Dogged by numerous creditors? Unable to afford the lease payments on your business space?
When the battle to remain solvent becomes too tough, an option of last resort for individuals and business owners is filing for bankruptcy. It can be a tough sell for many. We have it drilled into us that bankruptcy is a moral failing, the result of careless money management.
It may surprise you to know, then, that medical expenses are the number one reason Americans file for personal bankruptcy, and most of those individuals have some form of health insurance. By some estimates, one in ten American families will file for bankruptcy at some point.
Once you overcome the stigma attached, you might actually discover that bankruptcy not only provides welcome relief from current financial hardship but also allows you to build a strong foundation for financial independence in the future.
Bankruptcy 101
There are three main types of bankruptcy available to businesses and individuals:
- Chapter 7 Bankruptcy– Available to both individuals and businesses, Chapter 7 involves a liquidation of all non-exempt property in exchange for avoiding most claims.
- Chapter 11 Bankruptcy– Often called a “reorganization,” Chapter 11 allows businesses to keep their assets and stay in operation. Instead, the debtor negotiates with creditors to restructure the terms of the payments they owe.
- Chapter 13 Bankruptcy– Chapter 13 is a reorganization for individuals, allowing them to keep secured assets such as their home or car. Like Chapter 11, it involves restructuring the debt so that individuals with regular income can make full or partial payments.
Bankruptcy laws are complex and constantly changing to meet new government regulations, making them intimidating for the average person to understand.
One New Change to Chapter 13 Bankruptcy Law That Could Affect You
As of December 1, 2017, the Federal Rules of Bankruptcy Procedure shortened the amount of time creditors have to file claims against debtors under Chapter 13 bankruptcy. They now have only 70 days from the date of your filing of the petition for bankruptcy in which to file their claim against you. If the petition is a conversion to Chapter 13, the 70-day time for filing a proof of claim runs from the date of the conversion.
There is also a new requirement for secured creditors — i.e., claims that are secured by an asset, such as the debtor’s home. Creditors will now have to file a proof of claim before they can go forward.
Finally, the change to Chapter 13 bankruptcy law imposes two new bar dates for secured creditors when the claim is secured by the debtor’s primary residence. They must file proof of claim, with mortgage and escrow paperwork attached, within 70 days of the date of the order for relief. In addition, the creditor must file a copy of the mortgage and the home note as a supplement to the claim within 120 days of the court’s order of relief. Both deadlines must be met for the claim to be valid.
Do You Need Assistance in Filing for Bankruptcy?
If you are considering filing for personal or business-related bankruptcy, Bunch & Brock Attorneys at Law can help. We are Lexington, Kentucky, lawyers with over three decades of experience in this area. We know how difficult it can be to navigate the complexities of bankruptcy law, especially under financial strain, and we will work tirelessly to provide you with solutions.
