Bankruptcy Worksheet
(PDF File)
Bankruptcy Worksheet
(Word Document
File)
What is Bankruptcy? |
Chapter 7 |
Chapter 13 | Chapter 11
Anthony N. Perrotta established one of the first
consumer-oriented bankruptcy practices in Bartow County in
1984. Upon joining the firm in 1994, Brian R. Cahn headed
the firm’s bankruptcy section, allowing Anthony Perrotta to
concentrate on the firm’s family law and civil litigation
sections. With a focus on serving the individual consumer
debtor, members of our firm have served as lead counsel in
thousands of successful Chapter 7 and Chapter 13 bankruptcy
cases. Since 1994, the bankruptcy practice has expanded
geographically to our offices in Paulding and Gordon
Counties, and in scope, to include business bankruptcies
under Chapter 11.
What is Bankruptcy? -
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Bankruptcy laws were formulated to give the honest debtor a
fresh financial start. However, bankruptcy is not intended
to give debtors an unfair advantage over their creditors.
This requirement comes from the United States Bankruptcy
Code, Title 11 of the United States Code, and it is not
intended to protect the debtor who has acted in bad faith in
an attempt to defraud creditors. The United States
Bankruptcy Code is broken down into Chapters. Below are some
of the common Chapters of the United States Bankruptcy Code.
Chapter 7 and Chapter 13 cases are most frequently filed by
individual debtors with consumer debts, while Chapter 11
cases are most often filed by businesses as a means to
restructure debt.
Chapter 7 -
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Chapter 7 Bankruptcy is designed to provide relief from
dischargeable debts in exchange for liquidation of the
debtor’s "non-exempt" assets. A Chapter 7 debtor is an
individual or entity whose expenses exceed its income. This
could be caused due to illness, economic hardship,
unemployment, unexpected lawsuits, tax debts, or any other
circumstances that renders them insolvent. The individual or
entity is unable at this point to repay back its debts.
Filing for relief under Chapter 7 of the United States
Bankruptcy Code can afford the individual or the entity the
ability to discharge or eliminate their dischargeable
unsecured debts while maintaining a certain protection over
some of their assets. Each State law grants the individual
the privilege of protecting a certain amount of equity in
some of their assets. These are referred to as State Law
Exemptions. The State of Georgia exemptions, located in
O.C.G.A. § 44-13-100, were designed to allow the debtor to
retain the amount of property (including a certain amount of
real estate equity) deemed necessary by the Georgia
Legislature to obtain a fresh financial start.
Upon filing for relief under Chapter 7 of the United States
Bankruptcy Code, an "Automatic Stay" immediately takes
effect. The "Automatic Stay" enjoins and prevents the
creditors from taking any action against the debtor without
first securing permission from the Bankruptcy Court. This
"Automatic Stay" is a very powerful tool. It can and does
stop all collection efforts against the debtor (includes the
IRS). However, there are exceptions to the rule. For
example, the "Automatic Stay" cannot prevent the authorities
from arresting a fleeing felon only because the felon filed
for Bankruptcy. Once a petition is filed, any creditor who
attempts collection efforts may be subject to serious
penalties imposed by the Bankruptcy Court in violation of
the automatic stay.
Receiving a final discharge constitutes a permanent
injunction barring all creditors, owed dischargeable debts
incurred prior to filing for Bankruptcy, from ever
collecting on these debts. At the same time, any assets of
the debtor that were deemed exempt by the applicable State
law, remain in the possession of the debtor. Those debts
deemed nondischargeable (i.e., debts that can not be
eliminated by a Chapter 7 Bankruptcy), such as child support
debts and fraud-related debts, are enumerated in the
Bankruptcy Code.
A Chapter 7 debtor is typically allowed to maintain
installment payments on mortgages and automobile loans in
order to retain a residence or vehicle(s). The creditor,
however, may require the account to be completely current,
and may also require execution of a "Reaffirmation
Agreement." Such an agreement, when properly executed and
filed (and not rescinded within the rescission period) will
personally bind the debtor to repay the reaffirmed
obligation as though a bankruptcy was never filed on that
debt. If the account is not current and can not be brought
current prior to the filing of a Chapter 7, Chapter 13 (see
below) may be used to restructure and repay the obligation.
For a free consultation on Chapter 7 Bankruptcy, as well as
a quote, please call Perrotta, Cahn & Prieto, P.C., at (770)
382-8900. Please note that the cost of a Chapter 7 may vary,
depending upon the nature and complexity of the case.
Chapter 13 -
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Commonly known as "individual debt adjustment", "individual
debt consolidation", or "repayment plan". A Chapter 13
bankruptcy can be filed only by individuals. A typical case
generally involves people who have fallen behind in their
mortgage payments, delinquent with their priority taxes, or
have debts that are generally non-dischargeable in a Chapter
7 (student loans, child support arrears, and others). Filing
a Chapter 13 plan of reorganization takes into assumption
that the individual has a source of income. Such income
exceeds the individual's household expenses. In essence, the
individual has disposable income to be able to fund the plan
of reorganization. With this extra income, the individual
will be able to pay back their creditors over a 36 to 60
month plan. The advantage is that the individual will be
able to force creditors, in a successful plan, to accept
his/her terms. These terms afford the individuals relief
from losing their home, risking an IRS or State taxing
agency levy, wage garnishments, liens and other methods
utilized by creditors to collect on their debts.
Income, as understood in the Chapter 13 process, can be
wages from employment, self employment income, Social
Security & Disability benefits, Interest Income, Pension
Income, and any other source that provides the debtor with a
steady amount of income stream. Income could also be
contributions from family members or friends.
Chapter 13 attorney’s fees are capped by the United States
Bankruptcy Court, and typically paid as a priority
administrative debt through the repayment plan.
Consequently, a Chapter 13 bankruptcy case can be filed for
a small up-front fee, which represents the court filing fee.
For additional information about Chapter 13, or an initial
consultation with one of our attorneys at no charge, please
call Perrotta, Cahn & Prieto, P.C., at (770) 382-8900.
Chapter 11 -
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A Chapter 11, commonly referred to as a "business
reorganization", is commenced by the filing of a voluntary
petition by the debtor, or the filing of an involuntary
petition by creditors. Similar to other Chapters of the
United States Bankruptcy code, there is an automatic stay,
which affords the debtor with a breathing spell. During this
breathing spell, the debtor can and will commence
negotiations with its creditors in an effort to negotiate
its debts and to propose a reorganization plan. Corporations
in a Chapter 11 exist in a form separate from its owners,
the stockholders. In essence, the personal assets of
stockholders of the debtor corporation are not at risk,
unlike a company that is owned by an individual and that is
not incorporated in any form.
The debtor in a Chapter 11 reorganization is referred to as
the "debtor in possession". The debtor-in-possession
generally has many creditors. In such a case, it is
difficult for the debtor to attempt contacts and
negotiations with these numerous creditors. Accordingly, the
United States Trustee in major cases appoints creditor
committees' which are generally comprised of the debtor's
seven largest unsecured creditors. The committees duties are
to negotiate on behalf of the debtor-in-possession.
A Chapter 11 may be filed instead of a Chapter 13 for
several reasons. For one, only individuals may file Chapter
13. The Chapter 11 debtor is not necessarily an individual,
but instead may be a corporation. Two, an individual debtor
with debt in a dollar amount that exceeds the statutory
limit (cap) placed upon a Chapter 13 Bankruptcy, may only be
eligible for reorganization under Chapter 11.
For additional information pertaining to Chapter 11
Bankruptcy cases, please call Perrotta, Cahn & Prieto, P.C.,
at (770) 382-8900.
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