Question that a lot of people ask me when
they first call my office is, what is the difference between a chapter 7 and chapter
13 bankruptcy. There are a lot of differences and to cover all those in depth you’ll probably
need to contact my office and we can talk about that. But to give you a little overview
of what we are talking about in differences is, Chapter 7 bankruptcy is called the “Liquidation
Bankruptcy”. Any non exempt asset will be liquidated and potentially turned into cash
and distributed to creditors. It’s very likely that in a Chapter 7 bankruptcy
we can find a way to exempt most of your assets if you could qualify. The difference in a Chapter 13 bankruptcy
were if you have non exempt assets you we could keep those in a Chapter 13 bankruptcy
by agreeing to make a payment plan with the court. So by paying a percentage of your debt
20%, 10%, 30%, whatever may be we have to calculate your different means test versus
some of the other means test we see to determine how much of the debt you would have to pay
back. In chapter 13 we should probably be able to
keep all of your assets whether they are exempt or non exempt in a 13 or a 7. The other difference
I see, is in Chapter 13, you can eliminate loans on a house, in particular on a second
loan. I see that a lot lately over the last couple of years. Whether it’s in my San Diego
county office or in my Riverside county office, were people are trying to eliminate second
loans. The example that I give to people, let’s say
you have a house that’s worth $250,000. Let’s say you have a first loan that’s $270,000
and you have second loan for $100,000. What you will need to do if you could is to get
rid of that unsecured debt against your house, in other words, the second. Through Chapter 13 bankruptcy you can eliminate
that second over the course of the period of time you’re making a payments to the trustee.
it will be eliminated. Chapter 7 you cannot do that. So that’s a big difference and a
lot of people would want to file a 13 merely to get rid of second. The other difference I see in a chapter 7
versus chapter 13 is possibly reworking car loans and other loans on rental property that
can be done whether that’s in San Diego county or in Riverside county can be done and the
difference through 7 and 13 is, in a 13 you can manipulate the amounts owed and eliminate
certain loans on certain types of property that would normally be secure such as car
loans and real estate loans. There are also similarities between the Chapter
7 and the Chapter 13 in that when you file your bankruptcy you are protected by the automatic
stay of the US bankruptcy courts so any legal actions, judgments, debtors exams, garnishments,
repo action, foreclosures, will all be stopped immediately upon filing of your bankruptcy. We stop foreclosures on a daily basis and
save people’s homes in either San Diego County, Riverside county or other areas of the state
which we may agree to take your case in. To decide if you qualify for a Chapter 7 or
Chapter 13 bankruptcy we first have to perform a means test for you. That would be balancing
your income versus your expenses in the computer program that the bankruptcy court authorizes
that we have available in our San Diego county Office or in Riverside county office. if you
contact our office we can perform the means test for you either over the phone or in person
to determine which bankruptcy would be best for you, either Chapter 7 or Chapter 13. The type of people or businesses that comes
to me for Chapter 11 bankruptcy are usually businesses with significant assets and significant
debts. Maybe more assets than debt, maybe more debt than assets. Either way, the Chapter
11 lies to reorganize. Chapter 11 is a reorganization bankruptcy allowing you to keep things that
you have going to eliminate debt, to keep your business moving forward and get it out
of a tough situation that it may be in. There is a difference between a small business
Chapter 11 versus a non small business Chapter 11. To qualify for a small business Chapter
11, you have to have debts totaling less than $2,343,000.00 And if you do have debt total
that you can qualify for the streamline process of a small business Chapter 11 bankruptcy. The advantages of a small business Chapter
11 bankruptcy is the streamline process providing a plan to the court and providing an exit
plan to the court. So you get in and out of Chapter 11 bankruptcy much quicker, much cheaper
in a small business bankruptcy than you would in a larger business bankruptcy. The key to a Chapter 11 bankruptcy is reorganization.
you want to stop foreclosure actions, stop collection actions, stop garnishment actions,
whatever needs to be stopped. We would use that automatic stay of the US bankruptcy court
by filing the Chapter 11 and allowing you time to reorganize. Most likely you would
be able wait three to four months at a minimum till you have to pay any of your creditors
any money. The court allows you the time to propose a plan, that would reorganize and
show the court that you’re making your best effort to pay back all the debts you can but
you are asking the court potentially to relieve you from some of the debt that you don’t want
to have to pay within your business or corporate structure. Realize that chapter 11 can be
filed by a corporation or by an individual doing business. Please fell free to contact my San Diego office
or Riverside county office to decide if you can qualify for Chapter 11 bankruptcy and
be successful to keep that business going and profitable in the future.