Q: What are the different kinds of bankruptcy?

A. Chapter 7, Chapter 11, and Chapter 13.

Chapter 7 is commonly known as a “straight liquidation” and its purpose is to obtain a discharge or forgiveness of most debts while keeping all exempt assets. In Texas most normal assets owned by a family (home, car, clothing, jewelry, furniture) are exempt. Chapter 7 is available to both individuals and corporations.

Chapter 11 is available to reorganize businesses of every kind. The goal of any Chapter 11 is to propose a plan that restructures the debt of the business so that the business can have a positive cash flow. Sometimes this is done through plans that pay only a percentage of the unsecured debt.

Chapter 13 is on available to individuals and is used primarily to catch up overdue house payments, car payments and tax debt over a 36 to 60 month period of time. There are debt limits with this type of bankruptcy but individuals who qualify for Chapter 13 can discharge their debt while paying arrearages to save their home and cars.

Q: I am owed money by a person who recently filed for bankruptcy, what recourse do I have?

A. Depending on what they owe you money for and what Chapter under the bankruptcy code they filed under will help determine what recourse you have. For example if they owe you money you loaned them secured by collateral then you have a right to file the appropriate motion to go get the collateral securing you loan. If they owe you money and it is not secured by any collateral and they filed for Chapter 7 (which is liquidation) then you have a right to file a proof of claim if there are assets to pay the claims.