Can I File A New Bankruptcy Case?

Can I File A New Bankruptcy Case?

Bankruptcy law doesn’t set a minimum period that you must wait before filing for bankruptcy a second time. However, there’s a catch. If you file too soon after wiping out debt in a previous case, you won’t be eligible for another debt discharge (forgiveness). Although there are times that it makes sense to file for bankruptcy even though you won’t receive a discharge, these situations are rare (more below). Because a bankruptcy filed too soon will end up being a waste of time and money in most cases, it’s essential to know how to time your bankruptcy filing.

Filing Under the Same Bankruptcy Chapter: Chapter 7 and Chapter 13

Here are the timeframes if you plan to file the same bankruptcy chapter that you filed the first time:
Successive Chapter 7 cases

You’ll have to wait eight years after the first Chapter 7 case filing date before filing the second case.
Successive Chapter 13 cases

Two years must elapse between filing dates before you’ll be entitled to receive a second Chapter 13 discharge.
Chapter 13 before Chapter 7

If the court granted your first discharge under Chapter 13 bankruptcy, you’d need to wait six years (from the Chapter 13 bankruptcy filing date) before filing for a Chapter 7 discharge. You won’t have to wait that long; however, if you paid unsecured creditors in full in the Chapter 13 case, or if you paid at least 70% of the claims, the plan was proposed in good faith and was represented your best effort.

Chapter 7 before Chapter 13

If the court granted your first discharge under Chapter 7, you’d have to wait four years from the Chapter 7 filing date before filing a Chapter 13 case.

When a Second Filing Might be Beneficial Even without a Discharge

Sometimes you don’t need a discharge you need time to pay off a debt. For instance, suppose that you owed federal taxes that you couldn’t discharge in bankruptcy, and you could not work out a reasonable payment plan. Rather than have your wages garnished, you could file for Chapter 13 bankruptcy and stretch out the payments over a five-year Chapter 13 bankruptcy payment plan. A similar approach is to file a Chapter 13 case immediately after receiving a Chapter 7 discharge (a procedure informally referred to as a Chapter 20 bankruptcy). Again, all you might need is time to pay off non-dischargeable debts, such as domestic support arrearages not a discharge.
However, not all courts allow the process, and it can be tricky to qualify for a Chapter 7 bankruptcy and then demonstrate that you have sufficient available income to pay into a Chapter 13 plan. It’s possible, though, after taking into account the debts wiped out. In any case, it would be wise to consult with a local bankruptcy lawyer before attempting to go this route.

What If You Didn’t Receive a Discharge in the First Case?

In most situations, you can file again and receive a discharge in the second bankruptcy if you didn’t receive one in the first matter. But that’s not always the case. Also, you lose the full benefits of the automatic stay the order that stops creditors from collecting when you file multiple bankruptcies in quick succession.

The court dismissed the first case

Unless the court orders otherwise, you can file again. A 180-day waiting period may apply if you failed to obey a court order or appear in the case, or you voluntarily dismissed the case after a creditor filed a motion for relief from the bankruptcy stay.

The court denied your discharge

You might be able to file again, but you probably won’t be entitled to a discharge of the debts listed in your first case. This is another unusual circumstance wherein you would be wise to seek the advice of an experienced bankruptcy lawyer.

When Are Multiple Bankruptcy Filings Abusive?

The term abusive bankruptcy filing can refer to a Chapter 7 filing that doesn’t meet the means test the qualification standard that determines a filer’s right to a debt discharge. But it can also describe a case filed by someone who inappropriately uses the bankruptcy process to evade a creditor or buy time in a collection action, such as a foreclosure or lawsuit. Simply put, the court frowns on debtors who file with no intention of following through with the case. Repeat filers face the consequences for using such tactics, such as a lack of protection from collections (the automatic stay won’t go into effect after multiple filings) or the denial of a discharge.

Filing for bankruptcy relief doesn’t guarantee a discharge; the order that wipes out qualifying debt. If you don’t follow the bankruptcy laws or procedures in your jurisdiction, the court might dismiss your case. Luckily, most dismissals are without prejudice, and you can immediately refile your case.

Dismissals With and Without Prejudice

When the court dismisses a case without prejudice, you can file another bankruptcy matter right away instead of being required to wait. You can also discharge all qualifying debts in the next case. This type of dismissal usually occurs because of a procedural mistake, such as a failure to file the correct forms, not as a result of unethical behavior. By contrast, a dismissal with prejudice will prevent you from filing another bankruptcy for a specific period, or forever prohibit you from discharging any of the debts existing at the time of your first filing.

The court will dismiss a case with prejudice if you:
• try to take advantage of bankruptcy by hiding assets
• use the automatic stay to buy time without intending to complete bankruptcy, or
• abuse the bankruptcy system in some other way.

Reasons for a Dismissal without Prejudice

After filing your case, you must comply with the bankruptcy rules and procedures. The court dismisses most matters because of the failure of debtors to:
• file the correct forms with the court
• submit supporting documentation to the bankruptcy trustee
• attend the meeting of creditors
• complete a debtor education (financial management) course
• make timely plan payments in a Chapter 13 case, or
• fail to meet any other deadlines or requirements.

Bankruptcy Dismissal and the Automatic Stay

In bankruptcy, the automatic stay protects the filer from almost all creditor collection activities. It stops them in their tracks. In most cases, the stay remains in place throughout the bankruptcy matter. However, if the court dismisses your case, your creditors can come after you to collect their debts once again. Mostly, you’re in the same position you were in before filing. Also, immediately filing another bankruptcy will limit your automatic stay in the new case. Here’s how.
• If you refile your case within one year after dismissal, the automatic stay will be limited to 30 days.
• If you had two or more bankruptcies dismissed within the year before you filed the most recent case, the automatic stay wouldn’t be in effect at all.

In either situation, you can file a motion to extend or impose the automatic stay in your new bankruptcy. You’ll need to be prepared to explain to the court the need for multiple cases.

Consult With a Bankruptcy Lawyer

If the court dismissed your case without prejudice, it’s reasonably clear that you ran into a problem in the previous matter. A bankruptcy attorney can help you fix the issue, as well as file a motion asking the court to grant or extend the automatic stay’s protection against creditors.

How to File for Bankruptcy

Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue. Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you can’t afford to hire an attorney, you may have options for free legal services. If you need help finding an affordable bankruptcy lawyer or locating free legal services, check with the American Bar Association for resources and information.

Before you file, you must educate yourself on what happens when you file for bankruptcy. It’s not simply a matter of telling a judge “I’m broke!” and throwing yourself at the mercy of the court. There is a process – a sometimes confusing, sometimes complicated process that individuals and businesses must follow.

The steps are:
• Compile financial records: List your debts, assets, income and expenses. This gives you, anyone helping you, and eventually the court, a better understanding of your situation.

• Get credit counseling within 180 days before filing: You can’t file for bankruptcy until you’ve gone through required bankruptcy counseling. It assures the court you have exhausted all other possibilities before filing for bankruptcy. The counselor must be from an approved provider listed on the Utah Courts website. Most credit counseling agencies offer this service online or over the phone, and you receive a certificate of completion once it’s done that must be part of the paperwork you file. If you skip this step, your filing will be rejected.

• File the petition: If you haven’t hired a bankruptcy lawyer yet, this might be the time to do it. Legal counsel is not a requirement for individuals filing for bankruptcy, but you are taking a serious risk if you represent yourself. Understanding federal and state bankruptcy laws, and knowing which ones apply to your case, is essential. Judges are not permitted to offer advice, and neither are court employees. There also are many forms to complete and some important differences between Chapter 7 and Chapter 13 that you should be aware of when making decisions. If you don’t know or follow the proper procedures and rules in court, it could affect the outcome of your case. Without legal advice, you’re also running a risk that the bankruptcy trustee can seize and sell your property.

• Meet with creditors: When your petition is accepted, your case is assigned to a bankruptcy trustee, who sets up a meeting with your creditors. You must attend, but the creditors do not have to. This is an opportunity for them to ask you or the court trustee questions about your case.

Some of the Consequences of Bankruptcy

The overriding principle of bankruptcy is that you get a second chance with your finances. Chapter 7 (known as liquidation), wipes away debt by selling non-exempt possessions that have some value. Chapter 13 (known as the wage earner’s plan) gives you an opportunity to develop a 3-to-5 year plan to repay all your debt and keep what you have. Both equal a fresh start, but many times without some of the property (real estate, cars, jewelry, etc.) that may have caused the financial problem in the first place.

Filing for bankruptcy impacts your credit score. Bankruptcy remains on your credit report for 7-10 years, depending upon which chapter of bankruptcy you file under. Chapter 7 (the most common) is on your credit report for 10 years, while a Chapter 13 filing (second most common) is there for seven years. During this time, a bankruptcy discharge could prevent you from getting new lines of credit and may even cause problems when you apply for jobs. If some of your debts include loans that were co-signed by family or friends, they could be responsible for repaying at least some of the debt. If you are considering bankruptcy, your credit report and credit score probably are damaged already. Your credit report may improve, especially if you consistently pay your bills after declaring bankruptcy.

Where Bankruptcy Doesn’t Help

Bankruptcy does not necessarily erase all financial responsibilities. It does not discharge the following types of debts and obligations:
• Federal student loans (unless you meet very strict criteria)
• Court-ordered alimony and child support
• Debts that arise after bankruptcy is filed
• Some debts incurred in the six months before filing bankruptcy
• Some taxes
• Loans obtained fraudulently
• Debts from personal injury while driving intoxicated
It also does not protect those who co-signed your debts. Your co-signer agreed to pay your loan if you didn’t, or couldn’t pay. When you declare bankruptcy, your co-signer still may be legally obligated to pay all or part of your loan.

Bankruptcy Dismissal vs. Bankruptcy Discharge

The Automatic Stay

At the time of dismissal, you will no longer enjoy the protection of an automatic stay. An automatic stay is an order that stops creditors from taking action to collect debts during a bankruptcy case. This means, your collectors can continue or resume all collection efforts against you, including lawsuits, garnishments, foreclosure, and asset seizures. Since there is additional interest and/or penalties accrued from the time of a bankruptcy filing, you will be liable to pay off more than the amount that was due before you filed for bankruptcy.

Voluntary Bankruptcy Dismissal

A voluntary bankruptcy dismissal is still up for approval of a bankruptcy court. Their decision lies on the type of bankruptcy chapter you filed.

Chapter 7

It is not easy to ask for dismissal of a Chapter 7 bankruptcy case. When you file for this case, it is best to assume that you cannot back out of it. For example, you changed your mind about proceeding with the bankruptcy filing because you found out you have a lot more to lose than you assumed when you filed for bankruptcy, you request the bankruptcy court to dismiss your case by filing a motion. The court can decline your request especially if creditors will not get a good deal out of dismissing your case. On the flip side, you may not show up at the 341A hearing so that the court dismisses your case. Non-appearance at this hearing in Utah will usually result in the trustee filing a motion to dismiss the case. However, you would be better off having the case dismissed without you voluntarily filing a motion to dismiss. A voluntary dismissal for Chapter 7 case prevents you from refilling a bankruptcy case for 180-days.

Chapter 13

It is a different case for voluntary dismissal in Chapter 13 bankruptcy. According to the Bankruptcy code, you can dismiss a Chapter 13 case easily. Federal bankruptcy law allows the debtor to either dismiss a Chapter 13 case or to convert it to Chapter 7 at any time unless your case has previously been converted from another chapter of the Bankruptcy Code. You can ask for dismissal at any point in your Chapter 13 case, even as soon as you file it, perhaps because of a change of heart. You can also have the bankruptcy court dismiss your case once the payment plan has been approved if your financial situation has improved and find out you do not need a repayment plan anymore. All you need to do to have your Chapter 13 case dismissed is to have your New Jersey bankruptcy lawyer file a motion to dismiss your case. The court cannot keep you in a Chapter 13 case against your will.

Consequences of Chapter 13 Bankruptcy Dismissal

As with Chapter 7 bankruptcy voluntary dismissal, there are also consequences if you dismiss a Chapter 13 bankruptcy. You must be aware that a dismissal will make all unpaid or disputed debts due and demandable. It includes all interest, finance charges, legal fees, all late charges not allowed by the Bankruptcy Court as well as all debts of creditors who did not file their claims. As a requirement, you will be directly deal with the creditors on their terms. There will be no involvement from the bankruptcy court.
For example, your creditors may already file a motion in court to lift the automatic stay if you’re not paying your car loans. When the court lifts the automatic stay, your lender can repossess the car or demand payment.
If you file a motion to dismiss your case before the creditor has filed a motion to lift the stay, you will not be subject to the 180-day bar. However, if you filed for voluntary dismissal after the creditor has filed its motion to lift the stay, you can’t file another bankruptcy case for 180 days. This rule is in place to discourage debtors from dismissing a case then filing another just to restore the automatic stay after the same has been lifted as a result of a motion filed by a creditor.

Bankruptcy Dismissal by the Court

This happens when the debtor failed to meet the requirements due in the case filed. It can also happen when the debtor has filed in bad faith. Failure to do the following can be grounds for dismissal:
• File the required forms and supporting documents
• Pay the court filing fees
• Pass the means test
• Complete the required courses (credit counseling course and debt management course)
• Attend the 341 meeting or the meeting with creditors
• To keep up with the Chapter 13 payment plan
• Accurately disclose all of your income, assets, liabilities, and other required financial information, which constitutes as bankruptcy fraud
In most situations, except for dismissal with prejudice, you can counter the trustee’s motion to dismiss. You must submit the required or correct documents and completing the requirements.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

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How Does Bankruptcy Restructuring Work?

How Does Bankruptcy Restructuring Work

The essential task of bankruptcy and restructuring lawyers is to avoid a client’s bankruptcy. The term ‘bankruptcy’ itself is a technical term that refers to when financially distressed companies, unable to restructure on their own, file for Chapter 11 to undergo a court-supervised restructuring. In order to avoid this scenario, a company must successfully “restructure its debt to keep the company together and retain its value,” But the path to financial viability through court or not can be convoluted. The legal know-how required and the multitude and variety of actors involved make bankruptcy and restructuring a rather complex practice. Bankruptcy and restructuring attorneys must be adept at transactional work and litigation across a range of areas like M&A, securities, banking, labor and employment, environment, tax and IP.

What Bankruptcy Lawyers Do For You

• Analyze the situation in order to determine the feasibility of staying out of bankruptcy. What’s the problem? What caused it? How big is it? Will it result in a default that is uncontrollable? Who’s in the creditor body? Are they secured or unsecured? What’s the litigation status? What’s the liquidity status? Are there sufficient funds to stay in business while being restructured?

• Look for ‘red flags’, such as jurisdiction. “You need to know if the entity has international operations, how it operates, how it’s interconnected”.
• Work with financial advisers to create a model of how the crisis will be dealt with.
• Try to persuade creditors to “just stand still” and not pursue immediate payback. “You need to focus on the nature of the debt in order to determine who you approach to get a standstill or moratorium”.
• Negotiate with creditors and try convincing them that the problem is best solved out of bankruptcy.
• If negotiations are successful, work out payment plans for each creditor.
• If not successful, file for Chapter 11.
Court-supervised restructuring for debtor
• Initiate a Chapter 11 case to pursue restructuring within the protective provisions of the Bankruptcy Code (usually known as ‘filing for Chapter 11’).
• Prevent stigmatization of employees and business operations. Create a detailed communication plan to include regulators, shareholders, employees, vendors and clients. “Entry into Chapter 11 should be made as smooth and unruffled as possible.”
• Secure financing.
• Once liquidity is secured, work with the management team and financial advisers to decide what’s core and non-core to the business. Establish the company’s new vision.
• Build creditor consensus around the chosen exit strategy. This can be a lengthy process and require delicate negotiations.
• If creditors think they are being economically harmed, there could be extensive litigation.
• Document and effectuate the eventual agreement.

The Four Reorganization Bankruptcy Chapters

Debtors choose to reorganize under either Chapter 9, 11, 12, or 13, depending on the particular circumstances. An overview of each appears according to filing frequency.

Chapter 13: Individuals and Couples

This chapter allows single and married people (but not businesses, other than sole proprietors) to pay discretionary income (the amount remaining after paying living expenses) into a plan for three to five years. If your family income is above the average for your state (called the median income), your plan will be 60 months long. When income falls below the median, 36 payments are required, but you can propose a plan that spreads out what you need to pay over 60 months, if necessary.

How Debts Get Paid During the Plan Period

Bankruptcy law assigns a higher priority to some debts and requires the filer to pay them fully over the course of a three to five year plan. Examples of priority claims include the following:
• recent income tax debts
• past due child support and alimony payments, and
• overdue payments on secured debts like house notes (you don’t have to pay off the entire mortgage within the plan, however).

Most of your other debts like credit cards and medical bills will fall into the category of general unsecured debts and won’t necessarily be paid anything. They’ll receive something only if you have disposable income after all your higher priority claims get paid. Even then, the unsecured claims might be paid pennies on the dollar. The remaining debt gets discharged at the end of the case. Another interesting feature of a Chapter 13 plan is its ability to cram down (reduce) a secured debt (other than the mortgage on your residence or a recently purchased vehicle). If the collateral (the property securing the debt) is worth less than what you owe, you can propose to pay just the value of the asset plus interest at one or two points above prime. For high-interest loans that are under water, this can save you thousands of dollars. Unfortunately, not all secured loans are subject to cram down. It’s not available for the mortgage on your residence or on car loans that are less than two and one-half years old when you file your case. Also, you must be able to pay off the entire cram down amount over the course of the plan, something many people aren’t able to do for high-value property, such as vacation rentals.

Chapter 11: Businesses and Individuals

Chapter 11 bankruptcy is best known for helping prevent large corporations from closing their doors. Because of the expense involved in filing a Chapter 11 case, it’s used by small businesses to a lesser extent, and, on a rare occasion, by individuals whose debt balances exceed the Chapter 13 debt limitations. In many Chapter 11 cases, creditors actively work with the debtor to evaluate the debtor’s financial health and determine the best way to tackle the debtor’s debt. This collaboration will include more than renegotiating loan terms, although that accounts for an important part of the plan. During the first months of a Chapter 11 case, the parties look carefully at many aspects of the business. Decisions might be made to do one or more of the following:
• change leadership
• sell underperforming assets, or
• reorganize operations to make them more efficient.
The debtor then proposes a plan for paying its debts. A Chapter 11 plan must be approved not only by the bankruptcy court but by the creditors owed the most money. If a debtor fails to propose a confirmable plan, a creditor (or the trustee, if one has been appointed), can offer a plan that will be submitted to the creditor body for a vote. Once a plan is confirmed, the debtor can spend years carrying out its terms.

Chapter 12: Farms and Fishing Operations

If your primary business is farming or fishing, you’ll likely choose to file for Chapter 12 bankruptcy. The procedural aspects of Chapter 12 and Chapter 13 cases are similar; however, Chapter 12 bankruptcy provides more flexibility because it allows for the seasonal nature of the farming and fishing industries. The Chapter 12 debtor has 90 days after filing the case to propose a plan lasting from three to five years. Instead of making monthly payments as required by Chapter 13 bankruptcy, the Chapter 12 plan can allow for seasonal payments. The plan can also provide for a cram down of virtually any secured debt, including homes and farmland, and allow for the modified secured debt payments to extend beyond the five-year plan limit.

Chapter 9: Municipalities (Cities and Governments)

Chapter 9 bankruptcy is reserved exclusively for municipalities and governmental units like utilities and taxing districts. The plan and the plan approval process in Chapter 9 bankruptcy are similar to Chapter 11 bankruptcy. Creditors in Chapter 9 are not allowed to propose a plan, but taxpayers and creditors can file a plan objection.

Reasons Behind Restructuring

The overarching goal of a restructuring is to increase shareholder value but there are many reasons behind restructuring.

• Focusing on Core Business: Groups of shareholders can actively demand management to increase shareholder value by focusing on the private company’s core businesses. Pressure from shareholders can cause management to create a restructuring plan that will focus the private company’s resources on core businesses.

• Eliminating Poor Performers: Poor performance of a subsidiary due to industry conditions, poor management, or ineffective corporate strategy can be detrimental to the financial performance of the parent private company. Therefore, a parent private company commonly divests the poorly performing subsidiary. This may immediately improve the financials of the parent private company by not including the poorly performing financials of the divested subsidiary in the consolidated statements. As a result the parent private company might eliminate capital outflows that were needed to fund the failing business. Additionally, a divestiture of a failing business will provide additional capital the parent private company can use to stimulate growth in its core businesses. Finally a divestiture, if communicated correctly, will boost morale of existing employees and improve the public perception of the parent private company.

• Highlighting Undervalued Assets: Large private companies may have smaller subsidiaries that are high growth or strong performing private companies that may not be properly valued since their performance is hidden by the size of the conglomerate. In such a case, the parent private company may want to divest a part or all of the strong performing private company via a sale, spin-off, split-off or equity carve-out. Highlighting the positive attributes of the undervalued business is a benefit to both the shareholders of the parent and the divested private company. Divesting the smaller private company allows it to raise their own capital via debt and equity markets that is separate from that of the parent private company. By using their own cost of capital, the divested private company doesn’t need to vie for capital allocation from the parent private company. Additionally, the divested private company can be properly valued by the market based on its respective multiples. Furthermore, the parent private company receives proceeds from the divestiture that it can reinvest or issue to shareholders.

• Realizing Value from Stronger Business: Where strong performing businesses are not valued by the market, there is an opportunity for the parent private company to realize the value of this business through a sale or divestiture. Proceeds from this sale can be used to develop other parts of the private company’s businesses or pay down debt.

• Realigning of Capital Allocation: A private company with multiple business units, funding and capital allocation issues restrains optimal operations of its subsidiaries. There are often internal conflicts as management teams vie for capital from the parent private company. This leads to potentially inefficient allocation of capital where certain businesses will have excess capital while others will be under funded. Inefficient capital allocation restrains the growth of subsidiary private companies. In such a case, separation of the different business lines allows each newly divested private company to raise capital to service their needs.

• Avoiding Takeovers: Restructurings have been used to avoid takeovers. Selling or spinning off a key business unit can be an effective deterrent for takeovers since acquirers will have to pay capital gains tax on spin-offs of the target private company that were initially tax-free. Increasing leverage can also help defend against takeovers, but the effect on operating flexibility must also be taken into account.

• Lowering Borrowing Costs and Optimizing Capital Structure: Different operating divisions of a larger corporation have different operating risks and capital requirements that may overshadow each other. In such cases the parent private company may find itself over leveraged. One of the main goals of restructuring would be to reorganize the capital structure of the private company to lower borrowing costs. The capital structure of a private company should always strive to optimize funding costs. The goal is to balance between the high costs of equity and the lower costs of debt and the benefits and detriments of both methods of funding. Funding operations through debt issuances can lead to financial distress as the interest expense to service the loan can consume cash flow. Divesting a business division is a great way for a private company to improve its financial position.

• Providing Management Incentives: Management teams of a subsidiary often operate off the incentives based on the performance of the parent private company as a whole. Stock option plans that are given to executive level management teams of subsidiaries that are based off the stock performance of the parent private company are not always appealing if the operating activities of the subsidiary are not properly valued by the market. Separating the subsidiary from the parent creates lucrative invectives for management whose compensation is now directly based on their division’s performance.

• Pre-IPO Housecleaning Process: Prior to the initial filing of an S-1, firms that intend or explore the option of going public must enter a restructuring process. This pre-IPO restructuring process is known as the “House Cleaning” process and is done to ensure that the firm is SEC and compliant in terms of accounting, compensation, contractual agreements, corporate structure, and tax-related considerations. This process will begin with a combination of marketing/public relations and auditing processes and may prove quite costly, especially in combination with SEC filing fees. The time between the initial S-1 filing and the first day of trading, the firm must report as if it were a publicly traded firm each quarter. For firms that are unable to quickly achieve compliance, this may prove quite costly and often will result in an IPO withdrawal filing.

Methods to Assess Forms of Restructuring

There are two basic forms of restructuring: financial and transactional. A financial restructuring usually takes place when the operating performance of a private company is doing well but the capital structure needs improvement. Transactional restructuring takes place when there is a need to reconfigure both the operating effectiveness and the capital structure of a private company. Many times financial and transactional restructurings can occur simultaneously.

• Tax Basis in Different Businesses: Tax basis is one of the most important considerations in a restructuring process. In a situation where the tax basis is high the parent private company may consider a taxable direct sale of the asset where as when the tax basis is low there parent private company may consider a tax-free alternative such as a spin-off or a split-off.

• Break-Up Valuation: Before deciding on a type of divestiture, a parent private company should perform a break-up valuation to determine the extent to which a subsidiary is under or over-valued. The break-up valuation will determine which type of divestiture will be most appropriate.

• Leverage: If the parent private company is over-leveraged, it may force the parent private company to sell certain assets where as on the other hand if the parent private company is underleveraged it may wish to pay a special dividend to shareholders or take on additional debt.

• Operating Performance: The operating performance of the parent private company is the summation of the performance of its individual subsidiaries. The parent private company may wish to divest poorly performing divisions in an effort to optimize operating efficiency or divest strong but undervalued business units to realize their true value.

• Private Company Makeup: The corporate culture and overall structure and strategy of a private company may occasionally differ from its subsidiaries. It may be necessary to divest business divisions whose operations or goals conflict with overall strategic direction of the parent.

• Threat of Takeover: A parent private company may consider restructuring to defend against a threat of hostile take-over. The type of threat will determine the restructuring options available to the targeted private company. If the acquiring private company plans to use the excess cash of the targeted private company to help finance the acquisition the targeted private company may pay out a special dividend to shareholders thereby reducing the ability of the acquirer to complete the acquisition. On the other hand if a the acquiring private company is targeting specific assets of a private company the targeted private company may choose to divest those assets to realize their value on the open market thereby foiling the efforts of the acquirer.

Bankruptcy Lawyer Free Consultation

When you need legal help with a restructuring bankruptcy, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

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Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

How do I file for Chapter 13 bankruptcy?

According to Chapter 13 bankruptcy rules, it is necessary for a debtor to attend credit counseling prior to filing for bankruptcy. After the completion of counseling, the debtor must pay a fee and provide the bankruptcy court with information about income, debt, expenses, and creditor holdings of secured and unsecured debt. Once the court receives the appropriate paperwork, a trustee will review the case. The trustee will request information from the debtor, communicate with creditors, and hold a creditors meeting. The debtor is also responsible for filing a repayment plan with the court. Once the bankruptcy court approves the repayment plan, Chapter 13 bankruptcy is complete.

Does filing for Chapter 13 bankruptcy stop creditors from collecting a debt?

Chapter 13 bankruptcy rules state that a creditor may no longer pursue collection activities when a debtor files for bankruptcy. As soon as debtor files the appropriate paperwork and pays the filing fee, an automatic stay takes effect. An automatic stay prohibits creditors from further attempts to collect a debt. This means that any lawsuit proceedings must cease, a creditor may not report the debt to credit reporting agencies, and the debtor’s property and income are safe from seizure. Collection activities may continue for spousal and child support, tax debt, and pension loans, however.

Will a Chapter 13 bankruptcy erase my student loan?


A bankruptcy court will require repayment of your student loan debt. Chapter 13 bankruptcy rules treat student loan debt similar to priority debt–it is payable in full like back taxes and child support payments. Prior to 2005, student loan debt was only dischargeable when funded by a private lender. With the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act, however, privately funded student loans are now treated the same as student loans guaranteed or issued by the federal government. This means that all student loan debt is only dischargeable upon a showing of undue hardship.

Typically, it is difficult to convince a bankruptcy court to discharge student loan debt. A bankruptcy court will consider such factors as poverty, the inability to pay the loan due to a permanent disability, and a debtor’s good-faith effort to repay the loan for a long period. To have a student loan debt dismissed, a debtor must file a separate action in bankruptcy court called a Complaint to Determine Dischargeability of a Debt.

If I miss a scheduled payment under my Chapter 13 repayment plan, can a creditor sue me?

If a debtor misses a scheduled payment, Chapter 13 bankruptcy rules allow the trustee to institute an action for dismissal with the bankruptcy court. Because the debtor agreed to repay creditors according to a court-approved Chapter 13 repayment plan, a trustee may request the dismissal of the case once those creditors are no longer receiving payments. A debtor may be able to prevent the dismissal of a case by establishing their ability to repay the debt under the current plan or by requesting that the court approve a new plan.

If the bankruptcy court dismisses the case, a creditor may reinstitute collection activities against the debtor. Bankruptcy laws that prohibit collection attempts no longer protect the debtor at this point. Consequently, creditors may collect the current amount owed on the debt and any interest on the debt that accrued while the debtor was in bankruptcy.

Changes to the Bankruptcy Law

In 2005, new bankruptcy laws required potential bankruptcy individuals to be involved in courses educating and informing them of their financial options. Before an individual files for a Chapter 13 or Chapter 7 bankruptcy, you must receive credit counseling from an approved agency. Any Chapter 7 Lawyer will tell you that it’s required. In addition, before a bankruptcy is discharged, the individual must attain a personal finance management course known as debtor education.

Do I have to get Credit Counseling?

The purpose of credit counseling is to assist an individual’s evaluate his or her financial options and to determine if he or she can repay debts through a repayment plan without filing bankruptcy. In credit counseling, the individual will usually provide information regarding his or her income, expenses, and debts. The counselor then evaluates the information and proposes a repayment plan.

Personal Financial Management and Debtor Education

Debtor education information is meant to instruct individuals to be responsible with their finances. The education is meant for the individual to learn from his or her mistakes and never be in the postion to file bankruptcy again. A debtor education course will usually provide tips in developing a budget, managing finances, using credit responsibly, and how to deal with financial emergencies.

As part of the new bankruptcy laws, people wishing to file for bankruptcy (under Chapter 7 or Chapter 13) must now complete a credit counseling program before they will be allowed to file a bankruptcy petition. In addition, bankruptcy filers must obtain debt management counseling before being allowed to complete the bankruptcy process. In order to comply with these credit counseling and post-discharge debtor education requirements, filers must work with agencies that have been approved by the U.S. Trustee Program (a branch of the U.S. Department of Justice that is responsible for overseeing bankruptcy cases).

Two lists of agencies that have been approved by the Department of Justice — the first a list of agencies that provide pre-filing credit counseling to those wishing to file for bankruptcy, and the second a list of agencies that offer post-discharge debtor education to people who are completing the bankruptcy process. The third link below includes tips on choosing a credit counselor, from the Federal Trade Commission (FTC).

On April 15, 2013, the Executive Office for U.S. Trustees (EOUST) announced new policies on credit counseling and debtor education requirements. The list below is some notable new rules.

Quality – The quality of counseling must be consistent whether the debtor takes the course on the Internet, in person, and over the phone. In addition, the counseling must not be generic but individually specific to the debtor.

Use the Cheapest One – Credit counseling agencies and debtor education information providers must charge a reasonable fee that is $15 or less. An individual’s income that falls 150% below the poverty line is eligible for a fee waiver. We reccomend that you use – they are fast and the cheapest one that we could find.

Is credit card debt included in a Chapter 13 bankruptcy plan?

To qualify for Chapter 13 bankruptcy, a debtor must repay all secured creditors and priority debts in full and must repay a portion of the amount owed to unsecured creditors. “Secured debt” is a debt obligation backed by collateral such as a car or real property; “priority debt” includes child support payments and back taxes; and “unsecured debt” are those obligations that are not backed by collateral. Unsecured debt includes money owed on a credit card.

A Chapter 13 bankruptcy places a filer’s debt into a repayment plan. A bankruptcy court will not approve a plan unless the arrangement requires that the debtor repay all priority and secured debt in full. The repayment plan must also require the debtor to repay unsecured creditors in an amount equal in value to the filer’s nonexempt property. Nonexempt property includes any interest held in real property, business assets, and artwork. Once a Chapter 13 repayment plan begins, a trustee will disburse the monthly payment made by the debtor to the creditors each month.

Free Consultation with Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

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How do I know when filing for bankruptcy is a good idea?

How Do I Know If Bankruptcy is Right for me

When is bankruptcy a good idea?

Many people believe that bankruptcy is and will always be nothing but a bad thing. In the public mind, bankruptcy means losing your house, your livelihood; everything you own. This is, for obvious reasons, an undesirable mental image. However, bankruptcy may be a wise and important choice to make, depending on your personal debt situation.

So, how do you know if filing for bankruptcy is the right decision for you? Understanding how bankruptcy works and what it is for can help.

What is bankruptcy?

There are two different kinds of bankruptcy, Chapter 7 and Chapter 13. Each has a different function and purpose.

To briefly quote our more in-depth article about Chapter 7 bankruptcy, “A Chapter 7 bankruptcy is a bankruptcy case in which we give the debtor, the person who owes all the money, a fresh start, a new beginning. It essentially wipes out or erases the debt that the debtor has.”

In a Chapter 7, your assets may be seized and sold to creditors in order to pay off your debt. However, most people eligible for Chapter 7 bankruptcy do not have more assets than they are capable of protecting. In this case, you will be able to eliminate your unsecured debts without losing what you own.

In contrast, a Chapter 13 bankruptcy is “a wage earner’s reorganization. What that means is … you will make a regular monthly payment, called Chapter 13 plan payment to the trustee who is assigned to the case. In the state of Utah, there is only one trustee, and at this time, it is Lon Jenkins … Depending on how your plan is structured, you may or you may not pay off all of your debt in five years. It really depends on the type of debt and how the plan is structured. The payment is usually a minimum of $100 a month, to the Chapter 13 trustee for at least three years.”

Since Chapter 13 bankruptcies help you repay your creditors with a piecewise payback plan, it is highly likely that you will be able to retain your assets.

How do I know when filing for bankruptcy is a good idea?

Bankruptcy is different for every individual situation, so understanding your debts is the very first step to knowing if filing for bankruptcy is the right choice for you. If all other alternatives to bankruptcy are exhausted or not working, it may be time to consider bankruptcy.

However, it is important to note that there are debts that a bankruptcy proceeding cannot relieve. These debts can include:
• Child support
• Spousal support
• Criminal restitution
• Fines
• Tax debts
• Bad checks
• Credit card fraud
• Student loans

The rules and regulations for non-dischargeable debts are complicated and should be discussed with a lawyer or someone else with extensive knowledge before filing for bankruptcy.

Figure out what will happen to your home, car, pension, credit score, co-signers, and personal life if you file for bankruptcy. Consult with a lawyer or other knowledgeable person about the projected outcome and consequences of filing for bankruptcy.

If you are considering bankruptcy and would like more information or guidance about your options, call (801) 676-5506 for a free initial legal consultation.

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.7 stars – based on 45 reviews

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Utah Bankruptcy Lawyer – Does Bankruptcy Affect Your Credit? (801) 676-5506

Utah Bankruptcy Lawyer

Utah Bankruptcy Lawyer – Does Bankruptcy Affect Your Credit?

How Does Bankruptcy Affect Your Credit?

The general rule is that filing for bankruptcy will hurt your credit. All 3 of the major credit bureaus, Equifax, Experian, and Transunion, collect information every day from the United States Bankruptcy Courts. In the old days, I remember going to the Utah federal courthouse and you would see people going through the bankruptcy court listings and they would fax the information to the credit reporting agency. Later, people with laptop computers would come into the courthouse to data mine the information.

Now, the federal bankruptcy court has all of its filings online and the credit reporting agencies get that information directly from them.

So, the way the credit bureaus will report your bankruptcy is that it will simply indicate a bankruptcy filing. If you later have your bankruptcy case dismissed, the bankruptcy filing will still report on your credit reports.

If you file for a chapter 7 bankruptcy, it will stay on your credit report for 10 years. The general rule is that a debt will fall off of your credit report after 7 years; however this is not true for the chapter 7 bankruptcy case filing.

What will your credit score be after filing for bankruptcy?

Most people start off within 400s and 500 credit scores when they file for a chapter 7. This is because people have been waiting so long to take care of the debt situation, that they are usually behind on several bills and they may have even been sued. If that’s the case, then they will start off low and filing bankruptcy could actually improve their credit score. So, depending on your situation you could have a 600 plus credit score after filing, it just depends. Depending on the lender and what type of bankruptcy you filed, you may be able to buy a house the day after your bankruptcy case is concluded. You should also keep in mind that if you filed a chapter 13 case, the chapter 13 bankruptcy only stays on your credit for 7 years. I’ve previously explained a chapter 13 bankruptcy here and a chapter 7 bankruptcy here.

Just remember, even if your scores are in the 600 or even 700 range, if the bankruptcy is showing up on your credit report, it can still be taken into account and will cause your interest rate to be higher as a result, but the more you rebuild your credit, the better rates you are going to get. Additionally, the older the bankruptcy is on your credit report the better. This means the further back in time you filed, the less importance and weight the lender usually gives to it.

Watch this video for more information:

Just do your best not to get back into the same situation that you got into bankruptcy so it doesn’t happen again. Most of us know that huge medical bills, loss of employment and other issues can take a huge toll on you financially.

Lenders look at what they call the Universal Default Rate. Before you file for bankruptcy and you start defaulting on a loan, every other piece of credit that you have will switch from whatever interest rate you had to the Universal Default Rate for that line of credit…..which is almost always at least 30% higher than what you were paying. This is because lenders get scared and freak out because they don’t want to lose money. This happened all the time during the 2008 financial crises in the US. If this happens to you; then, the amount of money you owe will rise dramatically, making matters worse.

In the time that passes after you file for bankruptcy relief…you will still be able to get loans (yes even a mortgage after bankruptcy), but keep in mind that the interest rates will be higher as a result. Do your best to stay out of debt to avoid paying really high interest rates.

One way to improve your credit is to buy furniture from RC Willey after your bankruptcy case is concluded. RC Willey has the ability to set up a credit account for you and they will report positively on your credit so long as you stay current on your payments and make your payments on time.

If you have really high interest rates; that should make you to pay more in additional interest for years to come, which is why you should pay down debt and even pay off debt when you can.

The best thing to do after bankruptcy is to set up at least 1 to 2 new accounts and then to take it easy on credit for a while. Be sure you make timely and consistent payments because one mistake and it could be all over and back downhill.

Chapter 7 bankruptcy is the commonest denotation of bankruptcy. It stands for discharging or canceling of debts that you have incurred. As an individual, you can select between Chapter 13 or Chapter 7 bankruptcy. Selecting between the two is not easy. A good bankruptcy lawyer will review your specific circumstances before helping you to decide which type of bankruptcy is applicable to you.

Call us if you have any questions, we are standing by, ready to help you, so call Mike Anderson today at (801) 676-5506.

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 876-5876
4.7 stars – based on 49 reviews