Bankruptcy Information
So What is Bankruptcy?
Bankruptcy is a federal court process that is designed to help consumers and businesses eliminate their debts or repay them under the protection of the court. Bankruptcies can generally be described as "liquidation" or "reorganization" and the numbers define which type of bankruptcy you are involved in.
Under a liquidation bankruptcy (aka a Chapter 7 bankruptcy), the borrower asks the bankruptcy court to wipe out (discharge) the debts owed to all creditors. Under a reorganization bankruptcy (Chapters 11,12, and 13), the borrower files a plan with the bankruptcy court proposing how they will repay your creditors. Some debts must be repaid in full; others are paid only a percentage of the balance due; others aren't paid at all. While Chapter 11, 12 and 13 filings are more difficult to manage, they can be very beneficial if you have assets with a large value (over say $850,000) and lots of equity. There are a number of specialized lenders that can provide bankruptcy loans in certain parts of the country quickly. Many times these loans are bridge type financing that can be left in place or replaced with more conventional loans. Some call these loans, private, hard money loans.
The Difference Between Capter 7, 11, and 13 Bankruptcies
Under Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most debts owed. In exchange for the discharge of debts, your nonexempt property is sold and the proceeds are used to pay off your creditors. Eligible consumers and businesses can file under Chapter 7.
Under Chapter 11 or Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back your debts over time. The amount you'll have to repay depends on the amount of property you own and the types of debts you owe. Chapter 13 is less expensive and less complex than Chapter 11, but not everybody qualifies for Chapter 13 bankruptcy.
Consumers with secured debts under $871,550 and unsecured debts under $269,250 can file for Chapter 13. Consumers with debts in excess of the Chapter 13 debt limits and businesses can file for Chapter 11 -- a complex, time-consuming, and expensive process. Chapter 11 is rarely used by consumers for this reason, but many businesses use it because it allows them to stay in business rather than close their doors.