All Those Chapters…


You may have seen TV commercials advertising Chapter 7 as a way to get out of debt or Chapter 13 as a way to avoid losing your home or car. However, these commercials don’t tell the whole story. There are actually four chapters of bankruptcy: Chapter 7, Chapter 13, Chapter 11, and Chapter 12. Depending on your circumstances, you may qualify for more than one type of bankruptcy. However, an attorney can help you choose the right chapter to file, or help you determine whether bankruptcy is the best approach to solving your financial distress.

Chapter 7

Chapter 7 eliminates debt through liquidation of nonexempt assets, allowing debtors to get a fresh financial start. The key word in the previous sentence is “nonexempt.” Many debtors who qualify for Chapter 7 have few if any assets, and in most cases the assets they do have, such as personal effects, are exempt from liquidation. However, with few exceptions, Chapter 7 does not eliminate tax obligations or student loans. Chapter 7 also does not eliminate child support or spousal support obligations.

Chapter 13

Chapter 13 allows individuals, married couples, or sole proprietors to structure debts to make a single monthly payment to a trustee, who distributes the funds to creditors according to the debtor’s payment plan. The payment plan may or may not cover the entire amount of the debt, but once the payment plan has been completed, any remaining debt is discharged, much like with Chapter 12. Chapter 13 petitions generally allow petitioners to retain assets, such as a house or a car, that would be subject to liquidation through Chapter 7 bankruptcy.

Chapter 11

Chapter 11 provides debt reorganization by individuals, corporations, partnerships, and limited liability companies (LLCs). These types of operations are not allowed to file Chapter 13 petitions and must cease operations if Chapter 7 petitions are filed. Chapter 11 petitions allow such entities to obtain debt relief while remaining in business.

Chapter 12

Farmers and commercial fishing operations seeking debt relief may file under Chapter 12. Chapter 12 allows for flexible payments when fishing operations and farmers make their money.

Whether you are an individual, farmer or business owner, debtor, or creditor, we can help you deal with bankruptcy-related questions. Give us a call at Giddens & Gatton Law, PC, today! Also, the deadline to purchase your tickets to GG&J’s ‘A Night at the Ritz’ Charity Gala is August 3! Purchase your tickets here.

Dave Giddens
Giddens & Gatton Law, PC