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CHAPTER 10: SELECTED CIVIL CLAIMS - Table of Contents

10.1 - Alternate Dispute Resolution10.2 - Bankruptcy10.3 - Dissolution of Marriage10.4 - Intellectual Property10.5 - Personal Injury10.6 - Professional Malpractice10.7 - Real Estate10.8 - Taxation

10.2 BANKRUPTCY

The information upon which this section is based was provided by the Moran Law Group in Mt. View, California.

There are four kinds of bankruptcy proceedings. The four types of bankruptcy are referred to by the chapter of the federal Bankruptcy Code that describes them. Chapter 7 bankruptcy is the most common form of bankruptcy. It is a liquidation proceeding in which the debtor's non-exempt assets, if any, are sold by a trustee and the proceeds are distributed to creditors according to the priorities among creditors established in the Code. Chapter 7 bankruptcy is available to individuals, married couples, corporations and partnerships. Individual debtors get a discharge within 4-6 months of filing the case. Any wages the debtor earns after the case is begun are the debtor's, beyond the reach of creditors who had claims on the date of filing.

Chapter 11 bankruptcy is a reorganization proceeding, typically for corporations or partnerships. In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business. The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization.

Chapter 12 bankruptcy is a simplified reorganization for family farmers, modeled after Chapter 13, where the debtor retains his property and pays creditors out of future income.

Chapter 13 bankruptcy is a repayment plan for individuals with regular income and unsecured debt less than $269,250 and secured debt less than $807,750. The debtor keeps his property and makes regular payments to the Chapter 13 trustee out of future income to pay creditors over the life of the plan (3-5 years). The level of repayment provided for in the Chapter 13 plan can range from 10% to 100% depending on the debtor's income and the make up of the debt. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts.

Bankruptcy is a very specialized area of the law, with its own set of terms and procedures that can be quite important. Therefore, it may be particularly important to consult with a bankruptcy lawyer before proceeding in this area.

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