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Expertise: Let this be reiterated: deciding which type of bankruptcy suits you is a decision you can take on your own, but trust us (and our many clients would agree) it is better left to the discernment of an attorney. Our attorneys are familiar with the ins and outs of the bankruptcy laws and work closely with debt negotiation and credit counseling companies across the United States.

Experience As a client all you have to do is trust our ability to turn the tables, and save you from a crisis, impending or existing. Our success lies in the ability of our attorneys to read between the lines, and to not just limit themselves to rattling laws out of the books. Our attorneys understand your requirement well, before pronouncing a verdict on the roadmap for the future.

Efficiency: Filing for bankruptcy with the help of our attorneys will also save you from the trouble of trying to grasp the complex rules and regulation that govern bankruptcy. Our priority is to provide you with a solution, and free you of your stress at the earliest. At BankruptcyHome.com we redefine standards of efficiency, and will certainly rise above your expectations.

Economic: No doubt there may be much cheaper ways of filing bankruptcy. But our in-depth analysis of your case is unmatched, and invaluable. That said, the powerful, no-nonsense way of eliminating debts comes within your existing budget with low and affordable monthly payments.

With our Bankruptcy Chapter Advice, you can:

Pay off your debts for pennies on the dollar
Set up a new monthly payment you can live with and be completely debt-free in 3-60 months regardless of your debt amount.
Possibly even improve your credit rating by eliminating your debts.
Regain the ability to invest in your family's financial security and future with the extra money you will have after settling your debt, etc.
These are some of the many benefits we offer our clients.

Continue reading "Let Us Be Your Bankruptcy Attorneys" »

There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:

Chapter 7: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
Chapter 9: municipal bankruptcy; a federal mechanism for the resolution of municipal debts
Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans
Chapter 12: rehabilitation for family farmers and fishermen;
Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
Chapter 15: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.
The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. Corporations and other business forms file under Chapters 7 or 11.

In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt; however, the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior (e.g. concealing records relating to financial condition) and certain debts (e.g. spousal and child support, student loans, some taxes) will not be discharged even though the debtor is generally discharged from his or her debt. Many individuals in financial distress own only exempt property (e.g. clothes, household goods, an older car) and will not have to surrender any property to the trustee. The amount of property that a debtor may exempt varies from state to state. Chapter 7 relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is discharged. For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged.

The 2005 amendments to the Bankruptcy Code introduced the "means test" for eligibility for chapter 7. An individual who fails the means test will have his or her chapter 7 case dismissed or may have to convert his or her case to a case under chapter 13.

Generally, a trustee will sell most of the debtor's assets to pay off creditors. However, certain assets of the debtor are protected to some extent. For example, Social Security payments, unemployment compensation, and limited values of your equity in a home, car, or truck, household goods and appliances, trade tools, and books are protected. However, these exemptions vary from state to state. Therefore, it is advisable to consult an experienced bankruptcy attorney.

In Chapter 13, the debtor retains ownership and possession of all of his or her assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The amount of payment and the period of the repayment plan depend upon a variety of factors, including the value of the debtor's property and the amount of a debtor's income and expenses. Secured creditors may be entitled to greater payment than unsecured creditors.

Relief under Chapter 13 is available only to individuals with regular income whose debts do not exceed prescribed limits. If you're an individual or a sole proprietor, you are allowed to file for a Chapter 13 bankruptcy to repay all or part of your debts. Under this chapter, you can propose a repayment plan in which to pay your creditors over three to five years. If your monthly income is less than the state's median income, your plan will be for three years unless the court finds "just cause" to extend the plan for a longer period. If your monthly income is greater than your state's median income, the plan must generally be for five years. A plan cannot exceed the five-year limitation.

In contrast to Chapter 7, the debtor in Chapter 13 may keep all of his or her property, whether or not exempt. If the plan appears feasible and if the debtor complies with all the other requirements, the bankruptcy court will typically confirm the plan and the debtor and creditors will be bound by its terms. Creditors have no say in the formulation of the plan other than to object to the plan, if appropriate, on the grounds that it does not comply with one of the Code's statutory requirements. Generally, the payments are made to a trustee who in turn disburses the funds in accordance with the terms of the confirmed plan.

When the debtor completes payments pursuant to the terms of the plan, the court will formally grant the debtor a discharge of the debts provided for in the plan. However, if the debtor fails to make the agreed upon payments or fails to seek or gain court approval of a modified plan, a bankruptcy court will often dismiss the case on the motion of the trustee. Pursuant to the dismissal, creditors will typically resume pursuit of state law remedies to the extent a debt remains unpaid.

In Chapter 11, the debtor retains ownership and control of its assets and is re-termed a debtor in possession ("DIP"). The debtor in possession runs the day to day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. Upon meeting certain requirements (e.g. fairness among creditors, priority of certain creditors) creditors are permitted to vote on the proposed plan. If a plan is confirmed the debtor will continue to operate and pay its debts under the terms of the confirmed plan. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan.

Chapter 7 and Chapter 13 are the efficient bankruptcy chapters often used by most individuals. The chapters which almost always apply to consumer debtors are chapter 7, known as a "straight bankruptcy", and chapter 13, which involves an affordable plan of repayment. An important feature applicable to all types of bankruptcy filings is the automatic stay. The automatic stay means that the mere request for bankruptcy protection automatically stops and brings to a grinding halt most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection harassment.

Under the old bankruptcy laws, most debtors chose between a liquidation proceeding under Chapter 7 of the Bankruptcy Code and a wage-earner repayment plan under Chapter 13. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), new bankruptcy law, a two-part means (income) test now determines if your are eligible for Chapter 7 or must file under Chapter 13 for relief says Los Angeles Bankruptcy Attorney Steven C. Peck.

The new law mandates that all debtors must get credit counseling with an agency approved by the United States Trustee's office before they can file for bankruptcy. Once the bankruptcy case is over, all debtors must attend additional counseling on budgeting and debt management before bankruptcy discharge of debts can occur.

Filing for bankruptcy should always be a last resort, since it damages your credit for many years. Besides, the new bankruptcy law makes it much more expensive and time-consuming to file. Unsecured loans probably won't provide enough money for any debt consolidation loans. So, if you are a homeowner a debt consolidation loan may provide you some relief by saving you money on interest. You may want to consider mortgage refinancing or a home equity loan (second mortgage) to pay your credit card debt and secured loans, especially if the new law for minimum payments has you considering bankruptcy.

Continue reading "Bankruptcy Under the New Act" »

A preferential creditor (in some jurisdictions called a preferred creditor) is a creditor who receives a preferential right to payment upon the debtor's bankruptcy under applicable insolvency laws. says Los Angeles Bankruptcy Attorney Steven C. Peck.

In most legal systems, some creditors are given priority over ordinary creditors, either for the whole amount of their claims or up to a certain value. In some legal systems, preferential creditors take priority over all other creditors, including creditors holding security, but more commonly the preferential creditors are only given priority over unsecured creditors[citation needed]. Some legal systems operate a hybrid approach; in the United Kingdom preferential creditors have priority over secured creditors whose security is in the nature of a floating charge, but creditors with fixed security take ahead of the preferential creditors generally.

Classes of preferred creditors:
Creditors who are characteristically preferred creditors are:

employees
revenue authorities
in some countries, environmental clean-up costs
in some countries, tort victims
In the United Kingdom employees are preferential creditors for their wages (subject to a statutory limit), as are occupational pension schemes. The right of the Crown as a preferential creditor was removed by the Enterprise Act 2002

Creditors, and sometimes individual assets, are also placed in classes by specific laws for specific events, such as a deposit insurance scheme triggered by a bank failure. For example, Switzerland's deposit protection has Class I (first-class), Class II (second-class) and Class III (third-class) unsecured creditors.

Continue reading "Preferential Creditor In Bankruptcy Proceeding Receives Preferential Right To Payment" »

Cram down or cramdown is the involuntary imposition by a court of a reorganization plan over the objection of some classes of creditors.

Home mortgage loans:
While typically used in a corporate context, the phrase has gained currency in a personal context the financial crisis of 2007-2009.

Under current United States law, bankruptcy courts are not allowed to perform cram downs (i.e., reduce the principal amount or change the interest rate or other terms) on mortgages of bankruptcy filers' primary residences. As a potential solution to the sub-prime mortgage crisis, legislators and consumer advocates have advanced a proposal to allow cram downs on these loans, and legislation to that effect was introduced for potential inclusion in the Emergency Economic Stabilization Act of 2008.

However, the financial industry strongly voiced opposition to such a measure, claiming that it would create additional uncertainty as to the value of mortgage loans (and by extension, the collateralized debt obligations into which they are bundled). While the provision ultimately was not included in the bill passed into law, the concept still has advocates and new legislation allowing for first-mortgage cram downs may appear in the future.
Informal use:
The term (sometimes used in the phrase cram-down deal) has also gained currency to denote informally any transaction where existing investors (debt or equity) are forced by circumstance to accept an unappealing transaction, such as an expensive financing, a debt transaction that subordinates them, a diluted equity raising, or an acquisition at an unappealingly low price.

Continue reading "Cram Down: The Reduction of Principal and Interest On Loans Over The Objection of Creditors" »

Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.

Business insolvency is defined in two different ways:
Cash flow insolvency
Unable to pay debts as they fall due.
Balance sheet insolvency
Having negative net assets - in other words, liabilities exceed assets.
A business may be 'cash flow insolvent' but 'balance sheet solvent' if it holds illiquid assets, particularly against short term debt that it cannot immediately realize if called upon to do so. Conversely, a business can have negative net assets showing on its balance sheet but still be cash flow solvent if ongoing revenue is able to meet debt obligations, and thus avoid default - for instance, if it holds long term debt. Many large companies operate permanently in this state.

Insolvency is not a synonym for bankruptcy, which is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency.

Definition of inability to pay debts:
(1) A company is deemed unable to pay its debts;
(e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due. This is known as cash flow insolvency.
(2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities. This is known as balance sheet insolvency.
Consequences of insolvency:
The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the liquidation and elimination of insolvent entities but on the remodeling of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of their business. This is known as Business Turnaround or Business Recovery. In some jurisdictions, it is an offense under the insolvency laws for a corporation to continue in business while insolvent. In others (like the United States with its Chapter 11 provisions), the business may continue under a declared protective arrangement while alternative options to achieve recovery are worked out. Increasingly, legislatures have favored alternatives to winding up companies for good.

Continue reading "Insolvency Is the Inability to Pay Debts As They Become Due" »

A discharge in United States bankruptcy law, when referring to a debtor's discharge, is a statutory injunction against the commencement or continuation of an action (or the employment of process, or an act) to collect, recover or offset a debt as a personal liability of the debtor. The discharge is one of the primary benefits afforded by relief under the Bankruptcy Code and is essential to the "fresh start" of debtors following bankruptcy that is a central principle under federal bankruptcy law. A discharge of debts is granted to debtors but can be denied or revoked by the court based on certain misconduct of debtors, including fraudulent actions or failure of a debtor to disclose all assets during a bankruptcy case.

The benefit of the discharge injunction is narrower than (but similar to) the benefit afforded by the automatic stay in bankruptcy.

U.S. law also provides for specialized discharges in bankruptcy (see below).

Bankruptcy discharge for the debtor:
In the United States, there are generally seven kinds of debtor discharges in bankruptcy, found in the following statutes:

11 U.S.C. § 727(a) (relating to liquidation bankruptcies for individuals);
11 U.S.C. § 944(b) (relating to municipal bankruptcies);
11 U.S.C. § 1141(d)(1)(A) (relating to discharges resulting from confirmation of a Chapter 11 plan of reorganization);
11 U.S.C. § 1228(a) (relating to certain family farmer or fisherman cases);
11 U.S.C. § 1228(b) (relating to certain family farmer or fisherman cases);
11 U.S.C. § 1328(a) (relating to certain cases involving adjustment of debts of an individual with regular income);
11 U.S.C. § 1328(b) (relating to certain cases involving adjustment of debts of an individual with regular income).
The effect of the debtor's discharge is provided for at 11 U.S.C. § 524. In addition, certain limitations on the debtor's discharge are described at 11 U.S.C. § 523.

Other discharges in bankruptcy:
In the United States, with respect to taxes incurred by the bankruptcy estate (as opposed to the debtor) during case administration, a specialized discharge for the trustee, the debtor, any successor to the debtor, and (for cases commenced on or after October 17, 2005) the bankruptcy estate is provided in 11 U.S.C. § 505(b).

At the conclusion of a case the trustee (if any) may be discharged as trustee under 11 U.S.C. § 350(a).

Section 707(a) of the Bankruptcy Code provides that the court may dismiss a Chapter 7 case "only for cause." 11 U.S.C. § 707(a). This provision stands in meaningful and marked contrast to the liberal voluntary dismissal provision applicable to Chapter 13 cases, which states that "[o]n request of the debtor at any time...the court shall dismiss a case under this chapter." 11 U.S.C. § 1307(b). In the view of most courts, including this one, a Chapter 7 debtor may not "automatically" dismiss a case on request under § 707(a). In re MacDonald, 73 B.R. 254, 256 (Bankr. N.D. Ohio 1987). Courts have denied a debtor's request to voluntarily dismiss a Chapter 7 case where creditors have been or will be prejudiced by the dismissal. See, e.g., MacDonald, 73 B.R. at 256; In re Banks, 35 B.R. 59, 60-61 (Bankr. D. Md. 1983). Courts have also denied a debtor's request to voluntarily dismiss a case when property has been or will be obtained by the Trustee that will satisfy at least part of the debtor's obligations. See e.g., In re Klein, 39 B.R. 530 (Bankr. E.D. N.Y. 1984) (debtor's reason for dismissal was settlement of pending lawsuit, which court rejected); In re Blackmon, 3 B.R. 167 (Bankr. S.D. Ohio 1980). As the court noted in Blackmon, a debtor who chooses to place oneself in bankruptcy may not always choose to terminate the proceedings, even if unforseen consequences arise. Id. at 169. And so it is here.

Numerous courts have denied a debtor's voluntary motion to dismiss a Chapter 7 case when she intends to re-file and list post-petition debts, finding that such action cause prejudice to creditors. E.g., In re Hopkins, 261 B.R. 822 (Bankr. E.D. Pa. 2001); In re McCullough, 229 B.R. 374, 377 (Bankr. E.D. Va. 1999); In re Sheets, 174 B.R. 254, 256 (Bankr. N.D. Ohio 1994). As another judge of this court aptly explained,

The Bankruptcy Code contemplates that a singular point in time, the date of filing of the bankruptcy petition, is to be used to define the bankruptcy estate and the debts that are to be discharged. Simply put, it has to stop sometime. There will always be additional debts, and Congress has chosen to only allow the benefits of a Chapter 7 discharge once every six [n.b. now 8] years. Allowing debtor to add additional creditors undermines the fundamental precept of the bankruptcy system.
In re Sheets, 174 B.R. at 256.

In particular, in a case on point with this one, the debtors in Compton sought to voluntarily dismiss and re-file their Chapter 7 case so as to list a creditor in the new case whose claim arose from a post-petition automobile accident. Compton, 161 B.R. at 637. That is what occurred in this case due to a third-party driver of Debtor's motor vehicle having been in an accident involving personal injury Amber Hauck-Tucker. The court in Compton persuasively denied the requested voluntary dismissal as an effort to circumvent the significance of the bankruptcy petition date, the meaning of "claim" and the statutory limitations on the availability of Chapter 7 relief. There is no basis shown in the record upon which the outcome of Debtor's Motion should be any different than the Compton case.

The court found that post-petition creditors will be prejudiced and that Debtor has not shown cause for dismissal of this case.

Recent laws have made it more difficult and expensive for people to file for Chapter 7 bankruptcy, which erases most debts. Even if a person was able to file for Chapter 7 bankruptcy, odds are, the bankruptcy will not forgive any student loans.

Data from Kiplinger's Personal Finance magazine, published July 2007, estimated that the average debt a student incurs from attending college for four years is $20,000. That likely explains why student loan default rates are rising, according to data from the S&P and Experian Consumer Credit Default Index.

Despite the U.S. economy recovering from a recession, those who are seeking forbearance on their loans only find themselves incurring additional fees as they continue to find a way out of the debt.

Unfortunately, those who are looking for an out have very few options. There is no statute of limitations on the outstanding student loan debt, which means that the lender can attempt to retrieve the money, even the person files for bankruptcy. Those with student loans are urged to continue making timely payments.

The United States Bankruptcy code outlines procedural requirements for a bankruptcy filing under either chapter 7, 11 or 13. When you are considering filing for a bankruptcy, you should have detailed information of qualification criteria under any of the aforesaid chapters. Here is a brief description of various bankruptcy filing processes.

Chapter 7 bankruptcy process:
When filing for personal bankruptcy, it is pertinent for you to know what is chapter 7 bankruptcy. A bankruptcy under chapter 7 entitles an applicant liquidation and discharge of personal liabilities through an orderly, court supervised procedure wherein the overseeing trustee takes over the assets of the debtor and converts them into cash to repay all the creditors. This excludes certain exempt property for which the debtor has a right to retain. Typically, a chapter 7 bankruptcy does not require the debtor to appear in the court and face the bankruptcy judge unless an objection is raised in the case by some creditor or creditors. But to qualify for a chapter 7 bankruptcy, a debtor must pass the "Means Test".

Chapter 13 bankruptcy procedure:
If a debtor fails to pass the "Means Test" as mentioned above, he does not qualify for a chapter 7 personal bankruptcy but becomes eligible for a chapter 13 bankruptcy. However, chapter 13 bankruptcy laws are distinctly different from chapter 7 bankruptcy laws. While the debtor remains in charge of his property, he is required to repay his creditors in a time period of three to five years by proposing a plan that is approved by the creditors as well as the bankruptcy court. A debtor filing chapter 13 bankruptcy may have to appear before a bankruptcy judge to confirm the repayment plan through a formally arranged meeting at the office of the U.S. trustee which is called the "341 meeting".

Process for chapter 11 bankruptcy:
A chapter 11 bankruptcy process deals with small business enterprises which desire to continue operating their business. The bankruptcy code provides chapter 11 bankruptcy information, according to which the process entitles small business owners with a reorganization plan that is approved by the bankruptcy court 120 days after the business files for a bankruptcy, to repay the creditors. The court has the final authority to approve or disapprove the plan of reorganization. Thus, the debtor usually undergoes a period of consolidation and emerges with much reduced debts as well as reorganized business.

Continue reading "Chapters 7, 11 & 13 of the United States Bankruptcy Code Explained" »

Chapter 7 Bankruptcy:

Chapter 7 is a 'liquidation' of all the non-exempt assets that would allows a debtor to pay off some of their debts. As this is a supervised procedure, the court will appoint a personnel who has the authority to sell all the non-exempt assets owned by the defaulter and appropriate the sales money to various creditors. Bankruptcy chapter 7 exemptions means that there are assets that the creditors cannot touch when filing for bankruptcy.

The debtor selects property that he/she is eligible to keep from a list containing state exemptions or exemptions provided in the Federal Bankruptcy Code. The property shall be divided as exempt or non-exempt once the trustee files a property exemption report. State exemption laws can vary from one state to another although some basic laws may be the same.

Secured debts are first paid off but if the debt is unsecured, it can be possible that the creditors of unsecured debts may not get paid at all. The trustee will pay the right creditors in the right amount. The debtor may also file the case in a state where he/she has previously lived for more than 180 days, up to 2 years.

Federal exemptions may also be provided, if applicable in your jurisdiction, including retirement benefits, death disability benefits, survivor's benefits and miscellaneous uitems.

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If a debtor in bankruptcy owes a debt, and the debt is secured by some kind of lien (like a mortgage), the claim is "secured." The claim is secured, though, only to the extent that there is value in the secured asset above and beyond what's already pledged to others says California Bankruptcy Attorney Steven C. Peck.

Let's try an example from divorce. Let's say that Iggy and Edith divorce, and Iggy agrees to pay Edith $80,000 two years after their divorce is effective. Iggy keeps the house. To secure the payment, Edith takes a second mortgage in the house, which is junior in priority to the first mortgage. The two years have now passed, the house is now worth $200,000, and the mortgage has a current balance of $160,000. Does Edith have a secured claim? If so, how large? Here's where bankruptcy code section §506(a) steps in.

Edith has a secured claim in the amount of the excess of the value of the house over the value of the existing mortgage, or $40,000. Edith still has the $40,000 remainder of her claim, but it's an unsecured claim.

Secured creditors holding a judicial lien (that is, a lien created by a judge rather than by agreement) can have their security interests devalued dramatically if the property secured (for example, a homestead) is the subject of an exemption. Congress has said (in 11 U.S.C. §522(f)(1)(A)) that the exemption must yield to a judicial lien to secure support obligations. A judicial lien to secure a claim in property division, though, could be reduced to allow the exemption to be effective.

Continue reading "Secured Lien in Bankruptcy Only Secured To The Extent That there Is Value In the Asset" »

Under certain circumstances, certain taxes can be discharged in bankruptcy. Very specific timing rules must be considered before you decide that bankruptcy is the answer to your IRS Tax Problems. It is important that you seek the proper IRS representation before filing an IRS tax bankruptcy, and preferably you should seek the services of a qualified attorney, since they understand the bankruptcy ramifications much more thoroughly than a CPA for example. Very few professionals in the entire country understand these timing rules and are qualified to give you an opinion.

Continue reading "Certain Taxes Can Be Discharged in Bankruptcy" »

What's a Discharge?
In both Chapter 7 (liquidation) and Chapter 13 (readjustment of debts), the bankruptcy court will grant you a discharge from your debts. This means that you'll have no further responsibility for the discharged debts, and your creditors can take no further collection actions against you states Los angeles Bankruptcy Attorney Steven C. Peck.
Certain debts can't be discharged in bankruptcy: The Bankruptcy Code lists 21 categories of such debts.

In a Chapter 7 case, the most common types of debts that can't be discharged are:

•Taxes and tax liens
•Student loans
•Alimony and child support (domestic support obligations)
•Debts obtained through fraud, false pretenses or false representation
•Debts you failed to schedule in time to allow creditors to file proofs of claim (unscheduled debts)
•Debts for fraud while you were acting in a fiduciary capacity, or for embezzlement or larceny
•Debts for willful and malicious injury
•Debts for fines or penalties to governmental units
•Debts for judgments in wrongful death or personal injury lawsuits resulting from motor vehicle, vessel or aircraft accidents while you were intoxicated
•Condominium or cooperative association fees or assessments
If your bankruptcy case is under Chapter 13, you won't be discharged from the following types of debts:

•Child support and alimony (domestic support obligations)
•Student loans
•Fines and restitution
•Certain taxes, such as withholding taxes if you had employees, or taxes connected to fraudulent tax returns or tax evasion
•Debts incurred through fraud
•Debts for fraud while you were acting in a fiduciary capacity, or for embezzlement or larceny
•Debts for willful and malicious injury
•Judgments in wrongful death or personal injury cases arising from your intoxication
•Unscheduled debts
•Debts incurred after filing your case, which weren't included in your Chapter 13 plan
•Debts that are nondischargeable under other laws, for example amounts owed for certain health education programs
•Interest owed on nondischargeable debts

Continue reading "Discharge and Dischargeability of Debt in Bankruptcy" »

Bankruptcy is provided by Federal Law and all the cases related to bankruptcy are handled in Federal Court. Basically it is a legally declared by the court in which any individual or the organization is unable to pay their debts, expenses, bills to their creditors. Those who are bankrupt can file bankruptcy in a way to stop their creditor to collect debt from them.

Chapter 7: Liquidation Bankruptcy & the changes under the new law

It would be very harder for some people to file bankruptcy now. Especially with higher income level category they are now no longer allowed to use chapter 7. They need to pay partial amount of their debt under chapter 13. Before filing a bankruptcy case all the debtors have to undergo for the credit counseling, budgeting and the debt management. This law imposes on the lawyers too so it is very difficult to find an attorney to represent the bankruptcy case. Following are the changes in the Bankruptcy Law -
• Under the old law many filers can choose the type of bankruptcy. Most of them were choosing Liquidation (Chapter 7 - Bankruptcy) over Repayment (Chapter 13 - Bankruptcy) because they proved beneficial for most of them. But under the new law, it would not be the case for the higher income group filers, the new law has prohibited from using chapter 7 bankruptcy for them.
• Now the question arises about how you will define your income is high for filing under the bankruptcy. Under the new rules, the first step is to figure out your monthly income against the median income for a household for your size in your state to file in the chapter 7 bankruptcies. If it is less than that then you can file under chapter 7 and if it is not then you have to pass the means test. Another clause or the law in order to file for chapter 7.
• The means test is to be done to calculate your disposable income and to see whether you have enough disposable income after deducting your expenses, debts, payments under chapter 13. If your income is high up to a certain limit after deducting your expenses, debts and all then you are not eligible for chapter 7 and if it is less than the certain amount then you can file under chapter 7 bankruptcy.
• Now the next step is the counseling from the approved agencies by the United States Trustee's Office about the credit & debt counseling. Purpose behind this counseling is to see and give an idea about your need to file for bankruptcy.

Counseling is required even if it's a repayment plan or for the debts that you are facing and you do not want to pay. If the agency come up with a repayment plan the agency proposes and you agree on that propose then you can submit it to the court along with the papers that you have completed the counseling process. Towards the end of your bankruptcy case, you will have to attend the last counseling session to learn about the personal financial management. After submitting the proof to the court you fulfilled this requirement.

Continue reading "How The New Federal Bankruptcy Laws May Affect Your Bankruptcy Protections" »

There are two broad forms of bankruptcy, no matter your definition - Liquidation and reorganization. Liquidation is provided for in the United States under Chapter 7 of the Bankruptcy Code while Reorganization is covered under chapters11, 12 and 13 says California Bankruptcy Attorney Steven C. Peck.

CHAPTER 7

Chapter 7 bankruptcy is the chapter of the Bankruptcy Code that provides for the sale of the debtor's non-exempt assets for the distribution of the proceeds to creditors (liquidation). Usually, a trustee collects the debtor's assets, which forms the bankruptcy estate, under court supervision and "converts" herve leger discount it to cash for onward distribution to creditors. This is subject to the rights of the debtor to keep certain assets, which are exempt (for example personal clothing). Also, distribution of the liquidated assets is subject to the rights of secured creditors. As may be expected, most Chapter 7 bankruptcy cases are "no assets" cases, as the debtor literally has no assets that can be liquidated.

An individual or business filing for a Chapter 7 bankruptcy case is required to begin by filing a petition with the relevant bankruptcy court serving his area or the area where the business is registered or operated with its main assets.

The petition stage can be described as the declaration stage. The debtor will also need to provide other documents to the court in addition to their petition. This may include but not limited to;

§ A schedule of assets and liabilities
§ A schedule of current income and expenditures
§ A schedule of executory contracts and unexpired leases
§ A statement of monthly net income and any anticipated increase in income or expenses after filing.

Basically, the additional documents would capture all your assets, debts and financial affairs. On the average, the process may take up to six months and may cost the debtor in terms of filing, and administrative fees. Unfortunately, you cannot file a Chapter 7 bankruptcy if you have a bankruptcy discharge in the last six to eight years and also if your current financial affairs can permit a Chapter 13 bankruptcy. Debts like priority taxes, support, student loans, liens and any debts that were reaffirmed are not discharged under Chapter 7 Bankruptcy.

CHAPTER 11

Knowing the different types of bankruptcy is very importance especially if you are into business. Always remember that businesses sometimes hit a bad spell so you have to be prepared for any eventualities. If you are a business owner, you need to know about Chapter 11 Bankruptcy also known as Re-organization Bankruptcy. Since with type of bankruptcy involves Partnerships and Corporations, it is imperative you should know about this type of bankruptcy.

Under Chapter 11 Bankruptcy, businesses are allowed to propose payment plan to their creditors. The payment plan shall include the length of time needed for the business to recover and settle its financial obligations. Although there are some provisions under Chapter 11 Bankruptcy that are similar to Chapter 13 Bankruptcy, the two are quite different in the sense that Chapter 13 bankruptcy is more concerned with individuals. The fees that apply to partnerships and corporations are also different to those fees imposed on individuals who file for bankruptcy.

What Fees Apply Under Chapter 11 Bankruptcy?

A mandatory filing fee of $1,000 and additional $39 miscellaneous administrative fees apply under Chapter 11 Bankruptcy. In cases of joint petitions, only one filing fee is imposed. Since these fees are considered as mandatory, the failure of the debtor to pay these fees may cause the dismissal of the petition. Once the case is already in progress, the business or the petitioner may be required to pay the court trustee every quarter. The amount of the fees differs depending on the amount involved. In most cases, the fees would range from $250 up to $10,000.

Continue reading "Liquidation and Reorganization The Two Forms of Bankruptcy Protection" »

Exempt vs. Non-exempt Property Under Chapter 7

In a Chapter 7 liquidation case, the debtor must relinquish certain property to the bankruptcy trustee so that he or she can sell the property and use the proceeds to pay off debts. Property of the bankruptcy estate is broadly defined under Section 541 of the Bankruptcy Code. The estate is technically the legal owner of all of the debtor's property and consists of all legal and equitable interests that the debtor has in property at the initiation of the bankruptcy case. Income that the debtor earns after the date of the petition is not included in the estate. Debtors, whether they are businesses or individuals, are often justifiably concerned about what property they will be allowed to keep and what they must give up. An experienced bankruptcy lawyer can answer these and other questions, allay fears and keep the process moving forward as painlessly as possible.

A debtor must file a schedule of exempt property with the court. Exempt property is property that the debtor can protect from liquidation. The Bankruptcy Code allows each state to adopt its own exemption laws, which the debtor can select instead of the federal exemptions. It is important to consult with an attorney who can explain the exemptions available under your state's laws and how they compare to the available federal exemptions.

Non-exempt Property
Items that the debtor usually must forfeit include:

Expensive musical instruments, unless the debtor is a professional musician
Collections of stamps, coins and other valuable items
Family heirlooms
Cash, bank accounts, stocks, bonds and other investments
A second car or truck
A second home or vacation home
Exempt Property
Certain types of property are exempt, meaning that the debtor can keep that property. Exempt property includes:

Motor vehicles, up to a certain value
Reasonably necessary clothing
Reasonably necessary household goods and furnishings
Household appliances
Jewelry, up to a certain value
Pensions
A portion of the equity in the debtor's home
Tools of the debtor's trade or profession, up to a certain value
A portion of unpaid but earned wages
Public benefits, including public assistance (welfare), social security and unemployment compensation, accumulated in a bank account
Damages awarded for personal injury

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While federal law allows financially overwhelmed people to pursue debt relief through bankruptcy, such legal debt forgiveness is not automatic, according to the book "How to File for Chapter 7 Bankruptcy." Not everyone can qualify for permanent forgiveness of most debts through Chapter 7 bankruptcy, and some must instead repay part of their debts through a court-supervised Chapter 13 plan. Learning the basic qualifications for bankruptcy is essential to your success during this sometimes difficult legal process.

Credit Counseling
Before 2005, credit counseling was not required to file bankruptcy, according to the Federal Trade Commission. Today, however, all debtors pursuing any type of personal bankruptcy must complete a credit counseling session approved by the U.S. Trustee Program; otherwise, the debtor's local bankruptcy court clerks will not accept the initial filing paperwork. Typical sessions range from about 60 to 90 minutes. You also must complete this requirement no more than 180 days before filing bankruptcy and attach a copy of the completion certificate to your bankruptcy petition.

Income Tax Returns
To file bankruptcy, you must have filed your last three income tax returns even if you could not pay any resulting debts, according to "How to File for Chapter 7 Bankruptcy." If you did not file the tax returns and were required to do so, you must complete this step with the Internal Revenue Service before you can declare bankruptcy. Also, keep in mind that only tax debts more than three years old can be included in bankruptcy; if you filed your older tax returns late, you may not qualify for partial or complete relief of resulting debts. In addition, some Chapter 13 filers must pledge all or part of their tax refunds toward creditor repayment; this only applies while the debtor is actively repaying debts through the court-supervised plan.

Income Qualifications
Since 2005 bankruptcy reform, qualifying for Chapter 7 debt relief has become more difficult, according to the Federal Trade Commission. If you make less than your state's median income, you automatically qualify for Chapter 7 debt relief. Those who make more money must run their financial figures through a federal "means test." Basically, you calculate your income and essential expenses to determine whether you can really repay any of your debts; if you have disposable income, then likely you must repay some of your obligations through Chapter 13 bankruptcy. It is also important to remember that even if you qualify for Chapter 7, you will likely lose assets such as your home and savings accounts; Chapter 13 filers are often allowed to keep reasonable assets since they are repaying some of their financial commitments.

People who live or have a business or property in the United States can file for Chapter 7 bankruptcy in a federal court. Chapter 7 is straight bankruptcy or liquidation.

Some property can be exempt from chapter 7. Most liens including real estate mortgages and security interests for car loans survive. Other assets, if any, are sold or liquidated by the U.S. trustee to repay creditors. Many types of unsecured debt are legally discharged by the bankruptcy proceeding, but there are various types of debt that are not discharged in a Chapter 7. Common exceptions to discharge include child support, spousal support, , divorce settlements, income taxes less than 3 years old and property taxes, student loans and court fines.

A chapter 7 bankruptcy stays on your credit report for 10 years. While in some cases this may make credit less available, high debt can have the same effect, and in some cases, a person's credit score may even rise after declaring bankruptcy, which removes debt. Future ability to borrow may therefore be improved, harmed or remain the same.

Like other bankruptcy chapters, it is not available to individuals who have had bankruptcy cases dismissed within the prior 180 days under specified circumstances.

Another reason why a person's Chapter 7 bankruptcy application may be denied is if it is determined that the debtor's bankruptcy filing is abusive because the person is thought to be able to pay off the debt.

The U.S. Trustee can prevail in a challenge to the debtor's Chapter 7 filing by proving that the debtor can otherwise afford to repay some or all of his debts out of disposable income in the five year time frame provided by Chapter 13.

It is generally believed by most California bankruptcy lawyers that the U.S. Trustee has become much more aggressive in pursuing abusive bankruptcy filings. As a result, changes were made in recent years that require a means test, credit counseling and other requirements before bankruptcy can be filed and approved.

Though bankruptcy law is the same across the United States, each bankruptcy court has its own rules to some degree. In California, there are severla Bankruptcy Districts.

If you decide to hire a bankruptcy attorney, and you should, you will need to bring the following documents to your bankruptcy lawyer: taxes, pay stubs, automobile and real estate titles, real estate appraisals, mortgages, deeds, leases, divorce agreements, child support orders, financing and security agreements, credit reports.

Continue reading "Chapter Seven Bankruptcy Is Straight Bankruptcy or Liquidation" »

The issue is the treatment of student loans in the federal bankruptcy code and whether this treatment ought to change. Currently, it's nearly impossible for people to get rid of student loans in bankruptcy court, even though people in over their heads with credit card or gambling debts can often discharge those loans.

At the moment, a few members of Congress are trying to change the rules, so that people with loans from for-profit student-loan providers like Sallie Mae would be able to rid themselves of the debt in bankruptcy, as they were able to do before 2005 when the law changed says Los Angeles Bankruptcy Attorney Steven C. Peck.

So who is right here? Should private student-loan debt sit in the same category as things like criminal fines and back taxes owed, since those obligations are also nearly impossible to discharge in bankruptcy court? After all, lenders accept a fair bit of risk underwriting five-figure loans to 19-year-olds.

Or is it madness that people who merely want to educate themselves and improve their income and prospects can get stuck with the loans forever, while others who buy too big a Lexus can get rid of that debt when they file for bankruptcy?

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Events occur that financially devastate individuals and families. People lose jobs, go through divorce, or incur significant medical costs from illness. These are just a few of the many reasons why people file for bankruptcy. Bankruptcy is a legally declared inability for an individual or organization to pay its creditors. An insolvent individual or organization (debtor) who can no longer pay their creditors may voluntarily initiate a bankruptcy and get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan. Bankruptcy procedures are covered by three main chapters of the United States Bankruptcy Code, Chapter 7, 11, and 13.

While bankruptcy cases are always filed in U.S. Bankruptcy Courts, they are often dependent upon State law. For instance, California provides certain homestead exemptions for those who have significant equity in their home, California is a community property state and has single spouse discharge where one spouse's filing may affect the others. The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. Corporations and other business forms file under Chapters 7 or 11.

Bankruptcy proceedings begin when the debtor files a bankruptcy petition with the court. However, 180 days before filing the petition, a debtor must receive credit counseling from an approved credit counseling agency. If a debt management plan is developed during the required credit counseling, it must be filed with the court.

Continue reading "Bankruptcy: The InabilityTo Pay Creditors" »

How does the U.S. personal bankruptcy procedure affect small businesses? Because most small businesses are unincorporated, debts are personal liabilities of the business owner. Lending to those small businesses is legally equivalent to lending to their owners. If the business fails, the owner is likely to have large business debts that legally are personal debts. The Chapter 7 procedure of current U.S. bankruptcy law provides two important protections for small business owners who are faced with business debt:

Future earnings First, owners of failed businesses can file for personal bankruptcy, in which their unsecured personal and business debts are discharged. Their future earnings are exempt from the obligation to repay debt, so they can start new businesses or take jobs working for others without having their future earnings taxed to repay their pre-bankruptcy debt. The future earnings provision -- referred to as the "fresh start" -- applies uniformly throughout the United States.

Current assets Second, business owners (like other bankrupt debtors) must surrender current assets that are above an exemption level set by the state in which they live. The non-exempt assets, in turn, are used to repay debt. Because the exemptions vary by state, states with higher bankruptcy exemptions are more attractive to entrepreneurs. Most states have several bankruptcy exemptions for different types of assets, but the most important is the exemption for equity in an owner-occupied home (the "homestead" exemption). Seven states have unlimited homestead exemptions: Arkansas, Florida, Iowa, Kansas, Minnesota, Oklahoma, and Texas. Unlimited exemptions allow individuals or couples who file for bankruptcy to shelter millions of dollars of assets from creditors, as long as the assets are converted into equity in an owner-occupied home before the bankruptcy filing occurs. Several other states have homestead exemptions of $100,000 or more. At the other end of the spectrum, Maryland and Delaware have no homestead exemption at all and seven other states have homestead exemptions of $5,000 or less. Besides the homestead exemption, most states also exempt clothing, furniture, and cooking utensils, and have small exemptions for other types of personal property and some retirement accounts. In states with the highest exemptions, owners of failed businesses can shelter assets worth millions of dollars. That encourages even risk-averse individuals to go into business. In states with low exemptions, owners of failed busi nesses can shelter their clothes, furniture and cooking utensils, but little else. That discourages risk-averse individuals from going into business.

How does the variation in bankruptcy exemption levels affect small business? We can hypothesize that, in states with high exemption levels, individuals would be more likely to own businesses because the more generous exemptions cushion entrepreneurs against the consequences of business failure. We can also hypothesize that lenders would be more likely to deny applications for credit from small businesses in high exemption states because entrepreneurs in those states would be more likely to file for bankruptcy and would repay less when they file. To test the hypotheses, two fellow researchers and I examined the entrepreneurship and lending patterns in states with different exemption levels. Specifically, we used the homestead exemption as the basis for comparison because it is the largest exemption in nearly all states and it is also the most variable. As we made the comparisons between states, we kept in mind that renters cannot make use of homestead exemptions and, therefore, they cannot shelter as many assets when they file for bankruptcy. Bankruptcy therefore provides a much more generous "insurance policy" for homeowners who go into business than for renters.

Are your Creditors threatening to deal with your inability to pay up? If your answer is from the affirmative, you'll need to be well informed regarding the topic of bankruptcy and its legal status these days. Ignorance from the law is never an excuse; hence you would like to know what to do when you are drowning from the ocean of debt.

Indeed, the term "Bankruptcy" is usually a legal term utilized to describe the inability of an individual to pay his or her creditor. It also refers towards the inability of a firm or organization to spend up its creditors. In most instances, your creditor may well be a bank, a financial firm or even a wealthy person from who you borrowed some funds.

1. Chapter 7 bankruptcy. It is the basic liquidation for people and firms.
2. Municipal bankruptcy: This can be contained in Chapter 9 and it's meant for municipal debts
3. Corporate Bankruptcy: this is contained in Chapter 11 and it is employed by business debtors as well as other individuals having large debts and other assets
4. Chapter 12 bankruptcy: that is meant for farmers and fishermen
5. Wage Earner Bankruptcy: it is contained in Chapter 13 and it is meant for normal income earners who may well should repay their debts.
6. Chapter 15 bankruptcy: this is meant for international cases like foreign debts.

Nicely, the above are the standard varieties of bankruptcy from the US. Oftentimes, they're simply referred to as "Chapter 7, 9 11, 12, 13 and 15 respectively. Hence, whenever you are declared bankrupt, you are able to get a relief from debt by filing a voluntary bankruptcy petition in line with any from the above kinds of bankruptcy that relates to your circumstance. You also need to bear in mind that your creditor may well be the one to sue you to court. In this situation, it becomes a voluntary bankruptcy.

In all, you don't have to panic when you suddenly locate yourself or your company bankrupt. You need to obtain the services of an attorney to aid you out particularly in filing the suitable bankruptcy type for your case. Being bankrupt is never a crime. It is a situation that might be correctly handled once you go about it the legal way.

Continue reading "Bankruptcy: The Inability of Any Individual Or Business To Pay Their Creditors" »

The two common types of bankruptcy for individuals are Chapter 7 (liquidation) and Chapter 13 (readjustment of debts). Although each are governed by their own set of requirements and conditions, tax debts are generally treated similarly under both proceedings. However, the basic concepts behind each bankruptcy type will dictate how the debts are settled.

In general - under Chapter 7 -if the debts meet all of the conditions below, then they can be discharged during the bankruptcy proceedings, but if even one qualification is not met, then the debts will remain after the bankruptcy. However - under Chapter 13 - there is almost always a distribution to creditors. Therefore, the court appointed trustee must negotiate with the IRS and decide on a settlement.

Qualifications for Discharge

Although many taxpayers are under the impression that tax debts cannot be discharged, some actually can! However, in order for tax debts to qualify to be discharged, they must meet a hefty list of requirements. According to bankruptcy laws, the follow conditions must be met:

1. Tax Return Filed
Even if you are unable to pay the taxes due, you must still file a tax return before a tax debt can be considered for discharge. Additionally, the tax return for the tax debt that you want discharged must have been filed at least two years prior to the bankruptcy filing, regardless of when the returns were originally due.

2. 3 Years Old or Older
In order to discharge a tax debt, it must be related to a return that was due at least three years ago. Therefore if you wanted to file for bankruptcy in 2010, then the tax debts you hope to have discharged need to have originated from the 2007 tax year or before. This limit also includes any automatic extensions you may have requested, so if you got a six month extension on your return, then it will add another six months to your wait time before you can file for bankruptcy.

3. IRS Assessed
In order to have a tax debt discharged through bankruptcy, the IRS will need to have assessed it at least 240 days prior to you filing for bankruptcy.

4. Income Taxes Only
Unfortunately, income taxes are the only kind of tax debt that can be discharged through bankruptcy. Other tax debts such as unpaid employer payroll taxes, and trust fund recovery penalties cannot be discharged.

5. No Fraud Allowed
Last but certainly not least, the income tax debt incurred must not be related to any fraudulent activity. If you have willfully tried to evade taxes and were convicted of tax evasion, then you will not be allowed to have your debts discharged through bankruptcy.

Tax Returns

Before your bankruptcy will be approved, you will need to provide both the judge and any creditors who request a copy of your most recent tax return. You will also need to provide the court with proof that your four most recent tax returns have been filed with the IRS no later than the date of the first creditors' meeting.

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