Practice Areas and Legal Definitions

Every year, more than 1,000,000 Americans file for protection under Federal bankruptcy laws. Although some bankruptcy claimants are deemed as credit abusers and/or considered financially irresponsible, many hardworking individuals and businesses can succumb to financial difficulty, and face irreparable economic crisis. Bankruptcy is designed as a legal option to help resolve such a crisis, and act as a financial life preserver for those drowning in debt. To discuss your bankruptcy options, or other areas of recourse that might be available to you, contact a qualified bankruptcy attorney who can advise you of your legal rights as stated under Bankruptcy Law and federal Bankruptcy courts.

Bankruptcy Laws:
Bankruptcy is a federal court process designed to help individuals and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as liquidation or reorganization. Under a liquidation bankruptcy (Chapter 7), a claimant files to eliminate debt through the bankruptcy court. Under a reorganization bankruptcy (Chapter 13), a claimant files a plan with the bankruptcy court proposing how to repay creditors.

In 2005, the requirements under which a debtor could file Chapter 7 bankruptcy changed with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act.  Debtors are now required to seek budget and credit counseling within six months of filing, financial “testing” is required to determine the debtor’s capacity for debt repayment, Chapter 7 cannot be filed if the household income is greater than the median household income as deemed by the state, and state exemptions cannot be applied unless the debtor has resided at current residence for over two years.

Due to the imposed requirements for Chapter 7 bankruptcy as set forth by the new laws, debtors who were eligible to file under Chapter 7 now have to file under Chapter 13 bankruptcy instead, in which individuals and creditors agree to a court-imposed plan that requires some or all debts be repaid over five years, with an appointed trustee assigned to monitor the repayment process. Bankruptcy filings will continue to be recorded on an individual’s credit report for seven years in the case of Chapter 13, and up to ten years for Chapter 7.

Chapter 7:
Chapter 7 cases are commonly referred to as straight bankruptcy or liquidation cases, and may be filed by an individual, corporation, or a partnership. A Chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property.

Chapter 13:
A Chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. Chapter 13 permits individuals to keep their property by repaying creditors out of their future income.  It is not available to corporations or partnerships. After completion of payments under the plan, Chapter 13 debtors receive a discharge of most debts.

Debt Consolidation:
Contrary to popular belief, debt consolidation is not a loan. Debt consolidation is a process in which debt is restructured into one low monthly payment. It further enables a consumer to reduce the amount owed and thereby eliminate interest. Very often a consumer can detect warning signs of being in too much debt long before any collection notices are received. If more than two of the following signs apply to you, you are probably in too much debt:

• You have begun charging to your credit card essential expenses like food and daily expenditures
• You are making only the minimum payments on your credit cards each month
• You are near the limit of your credit cards
• You have too many credit cards
• You are unsure how much money you owe creditors

Bankruptcy Fraud:
Bankruptcy fraud is a business crime of filing for bankruptcy with criminal intent, that is with the intention of evading payment for goods even though the buyer has funds that could be used to pay for them, or accepting payment for goods or services but not supplying them. Common types of bankruptcy fraud include petition mills, false oath, concealment of assets, and fraudulent conveyance. Multiple filings are not per se fraudulent; as with all things in the law, it depends on the circumstances. Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act (but may prejudice a judge against the filer if there is evidence that bankruptcy is being used strategically).

If you or someone you know needs the assistance of an experienced Georgetown Texas Bankruptcy Attorney, call Hugh Butler today at 866-435-1654, or complete the contact form provided on this site to schedule your free consultation.