There are generally two types of bankruptcy cases that an individual or small business owner would consider. Chapter 7 is known as "straight" bankruptcy or "liquidation". It requires a debtor to give up property which exceeds certain limits called "exemptions" so the property can be sold to pay creditors. In a large majority of Chapter 7 cases, the exemptions are sufficient to protect your assets such as your home, automobile, any pension assets or IRA's and general tangible personal property. The other type of bankruptcy that is available to most individuals and small business owners is called a Chapter 13 debt adjustment plan. It requires a debtor to file a plan to pay debts (or parts of debts) from current income. A Chapter 13 plan may be appropriate where you are several months in arrears on a home mortgage and facing foreclosure, yet need time to rearrange your debt repayment to that creditor. Either type of case may be filed individually or by a married couple filing jointly.

In a bankruptcy case under Chapter 7, you file a petition asking the Court to discharge your debts. The basic idea in a Chapter 7 bankrutpcy is to wipe out (discharge) your debts in exchange for you giving up property, except for "exempt property" which the law allows you to keep. In most cases, all of your property will be exempt. Property which is not exempt, is sold, with the money distributed to creditors.

If you want to keep property like a home or car and are behind on the payments on a mortgage or car loan, a Chapter 7 case probably will not be the right choice for you. That is because Chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

In a Chapter 13 case, you file a "plan" showing how you will pay off some of your past due and current debts over three to five years. The most important thing about a Chapter 13 case is that it will allow you to keep valuable property such as your home or car, which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.

You should consider filing a Chapter 13 plan if you:

A decision to file bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. Although it may be possible for some people to file a bankruptcy case without an attorney, it is not a step to be taken lightly. The process is difficult and you may lose property or other rights if you do not know the law. It takes patience and careful preparation. Very few people have been able to successfully file Chapter 13 debt adjustment cases without the assistance of an attorney.

Attorney Garner is available to speak with you by phone or to meet with you at a free office consultation to discuss your particular financial needs and circumstances. Such an evaluation will give you an idea as to your eligibility for bankruptcy relief, what type of property you are entitled to keep following bankruptcy, what will happen to your home and car and the effect of bankruptcy on your ability to obtain credit in the future.