We provide advice and representation in the area of collections and bankruptcy law to both businesses and individuals. Because these two areas often overlap, the following concepts are helpful to understand this area of practice.
Chapter 7 is often called "liquidation" or "straight" bankruptcy. The bankruptcy court appoints a trustee to administer the bankruptcy estate. In return for having most debts extinguished away, you must turn over to the trustee all of your property which is not "exempt" under Oregon law. The trustee may sell or take the property and distribute the proceeds to your creditors in proportion to their claims. Chapter 7 bankruptcy is most often used by individuals who have few assets of meaningful value, and by businesses which are so burdened with debt that they have no viable option for recovery and reorganization.
Chapter 13 involves payments by you to your creditors over a three to five year period as part of a repayment plan which you formulate for approval by the bankrupcy judge. Chapter 13 is primarily utilized by debtors who have an asset or assets of significant value which they do not want to have sold and distributed to their creditors. As long as you remain current on your plan payments and on the regular payments to your secured creditors, you keep all of your property and "catch up" on all past due debts on secured property, like mortgages and car loans, over the life of the plan. Once you have completed your plan, your debts, if not paid in full, are discharged as they would be under Chapter 7. To qualify for Chapter 13, your must be an "individual with regular income" and your unsecured and secured debt totals must not exceed the maximum set by law.
This is for Corporations and other business entities not eligible for reorganization under Chapter 13, or in the case of farmer bankruptcies, Chapter 12. Individuals who exceed debt load limitations under Chapter 13 may also attempt reorganization under Chapter 11. These cases are generally complex, time-consuming, and expensive.
Financial distress does not necessarily indicate bankruptcy is inevitable. We can discuss possible alternatives for working things out with creditors.