Federal law in Chapters 7, 11, and 13 of the Bankruptcy Code (Title 11), details the type of bankruptcy relief available in the United States. Today’s blog, the last in a series, addresses some questions that you should ask if you are unsure which type of bankruptcy is best for you.

Chapter 7 of the Bankruptcy Code regulates the procedure for liquidation under federal bankruptcy law. In contrast to chapter 7, chapters 11 and 13 govern the process of reorganization of a bankruptcy debtor. A bankruptcy filed under chapter 7 is the most common type of bankruptcy case filed in the United States. Chapter 13 of the Bankruptcy Code provides for the adjustment of debts of an individual with regular income permitting a debtor to retain property and pay debts over a time period defined by federal law.

*How much time do you have?

Unlike a bankruptcy case filed under chapter 13 of Title 11, a chapter 7 bankruptcy case does not require the formulation and submission of a plan of repayment. Rather, the bankruptcy trustee assigned to the debtor’s case collects and sells the debtor’s nonexempt assets and uses the proceeds of these assets to pay creditors with allowed claims pursuant to the provisions of the Bankruptcy Code. The case typically lasts three to four months.

Chapter 13 permits debtors to consolidate their debts whereby the individual makes payments under the chapter 13 plan to a chapter 13 trustee who distributes them to creditors. Individuals are protected from direct contact with creditors during the life of the chapter 13 bankruptcy case, which is significant since this is a minimum of three years and a maximum of five years.

*How much secured debt do you have?

Chapter 13 allows individuals to reorganize their secured debts, with the exception of a mortgage on their primary residence, and extend, and even lower, payments of these debts over the three-to-five year period of the chapter 13 plan. A Chapter 13 debtor may “cram down” a car loan which may dramatically reduce monthly payments.

*Do you have a co-debtor?

Federal law in chapter 13 of Title 11 contains a provision that affords protection to third parties such as spouses and co-signers who are co-liable with the debtor for “consumer debts.” The automatic stay which extends to the debtor and protects him or her from collection efforts by creditors also extends to any co-debtor.

If you are facing debt problems, bankruptcy may be a viable solution. The experienced Sacramento metropolitan area/Northern California defense attorneys at the Montefalcon Law Offices are here to help you if your financial position necessitates the consideration of a bankruptcy case filing under Chapter 7, 11, or 13. Contact us online or schedule a consultation at any of our three conveniently located offices. Telephone our downtown Sacramento office at (916) 444-0440, our South Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929 for an appointment today.