Steven Neuner Esq.

If My Small Business Goes Bankrupt, Do I Lose My Personal Belongings?

July 20, 2019 by Steven Neuner Esq.

Does Filing a Business Bankruptcy Mean I Lose My Property?

On average, about 37,000 small businesses file for bankruptcy each year. If you are one of the many small business owners who need to file for bankruptcy, you might be wondering if you’ll have to give up your personal belongings. Keep reading to find out how you can file for bankruptcy and protect your private property.

Understanding the Different Types of Bankruptcy

To figure out if you will need to use any personal property to pay for business debts, it is helpful to consider what type of bankruptcy works for your business. The different types of bankruptcy you may want to consider include:

Chapter 7. Also called liquidation, Chapter 7 is essentially a type of bankruptcy that lets a person close down a business. During the process, any assets are liquidated and used to pay for the business’s debts. This may include liquidating personal assets to pay business debts. Any debt that is not covered by selling all assets can be forgiven.
Chapter 11. This type of bankruptcy is essentially a type of business reorganization. Keep in mind that your business debts are not forgiven in this type of filing. The company stays in operation and pays back debts over several years, so your assets are not used to pay debts.
Chapter 13: Not all businesses can file for this type of bankruptcy. It is only applicable to companies that have a sole proprietorship because it is technically for personal bankruptcy. You just create a plan to pay off the debt over three to five years with your income instead of selling everything to pay debts. Therefore, none of your property will be taken.

Ways Business Owners May Lose Their Private Belongings

As you can see, small business owners usually do not lose their own personal property when their companies file for bankruptcy. However, there are a few things that may happen to cause an owner to lose his or her house, car and other pricey belongings.

If you never incorporated the business and, instead, ran it as a sole proprietorship, you are personally liable for its debts. This means that if you file for Chapter 7 bankruptcy, your personal property may be taken.

If a creditor believes you fraudulently created a corporation to shield your assets from being reclaimed, they can file a lawsuit to seize your personal assets. Usually, a creditor can only do this if you did something unethical.

If you signed a piece of personal property, like a house, over as collateral for a business loan you took out, a business bankruptcy will not shield the property. It is now involved in the business and can, therefore, be a part of the debt owed to a creditor.

In Chapter 13 bankruptcy, both personal and business debts are considered. However, this type of bankruptcy just requires a payment plan, not complete liquidation of assets, so you usually will not automatically lose your home or vehicles.

Protecting Belongings When Your Business Files Bankruptcy

If you want to make sure your personal belongings are not taken for a business debt, it is important to pick the right type of bankruptcy. Usually, Chapter 11 and 13 are better at ensuring you keep personal assets if your small business is involved with your private life. However, if your business is an LLC or corporation, then you can typically file for Chapter 7 without losing your private belongings.

If you own a small business and are considering filing for bankruptcy, it is a good idea to have a lawyer on your side who is familiar with all the nuances of bankruptcy laws. U.S. bankruptcy laws are very complex, and filing the wrong paperwork can mean losing your property. At Neuner & Ventura, we work hard to protect the interests of our Marlton clients. Give us a call at (856) 596-2828 or email us through our online form to set up a consultation today.

How to File for Bankruptcy Without an Attorney

July 17, 2019 by Steven Neuner Esq.

The law doesn’t require you to have an attorney when filing for bankruptcy. In most cases, however, having the right attorney can make all the difference in your case.

Is It Possible to File for Bankruptcy Without an Attorney?

Legally speaking, you don’t need an attorney to file for bankruptcy. According to a recent poll, around 11% of bankruptcy cases are filed without an attorney. Therefore, the question isn’t can you file without an attorney but rather should you file without an attorney.

What Does an Attorney Do for You During a Bankruptcy Proceeding?

The attorney’s job begins before anything has been filed. Legal counsel will start by telling you whether you should file in the first place. If you should file, the lawyer can inform you which chapter to file under. Legal counsel will also let you know if you can discharge your debts and notify you about which assets you can keep once you’ve filed. Furthermore, an attorney could explain all the tax consequences of filing.

Upon starting the proceedings, your attorney will be responsible for walking you through the motions and making sure that you check all the necessary boxes as things move along. This includes helping you file the necessary forms at every stage, explaining to you bankruptcy law as it relates to your case, and assisting you with the case in any way you need.

What Will Be Expected of a Solo Filer?

Affected-by-a-Bankruptcy

Obviously, if you’re considering filing for bankruptcy, you are already strapped for cash and every little bit counts. Therefore, it’s natural for you to consider whether you need an attorney to file for bankruptcy or whether you can go at it solo. This would make you a pro se litigant.

If you go solo, you will need to perform all the duties that would have been carried out by your attorney. For example, you will have to familiarize yourself with the United States Bankruptcy Code as well as with the Federal Rules of Bankruptcy Procedure and with the unique rules of the court in which you file your case.

To make things simpler, here are a few things you might want to start with:

You should understand how bankruptcy forms work.
You’ll also need to know means testing information: The means test is a gauge that tells the government whether you have enough disposable income to pay off your debts or not.
You will need to know the required education providers around you as you must finish a session with an approved credit counselor before you can file for bankruptcy. And, after you have filed, you will be required to participate in a debt management course.
It’s also important to know which of your assets will be exempt from the bankruptcy proceedings.

Making the Decision of Going With a Lawyer vs. Going Solo

As you can see, filing for bankruptcy on your own isn’t impossible; it’s just a lot of hard work. With that said, here a few factors that will make it easier for you to decide whether you should go on your own or get legal counsel:

To begin with, you need to figure if you’re going to file for Chapter 7 or Chapter 13. In general, Chapter 13 filings tend to be more complicated. The more complicated the case, the better off you will be with the right attorney by your side.
Another variable to take into consideration is how much income you have and the number of assets that are at stake. Again, a lot of income and property means a complicated proceeding.
The most important variable in this entire equation is you. You need to be honest with yourself and figure out how willing you are to put in the work and effort required to manage your own bankruptcy case. You also need to assess how comfortable you would be with taking on this responsibility.

Even If You Go Solo, You Can Get Help Along the Way

There are several resources you can tap into for help whenever you need it. For starters, some bankruptcy courts offer pro se clinics where you will have an attorney explain your bankruptcy options and proceedings. Similarly, there are several legal aid organizations and legal clinics that do the same thing.

If you are considering the benefits of bankruptcy, reach out to Neuner & Ventura in Marlton, New Jersey. You are always welcome to visit our offices for a free consultation. Just contact us at (856) 596-2828 or drop by when you can.

The Intersection Between Probate and Bankruptcy

July 14, 2019 by Steven Neuner Esq.

How Bankruptcy and a Probate Estate Can Overlap

More than 50,000 bankruptcy cases are filed each month in the United States. Predictably, some of those people will pass away after having filed their bankruptcy petitions and while the cases remain pending. No matter how large the estate or whether a last will and testament exists, a pending bankruptcy creates a scenario in which the estate is automatically contested.

Bankruptcy

Bankruptcy as a legal concept is a means by which a debtor discards debt and/or agrees to a plan through which he or she repays debt. Generally, the person or organization petitioning for bankruptcy cannot repay their debts and seeks a practical alternative. The purpose of bankruptcy is its economic benefit. Creditors reclaim at least some of their investment, and borrowers get a second chance. All bankruptcy cases are handled by federal courts. The various types of bankruptcy include the following:

Chapter 7 involves the liquidation of assets.
Chapter 11 comprises individual or organizational reorganizations.
Chapter 13 deals with debt repayment via payment plans, lessened debt covenants and so forth.

Probate Estate

Probate is a legal concept in which something is validated and authenticated. It’s the initial step in administering the estate of a deceased person, and it can be done with or without a will. Probates can often be long and complex, but they are not required. They are generally only needed if the estate is contested. However, if a person has died while a bankruptcy is ongoing, then the estate is contested due to the nature of that case.

Property in the Custody of a Probate Court

Marshall v. Marshall is an important case in which the U.S. Supreme Court recognized the rights of state probate courts. The ruling prevents a federal court from marshaling property of which a probate court already has custody. Since all bankruptcy cases are handled at the federal level, this means that a bankruptcy court has no right to property that a probate court is already governing.

The Bankruptcy Reform Act

The Bankruptcy Reform Act of 1978 limited the extent of the Bankruptcy Act of 1938, which was actually the fourth such act that the U.S. had passed. The reform prevents bankruptcy courts from administering the estates of descendants. This does not mean that the court does not have access to the debtor’s estate. It does limit the court’s reach, but the court could, for instance, liquidate assets that it has a right to in order to make a lender whole.

A Tale of Two Estates

How a probate estate and bankruptcy intersect is still a matter of some controversy since laws can at times seem contradictory and no ruling has clarified those discrepancies. Once a bankruptcy has been filed, you essentially have two estates in the eyes of the law. You have the bankruptcy estate, which is determined at the time of the filing, and the debtor’s estate, which includes any exempt assets as well as assets acquired post-filing.

Exemptions and Dismissal

Certain asset exemptions exist inherently. A debtor can also assert certain exemptions as part of the filing, and recognized exemptions can never be a component of the bankruptcy estate. There is also the possibility for the bankruptcy to be dismissed. While the law does allow for a Chapter 7 case, for instance, to proceed post-death, it does not mandate the case, and a judge may choose to dismiss it.

Local Representation in New Jersey

Are you considering filing for bankruptcy? Have you been affected by a company’s or an individual’s bankruptcy petition? In either case, a bankruptcy lawyer at the office of Neuner & Ventura can provide you with guidance throughout the process. Our firm focuses on bankruptcy for people and organizations in southern New Jersey, and we have more than three decades of experience in the field. Initial consultations are provided at no charge, so contact our office in Marlton, NJ, today online or by calling (856) 596-2828.

How to Prepare for a Bankruptcy

July 11, 2019 by Steven Neuner Esq.

Making the Most of a Bankruptcy Filing

In 2005, Congress put new bankruptcy rules into place that made it harder to discharge student loans and qualify for Chapter 7 protection. However, the good news is that bankruptcy may still be an effective way to get out of debt or better manage any balances that you could still owe after your case is completed. It’s important to know what steps you can take to maximize the benefits of filing for Chapter 7 or 13 protection.

Inventory Your Existing Debts

The first step in the bankruptcy process is to take stock of your existing debt balances. This will help you to determine if a debt is secured or unsecured, and it can also help you to understand which debts can be discharged in bankruptcy. Generally speaking, Chapter 7 bankruptcy may be best if you have unsecured debts and can pass the means test.

Chapter 13 bankruptcy may be best if you have mostly secured debt such as a mortgage, auto loan, or secured personal loans. Student loan, payroll tax, and child support balances are typically not discharged in a bankruptcy. However, filing may provide you with more time to figure out a way to pay those balances without risking further negative consequences.

Follow Filing Instructions Carefully

It is in your best interest to learn about and follow all instructions related to filing for bankruptcy. Failure to follow the rules could result in a case being dismissed or otherwise delayed. In some cases, not following instructions could cause your case to become a Chapter 13 proceeding instead of a Chapter 7 proceeding.

Omitting assets from a financial disclosure form can lead to charges of fraud from creditors or the trustee overseeing the case. A New Jersey bankruptcy attorney could be able to help you gather necessary financial and other information needed to fill out bankruptcy paperwork. Your attorney may also be able to help you fulfill the credit counseling requirement imposed on most people who file for either Chapter 7 or Chapter 13 protection.

Create a Payment Plan and Stick to It

If you file for Chapter 13 protection, you will be required to create a payment plan that lasts for either three or five years. As long as you stay current on plan payments, you generally will not lose your home or other property. If necessary, it may be possible to request a modification to your payment plan if your economic circumstances change.

During a payment plan, you may not have to make any payments to unsecured creditors. Your bankruptcy attorney could help you to convert a second mortgage or other secured debts to unsecured debts. If you owe more on a car loan than the vehicle is worth, the negative equity could be forgiven.

Avoid Making the Same Mistakes Twice

Once your bankruptcy case has been discharged, you may be fully out of debt or have significantly fewer payments to make. However, if you have not learned from your prior mistakes, you could run the risk of having to file for bankruptcy again in the future. If you had trouble with credit card debt, it may be in your best interest to stop using credit cards or keep your credit limit to a minimum.

It may also be a good idea to focus on creating an emergency fund to help mitigate the damage that a future job loss could cause. An emergency fund can also be helpful in the event that you incur an unexpected repair or medical expense. Creating a budget can help you to identify how much money you make each month and how much you spend. Having a clear financial picture may help you to cut back on your spending or make other adjustments.

If you need a way out of credit card debt, contact the attorneys at Neuner & Ventura LLP today. You can reach us in Marlton by calling (856) 596-2828 or by visiting our office during normal business hours.

What Happens if You Avoid Getting Served for a Debt Collection Lawsuit?

May 3, 2019 by Steven Neuner Esq.

Can You Avoid the Server in a Debt Collections Lawsuit Forever?

If you have mounting debts behind you, you may end up facing a debt collection lawsuit at some point. This problem is not uncommon; there are roughly 30 million Americans who have at least one debt in collections. While avoiding the process server does delay you in getting bad news, it can cause some problems for you later on.

The Lawsuit Still Happens Even if You Aren’t Served

There are some important things to know if you are considering trying to hide from a process server for a debt collections lawsuit. For starters, you should understand that avoiding the process server will not actually keep you from having to go to court. Technically speaking, the court date could proceed without you knowing about it. However, the server is expected to put forth a good faith effort to find you.

When the server cannot get in touch with you right away, they could attempt a variety of other contact methods. They might try to visit your workplace or last known address. If this does not work, the state of New Jersey lets the server leave a copy of the summons at your address or give it to anyone else in your household who is over the age of 14. For people without a known address, the plaintiff can put a notice in a local newspaper informing you of the upcoming lawsuit.

There May Be Legal Consequences to Avoiding the Server

Avoiding a process server means you might end up being the subject of a lawsuit that you are not aware of. If a roommate throws away the papers or the notice is published in a newspaper you never see, you have no way of knowing the time and date of the lawsuit. This is a big problem because the judge usually rules in favor of the plaintiff if the other party does not show up.

Another problem with avoiding a process server in New Jersey is that you end up not having the time to prepare your defense. The legal process of being served with a lawsuit is meant to give you time to find a New Jersey lawyer and get ready for your case. If you are dragging out the process of being served, you end up without enough time to defend yourself or work with the people suing you to find a reasonable settlement.

Being Served Doesn’t Mean You Can’t File for Bankruptcy

A major reason people want to avoid a process server in a debt collection lawsuit is because they plan on addressing the lawsuit by filing for bankruptcy. Depending on your situation, it is true that bankruptcy can help manage the consequences of a debt collections lawsuit. However, this does not mean you have to resort to elaborate methods of hiding from process servers. As a bankruptcy lawyer can help you understand, you still have the opportunity to restructure your debts regardless of whether any lawsuits have been filed or judgments have been entered. However, it is still usually best to file for bankruptcy between the time of being served and going to trial because it lets you get started on the process as soon as possible.

It is tempting to avoid bad news and hope that it goes away, but trying to hide from a debt collections lawsuit never ends well. To get a good outcome from your case, you need to let yourself be served so you can meet with a bankruptcy lawyer and get started on your defense. Neuner & Ventura LLP has spent over 30 years helping the residents of New Jersey deal with debt and bankruptcy issues. Our bankruptcy law firm has the experience needed to help with these sensitive issues. Contact our practice in Marlton, NJ, today at (856) 596-2828 or email us to set up your free initial consultation.

How to Exclude Debts From a Bankruptcy

April 30, 2019 by Steven Neuner Esq.

How to Keep Debts Out of a Bankruptcy Case

It is estimated that there are just over 640,000 bankruptcies every year in the United States because of medical debt. While a bankruptcy filing may seem final, this doesn’t mean that an individual cannot continue to pay other debts while seeking to eliminate a medical bill or similar cost. There are ways a person can keep certain debts out of a bankruptcy filing.

Reaffirm the Debt With the Lender

When you file for bankruptcy, you have the option of signing an agreement that declares that you will continue to pay a debt as agreed. For example, you may assert that you will continue to pay your car loan or mortgage while having other debts discharged. Once the debt has been reaffirmed, it may be more difficult to go back on your agreement. Therefore, it may be in your best interests to avoid doing so until the idea can be discussed with a bankruptcy attorney or other professional.

What Types of Debts Can Be Reaffirmed?

It is much more common to reaffirm a secured debt as opposed to an unsecured one. Debts such as auto loans and mortgages are secured by the assets themselves. There are many potential benefits to telling a lender that you will repay the debt as agreed and keep them out of a bankruptcy proceeding.

What Are the Benefits of Reaffirming a Debt?

Reaffirming a debt can allow you to keep your car or house during a Chapter 7 case. While state law may permit you to keep equity in a home or car, you might not be able to keep the asset itself. This could make it difficult to go to work or keep a roof over your head during your case and in the months after as you work to rebuild your credit. Furthermore, by making your car or mortgage payment on time, it will be easier to rebuild your credit history and improve your credit score in less time.

There May Be Limits on How Much Debt You Can Reaffirm

While a lender may agree to allow you to reaffirm a debt, a bankruptcy judge could decide that it is not a good idea for that to happen. For example, a judge might decide that you will have too much debt after the bankruptcy case is over. Generally speaking, this means that you wouldn’t have enough money to provide the basics for yourself or your family while making debt payments.

A judge could also choose to reject a reaffirmation agreement if he or she feels that it would not be in your best interests for any reason. The court may reject if it seems like you don’t truly understand what you are agreeing to or if you owe more on an asset than it is worth.

Remember, once you reaffirm a debt, you are generally required to pay the full balance regardless of what happens to the asset. While it is possible to file for bankruptcy again, you can’t file for Chapter 7 protection for eight years after your current case is over.

Creditors May Be Willing to Negotiate

Depending on the circumstances of your case, a creditor may be willing to negotiate a new payment as part of the reaffirmation process. Creditors might decide to lower your interest rate, forgive a portion of the outstanding balance or waive any fees that you have accumulated. In some cases, they will choose to do all three. Your lenders may be willing to be flexible as getting a portion of what they are owed now could be easier than not getting anything after the case has been completed.

If you are in need of a bankruptcy attorney, don’t hesitate to contact us at Neuner & Ventura LLP. You can get in touch with us in Marlton, New Jersey, by dialing (856) 596-2828. You can also contact us through our online form or visit our law office during normal business hours.

Taking a Bankruptcy Means Test to Qualify for Chapter 7

March 26, 2019 by Steven Neuner Esq.

Chapter 7 Bankruptcy and the Bankruptcy Means Test

Nearly 500,000 people filed for Chapter 7 bankruptcy in 2016. If you are considering declaring personal bankruptcy, you probably are trying to figure out whether you should choose Chapter 7 bankruptcy or Chapter 13. Obviously, there are many factors that will go into your decision; however, one of the main considerations you need to keep in mind is whether you qualify for Chapter 7 in the first place, something that is determined through a bankruptcy means test.

What Is a Bankruptcy Means Test?

In order to file for Chapter 7 bankruptcy, which leads to debt forgiveness, you must qualify first by passing the bankruptcy means test. In short, you have to show that given your income, expenses, and family size, you do not have enough disposable income to meet your debts. Clearly, the bankruptcy means test was meant to limit the number of people who can opt for Chapter 7. That being said, if you don’t pass the test or you just want to hold onto some of your assets, such as your house or car, you can file for Chapter 13 where your debts will get restructured.

How Does the Test Work?

Simply put, the test gauges how much disposable income you have by deducting your expenses from your income. Consequently, the higher your disposable income, the less likely it will be that you’ll qualify for Chapter 7 as you’ll be expected to repay your debtors using your disposable income. Hence, even if you don’t pass the test and have to go bankruptcy means test through Chapter 13, the test will prove instrumental in setting your payment schedule. All that being said, the test consists of two parts: 1. Step 1: To start with, the test takes a look at your household income over the past six months and compares it with the state’s median income. The test also takes into consideration any changes or fluctuations in your income. On the one hand, if your income is already lower than the state’s median income, you pass automatically. Conversely, just because your income is higher than the median doesn’t mean that things are over: There is still the second step. 2. Step 2: At this stage, you have to calculate all your expenses over the past six months, especially things that are considered “allowable expenses,” such as your rent, your groceries, your clothing, and your medical costs. All of these costs are affected by the size of your family as well as where you live. Once these expenses are calculated, they are deducted from your household income in order to arrive at your disposable income, and if it is low beyond a certain threshold, you can qualify for Chapter 7. It should be pointed out that this stage can be a bit tricky: There are a lot of things that have to be accounted for, and you need to be as thorough and as forthcoming as you can be. Otherwise, if you omit something or write down conflicting information, you risk having your case tossed out altogether.

What Happens After a Bankruptcy Means Test?

In the event of passing the test, you can go ahead and file for Chapter 7, and the majority of your unsecured debt will be wiped away. Nevertheless, you need to bear in mind that this might not be the best route for you, and you might find it preferable to pursue Chapter 13. This is the sort of conversation you ought to have with your bankruptcy attorney. However, if you fail the test, you can’t appeal the decision. Yet, this doesn’t mean that you are obligated to go for Chapter 13. Assuming that you can hold on a bit, six months exactly, you can take another stab at the test again. After all, the test looks at your income and expenses over the past six months. It goes without saying that this entire process is significantly easier if you have the right bankruptcy attorney by your side. Therefore, if you are thinking of filing for bankruptcy, do not hesitate to contact us at (856) 596-2828, and we will be happy to start you off with a free consultation. Alternatively, you can come visit our offices in Marlton, New Jersey.

Does Bankruptcy Conclude Following a Discharge?

March 20, 2019 by Steven Neuner Esq.

What Occurs After Debts Are Discharged?

When a person successfully files for bankruptcy, his or her debts will eventually be discharged, which typically occurs at the very end of the process. In the final three months of 2018, more than 175,000 individuals and companies filed for bankruptcy, which shows just how common it is for people to take this step. If you’re thinking about filing for bankruptcy but are unsure of what the process involves, our New Jersey bankruptcy lawyer can help.

To What Does a Bankruptcy Discharge Refer?

When a bankruptcy court decides to order a discharge, there are a couple of things that occur. The main aspect of a bankruptcy discharge is that the debtor will no longer be required to pay some of his or her debts. However, not all debts are discharged. Some of the main debts that can’t be discharged when filing for a Chapter 7 bankruptcy include:

Debts incurred from student loans
Income tax debt in most cases
Spousal support and child support
Money that was gained via fraud
Any debt that’s not listed on your initial bankruptcy paperwork

Along with the discharged debts, this order will stop creditors from attempting to collect any of the debts that have been discharged, which means that these individuals are unable to contact you through telephone calls or demand letters that attempt to obtain these debts.

When a Bankruptcy Discharge Typically Occurs

The timing for a bankruptcy discharge can depend on which chapter of bankruptcy is filed. When a Chapter 7 bankruptcy has been filed, it’s common for the discharge to occur once the time expires for filing a bankruptcy lawyer complaint relating to a specific debt that’s about to be discharged. Creditors will usually have a certain amount of time to object to the discharging of a debt. This expiration date is oftentimes several months after the individual filed for bankruptcy. In Chapter 11 and 13 bankruptcies, debts will usually be discharged once the affected individual or company provides any and all payments relating to the plan that was made after the bankruptcy was filed. A bankruptcy plan is typically created soon after a person files for bankruptcy in an attempt to eventually pay back some of the debts that are owed. Once the plan has been fulfilled, it’s possible for some or any of the remaining debts to be discharged. There are times when this discharge could be denied if a person did not complete an educational course for financial management in the time that was allotted for him or her to do so.

Reasons That a Bankruptcy Case Could Be Reopened

In many instances, a bankruptcy case will officially end when a discharge has been ordered. However, it’s possible for a bankruptcy case to be reopened in certain situations. Knowing what these situations are may be able to help you avoid having your case reopened in the future. For one, a bankruptcy case could be reopened if the debtor would like to add a debt that he or she initially forgot to list. When a debt isn’t listed in the initial bankruptcy filing, it won’t be discharged. Adding debt to the list allows the debtor to correct the problem while also notifying the creditor about the bankruptcy case in question. It’s also possible for a bankruptcy case to be reopened by a creditor or trustee if he or she finds a debt that wasn’t listed in the initial paperwork. There are times when the liquidation of certain debts would be more beneficial to a creditor or trustee, which could cause him or her to ask the court to reopen the case. If you’re in the midst of bankruptcy but you would like some legal assistance on the matter, our bankruptcy lawyers at Neuner & Ventura can provide you with the assistance you require. When you’re about to file for bankruptcy, call our New Jersey bankruptcy lawyers at (856) 596-2828 at our office in Marlton so that we can guide you through your case and help answer any questions that could arise.

You Can Pay Debts Even During a Bankruptcy

February 24, 2019 by Steven Neuner Esq.

Reaffirming Debts During a Bankruptcy

Between March 2017 and March 2018, the number of bankruptcy cases filed in the United States dropped by 1.8 percent. Although the number of filings may be going down overall, there is still a chance that you will need protection from creditors. If you desire, it may be possible to reaffirm some debts and keep them out of your bankruptcy case.

What Is Reaffirmation?

Reaffirmation of a debt is a process during which you agree to repay a debt according to its current terms. You may choose to reaffirm a debt even if it is eligible to be discharged in a Chapter 7, 11 or 13 case. In order to commit to paying a lender as agreed upon initially, you will have to file form B240A with the bankruptcy court.

Does the Court Have to Approve a Reaffirmation?

In most cases, the bankruptcy judge in your case will need to approve the reaffirmation. Approval may not be granted if you owe more than an asset is worth. For example, if a vehicle is only worth $5,000, you may not be able to agree to pay a lender $10,000. Generally, there is no need to obtain court approval to reaffirm any debt secured by a home or other real property.

Why Would You Want to Reaffirm a Debt?

There are a couple of reasons why it may make sense to reaffirm a debt. First, it allows you to keep an asset during the course of the bankruptcy. For instance, by agreeing to make payments in a timely manner, you could avoid losing a car in a liquidation bankruptcy. Another good reason to continue to pay a debt is that it could help rebuild your credit after other debts have been discharged. Instead of having to take out a secured credit card or other token credit account, you can make payments to a lender with which you already have a history.

Can You Rescind the Reaffirmation?

It is generally possible to rescind the reaffirmation for up to 60 days after filing the proper paperwork with the court. If you do choose to rescind the reaffirmation, the asset could be liquidated or otherwise worked into a repayment plan.

A creditor could also move to have a debt included in a bankruptcy case if you fail to make payments as agreed. Your bankruptcy attorney may be able to explain the process of changing your mind after agreeing to pay a lender under the current terms of a loan.

Can You Sell Assets Held Outside the Bankruptcy Estate?

As long as the deal with your creditor allows you to sell an asset, you generally have the right to do so. This can help you raise funds to keep up with a repayment plan or let you get rid of an asset without losing equity that has accrued. Selling a home may be far preferable to having it foreclosed. Trading or selling a vehicle could also be beneficial in the event that you can’t get the court to agree to a cram down.

Debts Can Be Repaid After a Discharge

Whether you choose to reaffirm a debt or not, it is always possible to pay an outstanding debt in full. This is true even if you had it discharged in a bankruptcy case. Doing so could be helpful in preserving relationships with vendors, friends or family members. It can also be an ideal option for those who feel that they have a moral obligation to repay money that they borrowed from any source.

If you are in need of a bankruptcy attorney, reach out to the legal representatives from Neuner & Ventura LLP. You can contact our law office in Marlton, New Jersey, by calling (856) 596-2828. You can also use the contact form on this site or visit us at our practice at the Willow Ridge Executive Office Park.

What a Chapter 11 Bankruptcy Reorganization Plan Entails

February 21, 2019 by Steven Neuner Esq.

How a Chapter 11 Reorganization Plan Is Created

While filing for bankruptcy comes with a number of consequences that can be difficult to manage, doing so can provide you with an opportunity to save your business. There are more than 7,000 Chapter 11 bankruptcies filed every year, which shows how common this type of filing is. Here at Neuner & Ventura LLP, our bankruptcy lawyers have handled a large number of cases pertaining to this type of bankruptcy, which you should know more about when you’re getting ready to file.

What Reorganization Plans Typically Include

When a business has filed for Chapter 11 bankruptcy, they will have a certain amount of time to restructure their debts and reorganize their business in a manner that may allow for future success. While there are typically limits placed on how long a business can take to create a reorganization plan, these limits aren’t usually strict and can be extended by the bankruptcy court. The initial time limit is around four months, during which time a business will need to reorganize their financial affairs. Once these four months have passed, the creditors that are owed money by the business in question will be able to file competing reorganization plans if they wish to do so.

However, competing plans are rare because of how much work goes into creating such a plan. Instead, the creditors can recommend changing the filing to a Chapter 7 bankruptcy if they are dissatisfied with the plan that was sent in by the company in question. In most cases, business operations will need to be downsized somewhat to open up assets that can be used to cover a portion of the debts that are still owed. Though rare, it’s also possible that the restructuring may allow the company to pay back all of the debts they owe.

How a Chapter 11 Plan Is Confirmed

Once you’ve created a plan that reduces expenses, frees up assets, and provides a way for your business to move forward, the plan will then need to be confirmed by impaired creditors as well as the court that oversees the case. The plan will need to meet a variety of requirements before confirmation occurs. For one, the plan must be a feasible one, which means that the court must determine that the company’s plan for the next five or 10 years is likely to be a successful one. The plan must also be deemed by the courts to have been made in good faith, which essentially means that success can’t be obtained through illegal means.

For the plan to be confirmed, it will also need to be in the best interests of all creditors, which means that the creditors will need to receive as much or more than they otherwise would have if a Chapter 7 bankruptcy had been filed instead. Finally, the plan will need to be fair and equitable. This term means a couple of things. For one, the creditors that are owed will need to receive repayment that at least matches the value of the collateral. Equity owners will also not retain any form of ownership once the plan has been confirmed if the creditors have not been paid in full.

How Our New Jersey Bankruptcy Attorneys Can Provide Assistance

If you believe that the only way for your business to survive is by filing a Chapter 11 bankruptcy, our experienced bankruptcy attorneys are here to help. Creating a reorganization plan following the filing of bankruptcy oftentimes makes for a lengthy and complicated process. Obligations will need to be met, and the plan will likely need to be created in a certain time frame. Our bankruptcy lawyers can help you file any of the necessary paperwork while also making sure that your plan meets all of the legal requirements and is likely to be confirmed.

If you’re getting ready to file for Chapter 11 bankruptcy but you want to obtain some legal assistance to help guide you through the extensive process, call our New Jersey bankruptcy lawyers today at (856) 596-2828 to schedule your first consultation at our office in Marlton.