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The economic success of Silicon Valley has been nothing short of extraordinary; the San Jose Metropolitan Area has the third largest GDP per capita in the world, larger than most nations. In 2021, venture capital investment in the San Francisco Bay Area reached a record $120 billion. By December 2021, Silicon Valley growth had created a record 1.72 million jobs.

But as Silicon Valley veterans know, what goes up will eventually come down. Boom and bust cycles have been a part of Silicon Valley for as long as there has been a Silicon Valley. And when downturns hit, the human toll hits hardest. Layoffs and hiring freezes go hand in hand. People lose their jobs. The effects ripple outward. Businesses fail.


It all eventually turns around again, but in a downturn, people can find themselves in financial distress through no fault of their own. And that financial distress can come fast, too. Over half of all working Americans are only one paycheck away from being unable to pay their basic living expenses. If there’s a layoff, they can’t pay their mortgage, or rent, or make their car payment. For those workers with savings or other assets, they can forestall the pain, as long as the savings hold out. But for some, whether a laid-off tech worker, or the owner of a business that’s in financial distress, there may come a point when the bank is threatening foreclosure or repossession, the bills are still piling up, and the day of reckoning can no longer be postponed.

When you’re no longer able to make the payments, what are your options? Lose your house? Hand over your car keys? Should you declare bankruptcy? And how does that work?


Debtors typically view bankruptcy as a failure, to be avoided at all costs. And creditors may dread the specter of bankrupt debtors even more so. In reality, however, bankruptcy is a powerful tool for minimizing the damage when a debtor is unable to pay their debts.

A debtor in bankruptcy will still have legal responsibilities to creditors. However, while one of the goals
is to help the creditors get paid to the extent practicable, another goal is to help the insolvent debtor
manage an unmanageable debt load, discharge debt that is able to be discharged, and get back on their
feet post-bankruptcy.

The Three Main Types of Personal Bankruptcy

  • Reorganization: Chapter 11 reorganization allows an individual to reorganize their affairs, assets, and liabilities by eliminating unaffordable debts and contracts and developing a payment plan for their creditors. A Chapter 11 bankruptcy is more complex than Chapter 7 and Chapter 13, so it is more commonly filed by businesses. However, if an individual debtor meets the requirements for Chapter 11, it may give the individual debtor more flexibility on the payment plan time period and allowable disposable income than a Chapter 13 filing would allow.

  • Wage Earner’s Repayment Plan: Chapter 13 provides a framework by which a debtor with stable income can set up a repayment plan and avoid liquidation of all of their assets. In particular, a Chapter 13 repayment plan gives an insolvent debtor with stable income the ability to avoid a forced sale of their home. Under Chapter 13, a Trustee is appointed, and the debtor makes payments to the Bankruptcy Court Trustee, who then pays the creditors according to the terms of the payment plan. There are debt limits that must be met, and the repayment plan must be completed within a specified period of time, either three or five years. After successful repayment, the remaining unsecured debt will be discharged.

  • Liquidation: Chapter 7 liquidation, which provides insolvent consumers and their creditors with an organized liquidation of the individual’s non-exempt assets and payment of the creditors, while protecting the individual’s exempt assets. Under Chapter 7, the debtor can even keep their home and car, as long as they continue to make timely payments on them. After the non-exempt assets of the individual have been liquidated and the proceeds distributed to the creditors, the remaining debt is discharged in bankruptcy, with the exception of certain debts that are non-dischargeable under the Bankruptcy Code. To qualify for Chapter 7, the individual must meet the income eligibility requirements for their state.

Out-of-Court Workouts

Another approach to insolvency that may be available to a debtor is the out-of-court workout. In an out-of-court workout, the debtor reaches an agreement with their creditor without filing for bankruptcy protection. This approach is an attractive option for debtors with the means to pay the debt under an agreed-upon plan, because the plan is a private agreement, and thus, keeps the debtor out of bankruptcy court. It can also be an attractive option for the creditor, because the creditor ends up with an enforceable plan that doesn’t subject the creditor to the limitations the creditor would face in bankruptcy court. If the debtor has the means to commit to an out of court workout, this approach may be a win-win for both debtor and creditor.

Don't Delay - Take Action Now

If you are in financial distress and falling further and further behind on all or most of your debt, you need to understand what your options are, and take appropriate action before things get worse. A consultation with Nichani Law Firm is your first step in understanding what your options are. From that starting point, we can help you develop a plan of action that best fits your circumstances and objectives. Nichani Law Firm represents individual consumers in bankruptcy and financial disputes. Our team has highly experienced bankruptcy practitioners who provide workable solutions for debtors based on the best options available to the debtor.

Consumer Debt Relief

Nichani Law Firm practices bankruptcy law and is considered a debt relief agency by federal law. We help people file for bankruptcy relief from consumer debt under the United States Bankruptcy Code.

  • Chapter 11 Reorganization

  • Chapter 13 Wage Earner's Repayment Plan

  • Chapter 7 Liquidation

  • Out-of-court workouts and debt restructuring

  • Automatic Stay Motions

  • Debtor rights

Include Legal Representation For Debtors in:



Nichani Law Firm is a boutique Silicon Valley business and commercial litigation law firm, providing legal representation with a commitment to exceptional service, high-caliber solutions, and a deep focus on Business and Commercial Litigation, and Bankruptcy and Creditor Rights. In every dispute, whether large or small, simple or complex, we will provide representation custom-tailored to meet your objectives. As your representative, we will zealously advocate your position, whether in an Alternative Dispute Resolution process, or at trial. Nichani Law Firm has successfully represented a variety of businesses throughout Silicon Valley and the Greater San Francisco Bay Area. We also serve as local counsel in Silicon Valley and the Greater San Francisco Bay Area for out-of-state attorneys and out-of-area companies, whether based in another region of California, another state, or another country—with business interests in Silicon Valley and the Greater San Francisco Bay Area.

For a consultation, contact Nichani Law Firm.

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