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Written by Canterbury Law Group

Small Business Chapter Eleven

Small Business Chapter 11

Depending on the circumstances, small businesses have three potential bankruptcy options. Read on to learn more.

Chapter 7 – Chapter 7 is a bankruptcy option for debtors that do not have the means to restructure their obligations and continue in business. In Chapter 7, a trustee is appointed, available assets are sold, and creditors are paid to the extent funds are available. Partnerships, limited liability companies, and corporations are all eligible to file bankruptcy under Chapter 7. Depending on their income, individuals who own and operate small businesses as sole proprietorships also may file bankruptcy under Chapter 7. To learn more, see the articles in Chapter 7 for Small Business Owners.

Chapter 13 – Chapter 13 can be a restructuring option for small businesses owned and operated by individuals (a sole proprietorship). Only individuals can file Chapter 13, so it is not an option for businesses operated through partnerships, limited liability companies, or corporations. Chapter 13 eligibility is also subject to debt limits. As of April 2019, an individual owing more than $419,275 for unsecured debt and $1,257,850 for secured debt can’t file Chapter 13. (The limits for cases filed before April 1, 2019, are $394,725 in unsecured debt and $1,184,200 in secured debt.) To learn more, see the articles in Chapter 13 for Small Business Owners.

Chapter 11 – Another option for a small business is Chapter 11 bankruptcy. Generally, small businesses shy away from Chapter 11, because it is expensive, risky, time-consuming, and complex. Chapter 11 is the only bankruptcy option, however, for a small business seeking to restructure and continue in operation if it is owned by a partnership, limited liability company, or corporation. Chapter 11 is also the only bankruptcy option for individual business debtors who want to reorganize but owe too much money to meet Chapter 13’s eligibility requirements.

Chapter 11, Subdivision V – Most small businesses in need of reorganization help turn to this modified Chapter 11 specially designed for small business filers. It’s a simplified reorganization that doesn’t involve a creditors’ committee and disclosure statements and the bankruptcy judge can confirm a plan without creditor consensus. Small businesses with debt of $2,725,625 or less are eligible. In response to the coronavirus pandemic, the debt limit is currently $7,500,000 until March 26, 2021.

Learn about all of the options available to small businesses and their owners by reading Chapter 7 vs. Chapter 11 Bankruptcy.

What Is Chapter 11 Bankruptcy?

Chapter 11 is part of the United States Bankruptcy Code. Chapter 11 generally gets in the news when major corporations — like General Motors, K-Mart, and United Airlines — have financial problems and turn to the bankruptcy courts for help. Most Chapter 11 cases, however, are filed by businesses and companies that are far from being household names.

Under Chapter 11, a debtor can restructure its finances through a plan of reorganization approved by the bankruptcy court. By reducing obligations and modifying payment terms, a Chapter 11 plan can help a debtor balance its income and expenses, regain profitability, and continue in operation. Under Chapter 11, a debtor also can sell some or all of its assets so it can downsize its business if necessary or pay down claims that it owes.

 

Special Provisions for Small Business Debtors in Chapter 11, Subdivision V Cases

For the most part, small businesses and major corporations have to follow the same rules and meet the same requirements to reorganize under Chapter 11. There are, however, some special provisions for small business debtors that can help them fast track through the Chapter 11 process and reduce legal and other restructuring expenses.

Under the Bankruptcy Code, a Chapter 11, Subdivision V proceeding filed by a “small business debtor” is considered to be a “small business case.” A “small business debtor” is a person or entity who: (1) is engaged in business or other commercial activities; and (2) owes no more than $2,725,625 as of April 1, 2019, in total claims, excluding obligations owed to insiders such as family members of the business owners. (In response to the coronavirus pandemic, the debt limit has been increased to $7,500,000 until March 26, 2021.)

Source: https://www.nolo.com/legal-encyclopedia/chapter-11-bankruptcy-small-business-owners.html

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

Rent and Bankruptcy

Rent And Bankruptcy

Tenant bankruptcy can put a restriction on what you can do in collecting unpaid rent. As a landlord, however, you are still entitled to work within the system to recover the money owed by your tenant. Read on to learn more.

Eviction for Unpaid Rent

Usually, you can give your tenant a three-day pay or vacate notice if he is behind on rent. However, if the tenant has filed for bankruptcy, you cannot proceed. This is known as an automatic stay. You can evict for other reasons, such as for violating the lease agreement or illegal behavior.

Restrictions on Landlords

If you don’t follow the orders of the bankruptcy court and attempt to collect rent from your tenant, you could face penalties but you can file your own petition with the court. A bankruptcy judge will evaluate your petition and rule on whether to allow it or not.

Judgment of Possession

The exception to the automatic stay is if you were already far enough along in the eviction process that the judge awarded you a judgment of possession. If the tenant filed before you received the judgment, you must petition the court for relief from the automatic stay. The relief from the automatic stay doesn’t mean you can collect rent — it just gives you permission to proceed with eviction.

Proof of Claim

To get in line with the tenant’s other creditors and hopefully collect some of the back rent, file a proof of claim with the bankruptcy court. Keep records of the rent due after the bankruptcy filing because the court treats them separately. Inform the court of the tenant’s security deposit as well. 

Source: https://homeguides.sfgate.com/tenant-filing-bankruptcy-owes-back-rent-53174.html

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Subchapter 5 Bankruptcy

Subchapter 5 Bankruptcy

 

Subchapter 5 was added to Chapter 11 of the U.S. Bankruptcy Code in 2019 to make reorganization bankruptcies more accessible to small businesses. It gives small businesses that are earning a profit, but having trouble paying their obligations, a simplified process for paying down their debt. Businesses that file under Subchapter 5 can force creditors to accept court-approved repayment plans of three to five years. They can also use the plan to shed some of their unsecured debt. Read on to learn more.

Business Bankruptcy Types

  • Chapter 7: This is a “liquidation” bankruptcy for businesses that are no longer viable. You will be required to sell all of your business assets to pay creditors and close the business. In return, you will be debt free.
  • Chapter 11: This is a “reorganization” bankruptcy where you can force creditors to negotiate payment plans while the business stays open. This lets you repay most of your secured debts while continuing to run the business. Some of your unsecured debt may be discharged.

Both types of bankruptcy offer an automatic stay to protect you from creditors. This is often the biggest benefit of filing for bankruptcy. The automatic stay keeps creditors from collecting and will stop most court actions against you.

Benefits of Subchapter 5 Bankruptcy

Filing a small business bankruptcy under Subchapter 5 offers you the following benefits:

  • Continued business operations: You will continue to own and run your business so long as you stick to the payment plan. You will also need to pay your unsecured creditors all of your disposable income while the plan is in place.
  • No creditor approval: The bankruptcy court can confirm your reorganization plan without the approval of your creditors if it finds it to be fair. A traditional Chapter 11 plan must be approved by creditors.
  • Only your business can file a plan: In other Chapter 11 cases, your creditors can submit a plan on your behalf. But in Subchapter 5 only your business can submit one.
  • No disclosure needed: In Chapter 11 cases, you must normally file a detailed disclosure statement with the court. The statement provides a breakdown of your business and if you can repay your creditors. In a Subchapter 5 case, no statement needs to be filed.
  • Special trustee: You will continue operating your business in bankruptcy, but a trustee will be named to monitor its operations. The trustee will also make recommendations to the court regarding confirmation of the reorganization plan.
  • Expenses paid in installments: In a traditional Chapter 11 case, you must pay all of the administrative expenses on the day the plan becomes effective. Subchapter 5 allows you to pay the expenses over the length of the plan.

Who Can Claim Subchapter 5 Bankruptcy?

Businesses that qualify for Subchapter 5 bankruptcy must be pursuing business activities and have debt that does not exceed $2.75 million. The debt cannot include those owed to company insiders. Also, at least 50% of the business debt must come from business activities. 

COVID-19 Bill Temporarily Expanded Eligibility

The Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March 2020 expanded Subchapter 5 eligibility to businesses with debts of up to $7.5 million for one year. The change was made to help with the expected increase in business bankruptcies as a result of the pandemic.

Creditors Still Enjoy Some Protections

Subchapter 5 made it easier for small businesses to file for a reorganization bankruptcy, but creditors still have the following Chapter 11 benefits:

  • The reorganization must offer creditors at least what they would have received had you filed under Chapter 7.
  • Secured creditors may still retain their rights to the property you put up as collateral.
  • Secured creditors can protect their collateral and seek relief from the automatic stay.

A Bankruptcy Attorney Can Help

Subchapter 5 simplified Chapter 11 filing for small businesses, but it is still a complex process. A skilled attorney can walk you through each step in filing for bankruptcy to ensure the best possible result. Working with an experienced bankruptcy attorney near you can offer you guidance and work to protect your assets.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

Personal Guarantees in Bankruptcy

Personal Guarantees in Bankruptcy

When you guarantee a loan for your business, friend, or family member, you make yourself liable for it. Read on to learn more.

What Is a Personal Guarantee?

A personal guarantee is an agreement that allows a lender to go after your personal assets if your company, relative, or friend defaults on a loan. 

Why You Might Sign a Personal Guarantee

Most new companies don’t have much in the way of assets. To increase the odds of getting paid, a lender will require a personal guarantee before extending a property loan or another obligation.

How to Eliminate a Personal Guarantee With Bankruptcy

It’s relatively common for a business owner to file individual bankruptcy to get rid of a personal guarantee—and most personal guarantees will qualify for discharge. Also, keep in mind that filing on behalf of the business won’t get rid of your personal obligation to pay back the guaranteed loan

Liens Remain in Bankruptcy—Usually

Some personal guarantees include a security interest in your personal assets. In that case, the lender will typically have a lien on your property. 

Personal Guarantees in Bankruptcy Chapters 7 and 13

Each bankruptcy case is different. It’s common to have a lot of moving parts and considerations, so it’s best to meet with a bankruptcy attorney. 

Chapter 7 Bankruptcy

If you don’t have much in the way of income or property—primarily debt—Chapter 7 will likely be your best option. You can wipe out (discharge) qualifying debt, such as credit card debt and personal guarantees, in approximately four months. Chapter 7 also works well if you have a substantial income, and the majority of your debt is business debt. 

Chapter 13 Bankruptcy

Many business people find this chapter helpful in several situations. You, as an individual, not the business, would be filing Chapter 13—companies can’t file. Unlike Chapter 7, you can keep all of your property, and in most cases, you’ll pay a smaller portion of your personal debt over time. Chapter 13 has a few other benefits that aren’t available in Chapter 7. If you’re like many business people, you might have fallen behind on a house or car payment while trying to keep the company afloat. You can catch up on these payments through the Chapter 13 repayment plan and keep the home, car, or other secured property. Also, you might be able to reduce the amount you’d have to pay on some collateral through a cramdown in Chapter 13 bankruptcy. 

Source: https://www.alllaw.com/articles/nolo/bankruptcy/personal-guarantee-bankruptcy.html

 

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

How Long Does Bankruptcy Stay On Your Credit Report?

How Long Does Bankruptcy Stay On Your Credit Report

There are in excess of 50,000 bankruptcies by companies per year in the US. Generally, employees are well treated receive as creditors in bankruptcy courts, payment for wages owed is not  guaranteed once employers file for bankruptcy. Therefore, employees should know how to operate in a judicious manner. Read on to learn more.

Types of Bankruptcy

The two kinds of bankruptcy employers can file are: Chapter 7, where the company is liquidated by selling off the assets of the company and the proceeds are divided among all of the creditors in order of their priority, which is established by bankruptcy law. The second option is Chapter 11 allows a company to reorganize and restructure its debt contracts. 

Payroll

Payroll obligations can be impacted by bankruptcy. If an employer falls behind in making payroll, then files bankruptcy, employees become creditors and take priority in receiving remuneration. 

Rights as a Creditor

Employees can file a proof of claim and are entitled to a portion of any proceeds as a result of the bankruptcy. This provision in the tax law allows employees to potentially collect money from other creditors who hold a lower priority in the bankruptcy.

Payroll Taxes

By law, the employee and employer split the cost of payroll taxes. In bankruptcy, the portion of payroll taxes collected from employees cannot be discharged, but the half owed by the employer can be discharged.

Don’t Pay Yourself a Bonus or Back Pay

The bankruptcy system treats you in a similar way to an insider creditor. So if you pay yourself a bonus, repay a loan you made to the business, or otherwise take money out of the company during the 12 months prior to filing for bankruptcy, might be considered bankruptcy fraud the results of which may land you in jail or mean your bankruptcy claim is dismissed by the courts.

 

Source: https://smallbusiness.chron.com/can-employer-file-bankruptcy-out-payroll-10027.html

 

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

What Is Debt Restructuring?

What Is Debt Restructuring

Debt restructuring is a tool companies use to avoid default risks on lower rates of interest or existing debt. When you are nearing insolvency, debt restructure is an option for individuals and countries that are shortly to default on what is known as sovereign debt. Read on to learn more.

How Debt Restructuring Works

For example, a company may take several loans and restructure them in a hierarchy of payment priority. Often this means long term debtholders are paid before newer debtholders. Unsurprisingly, creditors are sometimes prepared to offer alternative debt management terms to avoid default or bankruptcy. The restructuring process normally involves prolonging the dates when debts are due, and/or reducing the interest rate on existing loans. Creditors realize they would receive less without the restructure. Obviously, this can be a winning solution for everyone in otherwise bad circumstances. Individuals can do this as well as businesses. But individuals need to check the legitimacy of any debt relief services they use as well as checking with a reputable consumer protection agency and the attorney general of the state.

Types Of Debt Restructuring

One option is known as a debt-for-equity swap. This happens when a creditor cancels part or all outstanding debts in return for some equity. This is often preferable when there are significant assets and debts, and the creditors would rather take control of a company undergoing tough financial times. Another option is called “taking a haircut” where part of the interest payments would be written off or part of the principal is agreed not to be paid back. Callable bonds are often used by companies to obtain protection and then can be redeemed when interest rates decrease. Therefore, the issuer can restructure debt in the future as the debt currently existing can be replaced with fresher debt and a lower rate of interest.

Other Examples Of Debt Restructure

Countries sometimes have sovereign debt threatening their solvency. Some countries restructure their debt and some use bondholders to do so. This may mean moving from the private sector to the public sector (this happened in the United Kingdom, post-WW2.) Sovereign bondholders may have to “take a haircut” and pay a percentage of the debt offering the government issuer greater time to access funds to pay bondholders. There is not a great deal of oversight to this but is less expensive than bankruptcy when an individual, business or country is in peril.

Source: www.investopedia.com/terms/d/debtrestructuring.asp

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

Debt Restructuring Pros and Cons

Debt Restructuring Pros and Cons

Debt restructuring is a very important element for financial survival. Let’s review some of the pro’s and con’s. Read on to learn more.

Debt Restructuring

This can be achieved in many ways. But it means settling debt through a program of debt management with a reduction on the debt amount and/or interest. Debt restructuring is of course also part of Chapter 13 bankruptcy.

Advantages

  • If your accounts were late and you were receiving collection calls, these calls will terminate once your plan is underway.
  • With the bankruptcy and/or debt management plan, you will be listed as current on your payments.
  • Be goal focused. You have a date you can circle on a calendar to see you getting closer to the target.

Disadvantages

  • When declaring bankruptcy, it will be on your credit report for up to 10 years.
  • You will lose access to credit cards.
  • Bankruptcy can come with high legal and court fees.

Difference Between Debt Restructuring And Debt Consolidation

A common method of debt consolidation tackles your debts with high rates of increase. it is worth exploring this option before undertaking debt restructure. With debt consolidation, you obtain a personal loan equal to the current debt amount. The newer loan has an interest rate that is lower. This means you will have one loan and one payment to handle. It is a good idea for those still maintaining reasonable credit. When you have credit that is not so great, a debt consolidation may not be the optimum option.

Source: https://www.valuepenguin.com/personal-loans/debt-consolidation/how-does-debt-restructuring-work

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

Can I File For Bankruptcy – Scottsdale?

Can I File For Bankruptcy

Bankruptcy may be the only solution in some cases but there are major consequences should you choose this route. Read on to learn more.

Consider The Following:

  • Bankruptcy can do severe damage to your credit score and should be considered as a last resort.
  • As an alternative, you may be able to negotiate with your creditors and work out a payment plan or other satisfactory arrangement.
  • If you decide to file for bankruptcy, you have two basic options: Chapter 7 and Chapter 13.
  • A Chapter 7 bankruptcy will sell off many of your assets to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period.

Before Filing Bankruptcy

You should consider alternatives that may do less damage to your credit and are less expensive than bankruptcy such as:

  • Finding out if your creditors are willing to negotiate.
  • With a home mortgage seeing if there are options available such as alternative repayment plans or loan modifications available.
  • Even the often dreaded IRS are willing to negotiate and offer payment plans.

Chapter 7 Means Test

The courts impose this test to determine whether you are eligible for Chapter 7. The test compares your average income over the previous six months with the median income for a household of your size in your state; if you earn less than the median, you should be eligible for Chapter 7. If it is greater than median you may still be eligible after you have subtracted allowed expenses. if you still do not meet the criteria, you will need to look at Chapter 13 options.

Source: https://www.investopedia.com/articles/pf/07/bankruptcy.asp

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Written by Canterbury Law Group

How Soon Will My Credit Score Improve After Bankruptcy? – Scottsdale

How Soon Will My Credit Score Improve After Bankruptcy

Ten years is the time a bankruptcy can stay on your credit record even following the discharge and debt repayment. However the length of time it remains depends on the kind of bankruptcy you file. read on to learn more.

Chapter 7 bankruptcy can remain on your credit report for up to ten years, meanwhile Chapter 13 can remain on there for seven years. However the impact of the bankruptcy does lessen over time and there are things you can do to help minimize the damage.

Chapter 7 Bankruptcy

When you file Chapter 7, you will most likely have to wait the full ten years before it comes off your credit report. Discharged debts will be listed as such, though they will fall from your credit report after seven years from the filing date, unless they were already delinquent, in which case, it may be sooner.

Chapter 13 Bankruptcy

A finalized Chapter 13 bankruptcy and the accounts will drop off your credit report seven years after you filed, unless they were already delinquent, in which case, it may be sooner. Chapter 13 is often looked more favorably upon because there is usually a payment of at least some of the debt.

Once the bankruptcy has been removed from your credit report, your scores should begin to upturn, even more so when you pay your bills on time and in full and utilize credit in a responsible way. Filing for bankruptcy is not an easy path though it may be right for some. If you can commit to using credit in a responsible manner following your bankruptcy, you can rebuild it while awaiting the bankruptcy debts to fall away from the credit report.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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Who Can File For Bankruptcy – Scottsdale?

Who Can File For Bankruptcy

Regardless of immigration status, nearly everyone can file for Chapter 7 bankruptcy. However you must meet certain criteria. Read on to learn more.

When filing an individual consumer bankruptcy you have to pass a means test and a court will not allow your case to proceed if you have filed a bankruptcy within certain time frames, or if the court suspects cheating on your part. Note an incorporated entity is forbidden from debt discharge in Chapter 7.

Income Versus Debts

Let’s go over some of the rules for meeting Chapter 7 bankruptcy debt discharge criteria. If you fail to qualify, you will need to consider Chapter 13 bankruptcy.

Income Level

You need to start by calculating your current monthly income versus the median income for a family of equivalent size in the state where you reside. This total is the average monthly income from the previous six months. If the income is equal too or less than the median, the law presumes you qualify for Chapter 7. if it is greater than the median, you must submit a means test to see if you qualify.

Disposable Income And Debt Repayment

The means test discovers if you have the disposable income to repay some of your unsecured debts over a five year repayment period. Besides the means test, the bankruptcy trustee will examine your finances looking for your current income and expenses and the amount of disposable cash available to pay creditors. The trustee will assess your Schedule I (income) and Schedule J (expenses) – if the trustee feels you can make payments to your creditors, he will most likely recommend Chapter 13 bankruptcy to the court

Previous Bankruptcies

You will not qualify for Chapter 7 bankruptcy if you obtained a discharge of your debts in a Chapter 7 bankruptcy case within the last eight years, or a Chapter 13 case within the previous six years. Nor can you file for Chapter 7 or Chapter 13 if your case was not accepted by the court in the past 180 days because:

  • The dismissal was requested after the creditor requested relief from the automatic stay
  • A court order violation
  • The court ruling your filing was fraudulent or it constituted an abuse of the system

Corporations or LLC’s

Chapter 7 bankruptcy will not eliminate the debt of an LLC or corporation. But the trustee will liquidate the assets of the company and distribute the funds raised to the creditors.

Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale

Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business BankruptcyChapter 7 BankruptcyCreditor RepresentationChapter 5 ClaimsChapter 13 Bankruptcy, Business RestructuringChapter 11 Bankruptcy, and more.

*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.

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