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Archive for the ‘Chapter 11’ tag

The Best Bankruptcy Advice: Get Legal Advice

June 8th, 2020 at 7:00 am

Businesses considering bankruptcy get intense legal advice before filing. You would also be smart to get solid advice to make a good decision. 


What Businesses Do Before Filing Bankruptcy

The following are just a few of the companies which have filed business bankruptcy in the last couple months:

  • Pier 1 Imports
  • CMX Cinemas
  • J. Crew
  • Gold’s Gym
  • Neiman Marcus
  • JC Penney
  • Hertz
  • Tuesday Morning

Some of these companies will completely go out of business, some will continue on after a financial restructuring.

What they all have in common is that they got lots of legal advice before deciding to file bankruptcy. They likely got that advice over the course of many months. They likely used that advice to try to avoid entering into bankruptcy, take steps to position themselves for filing, and then to time the filing as well as possible.

If Bankruptcy Is Even a Possibility, Get Immediate Legal Advice

That likely applies to you if you are reading this. If there is even just a chance you need to file bankruptcy, you should get legal advice for similar reasons. You would be wise to get legal advice to find out:

  1. if bankruptcy is the best option for you, and how to pursue other alternatives
  2. how Chapter 7, 11, 12, and 13 work, and whether either are right for you
  3. what actions you should take to position yourself for either a possible or definite filing
  4. what you should avoid doing
  5. the best timing for your bankruptcy filing

1. Bankruptcy or Other Alternatives?

Bankruptcy may feel like an option of absolutely last resort. Sure, it’s something to avoid when possible. But that doesn’t mean you should avoid finding out about it.

Bankruptcy is a tool. It’s a legal tool provided for in the U.S. Constitution (Article I, Section 8, Clause 4) and federal law to provide you financial relief.

It may be right for you, either now or at some point in the near future. Or it may not be. You would feel better knowing one way or the other.

2. The Different Chapters of Bankruptcy

Chapters 7, 11, 12, and 13 are each very different. They are designed for very different circumstances.

If you own a business, generally Chapter 7 is for closing down your business, Chapter 11 is for reorganizing it. Chapter 12 is essentially a Chapter 11 for farmers and fishermen.

If you are instead of consumer debtor your two options are usually either Chapter 7 or Chapter 13.

Chapter 7 is sometimes called “straight bankruptcy.” It takes only 3-4 months, usually you keep what you own and can “discharge” (legally write off) most debts. But Chapter 7 is very limited in how it deals with certain important debts. With secured debts (home mortgage and vehicle loans) you either keep current or lose the house/vehicle. Also, Chapter 7 doesn’t help much with debts that you can’t discharge, like recent income taxes, child/spousal support, and such.

Chapter 13 “adjustment of debts” is much more flexible, especially with secured and other special debts. But it takes much longer—usually 3 to 5 years. That extra time is what provides much of the flexibility. You and your bankruptcy lawyer put together a payment plan, mostly for dealing with the secured and special debts. There’s a plan approval process and then you pay according to the plan for as long as it lasts. Chapter 13 can often give you tremendous power over your secured and special debts.

In relatively straightforward situations, Chapter 7 provides immediate and lasting financial relief. In situations with more diverse debts, Chapter 13 also provides immediate, and more flexible and powerful relief with those debts especially.

Interim Conclusion

More on what to do, what not to do, and the timing of bankruptcy coming up in our next blog posts. In the meantime…

As bankruptcy lawyers we are genuinely in this to help people. We love it when we can provide real solutions for our clients’ serious financial dilemmas. So it’s sad when people come in to see us who would have significantly benefitted from coming in earlier.

Please get in touch with your bankruptcy lawyer as soon as bankruptcy becomes a possibility. Doing so will give you the peace of mind that comes from

  • knowing that you have some really helpful options, often better than you thought
  • learning how to either avoid bankruptcy or position yourself in the best way for it
  • establishing a trusting relationship with your bankruptcy lawyer
  • knowing that you are avoiding taking seemingly sensible but actually unwise actions
  • taking charge of your life instead of living in fear

There is no downside for getting legal advice when you’re hurting financially. The initial consultations are almost always free. It may well be the single best decision you could make now.

 

Foreclosure: Will the Bank Take My Home if I Miss a Payment?

September 19th, 2018 at 5:44 pm

Texas bankrutpcy lawyer, Texas chapter 7 attorneyConsumers who struggle to make monthly mortgage payments quickly become overwhelmed with collection calls and letters plaguing the mailbox. Fight or flight instincts immediately kick in, and most people choose to ignore the lender’s collection efforts. Many automatically assume that the bank immediately wants their home and retreat into self-preservation efforts. The truth is, the bank does not want your house. Lenders want you to pay the mortgage, and in most cases, if they can help you make that payment and save your home, they will. If the mortgage lender fails to reach an agreement with the borrower, imminent foreclosure efforts can stay through a bankruptcy filing.

Why Will the Bank Help?

The home you live in belongs to your mortgage lender. When you purchased, they assumed the cost of the home for you with the agreement that you would pay monthly payments until the loan is repaid in full. Until that day, the house belongs to the mortgage company. While they will not typically help someone with no potential benefits for themselves, they also are not in the business of buying and selling real estate either. If lenders must take a house in the foreclosure process, not only do they lose out on the money they would make in your interest payments, they also must pay the legal costs for the foreclosure process and the costs to sell the home, typically for less than the original amount. Lenders ultimately prefer to salvage the mortgage agreement, either by extending the loan or lowering the interest rate. If their borrower fails to communicate, this option is null, and the lender must begin foreclosure proceedings.

Bankruptcy or Foreclosure?

For your lender to recuperate some of their costs, they must have the title “free and clear,” which means they must have possession of the property. You can choose to allow the bank to go through a lengthy foreclosure process or opt to surrender the home through bankruptcy. A foreclosure enables the bank to remove you from your home, sell it for as much as they can make, and still hold you liable for any outstanding balances on the house. Foreclosure does not ensure an end to the collection calls. If you decide to file for Chapter 7 or Chapter 13 bankruptcy, both of which enable you to settle your debts often for pennies on the dollar, an automatic stay immediately halts all collection efforts, including from lenders. This momentary pause in a foreclosure process is sometimes all a family needs to earn enough money to save their home. Otherwise, if you do relinquish your home in bankruptcy, any liability is fully released. The bank cannot contact you if they lose money in the sale of the house.

Contact an Experienced Attorney

Attorneys are as unique as the fields in which they specialize. Like you would not hire a foot doctor for brain surgery, hiring a criminal attorney will not guarantee the best results when you face financial struggles. If you are having a hard time making your payments and are concerned about the future of your home, a New Braunfels bankruptcy attorney can help you get the answers you need. The Law Offices of Chance M. McGhee dedicates 20 years of experience to help you achieve financial freedom. Find out how we can assist you today by calling 210-342-3400 to schedule your free initial consultation.

 

Sources:

https://www.streetdirectory.com/travel_guide/63141/real_estate/why_the_bank_does_not_want_your_house.html

https://www.thetruthaboutmortgage.com/foreclosure-help/

 

The Bankruptcy Chapters–Chapter 7, 9, 11, 12, 13 Cases

September 23rd, 2016 at 7:00 am

You file bankruptcy most likely under Chapter 7 or 13, or possibly 11. Ch. 12 is for farmers and fisherman, Ch. 9 for governmental entities.

 

Chapter 7

Chapter 7, or “straight bankruptcy,” is the most common type of bankruptcy. Nearly 2/3rds of all bankruptcy cases filed in 2015 were Chapter 7s

It’s what most people think of when they hear “consumer bankruptcy.” Chapter 7 often provides the quickest way to a financial fresh start. But it isn’t the best type of bankruptcy for everyone.

A Chapter 7 case legally eliminates (“discharges”) many but not always all debts. Certain kinds of debts, such as child or spousal support obligations owed to an ex-spouse under a divorce decree or settlement, are never discharged under Chapter 7. Other debts, such as income taxes, can be discharged if they meet certain conditions. Student loans are very rarely dischargeable.

On secured debts, you usually have the option of keeping or surrendering the collateral. To keep the collateral generally you have to pay all or most of such debts. But there are exceptions.

A Chapter 7 case lasts about 3 to 4 months from filing to the completion, when your debts are discharged.  A bankruptcy trustee is appointed to your case to review your assets and other aspects of your financial affairs.

Although Chapter 7 is considered a “liquidation” form of bankruptcy, there’s a good chance you be allowed to retain everything you own. That’s because you can “exempt” everything which fits within certain categories up to specific maximum dollar amounts. Otherwise the trustee can take and sell whatever is not covered by the “exemptions.”

Once your debts are discharged, those creditors are prohibited from ever again trying to collect those debts from you.

Chapter 9

Chapter 9 is the “Adjustment of Debts of a Municipality,” so we’re only including it to be thorough. 

It’s for certain governmental entities. “Municipality” “means political subdivision or public agency or instrumentality of a State.” (Section 101(40)). States themselves can’t file bankruptcy or reorganize their debts, only their political subdivisions can do so, such as cities, counties, school districts and other public entities within the states.

These are extremely rare–only four Chapter 9 cases were filed throughout the entire country in 2015.

Chapter 11

Chapter 11 is the “Reorganization” chapter of the Bankruptcy Code. Through it, a business or individual can restructure its finances through a plan of reorganization approved by the bankruptcy court.  The plan usually reduces the debts of the business or individual, and changes debt payment terms.

The purpose of Chapter 11 is to help the business or individual balance its income and expenses, return to profitability, and be able to continue in operation in a sustainable way.  Under Chapter 11, a business can often sell some or all of its assets so it can focus on more profitable parts of its operation or as a way to raise funds to pay down or escape some of its debts.

Individuals would consider Chapter 11 mostly when they own and operate a relatively significant business that they want to continue in operation, or when their debts exceed the maximum limits allowed under Chapter 13.

Much fewer Chapter 11s are filed than Chapter 7s and 13s. In 2015 around 7,200 were filed, less than 1% of the 844,000 total bankruptcies.

Chapter 12          

Chapter 12, the “Adjustment of Debts of a Family Farmer or Fisherman.” It’s essentially a combination of Chapter 11 and 13, specifically for relatively modest farming operations and commercial fishing operations. Another very rare type of bankruptcy, with only about 400 filed throughout the U.S. in 2015.

Chapter 13

Chapter 13, is the “adjustment of debts of an individual with regular income.” It’s the second most common type of bankruptcy after Chapter 7. More than 300,000 Chapter 13 cases were filed in 2015, about 35% of all the cases filed.

 Under Chapter 13 you and your lawyer propose a debt repayment plan based on your ability to pay. That plan usually does not pay back all your debts, and often pays very little or even nothing to some of your creditors.

You must have a steady source of income to be eligible—such as wages, self-employment income, unemployment income, or social security income.

Your payment plan almost always covers a period of three to five years–your “applicable commitment period.” This plan is structured around a detailed set of laws about how you can treat each kind of debt. Your creditors, and the Chapter 13 trustee who administers your case, can object to the proposed plan. Usually any such objections get negotiated and resolved, or if necessary are ruled upon by the bankruptcy judge. Often there are no objections or they are minor. The bankruptcy judge signs off on the plan, either as originally proposed or as adjusted to meet any objections. Then that plan governs the rest of your case.

After you successfully pay off your Chapter 13 plan, all or most of your remaining debts are discharged forever.

Call today for a FREE Consultation

210-342-3400

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