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Charles E. Andersen

Chapter 7 is also know as straight bankruptcy if you don't want to repay any debt, chapter 7 is an option to consider
Chapter 7 is also called a fresh start bankrutpcy
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THE CHAPTER 11 PLAN: CONTENTS

 

 The Code specifies several provisions that must be included in a Chapter 11 plan, and, in addition, indicates other terms that may be part of a plan.
a. Mandatory provisions: A Chapter 11 plan must do the following:
(1) Classify all claims and interests, other than priority claims for administrative expenses, involuntary  gap claims, or seventh priority taxes.
(2) Specify any class that is not impaired;

(3) Describe the treatment to be accorded any impaired class
(I) Treat every claim or interest within a particular class identically, unless a holder consents to less favorable treatment; Debtor's Chapter 11 plan, which proposes to pay undisputed claims in a class a specified percentage on the effective date of confirmation and to pay disputed claims in that class pro rata from Debtor's remaining assets at a future time alter all contested issues have been resolved, is defective since it does not provide the same treatment for each claim in the class;


(5) Establish adequate ways to implement the plan, such as by-


(a) The debtor's retention of estate property;
(b) The transfer of estate property to another entity;
(c) Merger or consolidation;
(d) The sale of estate property free and clear of liens, or the distribution of estate property to the holders of any interests in the property;
(e) The satisfaction or modification of a lien;
(0 The cancellation or modification of an indenture,
(g) Curing or waiving a default,
(h) Extending the maturity date, or altering the interest rate or other terms of outstanding securities;
(i) Amending the debtor's charter, or
(j) Issuing securities of the debtor or a successor to the debtor, or of an entity with whom the debtor has merged or has been consolidated;
(6) Include, in the charter of a corporate debtor, a provision prohibiting the issuance of nonvoting stock, and complying with certain other requirements concerning voting powers ; and
(7) Provide for the selection of officers and directors in a manner consistent with the interests of creditors and equity security holders, and that does not violate public policy
b. Permissive provisions:  In addition to the mandatory items described above, a plan may provide for:
(1) Any class of claims or interests to be impaired or unimpaired
(2) The assumption, rejection, or assignment of executory contracts or
un-expired leases
(3) The settlement of any claim or interest held by the debtor or the estate, or the retention and enforcement of such action by the debtor, trustee, or an appointed representative of the estate;
(4) The liquidation of all or substantially all of the estate property, and
distribution of the proceeds [B.C. 1123(b)(4)]; and
(5) Any other appropriate measure that is consistent with the provisions of (lie Bankruptcy Code [B.C. 1123(b)(5)]. For example, the Supreme Court has upheld a plan's provision requiring the IRS to allocate a Chapter 11 debtor's tax payments first to trust fund taxes, before being applied to non-trust fund tax liabilities, where necessary for the success of the debtor's reorganization.
c. Exempt property:  If the debtor is an individual, any plan proposed by another entity may not include a provision to use, sell, or lease exempt properly without the consent of the debtor.


Impairment of Claims;

 

 Whether a class of claims or interests is impaired under a plan is of great significance in a Chapter 11 case, because if a particular class is not impaired, there is a conclusive presumption that the plan has been accepted by the class and by the holder of each claim or interest in the class. Consequently, it is unnecessary for the proponent of the plan to solicit their acceptances.  A class is deemed impaired unless the plan provides for all claims or interests of that class lo be treated in accordance with one of the three methods set forth below ;


a. Rights unmodified:  A class is considered unimpaired if the plan does not alter the legal, equitable, or contractual rights of the holders of the claims or interests, Any change in a holder's rights, even a favorable change, will cause the class lo be impaired.


(1) Example: Debtor Corporation files a voluntary Chapter 11 petition and is current on its payments to the unsecured bondholders, at a contractual rate of six percent. Under Debtor's plan, the bondholders will be paid, when due, at a rate of seven percent. The class is impaired because its rights have been altered.


b. Cure and acceleration: A class is deemed unimpaired if, regardless of any contractual or other legal right to accelerate payment upon default, the plan proposes: (i) to cure any default ; (ii) to reinstate the original maturity date; (iii) to pay for any damages caused by the claimant's or the interest holder's reasonable reliance on the right to accelerate; and (iv) not to otherwise alter the legal, equitable, or contractual rights of the holder of the claim or interest.


(1) Example: Debtor owes Bank $100,000, secured by a first mortgage on Blackacre. Debtor defaults, and Bank, relying on an acceleration clause in the contract, accelerates the debt and obtains a state court foreclosure judgment against Blackacre. Subsequently, Debtor files a Chapter 11 petition, and Bank unsuccessfully seeks relief from the automatic slay as the court permits Debtor, pursuant to its plan, to cure the default and reinstate the original maturity of the obligation on the same terms. For Bank (which has been placed, alone, in a separate class) to be unimpaired, Debtor must not only cure the default and de-accelerate the debt, but also compensate Bank for the damages, including attorney's fees, incurred in accelerating the debt and instituting the foreclosure proceedings. However, the damages will not include the attorney's fees incurred in seeking relief from the automatic stay, since those costs did not arise as a result of Bank's reliance on its right to accelerate the debt.
(2) Cure period:  Usually, the debtor is permitted to cure the default and reinstate the obligation at any time prior to a foreclosure sale, In re Madison Hotel Associates, 749 F.2d 410 (7th Cir. 1984), However, in states where the mortgage merges into the foreclosure judgment, some courts have held that there is nothing to cure and reinstate. Other cases suggest that merger is irrelevant because section 1124(2) evidences Congress's intent to permit de-acceleration.  However, the arrearage must be cured on or before the effective date of the Chapter 11 plan.
c. Cash out:  The third method of treatment that will leave a class of claims or interests unimpaired is known as a cash out.
(1) Class of claims: To render a class of claims unimpaired by a cash out, the plan must propose to pay each creditor in full the allowed amount of her claim, in cash, on the effective date of the plan.


(a) Section 1111(b) election: Recall that an under-secured creditor can prevent a cash out at the value of her collateral by making the election under section 1111(b)(2) to have her entire allowed claim treated as secured.
(2) Class of interests:  To render a class of interests unimpaired by a cash out, the plan must propose to pay, in cash on the effective date of the plan, the greater of any fixed liquidation preference or fixed redemption price to which the holders of the interests are entitled.

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Chapter 7&13

If you qualify

 

STOP

  • Creditor Harassment
  • Stop utility shutoffs
  • eliminate payments on unsecured debts.
  • Improve bad credit
  • Surrender car, and other secured collateral without incurring a "deficiency"

**For Chapter 13 cases with wage order and balance paid through a trustee as part of a partial re-payment plan and not paid directly to the attorney. Court filing fee is extra.

  • Emergency Petitions filed
  • Ask to see a statement of clients rights and responsibilities

 

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