I am often asked how I can be so optimistic when my job is working with people going through perhaps the most difficult time in their lives. It’s easy: my job is to make things better. I am a professional problem solver. Not only do I get to unburden my clients from overwhelming debt, but I get to them how to get the most out of the fresh start bankruptcy provides. Who hasn’t wanted a do-over? This time, with right mindset, wisdom earned from their experience, and God willing no unfortunate circumstances, the future is cheery.
Chapter 11 cases are more complicated bankruptcy cases in many ways and much more is required of a debtor in Chapter 11 than in a chapter 7 or chapter 13 case. The debtor's failure to comply with the operating and reporting requirements set forth below may result in the dismissal or conversion of a chapter 11 case to a case under chapter 7 of the Bankruptcy Code. Perhaps the most important early decision a business can make when contemplating bankruptcy, is selecting bankruptcy counsel that is experienced with successfully navigating a debtor through a chapter 11 case.
A bankruptcy case begins when a debtor files a bankruptcy petition in a bankruptcy court. The start of the case creates a bankruptcy estate, which contains “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). However, specific property of a debtor is excluded from the bankruptcy estate via statutorily created safe harbors known as exemptions. 11 U.S.C. § 522. An exemption withdraws an interest from the bankruptcy estate, and consequently from the creditors, for the benefit of the debtors.
Every day new companies open their doors, employ a workforce, and provide valuable services and products to help sustain our economy. Clearly, not all businesses are successful, particularly small businesses. Most businesses in operation in the United States are defined as a small business, which the U.S. Small Business Administration defines as an independent business having fewer than 500 employees. Small businesses, which each are commonly undercapitalized and lacking the necessary skills to operate a business, are particularly vulnerable to the incumbent risks that all businesses face. Only about half of small businesses will survive past the five-year mark. So, what does a business owner do when the business no longer can pay its debts as they come do?
Chapter 11 bankruptcy reorganization has and remains a viable option for companies in distress. The Bankruptcy Court provides a singular judicial forum where all creditors are required to participate. The Bankruptcy Court also has enormous powers and its procedures are well-oiled and generally predictable.
However, and particularly with respect to smaller companies, bankruptcies have become relatively expensive, making the process inefficient and costly for such debtors. For these “smaller” companies, therefore, other non-bankruptcy alternatives should be considered. One alternative solution to a Chapter 11 reorganization is known as an Assignment for the Benefit of Creditors, commonly referred to as an “ABC”.
Clients often ask if they qualify for a Chapter 7 bankruptcy. People may not know much about bankruptcy before calling my office, but there is a general anxiety as to whether they will be "forced" into repaying some of their debt.
[David Stevens, Esq. walks you through the bankruptcy filing process to help put you at ease]
Hi. So we've probably already spoken once. Perhaps you called my office and set up an appointment, or you emailed me, or you went online and set an appointment, that's all great.
What should I expect when I file bankruptcy?
Provide your Financial Information
When you come in, I'm going to give you an intake form to help me fill out some information, or perhaps you're going online and doing it now. Don't worry about not being able to provide all the information to me, that's fine. I used to do this face- to-face, and it would take at least an hour just to fill out this worksheet. So, the more you give me now, the better off we'll be, and we'll have more time to spend talking about things that really concern you.
An involuntary bankruptcy is one that is filed by creditors and not by the person or entity that owes the money. The filing of a petition for an involuntary bankruptcy is an extreme remedy with serious consequences for both the debtor and the petitioning creditors. For the creditors, if the petition is found to have been brought in bad faith, the creditors may be shouldered with paying the litigation costs of the debtor which were incurred in dismissing the case. And of course for the debtor, it must now find a way to meet its financial obligations under the heavy hand of the Bankruptcy Court.
The Supreme Court’s landmark decision of Till v. SCS Credit Corp., 541 U.S. 465 (2004), took up the issue of the proper method of selecting an interest rate sufficient to pay present value under section 1325(a)(5)(B)(ii). The Court considered and rejected the coerced loan, presumptive contract rate, and cost of funds approaches, and instead settled on a formula approach. Under this formula approach, the interest rate is determined by starting with a national prime rate and adjusting upward to account for greater risk of default.
The filing of a petition with the Bankruptcy Court instantaneously shields the debtor from most further acts by creditors to collect on debt owed as of that date. Filing automatically invokes the automatic stay under § 362(a) of the Bankruptcy Code. As a result, the debtor‘s estate is preserved for all creditors. The stay protects both the debtor, who gets relief, and the creditors as a group, whose claims are protected against other creditors who could otherwise pursue their own remedies.