Our firm represents individuals and commercial clients in bankruptcy proceedings, at both the state and federal level, that are initiated by either an insolvent individual, or business, or creditors seeking to have the debtor's remaining assets distributed among the creditors and, thereby, discharging the debtor from further obligation or restructuring and reorganizing the insolvent's debt structure.

WHAT IS BANKRUPTCY?

Bankruptcy occurs when your assets (the value of what you own) are not enough to viably pay off your debt (the amount of money you owe). Bankruptcy involves a Federal court proceeding in which the obligations of the debtor (the person who owes the debt) are balanced against the rights of the creditor (the party to whom the debt is owed). The objective of the debtor is to reduce debt or eliminate it completely ("wipe the slate clean"). The objective of the creditor is to collect as much of the debt as possible. The bankruptcy proceeding is the forum in which the debtor and the creditor resolve their differences.

IS BANKRUPTCY BAD?

Although it is an unpleasant word, there is actually little stigma attached to bankruptcy in our society today. In 1995, millions of bankruptcy petitions were filed in Federal bankruptcy courts. Millions of people throughout the country have "survived" bankruptcy, and continue to lead productive lives. Even with a bankruptcy on your credit report, many lenders will do business with you and extend you new credit. This is because the discharge obtained in bankruptcy leaves all future earnings free from the claims of past creditors.

SHOULD I FILE FOR BANKRUPTCY?

HOW DO I KNOW WHEN I SHOULD DO SO?

This is a personal decision, but it is always wise to consult an attorney before making a final decision. This decision should not be made solely to stop "harassment" by creditors. While the filing of a petition for bankruptcy in Federal court temporarily stops creditors from collecting, creditors can apply for "relief from stay" and then continue their collection efforts. Further, the critically important date of filing often determines whether or not certain debts will be discharged. (This is to keep people from rushing out to buy a boat, and then declaring bankruptcy the next day). The decision as to when to file a bankruptcy petition should be based upon the facts of the individual circumstances.

Be aware that you must divulge complete financial information in a bankruptcy petition. There are specific forms determined under Federal and local rules of court. A bankruptcy attorney will help ensure that you are following the appropriate form and content of the filing.

ARE THERE ALTERNATIVES TO BANKRUPTCY? 

CAN BANKRUPTCY BE AVOIDED?

Yes. There are a number of different strategies for handling debt. You can:

• Contact the creditor and settle the entire debt for a lesser cash payment.

• Get the creditor to agree to accept smaller monthly payments over a longer repayment period.

• Voluntarily restructure the debt, by agreement between the creditor and the debtor.

• Consolidate all outstanding debts into a single loan (often through credit card balance transfers and home equity loans).

• Transfer ownership of property to your creditors as a substitute for payment of the debt (this is known as "assignment for the benefit of creditors").

• Get the assistance of a consumer credit counseling service (check "Credit & Debt Counseling Services" in your local telephone directory).

• Talk to an attorney in our firm today for help with your particular problem. 

IN SIMPLE TERMS, 

WHAT IS INVOLVED IN THE BANKRUPTCY PROCEDURE?

First, you must determine whether to file under Chapter 7, 12 or 13, (see below for explanations of these types of bankruptcy petitions). You must then get all of the necessary forms, and gather the information to complete the forms. When all of the forms have been filed, your creditors will be given a "stay" against collection of debt.

A Trustee is appointed by the bankruptcy court to oversee the bankruptcy proceedings. You must submit a list of all your creditors to the bankruptcy trustee. All of your creditors will be notified that you have filed a petition for bankruptcy. Under a Chapter 7 case, the Trustee "liquidates" your non-exempt property and distributes the proceeds to your creditors. Under a Chapter 13 case, your payment plan is submitted to the trustee and your creditors are then allowed to provide their thoughts on the plan. After the property has been liquidated or the debts paid in accordance with the payment plan, a hearing is held to determine whether you will receive a "discharge" in bankruptcy.

WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY PETITIONS?

For individuals, there are several different types of bankruptcy's procedures. Chapter 7 and Chapter 13 are the ones most commonly used by individual consumers.

1. Chapter 7 - involves the liquidation of your property to pay off your debts.

2. Chapter 13 - is a restructured payment plan for those with steady incomes.

3. Chapter 12 - allows farmers with real estate debts to pay off the debts from the profits generated by future crops.

4. Chapter 11 - is typically used for business restructuring, and is not commonly used by consumers since it is more complex and expensive to pursue.

The "Chapter" refers to the particular law and rules found in the United States Code, the Federal laws which govern all bankruptcy cases. Each "Chapter" contains a different set of laws and rules.

WHAT ARE THE MAJOR DIFFERENCES BETWEEN 

CHAPTER 13 AND CHAPTER 7?

Chapter 7 bankruptcy is used by approximately 70% of all consumers filing bankruptcy petitions. The proceeding is faster to complete; thus, it enables you to get to the "fresh start" without the years of sacrifice. While a Chapter 7 bankruptcy does not allow you to remain in possession of all of your assets during the proceeding, it does enable you to get out from under the burden of debt you have created more quickly.

Under Chapter 7, a debtor with consumer debts secured by bankruptcy estate property must file a statement of intent as to whether he/she will retain or surrender such property. The debtor then has 45 days to perform in accordance with this statement of intentions.

A Chapter 13 bankruptcy enables you to keep all of your assets while the plan is in effect (unless otherwise ordered by the bankruptcy court). With a Chapter 13 bankruptcy, a proposed payment plan is filed in addition to the bankruptcy petition. The payments under Chapter 13 must have a value at least equal to what would have been paid to the creditor if you had chosen to file for bankruptcy under Chapter 7. A Chapter 13 bankruptcy is available only to those debtors who have less than $1,000,000 of debt. Chapter 13 is usually used where most of the debts will not be dischargeable, and is common where protection of the family home against foreclosure is vital. A typical Chapter 13 plan requires all repayments be made within three to five years. The payment plan under Chapter 13 must be approved by the bankruptcy court before it is binding on the debtor and his/her creditors. Once a plan has been confirmed by the bankruptcy court, it can be modified only through a new hearing in court.

Chapter 13 also allows you to separate your creditors by classes. Different classes of creditors receive different percentages of payment, as long as the classes of creditors is not based upon prohibited discriminatory bases. This enables you to treat debts where there is a co-debtor involved on a different basis than debts incurred on your own.

Stockbrokers and commodity brokers can only file a Chapter 7 bankruptcy. (Chapters 11, 12 and 13 are not available to stockbrokers and commodity brokers).

One of the advantages of Chapter 13 over Chapter 7 is that in Chapter 13 the Court can allow a longer period of time to pay off a debt (called a "deceleration") which has been accelerated due to default. For example, suppose the full amount of your mortgage becomes due at once because you failed to make your monthly payment, and the mortgage lender chose to demand that it be paid in full, at once. In Chapter 13 it would be possible to arrange a "deceleration" which would allow you to keep your home and have more time to pay.

Sometimes a bankruptcy starts in Chapter 13, but the debtor is unable to meet the obligations of the payment plan. In such cases the bankruptcy case can be converted from Chapter 13 into a Chapter 7 bankruptcy case. In other words, if you are unable to sustain the burden of the Chapter 13 payment plan, it may well be converted into a Chapter 7 "liquidation".

WHAT ARE THE DEFINITIONS FOR SOME OF THE KEY TERMS USED IN BANKRUPTCY?

After Notice and Hearing - doesn't actually require a hearing. Notice to interest parties must be provided and the opportunity for a hearing must be provided. An actual hearing is not required unless a party in interest requests one.

Claim - means a right to payment, whether or not it has been reduced to a judgment, liquidated, fixed, contingent, matured, un matured, disputed, secured or unsecured.

Community Claim - means a claim that originates before the filing of the petition for bankruptcy and the community property of the debtor or the debtor's spouse (or the debtor's former spouse) is liable. Typically debts that were incurred during a marriage are community debts, and are subject to a community claim.

Consumer Debt - means a debt incurred by an individual primarily for a personal, family, or household purpose.

Creditor - is a party who has a claim against the debtor that originated at or before the time that the debtor filed the bankruptcy petition.

Debt - means liability or obligation to pay a claim.

Venue - for a bankruptcy case typically rests in the district in which the debtor has his/her residence, principal place of business, or principal assets in the United States.