Small Business owner filing Personal bankruptcy

Will My Small Business Be Affected by my Personal Bankruptcy?

Does your personal bankruptcy affect your corporation? Probably, we should talk about how most of us who operate small businesses get credit for our corporations. And that’s by personally guaranteeing the debt. Any small business owner or operator and, their corporation is gonna be affected, by their personal bankruptcy. This is because it’s a virtual certainty that they’re personally guaranteeing the debt of the corporation when they get credit in the corporation’s name.

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Business Bankruptcy Advice

san diego bankruptcy lawyer Can bankruptcy stop foreclosure?

Can bankruptcy stop foreclosure?

Can bankruptcy stop foreclosure?

One of the most difficult and traumatic challenges that a person can face is the prospect of foreclosure. A person’s home normally is the center of life. The idea that one’s home might be taken away from him or she can be a most bitter pill to swallow. Considering bankruptcy is the next thought. If you have found yourself facing the prospect of a foreclosure on your home — or if you have already found yourself smack dab in the middle of a foreclosure case — you did not necessarily have to assume that all is lost. In this day and age, there are some options available to you should you find yourself involved in foreclosure proceedings.

Bankruptcy can hold the foreclosure

Chapter 7 versus Chapter 13 has very different effects when your house is getting foreclosed on. In  Chapter 7 bankruptcy, if the borrower’s behind on the mortgage, the lender is simply going to ask the bankruptcy court for permission to ahead with the foreclosure. And that’s done by filing a motion. Those motions are routinely granted and then the lender goes ahead with the foreclosure.

Now, that used to be the standard operating procedure for lenders, but that was before the real estate bubble sort of burst and now there are practical considerations coming into the picture as well as legal ones and lenders are prioritizing which foreclosures. Lenders will go after the larger balance mortgages first. So, someone with a relatively modest mortgage loan um, might stay in their home for months. So far the record, in my practice, I’ve seen, I had one client stay in his home for 20 months before even receiving a notice of default.

Chapter 13 is actually designed to be able to help the homeowner stay in the house and catch up on the mortgage payments that they’ve missed. the best case is a borrower who has to be in Chapter 13 because of some kind of temporary financial setback. Because, if it’s a permanent financial setback, in their income flow they’re just not gonna be able to keep up with all the payments. That is because they’ve gotta make not only the entire on-going mortgage payment but, then they’re gonna have to make the Chapter 13 plan payment for the credit payment, bills and to catch up all the missed mortgage payments. But, for someone who’s had a temporary setback, it’s a wonderful thing.

Can I File Bankruptcy 2 Times?

Can I file bankruptcy twice?

The general rule is that one can only file a Chapter 7 once during any eight year period. So long as the person filing hasn’t filed in the previous eight years (for Chapter 7, anyway.), he/she/they may file for Ch. 7. For Chapter 13 cases, you must not have filed in the past FOUR years. In some rare cases, a filer may file first a Chapter 7, then four years later a Chapter 13. In the trade, this strategy is know as a “Chapter 20” – although we should be clear here that there is no such thing as a Chapter 20 case filing.

It is rare for a debtor to file bankruptcy more than once in a lifetime. But it’s not unheard of. Sometimes tough times persist. Or they recur. Or, particularly for the most entrepeneurial among us, he or she is more comfortable taking risks than are most of us. Those risks often involve capital which the debtor puts at risk. Sometimes it’s the debtor’s own money. Other times, it could be money others have invested or maybe they have lent to the debtor. Interestingly, many of those who fail often and spectacularly are also those most talented at persuading others to back yet another venture. I suppose it wouldn’t be fair to the rest of us if they always succeeded the first time out of the gate;)

I have represented only a handful of clients in more than one bankruptcy over the past nearly-thirty years in practice. This belies the salacious rumors sometimes repeated by the lending lobby. They tell legislators fictions about how filing bankruptcy is a crutch, an enabling mechanism for the lazy of morally inferior among us. In my direct experience, nothing could be further from the truth. People treat bankruptcy as a last resort – sometimes waiting longer than they really should have. Don’t be that person.

Can creditors stop my bankruptcy?

It’s pretty difficult for a creditor and rare  to stand in the way of someone getting through a bankruptcy and getting a discharge. But creditors aren’t always completely out of luck when a customer / borrower files bankruptcy. There are several things a creditor may do to make the best out of what for them is a bad situation. Let’s talk about the most common forms of roadblocks likely to be thrown in the path of the person who files bankruptcy but there are rare.
In a Chapter 13, your creditor may file a “Proof of Claim.” Usually that just means that the creditor stands in the same line as all the other creditors to get the “pro rata” share. That means : they can get out of the Chapter 13 plan payment. No big deal. The plan payment doesn’t change as a function of them being in the line. They’ll just diminish the amount everyone else in that line receives. That’s how that facet of a Ch. 13 works.
In either a Ch. 7 or a Ch. 13, a creditor may file a motion or adversary proceeding in the bankruptcy court to have the bankruptcy court determine that . These are rare and usually you know they are coming.
  • (1) the debtor is a rascal who shouldn’t be allowed to enjoy the benefits of bankruptcy at all (creditor moves to have the court deny discharge of ANY debt; extremely rare, difficult to prove the grounds the creditor alleges which are usually fraud or deliberately dishonest behavior);
  • (2) The debtor is not a complete rascal but is enough of one that at least the complaining creditor should be treated better than the rest, i.e. no discharge as to the debt but only as to the debt owed the one creditor;
  • (3) the creditor is secured (read as in mortgage or car payment lender; occasionally a more exotic instrument like a UCC-1) and is entitled to have its collateral (again, usually a house or car) returned to it because the debtor is in default – this requires a motion for relief from stay, i.e. getting permission from the judge to go forward with a repossession or foreclosure.
There are some kinds of debts which are automatically nondischargeable. Where Child / Spousal / Family support and / or certain taxes are involved, the creditor doesn’t have to lift a finger to avoid the debt being discharged. It won’t be.
A word to the fearful and conflict avoidant: It’s common for someone involved in an ongoing lawsuit, feeling like it’s a David vs. Goliath situation then they  think they should sign an agreement, any agreement, to get out of the law suit. If you’re the defendant who owes (or may owe) the money, don’t sign anything until you’ve talked to a really good bankruptcy attorney. I’ve seen stipulated judgments, in a civil suit, which recite facts that amount to my client having confessed to committing fraud. That sticks in bankruptcy.

Can I keep my house and car if I file bankruptcy?

Some debts are “secured” debts, and some are “unsecured” debts. Secured debt is debt that involves having something on the table that your creditor can take if you do not pay what you owe. For example, if you fall behind on your mortgage payments, the bank can foreclose (take) your home and sell it to get the money you owe. The house is collateral. Another example of secured debt would be a car loan. If you fall behind on your car payments, your creditor will try to repossess your car. In both of these examples, the creditor has an interest (rights) in the property used as collateral.

What is a “secured debt?” and who is a secured creditor?

Usually, a debt is secured and the lender has a “security interest” and is a “secured creditor”. If that creditor lent you all or part of the purchase price of the asset and reserved a “security interest” in it. The latter is referred to as a “purchase money security interest” and a creditor who has one is highly favored among creditors in a bankruptcy proceeding. There are other types of security interests but, for the sake of brevity, only the most common are discussed here.

 Can a secured debt discharge in bankruptcy or  What is a reaffirmation?

Bankruptcy is often an effective way to deal with secured debts. When you file for bankruptcy, you must tell the court what you intend to do with those assets that are collateral for secured debts. Even if your debt is discharged, the creditor still has an interest (rights) in the secured property. In Chapter 7 bankruptcy, you have three options for dealing with secured debt: 

1) return the property and owe nothing;

2) keep your property and “reaffirm” your debt;

 3)“redeem” your property and pay the creditor the fair market value of that property (as opposed
to what you had agreed to pay for it).

The second option of reaffirming the debt means that the debt is not discharged by the bankruptcy. If you fail to pay what you owe, your creditor can still sue you for not keeping the payments up.

It is therefore imperative that you continue to make these payments and to make them on time. If you are behind on your mortgage payments or your car payments, and you have filed a Chapter 13, the amount that you are behind can be repaid in the Chapter 13 bankruptcy payment plan. One of the most common uses of a Chapter 13 bankruptcy is to stop a foreclosure and provide the borrower (that’s you) an opportunity to create and implement a repayment plan. The end result in an ordinary case, if the plan is performed by you, is that you keep your house or car or both, you make your current mortgage/car payments, and you will have paid the arrears off in thirty-six months as part and parcel of your repayment plan. In Chapter 7, you may choose to simply surrender the property, sometimes referred to by the lender as “collateral”, to the lender. As with most rules, there are exceptions. Not all security interests are absolutely enforceable by the lender in a bankruptcy proceeding.

Call our office at 619- 235-4095 for a  free bankruptcy consultation to discuss further details.

Do I have to have a Bankruptcy lawyer?

…or, fully understanding your rights during bankruptcy

Sound legal advice, preparation, and understanding of your rights are absolutely essential. There is no legal requirement that you be represented by an attorney in bankruptcy court, nor that you have an attorney prepare your bankruptcy documents. However, the risk of loss through error is high if you are without competent legal advice.

There are options besides being represented by an attorney or having bankruptcy lawyer attorney prepare your documents, of course. There are paralegals and other persons who may prepare your documents for you at what appears to be a discounted price. Several of my clients have discovered the hard way, having previously attempted these proceedings without an attorney, that they got just about what they paid for. Remember, too, that, at the time of this writing among bankruptcy preparers only an attorney can carry professional liability (read “MALPRACTICE”) insurance that will cover any loss to the client resulting from errors in the attorney’s planning, preparation of the documents or conduct at hearings.

It has been my experience that an attorney is much less likely than a
nonprofessional to make a costly error. I am pleased to report that no client of mine has ever had occasion to complain of a loss resulting from an error by my office.

paul staley bankruptcy lawyer
The Law Office Of Paul Staley provides legal advice and representation for residents of San Diego County. The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.
Paul Staley
Bankruptcy Attorney
1901 1st Ave., FLR 1 San Diego, CA 92101
Phone: +619 235 40 95
Email: pstaley@paulstaley.com

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