Bankruptcy

We have over 30 years of experience in guiding those in financial distress through the process of bankruptcy including individuals, business liquidations and reorganizations,  and farmers.  Each of our clients is a unique individual with unique circumstances. After an initial consultation, including disclosures required by law to be given to you, if it is determined that bankruptcy is the way to go, if it is a consumer Chapter 7 we will agree on a flat fee to be charged in addition to filing fees imposed by the court. Other chapters allow for payment of administrative fees through a plan. A retainer is agreed upon in advance.

The several types of bankruptcy are as follows:

Chapter 7: Liquidation

1. Chapter 7 is designed for debtors in financial difficulties that do not have the ability to pay their existing debts as they come due. Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under chapter 7. If your income is greater than the median income for your state of residence and family size you are required (with limited exceptions) to file a Chapter 13 and attempt to make payments to your creditors from future income.
2. Under Chapter 7, you must surrender your non-exempt assets. You may claim certain of your property as exempt under governing law. A trustee is appointed to liquidate your estate and may take possession of and sell property that is not exempt, using the proceeds to pay your creditors.
3. The purpose of a Chapter 7 is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct (think hiding assets) described in the Bankruptcy Code, the Court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.
4. Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for most debts in the following categories: (1) taxes (with some exceptions); (2) domestic support obligations; (3) student loans; (4) most fines, penalties, forfeitures and criminal restitution obligations; (5) certain debts which are not properly listed in your bankruptcy petition; and (6) debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs.  Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income

1. Chapter 13 is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. If you are not eligible for Chapter 7 as a result of the means test, this relief may be your only bankruptcy option. You are eligible for Chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.
2. Under Chapter 13, you must file a plan with the Court to repay your creditors all or part of the money that you owe them, using your future earnings. The period allowed by the Court to repay yours debts may be three years (if you are otherwise eligible for Chapter 7) or five years, depending upon your income and other factors. The plan is scrutinized by the trustee and must be approved by the Court.
3. You can use the term of your plan to catch up first on your mortgage arrears.
4. After completing the payments under your plan, your debts are generally discharged except for those debts listed in Chapter 7, paragraph 4.

Chapter 11; Subchapter V: Small Business Reorganization

1. This new subchapter applies to small businesses and individuals with over 50% business debt with a total debt limit of $2,725,625. It is new as of February 20, 2020 and is a vast improvement over old options for businesses. The elimination of creditors’ committees, perpetual plan exclusivity, and the support of a Small Business Trustee are measures intended to give more small businesses a chance at reorganizing instead of simply liquidating. It is streamlined and offers an opportunity to “reorganize” debt by using “cram down” provisions to reduce secured creditors to the value of their collateral.
2. There is a provision for “First Day Orders” dealing with the business’s right to use its cash collateral to stay in business despite the demands of secured creditors. A status conference occurs within 60 days. A plan is presented to the Court by the debtor within 90 days.
3. Like a Chapter 13, a Trustee is appointed. He or she will act as a conduit for plan payments and have the authority to investigate the financial affairs of the debtor and object to the allowance of proofs of claim.
4. One of the most significant changes to the small business debtor reorganization is that only the debtor is allowed to propose a plan.  The small business debtor does not need to solicit plan acceptances with a separate disclosure statement. Instead, the plan itself must include a brief history of the business operations of the debtor, a liquidation analysis, and projections with respect to the debtor’s ability to make payments under the proposed plan.
5. Subchapter V offers a unique restructuring tool to individual debtors. An individual who qualifies as a small business debtor can modify the mortgage on his or her principal residence, provided that the mortgage loan was not used to acquire the real property but was used primarily in connection with the debtor’s business. Modification of consensual liens on principal residences is not possible in chapter 13 or ordinary chapter 11.
6. Confirmation of a small business debtor plan of reorganization tracks the criteria of section 1129(a) of the Bankruptcy Code, with the critical exception that the debtor does notneed to obtain the acceptance of an impaired class of creditors.  The small business debtor also has the flexibility to pay administrative claims over the life of the plan instead of in cash on the effective date.

Chapter 11: Reorganization

Chapter 11 is designed for the reorganization of a business but is also available to consumer debtors. Its provisions are quite complicated. Such a filing might be necessary if you are not eligible for Chapter 7 because you earn too much, and are not eligible for the new Small business Chapter 11 because your consumer debt (think home mortgage) exceeds 50% of your debt and you are not eligible for Chapter 13 because of the debt limits (adjusted every year).

Chapter 12: Family Farmer or Fisherman

Chapter 12 is uniquely designed to permit family farmers and fishermen to repay their debts through a plan over a period of time from future earnings and is similar to a chapter 13. The eligibility requirements are restrictive, limiting its usefulness to those engaged in farming and fishing operations; however, for those eligible it offers opportunities to reorganize and restructure debt.