Bankruptcy is a legal process which allows individuals, corporations, and other entities to restructure or eliminate their debt under the power and authority of the United States Bankruptcy Court system. The word “bankruptcy” comes from ancient Latin, originally meaning "broken bench," bancus (a bench or table), and ruptus (broken). In ancient Rome, merchants would display their goods on benches in the marketplace. When these merchants failed to pay their debts, the Roman authorities would break their benches, effectively putting them out of business.


Today most modern countries, particularly those in the West, have developed a system of bankruptcy laws to more peacefully and, arguably, more effectively address the indebtedness of both businesses and individuals. Here in the United States, individuals enjoy the world's most liberal bankruptcy protection. This protection is a constitutional right, as provided to us under Article I, Section 8, of the United States Constitution.


For individuals, bankruptcy relief is provided for under Chapters 7, 11, 12, and 13 of Title 11 of the U.S. Bankruptcy Code. In short, and to oversimplify, Chapter 7 allows most people to wipe out all their unsecured debts while providing the option to keep or eliminate secured ones (i.e. houses, cars, etc.).


Chapter 13 allows individuals to pay a reduced amount on their unsecured debts, determined by their disposable monthly income, and also allows debtors to make up missed payments on secured obligations where they want to keep the secured property (i.e., houses, cars, etc.).


Chapter 12 is akin to Chapter 13, but is limited to farmers and fishermen and has special provisions just for them (we do not handle Chapter 12 cases).


Chapter 11 is a reorganization bankruptcy much like a Chapter 13. It is generally used by businesses, but is not limited to them. Individuals required or wishing to file a Chapter 13, but whose debts exceed the Chapter 13 limits (over $1,010,650 in secured debt or $336,900 in unsecured debt) may have no choice but to file a Chapter 11. Filing a Chapter 11 is more expensive and we do not handle them. However, the benefits can be great, and if I feel a Chapter 11 would be most beneficial, I will gladly recommend or refer you to experienced Chapter 11 counsel.


For more specific information, click on Chapter 7 or Chapter 13. . If you'd like more information in general, I recommend reading the booklet, Bankruptcy Basics from the U.S. Court, or watching their series of Bankruptcy Basics videos by clicking the link.


Do you have questions about bankruptcy or our services?

Contact us at +1 (714) 962-1892 or via our contact form