Bankruptcy Lawyers Blog

Tavern on the Green Closes Due to Bankruptcy

2010-01-13T10:07:00.001-08:00

Tavern on the Green, the iconic New York City restaurant overlooking Central Park, closed its doors for the last time on New Year's Eve. The restaurant has been a mainstay in the New York City culinary community for the past 75 years, drawing diners from across the globe.

As recently as three years ago, Tavern on the Green was plating more than 700,000 meals a year and generating annual revenues exceeding $38 million. However, the recession has dealt a crushing blow to the restaurant, sending it to bankruptcy court with more than $8 million in debt.

An auction will be held this week to sell off many of the ornate adornments which mark the restaurants décor, including chandeliers, stained glass, and a mural of Central Park. Proceeds will go towards paying off creditors.

Tavern on the Green has been owned by the LeRoy family since 1973, when Warner LeRoy took over the restaurant's lease. When he died in 2001, his wife and daughter took over the business.

A Manhattan federal judge is currently deciding whether the restaurant's name can be used by the next operator of the building. The Tavern on the Green name is valued at more than $19 million, a sum that will greatly help the LeRoys with their financial troubles if the judge rules they own the rights to the name.

Dean Poll, owner and operator of the Loeb Boathouse restaurant is expected to take over Tavern on the Green this spring, after renovating the building and modernizing the menu. The only question is whether he will be able to keep the classic name which has adorned the façade for almost a century.

TLC Vision Files Chapter 11 Bankruptcy

2009-12-22T09:35:00.001-08:00

TLC Vision Corp. and two of its subsidiaries, TLC Vision (USA) and TLC Management Services Inc., have filed for Chapter 11 bankruptcy. It is a pre-arranged reorganization, which means that their lenders have already agreed to the restructuring plan. This pre-arranged restructuring deal will most likely allow TLC Vision to move through bankruptcy much quicker.

The company, which specializes in eye care and refractive surgery, lists assets and debt between $100 million and $500 million. TLC has assured the general public that clinical patient care and obligations to employees will continue to be met during the bankruptcy process.

As part of the restructuring deal, TLC Vision has requested $15 million in debtor-in-possession financing, which will most likely be used to pay critical vendors and employee wages. Also, TLC Vision (USA) will become a private company, independent of the parent corporation. No other company affiliates or subsidiaries are involved in the bankruptcy filing.

TLC Vision Corp. is a Mississauga, Ontario company that operates 75 refractive vision centers throughout Canada and the United States. Their U.S. headquarters is based out of Chesterfield, Missouri.

Personal Bankruptcies on the Rise

2009-11-09T14:08:00.001-08:00

The American Bankruptcy Institute recently reported that the number of Americans filing personal bankruptcy increased 9% in October. In total, 135,914 people filed bankruptcy last month. Approximately one third of these were Chapter 13 Bankruptcy filings, which places you on a repayment plan that can last as long as five years.

It is expected that more than 1.4 million people will file for bankruptcy in 2009, an increase of more than 30% from last year. This would also be the highest annual total since 2005. Furthermore, there was a 7% increase in businesses filing bankruptcy. These statistics indicate that our economy is still struggling to recover from the recession.

Many Americans are struggling to pay off debt incurred by credit cards and home equity loans. The rising unemployment rate has forced many Americans into desperate financial situations they previously did not anticipate.

Some families have been able to avoid bankruptcy by drawing on money in savings accounts and retirement funds. However, many people who have been unable to find work are starting to exhaust these safety nets and are now forced into filing bankruptcy.

The last time bankruptcies were this high, it was the result of a change in bankruptcy laws rather than a reflection of a struggling economic climate. In October 2005, Congress changed the bankruptcy laws, making it more difficult for individuals to file Chapter 7 Bankruptcy, which enables them to clear their debts. In an attempt to avoid having to file under Chapter 13, many people rushed to file Chapter 7 in the months before the change in the law took effect.

Unfortunately, it does not seem that the current trend of rising bankruptcies will subside until the economy turns around.

Bankruptcy Judge Orders $12M Fund for Peanut Victims

2009-10-02T15:18:00.000-07:00

Yesterday, a U.S. bankruptcy judge ordered the insurance company for Peanut Corporation of America to earmark $12 million for a fund that will be used to reimburse victims who developed health problems after eating contaminated peanut products earlier this year.

To receive reimbursement, all victims must submit their claims to the claims administrator by October 31.

Peanut Corporation of America has faced a series of lawsuits involving a variety of peanut butter products tainted with salmonella. Investigations by health inspectors found that Peanut Corporation of America knowingly distributed tainted products to manufacturers for use in their retail products. Food products made with the tainted peanut butter included cookies, cakes, candies, crackers, and ice cream. These products were sold at grocery stores nationwide.

Hundreds of consumers suffered serious illnesses from the salmonella-contaminated peanut butter products, and at least nine people died from their consumption. After the injuries were made public, Peanut Corporation of America recalled hundreds of products containing the contaminated peanut butter.

Last February, Peanut Corporation of America declared bankruptcy after it became clear they were facing a multitude of lawsuits for their negligent actions.

Did Chrysler Stay in Bankruptcy Long Enough to Address Problems?

2009-09-14T13:05:00.000-07:00

Earlier this year, Chrysler filed for bankruptcy in order to reorganize and hopefully become a profitable company once again. At the time, the U.S. government pushed to move Chrysler through bankruptcy as quickly as possible in order to avoid a confrontation with the United Auto Workers union over pensions and other financial issues.

Unfortunately, Chrysler's rapid movement through Chapter 11 bankruptcy may have hurt them in the long run. Many bankruptcy experts have urged the company to take the necessary time to ensure that the company emerged in better condition than they entered. It appears that Chrysler did not remain in bankruptcy long enough to properly address all of the challenges facing them in the upcoming years.

Recently, Fiat purchased a controlling minority stake in Chrysler. The company plans to make several Fiat models available in the United States in order to boost the profits of the struggling Chrysler Corporation. Fiat also plans on phasing out several Chrysler, Dodge, and Jeep models that have not been profitable.

However, it is uncertain whether the help from Fiat will be able to resuscitate the floundering company. Their help may be too little, too late. Most likely, it will take at least two years for Chrysler to feel the impact of the changes brought by Fiat. Based on their current financial circumstances, it appears that Chrysler may not be able to wait that long.

Hertz, Macy’s, and Goodyear among Major Companies in Danger of Bankruptcy

2009-08-28T11:33:00.000-07:00

In our tumultuous economy, more and more large corporations are facing bankruptcy. The American auto industry has already seen two of the big three corporations, General Motors and Chrysler, file Chapter 11 bankruptcy. It appears that many other industries face the same economic hardships as the auto industry, and many companies that have long been regarded as extremely strong are treading dangerously close to bankruptcy.

Rental car giant Hertz is struggling to stay afloat amidst a sizeable debt incurred in the financing of their rental fleet. This debt is compounded by a falling rental demand among the general population. It remains to be seen whether Hertz will be able to right the ship in a hostile economic climate.

Macy's, long regarded as one of the most powerful department store chains in the country, is also facing the potential of filing bankruptcy. The company faces $2.4 billion of maturing debt over the next five years. They have tried to cut costs, but the reality is that vastly fewer people shop at department stores than ever before. Even if the economy rebounds soon, it is unlikely that Macy's will see their sales return to the level needed to maintain financial solvency.

Goodyear has recently lost a sizeable portion of the tire market share as demand for their tires has dropped. They are also financially strapped with massive debt and pension obligations. To make matters worse, The United Steelworkers union prevents Goodyear from exercising cost control measures by forcing factories to stay open.

Hopefully, these corporations will be able to pull through the tough economic times we are facing. For now, they are all playing a waiting game, and only time will tell if they can survive without filing bankruptcy.

GM Emerges From Bankruptcy

2009-07-29T10:33:00.001-07:00

On July 10, 2009, General Motors (GM) emerged after spending 42 days in bankruptcy. In order to help the company emerge from financial hardship, the U.S. government invested a landmark $50 billion into the auto-maker so that the company could restructure and eventually continue business.

Government bailout is not an option for everyone considering bankruptcy, which is why a bankruptcy lawyer is essential for people and smaller businesses with large amounts of debt. After the GM government bailout for their bankruptcy, the government now owns the majority of the company's common stock.

With the huge amount of money that has been poured into the auto company, GM will now look at what they can do to gain market share and restructure the company so they do not go into bankruptcy again. The chief executive of GM is saying that business at GM will never again continue like it has in the past.

Finally, the company says that it will attempt to repay taxpayers for the huge amount of money that saved thousands of jobs, but for this to happen, the value of GM stock would have to rise to an unprecedented level.

If you believe you are facing an insurmountable amount of debt and bankruptcy will be your best option, please contact an experienced bankruptcy attorney in your area to schedule an initial case evaluation. Your bankruptcy lawyer can help guide you through the filing process and help minimize the damage to your credit rating.

Number of Bankruptcies Filed In Georgia Skyrockets

2009-06-24T09:13:00.001-07:00

Bankruptcy trustees in South Georgia claim that the number of bankruptcies being filed is growing every week. Whether they are personal foreclosures or business bankruptcies, the number of buildings being auctioned off every week is growing.

While many say that the former employees of businesses that have filed for bankruptcy will start anew and make their own businesses, at the moment, the economic downturn is hurting many different people in the South.

One of the biggest areas of foreclosure and bankruptcy is in the building and construction market. There are many small construction businesses filing for bankruptcy because very few new homes and commercial buildings are being built at the moment. Carpet companies, electric companies, and plumbing companies are also feeling the hard times because there is much less work to go around than in previous years.

One of the reasons these companies are filing for Chapter 7 bankruptcy, Chapter 13 bankruptcy, and Chapter 11 bankruptcy is because they can't operate at a loss for very long. The construction business operates on a bid system; the people who offer to do the job at the lowest cost for the buyer usually get the job. Unfortunately, the lower and lower your offer gets, the less profit you make on the job itself. In the end, businesses are unable to make enough profit to continue running.

If you are a small business owner and you believe you will have to file for bankruptcy, one of the best things you can do is contact a bankruptcy lawyer to help you. An experienced bankruptcy attorney can help you pay off creditors and make sure you start on the road to financial recovery as quickly as possible.

Chrysler Dealers Follow Suit in Bankruptcy Claims

2009-05-28T13:59:00.001-07:00

Nearly 800 Chrysler auto dealers will be closing their doors as a result of the automaker's emergence from Chapter 11 bankruptcy. In just one month, about a quarter of all Chrysler auto dealers will be shut down.

The dealers the automaker is focusing on have failed to produce more than 100 new car sales over the course of the past year. While the company claims that many of these dealers are redundant, they have yet to say what affect this will have on local economies and what potential unemployed workers will do for jobs.

In addition to redundant dealers, Chrysler is going to look at dealers that have auto sales primarily in used cars rather than the newer, more expensive cars. According to Chrysler, 44% of the dealerships being closed also sell cars that are not Chrysler. These dealership closings are all apparently part of Chrysler's bankruptcy strategy called Project Genesis. With this new strategy, Chrysler is going to attempt to integrate their three strongest brands: Dodge, Chrysler, and Jeep.

Bankruptcy is not something that is only happening to large businesses. Small business bankruptcy claims and individual bankruptcy claims are becoming more and more common as well. Regardless of the situation, a bankruptcy attorney is essential if you are filing any type of bankruptcy claim.

GM May Attempt a “Surgical” Bankruptcy

2009-04-23T15:51:00.001-07:00

Unless there is a major change in the financial status of General Motors during the next few months, it is likely that the auto manufacturer will have to file bankruptcy by June 1. Over the past few weeks, there have been several discussions between GM officials and President Obama's automotive task force regarding this likelihood.

At the beginning of April, the task force gave GM 60 days to come up with a restructuring plan for the company. They are currently evaluating whether the auto manufacturer can once again become a viable company.

GM's strategy seems to be to prepare for a quick, "surgical" bankruptcy. This strategy will most likely be challenged by bondholders who would stand to lose a great deal of money as a result.

GM's plan would split the company in two: one part would include their strong assets, such as Chevrolet and their Chinese operations; the other part would include their underperforming assets and billions of dollars in debt that they currently owe.

While proceeds from the government's sale of equity in the better half of the company would help repay parties owed money by the weaker half, this sum would most likely not come close to settling all of GM's massive debts.

General Motors is hoping to make it through bankruptcy court in a few months instead of the typical year it takes many companies. However, it will be up to a judge to decide if the auto manufacturer can move forward with their accelerated bankruptcy plan.

What Does a GM Bankruptcy Mean for the Michigan Economy?

2009-03-18T14:01:00.001-07:00

The impending bankruptcy looming over auto manufacturer General Motors has many people concerned for the welfare of the local Michigan economy. Currently, the corporation has until the end of the month to prove that it is a viable company. If they can, they will most likely receive additional bailout funds from the federal government to help them stay afloat. If they are unable to do so, they will most likely have no choice but to file bankruptcy.

GM would have two choices if they file bankruptcy: they could file Chapter 7 (liquidation) bankruptcy or they could file Chapter 11 (reorganization) bankruptcy. Filing Chapter 7 would have disastrous consequences on the local Michigan economy and most likely on the national economy as well. It is less clear how Chapter 11 bankruptcy will affect the Michigan economy. Most likely, it stands to take a serious hit, but the extent of this hit hinges on several factors:

Under Chapter 11, GM could request that the courts alter the terms of their labor agreements with the auto union. GM would have to prove that the changes are strictly intended to enable them to survive bankruptcy as a viable company. However, union workers could stand to lose a great deal in terms of salary and health care benefits.
Retirees will most likely also be affected. GM's retirement fund is currently underfunded due to losses in the stock market. Under Chapter 11, there is a chance that GM retirees will see their benefits slashed due to lack of funding. Benefits such as health care, which are currently provided for retired salaried employees, may get cut entirely.
Suppliers will struggle under a GM bankruptcy as well. Suppliers are already feeling the cash crunch due to slumping car production, leading to fewer parts being ordered. However, under Chapter 11 bankruptcy, GM will be able to choose which contracts it wants to honor and which it does not. Many suppliers could lose contracts that they currently have with GM, forcing them into financial crisis.
White collar employees may face greater challenges than union workers. Their jobs can be eliminated and their wages can be cut more easily than those of union workers. Salaried white collar employees have already been hit hard by the economic downturn, as GM has already implemented massive layoffs to this sector of their work force.
Auto dealers may be affected as well, especially if auto production continues to decline.
GM car and truck owners may have to worry about whether or not their warranties will be honored. Companies have the ability to eliminate warranty service during Chapter 11 reorganization. However, it is unlikely that GM will do so. If their intention is to emerge from bankruptcy as a stronger company, they will need consumer confidence to accomplish this goal. Honoring customer warranties is crucial for maintaining consumer loyalty and confidence during tough times.
Local government will be hurt as well. Bankruptcy will most likely result in lost tax revenue for the local government, as well as rising unemployment, which will further put a strain on governmental resources.

Only time will tell how the current state of General Motors will impact the local Michigan economy. Unfortunately, Michiganders may be in for a long and bumpy ride.

Peanut Corporation of America Files Bankruptcy

2009-02-16T17:18:00.001-08:00

Peanut Corporation of America, the company responsible for the recent salmonella outbreak across the country, filed for Chapter 7 Bankruptcy last Friday.

The bankruptcy filing capped a horrendous week for the company. Earlier in the week, the company closed a plant in Texas after health inspectors discovered dead rodents, rodent excrement, and bird feathers in a ventilation shaft. A Congressional hearing also discovered that Peanut Corporation of America owner and president Stewart Parnell had knowledge of salmonella contamination, yet still ordered employees to ship these products to food manufacturers.

A lawyer for the company stated that bankruptcy was just about the only option left to the corporation. The salmonella outbreak has crippled its operation to the point where they could not conduct business at all without bankruptcy and reorganization.

By filing bankruptcy, the company will also be protected from the many product liability and wrongful death lawsuits it would have faced from the hundreds of Americans who have suffered serious illness or death from their contaminated peanut products. It seems somewhat unfair that Peanut Corporation of America will not be held accountable for criminally negligent actions committed on the part of their management. Perhaps bankruptcy laws should be revised to prevent this from happening in the future.

Should American Auto Manufacturers File Bankruptcy?

2009-01-22T14:52:00.001-08:00

This is a critical time for American auto manufacturers. Profits have been falling for quite awhile, and both GM and Chrysler may be headed toward bankruptcy without financial relief from the federal government. GM is closing approximately 20 plants across North America in anticipation of producing 250,000 fewer cars in the first quarter of 2009 than they did in the first quarter of 2008 (a reduction of about 30%). But is bankruptcy the best option for the auto manufacturers?

There are varying opinions on this matter. A recent survey conducted in early December polled 1,063 adults across the country. The findings indicated that only 26% of new car buyers would be willing to purchase a car produced by a company in bankruptcy.

The primary logic behind this hesitation on the part of consumers lies in the fear that if the bankrupt auto company eventually folds, people stuck with new cars from this manufacturer would be unable to receive the warranty service they deserve. This was certainly the situation with Daewoo, the last auto company that went bankrupt.

However, there are several prominent economists who argue that bankruptcy would in fact be the best option for several auto manufacturers. As part of the bankruptcy proceedings, these companies would undergo a reorganization that may leave them stronger in the long-run. Furthermore, the bankruptcy proceedings would most likely dissolve union contracts, leading to slightly lower wages for auto workers. Bankruptcy would also dissolve contracts regarding health payments and pension obligations. These factors have played a major role in the tenuous economic situation experienced by the big 3 auto manufacturers. By filing bankruptcy, these companies would also have the ability to restructure their debt, providing them with much lower interest rates. For these reasons, bankruptcy may give the big 3 their best chance at survival in these tough economic times.

Should I File Bankruptcy?

2009-01-02T14:47:00.001-08:00

Filing bankruptcy is a serious decision that should not be made lightly. It can be a gut-wrenching experience that will most certainly affect you for many years. It will take a long time to rebuild your credit after filing bankruptcy, and this will impact many areas of your life, including buying a home or a car and obtaining affordable insurance.

Before deciding that bankruptcy is the right option for you, it is important to explore all of your other options. While the bankruptcy laws are in place for a reason and can help you discharge insurmountable debts in the right situation, it is best to consider it a last resort. Ultimately, you must choose the best path to financial recovery available to you.

If you are a homeowner, you may be able to take out a low-interest home equity loan that will enable you to consolidate all of your other debts. Frequently, this interest rate will be lower than that of your other debts, and you may be able to pay off your debt slowly in this manner. This is only one option available to you. You should consult with a financial advisor to explore the many other options available to you before deciding to file bankruptcy.

If you decide that bankruptcy is the best decision for you, then you must decide whether to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Chapter 7 is reserved for those people who truly need all of their debts completely discharged. Bankruptcy laws changed in 2005, making the requirements for filing Chapter 7 much stricter. For those who don't qualify for Chapter 7, there is the option of Chapter 13 Bankruptcy, where you must repay part of your debts according to a fixed payment plan.

The laws and regulations governing bankruptcy are very complex. It is important to hire an attorney specializing in bankruptcy law if you do choose this route. Please contact The Bankruptcy Directory today for a listing of lawyers in your area.

Bankruptcy Overview

2008-11-19T08:57:00.001-08:00

Bankruptcy laws are a series of federal statutes intended to get individuals and companies out from under debts that are so severe that they may otherwise never recover. By filing bankruptcy, you are essentially given a fresh start.

There are several different forms of bankruptcy. The two most common are Chapter 7 and Chapter 11.

Chapter 7 governs bankruptcy cases involving individuals. It provides for a complete liquidation of the person's assets and a complete forgiveness of debts. The assets are managed by a Trustee, who uses them to pay off all of the debts owed to creditors at a fraction of what is owed (generally less than 10 cents on the dollar).

Chapter 11 applies to companies. It is designed to reorganize the company, while keeping them in business, operating under the strict supervision of the Trustee. Under Chapter 11, creditors are legally prohibited from suing the bankrupt company, so that it has some breathing room to restructure its business and get back on its feet again. The expectation is that creditors will eventually be paid most, if not all, of what is owed to them, and that the debtor corporation will emerge from bankruptcy healthy and functional once again. This process essentially saves the company from a total liquidation and dissolution.

In today's financial crisis, many companies, most notably General Motors, are in danger of filing Chapter 11 in order to reorganize and get out from under their massive debt.

There are certain exemptions under bankruptcy laws which allow the debtor to keep certain exempt property without having to turn it over to the Trustee. Generally, this applies to the debtor's home. These exemptions are usually regulated by state law, even though bankruptcy laws are federal statutes.

The Bankruptcy Directory can help you find the right attorney to suit your individual needs. Please contact us today for a listing of lawyers in your area.

When to Hire a Bankruptcy Attorney

2008-10-13T07:43:00.001-07:00

If you are completely saddled with insurmountable debt, bankruptcy might be the only way you can regain control of your finances. Both individuals and companies have the ability to file for bankruptcy.

There are no laws requiring you to hire a lawyer if you file either Chapter 7 bankruptcy or Chapter 13 bankruptcy. However, going into such a proceeding without the council of an experienced attorney is highly unadvisable. Bankruptcy laws are very complex, and you will most likely need the assistance of a bankruptcy lawyer to navigate through them. Remember, you are dealing with your personal finances. This is not a matter to mess around with.

Recently, bankruptcy laws have changed. A 2005 bill has enabled creditors to more easily collect the debts owed to them even after you've filed for bankruptcy. As a result, it is more important than ever to consult an experienced bankruptcy attorney if you decide that this is the best option for you.

A good lawyer can help save you a great deal of time wading through the myriad of complex laws and regulations regarding bankruptcy. He can also help you determine which chapter of bankruptcy is appropriate for your circumstances.

The Bankruptcy Directory can help you find the right attorney to suit your individual needs. Please contact us today for a listing of lawyers in your area.

Questions About Bankruptcy

2008-08-18T13:18:00.001-07:00

What is the difference between Chapter 13 and Chapter 7 bankruptcy?

Chapter 7, sometimes referred to as straight bankruptcy, is a liquidation proceeding where the debtor turns over all non-exempt property to the bankruptcy trustee. The property is then converted to cash for distribution to the creditors. The debtor receives a "discharge" of all dischargeable debts usually within four months. Chapter 7 affects your credit rating for several years, but you are able to get a relatively quick fresh start.

Chapter 13 is also known as reorganization bankruptcy and is filed by people who want to pay off their debts over a period of three to five years. This is appealing mostly to individuals who have non-exempt property they want to keep. It’s also an option if you have predictable income and your income is sufficient to pay your reasonable expenses with some left over to pay off your debts.

Will the creditors ever stop calling me?

By law, all actions against a debtor must stop once bankruptcy documents are filed. Creditors cannot initiate any lawsuits, wage garnishments or telephone calls demanding payments.

If I’m married, will my spouse be affected?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. However, in community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. The community property states are as follows: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

What Debts are Not Discharged Under Chapters 7 and 13?

2008-01-03T08:16:00.000-08:00

The following is not a comprehensive list of the non-dischargeable debts under Chapter 7 and Chapter 13 Bankruptcy. Only an experienced bankruptcy attorney in your area can provide you with a comprehensive list.

Debts not listed on your bankruptcy papers
Alimony
Child support and other debts of this nature
Debts for personal injury or death caused by DUI or DWI
Student loans
Any fines or penalties for violating the law including traffic tickets
Federal, state and local taxes (most)
Any debts not discharged in a previous bankruptcy that was dismissed due to fraud

Sometimes, Bankruptcy is the Only Option

2007-11-27T10:59:00.000-08:00

When an individual or company is hopelessly buried in debt, bankruptcy may be the only option. Bankruptcy allows individuals and companies to free themselves from this mountain of debt and start over. Bankruptcy can put you back in control, rather than having your debt control you.

Legally, you are not required to have a bankruptcy lawyer if you will be filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy. However, bankruptcy law is very complex. In many cases, it will be in your best interest to retain an experienced bankruptcy attorney.

In fact, in March of 2005, the U.S. Senate passed a bill that makes it easier for banks, realtors, credit card companies, and other creditors to recoup some money owed to them by entities filing for bankruptcy. So, if you are considering personal bankruptcy, choose a bankruptcy attorney from The Bankruptcy Directory.

A bankruptcy attorney will save you countless hours of worrying and frustration. The bankruptcy attorneys listed in The Bankruptcy Directory are experienced in bankruptcy law and will assist you in deciding which chapter of bankruptcy is right for you. Your bankruptcy lawyer will walk you through every step of the bankruptcy process.

What is Chapter 11 Bankruptcy?

2007-10-05T09:56:00.000-07:00

Chapter 11 bankruptcy is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers because it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11 although it does so under the supervision of the Bankruptcy court and its appointees.

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company might use Chapter 11 of the Bankruptcy Code to reorganize its business and try to become more profitable again. Management continues to run the day-to-day business operations, but all significant business decisions must by approved by a bankruptcy court.

A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most cases, companies that file Chapter 11 are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange (NYSE). However, even when a company is delisted from one of those major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.

Sometimes, you may first learn about the company's bankruptcy in the news. If you hold stocks or bonds with a broker, your broker should forward information from the company to you. If you hold a stock or bond in your own name, you should receive information directly from the company. You may be asked to vote on the plan of reorganization although you may not get the full value of your investment back. Sometimes, stockholders get nothing back, and they don't get to vote on the reorganization plan. Even when stockholders do not vote, they should get a summary of the disclosure statement and a notice on how to file an objection to the plan.

What is Chapter 13 Bankruptcy?

2007-08-24T07:22:00.000-07:00

Sometimes called "reorganization bankruptcy," Chapter 13 bankruptcy is quite different from Chapter 7 bankruptcy. In Chapter 7, most of your debts are totally wiped out, and, in exchange, you must relinquish any property that isn't exempt from seizure by creditors. In Chapter 13, you don't have to relinquish property, but you must use your income to pay some or all of what you owe to your creditors over time (usually 3-5 years depending on debts and income).

Because Chapter 13 requires you to use your income to repay your debt, you and your bankruptcy lawyer will have to prove to the court that you can afford to meet your payment obligations. If your income is too low or irregular, the court might not allow you to file Chapter 13, and if your total debt is too high, you will not be allowed to file Chapter 13. Your bankruptcy lawyer will explain eligibility to you in more detail.

Typically, before you file Chapter 13 bankruptcy, you must receive credit counseling from an agency approved by the United States Trustee's Office. These agencies are allowed to charge a fee for their services, but they must provide counseling for free or at reduced rates if you cannot afford to pay. There is also a filing fee for Chapter 13, which your bankruptcy lawyer will explain to you at your consultation.

Can I File Chapter 7 Bankruptcy?

2007-07-18T06:55:00.000-07:00

Sometimes filing bankruptcy seems like the only viable solution to rid yourself of the mounting debt you've accrued during the last several years. There are several types of bankruptcy options, but only a certain one or two will be applicable to your financial situation. Chapter 7 bankruptcy is one of the more common types of bankruptcy filed.

Chapter 7 bankruptcy, often called liquidation bankruptcy, cancels your debts, but you may have to let the bankruptcy court sell (liquidate) some of your property for the benefit of your creditors. Chapter 7 refers to the chapter of the federal Bankruptcy Code that contains the bankruptcy law. The whole Chapter 7 process takes about four to six months, costs around $300 (some hire a lawyer and it costs more), and usually requires only one court appearance.

Due to the difficult and intricate nature of bankruptcy law, it is highly recommended that you hire a trained bankruptcy attorney to handle this very serious financial and legal undertaking.

You cannot file Chapter 7 if you already received a bankruptcy discharge in the last six to eight years, or if, based on your income, expenses and debt burden, you could complete a Chapter 13 repayment plan. A Chapter 13 bankruptcy is also called a wage earner's plan. It enables people with regular income to develop a plan to repay all or part of their debts. Under this plan, debtors propose a payment plan to make installments to creditors over three to five years.

To file for bankruptcy, you will fill out a petition and a number of other forms and file them with the bankruptcy court or in your area (if you hire an attorney, he/she will assist you with these forms and file them for you). The forms require some basic information including what property you own; income; debts; property you claim the law allows you to keep through the bankruptcy process (clothing, furniture, etc.); property you owned and money you spent in the last two years; and property you sold or gave away in the last two years.

We have all heard horror stories about how filing bankruptcy will ruin your financial life for at least seven years. Finding and hiring a trained bankruptcy lawyer in your area will certainly help minimize the stress of the whole bankruptcy process, and he/she can advise you on how to recuperate from such a drastic financial measure.

New Bankruptcy Law

2005-10-26T17:02:00.000-07:00

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, signed on April 20th, has been the cause of more than 11,000 last minute case filings in North Carolina alone. Thousands of people, all trying to avoid the enactment of this law on October 17th, The new law has changed former policies so that it is more difficult for Americans to escape financial obligations through Chapter 7; now people who have an income stream are more obligated to use Chapter 13 bankruptcy, which requires a long-term repayment plan.