The Difference Between Bankruptcy Chapters 7, 11, 12 & 13

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Thanks for stopping by my website. I suppose that if you’ve landed on my page, you’re probably contemplating bankruptcy or wondering what the difference between Chapters 7, 11, 12 and 13 is. Let me preface with this: I am NOT an attorney! I don’t warrant that the information I am writing about is accurate, nor should you use this information in lieu of legal advice. I am an agent that specializing in luxury pet-friendly real estate in South Florida. I try to keep abreast of as many financial aspects that affects my clients, friends, colleagues and family.

Today I met with a wonderful woman who was interested in listing her properties with me. Like so many, she has experienced financial hardships and has lost her business. With a warehouse, and several apartments under water, she is drowning in debt. I of course advised her to first consult with an attorney before she makes any decisions. However, I thought this may be a great blog topic to write about, in layman’s terms, of course.

[Please note: the information provided below is excerpted from Disclosure §527(a)(1) and §342(b), with some additions based on my experience]. Again, I am not an attorney, and don’t guarantee the accuracy of this information.

The following are the differences between Chapters 7, 11, 12 & 13:

  • Chapter 7 is the liquidation of all of the debtor’s no none-exempt assets in exchange for the forgiveness or discharge of certain kinds of unsecured debts such as credit cards, signature loans, medical debts, and auto repossession debts. From my understanding certain types of debts are not dischargeable such as guaranteed student loans, some taxes, obligations such as alimony, and child support, criminal restitution, fraud, and a few others (of course an attorney will be able to thoroughly advise you).
  • Chapter 11 is for business reorganizations.
  • Chapter 12 is for family farmers.
  • Chapter 13 is a method of repayment of debts whereby a payment plan is proposed and the debtor agrees to pay his projected disposal income for a period of 36 to 60 months, depending on whether the debtor  has current monthly income below or above the state median income. A debtor will be required to make monthly plan payments commencing 30 days after the commencement of the case and every 30 days thereafter for the term of the plan.

As a realtor, as much as we depend on listings to earn our living, I highly recommend for you to speak with an attorney before you list a property, or attempt to negotiate with the bank. I often meet real estate and bankruptcy attorneys in my line of work. There are a few that stand out to me. If you would like a recommendation, it will be my pleasure to provide you with some names and numbers. Just leave me a comment below or email me directly.


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