Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

 What an unusual headline: “More Nuns in Bankruptcy Court.” That was the news story on Senior Housing News, a website that reports on the senior housing industry. This story, which was also reported on by Business Week, concerns Clare Oaks, a retirement community in a Chicago suburb. Clare Oaks filed for Chapter 11 bankruptcy protection to restructure its debts. What makes the story newsworthy is that Clare Oaks was founded by The Sisters of St. Joseph of the Third Order of St. Francis, a Roman Catholic religious institute.

Many corporations that file Chapter 11 bankruptcy will present a “prepackaged” bankruptcy case to the bankruptcy court.  A prepackaged bankruptcy is a cooperative effort between the company, its shareholders and its creditors to develop a plan to restructure the company that will take effect once the bankruptcy case is filed.  The idea is to shorten and simplify the bankruptcy process and save everyone concerned money and time.

Can a prepackaged bankruptcy work for you?

Most often unsecured creditors are discharged at the end of a Chapter 7 or 13 bankruptcy cases, so there is usually no benefit to working with an unsecured creditor prior to bankruptcy.  However, there may be an incentive to coordinate with a secured creditor before the bankruptcy is filed.  This may be especially true when dealing with smaller companies, local banks, or individual lien holders who may be apt to misinterpret your intention.  In other cases, there may be a large benefit to be gained by coordinating with the creditor prior to bankruptcy.  For instance, some homeowners have been able to modify a first mortgage to bring payments current, and then file bankruptcy to strip off a second mortgage.  The result is a lower plan payment and/or a shorter plan term.

As a general rule you should not volunteer information to your creditors as it may cause otherwise avoidable problems.  Some lenders may accelerate the collection processes if they believe a bankruptcy is imminent, especially in the case of delinquent auto payments.  Once you have filed bankruptcy, the creditor must obtain permission from the bankruptcy court to repossess, foreclose or collect.

If you are struggling with bills you cannot pay, discuss your situation with an experienced bankruptcy attorney.  Your attorney can guide you through the pre-bankruptcy process and advise you on the best course of action to achieve the most benefit.  Every situation is different, so consult your attorney.

Fears & Nachawati Bankruptcy Law Offices

4925 Greenville Ave Suite 715, Dallas, TX 75206 (214) 890-0711
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Recently the United States Supreme Court resolved an ambiguity in the bankruptcy law that had the federal circuits split. The case, Ransom v. FIA Card Services, decided whether an above-median Chapter 13 debtor can take a $496 vehicle ownership deduction on the Bankruptcy Means Test when the debtor owns the vehicle free and clear. The Means Test calculates projected disposable income and presumptively determines the amount a Chapter 13 debtor must repay to unsecured creditors.

Some federal courts previously allowed the debtor to deduct this ownership expense even when there is no lien or payment on the vehicle. The Supreme Court's ruling reverses this practice and resolves a split in the federal circuits.

This decision places some debtors in a difficult dilemma: whether to encumber their vehicle with a lien and loan payment prior to bankruptcy, or pay unsecured creditors over the course of the bankruptcy. For instance, a debtor who fails to qualify for the $496/mo vehicle ownership deduction may result in a payment of an extra $29,760 over a five year repayment plan. In other cases losing the vehicle ownership deduction may mean the difference between being eligible to file Chapter 7 and being forced to file Chapter 13.

If you own a vehicle outright and are experiencing financial trouble, speak with an experienced bankruptcy attorney and discuss your options. Do not get a title loan prior to filing bankruptcy without consulting your attorney as doing so may result in a bad faith objection from the bankruptcy trustee. Your attorney can explain your options and advise you as to your best course of action.

Occasionally an individual or couple cannot qualify for a Chapter 13 repayment bankruptcy and must file under Chapter 13. The procedure for proposing a Chapter 11 plan of reorganization is dictated by the Bankruptcy Code and is in many ways similar to a Chapter 13 bankruptcy. The Chapter 11 bankruptcy debtor may file a plan of reorganization during the first 120-day period after the case is filed, and the debtor has 180 days after the entry of the order for relief to obtain creditor acceptance of its plan. After that period a creditor may file a proposed plan with the court. A bankruptcy trustee, if one is appointed, will also file its own plan, or a recommendation for conversion or dismissal of the case.

The Bankruptcy Code lists mandatory and discretionary provisions of a Chapter 11 plan, including the designation of classes of claims and interests. Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders. These classes will vote on the acceptance or rejection of the proposed plan(s).

Before confirmation of a plan of reorganization can be granted, the court must be satisfied that the plan is in compliance with all the requirements for confirmation stated in the Bankruptcy Code. In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan is in compliance with the Bankruptcy Code. In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney. An experienced bankruptcy attorney can guide you through the Chapter 11 process, and help you reach the best possible financial outcome.

The Bankruptcy Code authorizes six different types of bankruptcies, but only four can be used by individuals.  Each type of individual bankruptcy case is known by the chapter that defines it in the Bankruptcy Code: Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

A Chapter 7 case is the most common type of individual bankruptcy case.  Chapter 7 is available to individuals, to married couples, and to a spouse who files separately.  Chapter 7 is an erase-your-debts-start-fresh bankruptcy case.  It is formally known as a "liquidation" proceeding, because (in theory) everything the debtor owns is taken and sold to pay creditors.  However, it is not very practical to take everything a person owns, and many state and federal laws protect the debtor's property to the extent that only about one case in twenty pays anything to creditors in a Chapter 7.  An average Chapter 7 case will take four to six months to complete.

A Chapter 11 case is called a "reorganization" proceeding, and is commonly used by corporations.  Individuals file Chapter 11 because their debts exceed the limits for Chapter 13 bankruptcy.  The bankruptcy trustee cannot take property from a Chapter 11 debtor.  The debtor proposes a plan to repay debts, creditors vote whether to accept the plan, and ultimately the bankruptcy court orders a reorganization plan which binds all parties to the terms of the plan.

A Chapter 12 bankruptcy case is only available to family farmers who wish to reorganize their finances.  Many provisions in Chapter 12 are similar to a Chapter 13.

In a Chapter 13 case the debtor pays what he can afford each month under a court-ordered repayment plan.  Creditors are grouped together in debt priorities and paid according to the availability of monthly income.  Creditors are paid between zero and 100% over three to five years.  Chapter 13 is only available for individuals who have a regular income (Chapter 13 is also called a "Wage Earner's Plan"), unsecured debt of less than $336,900, and secured debt of less than $1,010,650.  The bankruptcy trustee cannot take property from the Chapter 13 debtor.  Chapter 13 provides many advantages to Chapter 7, including the opportunity to reduce monthly vehicle payments and catch-up a delinquent mortgage.

The Bankruptcy Code offers four powerful types of bankruptcy cases to individuals.  If you are struggling with debt, speak to an experienced bankruptcy attorney and discover how the Bankruptcy Code can help you reorganize or eliminate your debt headache.

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews ‎  |  fnlawfirm.com  |  Directions

When a large corporate bankruptcy hits the news chances are the company has filed for Chapter 11 bankruptcy protection.  The title of Chapter 11 of the Bankruptcy Code is “Reorganization” and while companies like General Motors or Washington Mutual make headlines, individuals are also eligible to file under Chapter 11. 

In some cases, Chapter 11 may be the only option for an individual to file bankruptcy.  Eligibility for Chapter 7 is dictated by a “means test” that determines the debtor’s ability to repay debts.  Those who are able to repay their creditors may consider Chapter 13, but debt limits may disqualify the debtor from Chapter 13.  The debt limits for Chapter 13 are currently $360,475 for unsecured debt and $1,081,400 for secured debt. 

An individual debtor who files for Chapter 11 bankruptcy protection will follow many of the same (or similar) procedures that apply to Chapter 13 cases.  The debtor must file a petition and schedules of assets, liabilities, income and expenses; a plan to pay creditors; and attend a meeting with a bankruptcy trustee.  The debtor is required to commit all disposable income to repaying debts for five years.  Disposable income in Chapter 11 is determined differently than in a Chapter 13 case.  The bankruptcy court compares the Chapter 11 debtor’s monthly income against the reasonable monthly expenses. The result may be different than the disposable income amount determined in a Chapter 13 case. 

Creditors are classified as secured creditors, unsecured creditors entitled to priority, and general unsecured creditors.  The debtor’s plan is submitted to creditors for approval and the creditors are entitled to vote to accept or reject the plan.  If the creditors reject the proposed treatment by the plan, the bankruptcy judge can still approve the plan, provided that creditors receive as much during the plan as they would receive if the debtor’s assets were liquidated.  Ordinarily a Chapter 11 debtor will receive a discharge after completing all plan payments. 

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney.  If you are considering a bankruptcy filing, consult with an experienced attorney and discover your legal options.