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Individuals who file for bankruptcy to seek relief from debt have the option of reaffirming certain debts. In the event that a debtor elects to reaffirm debt, the debtor will continue to be liable for the balance on the respective property. However, the debtor also maintains the right to the property. Debtors generally reaffirm debt in relation to automobiles or real property.

A debtor may file a reaffirmation agreement in the bankruptcy court that allows the debtor to "reaffirm" the debt obligation with a lender. Such an agreement is a legally enforceable contract, and it binds the debtor to the promise to repay all, or part of, the debt. Otherwise, the debt would be subject to a discharge through the bankruptcy proceedings. If a debtor fails to make timely monthly payments toward a mortgage debt, the debtor will once again be subject to foreclosure proceedings. A debtor could continue to make mortgage payments without reaffirming the debt. In this case, the debtor would continue to provide adequate protection for the lender, but there would not be a legally-binding contract between the parties.

The lenders are not under any obligation to compromise with debtors to reaffirm mortgage loans, allowing the debtors to keep their property. This is especially problematic when the lender refuses to send regular statements to debtors after the bankruptcy because the debtor does not know the current state of the mortgage. However, debtors may still be able to keep their property if they continue to make regular monthly payments towards their mortgage throughout bankruptcy. Generally, lenders are more inclined to reaffirm a mortgage and create a binding legal contract because, by doing so, they sustain the right to seek legal relief in the event that debtor fails to make mortgage payments. However, lenders may also be reluctant to reaffirm a mortgage loan with debtors.

For instance, in some jurisdictions, lenders cannot pursue a remaining balance on a property after foreclosure proceedings. Therefore, lenders in those jurisdictions do not want to take the time and resources to complete reaffirmation paperwork because this procedure does not adequately protect the lender's interests. Furthermore, lenders often maintain branches across the nation. In the event that a specific jurisdiction does allow a lender to pursue a balance on a property, it is still overly costly to staff and maintain legal offices across the country to complete reaffirmation paperwork for corresponding lending agreements. However, a debtor may maintain the right to refinance a mortgage in spite of bankruptcy proceedings. In general, lenders are stricter in their refinancing procedures, requiring debtors to show sufficient equity in the property, and a sufficient monthly income to support mortgage payments.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.

Effective December 1, 2011, changes to the Federal Rules of Bankruptcy Procedure ("FRBP") affect how creditors file proofs of claim in individual bankruptcy cases. The amendments FRBP 3001 require claimants to use new forms for filing proofs of claim. Additionally, the new FRBP 3002.1 imposes a heightened notice obligation in chapter 13 cases for claims secured by a mortgage on debtor's primary residence.

Once a debtor files for bankruptcy, the Federal Rules of Bankruptcy Procedure require creditors to file a proof of claim using Official Form B10 to maintain the debt obligation.

The amended FRBP 3001 now requires claimants to provide additional information supporting the claim. For claimants filing proofs of claim in an individual debtor's bankruptcy case, FRBP 3001(c)(2)(A) now requires claimants to include an itemized list of the interest, attorneys' fees and expenses, and any other charges that are included in the claim. If claimants interest is secured by debtor's principal residence, FRBP 3001(c)(2)(B) now requires claimants to outline the amount necessary to cure any defaults that existed as of the bankruptcy petition date. Additionally, if the claim involves an escrow payment, claimant must also provide an escrow statement listing the date of the last payment and the number and amount of payments due. Claimants are required to use the Mortgage Proof of Claim Attachment to Official Form B10 to provide this information.

Furthermore, the newly added FRBP 3002.1 imposes additional requirements for proofs of claim filed in Chapter 13 cases if the underlying claim is secured by debtor's primary residence. For example, pursuant to FRBP 3002.1(b), if there are changes to debtor's loan payment, claimant must file and serve debtor, debtor's counsel, and trustee with notice of such changes within 21 days of the date payment is to come due. Claimants are required to use the Notice of Mortgage Payment Change Supplement to Official Form B10.

Additionally, FRBP 3002.1(c) and (d) require claimants to provide notice of charges incurred after the petition date that may also be secured by debtor's primary residence. Claimant must file and serve notice on debtor, debtor's counsel and the trustee within 180 days after the expenses are incurred. The notice must include an itemized list of the fees, expenses, and any other charges incurred after the petition date.

Perhaps the most noteworthy change is that FRBP 3001(c)(3) now allows for sanctions for failure to comply with these new requirements. Unless the court can determine that failure to comply was justified or harmless, it may preclude the claimant from presenting omitted information as evidence or may award the debtor attorneys' fees and other costs accumulated as a result of claimant's omission.

At the Law Offices of Salar Atrizadeh, we guide our clients through the regulatory and transactional pitfalls using legal knowledge and skill. Please contact us today online or at (310) 694-3034 to set up a confidential consultation.

Chapter 11 Bankruptcy

Bankruptcy protection allows certain individuals and businesses to repay their debts by either selling their assets or restructuring the company. Bankruptcy proceedings have flourished as the failing economy and lackluster job performance force applicants to seek relief under federal bankruptcy law. Over 1.3 million Americans filed for bankruptcy in 2009. Most were "consumer" cases, marking a 91% increase in chapter 11 filings that year. California still leads the nation in the total number of bankruptcies filed. Chapter 11petitions have also continued to increase despite the national drop in bankruptcy cases filed last year.

Chapter 11 is derived from title 11 of the United States Code (the "Bankruptcy Code"). Chapter 11 protection is used primarily by commercial enterprises that want to keep the business running while they repay creditors through a court-approved plan. Chapter 11 allows businesses to remain in operation while they restructure the organization and use the resulting profits to pay back creditors. Under an approved reorganization plan, businesses can reduce their debts by repaying a portion of their obligations and discharging others. Chapter 11 is unique in that it allows the debtor to be the trustee of the estate (also referred to as the "debtor in possession") and to keep possession of the company's assets while the case is in court.

Depending on the needs of the business, Chapter 11 offers debtors various protections, including but not limited to, the following:

• Maintenance of an intact business
• Opportunity to rescale operations
• Power to object to creditors' claims
• Extended deadline to repay creditors
• Greater flexibility than other chapters
• Recovery of assets and return to profitability
• Discretion to terminate onerous contracts and leases
• Time to sell real estate with equity and handle delinquent taxes

Chapter 11 gives businesses a chance to restructure their finances so they can continue to run. This keeps people employed and produces a profit for stockholders while ensuring that creditors get paid. The rationale behind this protection is that a functioning business is more valuable than one whose assets are sold. Companies under Chapter 11 protection get a financial "reprieve" to reduce debts, extend the repayment deadline, or lower operating costs, until they can "return" to a more viable state. While the case is in court, the debtor remains in possession of the estate and keeps control of the assets while the court approves a reorganization plan. Chapter 11 allows the "debtor in possession" to keep the business going while acting as trustee of the estate.

Under Section 1107 of the Bankruptcy Code, the debtor assumes the same fiduciary duties as a Chapter 11 trustee. These duties include providing an accounting of property and filing monthly operating reports as required by the bankruptcy court. Under this section, trustees have the power to discharge a portion of their obligations and object to creditors' claims. They also have the discretion to employ attorneys, accountants, and other professionals to assist the debtor in bankruptcy proceedings. Chapter 11 debtors generally enjoy more freedom as they undergo a period of consolidation before emerging with a reduced debt load and a reorganized business.
If you are a business owner seeking bankruptcy protection, the experienced California Chapter 11 bankruptcy attorneys at the Law Offices of Salar Atrizadeh can help. Our skilled attorneys and highly trained staff are dedicated to providing the highest quality legal representation to individuals and businesses throughout California. We have successfully handled all types of bankruptcy cases, helping clients get back on their feet. Regardless of the extent of your personal or business liability, we can help you restructure your finances and get a fresh start.

For a confidential consultation, call us at (310) 694-3034 or contact us online.

Individuals considering bankruptcy are often concerned about losing their retirement savings accounts. In most situations, unless you voluntarily choose to use the funds to satisfy debt obligations, filing for bankruptcy will not have an effect on your individual retirement savings. In a Chapter 13 bankruptcy, a debtor's assets are reorganized instead of liquidated and the bankruptcy plan is funded by the debtor's wages. During a Chapter 7 bankruptcy, retirement accounts are normally exempt or not considered part of the bankruptcy estate.

11 U.S.C. 522(d)12, passed in 2005, allows up to $1,095,000 in retirement funds exempted from taxation to be retained by each spouse when a debtor files for bankruptcy. This means retirement accounts established under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code cannot be liquidated through bankruptcy without your consent. Additionally, 11 U.S.C. 522(d)10(E) protects retirement payments used to support a debtor or the debtor's dependents from being considered by a bankruptcy court. Certain retirement plans governed by Title 1 of the ERISA statute and state regulated health insurance plans are also exempt from consideration by a bankruptcy court.

If a debtor cannot exercise dominion and control over a retirement account, it will be removed from the bankruptcy estate. This means if the person filing for bankruptcy cannot access the account except at specific life events such as retirement, termination, or death, it will not be considered by a bankruptcy court. On the other hand, if the debtor has total control over a self-funded account that is not subject to one of the federal exemptions discussed above, the account will usually be considered a part of the bankruptcy estate. It is important to note that states such as California provide additional protections for an individual's retirement account which extend beyond those established by Congress.

Generally, an individual's retirement fund will be protected in almost every individual bankruptcy proceeding. If your employer files for bankruptcy, however, your retirement account might be at risk of terminating. How an employee's retirement fund is affected will depend on the type of bankruptcy a company chooses to file. If an employer files for Chapter 11 reorganization, retirement plans may continue to exist throughout the process. If instead a business files for Chapter 7 liquidation, both retirement and health plans will generally end immediately.

Even when an employer liquidates its assets and ceases to exist, a worker's pension benefits will generally be protected from business creditors. The ERISA statute requires that all retirement funds promised by an employer be held in a trust account separate from the company's business assets. Additionally, if an employer's retirement or pension plan is terminated, an employee is immediately 100 percent vested in the plan. Some defined benefit plans are also insured by the United States government through the Pension Benefit Guaranty Corporation. A skilled California bankruptcy lawyer can further explain the protections that apply to retirement accounts during bankruptcy proceedings.

Continue reading "Retirement Accounts Are Generally Protected During Bankruptcy" »

According to an analysis recently performed by Professor Ronald Mann of Columbia Law School for the National Bankruptcy Research Center, the number of Americans who filed for bankruptcy protection fell by about 12 percent last year. Approximately 1.35 million people in the U.S. filed for bankruptcy in 2011. In 2010, that number was 1.5 million, or one out of every 150 people. Additionally, Chapter 7 filings declined by 17 percent and Chapter 13 filings were down 25 percent. The decline was the first drop in the number of U.S. bankruptcy filings since 2006.

However, California did not fare as well as the rest of the nation. One in every 120 Californians filed for bankruptcy protection in 2011. California had the fifth-highest statewide bankruptcy rate in the nation. The state with the highest bankruptcy rate was Nevada. Even after a 20 percent decline in filings from 2010, one in 88 Nevada residents filed for bankruptcy protection in 2011. Two California counties, San Bernardino and Riverside, were among the top five urban counties for highest bankruptcy rates nationwide. The remaining three counties are home to the cities of Memphis, Tennessee, Atlanta, Georgia, and Las Vegas, Nevada.

Unlike 2010 when regional variations existed, the decreases in bankruptcy filing rates in 2011 were spread out across the nation as a whole. Only the State of Delaware experienced an increase in personal bankruptcy filings last year. Professor Mann was careful to warn against reading too much into the 2011 bankruptcy rate decline. Because bankruptcy filing rates increased during the last two months of 2011, he believes bankruptcy filings may again be on the rise in 2012.

An individual, or debtor, who seeks to regain control of their finances through bankruptcy will generally file for Chapter 7 or Chapter 13 protection. In a Chapter 7 bankruptcy, a debtor's nonexempt assets are liquidated at the direction of a bankruptcy court in order to satisfy creditor claims. Any remaining claims are then discharged and the debtor is no longer personally liable for the debt. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires a bankruptcy court to determine whether an individual consumer debtor qualifies for relief under Chapter 7. If the debtor's income is too high, he or she may not be eligible for Chapter 7 relief.

A Chapter 13 bankruptcy focuses on reorganization and is designed for an individual debtor who has a regular source of income. A debtor must make regular payments according to a bankruptcy plan and is protected from garnishments, lawsuits, and other creditor actions. After the plan is completed, any remaining debts are discharged. This type of bankruptcy is more common among homeowners. The bankruptcy process is complex. If you are struggling financially, it is a good idea to contact an experienced bankruptcy attorney to discuss your options.

Continue reading "Personal Bankruptcy Filings Fell Nationwide, Still High in California" »

When a husband and wife face a relatively simple divorce (e.g., no children and little assets or liabilities) they can agree to be financially liable for debts that each person incurred (i.e., the legal terms for obtained) on his/her own. So, neither person is jointly liable for any of the other person's debt. For example, if the husband stops payments on his credit card bill, the credit card company may not seek payments from his former wife since she was not on her former husband's account. In this situation, if either of the formerly-married persons made the decision to file for bankruptcy, the divorce does not have an impact on bankruptcy procedure. If either or both of them qualified for chapter 7, they could do so and not be concerned about their prior divorce.

Another situation that may come up in divorce and bankruptcy situation is when the couple have joint debts (i.e., they are both financially liable for a specific debt). For example, they are joint account holders of credit cards, or under the Family Purpose Doctrine, they are jointly responsible for a debt. In some states, this type of scenario may come up when a former spouse incurs medical fees during marriage, which is generally treated as a joint or shared debt. So, her husband is legally responsible for those debts as well if the wife goes through medical procedures and cannot make payments.

Generally, it is not abnormal for a divorcing couple to find out they are financially liable for a debt and they are mandated to hold each other harmless from liability on that debt. In such circumstances, the court does not change the rights of the creditor. Stated otherwise, if both husband and wife are liable for a debt (i.e., it is a joint debt) and the court enters an order making only one of them responsible for that debt and to "hold harmless" the other former spouse, the following situation may occur:

If the husband fails to make payment to the creditor, the creditor has the legal right to contact the husband's former wife for payment. The creditor can also file a lawsuit against the wife in order to collect the debt. The wife may have no remedy or recourse against the creditor; however, she does have recourse against her former husband. Stated otherwise, she can request the judge to hold the former husband in contempt, due to his failure to follow the court's order to hold her harmless regarding the specific debt.

The option of which type of bankruptcy to file is fairly important in this situation. Please note that chapter 7 bankruptcy does not discharge or wipe out debts that are incurred in the course of a divorce or separation agreement. In other words, if the former husband files for bankruptcy relief under chapter 7, any debts that he was responsible for in his divorce will not be discharged. But under chapter 13, a person who owes a large amount of debt that he/she was responsible for in their divorce, can deal with such debts through a repayment plan.

In this scenario, if the former husband files bankruptcy under chapter 13 and lists his former wife as a creditor and co-debtor, and if he complies with his confirmed repayment plan, then at the conclusion of the repayment plan he will not be responsible for "divorce debt." Also, the court which was administering the divorce should not find the former husband in contempt, as long as the specific debt constitutes property settlement and is not child support or alimony.

This situation may apply to either of the spouses, i.e., the former husband or wife. If either person is liable for the debts of the other, stemming from their divorce settlement, a chapter 13 bankruptcy allows them to discharge that debt. However, a chapter 7 bankruptcy does not, and it permits the court to hold the non-paying spouse in contempt.

Please remember that debts regarding a domestic support obligation, such as child support or alimony, will not be discharged in chapter 7 or chapter 13. These types of debts can be repaid via chapter 13 bankruptcy. For more information on this topic, please contact Salar Atrizadeh, Esq. or visit the law firm's website at www.atrizadeh.com.

The potential value of the Hostess name and how Twinkie, Ding Dong or Wonder Bread could be repurposed into other consumer products was being assessed as Hostess Brand filed for bankruptcy this last Wednesday.

For the time being, Hostess will continue to produce Twinkies, but some experts are concerned about whether the company can survive. This is Hostess Brands' second trip in bankruptcy court where it resurfaced in 2009 after a four-and-a-half year corporate restructuring.

Throughout history, buyers have placed high bets on brand names like Borders, Polaroid and Sharper Image which continue to resonate with consumers even after the company has filed for bankruptcy and has liquidated its assets.

The National Association of Consumer Bankruptcy Attorneys ("NACBA") filed an amicus brief addressing the constitutionality of Michigan's bankruptcy specific exemption scheme in In re Schafer, No. 11-1340 (6th Cir.) NACBA's brief argues that section 522(b)(3)(A) of the Bankruptcy Code permits the states to enact whatever exemption laws deemed appropriate without regard to whether those laws are limited to bankruptcy debtors or applicable to all debtors in the state. Joining in the amicus brief were the National Consumer Law Center, Legal Services Association of Michigan, The Michigan Poverty Law Program and the Council of the Consumer Law Section of the State Bar of Michigan.

The State of California does not allow a debtor to use Federal bankruptcy exemptions under Title 11 of the United States Code ("Title 11 U.S.C.). For example, California has two sets of exemptions which can be used in a bankruptcy case. The exemptions are codified in California Code of Civil Procedure sections 703 and 704. A bankruptcy debtor is required to select only one set of exemptions. Click here to read the California exemptions under section 703. You may also click here to review the California exemptions under section 704. If you have any questions, contact me to discuss your options and avenues.

For example, in discussing C.C.P. § 704.730(a)(3), the United States Bankruptcy Court for the Southern District of California held that, to determine Chapter 7 debtor's "gross annual income," for purpose of deciding whether debtor was entitled to enhanced $150,000 homestead exemption accorded by the California legislature to debtors who are at least 55 years old and who have annual gross incomes of no more than $15,000, bankruptcy court had to deduct from gross receipts of business that debtor operated as sole proprietorship any legitimate business expenses, without regard to whether debtor's business was service oriented or was a more capital intensive enterprise, such as retail sales. See In re Bush, 346 B.R. 207. Generally, gross annual income has been interpreted as income from debtors gross receipts if he/she owns a business reduced by the expenses of that company. Gross annual income is the functional equivalent of "adjusted gross income" as used for computing taxes, i.e., wages, salaries, etc. or other income less the variety of possible deductions. See Shelly v. Kendall (In re Shelly), 184 B.R. 356, 358 (9th Cir. BAP 1995) affd. 109 F.3d 639 (9th Cir. 1997).

On November 28, 2011 American Airlines filed for bankruptcy protection under chapter 11. The filing by the AMR Corp. and its subsidiaries, including, but not limited to, American Airlines and American Eagle, resulted from unsuccessful attempts to win labor concessions. The bankruptcy filing listed $24.7 billion in assets and $29.6 billion in liabilities or debts.

The filing allows American to continue normal business operations during the restructuring. At the hearing, the bankruptcy court approved the debtor's requests to pay its employees, resume with its customer programs, and pay vendors critical to maintaining its daily business operations.

It seems clear that the cost gap between the airline and its competitors was indefensible. It is also clear that since 9/11, the economic climate has been most uncertain, oil prices remain high and volatile, which may have ultimately caused American Airlines to file for bankruptcy protection.

In the court papers, the company listed as its unsecured creditor Wilmington Trust Corp., which is the trustee for holders of $460 million in 6.25 percent convertible senior notes due in 2014. On September 27, 2011, the company sold $725.7 million of 10-year bonds backed by aircraft to refinance maturing debt. Also, this debtor paid the highest interest rates since 2009 to raise the cash.

Hopefully, with the economic recession coming to an end, the airlines can recover from the bear market that we are facing at this time.

The United States Bankruptcy Court required additional information from the trustee in the winding down of MF Global, to determine whether the trustee has a conflict of interest. In the case, the bankruptcy trustee has been accused of having a conflict because of prior work done for JPMorgan Chase & Co, which was one of the key lenders to MF Global. However, the trustee's law firm disclosed that it was hired by JPMorgan sometime between 2009 and 2010, and that the related income was less than 1/10 of 1% of the law firm's annual revenue.

In the legal profession, conflicts of interest are not uncommon. However, a bankruptcy trustee should be careful not to engage in conduct constituting conflict of interest with any of the bankruptcy debtors or businesses that file for bankruptcy. A conflict of interest can be a financial interest in any creditor or business of a bankruptcy or even knowing a bankruptcy debtor filing for bankruptcy. It is unethical for a bankruptcy trustee to administer a bankruptcy estate if he has a personal interest in the outcome of the bankruptcy case.

A trustee must be knowledgeable of all applicable laws, including, but not limited to, 11 USC § 701(a)(1), § 101(14), and § 101(31), and must decline any appointment in which the trustee has a conflict of interest or lacks disinterestedness. A trustee should a procedure to screen new cases for possible conflicts of interest or lack of disinterestedness when he or she is appointment.

If a trustee discovers a conflict of interest or a lack of disinterestedness after accepting the appointment, the trustee should immediately file a notice of resignation in the case. Generally, conflict waivers by either the debtor or creditor are not effective to prevent the trustee's duty to resign.

The U.S. Supreme Court has declined to hear a bankruptcy case in which a lender had contended that it did not violate the automatic stay in bankruptcy when it exercised its rights under the Real Estate Settlement Procedures Act ("RESPA") and reanalyzed a debtor couple's escrow account to determine how much money the couple needed to deposit to cover taxes assessed after they had filed their bankruptcy petition (Countrywide Home Loans Inc. v. Francisco Rodriguez, No. 10-1285, Chapter 13, U.S. Sup.; See 7/6/11).

After Francisco and Anna Rodriguez filed for Chapter 13 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey, the couple filed an adversary complaint against their lender, Countrywide Home Loans Inc., contending that it had violated the automatic stay by requiring them to deposit more money into their escrow account.

The bankruptcy filing by Jefferson County that includes Birmingham is the largest ever municipal bankruptcy. According to sources, county commissioners decided to declare bankruptcy because creditors balked at economic concessions outlined in a September deal.

The county is facing $4.23 billion in debt, according to the Birmingham News. The largest creditor, JPMorgan Chase & Co., owns about $1 billion of the county's $3.14 billion in sewer construction bonds. Reuters says the sewer bonds had soured in the mid-2000s amid corruption that led to bribery and fraud charges.

The county, listed assets and debt of more than $1 billion in Chapter 9 bankruptcy petition filed on November 9, 2011 in U.S. Bankruptcy Court in Birmingham.

The threat of bankruptcy has loomed over the county for more than three years and inspired provisions in the federal Dodd-Frank law seeking to protect localities from complex financial trades involving derivatives.

Our blog readers should know that there may be alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may be able to remain in business and avoid liquidation (i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors). If so, then you should consider filing a bankruptcy petition under chapter 11 of the Bankruptcy Code. In a chapter 11, a debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Also, sole proprietorships may qualify for relief under chapter 13 of the Bankruptcy Code. The sole proprietorship is the oldest, most common, and simplest form of business organization. It is a business entity owned and managed by one person. It can be organized very informally, is not subject to much federal or state regulation, and is relatively simple to manage and control. The prevalent characteristic of a sole proprietorship is that the owner is inseparable from the business. Because they are the same entity, the owner of a sole proprietorship has complete control over the business, its operations, and is financially and legally responsible for all debts and legal actions against the business. Another aspect of the "same entity" aspect is that taxes on a sole proprietorship are determined at the personal income tax rate of the owner. In other words, a sole proprietorship does not pay taxes separately from the owner.

Another alternative to filing bankruptcy may be (i) out-of-court agreements with creditors; or (ii) debt counseling services. Our readers should contact a law firm that is experienced in negotiating with creditors in reducing debts.

Please click here to contact us for a free consultation.

Bankruptcy filings continue with their decrease for the first half of year 2011. However, this does not mean that our economy is getting better. In fact, the decrease in consumer bankruptcy filings, may show that unemployed individuals are too broke to file.

Based on recent statistics, it shows that bankruptcy filings fell by 8 percent in the first six months of 2011 compared to the first six months of 2010. Some experts contend that if we see an increase in bankruptcy filings, it may be a sign that our economy is improving. Approximately 15 million in America are currently unemployed and probably need to max-out their debts in order to survive the recession. See the United States Department of Labor Bureau of Labor Statistics. As such, they may be holding off on filing for bankruptcy until they secure employment. Another expert believes that people tend to file when they return to work to have a fresh start which is one of the benefits of filing for bankruptcy.

There are several different options for filing a bankruptcy petition which is an application by a debtor (or his/her creditors) to a court to declare the debtor bankrupt. This depends on the debtor's financial status and ultimate goal. For example, Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases are commonly referred to as "straight bankruptcy" or "liquidation" cases, and may be filed by an individual, corporation or a partnership. Under Chapter 7, a Trustee is appointed to collect and sell all nonexempt property and to use any proceeds to pay creditors. In the case of an individual, the debtor is allowed to claim certain property as exempt. Chapter 7 individuals may receive a discharge, which means that the debtor does not have to pay certain types of debts. Corporations and partnerships do not receive discharges. Consequently, any individuals legally liable for the partnership's or corporation's debts will remain liable. Therefore, individual bankruptcies may be necessary as well as the corporation or partnership bankruptcy. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

In addition, Chapter 13 is the debt repayment chapter for individuals with regular income whose debts do not exceed $1,441,875. Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and secured debts are less than $1,081,400. See 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. This chapter is not available to corporations or partnerships.

Chapter 13 generally permits individuals to keep their property by repaying creditors out of future income. Chapter 13 debtor proposes a Repayment Plan which must be approved by the Court. The amounts set forth in the Plan must be paid to the Chapter 13 Trustee who distributes the funds for a small fee. Many debts that cannot be discharged can still be paid over time in a Chapter 13 Plan. After completion of payments under the Plan, Chapter 13 Debtors receive a discharge of most debts.

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Click here for more information about bankruptcy.

Be as it may, no one can deny the fact that the global economy, including, but not limited to, America's current financial status is in dire straits. Therefore, it is important to learn the ways to avoid a personal financial crisis before it happens. Please contact us for a free consultation.

Click here if you want to research bankruptcy statistics by type (i.e., chapter of the bankruptcy code) and the rate per 1,000 population.

With the legal sparring between Lehman Brothers Holdings Inc. and SunCal taking a new, nasty turn in California, Lehman is turning to a New York bankruptcy judge to block the real-estate developer from attempting an "end-run" around the court's previous rulings.

Lehman Brothers is accusing SunCal of playing "Russian roulette" in its cross-country legal fight with Lehman and is asking Judge James Peck of the U.S. Bankruptcy Court in Manhattan to enforce the automatic stay in its Chapter 11 case. That request, if granted, would bar the California developer from challenging more than $100 million in claims Lehman has asserted against the SunCal projects in their California bankruptcy cases.

Lehman's filing Tuesday in New York came the same day as SunCal took control of three other developments it had begun with Lehman's backing that had been mired in bankruptcy for more than two years. SunCal, which picked up the properties at a bankruptcy auction for $71 million, took the opportunity to criticize Alvarez & Marsal, the restructuring firm unwinding Lehman's estate, for blocking its attempts to bring the California projects out of bankruptcy.

Read more here.