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Insolvency & Bankruptcy

Insolvency is defined as either an inability to pay debts when due or when liabilities exceed your assets. Bankruptcy is a process that allows consumers and businesses to repay some or all of their debts under the protection of the federal bankruptcy court. For the most part, bankruptcies can be divided into two types: liquidation and reorganization.

Chapter 7 bankruptcy is called liquidation bankruptcy because trustee may take and sell ("liquidate") some of your property to pay back some of your debt. However, you can keep property that is protected (or "exempt") under state law. There are several types of reorganization bankruptcies, but Chapter 13  is most commonly used by consumers.

In Chapter 13 bankruptcy, you keep all of your property but must make monthly payments over three to five years to repay all or some of your debt. Both Chapter 7 and Chapter 13 bankruptcy have many rules regarding which debts are covered, who can file, and what property you can and cannot keep.

Chapter 11 is typically used by financially struggling businesses to reorganize their affairs. It is also available to individuals, but because Chapter 11 bankruptcy is expensive and time-consuming, it is generally used only by those whose debts exceed the Chapter 13 bankruptcy limits (rare) or who own substantial nonexempt assets (such as several pieces of real estate).

Please contact us for more information.