Quote:
Originally Posted by Rick Lee
She says she made to too much for Chapter 7 and had to file Chapter 11.
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Chapter 7 is liquidation.
Chapter 11 is businesss reorganization (although if you are a sole proprietor/self employed and individual can use Ch 11).
Chapter 13 is individual reorganization.
Liquidation=Here's what I have. Take it. I'll walk away owing nothing.
Reorganization=here's what I have, here's what I want to keep. I'll set up a payment plan to pay the Bankruptcy Court (thru Trustee) over the next 1-5 years to pay a portion of my debts back.
Recent legislative changes restrict use of chapter 7 liquidation.. basically, if your income is over the median income for the state where you live you are not allowed to just walk away...particularly with regard to unsecured debt (read: Credit Card debt). If your income reaches a certain level you have to pay at least a part of what you owe back. Based on what your earnings are. Not suprisingly, cc companies and consumer credit co's lobbied hard for this legislation.
Here's the problem with a Ch 13...your income falls to below median income level so you switch from a 13 to a 7 and you get out from under the 13 plan. Affectionally known as a Ch 20
Or you stop paying on the plan you set up and the Bankruptcy court throws out your case. Then all the creditors cacome after you because the automatic stay is no longer in force. And you're way down the line to get paid.
Bottom line...somebody a year into a Ch 13 is fraught with problems...If they're 2-3 years into it and their repayment plan is current, less so.