Different Types of Bankruptcies
When debt becomes overwhelming, knowing where to turn can make all the difference. At Macco & Corey P.C., we understand that bankruptcy is not simply a legal process; it’s a life-changing step toward financial recovery. With decades of combined experience and a reputation as one of Long Island’s most respected bankruptcy law firms, our attorneys have guided thousands of individuals, families, and businesses through the complexities of bankruptcy with skill, precision, and compassion.
Our team’s deep knowledge of bankruptcy laws, combined with the unique perspective of attorneys who also serve as court-appointed bankruptcy trustees, gives our clients a distinct advantage. We know how cases are evaluated, what courts and trustees expect, and how to navigate challenges before they become obstacles. This insight allows us to craft strategies that not only meet the legal requirements but also position our clients for the strongest possible financial future.
Macco & Corey P.C. offers a full spectrum of bankruptcy services tailored to both individual and business needs. For individuals facing mounting credit card debt, medical bills, or foreclosure, we provide clear guidance on personal bankruptcy options such as Chapter 7 and Chapter 13, helping clients choose the path that best fits their income, assets, and long-term goals. For businesses struggling with operational debt or cash flow challenges, we offer strategic counsel on Chapter 11 bankruptcy reorganization, enabling owners to restructure their obligations while maintaining operations.
Whether your situation calls for eliminating unsecured debts, reorganizing payment terms, or protecting valuable assets, we approach every case with the same commitment: to protect your rights, simplify the process, and help you regain control of your financial life. At Macco & Corey P.C., we don’t just file cases. We stand beside you from your first consultation to your final discharge, ensuring you have the knowledge, confidence, and support you need at every step.
Overview of Bankruptcy Basics
Bankruptcy is a legal process established under federal law that provides individuals, families, and businesses with a structured way to address overwhelming debt. Its primary purpose is twofold: to offer honest debtors a fresh financial start and to ensure fair treatment of creditors. Depending on the chapter filed, bankruptcy can either discharge certain debts entirely or reorganize them into a manageable repayment plan. The process is overseen by the U.S. Bankruptcy Court and guided by the Bankruptcy Code, which outlines the rights, responsibilities, and protections for all parties involved.
While bankruptcy is often viewed as a last resort, it exists to give people and businesses a path forward when financial obligations become unmanageable. It can stop creditor harassment, halt foreclosure or repossession, and create breathing room to rebuild financial stability.
Historical Context and Evolution of Bankruptcy Laws
The concept of bankruptcy has deep historical roots, evolving significantly over time. Early bankruptcy laws, dating back to ancient civilizations, were often punitive, with debtors facing imprisonment or loss of personal freedom. In England during the Middle Ages, bankruptcy was primarily a tool for creditors, offering little protection to debtors.
In the United States, bankruptcy was first addressed in the Constitution, granting Congress the power to establish “uniform laws on the subject of bankruptcies.” The first federal bankruptcy law was enacted in 1800, but it was short-lived. Over the 19th and 20th centuries, legislation gradually shifted toward more debtor-friendly provisions, recognizing the importance of economic rehabilitation alongside creditor repayment.
Major milestones include the Bankruptcy Act of 1898, which provided a permanent federal framework, and the Bankruptcy Reform Act of 1978, which created the modern Bankruptcy Code still in use today (with amendments over the years). These changes reflected a growing understanding that financial hardship often arises from circumstances beyond a debtor’s control (such as illness, job loss, or economic downturns) and that providing a legal means for recovery benefits both individuals and the broader economy.
Today’s bankruptcy laws strike a balance between protecting debtors from crushing financial burdens and ensuring creditors receive fair treatment. By offering structured, court-supervised solutions, bankruptcy remains a vital tool for restoring financial stability and encouraging economic participation.
Types of Bankruptcies
Bankruptcy law offers several different chapters under the U.S. Bankruptcy Code, each designed to address specific financial situations. The right chapter for you or your business depends on factors such as income, debt levels, assets, and long-term goals. Below is an overview of the most common types of bankruptcy, along with a brief look at some specialized options.
Chapter 7 Bankruptcy – Liquidation for a Fresh Start
Chapter 7 is often referred to as “liquidation” bankruptcy. It is available to individuals and businesses that cannot realistically repay their debts. A court-appointed trustee may sell non-exempt assets to repay creditors, although many filers keep most or all of their property due to exemptions. To qualify, individuals must pass the means test, which compares their income to the state median. Once completed, most unsecured debts, such as credit cards and medical bills, are discharged, offering a clean financial slate.
Chapter 11 Bankruptcy – Reorganization for Businesses
Chapter 11 is primarily used by businesses that wish to continue operating while restructuring their debt. It allows a company to propose a reorganization plan that adjusts payment terms, reduces obligations, or liquidates certain assets to improve financial stability. Individuals with debts exceeding Chapter 13 limits can also use Chapter 11. The process is more complex and costly than other chapters but offers the benefit of preserving business operations and protecting jobs while working toward repayment.
Chapter 13 Bankruptcy – Structured Repayment for Wage Earners
Chapter 13 is designed for individuals with a steady income who want to repay debts over time while keeping their assets. Filers propose a three- to five-year repayment plan based on their disposable income. This chapter is especially useful for stopping foreclosure, catching up on missed mortgage or car payments, and consolidating unsecured debts into a single monthly payment. Eligibility is limited to individuals within certain secured and unsecured debt limits set by federal law.
Other Forms of Bankruptcy – Specialized Applications
In addition to Chapters 7, 11, and 13, the Bankruptcy Code includes specialized chapters for unique circumstances. Chapter 9 is for municipalities such as cities or school districts facing financial distress. Chapter 12 is tailored to family farmers and fishermen, offering repayment plans suited to seasonal income patterns. Chapter 15 addresses cross-border insolvency cases involving debtors, assets, and creditors in multiple countries. While less common, these chapters serve important roles in addressing specific financial challenges.
Chapter 7, 11, 13 Bankruptcy Process and Requirements
Filing for bankruptcy is a formal legal process governed by strict federal rules and timelines. While the details vary depending on the chapter filed, the overall structure follows a predictable sequence designed to ensure fairness, transparency, and compliance with the Bankruptcy Code. Understanding these steps and having the right legal guidance can make the process smoother and more effective.
General Steps Involved in Filing for Bankruptcy
Initial Consultation and Case Evaluation: The process begins with a thorough review of your financial situation. This includes assessing your income, expenses, debts, and assets to determine whether bankruptcy is the best option and, if so, which chapter is most appropriate.
Pre-Filing Credit Counseling: Federal law requires all bankruptcy filers to complete a credit counseling course from an approved provider within 180 days before filing. The course outlines alternative debt relief options and issues a certificate that must be filed with your petition.
Preparing the Bankruptcy Petition: Your petition includes detailed schedules of your assets, liabilities, income, expenses, and recent financial transactions. Once filed with the bankruptcy court, an automatic stay takes effect, halting most collection actions, foreclosures, repossessions, and wage garnishments.
The Meeting of Creditors (341 Meeting): About a month after filing, you will attend the 341 meeting, where the bankruptcy trustee and any creditors who appear can ask questions about your finances and the information provided in your petition.
Plan Confirmation or Asset Liquidation: In Chapter 7 cases, the trustee determines whether any non-exempt assets will be sold to repay creditors. In Chapter 13 or Chapter 11 cases, the court reviews and confirms your repayment or reorganization plan, after which you begin making payments according to the approved schedule.
Completion of Financial Management Course: Before receiving a discharge, you must complete a debtor education course, which focuses on budgeting and responsible credit use.
Discharge and Case Closure: Once all requirements are met, the court issues a discharge order, releasing you from personal liability for most debts, and your case is closed.
Document Requirements
The bankruptcy process requires complete transparency about your financial situation. Commonly required documents include:
- Recent pay stubs or proof of income
- Federal and state tax returns (typically for the past two years)
- Bank account and investment statements
- Mortgage, lease, and vehicle loan documents
- Credit card, medical, and other debt statements
- A list of all assets, including real estate, vehicles, and personal property
- Records of recent large purchases, transfers, or payments to creditors
Accurate and complete documentation is essential, as any errors or omissions can delay your case, reduce the relief you receive, or even result in dismissal.
The Role of a Bankruptcy Attorney
A bankruptcy attorney is more than just a legal representative. They are your guide through a complex and highly regulated process. At Macco & Corey P.C., our attorneys handle every stage of your case, from evaluating your eligibility and gathering documents to preparing your petition and representing you in court. We ensure all filings meet legal requirements, anticipate potential challenges, and protect your rights throughout the process.
Because our attorneys also serve as bankruptcy trustees, we have unique insight into how cases are reviewed and decided. This allows us to identify potential issues before they arise, streamline your case, and maximize the debt relief available to you. With the right legal team, you can approach bankruptcy with confidence, knowing you have experienced advocates working toward your financial recovery.
Choosing the Right Bankruptcy Option
Selecting the right path forward is one of the most important decisions you will make when facing serious debt challenges. The U.S. Bankruptcy Code offers several bankruptcy options, each with its own eligibility rules, processes, and long-term effects. Choosing incorrectly or without a full understanding of the bankruptcy filing and requirements can result in unnecessary costs, delays, or even dismissal of your case. That’s why careful evaluation and expert guidance are essential.
Factors to Consider When Selecting a Bankruptcy Type
Your Income and Assets: Your current and projected income plays a major role in determining which chapter you qualify for. For example, Chapter 7 requires passing the means test, while Chapter 13 and Chapter 11 are designed for those with steady income who can commit to a repayment plan. The value and type of assets you own also matter, as some chapters allow you to retain more property than others.
Nature and Amount of Debt: Certain debts, such as child support, alimony, and most student loans, cannot be discharged under any chapter. If your debt consists mostly of secured loans (like mortgages or car loans), a repayment chapter like Chapter 13 or Chapter 11 might be more beneficial than liquidation under Chapter 7.
Your Long-Term Financial Goals: If keeping your home or business is a priority, a reorganization chapter may be the best choice. If you’re seeking the fastest route to eliminate unsecured debt, Chapter 7 may be more appropriate.
Debt Limits and Legal Requirements: Chapter 13 has strict secured and unsecured debt limits, while Chapter 11 does not. Understanding these bankruptcy filing and requirements ahead of time ensures you choose an option you are eligible for.
Importance of Strategic Planning and Consultation
Bankruptcy is not a one-size-fits-all solution. Strategic planning ensures that your chosen chapter aligns with your immediate needs and long-term financial health. This involves analyzing your full financial picture, anticipating potential challenges, and timing your filing to maximize legal protections and debt relief.
Consulting with experienced attorneys like the team at Macco & Corey P.C. is critical. We take the time to explain your bankruptcy options, evaluate your eligibility for each chapter, and develop a plan that safeguards your assets while achieving the greatest possible financial relief. With our guidance, you can move forward with confidence, knowing you have chosen the path that best positions you for a successful financial recovery.
Practical Insights on Bankruptcy Cases and Proceedings
Understanding the nuances of bankruptcy requires more than just knowing the different types of bankruptcies; it also involves recognizing how each bankruptcy case unfolds in court and what protections or obligations arise. Every bankruptcy filing begins with detailed bankruptcy forms submitted to the bankruptcy court, after which a bankruptcy judge supervises the bankruptcy proceeding to ensure fairness to both debtors and creditors.
For individuals with too much debt, personal bankruptcy often involves either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Chapter 7, sometimes called straight bankruptcy, allows debtors to eliminate many unsecured debts, though nondischargeable debts such as child support or certain tax obligations remain. On the other hand, Chapter 13 focuses on a structured debt repayment plan that requires monthly payments based on the debtor’s disposable income, helping filers restructure debts while keeping assets and continuing to support secured creditors.
Specialized options also exist. For example, family farmers and fishermen may benefit from tailored provisions under Chapter 12, which accounts for their regular annual income fluctuations. Businesses struggling with business debts often rely on Chapter 11 to restructure debts, protect financial interests, and pay creditors over time. In every scenario, bankruptcy protection offers a path forward, though a bankruptcy discharge is only granted after meeting all requirements set by the bankruptcy code.
Because the bankruptcy process can affect everything from retirement accounts to a person’s credit report (which may reflect the bankruptcy for up to ten years), working with a qualified bankruptcy attorney is essential. An experienced bankruptcy lawyer will not only explain the bankruptcy procedure but also evaluate whether filing to eliminate consumer debt, negotiating with secured debts, or crafting a plan to pay creditors is the most effective option. Careful planning ensures that the family’s current monthly income, child support obligations, and overall financial interests are fully considered before you file a chapter.
The Role of Macco & Corey P.C.
At Macco & Corey P.C., guiding clients through bankruptcy is not just about filing paperwork. It’s about providing a personalized, strategic approach that addresses each client’s unique financial situation. From the moment you schedule your free initial consultation, our attorneys take the time to understand your goals, challenges, and long-term priorities. We know that no two cases are alike, and we tailor our advice and strategies to meet your specific needs, whether you are an individual trying to save your home or a business owner seeking to restructure operations.
Our personalized service begins with a comprehensive review of your finances, including income, debts, assets, and recent transactions. We then explain your available bankruptcy options in plain language, outlining the advantages, disadvantages, and eligibility requirements for each. This ensures you have the knowledge you need to make informed decisions about your financial future.
Because our attorneys also serve as Chapter 13 bankruptcy trustees in the Eastern District of New York, we bring a rare insider perspective to the process. We understand exactly how trustees and courts evaluate cases, which allows us to anticipate potential issues and address them proactively. This experience extends across multiple bankruptcy avenues, including Chapter 7 liquidation, Chapter 13 repayment plans, and Chapter 11 reorganization for both individuals and businesses.
Working with a law firm experienced in multiple bankruptcy chapters offers significant benefits. We can assess your situation from every angle, ensuring you choose the chapter that provides the greatest relief and best aligns with your goals. If your circumstances change during the process, we have the flexibility and knowledge to adjust your strategy accordingly. Our depth of experience also means we are adept at handling complex cases, such as those involving significant assets, high debt levels, or multiple creditor negotiations.
Throughout the process, we remain your advocate and guide. We prepare all required documentation with precision, represent you at the meeting of creditors and in court hearings, and communicate with trustees and creditors on your behalf. Our goal is to reduce your stress, protect your rights, and help you achieve the maximum debt relief available under the law.
At Macco & Corey P.C., we believe bankruptcy is not an end; it’s a beginning. With our guidance, you can navigate the process with confidence and take meaningful steps toward a secure financial future.
Contact Our Team About Your Bankruptcy Options
If you are facing overwhelming debt, mounting bills, or the threat of foreclosure, you do not have to navigate the process alone. The decisions you make now will have a lasting impact on your financial future, and having the right legal guidance can make all the difference. We are here to help you understand your full range of bankruptcy options and determine the path that offers you the greatest relief and protection.
Our team combines 70 years of experience, trustee-level insight, and a commitment to personalized service. We take the time to explain the bankruptcy filing and requirements in clear, straightforward terms, so you know exactly what to expect at every stage. Whether you are considering Chapter 7, Chapter 13, or Chapter 11, we will work closely with you to create a strategy tailored to your needs and goals.
Take the first step toward regaining control of your finances. Contact us to schedule your free, confidential consultation. Let us help you move forward with confidence and start building a stronger financial future.