by Greg Bennett, Esq.     

In this article, I will be discussing a topic that no one wants to talk about – Bankruptcy. Filing for Bankruptcy is an important option for individuals and business owners in financial difficulties. If you have lost a stream of income, have more bills than you can pay, have bill collectors calling and harassing you about past due bills, bankruptcy might be right for you. Although it might be hard to contemplate filing Bankruptcy, the Bankruptcy laws are designed to help people seeking to recover from a difficult financial situation. Bankruptcy can erase debts, protect valuable assets, and help you begin to rebuild your credit score. Sometimes filing Bankruptcy is the absolute best thing you can do for yourself and your family.

There are two main types of bankruptcy for individuals and small businesses. Which one is best for you depends on your circumstances.

Chapter 7 Bankruptcy - By far the most common type of bankruptcy is Chapter 7 Bankruptcy. If you are an individual and have lost a source of income, have more debt than you can pay, want relief from harassing creditor calls and would like most, if not all, of your debts forgiven, then Chapter 7 Bankruptcy the best option. Chapter 7 Bankruptcy is designed to give an individual a Fresh Start. In a Chapter 7 bankruptcy, creditor collection activities are stopped and your debt is “discharged”, which simply means that you don’t owe it anymore. There are certain debts, such as child support, student loans and some income taxes, that cannot be discharged with a Chapter 7.

If your home is in foreclosure, the foreclosure on your house will be stopped temporarily during the proceedings. If you choose to allow your house to proceed to foreclosure, all debt will be discharged in relation to your home (including your second, third, etc.!). Many people don’t realize that they will be allowed to keep around $25,000 of their unsecured assets through their Chapter 7 Bankruptcy. In fact, the majority of people don’t lose any of their unsecured assets through Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy - Another type of Bankruptcy is a Chapter 13 Reorganization. If you have a steady source of income, but have more debts than you can pay or you have a house that you want to save, but the mortgage is in foreclosure, a Chapter 13 Bankruptcy might be right for you. Chapter 13 bankruptcy is frequently used when an individual wants to prevent foreclosure on a home or other secured asset. Under this type of bankruptcy you will “restructure” your debts (including your past due mortgage payments) and make payments through a Chapter 13 Plan. This type of bankruptcy only works when an individual or family (not a corporation or LLC) has a steady source of income sufficient to pay their bills going forward and the plan payment for a portion of their past due bills paid over several years.

Conclusion - Of course filing for Bankruptcy is very complex and the foregoing is only a super simple overview. Please come in for a free 30 minute consultation before making any bankruptcy related legal decisions. In my next article, I will discuss the details of Chapter 7 Bankruptcy more thoroughly.

Wm. Greg Bennett, Esq. is an attorney with over 20 years experience in private business and commercial real estate transactions and litigation. Mr. Bennett is a partner in the law firm of Bennett & Bennett, APC with his wife, Kelly Bennett, who practices family law, is a professional mediator and Mayor of Murrieta.  Mr. Bennett is also a partner in Mediation Law Group, Inc. an alternative dispute resolution provider specializing in civil litigation and divorce mediation.  Mr. Bennett can be reached by calling (951) 719-3456 or emailing him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it "> This e-mail address is being protected from spambots. You need JavaScript enabled to view it .