WHO CAN FILE WHAT TYPE OF BANKRUPTCY?
By Douglas A. Crowder
Copyright © 2019
The simplest and most common type of bankruptcy is the Chapter 7, which can be filed by an individual, or most types of businesses. If an individual’s debts are primarily consumer debts (as opposed to business debts), the individual may not be allowed to file if his / her income is above the state median income — which in California now is about $4,000 per month for a one-person family, and goes up depending on the family size.
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A Chapter 13 Bankruptcy can only be filed by an individual, not a corporation, but the individual may be a business owner. Under this system, one pays off either all, or a portion of his / her debts over a period of 3 to 5 years. This is the type most commonly used to save a home that is in foreclosure. To be eligible for Chapter 13 an individual’s unsecured debts (credit cards, personal loans, etc.) must be less than $394,725 and his / her secured debts (mortgages, car loans) less than $1,184,200.
If an individual’s debts are above these limits, then he / she could file a Chapter 11 and usually accomplish the same result as with a Chapter 13. A Chapter 11 is a business reorganization plan and can be filed by a corporation or an individual. This office has successfully filed Chapter 11s for corporations and individuals.
A Chapter 9 is similar to a Chapter 11, but only for municipalities (such as cities or water districts).
A Chapter 12 is similar to a Chapter 13, but ia only for family farmers and fishermen, and has a higher debt limit.
Recently, this office was hired by a creditor who had a judgment of over $1 million against a debtor who had filed a Chapter 13 bankruptcy. The judgment was partially secured by debtor’s real estate, since the creditor had recorded an “abstract of judgment,” which resulted in a lien against any real estate the debtor owned in the county, however at least $500,000 of the judgment was unsecured. This debt, by itself, put the debtor above the allowable Chapter 13 debt limits. Debtor’s counsel agreed to voluntarily convert the case to a Chapter 11 after being contacted by this office.
