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Oversimplified Summaries of

Chapter 7 Chapter 13 Chapter 11 Chapter 12

Chapter 7

Chapter 7 is a liquidating bankruptcy. The debtor does not reorganize, and does not make periodic payments to the court. The important issues include:

  • Whether or not the debtor is eligible for Chapter 7 under the new “means-test” and the old “totality of the circumstances test”.
  • Eligibility of the debtor to obtain a discharge based on full disclosure and cooperation with the court and lack of fraudulent transfers, concealment, or other bad behavior in the case.
  • There may be a question of dischargeability of any one debt based upon bad behavior as to that creditor. Samples are fraud, theft, embezzlement, willful and malicious injury, breach of fiduciary and the like.
  • The question of what property the debtors own, of all and every possible kind, and which of these properties are “exempt”, to be kept by the Debtor, and which are not exempt, to be kept by the Debtor, and which are not exempt.

Email IconIn most cases where the debtor does not run afoul of these problem areas, a discharge is often issued by the court in as little as 100 - 120 days after the case is commenced. The case can continue while the Trustee administers assets, if indeed there are assets. In a case where the Trustee pursues a personal injury claim, formerly owned by the Debtor, cases can extend for years.

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Chapter 13

Chapter 13 is available only to human beings, not to corporations or other fictitious entities. It is generally known as the Wage Earner’s Reorganization.

  • The debtor makes payments monthly to a Chapter 13 Trustee.
  • Generally all mortgage payments and car payments are made to the Chapter 13 Trustee as well as monies to cure arrears on secured debts and monies to pay some dividend to general unsecured creditors. How much to be paid is determined by the requirements of the bankruptcy “means test” and a “best efforts” test based upon a cash flow budget filed by the Debtor. The amount of non-exempt property that the debtor owns can also affect the amount of the plan payments.
  • Email IconUnless creditors are paid 100% of their claims, the Chapter 13 Plan must be at least 36 months. It is generally not to exceed 60 months, though there are exceptions. The means test determines whether 60 months is a mandatory minimum.

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Chapter 11

  • Chapter 11 is intended for reorganization of businesses. Its design is generally best suited to large businesses because of the cost and complexity. Chapter 11 is the only reorganization available to corporations and other fictitious entities, and recently changes have been made to make it more suited to small businesses. It can also be used for controlled liquidation of a businesses’ business assets. Generally a plan based upon a cash flow, or the sale of assets, or any other source of funding limited only by the debtor’s creativity, is submitted by the debtor, voted on by creditors, and scrutinized by the court for confirmation.
  • Email IconUnsecured creditors need not necessarily be paid in full; secured creditors need not necessarily be paid according to contract, and partially secured creditors can have their claim bifurcated and treated as two separated claims, one secured and one unsecured.

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Chapter 12

  • Email IconThis is reorganization similar to Chapter 13, but only available to family farmers. Mr. Herman’s experience in Chapter 12 Is extremely limited, since the only agricultural product produced in any quantity in Pinellas County, Florida is concrete. Nonetheless, Chapter 12 is quite similar to Chapter 13, and is administered through the same standing Trustees. Will be utilized if appropriate.

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