The attorneys at the Law Offices of Robert M. Stahl have more than 25 years of experience representing individual and business debtors in connection with bankruptcy filing and restructuring their financial obligations through negotiated workouts with creditors and in state court lawsuits, as well as in bankruptcy reorganizations. The Law Office of Robert M. Stahl has experience in representing clients with serious financial and tax problems in all types of bankruptcy cases. The Law Offices of Robert M. Stahl has successfully helped thousands of Maryland clients discharge or reorganize tens of millions of dollars of commercial and tax-related financial obligations, as well as save their residential and commercial properties from foreclosure. A Chapter 7 or 13 bankruptcy case can effectively discharge or reorganize financial problems. Our attorneys have extensive experience in guiding individuals through bankruptcy process. Bankruptcy law is not meant to punish a person in financial trouble; it is intended to provide the honest debtor with a financial “fresh start.”
An important feature applicable to all types of bankruptcy filings is the automatic stay. The automatic stay means that the filing for bankruptcy protection automatically stops and brings to a grinding halt most lawsuits, collection actions, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection harassment. It offers debtors a breathing spell by giving the debtor and the trustee assigned to the case time to review the situation and develop an appropriate plan. In most circumstances, creditors cannot take any further legal action against the debtor or the his/her property without permission from the bankruptcy court.
CHAPTER 7 BANKRUPTCY
Chapter 7 bankruptcy, often called a liquidation or straight bankruptcy, is the most common type of bankruptcy proceeding. In a Chapter 7 case, a debtor is allowed to exempt (keep) all or a certain portion of his or her property. In most cases, the debtor keeps all property. However, each person and situation is different, and the actual amount that can be retained (the “exempt” amount) by a specific debtor is determined by the market value of the debtor’s property in terms of dollars, the type of the property owned by the debtor (for example, a retirement account), and/or the manner in which the property is owned by the debtor (for example, whether the property is owned individually by the debtor or jointly by the debtor and a spouse).
Property that a debtor is entitled to keep is called “exempt property” and property that the debtor is not entitled to keep is considered “non-exempt property.” A Chapter 7 Trustee is appointed by the bankruptcy court to collect the non-exempt property of the debtor, sell it, and distribute the sale proceeds to creditors. However, the vast majority of Chapter 7 bankruptcies are “no-asset” bankruptcies in which the debtor is permitted to keep all of his or her property and nothing is distributed to creditors.
Although a liquidation case can rarely help with secured debt (the secured creditor still has the right to repossess the collateral if the debtor falls behind in the monthly payments), the debtor will be discharged from the legal obligation to pay unsecured debts such as credit card debts, personal loans, court judgments, garnishments, medical bills and utility arrearages. However, certain types of unsecured debt are allowed special treatment and generally cannot be discharged. These debts include some student loans, alimony, child support, criminal fines, and some taxes.
Although it is very possible that a debtor will be able to keep a house, car and remainder of the debtor’s other property in a Chapter 7 case, our firm strongly recommends that debtors consult experienced, knowledgeable legal counsel to determine the exemptions that will be available to them in their particular case.
CHAPTER 13 BANKRUPTCY
A filing under Chapter 13 is technically referred to as “individual reorganization.” It is a way for people to “reorganize” their debt into a manageable, monthly payment plan that is fair for the individual’s creditors. A Chapter 13 Plan must pay out the greater of the individual’s monthly disposable income aggregated over a certain period or the amount creditors would have received in a Chapter 7 bankruptcy if the individual’s property were liquidated. As in a Chapter 7, an individual in a Chapter 13 Plan gets to exempt a certain amount of property. In order to qualify for a Chapter 13 bankruptcy, a client must be an individual and have regular source of income (either from employment or from another source).
One of the principal advantages of a Chapter 13 bankruptcy is that it allows a client to bring certain secured debts, such as home mortgages and car loans, current. Under a Chapter 13 Plan, a client is able to consolidate all their debt together, including the arrearage on a house or car, back taxes owed and unsecured debt. This plan would require debtors to pay back the secured debt arrearages and certain back taxes in full, but allows the client to only repay a small percentage of the unsecured debt. Clients can also use Chapter 13 to reduce their tax liability and/or create a payment plan for tax liabilities. In many cases, Chapter 13 will even eliminate penalties and stop interest from accruing on all or a portion of their tax debt.
The debtor’s plan is a document outlining to the bankruptcy court how the debtor proposes to dispose of the claims of the debtor’s creditors. The debtor’s property is protected from seizure from creditors, including mortgage and other lien holders, as long as the proposed payments are made and necessary insurance coverages remain in place. The plan generally requires monthly payments to the bankruptcy trustee over a period of three to five years.
CHAPTER 11 INDIVIDUAL BANKRUPTCIES
A typical individual Chapter 11 client is one who falls into one of three categories: 1) an individual who has a lot of complex, usually business-related debt but also a lot of assets and/or high income, which can be used to fund or otherwise support a Chapter 11 Plan; 2) an individual who does not fall within certain parameters required for Chapter 7 or Chapter 13 bankruptcy; 3) an individual with a business that could be disrupted by a Chapter 7 bankruptcy; or 4) an individual who needs to reorganize debt but who also needs greater flexibility in order to accomplish his or her goals.
The process of filing a Chapter 11 bankruptcy case and obtaining confirmation of the debtor’s Chapter 11 Plan can be quite complex and costly. Accordingly, most Chapter 11 bankruptcy cases are filed by business entities. However, individuals are not precluded from seeking Chapter 11 relief, and in appropriate cases – usually involving individuals with large liabilities or engaged in complex business dealings – Chapter 11 bankruptcy may be the best solution for an individual with financial problems.
By and large, chapter 11 is a type of bankruptcy reserved for business and corporate reorganizations. Chapter 11 shares many of the qualities of a chapter 13, but tends to involve much more complexity on a much larger scale.
Most tax professionals mistakenly believe that no taxes can be eliminated (“discharged”) in a bankruptcy. This myth is wrong. Although the intersection of the United States Bankruptcy Code, the Internal Revenue Code, and IRS lien and levy rights is complicated, bankruptcy relief is available to stop collection activity by the IRS or state taxing authorities and eliminate some or all of an individual client’s tax liability. The filing of a bankruptcy case automatically and immediately stays (stops) IRS bank account levies and wage garnishments, and enables the taxpayer to either obtain a discharge or reorganization his or her tax liabilities.
BUSINESS WORKOUTS & CHAPTER 11 REORGANIZATIONS
With the extreme tightening of the credit markets experienced in recent months, individual professionals and small businesses have been having a difficult time finding credit to fund ongoing operations. This has exacerbated a problem that is typical of small businesses – obtaining the cash flow required for their operations. Many of our clients have very successful businesses that have been very profitable over time, but from time to time experience cash flow problems due to periodic declines in revenue. Other clients have had successful businesses on the brink of failure due to some poor business decisions or lack of attention to legal or fiscal matters. And some clients have had businesses that just didn’t work and needed to be closed or restructured in order to succeed. Often the appropriate solution to a client’s problem is beyond their ability due to the complexity of the issues involved in restructuring debt. No matter how complex a financial problem may be, our lawyers have the requisite knowledge and experience to resolve it.
To discuss your legal options with an experienced attorney, simply contact the Law Offices of Robert M. Stahl by telephone (410) 825-4800.