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Understanding the role of a creditors committee

For businesses in Hackettstown who are experiencing financial difficulties, a Chapter 11 bankruptcy offers the chance to halt the collection activities that have been driving it deeper into debt and formulate a strategy that will allow it to remain open. When discussing Chapter 11 cases, much attention is paid to the debtor in possession and the court-appointed trustee (if there is one). Yet while everyone assumes that their presence is recognized in a bankruptcy case, few details are often given about the creditors involved. Who looks out for their interests? 

The answer to that question depends on the unique circumstances of each individual case. If a debtor filing for Chapter 11 bankruptcy only has a handful of creditors, then dealings between the two sides can often be easily managed. Yet when several different creditors are involved, the court may appoint a creditors committee. 

Can credit cards help rebuild your credit post-bankruptcy?

Whether you have recently filed for bankruptcy or you have already had your bankruptcy discharged, you may be feeling the effects of bankruptcy on your credit score. There are methods you can take to rebuild your credit and get a fresh financial start. If credit card debt was a contributing factor to your initial need to file for bankruptcy, you are not alone. Yet, even after your bankruptcy is discharged, you may get invitations from credit card companies as a way to rebuild your credit and get back on your feet. It is important to stay on the alert for subprime credit card companies, as they can cause you to become stuck in debt once again.

Subprime credit card companies offer credit to people who have credit scores below 600, then charge inflated interest rates and fees as a way to protect themselves against a higher default rate. You may think you are improving your credit score, while you may be getting sucked into an endless cycle of maintenance fees, interest, annual fees and processing fees. Secured credit card companies, on the other hand, rely on interest to provide their revenue.

What bankruptcy mistakes should I avoid?

Filing for bankruptcy is a good option for people faced with exorbitant debt. Whether filing for chapter 7 or chapter 13, you must adhere to the specific laws regarding eligibility and your financial actions. Debt.org explains some of the common mistakes people make when filing, and what you can do to avoid them.

Relying heavily on your credit card

Losing lawsuit forces telecommunications company into bankruptcy

A common misconception about many in Hackettstown may be that the struggles that force people into bankruptcy can be easily avoided through proper resource management. If that is what most believe about individuals, then imagine how much more mismanagement is attributed to businesses that are forced to seek bankruptcy protection. The truth is that many of the issues that result in people and companies considering bankruptcy are unforeseen, and the decision to take such action is only motivated by avoiding further financial difficulties (as opposed to simply getting off the hook for having to pay back their debts). 

This notion is well-demonstrated in the recent bankruptcy filing of a regional telecommunications company based in Arkansas. The company started providing phone and internet services to rural clients. It eventually expanded to offer more information services in other markets, and even was recognized as a Fortune 500 company. Yet it was the decision to spin off its fiber-optic network assets into a Real Estate Investment Trust that led to its financial struggles. Some of its bondholders sued, claiming the move was a violation of their bond agreements. The court ruled in favor of the bondholders, leaving the company facing a massive civil liability. Its decision to file for Chapter 11 bankruptcy was motivated by the company's desire to continue to provide its services uninterrupted and without losing any of its resources as it works to reorganize its management structure. 

Medical expenses can cause overwhelming debt

For people who have recently seen the doctor, been sent to the emergency room or have had a medical procedure performed, the recovery process may entail more than just physical healing. It may take even longer for patients to heal financially from the medical expenses and debt accrued as a result of their medical treatment. In fact, a CNBC report announced that medical expenses were the number one cause for bankruptcies in the United States. Furthermore, it found that people who carry healthcare insurance were slightly more likely to declare bankruptcy than those who did not have medical insurance.

There are a few reasons why these medical expenses can become overwhelming and bury those who are responsible for paying them. Many people who carry insurance still have high deductibles, monthly premiums, copays and co-insurance expenses. For example, if a patient was to receive medical services for a broken arm, the patient may be held liable for most of that amount if the money is going toward a yearly deductible. In addition to paying toward the deductible, the insured must still pay a monthly premium to carry the insurance. Once the deductible is met, people may still owe a co-pay or be responsible for paying a portion of the expenses, depending on their plan.

Filing for Chapter 7 bankruptcy

Debt can often seem like a form of bondage to those in Hackettstown who suffer from it. Missed payments, late fees and other penalties can quickly add up to the point of one facing a seemingly insurmountable financial obstacle. In such cases, personal bankruptcy offers protection from further collection efforts, thus halting the growing liabilities compounding one's troubles. Chapter 7 bankruptcy also offers the added advantage of allowing certain debts to be discharged. It is for this reason why this particular form of bankruptcy consistently ranks as the most popular, with the American Bankruptcy Institute reporting it comprising over 67 percent of all non-business bankruptcy filings from the second quarter of the 2018 fiscal year. 

According to the website for the Federal Judiciary, when one first petitions the court to initiate a Chapter 7 case, they must include the following: 

  • A detailed breakdown of both their assets and debts
  • A record of their current income and expenditures 
  • A statement explaining their current financial affairs
  • Any unexpired leases or executory contracts they are involved with

Avoiding foreclosure through bankruptcy

If you find yourself facing foreclosure on your home in Hackettstown, then people may begin to advise you that filing for personal bankruptcy is the easiest way to ensure that you keep it. Several of those that we members of our team here at Jonathan Stone Attorney at Law have worked with in the past have been given similar advice, only to later discover that bankruptcy is not the automatic answer to foreclosure that it has been made out to be. Before you make this decision, it is important that you understand exactly how bankruptcy can affect foreclosure. 

As you contemplate your bankruptcy options, you may immediately be drawn to the appeal of a Chapter 7 case. This allows you to have eligible debts completely discharged (which is why it tends to be the more popular personal bankruptcy option). Yet when it comes to stopping your home from being foreclosed, it might not work. If your mortgage lender has already initiated a foreclosure sale, all a Chapter 7 does is the delay the sale with its automatic stay. Once your case is discharged four to six months later, you will still be facing foreclosure. Your lender can also petition the court to lift the stay in its case to allow the sale to go through. 

Diocese paying $20M to abuse victims as part of bankruptcy

For a company that is struggling with debt, bankruptcy may be a viable option in helping it get past such challenges and re-establishing itself in Hackettstown. Yet the fact that some companies are able to file bankruptcy and still remain in operation may cause some to wonder whether said businesses are simply taking advantage of bankruptcy laws to get out from under their debts. What those who think this may not know is that the rules governing a Chapter 11 (which allows businesses to reorganize themselves at the approval of their creditors) are very strict in how a business' debts are discharged, even going so far as to mandate many still be paid. 

This fact is evidenced in a recent Chapter 11 filing initiated by a Catholic diocese in Montana. The diocese is currently facing litigation stemming from over 80 reported cases of sexual abuse that were perpetrated by clergy members primarily between 1950 and 1980. In this case, the victims seeking compensation represent one of the diocese's creditors. The state's federal bankruptcy court recently announced that the diocese must pay out $20 million to these victims. The bulk of the settlement will be generated through the sale of a number of the diocese's properties, while insurance is expected to cover the remaining portion. 

What happens to a company after filing?

If you’re a small business owner in New Jersey, filing for Chapter 11 bankruptcy is a daunting prospect. Because Chapter 11 allows for a reorganization of debt it doesn’t necessarily mean that your business is lost forever. The Balance offers the following explanation so you can understand your options when it comes to getting your business finances in order.

Layoffs may occur

How can I prevent overspending during the holidays?

Do you spend too much money over the holidays? If so, you’re not alone. Many people find themselves overspending on gifts, food, and entertainment this time of year. Fortunately, there are steps you can take to prepare for the next holiday season right now, as explained by U.S. News & World Report.

Plan ahead

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