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Bankruptcy
Chapter 7, Chapter 11, Chapter 13

CHAPTER 7 Bankruptcy involves liquidation of the debtor's assets to satisfy the claims of creditors. A Chapter 7 petition may be filed by a "person", which is defined by the Bankruptcy Code as including an individual, partnership and corporation, but not a railroad, "banking institution" or an insurance corporation. A Chapter 7 petition is filed to give the Debtor a "fresh start" by discharging (eliminating) the debts owed. As soon as the Chapter 7 petition is filed all creditors are stopped from taking any legal action against the Debtor or the Debtor's property. This is called the "automatic stay".

Upon filing Chapter 7, a Chapter 7 trustee is appointed to administer the Bankruptcy case. The Chapter 7 trustee conducts the first meeting of creditors, which is called the 341a hearing. At that hearing, the Debtor is put under oath and must answer the trustee's questions concerning the assets and liabilities of the Debtor's Chapter 7 estate. Creditors of the Debtor are allowed to question the Debtor at that time, as well. Upon conclusion of the 341a hearing, the trustee makes a determination whether there are assets that may be liquidated to pay the Debtor's creditors. If there are assets to be liquidated to pay creditors, the creditors are paid based upon their priority established by the Bankruptcy Code on a pro rata basis. If there are no assets, the trustee files what is called a "no asset report" and no creditors receive payments from the Chapter 7 trustee.

When the Chapter 7 petition is filed, a notice is mailed to all creditors informing them of the date and time of the 341a hearing. This notice also provides a deadline for creditors to file a Proof of Claim, and a deadline for creditors to object to the Debtor's discharge of debts. There are a number of grounds to object to the Debtor's discharge, including the Debtor's fraud, purchase of excessive luxury items and the giving of false financial statement in obtaining credit. If no timely objection to discharge is filed, the Debtor will receive notice of the discharge in the mail and the Chapter 7 case will be concluded.

If the Debtor has any secured creditors (creditors that have an interest in the Debtor's property to secure payment, i.e. a deed of trust encumbering real property), the Debtor must maintain payments current, or the secured creditor may file a motion for relief from the automatic stay with the Bankruptcy Court to allow the secured creditor to foreclosure on its collateral.

This is a very basic overview of the Chapter 7 Bankruptcy process. Please note that Bankruptcy laws are subject to change, and if you are contemplating filing Bankruptcy, or you find yourself dealing with someone in Bankruptcy, consult with one of our Bankruptcy attorneys by e-mail or by telephone at (818) 657-0300.

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CHAPTER 13 Bankruptcy involves reorganization of one's debts. To be eligible to file a Chapter 13 petition, you must be a "person", which is defined by the Bankruptcy Code as including an individual, partnership and corporation, but not a railroad, "banking institution" or an insurance corporation. In addition, the "person" must have a source of income and liabilities may not exceed $250,000.00 in unsecured debt and $750,000.00 in secured debt. As in all Bankruptcy filings, regardless of which Chapter, as soon as the Chapter 13 petition case is filed all creditors are stopped from taking any legal action against the Debtor or the Debtor's property. This is called the "automatic stay".

Upon filing Chapter 13, a Chapter 13 trustee is appointed to administer the Bankruptcy case. The Chapter 13 trustee conducts the first meeting of creditors, which is called the 341a hearing. At that hearing, the Debtor is put under oath and must answer the trustee's questions concerning the assets and liabilities of the Debtor's Chapter 13 estate. Creditors of the Debtor are allowed to question the Debtor at that time, as well. Unlike a Chapter 7 or Chapter 11 trustee, the Chapter 13 trustee's role is more administrative. The Chapter 13 trustee monitors the Debtor's payments pursuant to the Chapter 13 plan.

When the Chapter 13 petition is filed, a notice is mailed to all creditors informing them of the date and time of the 341a hearing. This notice also provides a deadline for creditors to file a Proof of Claim and a deadline to object to the Debtor's proposed Chapter 13 plan. If you are a creditor of a Chapter 13 Bankruptcy it is very important to timely file a Proof of Claim, or you may be barred from receiving any distribution through the Chapter 13 plan. Local Bankruptcy Court rules vary considerably from Court to Court, and accordingly, it is important to pay attention to the notice and to consult with Bankruptcy counsel as soon as you receive notice of a Chapter 13 Bankruptcy filing.

If you are a creditor and you do not receive a copy of the proposed Chapter 13 plan, be sure to obtain a copy so that you can determine how you will be treated pursuant to the plan. Chapter 13 plans generally provide to cure any default on secured claims over a period of time. A Chapter 13 Debtor must maintain regular ongoing payments to secured creditors in order to retain the collateral. With respect to unsecured claims (those claims not supported by collateral), Chapter 13 plans generally provide for payment of a percentage of such claims. If a creditor objects to confirmation of a Chapter 13 plan, there will likely be a hearing held before the Bankruptcy Judge assigned to the case, at which time the objection will be considered and the Court will determine whether to confirm the plan. Once confirmed, a Chapter 13 plan is binding upon all creditors.

This is a very basic overview of the Chapter 13 Bankruptcy process. Please note that Bankruptcy laws are subject to change, and if you are contemplating filing Bankruptcy, or you find yourself dealing with someone in Bankruptcy, consult with one of our Bankruptcy attorneys by e-mail or by telephone at (818) 657-0300.

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CHAPTER 11 Bankruptcy involves reorganization. A Chapter 11 petition may be filed by an individual, partnership and corporation, but not a "banking institution" or an insurance corporation. Chapter 11 is the only Chapter of Bankruptcy available to a stockbroker or commodity broker and a railroad. Chapter 11 Bankruptcy cases can be very complex, and it is strongly recommended that if you are contemplating filing Chapter 11, or you find yourself dealing with someone in a Chapter 11 Bankruptcy, that you consult with a Bankruptcy attorney.

As in all Bankruptcy filings, regardless of which Chapter, as soon as the Chapter 11 petition is filed all creditors are stopped from taking any legal action against the Debtor or the Debtor's property. This is called the automatic stay.

When the Chapter 11 petition is filed, a notice is mailed to all creditors informing them of the date and time of the first meeting of creditors, which is called the 341 hearing. At the 341a hearing, a representative from the United States Trustee's Office examines the Debtor concerning assets and liabilities and prospects for reorganization.

In an ordinary Chapter 11 case, the Debtor has the exclusive right to file a plan of reorganization for 120 days. If that time period expires without the Debtor obtaining an extension, any interested party may file a proposed Chapter 11 plan. The plan provides for how the various liabilities will be paid. If you are a creditor, it is important to obtain a copy of the proposed plan so that you can determine how you will be treated pursuant to the plan. If you disagree with the treatment, you may consider filing an objection to confirmation of the plan. Chapter 11 plan confirmation can be extremely complicated and it is governed by a complex series of rules, Bankruptcy Code Sections and case law. It is possible to confirm a Chapter 11 plan over the objection of creditors, provided the plan complies with the requirements for confirmation. Again, you are urged to consult with Bankruptcy counsel familiar with Chapter 11 Bankruptcy Cases when dealing with Chapter 11 issues.

As in Chapter 7 and Chapter 13 situations, you are well advised to file a Proof of Claim. Unlike Chapter 7 and Chapter 13 situations, in a Chapter 11, a Proof of Claim deadline is generally not established as of the filing of the Chapter 11 case. The Proof of Claim deadline is generally established during the course of the Chapter 11 case. As a creditor, it is important to read all documents received concerning the Chapter 11 Bankruptcy, so that you do not miss the deadline for filing a Proof of Claim.

This is a very basic overview of the Chapter 11 Bankruptcy process. Please note that Bankruptcy laws are subject to change, and if you are contemplating filing Bankruptcy, or you find yourself dealing with someone in Bankruptcy, consult with one of our Bankruptcy attorneys by e-mail or by telephone at (818) 657-0300.

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