Logo for Harris Law website

6151 Lakeside Dr.,  Suite 2100
Reno, NV  89511

Reno Bankruptcy Attorney

Stephen R. Harris, Esq.

Providing Financial Protection

for 46 Years

There is nothing easy about making the decision to file for bankruptcy. I welcome the opportunity to speak with you personally and confidentially to help you find the ideal solution to your financial challenges.

The Chapter 11 Bankruptcy Process Can Be Scary

The Chapter 11 Bankruptcy Process Can Be Scary

In general the filing of a chapter 11 bankruptcy is complicated, time-consuming and expensive.

Complications of the Governing Provisions

The Chapter 11 bankruptcy process is complicated because the governing provisions for a Chapter 11 are found in section 1101 through 1146 of the bankruptcy code.  With the overlay of what can and cannot be done set forth in section 101 through 112 [General Provisions], section 301 through 308 [Commencement of the Case], section 321 through section 333 [Officers], section 341 through section 351[Administration], section 361 through the section 366 [Administrative Powers], section 501 through section 511 [Creditors and Claims], section 521 through section 528 [Debtors, Duties and Benefits], section 541 through section 562 [Estate].

The filing of the Chapter 11 bankruptcy petition, by an entity or individual, is governed by section 301.  Following the filing of a voluntary petition for Chapter 11 bankruptcy relief, there is normally set by the U.S. Trustee’s office a Section 341 first creditors meeting, scheduled to take place 4 to 5 weeks after the petition filing.  In between the petition filing and the noticed section 341 first meeting of creditors,  the initial debtor interview, is conducted at the bankruptcy court by US Trustee’s office.

Which is essentially an informal office interview where the debtor provides business records for his business and personal activities, bank statements 3 to 6 months previous to filing, evidence of insurance, available and most recent financial statements, and the last 2 to 3 years income tax returns.  All of these business records are then reviewed by the bankruptcy analyst working for the U.S. Trustee’s office.

The initial debtor interview is usually attended by the debtor and the debtor’s attorney, and answers given at the IDI meeting are usually not under oath, and lead to further questioning by the US Trustee’s attorney representative at the section 341 first meeting of creditors.  

After the section 341 first meeting of creditors is concluded by the US Trustee’s office representative, then creditors have an opportunity to ask factual questions about assets and liabilities for debtor’s business affairs.  Following conclusion of the section 341 meeting, the debtor has the exclusive time period to file a plan or reorganization of 120 days, followed by another 60 day exclusive of time period to gain confirmation of the plan of reorganization that is timely filed by the debtor.  

In the case of small businesses, under section 1121, the requirement is for the debtor to gain confirmation of plan within 300 days from the date of petition filing, unless extended by the court.  Additionally, there may be a 90 day limitation to file a plan reasonably capable of being confirmed in the case of a single asset real estate case.  See Section 362.

Filing of the Disclosure Statement in Chapter 11 Bankruptcy

After that debtor timely files its plan of reorganization, the debtor also files a companion pleading called a disclosure statement, which disclosure statement is noticed for hearing under section 1125 of the bankruptcy code, seeking a court order  decreeing the existence of the adequacy of the information in the disclosure statement, which is a requirement before debtors are allowed to solicit their plan of reorganization.  

Once the court enters its order approving of the adequacy of the information contained in the disclosure statement pursuant to section 1125, the debtor can proceed to notice a confirmation hearing under section 1129(a)  and (b) of the bankruptcy code.  The confirmation hearing is the ultimate goal for a debtor filing the Chapter 11 plan, for a confirmed plan dictates creditors repayment schedule, which payment obligations must be strictly adhered to  by the debtor and accepted by a creditor on certain terms and conditions set forth in the confirmation plan.

Timing the Chapter 11 Bankruptcy Filing

Timing may be a critical element in bankruptcy filing for number reasons.  Some reasons may affect your individual situation. Your attorney will be aware of the subtle details that might because you to delay the filing date. If these circumstances apply to you, talk with your attorney. Here are some of the important ones:

  • If you have repaid debt to family members or insiders during the past year, you may want to wait for a year to pass so you protect them from having to repay money to the estate.
  • If you expect to receive a large income tax refund or other payments, you might want to wait until you receive that money. If you file for bankruptcy before you receive the money, that money will become part of the bankruptcy estate and it will potentially go to the trustee not to you.
  • If you have recently incurred debt, especially credit card debt, you may want to wait in till some time passes so that the creditor will not try to claim fraud. The creditor may want to try to stop you from including that debt in the bankruptcy and receiving a discharge.
  • If you have recently lost your job or have a major reduction in your income, waiting a few months may make passing the means test much easier. The means test is based on your average income for the last six months before filing the petition, so if you have a few months of lower or no income, it will reduce your average monthly income for these 6 months.
  • If you’re considering divorce, talk with your attorney to see when the most advantageous filing date would be appropriate.
  • If you owe taxes that are more than three years old, it’s possible some of that tax burden may be dischargeable after a specific date also.
  • In Nevada, there is a homestead exemption of $550,000 if you purchase the home more than 1215 days ago prior to the petition filing. If you purchased it less than 1215 days prior to the petition filing, the homestead exemption is then set at $155,675.  So waiting past that 1215 day may be worth the difference in dollar savings to you.
  • If you think you’ll have large medical bills due in the near future, it may pay to wait at until after those bills were incurred to include them in the bankruptcy. You won’t be able to file another bankruptcy for least eight years.
  • Your debts will not be wiped out if you have filed a previous Chapter 7 case in the last eight years, or four years for chapter 13 case.

In many of these cases a few days, a week or a month mean the difference of thousands of dollars in assets that you may have to give up or may be able to keep.

I had a case where a husband and wife couple came in to consult with me that had over $2 million in their bank accounts, but were going to owe much more than the $2,000,000 in debts after 1 or 2 years when   their creditors’ claims matured.  They had transferred most of the $2,000,000 to potentially exempt assets beyond 2 years of their filing, therefore, they did not have to report on Question 10 of the statement of affairs that they transferred assets in the 2 year time frame before filing the petition.  

If asked about the transfer in the 341 meeting, they would have to disclose the transfers because it happened within 4 years. As luck would have it, the bankruptcy trustee and creditors that did attend the section 341 first meeting of creditors did not know of the transfers beyond the 2 year period, having failed to request records of the debtors that reflected that the $2 million had been transferred to other asset forms many years before the bankruptcy filing.  

If there is no questions asked about the time period after 2 years before filing the petition, and if there were no transfers within the two-year time frame of filing the petition that would be reportable under question number 10, there is no obligation on the part of the debtors to volunteer information relative to transfers that happened in year 3 and year 4 or other years beyond 4 years. 

Therefore, in this instance, silence is golden.  Had bankruptcy trustee or creditors asked about transfers in years 3 and 4 prior to petition filing, they would have found out about transfers to entities that were arguably exempt, or excluded assets, thereby triggering issues on the avoidance of these years 3 and 4 transfers under section 544, and the need applicable State of  Nevada uniform transfer act.   

The 9th Cir. previously held that transfers of nonexempt property to exempt property are not prohibited, so long as it is done not to defraud or hinder on delay creditors.  If transferring non-exempt to exempt property within 6 months of filing is considered an act in furtherance of defrauding creditors, one must wait for 1 year, 2 years or more. The Ninth Circuit case site for transferring nonexempt and exempt is Sherwood.  That case essentially held that transferring non-exempt assets to exempt assets status is legal, so long as it is done without the intent to defraud creditors.

Summary

All of the above examples perfectly illustrate why it is absolutely mandatory that you hire an experienced bankruptcy attorney to steer you through a chapter 11 bankruptcy case. I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.

Bankruptcy: Who Are the 4 People Important to You During Your Filing?

Bankruptcy: Who Are the 4 People Important to You During Your Filing?

Your Bankruptcy Attorney

It is imperative that you have an attorney to deal with the current bankruptcy laws. In almost all cases, an experienced attorney will save you at least the amount of their fees by avoiding pitfalls that you will inevitably make trying to do it yourself. Your attorney will become your direct interface with the other players in the bankruptcy process and will keep the interaction that you have with the other players to a minimum.

Insist on an experienced bankruptcy attorney, not a credit counselor, debt counselor or paralegal.

After you have settled on an attorney to handle your filing, it is important that you be candid, honest and straightforward with him. This is the only way in which your attorney can provide the best outcome for your individual circumstances. Remember, your bankruptcy attorney is not going to assist you in hiding assets or fail to disclose assets.

Once your attorney has all the facts of your specific situation, he or she will spend a great deal of time discussing whether Chapter 7, Chapter 13 or Chapter 11 is the best way for you to proceed. He or she will discuss the advantages and disadvantages of each kind of bankruptcy. Therefore it is so important for you to disclose all accurate facts and circumstances of your case with your attorney.

The best method of finding a reputable, competent lawyer is through a referral. If you know an attorney who does not handle bankruptcy, ask them to recommend a specialist. They will tend to recommend someone that they respect. Ask any friends or relatives who may have filed bankruptcy about their past experience with their attorney. Go interview those referred attorneys to see what your comfort level is with them. Many times the initial consultation is free. Be sure you talk directly with the attorney that would handle your case, not an assistant or paralegal.

There are several reasons to hire a local bankruptcy specialist:

  1. Your attorney will have knowledge of the policies and procedures of your local bankruptcy court. Even though the bankruptcy law is nationwide, how things are handled, and local customs vary in each jurisdiction. Also, the state law on exemptions may dictate the guidelines of your specific case.
  2. Your attorney will help you with pre-filing guidance. He or She will point out things to do and things to avoid prior to filing.
  3. Your attorney will help you with timing issues. There are many deadlines both before and after filing that can become critical to a successful bankruptcy. Poor timing can cost you thousands of dollars. Only experience will help you avoid disastrous pitfalls.
  4. Your attorney can help you with tax issues. Regardless of when you file, the tax clock will always be ticking.
  5. Your attorney will protect you from creditor claims. Sometimes creditors will not agree with you on repayment plans, exempt property issues, fraud claims and other issues. Your attorney will know how to best shield you from these claims.
  6. Your attorney will help you determine the best kind of bankruptcy to file considering your individual financial circumstances.
  7. Your attorney will help you complete and file the bankruptcy documents and pleadings required by the Court.
  8. Your attorney will represent you at the 341 first meeting of creditors hearing and the planning for it.
  9. Your attorney will keep your filing from being denied or revoked or dismissed.
  10. Your attorney will guide you through the endless minefield of Chapter 11.
  11. Your attorney will help you propose a Plan of Reorganization that will allow you to potentially retain valuable assets, assuming the value of the assets are paid for through Plan Payments, and to hopefully to receive a discharge of all the unpaid obligations at the end of Chapter 11 Plan repayment period.
  12. Your attorney might guide you in the timing for filing, such as any potential re-payment of loans to non-insiders or insiders are beyond the applicable time limitations found in §547 of the Bankruptcy Code.
  13. Your attorney can legally assist you in legally redeploying assets from non-exempt holdings to exempt holdings.

The Bankruptcy Judge

In most cases you may never even see the US Federal Bankruptcy judge where your case is assigned. Bankruptcy Judges are appointed to 14-year terms. Most of them are well versed in the intricacies of bankruptcy law and are quite competent and conscientious. Most issues are resolved by negotiation with bankruptcy case trustees. The judges are usually called into play to make decisions over problems and disputes.  The judges may make decisions on creditor’s objections to proceedings. He will approve leases and sales requests. Their decisions can be reviewed by U.S. federal judges.

Bankruptcy Trustees

Other than your attorney, the bankruptcy trustees are the real work horses in the process. In Chapter 7 cases, the bankruptcy trustee’s primary job is selling non-exempt property and distributing the proceeds to your creditors, if there are any non-exempt properties.  In over 90% of Chapter 7 cases, there are not any assets that are liquidated, because all of them are exempt or not worth the trouble to liquidate. The trustee is compensated on a commission basis of how much money they collect and pay creditors, as directed by the Bankruptcy Code.

The trustees and their staffs will review your bankruptcy documents and pleadings and ask you questions in a 341 meeting (more later) to determine whether any assets can be sold to pay some or all your debts. He may also gather monies from tax refunds, or divorce property settlement you may have received and collect inheritances you may be entitled to collect in the six months after filing. He may also ask you about any payments or transfers of assets that are made within two years prior to your filing to see if he can recover additional monies for creditors.

The standing bankruptcy trustee’s job in a Chapter 13 case is a bit different from Chapter 7 cases. They also ask you questions about your assets and expenses. They’re trying to assess whether your repayment plan meets the court’s requirements and assess how likely it is to succeed.  Specifically, the standing trustee’s mission is to collect the monthly payments that you make under the repayment plan and distribute them to creditors.

Creditors

After your bankruptcy filing date, you probably will have very little to do with your previous creditors. Sometimes they will attend the 341 meeting, where they can ask questions on your assets and liabilities, but typically few actually do. Most contact is handled by the trustee or your lawyer. Occasionally a creditor will hire their own attorney to protect their claim, where there are substantial assets in a Chapter 13, or 7 or 11 case. After you file, all creditor’s collection activity will stop or be stayed, so you will not hear from them.

I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.

Chapter 7 Bankruptcy: What Other Personal Bankruptcies Are There?

Chapter 7 Bankruptcy: What Other Personal Bankruptcies Are There?

Depending on your individual circumstances, choosing which kind of bankruptcy to file can be very difficult. Let’s look at some of the factors that may help you make the right decision.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy allows a person to keep all their exempt assets and discharge their debts. The trustee is appointed to gather all the nonexempt assets, sell those assets, and distribute them pro-rata to the creditors.

Chapter 7 bankruptcy may be your best choice under the following circumstances:

  • If all the property you have is exempt under both state and federal bankruptcy laws. In other words, you do not have assets that you will have to give up. Over 90% of all bankruptcy cases are this variety.
  • You are current on your home and automobile payments before filing for bankruptcy.
  • You are willing to give up your house and automobile before filing bankruptcy.
  • You do not have any extra funds left over each month after paying all your expenses. In other words, you don’t have money to reclaim assets like in a Chapter 13 bankruptcy case.
  • You don’t have a previously discharge chapter 7 bankruptcy, or chapter 13 bankruptcy in the last eight years.

If you qualify for chapter 7 bankruptcy under the means test and Median test, you give up all your nonexempt assets, and keep those that the law allows. This option gives you a new and clean start without the pressures and anxiety hanging over your head.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to make partial payments to your creditors for 3 to 5 years and obtain a discharge of all your remaining debts. Chapter 13 in many instances will allow you to retain some or all your non-exempt assets, as long as you pay for the value of those nonexempt assets in your Chapter 13 repayment plan. Chapter 13 will also allow for liens and liens strip downs under certain circumstances. Chapter 13 allows “first aid” pursuant to section 362 of the bankruptcy code, in that any foreclosures at the time bankruptcy filing are stayed until future order of the bankruptcy court.

Chapter 13 bankruptcy is probably your best choice under the following circumstances:

if you need time and/or have adequate income to pay passed bills.

  • You need time to catch up on back mortgage payments. Chapter 13 repayment plans give you 3 to 5 years to make up your arrears.
  • You need time to pay off old tax debt without penalties in interest. This can be a huge savings under some circumstances.
  • You need time to pay alimony and child support that is best due.
  • You already received a discharge in a bankruptcy case within the last eight years.
  • You may be able to reduce payments on unsecured loans to the value of the collateral, and not the full amount of the loan. For example, you may owe $15,000 on automobile, but is currently worth only $10,000. So, you might get relief of the $5,000 difference.
  • You will get to keep the nonexempt property by making payments on it through your Chapter 13 repayment plan.
  • Any cosigners of your debt would be spared the harassment of bill collectors by making payments through your plan.
  • You may back of out of a chapter 13 plan and take another route without the court’s permission. A big part of choosing Chapter 13 depends on your income. Many Chapter 13 repayment plans are proposed with too much optimism. Only about two thirds of Chapter 13 plans are fulfilled. Most of those failed plans are forced into Chapter 7 or the bill collectors come back with a vengeance since you are no longer protected by the bankruptcy automatic stay provisions.

Chapter 11 Bankruptcy

Chapter 11 is your best choice if you have a business and/or substantial assets and want to continue in business. The Chapter 11 also gives you the most flexibility in negotiations. You can also withdraw from the Chapter 11, which would put you back to where you were with creditors before filing.

Chapter 11 filings allow individuals and business entities to file for reorganization, thereby allowing the petitioner to repay their general unsecured debt in their priority unsecured debt such as taxes, and their secured debts over a period, such as five years. Chapter 11 petitions also invoke the provision of 1129(b) Chapter 11 filings are known for “cram downs,” which allows a treatment term and for interest rates to imposed on a security and or unsecured creditors over their objection.  Thus, cram down or forced acceptance under certain terms and conditions are set forth in section 1129(a)(b) of the Bankruptcy Code.

The provisions of the Bankruptcy Code governing Chapter 11 filings also allows for repayment of tax debt over a five-year period commencing on the date of assessment. Further, bankruptcy court has the authority under section 507 to determine the validity, extent and amount of tax claims. In the instance of an individual filing Chapter 11, relief or a partial discharge of debt is allowed if the individual debtor contributes to disposable income, over five-year plan.

The best next move is to call an experienced bankruptcy lawyer for a free and confidential consultation, such as Harris Law in Reno, Nevada at (775) 786-7600 or (775) 690-9120 anytime.

Bankruptcy: The Main 3 Types of Chapter Filings

Bankruptcy: The Main 3 Types of Chapter Filings

Why are there different kinds of bankruptcy? The United States Bankruptcy Code is broken up into several chapters, and each chapter was created to adapt to the circumstances of specific kinds of entities and individuals.  The bankruptcy chapters  that concern us here are for individuals and various kinds of business entities.

Chapter 7 – Straight Bankruptcy and Return of Exempt Properties Only

Chapter 7 individual bankruptcies allow the person filing for bankruptcy to keep all their exempt assets (assets so designated from being taken by creditors or the bankruptcy trustee) and discharges all their debts. For the bankruptcy trustee, the goal of Chapter 7 is to liquidate all of the nonexempt assets belonging to the bankruptcy estate.  Specifically, the bankruptcy trustee is appointed to gather all the nonexempt assets and sell those assets and distribute them pro rata to the creditors.

Chapter 7 filings can also include corporations and limited liability companies, general limited  partnerships and similar corporate businesses . The primary goal of the Chapter 7 is to discharge all of your outstanding debt that is eligible.  There are a number of rules of the bankruptcy law that limit your ability to do this and we will discuss some of those limitations in later chapters.

The chief reason many people file bankruptcy is to stay a foreclosure action on their home or investment property. The bankruptcy forestalls action and gives the debtor time to work out solutions to the impending foreclosure.  Another chief reason is to stay a lawsuit and  to remove it into the bankruptcy court.

Chapter 13 – Reorganizations for Individuals Only With Limited Claim Amounts

Chapter 13 filing is for individuals only, but there are strict eligibility requirements. You cannot have more than $383,175 in general unsecured creditor claims, or you cannot have more than $1,149,525 in secured claims. If you have more debts in either of these categories, you’re not eligible for a Chapter 13 filing.  

The primary goal of Chapter 13 is to keep significant nonexempt assets from being taken. For example, in Nevada, real estate prices in some cases fell as much as 50%. If you had relinquished these real estate assets in a bankruptcy near the bottom of their valuations, you would not have been able to reap the benefits of the significant rebound in the last 36 months. The assets would be gone and you would not have regained their value for sale at a later date.

Chapter 13 allows you to make partial payments to your creditors for 3 to 5 years, and it is aimed at discharging all of your remaining unpaid debts at the end of the repayment period. Chapter 13, in many instances, will allow you to retain some or all of your nonexempt assets, so long as you pay for the value of those nonexempt assets in your Chapter 13 repayment plan. Chapter 13 cases also allow for modification of secured debts, including lien stripping and lien strip downs under certain circumstances.

Chapter 13 is a filing that also allows protection from creditors’ collection actions pursuant to section 362 of the Bankruptcy Code, including a stay of any foreclosures pending at the time of the bankruptcy filing, until further orders of the bankruptcy court.

Means Testing

Since the rewriting of the Bankruptcy Code in October 2005, known as Bankruptcy Abuse Prevention and Consume Protection Act (BAPCPA), there have been significant changes in the Bankruptcy Code, making it harder for individuals to discharge their debt if they exceed certain income limitations. The 2005 bankruptcy law set up a requirement for “means testing”. It specified income limitations that dictated whether or not an individual must “means test” in a Chapter 7 or Chapter 13 filing.

The essential idea for means testing is that a formula determines whether you really can afford to pay some money to your creditors. If your “means test” indicates that you have surplus disposable income, your only option is to pay a portion of your debts in a three to five-year Chapter 13 plan. In Chapter 7, your debts are simply discharged by turning over any nonexempt property. If you failed to means test by earning too much to qualify for a Chapter 7, your Chapter 7 case can be dismissed by the court or alternatively, you may elect to convert to Chapter 13.

In the event of a single individual filing for bankruptcy, the limit of the dollar amount limitations on means testing is currently $42,988, which means that you will have to complete the means test analysis if you have annual gross income in excess of this amount.

For a family of two, the limitation is $56,160; for family size of three people, the limitation is $56,160; and for family of four people, the means testing amount is $62,636.

Social Security benefits are not counted for the purposes of the means test. Other income that is not counted toward the means test is payments to victims of war crimes or victims of terrorism. Just about everything else is considered income, whether it’s taxable or not, including wages, salary, fees, commissions, bonuses, retirement income, tax refund, income from business dealings, sale of assets, net rental income, your share of partnership income, inheritances, support payments, awards, prizes, gifts, insurance payments and services.

There is one major exception to the means test. That is, if more than 50% of your debt is for business debt, the petitioner does not have to comply with the means test. For example, I had an airline pilot who worked for a major airline, and he made in the neighborhood of $285,000 a year, and his annual expenses after taxes, were only about $80,000 to $100,000.

Therefore, he had about $4,000 to $6,000 a month in surplus income to pay creditors.  Since more than 50% of his debt was business-related, he did not have to comply with the means test requirements, which means he had $4,000 to $6,000 surplus income per month with which he did not have to pay his creditors.

Median Test

The first thing that you need to know is that the odds are you probably won’t have to take the means test at all, provided you pass the “median test”. The median test says if your income for the six months preceding bankruptcy is less than the median income for your state, then you’re home free. The basic theory behind the median test is that a debtor earning more than the median income should not be able to simply walk away from  his or her debts in Chapter 7, if they can pay a significant amount under a Chapter 13 repayment plan for three to five years. 

If you earn less than the median income, you don’t have to worry about the means test.  Again, the number one goal of means testing  is to force debtors to repay a portion of the outstanding debt by forcing them into a Chapter 13 bankruptcy, which requires some repayment over 3 to 5 years. 

Allowed Expenses

After you calculate your income for purposes of means testing, you just need to figure out what expenses are allowed by the court. There are certain IRS national and local standards that set forth standard expenses to determine how much expense is allowable. The allowable expenses are the amount you get to keep before making repayments of your surplus to your creditors.

Passing the Means Test by Showing Special Circumstances

Special circumstances include health insurance, disability insurance, health savings accounts, expense necessary to protect your family from domestic violence, home energy cost in  excess of IRS standards, expense for food and clothing for children above IRS standards, etc. If you have any of these, you might be exempt from the means test requirement.

Ways Around the Means Test

You might avoid the means test because of serious medical condition, call to the armed forces or special consideration for losing a high paying job.

Chapter 11 – Reorganizations for Individuals and Entities

Chapter 11 filings allow for individuals and business entities to file for reorganization, therefore allowing the petitioner to repay their general unsecured debts and their priority unsecured debts (such as taxes), over a period of time, such as five years.

Chapter 11 filings are usually for business debtors, either individuals or business entities, with business entities such as corporations, limited liability companies, partnerships etc. Chapter 11 filings are extremely complicated and time-consuming, but may be the way to go if you have substantial assets and you still want to exercise control them and survive financially.

Good example of Chapter 11 bankruptcy was General Motors, in 2008. They wanted to continue in business but needed time to reorganize their business to solve their businesses problems that lead to the downfall.  They were able to reorganize their business under the Bankruptcy Code and now are profitable organizations, employing thousands of direct employees and many more thousands of suppliers. Another example would be Enron.  Its objective was different.   Enron desired  to totally liquidate the company and its assets.

Of course, your company is probably not a massive multi-billion dollar enterprise, but you could still use the bankruptcy law to regain your financial balance, solve your creditor problems and continue in business. You can successfully use Chapter 11 bankruptcies as a strategic business tool.

Chapter 11 filings are a specialty unto their own. Most attorneys who concentrate on consumer bankruptcies have little experience in Chapter 11 cases. It is wise to seek out an attorney who has extensive experience in Chapter 11 business reorganization cases.

Experienced Chapter 11 attorneys need to be  well versed in the “cram down” provisions of the Bankruptcy Code, also called  a “forced acceptance,” which  is found in 11 U.S.C. §1129(b).  Not only are “cram down” situations involved, but an attorney must know the bankruptcy law and the bankruptcy judge to approach to contested confirmation hearing, in order to pursue reasonable loan extensions and adjustments in the interest rate.  Without knowing the relevant case law, the facts and the bankruptcy previously confirmed cases, it is impossible for an inexperience bankruptcy attorney to attempt a Chapter 11 and navigate a Chapter 11 case through the “Rocky Shoals” of Bankruptcy Law. 

In summary, the course of action involving cram down or a forced acceptance under certain terms and conditions are set forth in section 1129(a)(b) of the Bankruptcy Code. The provisions of the Bankruptcy Code governing Chapter 11 filings also allow for repayment of tax debt over a five year period commencing on the date of the assessment of the tax.  

Further, the bankruptcy court has the authority under section 507 to determine the validity, extent and amount of tax claims. In the instance of an individual filing Chapter 11 relief, a partial discharge of debt is allowed if the individual debtor contributes their disposable income over a five-year plan.

This may seem like a lot of information but it is designed to protect you. Give us a call at (775) 786-7600 or (775) 690-9120 for a free and confidential consultation to discuss your financial situation, alternatives to bankruptcy and the many details of filing for bankruptcy whether it be chapter 7, chapter 11 or chapter 13.