The remedy of Bankruptcy relates back to Biblical times. Early cultures learned that when members of their communities became unable to meet the financial obligations they could lose hope.
Once hope was lost, that person would no longer be a productive member of the community but rather a burden. Therefore, gradually, over time, the communities learned that forgiveness of debt, in certain circumstances, could reduce the overall negative effect on the community.
The result was the development of a Bankruptcy system that granted to the beleaguered member a fresh start. The ability to start with a clean slate afforded these members the ability to again be productive.
The old phrase “A chain is only as strong as its weakest link” has application in this sense. Grant the “weakest link” the opportunity to grow stronger and the entire chain is benefited.
In addition to the following services, we provide representation in Adversary Proceedings related to Bankruptcy case filing. Adversary proceedings are separate actions in the Bankruptcy Court that deal with a number of issues pertaining to discharges of debt or preferential treatment of a creditor. Adversary proceedings can have serious consequences, not only to the party filing a Bankruptcy case but to the creditors as well.
Chapter 7: This is the traditional “liquidating” Bankruptcy. The Debtors give up their non exempt Bankruptcy. The Debtor's give up their non-exempt assets; the court appoints a Trustee to take the assets and convert the assets to cash. The Trustee makes a distribution to creditors based upon a schedule of priorities set out in the Bankruptcy Code. The Debtor receives an order from the Bankruptcy Court that discharges their eligible debts and they get a fresh start.
Chapter 13: In a Chapter 13 case, the Debtors retain their assets and pay the creditors (through a court appointed Trustee) all or a portion of the claims over a period of time. At the end of the case, the Debtor receives a discharge as to the remaining unpaid debts. In a Chapter 13, the Debtor must pay to the creditors at least the amount that the creditors would receive if the Debtor filed a Chapter 7 Case. This can be of concern if the Debtor has significant equity value in a residence of other assets. In order to qualify for Chapter 13 case, the Debtor must have sufficient, regular, income sufficient to meet their ongoing living expenses and make the necessary payments under the plan. There is also a statutory limit on the amount of secured and unsecured debts that a Debtor may have in order to seek Chapter 13 relief.
Chapter 11: Chapter 11 is a reorganization type of proceeding. It is used for Debtors who have an ongoing business that is suffering a temporary financial crises. A Chapter 11 allows a Debtor to continue operating his business and formulate a new plan to work out of the crises either through additional funding, sale of assets or long term payout. Chapter 11 cases are very complex, time consuming and expensive. You will rarely see a Chapter 11 case for small individual Debtors.
Debt Negotiation: The strategy here is to negotiate your principal down and reduce your pay-off balances significantly, The advantage is that you may get out of debt in a relatively short time for significantly less than you originally owed and you can avoid Bankruptcy. However, you should understand that this options is complicated and brings with it the possibility of lawsuits. Debt Negotiation will compromise your credit in short term, and you may have to pay taxes on the forgiven debt ( happens very seldom). However, for individuals or families in hardship, the benefits often outweigh the risks.