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Subchapter V Can Protect Personal Assets During a Small Business Wind Down
Small business is a critical component of the U.S. economy. However, starting a business is risky and many ventures fail. Startups and even businesses of some duration may be partially capitalized by the owners’ personal funds and debt obligations. When the business ceases to operate, the owners can be left with crushing debt burdens. Fortunately, […]
When Can a Creditor Get Relief from the Bankruptcy Automatic Stay?
One of the most powerful features of the bankruptcy code is the automatic stay that goes into effect once a debtor’s petition is filed in court. The automatic stay prevents creditors from taking further action to enforce most debt obligations. The purpose is to give the debtor some time to reorganize or to discharge debts […]
How the Absolute Priority Rule Affects Chapter 11 Plans
In a Chapter 11 bankruptcy, creditors are generally entitled to repayment of some of the outstanding debts and obligations. However, not all obligations are treated equally. Creditors as well as equity holders are paid in accordance with the absolute priority rule, which sets a hierarchy for the fair and equitable distribution of debt repayments. To […]
Why an Individual Debtor Might Benefit From Chapter 11
Financially distressed companies are able to utilize Chapter 11 to restructure debt and reorganize operations with the goal of regaining solvency. Although it is not commonplace, individuals can also file for bankruptcy under Chapter 11, and sometimes this is the best option. Chapter 7 and Chapter 13 are the most popular bankruptcy options for individuals […]
Pros and Cons of Debt Settlement Instead of Bankruptcy
Consumers who are overwhelmed by debt and cannot make their payments may choose between filing bankruptcy or settling and consolidating their debts privately. Each of these measures has advantages and disadvantages that should be carefully considered before deciding which path to take. Debt settlement and consolidation require negotiation with creditors. This can be done directly […]
What to Know About Assuming a Lease or Executory Contract During Chapter 11
Existing leases or executory contracts present special issues when one of the parties files for Chapter 11 bankruptcy. Other parties to the lease or contract may wish to end it, fearing the debtor may not be able to fulfill the terms. Some leases and contracts include a clause that automatically terminates the agreement upon a […]
Which Types of Debts Can Be Discharged in Chapter 13 but Not in Chapter 7?
Chapter 7 and Chapter 13 are forms of bankruptcy that offer relief from debt in order to gain a fresh financial start. However, there are differences between them that are important to deciding which type of bankruptcy to pursue. Although Chapter 7 generally results in a full debt discharge, there are certain debts that only […]
Options for Selling Assets in a Chapter 11 Bankruptcy
The purpose of Chapter 11 bankruptcy is to allow a troubled company to restructure its debt with the goal of restoring its financial solvency. One way to achieve that goal is the sale of some of the company’s assets. However, bankruptcy law places restrictions on such sales. Debtor companies need to carefully weigh their options […]
Claiming the Homestead Exemption in a California Bankruptcy
When a debtor files a Chapter 7 petition, the U.S. bankruptcy trustee is authorized to sell certain of the debtor’s assets to pay the creditors. However, much if not all of those assets can be shielded from liquidation through the use of exemptions allowed by federal or state law. One of the important exemptions for […]
U.S. Supreme Court Rules Another Person’s Fraud Can Bar a Debt Discharge
Bankruptcy law has long barred the discharge of debts when the debtor has committed fraud. The rationale is that people should not be rewarded for the negative consequences of their unlawful actions. Now, the U.S. Supreme Court has settled the question of whether the fraud exception can apply when someone other than the debtor is […]
