Bankruptcy - protecting individuals and business against creditors

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Generally, “bankruptcy protection” is a term that helps people and companies get rid of their debt (Chapter 7) or repay a certain percentage of their debt (Chapter 13). The most used chapters under the Bankruptcy Code are Chapter 7 and Chapter 13.


Kaplan Law Offices, P.C. will analyze your particular financial situation to determine what, if any, liabilities you have if you file a Chapter 7 bankruptcy. We give free consultations. Feel free to call us at (847) 509-9800 for an appointment.  


Chapter 7

A Chapter 7 can be filed by individuals and corporations, but only individuals can get a “discharge” under Chapter 7. In a chapter 7 case, a Trustee is appointed to determine if there are any assets which you have which can be sold (otherwise known as “liquidated”). The proceeds from the sale will be used to pay some of your creditors.


The Trustee will not take property (real estate or personal property) that has no or minimal equity. Also, the Trustee will abandon any property that is “exempt” (that is, protected by the law from being attached by the Trustee). In a majority of cases, debtors keep their real estate (even investment property), their cars (even multiple cars, trucks, trailers, motorcycles and other recreational vehicles), and their personal property.


In a Chapter 7 case, most of your debt will be extinguished. Most people get relief in Chapter 7 from credit card debt, medical bills, personal loans, and business loans that are personally guaranteed.


Some debt cannot be wiped out in a Chapter 7 bankruptcy. The following are some of the debts that, generally, must be repayed even if you file for Chapter 7 bankruptcy:

  • Income taxes that are less than three years old
  • Child-support, alimony, or other domestic relations obligations
  • Fines and penalties
  • Education loans

Chapter 13

A Chapter 13 bankruptcy, also known as a “repayment bankruptcy” or a “wage earner” bankruptcy, requires that you have a verifiable source of income.


In a Chapter 13 bankruptcy, you submit a “repayment plan” to the Court and Trustee, which shows how much of your debt you can afford to repay.  A Chapter 13 plan can last up to five years, or 60 payments. The amount of the repayment is based on your income, how much is owed to secured and unsecured creditors, and your monthly living expenses.


Chapter 11

A Chapter 11 bankruptcy is usually used for a business that finds itself with debt that exceeds its income and wants to restructure that debt in order to be viable in the marketplace.


In limited situations, an individual can file a Chapter 11 case, but it is generally used by companies seeking protection against its creditors without losing the income that it generates.

Chapter 12

A Chapter 12 bankruptcy applies primarily to family farmers or fishermen or those with a regular annual income that is generated from agricultural (including livestock) pursuits.


A Chapter 12 bankruptcy lasts between three to five years. During this time, the family farmer, pursuant to his/her “bankruptcy plan,” makes payments based on their available income.  In the course of this time, the farmer saves his assets, and pays a small percentage of his/her debt.

Chapter 9

A Chapter 9 bankruptcy applies to municipalities who are in financial distress.  In a Chapter 9 plan, the municipality can request the Court to rework its contractual obligations, even a pension plan.


 A Chapter 9 bankruptcy is very rare, but it’s a tool available to municipalities who are struggling to keep revenue flowing in the face of mounting financial obligations and responsibilities.