Bankruptcy - Legal Implications

In the present complex world of Finance and Industry, bankruptcy is one of the most commonplace terms that are closely associated with insolvent companies. The term "Bankruptcy" is essentially used for large corporate houses, small business ventures or even individuals having outstanding loans accruing over a period of time including an equally very high interest that are legitimately to be paid to creditors over a stipulated period. Bankruptcy can easily be depicted as a legal proceeding in a court of law where the assets of the debtor are liquidated in order to provide a relief to the debtor from any further liability to their creditors and to arrange payment of debts from the limited resources of the debtor.

Causes of Bankruptcy

There are a large number of companies picking up huge loans at higher rates of interest from companies offering loans, creditors or financial institutions with a view to expand their business potential. In the present day scenario, it is a normal practice that it is not only the companies that take up loans, rather individuals also approach financial institutions for personal loans. The inability of these large companies to repay their loans results in the company becoming bankruptcy or insolvent. One of the major factors that often result in bankruptcy is the grim economic situation of the country and the impending recession.

Bankruptcy Laws

The repercussions of these laws on the company or an individual are extremely strenuous. Once the creditors become aware about the insolvency of the company, they file a legal suit against the debtor claiming repayment of their loans by the debtor. One of the first steps of the laws of bankruptcy is that the assets of the debtor are liquidated to pay off the creditors.

Professional Assistance

In a normal situation, a company files for bankruptcy prior to declaring themselves bankrupt due to insurmountable loan amounts that have accrued along with the interest. It is always in the interest of the debtor that he consults a legal practitioner and seeks his assistance on the prevalent laws of bankruptcy or obtains appropriate credit counseling from an organization approved by the government at least six months prior to applying for filing for a bankruptcy protection in a designated court of law.

There is no dearth of solicitors and lawyers around the country who offer their professional services to help a bankrupt company to tide over their financial crisis. These professional attorneys assist their clients in working out their loans and helping them with the settlement of their outstanding debts in an orderly manner, thereby securing their clients' financial future and consolidating their financial resources. However, it would be prudent for people who are plagued with debts to check on the credentials and reliability of the attorneys filing their petition before entrusting them with the assignment since this work involves a lot of secrecy and confidential information being handed over the attorneys.

Tips for Finding the Perfect Bankruptcy Attorney

Filing for bankruptcy can be a daunting process, but it doesn't have to be one that you face alone. Trusting the expertise of a bankruptcy attorney can help you navigate legal complications and avoid common pitfalls. By allowing an attorney to guide you through the process, you're making your filing for bankruptcy efforts easier and more likely to succeed. Regardless of whether you apply for a Chapter 7 or Chapter 13 bankruptcy, it's usually in your best interest to seek advice from an attorney.

The Right Choice

However, there are many options available and it can be difficult to find the perfect bankruptcy attorney for your situation. Finding one that meshes with you personally and has the experience needed to successfully guide the case can be a challenge. Since a bankruptcy attorney can come with considerable fees, it's crucial to find one that you like and trust before hiring him.

To find the perfect bankruptcy lawyer, consider:

•Asking friends and family members. Yes, Google exists - and for good reason! But the referrals and recommendations from your family and friends should be trusted and can offer good connections that can help you in your case.

•Seeking a specialist. Don't just seek any lawyer. Bankruptcy attorneys have proven expertise in the bankruptcy process and law. They can help you as you're filing for bankruptcy and can also give you advice as you recover financially.

•Contacting your state bar association. If your family, friends, and internet searches don't leave you with any stand-out leads, consider contacting your state bar association to ask for lawyer referral services. You can find reviews and complaints about attorneys.

•Taking advantage of the free consultation. Most bankruptcy attorneys offer free consultation to talk about your case. Instead of completing this over the phone, try to see the attorney in-person. You'll be able to feel the personal connection as well as determine whether or not you trust him. This also gives you a glimpse of what it will be like to work with this particular lawyer, and you can compare him to other bankruptcy attorneys that you've visited and considered.

•Referrals from other lawyers, bankruptcy court. If you've used a lawyer for anything else, feel free to contact him for a bankruptcy attorney referral. Most professionals are well connected within their industry and can give you insight as to whom to trust. A bankruptcy court could be a great place to seek information as well.

Once you consider all of these tips to find a good bankruptcy attorney for your case, filing for bankruptcy will be easier than you thought possible! A bankruptcy attorney will help you complete all of the necessary paperwork as you're filing for bankruptcy as well as represent your case with specialized skills.

Chapter 7 Liquidation Bankruptcy Vs Chapter 13 Reorganization Bankruptcy

Chapter 7 Liquidation Bankruptcy

Chapter 7 is named 'Liquidation Bankruptcy' because a trustee is appointed to collect and reduce to money any non-exempt assets for the benefit of priority and unsecured creditors of the estate.

Over 90% of all Consumer Chapter 7 filings are declared 'non-asset cases' because few consumers filing Chapter 7 have assets that exceed any amount that can be protected. Chapter 7 is the simplest, quickest, least expensive and easiest way to discharge 'unsecured' debt.

Debt owed to 'secured creditors' are generally discharged but the secured creditors contractual rights to their 'security' usually remains unaffected. So they must be financially satisfied to prevent them from pursuing their rights to the security after the bankruptcy case is concluded... usually 3 to 5 months after the case was filed.

While Chapter 7 discharges most all General Unsecured obligations, it does not discharge: most tax obligations, debts owed as a result of a Domestic Support Obligation, Student Loans, Fines and some other less common obligations.

It should be understood that in order to receive the benefits of a Chapter 7 bankruptcy the law now requires anyone earning more than their States Median Income to prove they're unable to repay at least 25% of, or $10,000 to, their General Unsecured Creditors over a 5 year period ($167 monthly). However, some skilled bankruptcy attorneys have been able to successfully challenge the 'systems' presumptive position in that regard which has allowed some of their over Median Income clients to still receive the benefits of a Chapter 7 discharge.

You should also understand that it's not unusual for someone to file Chapter 13 and actually pay less per month or even pay less in total to their creditors than what they would have paid had they filed a Chapter 7.

Because Chapter 7 may not be available or because that availability may need to be skillfully challenged and because a Chapter 13 may be more advantageous, it's important to have your financial affairs reviewed by, and for you to be represented by, a consumer bankruptcy specialist highly skilled with Chapter 7 and Chapter 13 matters.

Chapter 13 Reorganization Bankruptcy

Chapter 13 bankruptcy restructures and discharges debt based on a consumers ability to repay over a period of at least 36 months and usually 60 months. Most Chapter 13 Plans primarily call for the repayment of secured and priority creditors and leave little, if anything, available to pay unsecured creditors. It's not unusual for a person filing Chapter 13 to pay less per month and or pay less in total to their creditors than they would have, had they filed a Chapter 7 Liquidation Bankruptcy.

That's because Chapter 7 doesn't have much effect on Secured and Priority creditors while Chapter 13 can restructure those creditors which have a shorter repayment period remaining than the length of the proposed Chapter 13 Plan. This 'restructuring' can modify the rights and status of secured and priority creditors.

As an example the filing of a Chapter 13 can remove a totally unsecured junior (2nd or 3rd) mortgage from their secured position on the real estate and treat it as they truly are... "unsecured". Chapter 13 also can stop foreclosures and design a Plan to cure the mortgage delinquency over the life of the Plan... without allowing future interest on the delinquent amount.

Chapter 13 also stops future interest on outstanding priority tax obligations and can provide up-to 5 years to repay those taxes. It can also reduce interest rates on consumer secured obligations like vehicle contracts when they're in excess of the current prime rate of interest plus 2 or 3 percent.

In some instances, depending on when the debt was made, vehicle contracts and other contracts secured by consumer goods can be treated as partially secured and partially unsecured when the value of the security is worth less than what's owed.

These features are generally not available to someone filing Chapter 7 bankruptcy.

While Chapter 13 can often be more advantageous than a Chapter 7 you must be careful to find and select an attorney willing to file and able to skillfully file, Chapter 13's. Not all bankruptcy attorneys will file them and some of those who do, don't provide the level of expertise needed to take the greatest advantage of the special provisions available.

Dual Income Households, Job Security, and Chapter 13

It's easy to think that two incomes create a buffer against financial hardship, but between their vehicles, homes, education, medical bills, and other major expenses, many Americans incur and carry significant consumer debt. Many people also have a natural desire to reward themselves for their hard work, leading to purchases that can be managed with current income levels but leaving less room for the unforeseen. Needless to say, when one income is removed typically to job loss, it can be difficult, if not impossible, to keep pace with monthly bills. As a result many of these households seek debt relief through chapter 13 bankruptcy.

Decline in Purchasing Power 
It's not just potential job loss and consumer purchases that lead to difficulties in getting out from a burdensome debt. There are also macro-economic trends. For one thing, dual income is itself not the bulwark against financial hardships that it once was. In the book The Two Income Trap, authors Elizabeth Warren and Amelia Tyagi point out that these households are typically in worse shape than single-income households from the generation before. Despite bringing in 75 percent more income, fixed living costs have been rising at an even faster rate. Perhaps what's most interesting is that this book was published in 2003 when the cost of gas was approximately $1.75 per gallon.

Chapter 13 Debt Retirement Plans 
A decline in purchasing power may have been the general point of this book, but it also has specific applications for chapter 13 bankruptcy. Unlike chapter 7, this chapter requires filers to submit a detailed debt repayment plan-typically with the assistance of a credit counseling agency. This plan includes the amount of anticipated disposal income that can be used to pay down consumer debt. With the need to account for rising living costs, there is less disposal income. This trend has a double negative impact. Not only does it make it more difficult to execute a chapter 13 repayment plan, but it may keep other filers from receiving chapter 13 approval from the outset.

Increase in Percentage of Chapter 13 Filings 
Again, despite this added difficulty, the prevalence of formerly dual income households experiencing at least one job loss is leading to an increase in the relative percentage of chapter 13 filings. In other words, due to improving economic conditions, bankruptcy filings saw an 11 percent decline from 2010 to 2011. However, over the same time period, chapter 13 filings went from 28 percent of all non-business bankruptcy filings to 30 percent.

Moreover, as the economy continues to recover, it will be interesting to see the number of new dual-income households and their spending habits. Will these spending habits return to pre-recession levels and will the next recession cause this cycle to repeat once again? Likewise, will the decline of purchasing power reverse itself in the foreseeable future, and what types of jobs will be available to these households. After all, many of the job losses experienced by dual income households are temporary. However, the next job may not offer the same level of income, throwing many debtors into the multi-year repayment plans offered in chapter 13.