Business & Personal Bankruptcy
- Business & Personal Bankruptcy
Filing Chapter 7 Bankruptcy: Overview and Benefits
With the credit crunch, rising interest rates, company lay-offs, and the economy collapsing under the weight of inflation, it is not an exaggeration to say that a lot of people simply can not maintain all their financial obligations. The question of why a lot of people are in big financial trouble is eclipsed by the greater question of how to remedy it. At Relief Lawyers LLC, we can provide you with the financial relief you need to get a handle on your finances again, and to get a fresh start through bankruptcy relief.
1. Introduction to Chapter 7 Bankruptcy
The term “Chapter 7” is actually taken from the provision of the US Bankruptcy Code it comes from (11 U.S. §§ 701 – 707, Chapter 7-LIQUIDATION). Chapter 7 bankruptcy is one of the two most common bankruptcy types (the other is a Chapter 13 bankruptcy). Chapter 7 bankruptcy can be described as the bankruptcy most people refer to when they use the word “bankruptcy” generically (e.g., “I’m just going to declare bankruptcy”).
Individuals, partnerships, or small businesses who do not have enough income or assets to keep up with all their financial obligations and who have little to no hope for repairing their financial situation, can have their debts discharged or wiped out through a Chapter 7 bankruptcy proceeding. Most of the time those who are forced to file for bankruptcy are simply unlucky, due to certain circumstances such as job loss, accident, injury, illness, medical expenses, overwhelming financial burdens, credit card debt, gambling debts, foreclosure, bank levy, wage garnishment, or judgment.
If the individual, partnership, or small business does qualify for a Chapter 7 (see below), all of the unsecured debts will be discharged upon successful completion of the bankruptcy case, with a few exceptions: e.g., student loans, a large proportion of income tax debt, child support debt, court fines, criminal restitution, civil judgments for fraud or defamation, typically cannot be discharged.
By filing for bankruptcy you can obtain relief from your unsecured debts and have a fresh financial start. Filing for bankruptcy can protect your assets, discharge most of your debts, and clean up your credit report to improve your financial situation in the long run.
2. Eligibility and Requirements (the “Means Test”)
Not everyone qualifies for Chapter 7 Bankruptcy discharge of debts. There are very specific requirements for Chapter 7 eligibility under the US Bankruptcy Code. The US Bankruptcy Code has a “Means Test” which should be analyzed by an attorney, taking into account the Debtors’ use of standard deductions and their income before fling. If the debtors’ family income is less than the Nevada median income, then they automatically qualify for Chapter 7 liquidation, and don’t need to do the second part of the means test. However, if the family household income is higher than the Nevada median income the test looks at whether the debtors have enough income to pay the debts, AFTER deducting the ordinary living expenses and secured or priority obligations such as car loans, mortgage, child support, alimony, student loans, tax payments, etc. If the debtors have enough disposable income left after these deductions to pay at least 25% of the unsecured debts, then the court will likely convert the Chapter 7 case to a Chapter 13 bankruptcy so the debtors can pay some of the unsecured debt through a repayment plan.
3. The Process of Filing Chapter 7 Bankruptcy
The main phases of the bankruptcy process are as follows:
a. Counseling Prior to Filing: Most people who file Chapter 7 are dealing with severe financial hardship which has left them unable to meet their financial obligations and interfering with important aspects of their lives. Money management and financial responsibility counseling, which are available from various agencies and can be completed quickly, on-line, on a free to low-cost basis, are the first steps of the process.
b. Preparing the Filing Package: After you have inquired about bankruptcy relief and made the decision to move forward, it’s time to collect the necessary paperwork and information, and then begin the complex process of knowing what information needs to be presented to the Court and how it should be presented in the bankruptcy filing package. The filing package is submitted to the U.S. Bankruptcy Court that has jurisdiction and venue over the debtor and the bankruptcy estate.
c. Filing and the Automatic Stay: As soon as your filing package is submitted, important things happen nearly instantaneously: A unique bankruptcy case number is assigned by the court, and the “Automatic Stay” goes into effect – this IMMEDIATELY stops all collection efforts and prohibits any and all attempts from your creditors to collect a debt from you or your property. A bankruptcy trustee can also be appointed to a case specifically to administer the assets of the bankruptcy estate. Most people who file bankruptcy do not lose many, if any, assets because of how various allowances and exemptions are applied to the bankruptcy estate.
d. A Meeting of Creditors (341 Meeting): is scheduled by the Court about 30 days after the petition is filed. The court will mail your creditors a notice which informs them of the bankruptcy case, provides information about various court deadlines, and contains the date, time, and location of the Meeting of Creditors. The Meeting of Creditors is not a court hearing and is not very long and rather informal. It is a chance for the Chapter 7 Trustee and the creditors to confirm details about the debts and assets, and obtain more information about the debtors’ financial condition.
e. Complete the Financial Management Course: In addition to the credit counseling course that the debtors are asked to complete before they file for bankruptcy, there is also a financial management course that needs to be completed before discharge of the debts is granted. This course needs to be completed about 60 days after the Meeting of Creditors. The course is fairly short and can be completed in person, on the internet, or over the phone. Once the debtors complete the financial management course, they will receive a Certificate of Completion that needs to be provided to your attorney, who will complete and file an Official Form 423
(“Certification About a Financial Management Course ”) unless the agency who conducted the course files the certificate with the court directly.
f. Discharge of Debts Granted: Congratulations! The discharge is the order from the court forgiving your eligible debts. Discharges may be granted as early as 60 days after the date first set for the Meeting of Creditors. Once the debtors’ discharge is granted, the creditors can no longer attempt to collect any of the debts that were discharged.
4. Benefits of Chapter 7 Bankruptcy with an Attorney
Filing bankruptcy under Chapter 7 takes careful preparation and understanding of comblex legal issues. Misunderstandings of the law or making mistakes in the process can affect your rights under the law. Court employees and bankruptcy judges are prohibited by law from offering legal advice. Filing without an attorney may be difficult for an individual. Filing without professional help may not effectively address issues or reap all the benefits of bankruptcy.
5. Conclusion
Bankruptcy laws exist for a reason. They could be said to serve the greater needs of society rather than the individual. Society’s greater needs – aside from the more obvious need to offer someone another chance – would include protecting certain assets, such as a car, so that the debtor can continue to go to work, pay taxes, and hopefully contribute to the local economy. There are many misconceptions about Chapter 7 bankruptcy and the process. Some people seem to believe that it’s an easy way to get out of paying one’s creditors. That is not the case at all. And, in any case, if the debtor has not been paying on any of his or her debts for several months now, the negative consequences have already begun to happen. Other people believe that it is very difficult for a debtor to qualify for a Chapter 7 bankruptcy. This isn’t true. It is true however, that the process is well-defined, everybody has to follow the same rules, and the process is not always so easy. Contact Relief Lawyers LLC to secure the needed relief from your burdensome debts.
Understanding the Process and Benefits of Filing for Chapter 11 Bankruptcy
1. Introduction to Chapter 11 Bankruptcy
In cases when businesses or higher income earners require immediate bankruptcy relief, stopping lawsuits, halting creditor collections, or preventing a foreclosure, or eviction, Chapter 11 bankruptcies provide the best opportunity to secure the relief sought, without turning over the financial reigns of the business and assets to a third party Trustee. Upon filing for Chapter 11 bankruptcy protection, all suits, evictions, and collection efforts are immediately stopped pursuant to the statutorily granted “automatic stay.”
Chapter 11 bankruptcy is a legal process available to both individuals with multiple properties and commercial entities that addresses the financial difficulties they are experiencing through establishing a plan to reorganize their assets and provide debt relief. The relief offered under Chapter 11 is significant and permits those filing for this type of bankruptcy to continue operating their business or managing their personal assets as the “debtor in possession,” instead of the court appointing a third party Trustee to do so. Chapter 11 bankruptcies rarely end with liquidation. Numerous benefits of filing Chapter 11 bankruptcy make it very appealing to troubled debtors who are more sophisticated and have more assets to protect. Promptly filing for bankruptcy may enable debtors to work a number of these benefits into a reorganization plan at an earlier point in the bankruptcy process.
2. Key Steps in the Chapter 11 Filing Process
a. Exchange of Information and Confidentiality Agreements. The attorneys who will assist in the Chapter 11 process may request that each interested party, execute a confidentiality agreement to receive confidential information related to the Chapter 11 process. If an interested party executes the confidentiality agreement with the debtor, then the involved personnel will have access to certain (if not all) confidential information, subject to certain conditions. If agreed to, the confidentiality agreement will prohibit the involved third parties from disclosing the information to outside parties, using the information to acquire any securities, trading in any debt or equity securities of the debtor, or making negative or derogatory comments about the business, operations, staffing, or management of the debtor, in addition to other confidentiality-related covenants. If the party signs the confidentiality agreement and the debtor’s professionals view them as a legitimate purchaser, the professionals will most likely arrange with the debtor to have an introductory call or meeting with the interested party as soon as practicable to occur.
b. Creating a Detailed Plan of Reorganization (Plan). Your bankruptcy attorney is tasked with drafting a detailed Plan of Reorganization, and presenting that plan to the creditors and the Court. To that end, debtor counsel will solicit suggested plan proposals from secured creditors and other interested parties, though not necessarily from unsecured creditors. Interested parties can submit plan proposals within the time frame set by the debtor, including the terms of any financing to implement the plan. Upon receiving the plan proposals, the attorney for the debtor will evaluate the plan proposals and the feasibility of the plan, which include a projection of the debtor’s future performance under the plan. If it wishes to move forward with the plan, the debtor prepares disclosures of the plan and files it with the court. The court sets the dates of the disclosure statement hearing, plan confirmation hearing, and the applicable voting deadlines. Bankruptcy Rule 3016 mandates the form of the disclosure statement and sets forth the minimum contents of the disclosure statements.
3. Benefits of Filing for Chapter 11 Bankruptcy
There are many benefits to filing for Chapter 11 bankruptcy. For example, business owners can receive immediate assistance – such as the halting of repossession, foreclosure, and other limitations – from the initiation of the court case. By filing for Chapter 11, businesses have also registered their interests and finances, protecting them from individual opponents searching for payment from the property or income of the debtor. When filing for Chapter 11 bankruptcy, business owners make a voluntary election to open the business to the inspection of the U.S. Trustee’s office. If a trusteeship is requested at any time, the debtor is responsible for the appointment of the trustee. This implies that if the business concerns associated with the business and its various dealings are practically important, business owners are the best managers of the business should continue to be in charge as the “Debtor in Possession.”
Filing for bankruptcy isn’t always the last resort for struggling businesses. Business owners can file for Chapter 11 bankruptcy to restructure company finances and reorganize the company in a way that makes it feasible once again. The attorneys at Relief Lawyers LLC can help business owners take the first steps towards financial recovery in a difficult time. Contact the bankruptcy attorneys today if you are considering or have questions about Chapter 11 bankruptcy.
There have been many billion-dollar companies, such as Apple, Revlon, Marvel Entertainment, Six Flags, General Motors, Chrysler, United Airlines, and Texaco, who have successfully used Chapter 11 protection to reorganize their business operations and come back stronger. There have been thousands of smaller cases as well, where entrepreneurs and small and mid-sized companies, unable to solve their problems out of court, seek some breathing room and relief under the Bankruptcy Code. They range from car dealers, attorneys, doctors, and construction companies, to hotel operators, insurance brokerages, and real estate agencies. Because there may be many ways to address similar financial troubles, every company’s case will have some unique aspects which a good bankruptcy firm can help you identify and utilize. Contact Relief Lawyers LLC today to arrange a consultation with one of our Chapter 11 bankruptcy attorneys.
Filing Chapter 13 Bankruptcy: Overview and Benefits
1. Introduction to Chapter 13 Bankruptcy
Bankruptcy was introduced into our legal system as a way of giving a fresh start to people who are facing unmanageable financial problems, and to protect them from losing everything they have worked so hard to obtain. The process of filing for Chapter 13 bankruptcy can be a complex one. In a Chapter 13 bankruptcy, the debtor is allowed to keep his or her property, stop all collection efforts, and allow the debtor to repay creditors over a longer period – generally three to five years. The length of the repayment plan really depends on the debtor’s ability to pay. It is important to note that even though Chapter 13 bankruptcy is preferable to some debtors because it allows people to keep their property, not everyone can qualify for Chapter 13 bankruptcy.
Typically, only those debtors with stable incomes can file for Chapter 13. Those who do not qualify for a Chapter 13 may qualify for a Chapter 7 Bankruptcy, or possibly a Chapter 11 Bankruptcy.
2. The Process of Filing for Chapter 13 Bankruptcy
a. Lists, Schedules, Statements, and Incomplete Filings: Failure to file a list of creditors, or a schedule or a statement, other than the schedule of executory contracts or unexpired leases pertaining to section 521(1), within the time fixed by order of the court or the rule, can be grounds for converting.
b. Filing the Voluntary Petition: The voluntary petition for relief under chapter 11 must conform substantially with the official form and shall be verified by the debtor. The manner of verification under the present act is customer-defined and may be uniform for all cases in any particular case. The voluntary petition shall be signed by the debtor if the debtor is an individual. If a joint petition is filed, the voluntary petition shall be signed by a properly authorized agent. Subject to the specific direction of the court, the joint petition may be the same official form as filed for both other petition.
c. Relevant Place for the Filing of the Petition: A petition may be filed with the court of a district within the residence of the debtor for a case under chapter, where the debtor has had anything to do for such a district during the majority of the 180 days preceding the order of the petition, or was domiciled within the district within 180 days before the implementation of the act. The petition may also be filed with the court for the district within which the debtor has been continuously located if the division is from outside the United States.
3. Benefits of Choosing Chapter 13 Bankruptcy
Chapter 13 can stop foreclosures, lawsuits, and other collection activities while you are in the repayment plan, and can enable you to keep income and property that would otherwise be liquidated to pay off your debts. It can also provide other important protections and benefits, like “cramming down” the principal amount of your car loan, eliminating second mortgage liens, or restructuring terms of onerous contracts.
Also, just like businesses can do under Chapter 11 cases, individuals who file under Chapter 13 can avoid the loss and potentially embarrassing legal process of liquidating non-exempt property such as rental homes, recreational vehicles, or other similar assets. Individuals who file under Chapter 13 can keep their assets and formulate a repayment plan to pay a certain portion of their debts over time, so they do not need to qualify for an exemption to avoid having an asset liquidated to pay creditors. However, the exemptions can affect the monthly payment amounts under the Chapter 13 repayment plan. The reason for this is because payments under the plan are derived according to the value of the non-exempt property.
Those filing under Chapter 13 are allowed to request a long-term commitment and payment of certain debts to extend for up to 5 years, or more, and are protected from the creditors during this time. Debts such as unpaid child support, tax arrears, and student loans are best suited for treatment under the Chapter 13 plan, and are often dealt with much better under this chapter than in a Chapter 7 case.
4. Conclusion and Final Considerations
As you consider whether to file for bankruptcy, and whether Chapter 13 is the right type for you, it’s important to talk with a qualified bankruptcy attorney. An attorney can help you understand both the long-term benefits of Chapter 13, as well as the potential concerns with of filing for bankruptcy. Whether you’re at high risk of having student loans remaining, or having your attorney find non-exempt assets or substantial credit disadvantages, filing for bankruptcy is a decision best made with advice from knowledgeable legal professionals.
