Bankruptcy in a nutshell

Photo courtesy of Melissa Raskey
Melissa Raskey, Attorney at Law SBN 219242

■ By Melissa Raskey / Contributed

Bankruptcy is the legal system’s remedy for debts owed to creditors by a person or entity, and that person or entity that owes the debt no longer has the ability to pay.
Bankruptcy is governed by the federal law found in Title 11 of the United States Code. As federal law, it supersedes any conflicting state law under the operation of the Supremacy Clause of the Constitution.
Bankruptcy is very similar in every state, with the exception of what we call “exemptions.” Exemptions are a set dollar amount provided under the governing law allowing a debtor to keep personal property or real property that the value does not exceed the dollar amount set by the particular exemption.
These exemptions vary from state to state. Bankruptcy can benefit both creditors and debtors. Debtors get relief from debts and creditors get paid from whatever assets the debtor does not need for basic living.
There are six kinds of bankruptcy proceedings that impact individuals, businesses and municipalities. In this article, I will only briefly touch on Chapter 7 and Chapter 13. They are referred to by the Federal Bankruptcy Code that describes them.

Chapter 7
Chapter 7 is what many call the “fresh start” bankruptcy. It runs about four to six months from the filing date until the discharge of debts in a non-asset case. It is the most common form of bankruptcy and is available to individuals, married couples, corporations, and partnerships. It is a liquidation proceeding in which the debtor’s non-exempt assets, if any, are sold by the Chapter 7 Trustee and the proceeds distributed to creditors, according to the priorities among creditors established in the code.
If there are assets that the exemptions do not protect, the trustee takes control of those assets, sells them, and pays creditors as much as the proceeds permit. Any wages earned after filing the case are kept by the debtor, and the creditors have no right to these earnings.
You can eliminate some federal and state tax debt, stop wage garnishments, bank levies, and forestall both vehicle repossessions and real property foreclosures.

Chapter 13
Chapter 13 is a repayment plan for individuals with regular income. The debtors unsecured-debt cannot exceed $394,725. The secured-debt cannot exceed $1,184,200. This chapter is primarily used when a debtor exceeds the allowable median income for their household size and area they live, or trying to save a home from foreclosure or a vehicle from repossession.
The debtor generally keeps his/her property and makes regular payments to the Chapter 13 Trustee out of future income. The bankruptcy generally lasts three to five years depending on the debtor’s bankruptcy district.
In Chapter 13—depending on the debtor’s income, debts and assets—a debtor can repay a small amount to creditors or up to 100 percent. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Chapter 13 also provides an opportunity for a debtor to catch up on secured debts, unpaid priority taxes, and child support.
This article contains a limited amount of information, and is meant to only give the basics about Chapter 7 and Chapter 13.

Melissa Raskey has had her law degree since 2001, and has been an active Real Estate Broker since 1991. Ms. Raskey currently owns Urban Seeds Real Estate. Ms. Raskey’s real estate experience is expansive. With the growing number of families experiencing foreclosure, she has been able to assist many with loan modifications and bankruptcies. Ms. Raskey maintains small offices in order to keep her fees low. You will always meet face to face with Ms. Raskey, and know that you are getting the best advice possible in your matter. For more information, please call 866-411-6659 or visit and for more information.

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