How are Debts Handled under Different Bankruptcies?

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Our firm files many Chapter 7 bankruptcy cases annually, which are liquidation cases that do not involve plans to reorganize debts over time. We also file numerous Chapter 13, Chapter 11, and 12 consumer bankruptcy cases, which involve plans to reorganize debts under these different bankruptcies over time, typically in a plan that lasts 3 to 5 years. How do these plans work?

Reorganization under Chapter 13 bankruptcy cases

In Chapter 13 cases, our clients propose to pay someone called the trustee. The trustee is a standing trustee that serves a local district and administers cases. They have accountant like duties to take money in and account for payments to creditors under the plan. They also review our plans to make sure they comply with the bankruptcy code. Once the plans are confirmed by the court, the trustee pays the money out according to the plan and monitors the plans to make sure money is coming in regularly and the plans will pay who they need to pay within the time we’re allowed.

Reorganization under Chapter 12 bankruptcy cases

Chapter 12 family farm bankruptcies are similar, but there is usually only one standing Chapter 12 trustee per state. Usually the payments are made to a trustee. But because farm income isn’t as regular as wage income, the payments might be made every 2-3 months, every 6 months, or even yearly to the trustee to pay the creditors.

Reorganization under Chapter 11 bankruptcy cases

Chapter 11 cases are voted on by creditors, so they go through a different process. Instead of creditors filing objections or staying silent, they have to actually cast ballots. In our plans, we divide creditors into different classes. There may be classes of tax debts, classes of unsecured debts like credit cards and loans, classes for secured debt like vehicles or real estate, and so forth. Each class needs to approve the plan or there needs to be additional showing in order to get the plan confirmed (court approved). This process is similar whether we are filing a case for an individual debtor, a regular business or a small business under the newer Subchapter V designation.

If you have questions about reorganization type bankruptcies or debts under bankruptcies, contact one of our experienced attorneys at W M LAW. We have confirmed many cases under Chapters 11, 12 and 13 and are here to serve our Kansas and Missouri clients. For more information, visit our website at or contact us at 913-422-0909. At W M LAW, “We are Here to Help”.

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Jeffrey L. Wagoner


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