Filing for bankruptcy can reduce or eliminate unsecured debts such as credit card debts and medical bills. The Bankruptcy Law Offices of Stephen Johnson will use the bankruptcy laws to obtain debt relief for you.
Bold labels are required
Q: How does Chapter 7 liquidation work?
A: In a Chapter 7 case, the debtor must relinquish his or her nonexempt property to a bankruptcy trustee, who then converts the property into cash by selling it and pays the debtor's creditors from the sale proceeds. In return, the debtor receives a Chapter 7 discharge of certain debts if he or she is eligible for such a discharge, pays the filing fee, completes a personal financial management course and obeys the court's directives.
Q: Are all debtors automatically eligible for a Chapter 7 discharge?
A: No. A debtor may not be eligible for a discharge under Chapter 7 if he or she has been granted a discharge in a Chapter 7 case within the last eight years. Debtors who engage in certain fraudulent conduct related to the bankruptcy or their financial situation also may not be eligible for discharge. In addition, if the debtor refuses to answer questions or obey orders of the bankruptcy court, the court may refuse to grant a discharge.
For most consumers, life before bankruptcy is fraught with financial difficulties. It is important to remember that although bankruptcy is not the first resort, it is best not to wait too long to take action. If you are facing what seems to be insurmountable debt, contact a chapter 7 attorney at once in order to make the best of a bad situation.
The term "workout" is used to describe a non-bankruptcy negotiated modification of debt. More simply stated, a workout is an out-of-court agreement between a debtor and his or her creditors for repayment of the debts between them, which is negotiated without all the procedural complications - and perhaps the stigma - of the bankruptcy process. A lawyer at the Bankruptcy Law Offices of Stephen Johnson in Auburn, California, who is experienced in bankruptcy and debtor-creditor law, can advise both debtors and creditors in Lincoln, Rocklin, Roseville, Sacramento, Redding, Chico, Colfax, Truckee, Nevada, Yolo, Shasta, Tehama, and Amador, California about whether a non-bankruptcy workout is their best course of action.
There are a variety of reasons why a debtor might prefer a workout to bankruptcy. By entering into a voluntary agreement with creditors, the debtor avoids the stigma that attaches to bankruptcy but achieves the same results - discharge from all or a portion of his or her debts. In fact, a workout discharge can be even broader than a bankruptcy discharge. In addition, a workout discharge does not affect the debtor's rights to file a future bankruptcy, whereas certain types of bankruptcy discharges do. The main advantage of a workout is that both the debtor and the participating creditors voluntarily enter into it. In a workout, unlike bankruptcy, the majority of creditors cannot cram down concessions on dissenting creditors.
Compositions and extensions - A "composition" is a contract between the debtor and two or more creditors in which the creditors agree to take a partial payment in full satisfaction of their claims. An "extension" is a contract between the debtor and two or more creditors in which the creditors agree to extend the time for payment of their claims. An agreement may be both a composition and an extension; in other words, an agreement to accept less money over a longer period of time.
There is no requirement that all of the debtor's creditors agree to a composition or extension, but most of them must voluntarily support it for it to work. Creditors that do not agree to the workout are not affected by it and remain entitled to pursue other remedies to collect the debts owed to them. Although they can theoretically proceed to recover the full amount due, they forfeit the right to benefit automatically from whatever partial payment the composition would have allowed had they taken part.
Assignment for the benefit of creditors - An assignment may be a simpler and cheaper alternative to bankruptcy for a small business that wishes to be liquidated. The debtor assigns all nonexempt property to an assignee who acts as a fiduciary for the benefit of creditors. The assignee liquidates the assets and distributes the proceeds pro rata among creditors who have filed claims with the assignee. An assignment is voluntary, but all creditors must accept it.
Chapter 11 - Filing for bankruptcy under Chapter 11 may be an option for debtors such as corporations, sole proprietorships and partnerships that are engaged in business. These debtors may wish to stay in business and avoid liquidation. Under Chapter 11, the debtor can have debts reduced or have the time for repayment extended.
Chapter 13 - Chapter 13 may be an option for individual debtors with regular income. Chapter 13 allows individual debtors to save their homes from foreclosure by coming up with a payment plan for past due payments. Sole proprietorships may also be eligible to file for Chapter 13.
Non-bankruptcy alternatives such as compositions and extensions have several benefits. However, in some circumstances, a debtor is afforded greater protection by a formal bankruptcy, and attempting a workout may just prolong the financial agony and delay the inevitable. An attorney who has experience in bankruptcy and debtor-creditor law at the Bankruptcy Law Offices of Stephen Johnson in Auburn, California, can help both debtors and creditors around Lincoln, Rocklin, Roseville, Sacramento, Redding, Chico, Colfax, Truckee, Nevada, Yolo, Shasta, Tehama, and Amador, California determine whether a workout is the best option for debt repayment, or whether bankruptcy is the better choice in their particular circumstances. Call today to schedule a consultation.
Bold labels are required