Bankruptcy and Insolvency Legal Services

Bankruptcy filings in the United States have been rising steadily. According to Epiq Automated Access to Court Electronic Records data, total bankruptcy filings rose 11% during 2025, with consumer Chapter 7 filings increasing 15% to 332,706 and consumer Chapter 13 climbing six percent to 200,055.

The problem of finances is something that can affect everyone regardless of whether an individual is having issues with credit cards and medical bills or a company is dealing with decreased revenues and higher expenses. Sometimes the financial crisis just seems to sneak up on you without warning.

But bankruptcy is not simply about eliminating debt. For most people thinking about bankruptcy, the key points feel practical. And you need to decide which chapter really fits the situation, what the process asks for exactly, and what ends up happening once it is done.

According to bankruptcy and insolvency lawyer Evan L. Smith, when financial pressure threatens the future of your company, having the right legal guidance can determine whether your business recovers or closes its doors.

The legal process gets easier to understand once you know the basic terms and how everything works together.

Chapter 7: Liquidation Bankruptcy

Chapter 7 is the most popular form of bankruptcy among consumers and constitutes about 64% of all consumer bankruptcies in 2025. Consumers who satisfy certain income conditions can declare Chapter 7 bankruptcy.

In Chapter 7, an individual declares his/her bankruptcy before a court-appointed trustee examines his/her assets.

According to a McHenry County bankruptcy lawyer, the bankruptcy process allows debtors to work out a plan to repay the money over time under Chapter 11, 12, or 13 of the United States Bankruptcy Code or eliminate debt in Chapter 7.

Nonexempt assets are sold by the trustee to pay off debts, while there are usually no assets in most cases that can be sold. Most unsecured debts, which include credit card bills, medical expenses, and personal debts, are erased after three to four months.

Despite this, Chapter 7 does not discharge all kinds of debts. For example, most student loans, child support, alimony, some tax debts, and any fraud debts will remain even after filing the bankruptcy.

Liens on property securing the debt will also remain until the debt is paid off or the property is given up.

Chapter 13: Reorganization for Individuals

Chapter 13 is tailored for individuals who have stable incomes and would like to preserve their properties, specifically their homes, by paying back their debts within a three- to five-year period according to an approved court repayment plan.

Upon completion of the plan, any eligible unsecured debts may be discharged.

Unlike Chapter 7, Chapter 13 allows people to recover from delinquency in terms of paying their mortgages and even halt foreclosure proceedings on their property if the house value is lower than the amount of the first mortgage.

This process takes quite a few years, which means that one must have a steady income and budget accordingly because otherwise the case might be dismissed.

Chapter 11: Business Reorganization and High-Income Individuals

Chapter 11 generally targets businesses, although an individual whose liabilities exceed Chapter 13 limits may file too.

In 2019, Subchapter V was added to Chapter 11 of the Act. It is a simplified process of restructuring for a small business with debts below some particular limit, which presently is set at $7.5 million.

Due to the ability to make Subchapter V elections, such elections increased in number in 2025 by approximately 11% to 2,446, reflecting the increasing number of small entities preferring this procedure to the traditional Chapter 11 approach.

Chapter 11 provides that the debtor generally operates as a debtor-in-possession when developing and filing the reorganization plan with its creditors.

The whole procedure is carried out within the framework of creditor committees, disclosure statements, voting on the plan, and finally court approval.

In practice, it is significantly more complex and expensive than consumer bankruptcies, and it is preferable only in cases where there is a going concern value that must be maintained.

What the Bankruptcy Filing Process Involves

No matter what chapter of bankruptcy you choose, there are steps you need to follow. The first step is to file paperwork outlining your assets, liabilities, income, expenses, and financial activity over the past several months. Also, before filing, you’ll need to take a credit counseling class.

After filing your case, the automatic stay comes into effect, putting an end to most actions of collection, such as foreclosures, garnishment of wages, and lawsuits, even though there are some situations when creditors can request that the automatic stay be lifted by the court.

Three weeks after filing your case, you are required to attend a 341 meeting of creditors, during which the trustee will ask you some questions regarding your finances under oath.

Alternatives to Bankruptcy

Filing for bankruptcy is not the only solution to deal with debts. Some other ways include:

• Debt settlement: Negotiate with the creditor to settle for paying less than the total debt owed; however, any forgiveness of debt will be taxable.
• Debt management plan: Non-profit credit counseling companies help you to reduce the rate of interest and consolidate all debts into one monthly payment without declaring bankruptcy.
• Debt consolidation loans: Borrowing another loan to consolidate all your existing debts, sometimes at a lower interest rate; however, you have to qualify for the loan and repay the loan.
• Out-of-court workout: Companies may negotiate with their creditors without involving themselves in the court.

It depends on the individual; what suits him/her best is according to his/her own situation. Bankruptcy provides the most powerful protection among all the above-mentioned options.

Choosing the Right Path

Since consumer bankruptcies continue to be filed at an increasing rate, more individuals will have to make such decisions yearly.

There is information available on the bankruptcy section of the website of the United States Courts, including the forms and description of each chapter, which can prove useful.

Each of the means tests, exemption schedules, and discharge provisions depends on the state and the circumstances involved.

The applicability of one chapter over another, the value of assets, and the availability of alternatives will depend on each particular situation.

Knowing the details behind each alternative will probably be the initial step to taking action based on what is really going on financially, rather than misunderstanding the effects of bankruptcy.