BANKRUPTCY INTRODUCTION

Individual Bankruptcies Chapter 7 and Chapter 13 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 bankruptcy is to wipe out (discharge) your debts in exchange for giving up your property, except for exempt property which the law allows you to keep. In most cases, much or all of your property may be exempt. Property which is not exempt is sold and the money distributed to creditors.

CH. 13 Chapter 13 - In a Chapter 13 case, you file a plan showing how you will pay off some of your past-due and current debts over an extended period, normally three to five years. After you complete the plan, the unpaid balance on certain debts may be wiped out. The most important thing about a Chapter 13 case is that it can allow you to keep valuable property (especially your home) which might otherwise be lost. You should consider filing a Chapter 13 plan if you: own your home and are in danger of losing it because of money problems; are behind in debt payments, but can catch up on the most important debts if given some time; and have regular income. (This can include government benefits such as social security or public assistance.)

Chapter 11 – Commercial Bankruptcy - reorganization Chapter 11 Bankruptcy is usually pursued by commercial enterprises. Chapter 11 Bankruptcy is designed for companies that want to repay their debts while staying open for business. In a Chapter 11 Bankruptcy case, the business owner submits a plan of reorganization to the court. If the court approves your plan, management then continues to run everyday operations of the business, however, the bankruptcy court must approve all significant business decisions. Under Chapter 11, after a period of consolidation, the debtor typically emerges with a reduced debt load and a reorganized business.

The Automatic Stay Every Case Comes With An Automatic Stay Federal Court Injunction Against Proceeding The Stay Is In Force, Whether or Not Anyone Has Received Notice of The Bankruptcy If someone goes ahead with actions against a debtor in violation of the stay, those acts are void or voidable

Don’t Violate the Stay Deliberate Actions In Violation Of The Stay Expose The Actor to Damages Damages Can Include Punitive Damages And Attorneys Fees

Stay in Ch. 13 Protects Co-debtors If the lawsuit involves a consumer debt, anyone who is jointly liable with the debtor is protected A consumer debt is defined as a debt incurred by an individual primarily for personal, family, or household purposes The co-debtor stay may be lifted by a motion for relief from the stay if the Ch. 13 plan doesn’t propose to pay the debt in full

Other Defendants The suit in nonbankruptcy court can generally continue against other parties The debtor may be required to appear as a nonparty witness Most courts hold that suits can continue against entities owned by the debtor

Multi-party actions including the debtor You may not want to proceed with the debtor absent from the case You can seek to remove the suit to bankruptcy court and try the claim there or You can seek relief from the automatic stay

Dischargeability not an exception to the stay You must respect the stay even though your claim may be ultimately nondischargeable Some matters that are nondischargeable include criminal matters, family law for paternity and status, tax assessments

Discharge provides permanent injunction Once discharge occurs you cannot pursue your claim unless your claim is not dischargeable