Divorce and bankruptcy seem to go hand in hand. If a divorce puts you in bad financial straits in San Jose or Santa Clara County, you should consider using the consumer-friendly U.S. bankruptcy laws to help you start your finances over again. Bankruptcy will not absolve you of all of your debt, but it will help alleviate the overwhelming and seemingly insurmountable burden of unmanageable debt, whether that debt is personal or business debt.

Bankruptcy is not the appropriate option for every debtor because there are significant drawbacks to filing for bankruptcy protection. One significant detriment to filing for bankruptcy protection is the loss of ability to borrow money or obtain credit for a large period of time. Another significant drawback to filing bankruptcy is the real possibility that the bankruptcy court will compel you to liquidate your assets so you could pay some of your debtors. Choosing the appropriate bankruptcy chapter depends on your needs. You must consult closely with an experienced, knowledgeable, and skillful bankruptcy attorney to select the best bankruptcy option for you and your future.

Bankruptcy Under Chapter 11

Chapter 11 of the U.S. Bankruptcy Code provides the framework for a business to restructure its debt while remaining operational. Chapter 11 allows business entities such as corporations, partnerships, and limited liability companies to retain profits while reworking the organization’s debt. The bankruptcy court tabulates the debt and then determines a payment schedule. The organization must satisfy its obligation under the payment schedule to avail itself of Chapter 11’s protections.
A secured creditor may not receive full payment for the debt owed in a Chapter 11 bankruptcy. However, the unsecured debts will be discharged if the debtor pays according to the schedule set forth by the court. The debtor must ask the bankruptcy court to grant a discharge order when all of the restructured payments have been made.

Chapter 13 and Chapter 7 Bankruptcy Petitions

Chapter 7 is known as personal bankruptcy. The filing of a Chapter 7 bankruptcy petition signals the court to appoint a trustee who will examine your debts and income. The trustee will take non-exempt assets and place them in the bankruptcy estate. The trustee could sell the assets off to satisfy the debt.

Chapter 7 is usually the primary vehicle to “declare bankruptcy” for an individual. Chapter 7 helps debtors discharge unsecured consumer debt, car loans, and other private debts. Some people looking to discharge debt do not qualify for Chapter 7 protection because they make too much money or they have already filed a Chapter 7 bankruptcy petition.

Chapter 13 bankruptcy petitions are similar to Chapter 11 petitions in that the court establishes a payment schedule to unsecured creditors. The court will not order the liquidation of your unsecured assets if you adhere to the payment schedule. Instead, the court allows you to retain your unsecured property provided that you make timely payments.

The money you would have to repay your unsecured creditors in a Chapter 13 bankruptcy restructuring will depend upon the amount of non-exempt property you own. The court will order you to pay a larger amount of money to your unsecured creditors for the duration of the repayment plan.

Secured Debt versus Unsecured Debt

Secured debt is debt given in exchange for property in which the creditor retains a legal interest so that if the debtor fails to make payments, then the creditor seizes the collateral as repayment for the debt. Conversely, the debtor does not pledge any debt as security for unsecured debts. Examples of unsecured debts are private loans and consumer credit cards.

Trust Gemma V. Reyes to Guide You Through the Bankruptcy Process

Understanding bankruptcy is extremely difficult. If you are contemplating petitioning for bankruptcy protection, you need a seasoned bankruptcy lawyer to guide you through the process. Otherwise, you could find yourself in serious financial problems. Santa Clara County bankruptcy attorney Gemma V. Reyes possesses a high degree of knowledge and experience helping clients navigate the bankruptcy process. Your future depends upon doing it right the first time. Call Attorney Gemma V. Reyes today at 408-292-6289 to obtain expert bankruptcy advice.