Personal Bankruptcy Banrupsy

[Meesmom]

We need advice on which Bankrupsy we should file?
When I married my husband 7 years ago his two fast food business (One a franchise) were $40,000 in idept to his mothers estate. When she died he took out a loan & paid the debt off to his his brother & sister giving them each $20,000. Then a Casino was built and business's all over this small struggled financially to stay in business. Many have either sold or gone bankrupt. My husband has owned & managed these business's for almost 29 years! For all those years they were very profitable. He began having to barrow money here & there thinking business would pick up so he could get the debts paid off & sell. It didn't get better only worse! He is 62-yrs old & didn't plan for retirement & now we are forced into bankrupsy with no retirement for him! His thinking was much different than mine would have been. He felt that his business's were doing great & that would be his retirement! We recieved notice that the business are being auctioned off in just a couple weeks!
We were advised to seek out counsel from a paticular Attorney which we did but we are worried about his counsel! Several people have told us that he doesn't have integrity. We are 500,000 in debt, he said we need to file a chapter 13 & others think we should file a chapter 11.
Could you tell me the differece between the Two & which one would be the best! I would very much appreciate it as time is running out & we are becomming more & more confused!

 

[Michael Wechsler]

Are you filing bankruptcy for the business or personally? With a $500,000 unsecured debt, you might not qualify for Chapter 13. I'm not sure why Chapter 7 bankruptcy was not mentioned. Chapter 11 is usually commercial, from my understanding. Why are you questioning your attorney's judgment and ethics? I usually like to give the attorney the benefit of the doubt, especially if he/she might be knowledgeable in the area.

FYI, from the US Federal Court's web site, here is their explanation of the differences of various bankruptcy chapters:

Chapter 7: Often called "Straight bankruptcy" or the "liquidation chapter", chapter 7 may be filed by an individual, partnership, or corporation. Under chapter 7, a trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors according to priorities of the Bankruptcy Code. In the case of an individual, the debtor is allowed to claim certain property exempt. In exchange for this, the debtor gets 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 corporations's debts will remain liable. Therefore, individual bankruptcies may be required as well as the corporation or partnership bankruptcy.

Certain types of entities such as banks and insurance companies may not be eligible to file bankruptcy, but almost all other entities can file under chapters 7 and 11. A business that is NOT a partnership, corporation or business trust, cannot file a separate bankruptcy on its own but must be included in the personal bankruptcy of the owner(s).

Chapter 9: Only for municipalities and governmental units such as cities, schools, water districts and so on. It is designed to allow a municipality to continue operating while it works out a repayment plan for its creditors. A municipal unit cannot liquidate its assets to satisfy its debts.

Chapter 11: Often called the "reorganization chapter", chapter 11 is available to businesses and individuals who have substantial assets and/or income to restructure and repay their debts. Creditors vote on whether to accept or reject a plan of reorganization which must be approved by the court. While the debtor normally remains in control of the assets, the court can order the appointment of a trustee for cause, such as when the debtor does not get a plan approved in a reasonable amount of time, fails to follow some of the rules, or breaks the law. In addition to the filing fee paid to the clerk, a quarterly fee is paid to the U.S. Trustee in all chapter 11 cases.

Chapter 12: Often called the "family farmer reorganization chapter", chapter 12 offers bankruptcy relief to those who qualify as family farmers. There are debt limitations for chapter 12 and a certain portion of the debtor's income must come from the operation of a farming business. Family farmers must propose a plan to repay their creditors over a period of time, not to exceed 5 years, from future income and it must be approved by the court. Plan payments are paid to a chapter 12 trustee who distributes the funds to the debtor's creditors for a small fee. The trustee also monitors the debtor's farming operations while the case is pending.

Chapter 13: An individual with a regular income whose debts do not exceed a certain amount (which is adjusted every three years but is currently set at $290,525 in unsecured debts and $871,550 in secured debts) are eligible to file a chapter 13. An individual who operates a business as a sole proprietor is also eligible but chapter 13 is not available to corporations or partnerships. Chapter 13 generally permits individuals to keep their property by dedicating a certain amount of their future income for a period of between 3 and 5 years to repayment of their debts. Each chapter 13 debtor proposes a repayment plan which may call for full or partial repayment of all debts and must be approved by the court. Payments are made 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.

 

[Rathi]

I know this is a silly question, but I'm full of 'em!!
1. What's the difference between secured debt, and unsecured debt?


2. If I file bankruptcy, and owe $25,000 on my home. What if the bank, or mortgage comp., sells my home for $50,000? Or do they do that? Do they only try to sell the home for the amount owed?


3. Last one... Do I have to be proven to be "so" far in debt, before being able to file bankruptcy? I mean, if I can see, a huge hole that's about to be dug, *(loss of job, etc.), can I file before the debt grows enormous?

Told you they were silly!! Thanks for the place guys, I'm very interested....

 

[johnmeeker]

Bankruptcy

The difference between secured debt and unsecured debt is as follows. Secured debt is created when you sign an agreement (like a loan agreement) where you give the lender a "security interest" in the collateral. You borrow money to buy a car or a house and give the lender on the car a lien ususally recorded at the Department of Motor Vehicles, or in the case of a house a mortgage or deed of trust recorded in the county recorder's office.

You can file bankruptcy at any time. There may be strategic reasons for the timing of the filing. Those reasons are special to each case so there is no way to answer this question generally.

About the house. The mortgage is $25,000 and the value of the house is $50,000.00. There is one fact missing. Does West Virginia have a homestead exemption for the value of the equity in your house. Equity equals value of home minus all mortgages. If there is equity greater in value than your homestead, the bankruptcy trustee, can sell the house unless the house lender seeks relief from stay to continue with its own foreclosure. This is a general answer which would change depending on more specific facts.