What is the Process of Chapter 7, 11, 13 Bankruptcy?
The ultimate goal of bankruptcy is discharge. Bankruptcy stays on your record for ten years. For individuals, discharge means a fresh start. For companies, they may have the ability to continue business, respectively in a chapter 13 or chapter 11. However, if a secured creditor does not receive a full discharge on its debts with the debtor, the secured creditor may initiate litigation outside of bankruptcy to recover the balance of the debt owed. If the creditor did not participate in the bankruptcy proceedings, the creditor may also initiation litigation to recover payments for its debts from the debtor after discharge or dismissal.
Chapter 7
Under chapter 7, only individuals receive a discharge or fresh start. Companies and partnerships do not receive a fresh start because they can dissolve and create a new corporation or partnership. In this case, the discharged debtor must be with enough property to meet debtor's post-petition needs and must take a financial management course. However, debt that will not be discharged are debts or creditors not listed on the schedules filed at the beginning of the case, student loans unless the debtor shows undue hardship, recent federal, state, and local taxes, child support and alimony, government-imposed restitution, fines and penalties, court fees, and debts not dischargeable due to debtor's fraud. Other non-dischargeable debt includes debts from fraud, certain debts for luxury goods or services that occurred within 90 days before filing and cash advances taken within 70 days after filing, debts from willful and malicious acts, embezzlement, larceny, or breach of fiduciary duty, and debts from a divorce settlement agreement or court order.
Chapter 13
Under chapter 13, the debtor is entitled to discharge once the debtor completes all payments under the repayment plan on the condition that: (1) the debtor maintains domestic support obligation; (2) the debtor has not received a discharge in a prior case filed within two years for prior chapter 13 cases or four years for prior chapter 7 and 11 cases; and (3) the debtor completed an approved course in financial management.
The debtor receives the discharge when all payments of plan are made either within three or five years, whichever is set by the court. However, in the debtor's petition may be dismissed or converted to chapter 7 for cause such as bad faith. A chapter 7 debtor who has proceeded in bad faith and opts to convert the case to chapter 13 is not eligible to be a debtor under chapter 13 because debtor's case would be subject to dismissal or reconversion to ch.7 under 1307(c). Once the debtor receives a discharge, creditors involved in the bankruptcy proceedings may not initiate or continue legal action against the debtor regardless of whether creditors were paid in full or in part. Certain debts are not dischargeable such as certain long term obligations such as a home mortgage, domestic support obligations, taxes, educational loans, debts from death or personal injury, and debts for restitution or a fine. There are also debts that are dischargeable in a chapter 13, but not in chapter 7. These debts are those for willful and malicious injury to property, those incurred to pay nondischargeable tax obligations, and those arising from property settlements in divorce or separation proceedings. It is wise to seek legal advice online before filing for bankruptcy.
A hardship discharge is only available to debtors when the debtor fails to complete payments due to circumstances for which the debtor should not justly be held accountable but only if modification of the plan was not practicable.
Chapter 11
In a chapter 11 case, the debtor is granted discharge when there is confirmation of the plan by the court. In this case, the debtors, both individuals and companies, get the discharge and can continue its business operations. The confirmation plan discharges the debtor from any debt that arose before date of confirmation whether or not proof of claim was filed or claim was allowed under 502, which is governed by section 1141(d).
Also, a confirmation plan sets forth all of the debtor's obligations to creditors included in the reorganization of the entity and discharges all pre-confirmation obligations of the debtor. When there is confirmation, it is binding on all of the parties (or creditors) involved even if they voted against it. The confirmation plan can be anything the parties agreed to. To be confirmed by the court, the court must find that (1) the plan is feasible that when the plan is confirmed, it is not likely that it will be result in liquidation or further reorganization; and (2) it is possible that the plan will meet requirements and the court still finds the plan not feasible. Bankruptcy law provides that creditors must receive what they would've received in chapter 7 before the plan is confirmed, which is known as the best interests rule.
If you have any questions about filing for bankruptcy, seek immediate legal help.
Chapter 7
Under chapter 7, only individuals receive a discharge or fresh start. Companies and partnerships do not receive a fresh start because they can dissolve and create a new corporation or partnership. In this case, the discharged debtor must be with enough property to meet debtor's post-petition needs and must take a financial management course. However, debt that will not be discharged are debts or creditors not listed on the schedules filed at the beginning of the case, student loans unless the debtor shows undue hardship, recent federal, state, and local taxes, child support and alimony, government-imposed restitution, fines and penalties, court fees, and debts not dischargeable due to debtor's fraud. Other non-dischargeable debt includes debts from fraud, certain debts for luxury goods or services that occurred within 90 days before filing and cash advances taken within 70 days after filing, debts from willful and malicious acts, embezzlement, larceny, or breach of fiduciary duty, and debts from a divorce settlement agreement or court order.
Chapter 13
Under chapter 13, the debtor is entitled to discharge once the debtor completes all payments under the repayment plan on the condition that: (1) the debtor maintains domestic support obligation; (2) the debtor has not received a discharge in a prior case filed within two years for prior chapter 13 cases or four years for prior chapter 7 and 11 cases; and (3) the debtor completed an approved course in financial management.
The debtor receives the discharge when all payments of plan are made either within three or five years, whichever is set by the court. However, in the debtor's petition may be dismissed or converted to chapter 7 for cause such as bad faith. A chapter 7 debtor who has proceeded in bad faith and opts to convert the case to chapter 13 is not eligible to be a debtor under chapter 13 because debtor's case would be subject to dismissal or reconversion to ch.7 under 1307(c). Once the debtor receives a discharge, creditors involved in the bankruptcy proceedings may not initiate or continue legal action against the debtor regardless of whether creditors were paid in full or in part. Certain debts are not dischargeable such as certain long term obligations such as a home mortgage, domestic support obligations, taxes, educational loans, debts from death or personal injury, and debts for restitution or a fine. There are also debts that are dischargeable in a chapter 13, but not in chapter 7. These debts are those for willful and malicious injury to property, those incurred to pay nondischargeable tax obligations, and those arising from property settlements in divorce or separation proceedings. It is wise to seek legal advice online before filing for bankruptcy.
A hardship discharge is only available to debtors when the debtor fails to complete payments due to circumstances for which the debtor should not justly be held accountable but only if modification of the plan was not practicable.
Chapter 11
In a chapter 11 case, the debtor is granted discharge when there is confirmation of the plan by the court. In this case, the debtors, both individuals and companies, get the discharge and can continue its business operations. The confirmation plan discharges the debtor from any debt that arose before date of confirmation whether or not proof of claim was filed or claim was allowed under 502, which is governed by section 1141(d).
Also, a confirmation plan sets forth all of the debtor's obligations to creditors included in the reorganization of the entity and discharges all pre-confirmation obligations of the debtor. When there is confirmation, it is binding on all of the parties (or creditors) involved even if they voted against it. The confirmation plan can be anything the parties agreed to. To be confirmed by the court, the court must find that (1) the plan is feasible that when the plan is confirmed, it is not likely that it will be result in liquidation or further reorganization; and (2) it is possible that the plan will meet requirements and the court still finds the plan not feasible. Bankruptcy law provides that creditors must receive what they would've received in chapter 7 before the plan is confirmed, which is known as the best interests rule.
If you have any questions about filing for bankruptcy, seek immediate legal help.
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