property either after the bankruptcy is complete or by asking permission from the bankruptcy court. Chapter 13 bankruptcies can be used by a Debtor to help catch up on late mortgage payments in order to prevent a house from being foreclosed.
Will I lose my home or other property in a bankruptcy?
The bankruptcy code allows a Debtor to save or “exempt” a dollar amount in certain property. These exemptions are usually enough to prevent a Debtor from losing certain property of the Debtor, such as cars, jewelry, furniture, clothes, and a residential property. However, it is best to consult with a bankruptcy attorney to determine if all of your property is indeed protected.
What is the waiting period for filing another bankruptcy?
The waiting periods between bankruptcy filings varies depending under which chapter you are trying to file a bankruptcy and under what chapter your previous bankruptcy was filed. An individual must wait 8 years after receiving a “discharge” in a chapter 7 bankruptcy before filing another chapter 7 bankruptcy. For additional waiting periods please consult a bankruptcy attorney.
