An Explanation of Chapter 7, Chapter 11, & Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is the most common form of filing, often called a “straight bankruptcy”. With many technical exceptions beyond those listed here, all Debts are discharged in Chapter 7 Bankruptcy EXCEPT the following:
- Child Support
- Student Loans
- Most Traffic Tickets and Criminal Fines
- Most Taxes
- Injuries Caused by Drunk Drivers
- – Medical Bills
- – Lawsuits for injuries caused while driving uninsured
- – Credit Card Debts
- – Debts following evictions and/or repossessions
- – Lawsuits for breach of contract
- – Small or moderate NSF checks
- – Garnishments
- – Most business debts
- – Some fraud debts
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy involves making payments over time to creditors. The payment plans can be as short as 36 months–even less if you can repay quickly–or as long as five years. Some people have problems that cannot be taken care of with a Chapter 7 Bankruptcy, and are better off filing a Chapter 13 Bankruptcy plan.
The following debts and problems can often be handled more advantageously in a Chapter 13 Bankruptcy:
- Moderate to large NSF Checks
- Child Support
- Criminal and Traffic Ticket Fines
- Reinstating a suspended driver’s license
- House payments that are several months behind
- Car payments that are several months behind
- Injuries caused by your intentional conduct (such as assaulting someone
- Unpaid alimony or spousal maintenance
- Reducing a car payment to an affordable level
- Reducing a furniture or household payment to an affordable level
In a few rare cases, it can be necessary or advantageous to file a Chapter 7 Bankruptcy before a Chapter 13 Bankruptcy. These are called “Chapter 20 Bankruptcy” cases. For example, if you have high credit card debt that you cannot possibly hope to repay, but also have student loans or a suspended license because of many unpaid tickets and/or court restitution, it may be best to ask about a Chapter 20 Bankruptcy plan.
Chapter 11 Bankruptcy
Chapter 11 Bankruptcy cases are increasing in rarity. They are usually for large corporations or businesses, or individuals with many large debts as well as lots of equity in their assets. If you have a secured debt of over $1,010,650 and unsecured debt of over $336,900, you may have to file a Chapter 11 Bankruptcy instead of a Chapter 13 Bankruptcy, unless you are willing to file a Chapter 7 Bankruptcy. The decision to file a Chapter 11 Bankruptcy is indeed a technical decision. Chapter 11 Bankruptcy cases are very expensive and infrequently recommended. Most attorneys will not even tackle Chapter 11 Bankruptcy cases. Chapter 11 Bankruptcy cases are reserved for the most aggressive and hardworking attorneys. Our office is willing to put forth the effort necessary to serve your Chapter 11 needs, if we determine that a Chapter 11 Bankruptcy filing is the best plan for your situation.
Costs to File Bankruptcy
Chapter 7 Bankruptcy: Cases for our lowest income and senior clients may receive a slight discount from our regular fees. Responsible and professional legal representation can be had for as little as $1,650. Most wage earners pay $1,650, and those wage earners with higher incomes will generally pay between $1,950 and $2,150. Business owners in Chapter 7 Bankruptcy generally pay at least $2,200. This fee can be higher depending upon the anticipated complexity or difficulties of the case in terms of preparation or representation. Rarely does any business owner case exceed $6,000. Generally, in most basic routine cases, we will start work on your case with the payment of $350. The remaining balance of the attorneys’ fee is due at your convenience, whenever you are ready to have us send your papers to the United States Federal Bankruptcy Court.
Bankruptcy is an excellent investment. There exists no better long-term investment than ridding your family of “negative equity” and expensive creditor payments. You will be happier, healthier and less stressed out after your bankruptcy case, because once again you will have hope for the future. We also help you arrange with the courts for a four-month postponement of the payment of the $306.00 Chapter 7 Bankruptcy court filing fee and the $281.00 court filing fee.
Chapter 13 Bankruptcy: Really, all attorneys pretty much charge the same price for Chapter 13 Bankruptcy. The court’s “official” minimum fee charged by attorneys is $3,500. Most attorneys allow you to pay a $350 nonrefundable down payment and then an additional $1,250 plus a $100 contribution towards the court mandated filing fee when you sign your documents, depending upon the complexity of your case. Then, with almost all attorneys, the balance of the fees (e.g., the approximate remaining $2,000) is taken in small monthly installments after your plan is filed, and is paid to the attorney from the bankruptcy court trustee, and not out of your pocket. Thus, to be absolutely clear, you usually never pay more than $1,500 up-front out of your personal pocket to the attorney in most Chapter 13 Bankruptcy cases—unless the case is unusually rushed because of a looming foreclosure/repossession, or the attorney believes it presents unusual risk or complexity.
There are some exceptions to our “$350 then $1,150 plus $100 towards filing fee” rule here at our office. If your case if related to the operation or failure of your business, OR you are coming in to receive our services in the final three weeks before a foreclosure sale on your home or other property, OR you have exceptionally high income and taxes, then you have what we call a difficult “high maintenance” case. We may ask that you pay more of your fees up front for such difficult and/or time pressured “high maintenance” cases. Failed business and last-minute foreclosure/repossession and garnishment cases can be examples of the most common “high maintenance” type cases. We believe that charging more up front for a “high maintenance” case is fair. Think about it like a shipping cost to send a package. Last-minute priority and overnight delivery mail like Federal Express and UPS always costs more than a normal mail package. Also, shipping a large, complex, odd-shaped or fragile object by special delivery or special freight always costs more than a plain package that is not insured against breakage. For those difficult and/or last-minute cases, the up-front fee thus may increase slightly according to the risk and complexity of delivering the work product.
With all attorneys, in complex Chapter 13 Bankruptcy cases, there can be extra fees above $3,500—remember, you generally never pay more than $1,500 plus a $100 filing fee contribution out-of-pocket to the attorney. Again, any extra fees above $3,500 are added into the “bankruptcy plan” and are disbursed to the attorney by the bankruptcy court trustee, such that you really don’t end up paying any extra money directly out-of-pocket. What usually happens is that payments made through the plan to credit cards and medical bills and other debts are reduced so that the attorney services of your attorney can be paid. Rarely does the total fee in a Chapter 13 Bankruptcy case exceed $3,500, and very little of this is paid out-of-pocket by you. We find that few, if any, reputable attorneys in our business service area differ much from our Chapter 13 Bankruptcy fee policy.
Chapter 11 Bankruptcy: Call for pricing. We are extremely competitive.
Bankruptcy is a prudent step towards rebuilding your financial future.
As an example, paying $1,750 in bankruptcy attorney fees to be rid of $40,000 in credit card and medical bill debt is an immediate 2,228% “return on investment” that really increases your net worth by $40,000 because you erase this negative hit off of your balance sheet. No stock market, real estate or bond investment will ever provide an immediate 2,228% positive return on your investment. Bankruptcy is the US Government’s gift to you and your family that keeps on giving as you go on to build stability, comfort and happiness for you and those who depend upon you.
Would you accept a gift of $19,860.75 cash into your bank account from the U.S. Government? Why of course you would accept a $19,860.75 perfectly legal cash gift! Bankruptcy is just such a gift. By illustration, if you are struggling under total $500 monthly credit card and medical bill payments but then file for bankruptcy under the laws of the United States of America, you could thereafter begin to contribute that $500 monthly amount into your 401k, savings account or other investments. Bankruptcy would enable you to start saving $500 monthly (over $6,000 per year) towards retirement or other goals. With the addition of a very conservative compounding interest rate of just five percent (5.0%) per year you would have over $19,860.75 “cash in hand” after just three short years. We encourage you to accept the US Government’s $19,860.75 personal gift to you.