BANKRUPTCY

Rhine, Rhine & Young routinely handles creditor representation in bankruptcy cases, but practices debtor representation as well.  Are you a business owner and someone filed bankruptcy on one of your accounts?  Creditors harassing you for money you don't have?  Contact Rhine, Rhine & Young for advice on what you need to do.  There are many deadlines in bankruptcy.  Failing to state your claim before a deadline could result in losing your claim.  Don't let this happen to you.  Rhine, Rhine & Young will discuss your situation confidentially, and provide alternative solutions to help you solve your problem.

BANKRUPTCY OVERVIEW

Commencement of a Case.  A bankruptcy case may be opened by filing a Petition.  A husband and wife may file one joint petition for their individual and joint debts.  The court requires a filing fee to be paid for the opening of a case.  Either in conjunction with the Petition or within a couple of weeks of the Petition, Schedules, the Statement of Financial Affairs, and other miscellaneous forms must be filed with the court.  Failure to file all necessary forms will result in dismissal of a case.  A "Meeting of Creditors", also known as a 341 Meeting, must convene within a reasonable amount of time after the Petition.  Creditors are allowed to examine the debtor(s) under oath at said meeting.  The court is not present at any meeting of creditors.  The meeting is conducted by the trustee assigned to the case, and in a Chapter 7 bankruptcy, the trustee must examine the debtor(s).  In a Chapter 7 bankruptcy, if no objections are filed by any creditor or trustee within 60 days after the Meeting of Creditors, then the Court will automatically enter an Order of Discharge.  In a Chapter 13 bankruptcy, a Plan must be proposed; the Plan must be confirmed; the Plan must be completed; and an Order of Discharge will be entered by the court upon completion of the Plan.  In a Chapter 11 bankruptcy, a Plan must be proposed; the Plan must be confirmed; an Order of Discharge will be granted upon confirmation of the Plan; the case is closed and the debtor(s) carries out the Plan.

Who may be a debtor (i.e., eligible to file for bankruptcy relief)?  Any person who resides in, is domiciled in, has a business in, or owns property in the United States may be a debtor.  Additionally, any municipality may be a debtor.  Typically, railroads, insurance companies, and banks may not file for Chapter 7 relief.  Only a person who is eligible for Chapter 7 relief, except for railroads and stockbrokers, is eligible for Chapter 11 bankruptcy relief.  To be eligible for Chapter 13 relief, a person must be an individual (i.e., not a corporation or LLC), have unsecured debt in an amount less than $250,000.00, have secured debt in an amount less than $750,000.00, and have regular income.  Only a farmer with regular annual income is eligible for Chapter 12 bankruptcy relief.  Only an insolvent, authorized municipality is eligible for Chapter 9 bankruptcy relief.  Additionally, no individual or family farmer may eligible for bankruptcy relief if they have filed a previous bankruptcy case which was dismissed in the past 180 days for willful failure of the debtor to abide by orders of the court or if the debtor voluntarily dismissed a bankruptcy case in the past 180 days following a request for relief from the automatic stay by a creditor.

What is the automatic stay?  Upon the filing of a bankruptcy Petition, there is automatically with no Order of the court required a prohibition (stay) against (1) commencing any judicial, administrative, or other action against the debtor; (2) the enforcement of a judgment; (3) any act to obtain possession of property of the estate; (4) any act to create, perfect, or enforce a lien against the estate or the debtor; (5) any act to collect, assess, or recover a claim; and (6) the setoff of any debt.  The automatic stay does not stop any criminal proceedings; an action to establish paternity; the establishment or modification of alimony, maintenance, or child support; any collection proceeding for alimony, maintenance, or child support if it is against property that is NOT property of the estate; any setoff by a repo participant arising out of repurchase agreements, many actions by the government; and actions by a landlord to obtain possession of real property under a lease if said lease has terminated and is for the lease of nonresidential  (i.e., commercial) property.

Where and how do I file?  The United States Bankruptcy Court in Arkansas is located in Little Rock, Arkansas.  Judges travel to several Federal Courthouses located throughout the state, including Jonesboro, Helena, Fort Smith, Fayetteville, etc... to hear cases in those regional areas.  All records are kept in Little Rock, Arkansas.  The U.S. Bankruptcy Court of Arkansas has moved to a paperless system of electronic case management.  Attorneys must now register with the court and file all documents electronically.  Debtors and Creditors who represent themselves may mail or go to the bankruptcy court clerk in Little Rock to file documents.  The clerk will then electronically file the document.

BANKRUPTCY CHAPTERS

Chapter 7 Bankruptcy.  Chapter 7 bankruptcy is known as the liquidation chapter.  Relief under this chapter is fairly quick.  All assets of the debtor which are not exempt are sold by the trustee and the money disbursed to the creditors.  Unsecured debts are typically discharged.  Secured debts may be discharged or reaffirmed.  If you desire to keep the property that is secured by the debt, then you must pay/reaffirm the debt.  The debt to the secured party must be current to reaffirm.

Chapter 13 Bankruptcy.  Chapter 13 bankruptcy is a repayment plan.  Non-exempt assets may be sold by the trustee to pay creditors.  All disposable income of the debtor is paid to the trustee.  The plan usually lasts for 3 to 5 years, during which payments are made monthly to the trustee, and the trustee disburses money according to the plan.  Secured purchase-money debts on the homestead must be paid in full.  Other secured debts must be paid the value of the security. Unsecured debtors are paid a percentage of the debt owed depending on how much disposable income is available to pay them.   

Chapter 11 Bankruptcy.  Chapter 11 bankruptcy is known as the reorganization chapter.  It is kind of a mixture of Chapter 7 and Chapter 13 bankruptcy.  A plan must be proposed and confirmed.  Debts are discharged immediately instead of at the completion of the plan.   The trustee is usually the debtor, but is sometimes a professional trustee.  This is the chapter typically used by businesses and corporations.  It can be very complicated, but also has some very favorable provisions for the debtor.

Chapter 12 Bankruptcy.  Chapter 12 bankruptcy is a chapter specifically designed for farmers and the special needs of farmers.

Chapter 9 Bankruptcy.  Chapter 9 bankruptcy is a chapter specifically designed for municipalities and the special needs of municipalities.

Chapter 21 Bankruptcy.  This is not a real bankruptcy chapter.  I have included it here because it is a common jargon used by attorneys and judges in referring to a particular situation that occurs.  The debtor receives a Chapter 7 discharge to get rid of unsecured creditors, and then files for Chapter 13 relief to help pay off secured debts.  [Chapter 7 plus Chapter 13 = Chapter 21]

What bankruptcy chapter should I file under?  It really depends upon your situation.  A vast majority of filers apply for Chapter 7 bankruptcy relief.  If you have no secured debts or are current on any secured debts which are secured by property you wish to keep, then I would advise filing for Chapter 7 bankruptcy relief.  It is the cheapest, quickest, and most likely to achieve what you want it to.  If you are behind on a secured debt that you desire to keep, such as your home or maybe a vehicle, then you probably need to file for Chapter 13 bankruptcy relief.  If you own a large value of assets, such as most businesses and corporations, you will probably want to examine Chapter 11 bankruptcy.  Chapter 12 bankruptcy is for farmers only, and Chapter 9 bankruptcy is for municipalities only.

Last Updated:  August 4, 2003