Chapter 7 bankruptcy

How long your Chapter 7 bankruptcy will take depends upon whether you have assets to distribute. Most Chapter 7 cases are completed quite quickly. But if you have unexempt assets, your Chapter 7 case could have a more extended timeline. Asset cases take longer. If the trustee must liquidate assets and distribute proceeds to creditors, that takes time. Your attorney should advise you before you even file whether you have an asset or no-asset case.

If all of your property is fully protected by exemption, then you will have a no-asset case. No asset cases take three months, start to finish, from filing to discharge. Other types of actions, like adversary proceedings, can delay the closure of a Chapter 7. But the vast majority of Chapter 7 bankruptcies close about 90 days after filing.

Chapter 13 bankruptcy

Chapter 13 bankruptcy allows you to propose a repayment plan that lasts from three to five years. Your household income and type of debt determine whether you have a three-year (36 months) or five-year (60 months) repayment plan. If you want to make up missed payments on a secured debt, like a home mortgage, then usually you will want to file a five-year plan.

And at the end of your plan, all remaining balances on your debts will be discharged. Chapter 13 bankruptcy is available to almost every consumer debtor, but you must have steady monthly income to qualify.

Chapter 11 bankruptcy

Individual debtors may also use Chapter 11 of the bankruptcy code. Typically, Chapter 11 bankruptcy is reserved for high earners or those with multiple real estate or business assets. If you are able to “pre-package” your case, then the process may be over in a matter of weeks. Other Chapter 11 reorganization plans last two years, five years, or even longer. Chapter 11 offers flexibility but comes with costs, too. Most consumer debtors are better served by Chapter 7 or Chapter 13.

How long does bankruptcy take?

Chapter 7 usually takes three months, start to finish. Chapter 13 takes between three and five years. And Chapter 11 can be over very quickly or take more than five years.

If timing is a concern for you, be sure to ask your attorney about your expected timeline before you even file. Note that for most credit reporting, the date of the bankruptcy filing (and not the discharge date or date of case closure) is the most important date in your case.

Your financial freedom of choice may be limited while you remain in an active bankruptcy. If you have concerns about how long your bankruptcy will take, discuss them with your attorney from the outset so he can plan your case appropriately.

Chapter 7 Bankruptcy Cost

The court’s administrative filing fee for a Chapter 7 bankruptcy is $335. Chapter 7 is sometimes called “straight bankruptcy,” and it is typically the quickest and easiest of the bankruptcy chapters. Legal fees for a Chapter 7 range between $1000 – $4000, depending upon the complexity of your case. Read more about case complexity below.

Chapter 13 Bankruptcy Cost

The court’s administrative filing fee for a Chapter 13 bankruptcy is $310. Legal fees for a Chapter 13 range between $1,500 – $5,000. Chapter 13 is much more complex than Chapter 7 and is often used to make up mortgage payments or protect unexempt property from liquidation. Chapter 13 provides relief for individuals who are under unrelenting pressure from creditors. Chapter 13 also heals your credit more quickly than Chapter 7.

Chapter 11 Bankruptcy Cost

If you file an individual Chapter 11, your case is complex. The court’s administrative filing fee for a Chapter 11 bankruptcy is $1,717, and legal fees start at $10,000, however that is the minimum fee. Chapter 11 bankruptcy for individuals can solve complex problems that Chapter 13 cannot address. Individual Chapter 11 cases are often complicated and can be expensive to administer.

Bankruptcy Cost and Case Complexity

Lee Legal provides excellent consumer bankruptcy services at very reasonable prices. Every client receives a free consultation. Our fees are very competitive, and we offer easy monthly installment plans.

The complexity of your case determines your legal fees. Lawsuits, foreclosures, emergency filings, lien strips, repossessions, evictions, garnishments, and other complications will ordinarily add to your total bankruptcy cost.

Your bankruptcy attorney must be paid in full, including the filing fee, to file your case. Attorneys fees not collected prior to the filing of your case will be discharged and are barred from collection. Unfortunately, bankruptcy lawyers must be paid in full prior to the filing of your case.

Contact Lee Legal with Any Questions

Lee Legal is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. If you want to learn whether you are a candidate for bankruptcy and how much your total bankruptcy cost will be, call to schedule a free consultation.

Most people associate Chapter 11 with business bankruptcy. But Chapter 11 can also be used to reorganize the finances of individuals who have debt levels above the Chapter 13 thresholds, or who own assets that cannot be protected in Chapter 7.

Jackson’s bankruptcy lawyers said in a statement that Chapter 11 would allow “Mr. Jackson to reorganize his financial affairs as he addresses various professional liabilities…” That’s one way of putting it. On July 24, 2015, just 10 days before Jackson filed for bankruptcy protection, a jury ordered the hip-hop star to pay $7 million to a woman whose sex tape he released online. Hardly a “professional liability.”

You do not have to be broke to file bankruptcy

Obviously, 50 Cent is not broke. In 2015, Forbes named 50 Cent the fourth wealthiest hip-hop artist, citing his net worth as $155 million.

50 Cent is not broke — he’s insolvent. Although he has assets, he is unable to meet his current debt obligations.

Chapter 11 could be the right solution for Jackson, that is, as long as he doesn’t keep flaunting how “broke” he is on social media, like he did recently on Instagram in the picture above. “My social media posts are a vehicle to perpetuate the demand for my music and entertainment services,” the rapper told the bankruptcy court in an affidavit. “Just because I am sensitive to the needs of maintaining my brand does not mean that I am hiding assets or that I have lied on my filings in the bankruptcy case . . . I take my responsibilities and obligations imposed by the bankruptcy code very seriously and have truthfully responded to questions from creditors,” he said.

For Jackson’s sake, let’s hope he’s telling the truth, because the United States Trustee has moved the bankruptcy court for an independent review of his assets. Bankruptcy fraud can have serious consequences, as Major League Baseball center fielder Lenny Dykstra and Real Housewives of New Jersey star Teresa Guidice have learned the hard way. You do not have to be broke to file bankruptcy, but you do have to be honest about your income and assets, debts and expenses.

Chapter 7: Liquidation

Chapter 7, also called straight bankruptcy, allows you to discharge most types of unsecured debts. The discharge completely eliminates your liability on debts. Usually taxes, student loans, alimony, and child support pass through the Chapter 7 discharge.

Chapter 7 is an excellent option for individuals who have become overwhelmed by debt. Overwhelmed either by the amount of their debts or by the sheer number of creditors. In most cases, Chapter 7 is quick and painless, taking about three months from start to finish.

Chapter 13: Reorganization

Chapter 13 is a form of debt adjustment. Your bankruptcy attorney will work with you to formulate a payment plan that you can afford. Chapter 13 is sometimes also called the “wage-earner’s bankruptcy” because you will need a sufficient monthly income to support your repayment plan.

Chapter 13 is also an excellent option for those who need to stop a foreclosure because it gives you three to five years to catch up on missed payments. In some cases, we may even be able to strip off your second mortgage using Chapter 13 procedures. In general, Chapter 13 is more flexible than Chapter 7 for solving certain types of financial problems.

Chapter 11: Restructuring

Chapter 11 bankruptcy is the chapter of bankruptcy that you hear about in the news all the time because it is usually filed by large businesses. But Chapter 11 also available to individuals, usually those with significant assets. Chapter 11 allows you to restructure your debts and shares similarities to Chapter 13.

In a Chapter 11, the debtor (or “debtor in possession”) maintains control of the day-to-day operations of the business or the individual’s finances. In Chapter 11, the debtor in possession develops a plan to repay some or all of the debt owed to creditors over time.

Chapter 12: Family Farmers & Fishermen

Chapter 12 bankruptcy addresses a very specific group of debtors: family farmers and fisherman. A form of reorganization, Chapter 12 allows farmers and fisherman with steady income to pay back all or a portion of their debts over an extended period of time.

Chapter 12 is often used to finance significant debts due to equipment purchases or facility upgrades. Chapter 12 bankruptcy is uncommon in the immediate D.C. area but occurs in the more rural areas of Maryland and Virginia.

Which of the bankruptcy chapters is right for you?

Most people must decide between the bankruptcy chapters of Chapter 7 and Chapter 13. This can be a tough choice. If you are considering filing bankruptcy in DC, Maryland, or Virginia, call Lee Legal to discuss which of the bankruptcy chapters is best for you.

Why file a Proof of Claim?

A creditor may be entitled to monetary distribution made by the trustee in a Chapter 7 bankruptcy. And creditors must also file a Proof of Claim in order to be paid through a Chapter 13 repayment plan. Creditors must also file a POC in order to participate in a Chapter 11 reorganization. A few typical reasons to file a Proof of Claim include:

• Sharing in the distribution of any estate assets
• Providing notice of a claim against the estate
• Participating in the election of a trustee in cases under Chapter 7 or Chapter 11
• Establishing the creditor’s right to receive court notices relating to the bankruptcy case
• Voting for a Plan of Reorganization

Secured creditors need not file a proof of claim in order to preserve their liens in a bankruptcy case.

In Chapter 11 cases, claims and interests listed in the schedules filed by the debtor are deemed to be allowed. In the event a Chapter 11 case is converted to a case under Chapter 7 or Chapter 13, however, a proof of claim must be filed in order for the claim to be allowed. Accordingly, it is wise to file a proof of claim at the outset of a Chapter 11 case to preserve a claim in the event of conversion.

Unsecured creditors that fail to file a Proof of Claim within the statutory period do not share in any distribution of funds resulting from the bankruptcy.

The Proof of Claim form: Official Form 410

To establish a claim in a bankruptcy case, a creditor must properly complete and file Official Form 410. A properly completed and filed proof of claim is prima facie evidence of a creditor’s claim or interest in the bankruptcy estate. Creditors must attach supporting documentation to the Proof of Claim form. Once filed, the debtor or any other party of interest may object to the Proof of Claim.

The basic information required by the official Proof of Claim form includes:

• Debtor identity and bankruptcy case number
• Creditor identity and mailing address
• Amount of and basis for the claim
• Type of claim.

The deadline for filing Proofs of Claim is 90 days after the first date scheduled for the Section 341 Meeting of Creditors. Although relatively simple to accomplish, the filing of a Proof of Claim is a crucial step that must be undertaken timely and accurately.

Bankruptcy terms: A – C

Adversary Proceeding: A lawsuit related to a bankruptcy case and commenced by filing a complaint with the court under Fed. R. Bankr. P. 7001.

Assumption: An agreement to continue performing duties under a contract or lease post-bankruptcy.

Automatic Stay: An automatic, court-ordered injunction that stops lawsuits, foreclosure, garnishments, and all other collection activities against the debtor at the very moment a bankruptcy petition is filed. To learn more, read my article The Automatic Stay.

Bankruptcy: The legal procedure for solving intractable debt complications.

Bankruptcy Administrator: An officer of the court in certain districts who, like the U.S. Trustee, is responsible for supervising the administration of bankruptcy cases.

Bankruptcy Code: Title 11 of the U.S. Code, the law of federal bankruptcy.

Bankruptcy Court: Subsections of District Courts, the courts controlled by judges with expertise in bankruptcy law.

Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation,” or the sale of the debtor’s nonexempt property. Proceeds are distributed to creditors. Many cases are considered “no asset.”

Chapter 9: The chapter of the Bankruptcy Code providing for reorganization of cities, towns, counties, utilities, and school districts.

Chapter 11: The chapter of the Bankruptcy Code providing for reorganization of corporations, partnerships and individuals with significant assets and income. A Chapter 13 for the wealthy.

Chapter 12: The chapter of the Bankruptcy Code providing for debt restructuring of a family farmers or fisherman. Infrequently used in the DMV.

Chapter 13: The chapter of the Bankruptcy Code providing for reorganization, usually over three to five years, of the debts of individuals with regular incomes. Otherwise known as the “wage-earner’s bankruptcy.”

Chapter 15: The chapter of the Bankruptcy Code dealing with cases of international insolvency according to the model law as promulgated by the United Nations Commission on International Trade Law (“UNCITRAL”) in 1997.

Collateral: Property subject to liens. Creditors with rights in collateral are defined as “secured creditors” and have additional protections under the Bankruptcy Code.

Confirmation: Approval by the court of a bankruptcy plan of reorganization.

Consumer Debtor: A debtor whose debts are primarily consumer debts, as opposed to debts incurred as a result of the operation of a business.

Contingent Claim: A claim that may be owed by the debtor under certain (or uncertain) circumstances.

Conversion: The process of changing chapters in bankruptcy, or “converting” a case from Chapter 7 to Chapter 13, or vice versa. Conversion is usually allowed, absent bad faith, at the request of the debtor.

Creditor: An individual, company or other entity to whom the debtor owes (or may owe) money.

Credit Counseling: A generally useless “briefing” from a nonprofit credit counseling agency that individual debtors must attend (online or over the phone) prior to filing under any chapter of the Bankruptcy Code.

Current Monthly Income: The average monthly income of the debtor over the six months prior to the filing of the bankruptcy petition.

Bankruptcy terms: D – F

Debtor: An individual or corporation who has filed for relief under the Bankruptcy Code.

Debtor Education: Equally useless as credit counseling, a very similar course to credit counseling that the debtor must complete to receive a discharge.

Debtor-in-Possession: In a Chapter 11 case, a debtor who remains in possession of the estate’s assets and who assumes the duties of a trustee. The debtor-in-possession is, in theory, a fiduciary for the creditors of the estate, and owes them the highest duty of care and loyalty.

Discharge: Complete financial relief from liability for a debtor from all dischargeable debts. A discharge prevents creditors from taking any action against the debtor to collect on debts. Moreover, creditors must report the debts as satisfied or discharged to credit bureaus. The “Discharge Order” prohibits all collection efforts of discharged debts.

Disclosure Statement: “Adequate information” provided to Chapter 11 creditors to enable them to evaluate the plan of reorganization.

Dismissal: Termination of a bankruptcy case without either discharge or denial of discharge, usually for fraud or technical deficiency.

Estate: All legal and equitable interests and property of the debtor at the moment of the bankruptcy filing.

Equity: The market value of a debtor’s interest in property less any liens and/or judgment interests.

Executory Contracts: In a Chapter 7 case, unexpired contracts or leases which the debtor may assume or reject.

Exempt Property: Property owned by the debtor that is protected by federal or state law from unsecured creditors. Many exemptions are available to debtors in Washington, D.C. and Virginia.

Fraudulent Conveyance: Transfer of an asset prior to and in anticipation of the commencement of a bankruptcy case, usually for less than adequate consideration.

Bankruptcy terms: I – R

Insider: A relative or agent of the debtor of an individual debtor, or an officer of a corporation.

Joint Petition: A single bankruptcy petition filed by husband and wife.

Lien: A perfected right to sell property to satisfy a debt.

Liquidation: The sale of a debtor’s property to benefit creditors.

Means Test: Calculations used to determine whether an individual debtor’s Chapter 7 filing is presumed to be an abuse of the Bankruptcy Code. “Abuse” is presumed if the debtor’s monthly income, over 5 years, is more than $10,950, or 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575.

Meeting of Creditors: Required by Section 341(a) of the Bankruptcy Code, the meeting at which the debtor is questioned under oath by a bankruptcy trustee. Creditors may also question the debtor about his or her finances.

Motion to Lift the Automatic Stay: The legal method by which a creditor requests authority to act legally against the debtor, usually to foreclose against or repossess property.

No-Asset Case: A Chapter 7 case where there are no assets available to satisfy unsecured creditors’ claims.

Nondischargeable Debt: Debt that cannot be eliminated in bankruptcy. Mortgages, alimony, child support, taxes, student loans, and benefit overpayments are generally nondischargeable.

Petition: The document, containing basic information about the debtor’s assets and debts, and that commences a bankruptcy case.

Plan: A detailed prospectus of how the debtor proposes to pay creditor claims over a fixed period of time.

Preference: Payment, over $600 in the aggregate, made on a debt by the debtor within the 90-day period prior to the filing of the bankruptcy petition.

Priority Claim: An unsecured claim entitled to payment before other unsecured claims.

Proof of Claim: Documentation required of a creditor to verify a creditor’s claim against assets of the bankruptcy estate.

Pro Rata: The distributional allocation amongst multiple creditors based on the numerical proportion of their claims.

Reaffirmation Agreement: A court-approved contract by a Chapter 7 debtor that provides for continued payments on a collateralized debt.

Bankruptcy terms: S – U

Schedules: Detailed lists (labeled A-J) filed by the debtor with the petition. The debtor’s schedules catalog all of the debtor’s assets and liabilities, as well as other relevant financial information.

Secured Creditor: A creditor with a security interest in collateral possessed by the debtor. Mortgage companies are secured creditors because they hold an interest in real property until the mortgage contract is satisfied. Auto finance companies are secured creditors because they hold a security interest in a vehicle until that vehicle is paid for. Best Buy holds a security interest in a financed flat-screen TV until the financing contract is satisfied. Secured creditors have the right to repossess and sell any property in which they hold an interest to satisfy all or some of the claim.

Secured Debt: Debt backed by a security interest, such as a mortgage, collateral contract, or lien.

Statement of Financial Affairs: Affectionately referred to by bankruptcy lawyers as the SOFA, a statement containing information about the debtor’s income, transfers of property, lawsuits by creditors, business interests, losses, gains, accounting, and much more.

Statement of Intention: A declaration made by a Chapter 7 debtor concerning plans for dealing with consumer debts secured by property of the estate. Read my article What is the Statement of Intention?

Trustee: A private individual, usually an experienced bankruptcy lawyer, who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. Trustee. The trustee reviews the debtor’s petition and schedules and conducts the Meeting of Creditors. In Chapter 7 cases, where necessary, the trustee liquidates portions of the debtor’s estate and makes distributions of the proceeds to creditors. In Chapter 13 cases, the trustee oversees the debtor’s plan, receives payments from the debtor, and disburses payments to creditors in accordance with a confirmed plan.

U.S. Trustee: An officer of the Department of Justice who ensures the proper administration of a bankruptcy case.

Undersecured Claim: An “under-water” collateralized interest, or a debt secured by property worth less than the full amount of the claim.

Unsecured Claim: In contrast with secured claims, unsecured claims are those in which creditors have no interest in collateral and in which credit was extended based solely upon an assessment of the debtor’s future ability to pay. Unsecured claims are treated very differently in bankruptcy than secured claims.