The Bankruptcy Code has numerous different “chapters” , so named by the designation listed in the code. While all of these are current and valid, the Law Office of Allan D. Sarver focuses its practice on the three most common, chapters 7, 11, and 13.

Chapter 7, also called Liquidation, is a court-supervised procedure by which a trustee administers the assets of the debtor’s estate, and where applicable, reduces them to cash, and thereafter makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. In cases where there is little or no nonexempt property , there may not be any actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will receive a distribution from the bankruptcy estate only if the case is an asset case and the creditor with notice of the filing, timely files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts.

Chapter 11, is a form of Reorganization, used by individuals who do not meet the monetary limitations of chapter 13, as well as commercial enterprises that desire to continue operating their business and repay creditors through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan and timely object. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations over the life of the confirmed plan and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income and meets the debt limitations for qualification under chapter 13. Chapter 13 is often preferable to chapter 7, because it enables the debtor to keep valuable assets, such as the family home, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the “means test” which will be explained by Allan D. Sarver during the course of consultations.

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