What Is a Reorganization Bankruptcy?

If you are trying to gain a basic understanding of the ins and outs of bankruptcy, you will invariably come across some terms that you may not fully understand in the context within which they are being used. With this in mind, this blog post will provide a basic explanation of the term “reorganization” as it applies to bankruptcy.

Chapter 13 Bankruptcy

Some people are under the impression that your debts are simply wiped away when you file for bankruptcy. In fact, this is not necessarily the case. It all depends on the type of bankruptcy that you file coupled with unique circumstances surrounding your case. There is a type of bankruptcy called a Chapter 7, and unsecured debt like credit card balances and unpaid medical bills can be completely discharged if you file this type of bankruptcy. However, you cannot qualify for a Chapter 7 if you have enough disposable income to make reasonable payments toward your unpaid debts after your basic living expenses are met. Under these circumstances, you would have to file a Chapter 13 bankruptcy.

A Chapter 13 bankruptcy is a reorganization bankruptcy. Your debts are reorganized, and you make payments over a three-year or five-year period. You don’t lose any of your property, and if you are behind on your mortgage or your vehicle payments, you can pay back the arrearage through the payment plan. High priority debts must be paid in full, and these would things like child support, spousal support, and some income tax debt. Secured claims such as your home mortgage arrearage would also be paid in full through the terms of the reorganization plan.

However, you may wind up paying a fraction of low priority unsecured debts like credit cards balances and medical bills. In fact, you may not pay any of this debt at all if your disposable income cannot stretch that far. At the conclusion of the term, the unsecured debts would be discharged, and the creditors would not be able to seek repayment from you going forward.

Chapter 11 Bankruptcy

A Chapter 11 is another type of reorganization bankruptcy. This form of bankruptcy is primarily utilized by business entities like corporations and partnerships. However, there is a debt limit for individuals who would like to file for Chapter 13. Some of these people can opt for a Chapter 11 reorganization.

If you would like to learn more about reorganization, we would be glad to assist you. Our firm offers free case evaluations to people in Medford, Klamath Falls, Portland, and other metropolitan areas in Oregon and the state of Washington. To set the wheels in motion, send us a brief message through our contact page.

What Can I Keep When I File for Bankruptcy?

If you are thinking about filing for bankruptcy, you may be concerned about the possibility of surrendering all your property so that it can be liquidated to pay back your debts. In fact, you may be able to keep some or all of your property when you file for bankruptcy. It will depend on the circumstances and the type of bankruptcy that you file. First, let’s look at the way that property is handled when a Chapter 7 bankruptcy is filed.

This type of bankruptcy is called a liquidation bankruptcy. Property that is not exempt would become part of the bankruptcy estate, and it would technically be liquidated by the trustee to pay back some of the outstanding debt. However, in many cases, there is no nonexempt property to speak of, so there are no losses. You could keep exempt property when you file for Chapter 7, including your home and your motor vehicle, assuming you have limited equity and you are up to date on your payments. Limited personal property and the tools of your trade are exempt, there are a number of other exemptions.

To qualify for a Chapter 7 bankruptcy, you must pass a means test, because you have to make an effort to pay back your debts if you have the means to do so. If your income is less than half the median in your state of residence, you would pass this test. You could possibly pass the test even if your income exceeds the median if your financial responsibilities severely limit your disposable income. A formula is utilized to make this determination.

Chapter 13 bankruptcy would be an option for you if you cannot pass the means test. This is a reorganization bankruptcy. Your debt is restructured to become manageable, and you use your disposable income to make payments over a three-year or five-year period. It can also be the right choice if you are behind on your mortgage and you want to prevent a foreclosure. You can’t pay back the arrearage to stop a foreclosure if you file a Chapter 7 when you are behind on your mortgage payments. However, you can fold it into a repayment plan if you file for Chapter 13. With a Chapter 13, you can keep all your property if you honor your repayment plan and keep your ongoing obligations current.

Set Up a Free Case Evaluation

We have shared some of the basics with regard to property retention in this brief blog post, but you probably have more questions if you are thinking about a bankruptcy filing. If you would like us to provide you with answers, we would be more than glad to do so. Our firm offers free consultations to people in Portland, Eugene, Bend, and a number of other cities in the state of Oregon. To set up an appointment, call us right now at 1-800-682-9568.

What Is a Priority Debt?

If you file for bankruptcy, the different debts that you have are not all created equal in the eyes of the law. Some debts are considered to be priority debts that cannot be discharged through a bankruptcy filing. Let’s look at the details as they apply to the two most common types of bankruptcy that are filed by individuals.

Priority Debt and Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is called a liquidation bankruptcy. Property that you have that is not exempt would become part of your bankruptcy estate. This property would be sold by the trustee, and the proceeds would be used to pay back a portion of your debts. Priority debts would be the first debts that would be paid by the bankruptcy trustee. These would include recent unpaid income taxes, alimony, child support, compensation that you owe to employees, and a handful of other less common types of debt.

Priority debts such as these will never be discharged, even after the bankruptcy is finalized. As a result, the creditors can continue to seek payment if they were not paid in full by the bankruptcy trustee after the liquidation. Plus, property that you acquire after the bankruptcy will not be part of the bankruptcy estate. As a result, priority debt creditors could seek to attach your wages going forward.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a reorganization rather than a liquidation. You present a reorganization repayment plan to the bankruptcy court, and you are given three or five years to complete the plan. Under this type of bankruptcy, you don’t necessarily lose any of your property, and you may not have to pay all your creditors in full. In fact, you may not have to pay some unsecured debts at all.

The priority debts in Chapter 13 are identical to the priority debts that we described above in the Chapter 7 section. These debts must be paid in full over the term of your reorganization plan. Though it is not technically a priority debt, secured claims, like mortgage arrearage that is folded into the repayment plan, must be paid in full as well.

Schedule a Complimentary Case Evaluation

We have offices in Eugene, Grants Pass, Klamath Falls, Tigard, Salem, Portland, and a handful of other cities in Oregon and Washington. If you would like to schedule a free consultation, give us a call at 1-800-682-9568.

Do I Need a Lawyer to File for Bankruptcy?

Many people like to engage in do-it-yourself projects, and they have different motivations. Some individuals genuinely enjoy certain types of DIY challenges, and there are others who decide to go it alone because they want to save some money. There is nothing wrong with doing some things for yourself, and the information that can be easily obtained on the Internet makes it easier than it has ever been. However, you do have to know where the draw the line. You may feel confident replacing the alternator on your car, but do you think that you have the know-how to file for bankruptcy for yourself?

Technically speaking, you don’t have to have a license to practice law to file for bankruptcy. However, these are some rather complicated waters to try to navigate on your own as a layperson. First of all, do you know what type of bankruptcy to choose? You may hear about the fact that a Chapter 7 can make your credit card debts and medical bills disappear. This can be true, but are you sure you qualify for a Chapter 7? You have to pass a means test to qualify for this type of bankruptcy. If your income exceeds the median income in your state of residence, you won’t automatically qualify. A complex formula would be utilized to determine whether you are eligible to file a Chapter 7.

A Chapter 13 bankruptcy could be the right choice for you if you do not qualify for a Chapter 7. It can also be a better option if certain circumstances exist. For example, you cannot stop a foreclosure if you are behind on your mortgage through a Chapter 7 filing, but a Chapter 13 could allow you to repay the arrearage over time. When a Chapter 13 bankruptcy is filed, a complicated repayment plan is submitted to the court. This form of bankruptcy is so complex that there are some bankruptcy attorneys that do not handle them, so it is very unlikely that you could effectively file a Chapter 13 bankruptcy by yourself without any legal guidance.

We understand the fact that people who are experiencing financial difficulties are not particularly anxious to put out money to engage a bankruptcy lawyer. This is why we have established a very affordable fee structure, and our clients find that the value that we provide is extraordinary. Our firm offers free consultations to people in Portland, Eugene, Grants Pass, Bend, Tigard, and a few other Oregon cities, and we have locations in the state of Washington as well. If you would like to set up an appointment, send us a quick message through our contact page.

How Can I Avoid Foreclosure?

If you are concerned about the possibility of losing your home because the payments are becoming unmanageable, there are steps that you can take to avoid foreclosure. It is wise to contact your mortgage lender proactively if you come to the realization that you are not going to be able to meet your upcoming obligations. The lender may be able to work with you and make some adjustments so that you can get back on track.

For example, let’s say that you cannot make your payment, but you will be receiving an inheritance in a couple of months after your father’s estate has been probated. Your mortgage holder may be willing to allow you to pay what you can afford for a limited period of time until you receive the bequest. Under different circumstances, you may be able to work out a long-term loan modification. A conversion from a debilitating adjustable rate mortgage to a fixed rate loan could also be a possibility.

The Bankruptcy Solution

Negotiating with your mortgage lender will sometimes be possible, but a bankruptcy filing will be the best choice for many consumers. If you are current on your mortgage payments, but unsecured debts like medical bills and credit card balances are making it hard for you to fulfill all your responsibilities, you may want to file a Chapter 7 bankruptcy. You could maintain ownership of your home, but unsecured debts would be discharged. You would then have more disposable income to pay priority debts like your mortgage.

If you are behind on your mortgage payments, you could choose to file for a Chapter 13 bankruptcy. This is a reorganization bankruptcy. With this type of bankruptcy, your debt is restructured, and you make affordable payments over a 3 to 5-year period. Your mortgage arrearage could be paid back over time as part of the reorganization arrangement, and you would be able to maintain ownership your home as long as you keep the ongoing monthly payments current.

Now that you have digested this information, you may be ready to take direct action. Our firm offers free consultations to people in Salem, Grants Pass, Klamath Falls, Tigard, Roseburg, and several other cities in Oregon and Washington. If you would like to set up an appointment, send us a message through the contact page on this website or call us at toll-free at 1-800-682-9568.