Bankruptcy

Debtor and Debtor-in-Possession Bankruptcy Representation

iStock_000008279777_LargeEither an individual debtor or a business may file for bankruptcy protection under chapter 7 and chapter 11.  When a business files bankruptcy a chapter 7 is typically chosen if the business plans to end operations while a chapter 11 is usually used if the business intends to reorganize and stay in business.  When repaying debt becomes impossible or impractical, our attorneys can help by guiding the debtor through the often complex bankruptcy process.

Sometimes Bad Things Happen to Good People. 

Ch. 7 Bankruptcy

In chapter 7 bankruptcies, most debtors are allowed to discharge, or eliminate, most debts. A chapter 7 bankruptcy is often referred to as a “liquidation” because non-exempt assets of the debtor are sold and the proceeds used to repay creditors.  Most individual debtors who file a chapter 7, however, are able to use federal or state exemptions to protect most, if not all, of the debtor’s assets.  Because a debtor is allowed to discharge most debts in a chapter 7 bankruptcy without repayment, chapter 7 is intended to be used by moderate to low income debtors who do not have the ability to repay those debts.

When a business files a chapter 7 bankruptcy, it typically signifies the termination of the business because most business assets are sold during the bankruptcy.  It does, however, also relieve the business of the responsibility to pay off most creditors as well.  Chapter 7 is often used by service or technology based businesses that have minimal tangible assets.

Ch. 13 Bankruptcy

Chapter 13 is intended for higher income debtors to alleviate the stress of mounting debt in a way that allows the debtor to reorganize the debts into a structured repayment plan. However, chapter 13 bankruptcy allows the debtor to discharge a percentage of most debts at the end of the repayment plan.  The debtor will develop a repayment plan depending on the debtor’s disposable income. Repayment plans typically last five years or sixty months, but a three-year plan is also possible.  A trustee hired by the bankruptcy court to oversee the distribution of estate funds to creditors supervises the bankruptcy process.  Debtors are afforded the same exemptions to personal property as a chapter 7 that allows the debtor to keep most, if not all, of his or her personal assets. The trustee can either sell personal assets that are not exempt, or the non-exempt value can be added to the debtor’s plan. Chapter 13 is only allowed to individual debtors.

Chapter 13 limits the amount of unsecured debt to be reorganized to less than $383,175 and secured debts that are less than $1,149,525. Chapter 13 debtors may be able to avoid foreclosure, pay mortgage arrearages through the plan, and restructure secured debts with the exception of a primary residence.  Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.”  This provision may protect co-signers. Once the debtor has completed all the plan payments, the debtor may apply for a discharge of the remaining debt, if any.  The experienced bankruptcy attorneys at Keery McCue PLLC will represent the debtor through the entire process up to and including discharge.

Ch. 11 Bankruptcy

Chapter 11 is similar in nature to a chapter 13 except that there is no limit to the amount of debt a debtor may have in a Chapter 11 bankruptcy proceeding.  As such, individuals who own businesses or multiple investment properties often use Chapter 11 proceedings to catch their breath and reorganize their debts.  In a Chapter 11 bankruptcy the debtor must develop a repayment plan which provides for the repayment of the majority of the debt included in the bankruptcy over an extended period of time.  The creditors involved in the bankruptcy must approve the reorganization plan submitted by the debtor.   The business involved in the bankruptcy will remain operational and will normally retain all their desired assets so long as the payments under the confirmed Plan of Reorganization are successfully completed.

Our bankruptcy practice group stands ready to help clients navigate the intrepid waters of bankruptcy proceedings and help to maximize the desired outcome.

Secured and Unsecured Creditor Representation

While KM specializes in Debtor representation, our attorneys will represent select creditors in various chapters of bankruptcy.  Given KM’s Debtor and Debtor-in-Possession representation, we are highly effective at helping creditors preserve their rights in a bankruptcy context.

Debtor and Creditor Representations outside of Bankruptcy

In many instances, some of the most important bankruptcy representation occurs prior to the filing of a bankruptcy petition.  Our attorneys can work with Debtors or Creditors to assist them in creating the best possible position when the inevitable bankruptcy is filed.

Bankruptcy Litigation

In some instances, debt incurred by a Debtor may be non-dischargeable pursuant to the Bankruptcy Code.  KM has represented numerous Debtors in instances where a creditor has instigated bankruptcy litigation to assert that their debt is not subject to discharge under Ch. 7 or Ch. 11.  Further, if a Debtor makes material misstatements in their petition, schedules or statements, a creditor or the U.S. Trustee may assert that the Debtor’s conduct is egregious enough to warrant a denial or revocation of discharge.  The ramification of a creditor successfully asserting these claims has a serious impact to the Debtor’s “fresh start.”  Our attorneys have represented clients where these denial of discharge claims have been deemed without basis.