Frequently asked questions

Bankruptcy refers to a federal court procedure that allows debtors to catch up on their debts by having some of them discharged and others repaid, depending on the type of bankruptcy. The process is available to both businesses (which often file for Chapter 11) and consumers (usually Chapter 7 or Chapter 13).

After getting court approval, the court shields you from lawsuits and some other adverse actions while you work through the procedure. For consumers, bankruptcies are almost always either "liquidations" (Chapter 7) or "reorganizations" (Chapter 13). In a Chapter 7 proceeding, property may be sold (liquidated) to pay back creditors. In a Chapter 13 proceeding, consumers typically keep most of their property but must establish a plan to repay at least some of their debt within three or five years.

Bankruptcy can help you get rid of some, but not all, kinds of debt. For instance, unsecured debt from credit cards and hospital bills may be forgiven in many cases. But child support, alimony and taxes may not be discharged. Student loans are not dischargeable unless the debtor can prove that repayment would cause an undue hardship (which is very difficult to prove). Also, creditors may argue that a given debt should not be discharged, subject to the bankruptcy judge's approval.

Chapter 7 is called "liquidation" bankruptcy because filers may lose some of their property, with some important exceptions. Chapter 7 is reserved for individuals and businesses with little or no ability to repay debts in the future. So those who file Chapter 7 may lose non-exempt assets in exchange for having most debts erased.

Chapter 13 is called "reorganization" bankruptcy because it allows consumers to reorganize their debt burdens and payment schedules. Anyone filing for Chapter 13 must also propose a repayment plan showing your income and how you will pay off your debts. Working with the court, your plan will determine how much you need to repay, based on your income, debt load, and the value of your property.

If you meet the eligibility requirements for both Chapter 7 and Chapter 13 bankruptcy, then you may choose which type to file. Otherwise, you may not have a choice.

Those with an income higher than the median income for a similarly sized family are not eligible for Chapter 7 if they would be able to repay some of their unsecured debt within five years. To be eligible for Chapter 13, you must not exceed a certain level of debt (see Individual Debt Adjustment for current limits). If you don't meet these requirements, then Chapter 13 bankruptcy is not available to you.

Usually, those who have a choice in the matter go with Chapter 7 bankruptcy, since they may be able to have all of their debts discharged (besides the debt covered by the proceeds of liquidated property). Chapter 7 also can be a much faster process than Chapter 13. However, Chapter 13 may be the best option for those who have adequate income and substantial assets.

The court issues a protective order when you file for bankruptcy called an "automatic stay," which stops most creditors from contacting you about your debts or making any collection efforts. Only the court has the authority to lift the automatic stay and allow creditors to seek repayment of debts.

No, the assets are entirely liquidated by the bankruptcy trustee. There are no exemptions available for businesses, unlike that for personal Chapter 7 bankruptcies.

When you file bankruptcy in Las Vegas, in theory you surrender everything you own to the bankruptcy trustee. However, the state legislature has decided that there are certain assets that a person should be able to keep even if they are filing bankruptcy. These are called “exemptions.”

In Nevada, you may exempt $15,000 for a car; $12,000 for clothes, household furniture and goods; $5,000 for a wedding ring or other jewelry; $10,000 for work tools, machinery or inventory of a sole proprietorship, $1,000 “wildcard” for anything you choose, $550,000 for a house; $500,000 for a qualified retirement account. In Nevada even some types of stocks are exempt, as well as life insurance proceeds.

So, most individuals who file bankruptcy will lose nothing, unless they have valuable assets that are not exempt. If you are concerned about a particular asset you have, please come in for a consultation.