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Alternatives to Bankruptcy There are many alternatives to filing a bankruptcy proceeding, all of which work in certain cases. Three examples are direct negotions, assignments and workouts. Creditors will sometimes agree through direct negotiations to discount their claims. Some states have procedures called assignments for the benefit of creditors where assets are assigned to a neutral third party who sells them for the benefit of creditors. Formal workouts involve meeting with creditors as a group and entering into a payback agreement over time. There are many others. | ||||
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Automatic Stay: What is it? The automatic stay is a fundamental part of the bankruptcy law which temporarily freezes creditors and others from taking action against the debtor during the bankruptcy case. Ceditors can ask the Bankruptcy Court for permission to modify or terminate the operation of the automatic stay. | ||||
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Chapter 11: What is it? Chapter 11 is a reorganization or restructuring process which allows the use of existing assets, future income and other resources to pay debts over time. Chapter 11 is very powerful, but also very costly in legal and accounting fees. Chapter 11 is not for everyone. | ||||
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Chapter 7: What is it? Chapter 7 allows individuals to get a fresh financial start. Individuals keep basic assets (called exempt property) which vary from state to state. All other property is sold for the benefit of creditors by a Chapter 7 Trustee. | ||||
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Chapter 13: What is it? Chapter 13 is a voluntary repayment program for individuals which lasts no more than 60 months. Your household income is compared to your reasonable costs of living. Any excess is paid to creditors in monthly installments. Not everyone is qualified to participate in Chapter 13. | ||||
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