Bankruptcy

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Posted by macdonalddesign on January 6, 2024
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Businesses in Financial Distress

Thompson Law Group only advises businesses on financial distress. There are many non-bankruptcy options for businesses available. If bankruptcy may be a solution for you or your business, we will refer you to a bankruptcy attorney. Thompson Law Group does NOT file any type of bankruptcy at this time.

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Is your Business Overwhelmed by Debt? BREATHE. There are options.

There are many reasons why a business may become financially distressed. Unfortunately, this happens. Fortunately, we have laws to help. It is imperative that at the time the business begins to struggle or a struggle is imminent that business management seeks advice so that the business is prepared for whatever happens. Businesses need to plan for the worst (shutdown) and hope for the best (sale or reorganization). Set up a consultation today, so you can get real information about what options are available to reorganize or the business.

We WILL Get Through This TOGETHER.

Thompson Law Group has been helping business owners through the emotional and intimidating process of business closure since 2005. Not every case is the same, but we will find the right option for you and your business.

If you find your business in financial distress or THINK it will be in financial distress imminently, contact us as soon as possible so you know your options. It is critical to prepare for a business shutdown as soon as possible so that you do not inadvertently eliminate your options. Sometimes with the right advice, business owners are able to turn the business around or find other avenues to pursue. Regardless, you need solid legal advice on all available options.

Many times, it is easier and faster to file a personal bankruptcy for the business owners of a company in financial distress. If this is an option to explore, we will work in concert with your bankruptcy attorney (or refer you to one) to ensure that your business is shut down appropriately in preparation for your bankruptcy.

YOU. WILL. SURVIVE. EVEN IF YOUR BUSINESS CLOSES.

The Big Picture

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Bankruptcy is a REAL Option for EVERYONE

No matter what your circumstances, income, debt amount, type of debt, assets, or if you have filed bankruptcy before, you may declare bankruptcy at any time.

Bankruptcy is always an option. The real questions are: what type of bankruptcy would you need to file given your particular circumstances; is bankruptcy the best option for you and your family; and if bankruptcy is not a good option now, will it be a good option in the future?

You owe to yourself and your family to learn ALL of the facts about bankruptcy and other options when you are in financial distress or even anticipate that you may be in financial distress in the future. We urge every person or business that is in financial hardship or anticipating financial hardship to seek the advice of an attorney before taking any action. Many times, bankruptcy is not the optimal solution to a financial problem, but it is important to get the facts about your particular circumstances from a knowledgeable professional. It is also important to have a plan so you can adjust to your circumstances when they change.

 

Common Bankruptcy Myths: GET ACCURATE INFORMATION

This is FALSE. In fact, the reverse is true. Folks exiting bankruptcy will be able to rebuild their credit rapidly after they are discharged from their bankruptcy case. After bankruptcy, folks are an excellent credit risk because typically, folks coming out of bankruptcy have little to no debt. Moreover, they do not want to file a bankruptcy again. Sure, the bankruptcy will be reported on their credit report for 7 to 10 years, but our clients have been able to buy houses and cars at good interest rates while they were in an active bankruptcy case and even immediately after they were discharged. This myth has been perpetuated by credit card companies that do not want folks to take advantage of the federal law designed to assist them when they hit hard times.

This is FALSE. Bankruptcy is NOT designed to devastate you. It is designed to help those who have found themselves in financial distress, for whatever reason, create a better financial future. Folks in bankruptcy need to have a place to live and transportation to go to work. Bankruptcy laws are designed to protect these things. You will be able to keep your house and you will be able to keep your car. You still have to pay for them, but if you do so, you will be able to keep them.

This is FALSE and just silly. Bankruptcy is a tool that has been used by many folks and businesses to reorganize and eliminate debt. We have many clients who bought into the promises that a debt consolidation company made. In particular, the debt consolidation will promise to settle debts for pennies on the dollar. No company can make this promise. Our clients believed them and paid them. The debt consolidation company took their money (much like in a Chapter 13 bankruptcy) and did not negotiate with the creditors until they had been paid the consolidation company’s full fee (read the fine print of the contract). By this point, our clients were being sued and garnished. They had to file bankruptcy to resolve their financial situation only at this time, they had lost the money they paid to the debt consolidation company for doing nothing and they had lost more sleep with worry. Had they consulted with a bankruptcy attorney first, they would have known that debt consolidation companies cannot guarantee results while a bankruptcy attorney can.

This is FALSE. First, if you are in the unfortunate circumstances where you need to file bankruptcy you are already stuck in a debt cycle that is not going to get better unless you win the lottery. If you were offered a guarantee that by making payments on your debt for 3 to 5 years would get you out of that cycle, you would do it especially if your Chapter 13 Plan payment was less than your minimum monthly credit card payments. A Chapter 13 bankruptcy is a guarantee that you are done with your credit card debt at the end of your Chapter 13 Plan (which can not be longer than 5 years. During your Chapter 13 bankruptcy, if you need a new car, house or need to sell your property, you may do so and obtain credit during that time so long as you get approval to do so. As long as your request to sell or buy property is reasonable, you will be given permission to do so. In short, you are not stuck and you will be able to do what you need to do.

This is FALSE. First, if you are anticipating you will be in or are already in the unfortunate circumstances where you need to file bankruptcy, your credit score is already decreasing. Bankruptcy wipes it clean so you can rebuild it. Rebuilding credit is actually easy and hinges on making timely payments on different types of debt. Many times a credit score can be raised within 90 days of discharge from bankruptcy. Also, your credit score only matters if you are obtaining new credit. If you already have a house and a car, you do not need new credit in the immediate future. If you need new credit after bankruptcy, you will be able to get it as you are a good credit risk given you will have little to no debt.

This is FALSE. Typically, the only people that will know you file bankruptcy are the ones you tell. While a bankruptcy is a public record, those records are not easily accessible. If someone from the general public wanted to know if you filed bankruptcy, it would take some sleuthing which is not impossible but requires motivation. In short, there is no publication requirement for bankruptcy filings as there was in the past so bankruptcy filing information is not readily accessible.

Bankruptcy Stops Collections So You Can Sleep Again.

Individuals and businesses that file for bankruptcy relief get to breathe again. Foreclosure, lawsuits, calls from creditors, garnishments and any other collection activity will stop once the bankruptcy case is filed. Harassment ends and creditors may no longer contact anyone who has filed for bankruptcy. Upon filing a bankruptcy case, the bankruptcy court imposes what is called an “automatic stay” which prohibits creditors from taking any further action against the debtor without express permission of the bankruptcy court. The stay is automatic and creditors that violate it may be sanctioned by the bankruptcy court. Creditors will not stop calling or collecting until they have a bankruptcy case number. You can tell them you are filing for bankruptcy, but they will continue their collection efforts until they have a bankruptcy case number.

Bankruptcy Gives You a Fresh Start

Bankruptcy is a way to get a fresh start. It is governed by federal law that allows individuals or businesses to eliminate debt and reorganize their financial affairs so that they get a clean financial slate. People file bankruptcy because they can no longer realistically pay their debts. This usually occurs when someone in the family has lost a job, has medical debt after an illness, is unable to work, got divorced or had a business fail. Many times, folks must file bankruptcy because of changes in the economy and they simply cannot afford to pay their bills and pay for basic necessities (food, utilities, housing, etc.). Bankruptcy eliminates many debts and also allows folks to reorganize so they can move forward with a fresh start. No one plans to file bankruptcy, but the option is available when it is necessary. There is no shame in using the federal laws designed to assist you if you are in these unfortunate circumstances.

Planning for Bankruptcy

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What are the Different Types of Bankruptcy?

There are three types of bankruptcy cases: Chapter 7, 11 and 13. Chapter 7 bankruptcies and Chapter 11 bankruptcies may be filed by people or business entities while Chapter 13 bankruptcies may only be filed by people.

Chapter 7 bankruptcy is available to individuals as well as businesses. A Chapter 7 bankruptcy are referred to as a “liquidation” which is a scary term and as a practical matter, not entirely accurate. The concept is that all of the debtor’s assets are liquidated so that creditors may be paid their pro rata share of the proceeds from liquidation. The reality is, generally, debtors (with the exception of businesses in Chapter 7) do not have anything to liquidate and if they do, the property has little to no actual resale value, so it is not worth the trouble to sell (liquidate) it. Only businesses that want to completely shut down should file a Chater 7 bankruptcy. However, it is rare that a Chapter 7 bankruptcy is necessary as Arizona has dissolution statutes that generally will allow for a dissolution of a business without the need of a bankruptcy.

A Chapter 11 Bankruptcy is a reorganization of people or businesses. If a business wants to continue to operate and needs to reorganize, it must file a Chapter 11 Bankruptcy. People generally only file a Chapter 11 when they need to reorganize and when their debt exceeds the debt limits of a Chapter 13 bankruptcy. There are no debt limits in a Chapter 11 bankruptcy. Chapter 11 also has a subclassification called a Subchapter V which is a streamlined and less costly version of a Chapter 11 bankruptcy for smaller businesses and people with debt that does not exceed a total amount of up to $3,024,725 in secured and unsecured debt combined.

A Chapter 13 bankruptcy is designed to restructure the debts of people. Currently, only people that have debts that do not exceed $465,275 in total unsecured debt and $1,395,875 in total secured debt may file a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy case, individuals file a Plan to repay some or all of their debts over a period of time (3 to 5 years). The amount that must be paid to creditors is determined by an individual’s specific income and expenses. People who have become behind in their mortgage or car payments, owe taxes or need to pay for their nonexempt (unprotected) property so they may keep it may also choose to file a Chapter 13 bankruptcy.

When individuals file a Chapter 13 bankruptcy case, they will begin to make a monthly payment to the Chapter 13 trustee. The Chapter 13 Trustee will distribute the payment to the creditors that are entitled to be paid based on the Chapter 13 Plan. Once all of the Plan payments are made, the individual will be granted a discharge.

The Thompson Law Group, P.C. is a Congressionally-designated debt relief agency that provides legal assistance to consumers and small businesses seeking relief under the United States Bankruptcy Code.

We do not accept credit card payments for any bankruptcy services or consultations and services for businesses in financial distress. Please contact our office to make arrangements for payment for bankruptcy services.

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The Process

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  • Let’s Start
  • Ready? Next…
  • Costs
  • After Bankruptcy

Where Do I Begin?

After your initial consultation with one of our attorneys, we will provide you with a comprehensive list of the documents you will need to provide to us prior to filing your bankruptcy case.

However, listed below are the main items we will need in order to determine whether or not you are able to file a Chapter 7 or a Chapter 13 bankruptcy case:

  • Tax returns for the past four years
  • Six months of pay stubs for you and your spouse
  • Documentation of any additional income you receive or have received from any source during the last 6 months

I’m Think I’m Ready to File. What Next?

Provide all of the documentation necessary to file your case. We will give you a list of documentation necessary and once we have received all of your documents that we will be able to prepare your case.

Once we have all of your documentation, we will provide you with the information necessary to complete the credit counseling class that is necessary prior to filing your bankruptcy case. It takes about an hour to complete and can be done on the Internet or by phone. You may not file a bankruptcy unless you have completed a credit counseling class within 180 days PRIOR to filing your bankruptcy case.

Once we have prepared the documents called “Schedules” that detail your assets and debts, you will meet with an attorney to review your case and make sure all of the Schedules are accurate.

Once your case is filed with the bankruptcy court, you will be appointed a trustee and given a date for a “Creditor’s Meeting” approximately 45 days after filing your bankruptcy. You must attend the meeting. It is scheduled for approximately an hour, but usually only takes 10 minutes depending on how many other meetings are scheduled at the same time. We will let you know where and when you will need to appear. An attorney will attend the meeting with you and you will need to show your government-issued photo identification (driver’s license or passport is fine) and your social security card (if you do not have one, you can provide an original pay stub). The trustee will ask you any questions he or she has about your financial affairs as of the date of filing your bankruptcy case.

After filing your bankruptcy, you will need to complete a financial management course. It will take approximately one hour of time to complete and can be done via Internet or phone.

If you have filed a Chapter 7 bankruptcy and there are no assets for the trustee to sell to pay your creditors, you will obtain a discharge from the bankruptcy court within 6 months.

If you have filed a Chapter 13 bankruptcy, you will need to make your Plan payments from the date you file bankruptcy until you have completed your Plan (typically 60 months).

If you have filed a Chapter 13 bankruptcy, another hearing will be set to confirm/approve your Plan. You need not attend this hearing. Once the Chapter 13 Plan is confirmed/approved, you will continue to make your Plan payments for the duration of the Plan and after you have made all of your payments, you will be granted a discharge by the court.

What Costs Are There?

During your initial consultation, we will be able to determine if bankruptcy is an alternative for you. Sometimes filing bankruptcy is not the right solution for a particular client or the client needs to wait a period of time prior to filing bankruptcy. During that time, we will create a plan for you to pay your attorney’s fees.

The filing fee for a Chapter 7 bankruptcy is $338, and the filing fee for filing a Chapter 13 case is $313.

Due to the nature of bankruptcy, we do not accept credit card payments for any bankruptcy services.

Why do I need an attorney?

Bankruptcy is a complicated process. There are many document preparation services that will provide individuals with the necessary documents to file their own bankruptcy case, and these services will charge a fee to help individuals fill out the forms. However, document preparers may not provide any legal advice as they are not attorneys licensed to practice law. Even telling individuals whether or not they should file a certain chapter bankruptcy case is giving legal advice.

In addition, any mistakes that are made are considered the individual filing the bankruptcy case and individuals may lose their property or be dismissed from bankruptcy because they did something wrong.

If individuals choose to represent themselves and/or use a document preparer to prepare your bankruptcy documents, they are responsible for acting as an attorney which means they must make sure that all of the filings of your case are made correctly and in a timely fashion. They will not be excused for mistakes because they did not “know”. The law requires that individuals acting as an attorney on their own behalf know the law and if they do not know the law there is not any excuse or “do-over”. Many individuals file their own case only to have it dismissed because it was not filed properly and then the individual must hire an attorney to fix the problem. Ultimately, the individual will end up paying more in fees and costs than he or she would have had an attorney been hired in the first place.

In addition, because of a bankruptcy dismissal the individual may have lost property that could have been saved or may not be able to file another bankruptcy case.

What Should I Expect After Bankruptcy?

What is a “discharge” from bankruptcy?

A “discharge” from bankruptcy is the Court order stating that the debtor has met all of the requirements of the debtor’s bankruptcy and all the debts subject to the bankruptcy are considered eliminated. Any debt that is discharged no longer needs to be paid, and the creditor may never take any action against an individual for collection of a discharged debt.

In all bankruptcies, there is some debt that is not dischargeable, and the individual will continue to have to pay it even after a discharge. These debts are debts for payment of child support, alimony, criminal restitution and fines, student loans (depending on the type) and most taxes (sometimes can be discharged, but is rare). In addition, if a creditor believes that the individual has committed fraud by transferring property prior to filing bankruptcy or hidden assets, the creditor may ask the bankruptcy court to make the creditor’s debt non-dischargeable which means that the individual would have to pay that debt no matter what the outcome of the bankruptcy.

How does bankruptcy affect my credit report?

Bankruptcy will be on an individual’s credit report for 10 years after the date of the bankruptcy discharge. However, if individuals are in a situation where bankruptcy is appropriate, chances are their credit is not good anyway.

Bankruptcy affords individuals a way to get a clean slate and re-establish their credit. All creditors are aware of the bankruptcy code. Many Creditors extend credit to individuals that have filed bankruptcy because the creditor knows that a person discharged from bankruptcy may not file a Chapter 7 case for 8 years after discharge and may only file a Chapter 13 (which would allow for the Creditor to be potentially re-paid some amount) in certain other circumstances. An individual that is discharged from bankruptcy has less debt than those who are struggling to pay their bills under high interest rates, late fees and overlimit fees.

The information provided in this website is meant only as a general description of the current laws as of the date of the writing. It is not meant to be an exhaustive discussion of all the nuances of the law and is intended to be only an overview. Many issues may appear simpler than they are, and an individual should always contact an attorney to obtain a complete, accurate interpretation of the law given the individual's particular circumstances. Thompson Law Group, P.C. makes no representations as to how the law would affect a particular situation and intends only to illustrate areas of concern and give general information.