Bankruptcy Solutions for Individuals
Helping Individuals Achieve a Fresh Start
Congress enacted the United States Bankruptcy Code in 1978, pursuant to a grant of authority from the United States Constitution. A fundamental goal of the United States Bankruptcy Code is to give individuals a financial “fresh start” from burdensome debts. In fact, the United States Supreme Court has stated that the purpose of the bankruptcy laws are to give the “honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.”
The attorneys at Leiderman Shelomith Alexander + Somodevilla, PLLC keep this axiom in mind in dealing with each and every individual client. The honest but unfortunate individual debtor deserves a fresh start. We never steer away from this focused goal.
One of the main goals of an individual bankruptcy case is obtaining a bankruptcy discharge, which releases the debtor from personal liability for certain specified types of debts. Upon entry of a discharge, the debtor is no longer legally required to pay any debts that are included in the discharge. The discharge is a permanent injunction prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
There are several different methods of obtaining a financial fresh start for an individual. The different types of bankruptcies available for individuals include:
A Chapter 7 bankruptcy, also known as a liquidation, contemplates an orderly, court-supervised procedure by which a Chapter 7 trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no non-exempt property in most Chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under Chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for Chapter 7 relief. A Chapter 7 bankruptcy is the most common form of individual bankruptcy.
A Chapter 13 bankruptcy is designed for an individual debtor who has a regular source of income. Chapter 13 is often used by a debtor who wants to keep a valuable non-exempt asset and it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. A common misperception is that the debtor must repay his or her creditors 100%. This is not true. The amount of the plan depends on a number of factors, and depending on the circumstances, it is possible for the debtor to repay only a small percentage of the amounts due to his or her creditors.
Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect.
An individual Chapter 11 proceeding is one filed by an individual, rather than by a business, and is a personal reorganization. Whereas the vast majority of bankruptcy cases filed by individuals are Chapter 7 liquidations or Chapter 13 reorganizations, Chapter 11 provides an alternate method for an individual to reorganize his or her finances. Contrary to what some other attorneys may think, individuals are eligible to file a Chapter 11 bankruptcy case. In fact, many of the provisions of Chapter 11 of the United States Bankruptcy Code are specifically tailored for individuals.
Many attorneys who handle business Chapter 11 cases or Chapter 13 cases are not aware of the countless nuances, pitfalls and benefits of the individual Chapter 11 case. Numerous individual bankruptcy cases are filed as a Chapter 7 or Chapter 13 case, when a Chapter 11 case would instead bring about much greater benefits to these individuals.
Other types of less-common bankruptcy proceedings available to individuals include Chapter 12 (adjustment of debts for a family farmer or fisherman with regular income) and Chapter 15 (which provides mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country).
The attorneys at Leiderman Shelomith Alexander + Somodevilla, PLLC have familiarity with all of the types of bankruptcy proceedings available to individuals. We have extensive experience dealing with Chapter 7, Chapter 13 and individual Chapter 11 bankruptcy proceedings, representing clients throughout the Southern District of Florida. Call us now for a no-cost initial consultation to see which solution is best for you.