Bankruptcy Questions Answered

Jared Myers asked:


Chapter 11 bankruptcy has also been termed “Re-organization bankruptcy”. It’s the most familiar type of insolvency in the United States. It is typically used in large organizations or businesses dealing with financial crisis. But it is also utilized by partnerships, individuals and corporations.

Advantages
Remember, Chapter 11 Bankruptcy is reorganization, not liquidation. In some situations, filing for Chapter 11 bankruptcy allows a business to go on operating throughout bankruptcy proceedings. What this means is that under hard circumstances, you now have time to reorganize under the bankruptcy court’s supervision. This chapter has no limits on the amount of debt, where as Chapter 13 does.

How it works

Chapter 11 bankruptcy is commonly used by businesses as a way to restructure their debt without forfeiting their bussiness. To do this, the debtor files a petition which includes a list of assets and liabilities, and a detailed statement of financial affairs. And several of the bussiness’s assets are sold off to remunerate past due creditors. The debtor must then come up with a course of action and get it sanctioned by the creditors.

Notice: If the enterprise walks into the courthouse unprepared, then the results may be that the judge deeds over the business to the biggest people you owe.

Limitations & Drawbacks

Chapter 11 bankruptcy is easily the most high-priced corporate option in terms of legal costs and attorneys fees. Just to file a Chapter 11 Bankruptcy you must surrender a filing fee of $830.00–plus a quarterly administrative fee to the Court. It is not commonly used by individual consumers because it can be far more complicated and high-priced to pursue.

Chapter 11 Bankruptcy is almost certainly the most flexible of all the chapters, and at the same time the most difficult to generalize. Chapter 11 bankruptcy is a time consuming and expensive chapter, therefore it is only appropriate for individuals whose circumstances make Chapter 7 or Chapter 13 inapplicable or inappropriate. Fewer than one percent of all bankruptcy filings are Chapter 11s.

Comparison with Chapters 13 & 7

Chapter 11 bankruptcy is a viable option when a business has sufficient prospects to continue operating. Businesses are commonly allowed to continue to operate while in Chapter 11 bankruptcy, though they must do so under the supervision of the bankruptcy court.

Chapter 11 Bankruptcy is unique, because the debtor will commonly operate as his or her own trustee. This concept is called a “debtor in possession”. Businesses that file Chapter 11 bankruptcy are commonly are allowed to operate under the supervision of the bankruptcy court. In Chapter 7 bankruptcy a business sells off all its assets and eventually ceases operation.

Other Options

Chapter 11 Bankruptcy is not the only option available to a business - reorganization is permitted under Chapter 13, too. Often times, a sole proprietor may file for personal bankruptcy, which grants reorganization of the business without the cost of pursuing a Chapter 11.

Want more chapter 11 bankruptcy information? Visit our website.



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Jane Worthington asked:


Filing for bankruptcy is something about which many people are embarrassed. It is important to remember that 85% to 90% of bankruptcy filings are due to divorce, illness, or loss of employment. Therefore, many people are forced to file for bankruptcy due to circumstances they cannot control. However, you have to know that you can survive after bankruptcy. No matter what reasons you had to file in the first place, you need to know that you rebuild your life afterwards!

Most bankruptcy lawyers encourage you to think of filing for bankruptcy as a fresh start. Your debts are wiped out but you will need to work hard to rebuild your credit! The stigma is the same whether you filed for Chapter 7 or bankruptcy Chapter 13. If you are diligent and honest, you will be able to regain a decent credit score in as little as two years. If you put off rebuilding your credit, however, you will find that it takes much longer than it should.

You need to start working hard immediately after your bankruptcy case is over. All of these steps are suggestions on how to reestablish your credit so that you can overcome your bankruptcy and live a happy life. The first step to building up your credit again is to establish new credit lines.  Most major credit card companies and banks will most likely not approve you but there are other avenues that you can try. After you talk to the three main credit report companies to make sure that they show your debts have been “discharged in bankruptcy,” you can try to find a bank that will establish a savings account for you. Try to find an account that will have a credit card attached to it; this card is called a secured credit card.

In order to get your life back on track, you need to maintain as positive an attitude as possible. If you allow yourself to be bogged down in the bankruptcy and do not work hard to overcome it, you will have a much harder time reestablishing yourself. Have a story prepared to tell people why you needed to file bankruptcy. If you are honest and show remorse, people will be more willing to give you a second chance.



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Peter Gitundu asked:


Bankruptcy can happen to anyone, anywhere. There are procedures that you need to follow when you find yourself not in a position to remain committed to your financial obligations. The procedure is relatively the same the world over.

Before filing for bankruptcy, it is highly advisable that you get to weigh all the other available alternatives that you could have at your disposal. These include writing to your creditors and explaining your position. You then make an agreement with them on how you are going to repay them bit by bit. To be on the safe side, you need to have a lawyer present. This is because, if your creditors default on the agreement at some point, you will have a legal representative who will deal with the situation accordingly.

Supposing this option fails and you realize that the only way out is to file for insolvency, you need to be well versed with the law. Get to understand that there are different chapters under which you can file for insolvency in the United States. They are chapters 7, 9, 11, 12 and 13 and they all apply in different capacities to different scenarios.  

As an individual, it is more advisable to file under chapter 7 or 13. Chapter 7 requires that your assets be liquidated and the proceeds distributed among the creditors. If you wish to retain some valuable property, you are highly advised to have it exempted from bankruptcy way before you file the petition.  Chapter 13 on the other hand is more appealing for people with a regular source of income. It is from this income that you are required to make regular payments to your creditors till the bill is settled. This can be done for up to five years.



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When considering bankruptcy, people want to know what are bankruptcy Chapter 7 exemptions?

First, a person needs to understand that Chapter 7 bankruptcy is known as the liquidation bankruptcy because a debtor’s property that is not exempt is sold and the net proceeds are distributed to the debtor’s creditors. The more property that is exempt, the more property that a debtor can keep after filing bankruptcy.

While bankruptcy is federal law and bankruptcy cases are filed in the federal district court for the area in which the debtor lives, state laws have a big effect on bankruptcy. As part of the federal law, states may determine what property is exempt from a Chapter 7 bankruptcy. Therefore, bankruptcy Chapter 7 exemptions vary state to state. That is the reason you may have heard that a lot of famous wealthy people move to Florida and then file bankruptcy. Apparently, Florida’s exemptions are more generous than other states.

Most states exempt at least a portion of the following:

- Household goods such as furniture, kitchen appliances and utensils, electronics, etc.

- Personal items and property such as clothing, jewelry, etc.

- Health aids.

- Tools of a person’s trade.

- Automobiles and vehicles.

- Homes used as the debtor’s primary residence.

- Pensions.

Generally, the way that a portion of property is exempt is that dollar values are used. For example, a state law may say that $2,000 of a car’s value is exempt and that the exemption is applied to the equity that a person has in the property. If there is a loan on the car, the exempt amount is applied to the amount of equity that the debtor has in the car. In our example, if the car is worth $5,000 with a loan balance of $3,000, then there is $2,000 in equity. If the exemption is $2,000, then the car is exempt from the bankruptcy ($2,000 equity less $2,000 exemption) and the debtor may keep the car as long as the debtor pays off the car loan.

To determine exactly what property is exempt, you need to look at your state’s laws. Information that you find on the internet may or may not be accurate. The best way to learn what property is exempt is to contact a lawyer.

This is only general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

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