Covid-19 Update: Open For Business

James R. Jones, Attorney at Law will be open for business at our physical location while practicing social distancing guidelines set forth by government & health officials.

Call Us Now To Get Started (713) 263-3888

James R. Jones, Attorney at Law.

The Chapters of Bankruptcy Explained

Under the Federal Bankruptcy Code, there are four different types of bankruptcy filings: Chapter 7, Chapter 11, Chapter 12 and Chapter 13. The chapter under which you file depends on your personal financial situation—the most common is Chapter 7, but the other three options are also relatively common.

Here’s some information about each of these bankruptcy chapters from an attorney specializing in bankruptcy in Montgomery County, TX.

Chapter 7 bankruptcy

A person who files for Chapter 7 bankruptcy does so with the hope of having as many of their debts discharged as possible to give them a clean financial slate. Upon filing for bankruptcy, the debtor will have an administrator or trustee appointed to manage the sale of his or her assets. However, only assets that are nonexempt can be sold off to pay debts. There are certain types of property that cannot be touched in this process, such as a primary residence and certain personal items.

After the debtor’s nonexempt assets have been fully liquidated, the trustee pays off creditors a portion of the money raised. It is likely that not all creditors will receive money from the proceeds; the debts must be prioritized. Therefore, many financial obligations will be discharged under a Chapter 7 filing.

After filing for Chapter 7, a person cannot file under that chapter again for seven years, and any debts that were not forgiven in that filing cannot be discharged in another filing. There are also certain debts that cannot be discharged, including alimony, taxes and child support. Student loans are also very rarely discharged—one must prove significant financial hardship to be able to benefit from student loan forgiveness under bankruptcy.

Chapters 12 and 13

Chapters 12 and 13 are essentially the same type of bankruptcy, but Chapter 12 is specifically meant for family farmers, while Chapter 13 can be any individual. To file for Chapter 13 bankruptcy, you must have a steady income and a greater ability to pay off your debts. Under this type of bankruptcy, the debtor and trustee develop a repayment plan, which then gets approved or altered by the court. This repayment plan gives the debtor three to five years to restructure and pay off existing debts.

This is typically the course of action a debtor takes if he or she is ineligible for Chapter 7 bankruptcy. It also prevents the debtor from having to liquidate assets.

Chapter 11 bankruptcy

Chapter 11 bankruptcy is also similar to Chapter 13 bankruptcy, but the primary difference is that there are no limits with regard to the amount of money the debtor can owe. It was developed for large corporations, but individuals are also allowed to file for bankruptcy under Chapter 11.

For more information about the various types of bankruptcy in Montgomery County, TX and the best steps for you to take given your personal financial situation, we encourage you to reach out to an experienced bankruptcy attorney at the office of James R. Jones, Attorney at Law today.

James R. Jones, Attorney at Law.
James Jones, Esq.

Mr. Jones’ practice concentrates on business and consumer Chapter 7 bankruptcy
and he has been an attorney of record in several hundred such cases.