Are you are suffocating under a pile of unpaid bills and collection notices? Perhaps you’ve tried dealing with your creditors directly with limited results. Or worse, you’ve been avoiding the situation altogether. There are legal and proper ways to repair your financial troubles, and one of them is to declare bankruptcy.
Whether for your business or your personal finances, declaring bankruptcy can be a very isolating and scary process. The team of Boyle & Valenti is here to help guide you through the process towards getting back on track.
What is bankruptcy?
Bankruptcy is a legal process helps individuals or businesses that cannot repay their debts and are seeking relief. Different types of bankruptcy can mean unique repayment options and rules.
There are six different types of bankruptcies, and Boyle & Valenti works with individuals and business entities, as well as both creditors and debtors. These are the three most common types of bankruptcy:
Chapter 7: Liquidation
This is the most common type of bankruptcy for individuals, and the most direct path to a fresh start for those struggling with credit card debt or medical debt. Most of your assets or property is sold to pay off creditors, and any remaining unsecured debt like medical bills could be erased. Some essential assets are exempt from the liquidation, depending upon state laws. With the help of your attorney you will know exactly what can be sold in the liquidation proceedings. Typically, after several months, the court orders a “bankruptcy discharge” ending the process, after which you can start rebuilding your credit.
Chapter 11: Large Reorganization
Chapter 11 bankruptcy is designed to allow struggling businesses to restructure their finances and maximize the return to their creditors and owners. Businesses, with the aid of their attorneys, come up with a plan on how to continue operating while paying back debts. This can help a viable business keep the doors open long enough to regroup and reimagine a future-forward strategy. It doesn’t matter whether the company is avoiding paying vendors, having a tough time meeting payroll or rent, or struggling with some other obligation that’s come due, the debt relief afforded by Chapter 11 gets businesses back on track. Filing for Chapter 11 stops all creditors from demanding payment, evictions or foreclosures, property seizures or other collection processes. The goal is to create a financial plan that the filer, creditors, and the court agree will enable the company to remain open and prosper. The plan can include modifying interest, payment due dates, and other terms—it can even discharge (erase) debt entirely. Most plans provide for at least some downsizing of the debtor’s operations to reduce expenses and free up assets.
Chapter 13: Repayment Plan
Chapter 13 reorganizes your debt instead of forgiving it. The requirements are that your debts cannot exceed a certain amount, you need to have a steady income, and you must be an individual, not a business. After initial filing, you create a budget based upon your income, less living expenses, and submit it to the court. Once approved, you pay a trustee monthly. Payment plans last for no more than five years. By filing for Chapter 13, you are able to keep your assets and stop processes such as home foreclosures.
Other types of bankruptcy are Chapter 12, for family farmers, Chapter 15, which is used in foreign cases, and Chapter 9, for municipalities.
A non-dischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. Such debts include, but are not limited to, student loans; most federal, state, and local taxes; money borrowed on a credit card to pay those taxes; and child support and alimony. Also, in certain cases, filing for bankruptcy is complicated by the fact that the person is experiencing financial difficulties due to illegal actions such as fraud or embezzlement. These cases can be extremely complex, and require professional legal representation.
Adversary Proceedings and Litigation
While a bankruptcy case itself is not an adversarial process, in some bankruptcy cases, an issue or dispute arises that requires resolution by the bankruptcy court. For example, a creditor may raise the issue by filing an adversary proceeding with the bankruptcy court. The court resolves the dispute as a separate action within the bankruptcy case. The underlying bankruptcy case does not close until the adversary proceeding ends with settlement or a court decision.
Avoidance Action Claims
Certain assets purchased by a business or individual that have not been fully paid for might not be part of a bankruptcy agreement. In this case the creditor is entitled to repossess the item or demand payment.
The above cases may be appealed to the proper courts.