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A Comprehensive Guide to Bankruptcy in 2021

Finding yourself in financial turmoil can be a challenging and stressful situation to endure. You’ve likely exhausted all of your other options in an attempt to get your head back above water.

Considering filing bankruptcy can be a frightening thought, but we’re here to remind you that bankruptcy is not a death sentence. You can still live a fulfilling life after filing bankruptcy, as long as you do the work necessary to turn things around.

Here’s what you need to know about filing bankruptcy in 2021:

First, You’ll Need to Choose the Right Chapter for Your Circumstances

There are several different types of bankruptcy chapters, and each is unique in its own way. Here are the most common types of bankruptcies for consumers and small business owners:

Chapter 7 Bankruptcy - Liquidation Under the Bankruptcy Code

Chapter 7 bankruptcy is one of the most well-known types of bankruptcy. Under chapter 7, the bankruptcy trustee puts together and sells your nonexempt assets. Using the proceeds from the sale, the holders of the claims (creditors) will be paid back in accordance with the provisions of the Bankruptcy Code.

A portion of your property may be subject to liens and mortgages that pledge the property to other creditors. The Bankruptcy Code allows you to retain certain property that is “exempt,” but the trustee will liquidate your remaining assets.

Ultimately, you should be prepared to lose property after filing chapter 7 bankruptcy.

Chapter 11 Bankruptcy - Reorganization Under the Bankruptcy Code

Chapter 11 bankruptcy is best for people who have a viable business but are facing debt challenges. This chapter enables business owners to reorganize or restructure their debt, which allows the business to remain in operation.

Also referred to as a “reorganization bankruptcy,” with chapter 11, you are able to do the following:

  • Remain “in possession” of your assets
  • Have the powers and duties of a trustee
  • Continue to operate your business
  • Borrow new money (with court approval)

Under chapter 11, a plan of reorganization is proposed in which creditors whose funds are impacted may vote on the plan. The plan may then be confirmed by the court if it receives the required votes and satisfies particular legal requirements.

Chapter 13 Bankruptcy - Individual Debt Adjustment

Also referred to as a “wage earner’s plan,” Chapter 13 bankruptcy allows you to develop a plan to repay all or a portion of your debts, so long as you have a regular income. Under this chapter, you may propose a repayment plan to make payments to your creditors in the form of installments over a period of three to five years.

If your monthly income does not meet the applicable state median income, the plan will likely be set for three years unless the court approves a longer period “for cause.” If your monthly income is greater than the applicable state median, your repayment plan will likely need to be for five years.

During this period, debt collectors are not allowed to start or continue collection efforts.

Common Bankruptcy Court Fees

The U.S. Bankruptcy Court charges fees for all of the services they provide. Some of the most common fees include:

  • Paper copies of any documents:
    • $0.50 per page
  • Copies of an electronic record stored outside of the court’s electronic case management system (i.e. document files, audio recordings, and video recordings):
    • $31 per record
  • Certification of any document:
    • $11
  • Exemplification of any document:
    • $23
  • Reproduction of a court proceeding’s audio recording:
    • $32
  • A search of the bankruptcy court records:
    • $32 per name or item searched
  • Filing a complaint:
    • $350
  • Administrative fees:
    • Filing a petition under Chapter 7, 12, or 13:
      • $78
    • Filing a petition under Chapter 9, 11, or 15:
      • $571
    • Motion to divide a joint case under Chapter 7, 12, or 13:
      • $78
    • Motion to divide a joint case under Chapter 11:
      • $571

While the Bankruptcy Court can impose many more fees than those listed above, the ones mentioned here are the most common. For a full list of the Bankruptcy Court miscellaneous fee schedule, click here.

If you are in financial trouble and are considering filing bankruptcy, our team is here to help. We have helped many others in similar situations, and we may be able to help you too. Don’t delay—reach out to our office right away with any questions you may have.

Contact the experienced attorneys at Caddell Reynolds Law Firm by calling (800) 889-6944 or filling out an online contact form today.

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