Bankruptcy: Bankruptcy is a legal right in our system of law, designed to free people from a hopeless financial situation rather than make them suffer the rest of their lives.  There are several types of bankruptcies for different situations.  You may have heard of Chapter 7, Chapter 11, or Chapter 13.  These are the most common types of bankruptcy.  One of the most important aspects of a bankruptcy is the automatic stay or court order that immediately takes effect upon filing.  This court order stops creditor harassment, repossessions, IRS levies, lawsuits, and foreclosures and gives a person time to try to salvage as many assets as possible.  Bankruptcy is complicated so it is important to seek the advice of an experienced bankruptcy attorney. 

                Chapter 11 of the Bankruptcy Code is the section of the code used for the reorganization or liquidation of businesses.  This chapter may be used for either companies or individuals who are in business.  We usually hear about it when it involves very wealthy individuals, airlines, oil companies, or other large businesses.  However, it is also commonly used by medium sized and small businesses as well.  Chapter 11 allows a business or business person to re-organize its debts or to allow an orderly sale of assets to maximize the sale price.  Many times, it is the only way in which a company may continue doing business in times of cash flow shortages or in the event of a pending foreclosure. 

                Chapter 13 of the Bankruptcy Code is sometimes called the consumer section of bankruptcy.  It allows a qualified debtor, usually a small businessperson or wage earner, to re-organize one's debts under the protection of the bankruptcy court.  Like other sections of the code, Chapter 13 recognizes the exemption of certain kinds of property, such as your home, cars, tools, and other specified properties, and allows a debtor to re-organize his/her debts into a plan within which he/she can operate while paying that debt under terms, which may or may not be anything like the terms agreed upon with his/her creditors at the time the debt was created.  In addition, certain types of property may be paid for at fair market value rather than in the amount of the debt, and other types of debt may be avoided altogether.

                Chapter 7 of the Bankruptcy Code allows a debtor to completely discharge all of his/her debt under certain conditions.  It allows him/her to retain his/her exempt property, such as the family home and automobile, household furnishings, certain types of savings accounts, certain tools of trade, and other specified property.  Chapter 7 is available to businesspersons and individuals and is designed to give the debtor a fresh start virtually free of debt.  There is no limitation upon how much or how little debt can be discharged.  However, there are certain limitations upon how much of your property can be retained as exempt property free of any claim by the creditors of the Chapter 7 debtor.  Discharge of your debts in Chapter 7 is usually accomplished in a minimum of time, often within less than 6 months.