Chapter 11 bankruptcy provides court-ordered debt relief and financial restructuring for businesses and individuals under the Bankruptcy Code. Chapter 11 bankruptcy has saved many Connecticut businesses from closing their doors under the strain of seemingly insurmountable debt. It is an excellent solution for basically sound companies facing serious financial crisis.
Chapter 11 allows an owner to maintain operation of a business and reorganize through a court protection process when other methods of negotiation and out-of-court resolutions have failed. Through proper Chapter 11 relief, a business is enabled to continue normal operations, even in the event of lawsuits, levies, or attachments from all types of creditors.
Chapter 11 businesses and their owners are fully allowed to operate their businesses in the normal course as they did prior to the filing, but they enjoy full protection from collections or suits on pre-petition back bills. Regular bills, purchases and all customary business decisions are made regularly by the business owners, operators and employees. The operations and the operators of the business continue with all day-to-day transactions, incurring charges and paying current bills without Court involvement.
THE CHAPTER 11 BANKRUPTCY PROCESS
There are three basic stages to a successful Chapter 11 Reorganization:
Analysis and Filing: During this initial phase, all aspects of the business operations, including income and expenses, assets and liabilities are carefully examined to create a game plan for the entire case and the desired final results. Full preparation is followed by the filing of a complete Chapter 11 petition, supporting documentation and the initial outline of a future plan for the reorganized business. It provides a single forum for all matters related to the business.
Filing Chapter 11 provides an automatic stay or stoppage on collection actions while providing one local court for the disposition of all claims by or against the Chapter 11 company. It also provides a convenient forum for our Chapter 11 attorneys to dispute and resolve claims against company assets and promptly collect from parties owing money to the filing company. In the hands of an educated and experienced Chapter 11 counsel, a filing under Chapter 11 can save your life’s work.
Operating Period: Immediately upon filing, the company is relieved of all payments on past debt in full, and operates in the ordinary course without interference from past debt or debt service.
Chapter 11 provides the company a hiatus on all payments through a court-ordered period where no payments need to be made on debt incurred prior to filing. This provides the company or filing individual the necessary relief and time to reorganize. During this period, the company is free to operate its normal business without interference from creditors or the Court.
Plan of Reorganization Approval: During the interim period of operating the business without payment on prior debt, legal counsel and ownership determine the proper treatment of past debt obligations that were frozen on the date of filing. Debts are categorized in order of importance, prioritized for separate or group treatment under a Chapter 11 Plan of Reorganization. The Plan proposes treatment for each Class of creditors in accordance with various important factors, Classes are then required to accept the treatment or dividend on their pre-petition debt; or in some cases, vote for acceptance of the Plan of Reorganization. An approved or confirmed Chapter 11 Plan controls all creditors in the future by Court approval or a vote, and the Plan becomes binding through an Order of Confirmation.
All Chapter 11s have important ramifications, often to a lot of parties. They require expert preparation and experienced Chapter 11 reorganization counsel to assure a successfully reorganized and profitable future business.
You may want to consider Chapter 11 bankruptcy for your business debt if you face pressing financial concerns that threaten your company or personal financial future; including:
Overwhelming debt payments
Liability related to a lawsuit
Tax problems with the IRS, state or local taxing authorities
Bank or Lender lawsuits
Landlord-tenant conflicts
Inability to pay certain debt obligations
High interest consumer debt obligations
Interference with the financial health of your household
Other business debt problems
Business Debt Problems Lead to Personal Debt Problems
All small business problems have a direct impact on the personal finances of their owners. At the Law Offices of Neil Crane, we know that business financial problems require a coordinated reorganization of the business and its owners. With proven methods and experience in all aspects of personal and business Chapter 11 proceedings, we produce a comprehensive solution to all your business and personal needs. We have over three decades of experience with out-of-court workouts, Chapter 7 Bankruptcy, Chapter 13 and Chapter 11 Bankruptcy Reorganizations.
Learn more about our small business bankruptcy services and how our Connecticut Chapter 11 bankruptcy attorneys can help you obtain the debt relief necessary to save yourself and your small business from insolvency.
Consult With Our Connecticut Small Business Chapter 11 Debt Relief Attorneys
We offer a free consultation regarding Chapter 11 bankruptcy. Please do not hesitate to call us today at 203-230-2233 or complete our online contact form to discuss your questions and concerns with an experienced business and personal debt relief attorney at the Law Offices of Neil Crane.
People who are considering filing for bankruptcy in order to gain credit card debt relief or help with other kinds of deep indebtedness, often ask what effect this action will have on their credit score. They’ve been told and taught that they will never recover their credit score if they file for bankruptcy. However, the truth is quite the opposite. True recovery and true credit score recovery start with debt relief. Modern credit scores depend on low debt levels, and this starts immediately after the filing of a bankruptcy petition.
It depends on your starting point
Filing for bankruptcy will be reported on your credit report, but the effect on your credit score will depend on your credit score before filing, and how you rebuild your credit score through sound post-bankruptcy and proven practices for credit restoration. Most Connecticut residents seeking debt relief are great payers with falling credit scores due to their unhealthy debt-to-income ratio as reported on their FICO scores as high utilization. High credit scores are only available to those who have low debt loads. Perfect payers no longer have perfect scores. They waste hundreds or thousands of dollars each month and still endure falling credit scores.
While it’s not good that you find yourself in a situation where you have to file for bankruptcy, it is actually the best avenue to raise your credit score and keep it solidly high. The myth of “no credit after bankruptcy” is not true. People don’t need to fear the solutions provided by the country’s bankruptcy protection laws. In fact, Lenders love post-bankruptcy clients. If you don’t file for bankruptcy and your unpaid debts continue to accumulate, this will be far more damaging to your credit score than any bankruptcy filing. Additionally, your debt-to-income level will continue to ruin your credit score. Unpaid bills create tanking credit scores that require solid advice and a sound solution.
Post-bankruptcy clients qualify for regular rate credit cards immediately along with solid rate car loans. Often these loans are far better than any pre-bankruptcy offerings. We don’t file bankruptcy to improve your credit, but it will eventually give you the highest credit scores available.
Bankruptcy, while often delivering a short-term knock to your credit, not only enables you to reduce your debt load and get your true finances under control, but it also immediately starts the process of rebuilding your credit. If you come to the point where bankruptcy is your best option to obtain financial recovery, rest assured that the damage to your credit will be temporary. In addition to solving your financial problems, bankruptcy is an effective tool for revitalizing your credit and re-establishing the highest possible credit score.
If you reach a point where you are struggling to meet your mortgage payments, you can get the help of a foreclosure defense attorney, which means you can stop struggling! Although your mortgage repayment plans may seem to be set in stone, you are well within your right to renegotiate it if you find yourself in financial difficulty.
Modifying a Loan
If you find that your payments are unaffordable, there are a number of steps you need to follow.
First of all, keep in touch with your creditor. Do not avoid their calls, letters or emails. While it is in their best interest to avoid foreclosure. You need to present a good plan to solve your problem with them. Be transparent about your situation and discuss your options. The lender may agree to temporarily suspend payments. This is a short-term solution, however, and if you need something more permanent, then you should consider modifying the loan.
Secondly, if you do decide to modify the loan, read the terms of your modification carefully – is it helpful? Is it fair to you?
Thirdly, you must be able to present evidence to show that you have hit upon hard times financially and cannot service the debt as it stands, but you have a good chance to pay the modified loan requested.
In the fourth step, get the help of an experienced and specialized foreclosure defense attorney. They will know the correct way to maximize your chances for success.
Step Five is the application itself. You or your lawyer will contact the lender’s loss and mitigation department, and your eligibility will be assessed. You will then receive the application to complete and, once this submitted, along with your motivation letter, pay stubs, bank statements W-2 forms, and tax returns, you should receive a response within a few weeks to a month. The application should be organized and complete with a hardship letter and a new well-Powered solution submitted with pay stubs, bank statements, profit & loss records for the self-employed, tax returns, and other backup documents.
Most people see bankruptcy as a terminal sign of financial ruin. With a Chapter 13 bankruptcy lawyer, however, Chapter 13 can be a comprehensive start to a new reorganized financial life. Chapter 13 of the Federal Bankruptcy Code provides protections for individuals seeking to reorganize all different types of debt through a customized plan for the payment of important debts, and the reduction or elimination of other less important debts, without any loss of assets.
How Does It Work?
With Chapter 13, you are given the opportunity to formulate a plan to repay your debt from personal income from any source. With the help of a Chapter 13 attorney, the petitioner submits a reorganization plan that protects assets against foreclosure or repossession and provides forgiveness or restructuring for other debts. The petitioner’s attorney creates a three to five year plan for reorganized past debt in accordance with each family’s current income and expenses.
Who Is Eligible for Chapter 13?
Chapter 13 is only for individuals, not for businesses, but the individual can be self-employed, a business owner, or an employee.
How Does the Filing Process Work?
Applicants should first secure a Chapter 13 lawyer, who will review and submit some of the following documents:
A list of creditors,
Disclosure of the amount and sources of income,
A list of property and assets,
A breakdown of the applicant’s living expenses, and
Tax information, such as tax returns, statements, and the like.
After filing, your Chapter 13 attorney submits a repayment plan that you have reviewed and approved before your case is filed. The Chapter 13 plan calls for the full or partial repayment of an individual’s debt in order of importance through a single monthly payment after paying for regular monthly household living expenses. The debtor is not required to interact directly with his/her creditors; instead, any and all communications must and should be through an appointed mediator to handle all communications. Once a repayment plan is granted, the monthly payments are set, although acceleration of payments and early settlements are permitted. Chapter 13 bankruptcy is a rarer form of bankruptcy than Chapter 7, but it offers the most protections for individuals and homeowners of any form of bankruptcy law.
Many people worry about what happens after foreclosure. If you are going through foreclosure, it is good to understand what you might still be responsible for or what the bank may due after a foreclosure. We’ll go through what a deficiency judgment is as well as the tax implications.
Deficiency Judgments: Money Banks Seek After Foreclosure or Repossession
Deficiency judgments represent the money due when a foreclosure or other form of forced sale does not produce enough proceeds to cover the debt owed. Given the high debt due under most defaulted mortgages and low real estate values in today’s market, deficiency judgments can be very large amounts, since they are overdue, they are immediately and fully enforceable court judgments.
In most Connecticut foreclosures you lose your house and still owe the bank for the remaining money borrowed, including interest, fees, costs and other bank charges. This is a disastrous result that is widespread throughout Connecticut and in the 40 other states that allow for deficiency judgments.
Any bank that completes a foreclosure with a debt amount due that exceeds the value of the property can bring a Motion for Deficiency Judgment and preserve their right to sue for money “unpaid” if they file it within 30 days of the Foreclosure Judgment.
With real estate values at historical lows, deficiency judgments result from the vast majority of Connecticut foreclosures. It is rare that banks receive enough proceeds from forced and often slow sales to satisfy the large amount of mortgage debt, fees and costs that result from a foreclosure.
Unpaid second mortgages, credit lines or liens are also the personal responsibility of the borrower, even after a foreclosure.
Second mortgages and unpaid credit lines can be very large amounts that are due in full by suit, lien, attachment or other means of court collection. It is important to understand that mortgages or liens that are on your home before foreclosure generally become unsecured Judgments due against the homeowner after the first mortgage foreclosure, even if the first mortgage doesn’t seek a deficiency judgment. Avoiding personal liability for large second mortgages, credit lines and other liens requires experienced counsel with knowledge in all forms of debt relief, including filing for bankruptcy under the revised requirements for Chapter 7 eligibility and relief.
How We Can Help You Avoid A Deficiency Judgment
Avoiding a deficiency judgment should always be pursued with the assistance of a highly qualified Connecticut deficiency judgment lawyer. There are three major ways to avoid a deficiency judgment in Connecticut. Two of the three require bank permission and assistance:
Chapter 7: provides full relief from all Deficiency Judgments by discharging personal liabilities in full. All debts, including other mortgages, liens and court judgments still remaining after a foreclosure are also discharged from personal liability. This allows the post-foreclosure family to proceed forward with a clean slate on foreclosure debt and all other forms of general unsecured debt, including full credit card relief, so the Bank and any creditors are barred from proceeding against you, your assets, or future earnings.
Full Discharge under Chapter 7 never requires permission or assistance from your Bank or creditors. It’s a right provided to you under federal law.
Deed-in-lieu of foreclosure: This is the process where, through negotiation, your lender agrees to accept the title to the property in full satisfaction of your debt prior to the end of the foreclosure. This process should only be used if it assures that the homeowner who gives back their house will have no deficiency still due to the Lender. This is a result rarely ever seen. Furthermore, it is always made more difficult by the involvement of junior liens or credit lines. A deed-in-lieu requires complete cooperation, assistance and permission from all lenders. This option is not always available when dealing with mortgage lenders and servicers, but our attorneys know how to maximize your chances for deed-in-lieu success whenever this option will fully resolve your financial difficulties.
Short sale: This is the process whereby the Bank allows you to sell the house for less than the total debt. A short sale is an important and huge financial decision that should never be undertaken without the advice from a short sale legal representative or an experienced bankruptcy attorney. Short sales don’t solve other debt problems or tax issues as you leave your home. Never do a short sale that leaves you with a deficiency. The Bank needs to assure you that the short sale proceeds are taken to satisfy the whole debt. Short sales are uncommon in today’s difficult banking environment where large banks are slow and servicers are unlikely to coordinate all the parties and steps necessary for a successful short sale. Under certain specific circumstances, short sales can be a foreclosure and deficiency solution when properly pursued by our experienced short sale attorneys.
Tax Consequences of Short Sales, Deficiencies and Solutions
Foreclosures create perilous results for uneducated homeowners long after the foreclosure is completed.
Deficiencies resulting from refinances, second mortgages and credit lines can have disastrous tax consequences if any of the borrowings were not utilized solely for the purchase or the improvement of your house. These forms of debt cancellation create taxable income in the form of a 1099-C that can be very large.
Tax problems created by foreclosures and other debt cancellation can cause long lasting and often unsolvable tax consequences if you don’t seek experienced legal help. Foreclosure can be a taxable event. The Mortgage Tax Forgiveness Act was lost in 2018 and 2019, but is due back in 2020, and you need to carefully understand it. Don’t lose your house and get stuck with a huge non-dischargeable tax debt because you didn’t just make a call and seek legal advice.
Chapter 7 allows for full debt discharge before or after a foreclosure with no tax consequence to the homeowner. All liability for deficiencies and all other non-tax debt is relieved tax free. This ensures no post foreclosure obligations and a true fresh start.
Deed in Lieu of Foreclosure can create a serious tax ramification if it is not properly handled and documented before the date of transfer. Don’t ever give back a home and create a non-dischargeable tax debt. This depends on careful and precise documentation. Get proper legal counsel and never rely on the Bank’s forms or lawyers.
A Short Sale creates a perilous situation for all homeowners. They’re faced with the loss of the home, the potential for remaining deficiencies liability, and the serious negative effects of income cancellation tax debt. If done incorrectly prior to the short sale transfer the ramifications can be serious and long-lasting. A short sale is a real estate closing with many parties involved – Banks, lenders, brokers, buyers, seller, courts…Get excellent and experienced local short-sale or bankruptcy counsel. Short sales need to be perfectly coordinated with an experienced attorney working for you.
Recovery After Foreclosure
Unfortunately, many Connecticut residents have lost their homes to foreclosure, very often without the help of legal representation. While the consequences can be dire, there is no question that you still have a road to financial recovery and various legal avenues to completely regain your financial future. Recovery through legal rights granted under Federal law gives foreclosure victims in even the seemingly worst of circumstances a path to recovery after home loss to foreclosure. To learn how you can create recovery after foreclosure, contact our team of bankruptcy and foreclosure attorneys. We always offer a free consultation and are available to answer your questions directly by phone at 203-230-2233.
Does my mortgage modification control future banks or servicing companies if my mortgage changes hands or is sold or assigned?
The simple answer is YES. New holders or servicers are legally bound by the terms and conditions of a properly modified permanent modification. A permanent loan mortgage modification is a legally binding new mortgage with terms that control and override the original mortgage. These terms will always obligate any future holders or servicers of your mortgage.Be careful about your payments when your mortgage changes banks.
Many transfers result in payment processing problems between old lenders and replacement lenders. Payments can be misapplied, returned, or late processed, causing improper mortgage defaults, late charges and credit reporting problems. Problems with escrow payments, insurance payments, and proper allocations to principal and interest can occur each time a mortgage changes hands.
What Happens to My Trial Modification if My Mortgage Changes Hands?
Trial Mortgage Modifications from one Bank or Lender does not bind a subsequent Bank or Lender. This problem occurs when homeowners have a temporary or trial Modification with one Lender, who sells or assigns the loan during the trial period and refuses to honor a prior Lender’s trial Modification. With the slowness of the Mortgage Modification process and the reality of continuing mortgage assignments and transfers without any borrower’s consent or involvement, trial Modifications can be broken with a transfer during the trial Modification period. The results can be a disaster for the homeowner, who has no control or right to enforce a trial Modification against the new Lender.
“My experience was a very positive one. Dealing with Neil Crane and his staff was the best decision that I could have made. Neil has helped me get back on a solid financial path. My case was a tough one and the Neil Crane Law Firm was the best Law Firm I could have chose.
Thanks for all the help. Now I can put all my bad choices behind me and move forward in my life.”
