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The What, When, Why – Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 are two common bankruptcy programs available to individuals to discharge their debts. If you ever got confused between the two, here is a quick what, when, and why to help you learn their differences.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a liquidation bankruptcy. Your non-exempt assets are sold by the court trustee to repay your creditors.

When is Chapter 7 Bankruptcy Needed?

When your debt becomes completely unmanageable, and you want a quick discharge to restart your financial life.

Why is Chapter 7 Bankruptcy Important?

It helps eliminate the risk of debt trap that, otherwise, individuals could fall into if they can’t keep up with the repayments.

What is Chapter 13 Bankruptcy?

Chapter 7 bankruptcy is a reorganization bankruptcy. Rather than a discharge, your repayment schedule is reorganized based on what you can actually pay.

When is Chapter 13 Bankruptcy Needed?

When you are struggling to repay your debt but don’t want to risk losing any of your assets.

Why is Chapter 13 Bankruptcy Important?

It allows you to prevent foreclosure or selling off of your assets by creditors by making repayment more manageable.

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Steps to Take When You Are Sued by A Creditor

Whether you have a bank loan, a credit card loan, or even an unpaid medical bill, living with excessive debt can be risky. While we all have taken some debt at a given moment, it is necessary to keep track of everything that you owe.

If not, you might find yourself in a difficult situation where your creditor ends up suing you. While you should try your best to avoid such problems, you should also be aware of how to respond to a creditor lawsuit if it ever happens.

You would be surprised to know that a good majority of civil cases that the court addresses are debt cases. If you have received a letter for the same, you should follow these steps to resolve the issue:

Do Not Panic

While it sounds pretty basic, not panicking in such situations is extremely significant. As stated above, these cases are common, and if you have an unattended debt, there is a high chance that your lender will use this way to get their money back. However, if you are not in the right state of mind, you can make things even more difficult for yourself.

Do Not Ignore

Another thing that goes hand in hand with the above point is to respond to the situation. Yes, staying calm is important but that in no way means that you sit back and relax while ignoring the matter altogether.

If a creditor has filed a lawsuit against you, it means that things are pretty serious, and you need to be there to respond to it.

Additionally, you need to take court seriously and be present. Because if you miss court hearings, the final decision will ultimately be in favor of your creditor. Hence, you will lose any opportunity for negotiation.

Be Cautious

If you follow the above two steps, it will become easier for you to take things smoothly. You probably have a debt that has gone unattended for an extended period because of which the creditor had no option but to sue you.

However, this doesn’t mean that you should agree to everything that has been stated against you. Since filing a lawsuit is additional work and money for the creditor, they may include extra charges or interest in the overall cost.

Hence, be very cautious and not take liability for everything right away. However, you will need proper documentation for being in this position, which brings us to our next point.

Documentation

Documentation does not only mean asking the creditor to give you a copy of your complete account statement or other such documents. It also includes all your receipts, salary records, bills, and any other essential documents that may prove helpful in the future.

You may only need all of this if the case involves a debt that you are not in a position to attend. However, you should still keep everything to be on the safe side.

Talk to a Lawyer

Lastly, even if you think that your case is not too serious, you should at least consult a lawyer. This way, you will know the possible outcomes and be better prepared to handle the case. However, if the debt is enormous and you have no way of paying the amount back, you will probably need an attorney by your side.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

CARES Act and Chapter 13 Bankruptcy

In March of this year, in response to the impending economic downturn, the US government passed the CARES Act. Beyond the massive $2 trillion dollar stimulus package, the Act has allowed for a number of different changes to existing laws to make it easier for both businesses and individuals impacted by the COVID-19 pandemic to whether the crisis.

Among these includes changes made to the Chapter 13 Bankruptcy Law. Where the previous maximum repayment plan duration was set to 5 years, struggling debtors can now have it extended by a further 2 years. In addition, any COVId-19 related federal emergency relief payments will not be taken into account by the bankruptcy court in calculating your current monthly income.

These changes apply to all bankruptcy cases filed after the Act was enacted and is likely to remain applicable for some time.

Have any further questions regarding the CARES Act or bankruptcy? Schedule your free consultation with our legal experts by calling 512-640 3340.

Alternatively, you can book one online by visiting our website:

Link: https://seanflynnlaw.com/calendar/

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The Effect on Chapter 11 Business Bankruptcies in 2020

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Bankruptcy is one of the most challenging options that one can only choose if the situation does not allow any other possible way. While there can be various kinds of bankruptcies, when we talk about this year, the first thing that comes to mind is business bankruptcies in 2020.

The reason why your mind will take you directly towards this is not just because of the obvious calculations of businesses facing a downfall due to COVID-19, but also because we now have statistics that confirm this case. Hence, before moving forward with everything you need to know about recent corporate bankruptcies, let’s take a look at some figures first to legitimize the significance of this topic.

Statistics

The best way of analyzing data in this situation is to compare it with the data for last year. Although we are not yet done with this pandemic and the year itself, one can still compare and contrast the statistics present for half of the year which were recently released.

While the overall bankruptcies for all chapters went down by 23% for the first 6 months from last year, there was an increase of 26% in chapter 11 bankruptcies from 2019 for the first half and a stark increase of 43% was noted for June 2020 in comparison to June 2019!

These figures are good enough to show how businesses have been opting for seeking help by filing bankruptcy amidst the pandemic even after knowing that there can be severe consequences.

Chapter 11 Business Bankruptcy

We are now well aware of how there has been an increase in business bankruptcies in 2020 for the first half only and the number will probably go even more up for the rest of the year. However, it is also essential to understand what exactly chapter 11 means and what effect does it might have had after the recent changes.

Chapter 11 bankruptcy is a reorganization process through which you can change your payment plan by proposing a new one that allows you to keep your business running while also being able to pay back to your creditor. The case is different for every business, but it is surely not like chapter 7 where you directly just give in and all your assets are taken to pay the debt amount.

In February 2020, an amendment came into effect which was basically for small businesses. This change was made in subchapter V of chapter 11 through which the process of bankruptcy was made faster and at a low-cost for small businesses. While this change was not specifically made because of the current pandemic, it did help a lot of people who because of coronavirus are now unable to pay their debt according to the payment plan that they were okay with at the start.

As a piece of advice, we would suggest that if you have a business which had to face a major setback due to the current situation, you should consult an expert before taking any big step and then do what might be the best option for now!

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

4 Quick Tips to Regaining Your Financial Health After Bankruptcy

A bankruptcy discharge can definitely hurt your credit score, but nonetheless, without the burden of your past debts, you can find it much easier to regain your financial health.

1. Plan a Budget

Budget planning is central to effective money management. On a spreadsheet or with the use of an online app, make a note of all your expenses, categorizing them on whether they are ‘essential’ or ‘non-essential.’

If the sum of your monthly income and expenses just break even or is in the negative, consider cutting on non-essential expenses until you can generate some savings.

2. Use Cash

Prioritizing cash spending can help you save money by limiting the amount you can spend at any time. With credit, it can be easy to indulge in excess spending, but while using cash, there is only so much you can buy before it runs out.

3. Set an Auto-Payment System

Regaining a good credit score means never missing the deadline on many repayments. However, with so much going on in our lives, it can be actually much harder than it seems. Fortunately, most financial agencies allow you to set up an auto-pay system to avoid any unintentionally missed payments.

4. Add Positive Accounts to Your Credit History

Provided they qualify, consider adding positive accounts to your credit history, such as your utility and phone bills, to improve your credit report. This can be especially helpful for those with little or no credit score.

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What Happens When Public Companies Declare Bankruptcy?

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Declaring bankruptcy has significant effects on a public company, including severe consequences for its investors. This decision is often derived from cripple debt that the public company cannot pay back under the current terms of agreements. Hence, declaring bankruptcy is the only way for the company to save itself and start running again after facing some considerable losses.

How Do Companies Declare Bankruptcy?

Federal bankruptcy laws determine ways to deal with a business that has declared bankruptcy and governs how the debts of a business will be divided. The two types of bankruptcies that businesses can file for are Chapter 7 and Chapter 11 bankruptcy.

Chapter 7 bankruptcy allows businesses to conduct a “going out of business sale” to generate money so that the company’s debts can be paid off. Chapter 11 bankruptcy, on the other hand, is when a company wants to reorganize its business and categorize the debt so that it can survive and introduce a new business model. If a company files for this kind of bankruptcy, it is allowed to run the day-to-day business but needs the bankruptcy court’s permission to make significant business decisions.

What Happens to the Company’s Stock?

Regardless of the type of bankruptcy that a company chooses to declare, their current stock becomes useless. This is because the common stock, also known as the equity in a company, does not receive much in the bankruptcy proceeding. Creditors, such as bondholders, suppliers, and employees need to be dealt with before the common stockholders.

You might have noticed the “Q” placed on a ticker symbol. This shows that the company is going through bankruptcy proceedings. It is seen as an end mark to investors as even if the company manages to reorganize, its plan automatically cancels all existing shares of common stock. Even after the new stock is issued, the company’s reorganization plan will trade without the “Q,” but the old stock will still retain the “Q.” This often confuses the investing public.

How Stock is Traded After Bankruptcy

As mentioned above, a company can still trade its common stock despite filing for bankruptcy. However, they are often unable to meet the listing standards of important exchanges. Hence, they are required to go to the OTC Markets along with the “Q” attached to their ticker symbol.

It is important to keep in mind that the federal law does not prohibit a company from trading just because it is in the midst of bankruptcy proceedings.

Investing in a Bankrupt Company

Some investors may want to buy or hold the bankrupt company’s common stalk thinking that the company may reemerge, and they would be able to gain the rewards.

However, this is not a smart move. There is no indication that old investors receive any benefits from the organization. In fact, they may incur losses as the old common stock depreciates and holds no real value. The priority scheme set by the federal bankruptcy laws determines that bondholders are to be paid before stockholders because the holders of common stock are at more risk.

Looking to fill out the Texas Bankruptcy Form? Click here. And for more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

Payday Loans and Bankruptcy

Payday loans, also commonly known as cash advances, check advances, or paycheck advances, may seem like an appealing option to those falling behind on their bills. However, when people start to rely heavily on payday loans, they can get stuck in a pattern and end up filing for bankruptcy.

What is a Payday Loan?

A payday loan described as a short-term, high-cost loan that is generally for $500 or less. These act as a cushion to your immediate cash needs and need to be paid back within two weeks or close to your payday.

Since payday loans charge triple-digit annual percentage rates (APRs), they can be a burden to repay. In fact, if you’re not mindful, you may end up going overboard, and these negligent payday loans may end up costing you a lot more.

Can Payday Loans Be Discharged When Filing for Bankruptcy?

Payday loans are known as “unsecured debt.” This is because they do not entail any property as collateral in case of failure to pay. Unsecured debt is eligible to be discharged when someone files for Chapter 7 bankruptcy. It can also be added in the court structured repayment plan if filed for Chapter 13 bankruptcy. Through this, the debtor is allowed to repay the loan over time at his/her convenience.

Hardship provision is an option given when filing for bankruptcy. This means that the debtor can remove all or a portion of these debts, according to his personal situation. This can be decided and determined by the bankruptcy attorney based on being unable to complete the repayment plan.

Sometimes, lenders will subtly include a disclaimer in your paperwork, which states that the debt cannot be foregone despite bankruptcy. However, you don’t need to worry; these disclaimers have no place in the court of law. Along with unsecured loans, cash advances and payday loans can be fully discharged in a bankruptcy proceeding.

Loans That Cannot Be Discharged in Bankruptcy Proceedings

The point of declaring bankruptcy is to achieve a fresh start rather than skirting creditors with the intention of never repaying their money. To ensure this, bankruptcy courts state that any debt or loan taken within 60-90 days before filing for bankruptcy cannot be discharged.

Things to Pay Attention To

It is usual for some payday loans to be renewed automatically every month till full payment is received. Lenders might try to twist this in the bankruptcy court to show that the loan is newer than 60 days. However, in such cases, your bankruptcy attorney can make the court aware of the loan’s initial date. This will help the court refer to the date you obtained the loan and rule in your favor.

In case a lender has a post-dated check for an amount that is out of your current budget, make a quick trip to the bank, pay a small fee, and get payment stopped on that check. This will relieve you of additional stress in bankruptcy court.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

5 Biggest Mistakes to Avoid with Chapter 7 Bankruptcy

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If you are struggling with a mountain of debt, a Chapter 7 bankruptcy allows you to resolve yourself of the burden and start your financial life on a fresh slate. However, there are a few pitfalls that one should take care to not fall into when filing for a Chapter 7 Bankruptcy if they want their expected case outcome not to be jeopardized. Here are the 5 biggest mistakes to avoid with Chapter 7 bankruptcy.

1. Filing Too Early or Too Late

Before filing for a Chapter 7 bankruptcy, it is often recommended to take into consideration all options on the table. Filing for bankruptcy is an important decision and carries with it serious consequences. It should only be taken once you are fully sure that there is no better alternative choice.

With that said, delaying the decision to file for bankruptcy when you clearly need it can also be harmful. If you are unable to manage your mounting debt, it is better to declare bankruptcy rather than continue suffering from poor financial health.

If you are unsure about when is the right time to file for your bankruptcy, consider consulting an experienced bankruptcy attorney.

2. Not Making a List of Your Debts

If you have multiple debts, it is a best practice to list them and includes in it their outstanding amount. Neglecting to do so before filing for bankruptcy could prevent you from realizing the outcome you were hoping for.

3. Selecting the Wrong Bankruptcy

Quite many debtors make the mistake of filling for Chapter 7 bankruptcy when a Chapter 13 could likely have been the better choice. For instance, one could be struggling to repay their mortgage but can still potentially avoid foreclosure if their repayment plan is readjusted through Chapter 13.

For more information on which bankruptcy to file for which occasion, click here.

4. Missing the Required Documents

This is a very common mistake that typically occurs when one is filing for bankruptcy without a lawyer. A lot of different documents may need to be submitted along with your bankruptcy petition. If a critical piece of documentation is found missing, it can delay your bankruptcy case or influence a more negative outcome. You can even be charged with bankruptcy fraud if the court mistakenly assumes your intent to have been malicious.

5. Not Hiring an Attorney

While virtually all debtors who file for Chapter 7 bankruptcy obtain a discharge, how much the outcome had been ruled in their favor is another question. If you are concerned about the cost of professional help, consider how much more you could lose in terms of property and assets if you approach the bankruptcy process alone.

The Law Offices of Sean T. Flynn provides personalized legal service and consultation to clients filing for bankruptcy under Chapter code 7 and 13. To schedule an appointment or for any queries, call 512.640.3340 or schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

How to Handle a Debt Collection Lawsuit

Constant calls, emails, or lawsuits from debt collectors may stress you out, putting you in a frenzy, but they are more common than you know. The Consumer Financial Protection Bureau states that over 70 million Americans have faced debt collectors at some point in their lives, while approximately 25 percent have felt threatened in their dealings.

Debt collection lawsuits are something people do not like to deal with. The type of language used in collection agencies is enough to ignite fear and panic in individuals. After all, when you are served with a lawsuit, and your wages, bank accounts, and assets are under threat, it is natural to become overwhelmed.

This blog will list down the steps you can take to defend yourself or your company against a debt lawsuit to help you stay composed and collected when served papers for debt. First things first- understand your rights.

Respond to the Lawsuit

If you get served a lawsuit or debt claim, the first thing you need to do is respond to it. Failing to respond in a timely manner results in notices arriving in the form of summons and complaints.

If you owe some debt but can’t afford to pay it, you still need to respond otherwise, the collection agency will form a default judgment against you. Then, they might collect their money through wage garnishments or from your bank account.

Challenge the Collection’s Company Right to Sue

You can respond to a lawsuit by challenging the plaintiff’s right to file the lawsuit. Mostly, when a debt reaches this stage, it has already been sold. This means that person who owns the debt is legally required to prove that they have the right to file a lawsuit. Once served, the burden of proof rests with the plaintiff. This means that the person suing you has to prove that you are solely responsible for the debt, that they can legally sue you, and that you owe a specific amount.

To prove that you owe a specific amount, the collection agency needs to show proof of your balance increasing when you made purchases and that your current balance is accurate and accounts for every dollar you have spent.

However, if you choose not to respond, the court will assume that your silence means that you take responsibility for the debt.

Hire Your Own Attorney

If you cannot afford to pay back the debt, incurring further legal expense is not attractive. However, once you consult your attorney, you will be made more aware of your options and have a higher chance of defending yourself against the debt collection lawsuit.

Sometimes, all you need is a third-party to help you see things from a different situation and pick out key elements you might have missed out and could use to your advantage.

File for Bankruptcy

If you cannot pay back the debt, bankruptcy might be the only option. When you file for bankruptcy, an automatic stay is ordered. This means that all debt collection activity must cease until the bankruptcy process is handled.

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

Have You Ever Wondered Who Pays for Bankruptcies?

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If you are a debtor who is out of options and is now thinking of going bankrupt, it might be the right way to go for you. However, if you are an investor, a personal creditor, either secured or unsecured, the situation for you will be very different if one of your debtors goes bankrupt. This is why it is significant to understand how bankruptcies work no matter which boat you are in.

When you start understanding the legal procedures, the first thing that may come to your mind would be as to who really pays for bankruptcies? This question is completely valid. However, the answer is much trickier and complex than you might think. The rationale behind it is that bankruptcy is not a simple process with just one situation that can occur. There are different processes, involving different kinds of bankruptcies, which eventually results in different solutions to cover the costs of different loans that you have.

The basic difference in payment methods results from two different types of bankruptcies, i.e. chapter 7 and 13 bankruptcies. Chapter 7 is applicable when it can be proved that you cannot pay any of your loan at all and so all your assets are taken away to pay back your debts. This type is also called straight bankruptcy, although, there are still several complications in this as well.

Chapter 13, which is also referred to as reorganization, is a plan where the court revisits your payment plan and make changes according to your monthly income. This way, you get at least 3-5 years to pay off some part of your debt and see if there still exists a need of going completely bankrupt. One thing that you need to keep in mind is that both of these are still types of bankruptcies and so if you opt for them, you will have it on your credit for 10 years!

What if All Your Assets are not Enough to Pay Off Your Debts?

This is often the case when big companies go bankrupt. This is why corporate bankruptcy is the most harmful one. However, there is a process through which the court divides the amount recovered. This is done under section 507 of the code which states the hierarchy through which the amount is divided and who is given priority. The priority is always given to secured creditors, after which unsecured creditors are in line, which may include employees and lastly if there is still some recovered amount left, stockholders are entertained. Although, reaching that stage is a rare thing and so unless everyone else is covered, stockholders get nothing!

Even apart from companies, when we are talking about personal bankruptcy when the cost cannot be completely recovered and the money is not paid completely to the creditors, they have to find different, more indirect ways of retrieving that amount. Some personal investors increase their interest rates, while sellers have to increase the profit amount so that they can cover at least some of their losses!

Whether you are a debtor or a creditor, it is always necessary to get legal advice beforehand, to understand these critical processes in an easier way!

For more information, speak with an experienced bankruptcy attorney – schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

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