As you may know, bankruptcy is a court proceeding in which a judge and court trustee examine the assets and liabilities of individuals and businesses who cannot pay their bills. Then the court will decide to discharge the debts and you will no longer be legally required to pay your debts.
If your finances have gone wrong and you find yourself surrounded by debt, you can ask for a second chance, that's where bankruptcy comes in place. Individuals or business owners can file bankruptcy; both can petition U.S. Bankruptcy Courts to release you from debt and start your financial life with a clean slate.
Chapters in Bankruptcy
There are two main types of bankruptcy available to individuals. In Chapter 7, the consumer can have all or part of his debts discharged after the liquidation of his non-exempt assets to pay part of the debt, often without losing any assets. In Chapter 13, the consumer can repay part or all debt with a 3-5 year payment plan. Most people choose to file Chapter 13, to keep all of their assets.
The basic process to file for bankruptcy would be to confirm that you really can't pay your debts, then choose a bankruptcy attorney to help you choose the best option that fits your case. Since personal bankruptcy laws are complicated, good advice is to seek professional help from an attorney before filing for bankruptcy. This is the best way to make sure your paperwork is filed completely and accurately.
Both options of bankruptcy (Chapter 7 and Chapter 13) may help you with foreclosures, repossessions, garnishments, utility shut-offs, and debt collection. Both types provide exemptions that allow people to keep certain assets, but the exemption amounts vary. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. These will remain active even with the bankruptcy process.
A trusted Roseville bankruptcy attorney may prove helpful in solving your debt problems.
Bankruptcy is sometimes frowned upon, especially if you do not know the flexible provisions under the Bankruptcy Code. Chapter 13 deals with the adjustment of debts. This provision lets the petitioner apply for protection from bankruptcy by seeking a repayment plan to repay the debts.
This repayment plan is usually structured to allow the petitioner to repay the debts over the next three to five years. This is an ideal option for individuals and businesses that cannot repay their debts immediately but can do so soon.
Who can file for Bankruptcy under Chapter 13?
Petitioning for bankruptcy under the provisions of Chapter 13 allows the petitioner to keep his or her home and is, therefore, a popular choice. However, to avail of this benefit and many others, you need to first talk to a lawyer specialized in bankruptcy laws to figure out whether you qualify for it. To be eligible, you need to fulfill specific eligibility criteria.
To begin with, you must have filed your tax returns in the previous four years. Next, you must demonstrate your ability to repay your debt within 3 to 5 years. As of 2020, your unsecured debts need to be under $394,725, and your secured debts must not exceed $1,184,200. These figures are taken directly from the Consumer Price Index and may, therefore, vary in the future.
Also, you would have to dedicate all your disposable income to the repayment of debts. Nevertheless, it can be used to prevent foreclosure of your home, and you may even be able to modify your 2nd mortgage through a procedure referred to as lien stripping.
To sum it up, Bankruptcy under Chapter 13 lets you renegotiate your secured debts, such as mortgages, and buys you enough time to repay your creditors. Also, it prevents the foreclosure of your primary residence and can be a well-planned move for those having multiple secured debts.
However, it is always recommended that you decide after discussing your finances with a Citrus Heights bankruptcy attorney specializing in bankruptcy laws.
If you or your business are going through financial difficulties and you wish to file for bankruptcy, you may choose to do so under the bankruptcy code. The Bankruptcy Reform Act of 1978, often referred to as the Bankruptcy Code is a federal law and must be read along with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Depending on the type of financial difficulties you or your business are facing, you would have to file a bankruptcy petition for liquidation, reorganization, or debt adjustment.
In most cases, when someone refers to bankruptcy, they are most likely referring to the liquidation of assets, which happens when an individual or business petitions under Chapter 7 of the Bankruptcy Code. This halts all creditors from chasing you to recover the debts you or your business owes to them.
A Chapter 7 Bankruptcy petition declares an individual or an entity's inability to repay debts. Consequently, it would then result in the liquidation of non-exempt assets of the petitioner. Although the procedure may seem straightforward, it is always recommended that you hire a bankruptcy lawyer with a proven track record.
When should you file for bankruptcy under Chapter 7?
- Your debts exceed roughly half your annual income.
- If your debts are so high that it would take five years or more to repay the debt despite extreme measures.
- Your debt is causing friction in your relationships and affecting the various aspects of your life.
- You do not have any disposable income.
- Your monthly income is far below the average monthly salary in your state.
The above-mentioned scenarios indicate the inability to repay the debt, with little or no room for reorganization. In such cases, you may opt to file for a petition for liquidation under Chapter 7 of the Bankruptcy Code. Before filing, you should consult an expert Folsom bankruptcy attorney, who will help you identify which debts can be discharged under this petition. The attorney would also help you determine your exempt and nonexempt assets and help you plan the best course of action.
As the year 2020 continues to witness a sharp decline in economic growth, businesses all over the U.S. are filing for bankruptcy. This mainly includes the brick-and-mortar retail sector businesses that have succumbed to the economic meltdown due to operational difficulties and financial stress. As a result, quite a few retail companies have petitioned for bankruptcy, including household names such as J.C. Penny and J. Crew, Pier 1.
The most recent addition to the list of companies filing for bankruptcy was RTW Retailwinds, the fashion retailer's parent company New York & Co. This is likely to result in the shutting down of business operations across 400 locations. However, the management of New York & Co does not plan to shut down the business entirely, but rather spin out portions of its business to repay creditors. In the bankruptcy petition, the retail giant declared assets worth $412 million and liabilities worth $396 million.
Sur La Table
Sur La Table has been in the kitchenware business for slightly over five decades. However, the privately held kitchenware retailer could not survive through the economic slowdown. In a recent move, Sur La Table filed for bankruptcy under Chapter 11. According to a report, Sur La Table plans to shutter down half of its operations, which is roughly about 60 stores in the U.S. The Seattle-based kitchenware retailer is currently negotiating a 70-store deal with the Fortress Investment Group.
Muji USA, the Japanese home goods chain, filed for bankruptcy protection under Chapter 11 with $64 of million debt. The minimalist home goods supplier plans to close non-revenue generating stores and renegotiate its leases.
After analyzing some of the top retailers that have filed for bankruptcy, two significant problems stand out. First off, these companies relied more on their brick-and-mortar business model, and secondly, they did not have a reliable disaster management plan in place. This made it impossible for them to adapt their operational model quickly.
If you are in that tight spot and are running into debt, you still have a handful of options. Depending on your assets and liabilities and your ability to repay your debt in the next five years, you can file for liquidation under Chapter 7 of the Bankruptcy Code or reorganization under Chapter 13.
Contact a Sacramento bankruptcy attorney to find out how you can get financial relief.
If you have severe debt and the only viable option looming in front of you is to file for bankruptcy, you may want some questions answered. To start with, you must understand the two most common types of personal bankruptcy that people and organizations file – Chapter 7 and Chapter 13.
Chapter 7 involves the 'liquidation' of some of your assets and then sold to pay off your debt. Chapter 13 involves 'reorganization,' in which you keep all of your properties and assets and pay towards the debts within a fixed time period. Before contacting a lawyer, you should know the basics of how these two types of personal bankruptcies work so that you can clearly communicate your situation. Here are some frequently asked questions for you to get some insight into both types.
Who can file for Chapter 7 and Chapter 13 Personal Bankruptcy?
Both individuals and business entities can file for Chapter 7, whereas only individuals (including sole proprietors) can file for Chapter 13.
Are there any eligibility restrictions?
The disposable income must be low enough for your case to clear the Chapter 7 Means Test. In chapter 13, you cannot have more than $419,275 of unsecured debt or $1,257,850 of secured debt (as of April 2019).
How long does it take to get a discharge?
In Chapter 7, it usually takes just three to four months. In chapter 13, you get a timeframe of three to five years to pay off all your debts. You will get a discharge only when you complete all the defined plan payments.
Will I lose all my properties?
You may lose some of your properties in the case of Chapter 7, but you can keep your exempted properties like clothes, tools related to your profession, retirement account, and so on. However, in Chapter 13, you get the opportunity to keep all of your properties (if the court allows), but you will have to pay the unsecured creditors an amount equal to your non-exempt assets.
What are the benefits?
Filing for Chapter 7 bankruptcy helps debtors get a quick settlement by discharging the qualifying debts in a span of three to four months and subsequently get a fresh start. On the other hand, Filing for Chapter 13 bankruptcy will help you keep your properties and give you more than a couple of years to pay off the mortgages and other debts through your earnings.
What are the drawbacks?
The biggest drawback of Chapter 7 is that the trustee can sell your non-exempt properties and not give you enough time to avoid foreclosure or repossession. When it comes to Chapter 13, the drawback is that you have to continue paying monthly payments to the trustees over three to five years, and even one missed payment can have serious repercussions.
How long will this be mentioned on my credit reports?
Chapter 7 remains on your credit reports for ten years, whereas Chapter 13 remains for seven years.
Now that you know the basics of both types of personal bankruptcy, you should be able to make the right move that will improve your financial status. Your next step is to contact a Sacramento bankruptcy attorney to find out how you can get financial relief.