Chapter 15 is a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It replaces section 304 of the Bankruptcy Code. The new chapter was meant to compliment the Model Law on Cross-Border Insolvency (UNCITRAL) enacted by the United Nations in 1997.
Chapter 15, per Bankruptcy Code, is designed to meet the following objectives:
Promote cooperation between the U.S. courts and parties of interest and the courts of foreign countries involved in cross-border insolvency cases.
Establish greater legal certainty for trade and investment.
Provide for fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested parties.
Afford protection and maximization of the value of the debtor’s assets.
Facilitate the rescue of financially troubled businesses, to protect investments and preserve employment.
Usually, a Chapter 15 case is ancillary to a primary proceeding started in another country, typically the debtor’s home country. As an alternative, the debtor can file a Chapter 7 or Chapter 11 in the U.S. if the assets in the U.S. meet the requirements necessary to file.
With a Chapter 15 the bankruptcy court may authorize a trustee to act in a foreign country on behalf of the U.S. Also, it gives foreign creditors the right to participate in U.S. bankruptcies cases as well as prohibits discrimination against foreign creditors. The UNCITRAL Model Law has also been adopted in Canada, Mexico, Japan and several other countries. It is pending in the United Kingdom and Australia.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
If you have to file bankruptcy, Chapter 13 is the best option to consider first. Though creditors never look on bankruptcy as a positive event, a Chapter 13 shows the debtor is at least trying to pay off their debt. This is sometimes referred to as the “wage earner” plan.
The debtor must have verifiable income sufficient to make monthly payments. The court works with all parties involved to create a longer, more manageable payment plan for all debts usually three to five years.
There are several other advantages to Chapter 13 bankruptcy. If a debtor is in danger of losing his home to foreclosure the court can intervene. They devise a plan to make up late payments. The debtor agrees to make all future payments on time. Other secured debts (not including the home) are restructured to lower the monthly payment amount. Third-party debtors, like co-signers, are exempt from payment. Basically Chapter 13 is like a debt consolidation, endorsed by the court and offering protection to the debtor.
Other forms of bankruptcy require the debtor to liquidate or sell certain assets with the proceeds applied to their debt. With Chapter 13 the debtor is allowed to keep assets and property. To be eligible an individual’s unsecured debt can not exceed $307,675 and for secured debt the limit is $922,975. With the changes made in Bankruptcy Code in 2005, a debtor must prove they received credit counseling from an approved counseling agency prior to filing bankruptcy.
Chapter 13 is initiated by filing a petition with a federal court. All financial information must be disclosed. The judge appoints a trustee to work with the debtor and creditors. All creditors are notified and given the opportunity to appear in court. During the confirmation hearing the debtor presents their repayment plan to the judge. If it’s approved, the trustee collects monthly payments for distribution to creditors. If the judge doesn’t approve the plan, the debtor can rework it.
Another change made in 2005 was comparing the debtor’s income with the median income for their state. This determines how long the repayment plan will last. Once the court approves the repayment plan the debtor is bound to comply. After all debt is paid as agreed the bankruptcy is discharged. A bankruptcy can stay on credit reports for up to 10 years. The best thing a creditor can do to prove they will pay future bills on time is to make all payments as agreed after filing bankruptcy.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Bankruptcy was designed to help individuals or companies get out of difficult financial situations. There are six types of bankruptcies; each fills a different need. In some situations, all debt is forgiven, allowing the individuals involved to start over. Other times the bankruptcy court approves a reorganization of debt, giving the individuals relief from creditors and more time to repay their obligations.
Lawmakers felt that farmers and fisherman had unique situations. Chapter 12 was designed just for them. The farmer or fisherman must be able to prove regular annual income. The court recognizes their income is seasonal and that weather and nature affects their potential to earn money. With a Chapter 12 the debtor proposes a reorganization plan to the court. Basically this gives them more time to repay their debt, typically three to five years.
The court defines family as an individual or individual and spouse and a corporation or partnership. They have to meet other criteria such as: proof they operate the business for profit and debt can not exceed a certain amount (defined as fixed or variable)at least 50 percent of the income must come from farming or fishing.
For corporations, more than one-half the outstanding stock must be owned by one family or one family and its relatives.
Chapter 12 bankruptcy begins when a petition is filed with the bankruptcy court. This automatically stops creditors from contacting the debtor directly. A trustee is appointed to collect payments from the debtor for distribution to the creditors. All creditors are notified and given the opportunity to appear in court. The debtor has to provide a complete disclosure of all assets, obligations, financial statements and all sources of income. They present a repayment plan to the bankruptcy judge. The judge approves the plan or they can recommend a Chapter 11 or 13 instead.
Debts are classified as:
priority
secured
unsecured
Priority claims are paid first, and unsecured claims are paid last. Once the repayment plan is approved it is binding on debtor and creditors. When the trustee determines that all obligations were paid as agreed, they request a discharge.
Bankruptcy is never easy but it’s sometimes necessary. It does affect your credit score and can remain on your credit report for up to 10 years. The best way to reestablish your credit after a bankruptcy is to make all payments, after the bankruptcy, on time.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Chapter 11 bankruptcy is sometimes referred to as “reorganization.” It usually involves a partnership or corporation. The debtor presents a repayment plan to the bankruptcy court. If it’s approved, the business is able to stay open, which is usually better for the creditors and everyone involved.
Like other types of bankruptcy, Chapter 11 is initiated when the debtor files a petition with a federal court. The petition can be voluntary or involuntary. The debtor must provide all information pertaining to assets, liabilities, income, expenditures, contracts and leases, and financial statements. They must also prove they’ve been to an approved credit counseling agency in the past 60 days. The debtor receives protection from his creditors as soon as the petition is filed. They keep their possessions and control their assets while they prepare a reorganization plan. The type of corporation effects how the bankruptcy is handled.
A corporation is separate from its owners, the stockholders. The personal assets of the stockholders are not at risk. Their risk is limited to the amount of their investment. A sole proprietorship is the opposite. The owner or debtor invests their personal assets in the business. It’s difficult to separate personal from business. Typically there’s a personal (Chapter 7 or 13) and business bankruptcy.
Similar to corporations, partnerships exist separate from the partners. There are two types of partnerships: general and limited. With a limited partnership each partners risk is limited to the amount of their investment. But with a general partnership the partners have unlimited personal liability.
After the debtor presents a repayment plan to the bankruptcy judge, it can be confirmed, dismissed or converted to a Chapter 7 or 11. In some situations a trustee is appointed. In others the court allows a representative of the company to handle the case. Creditors are notified and can attend the hearing. The debtor must answer questions under oath about their debt. A Chapter 11 bankruptcy is more complicated than Chapter 7 or 13. There’s more work, more people involved, more deadlines, more paperwork and more possible outcomes.
Legal advice is recommended when filing a Chapter 11. Creditors are classified as secured, unsecured, general unsecured and equity security. This determines in what order and how much they are paid back.Certain debts, like child support, taxes, education loans, legal payments resulting from law suits, etc., are excluded from the bankruptcy. Once the debtor has paid off all debt agreed to in the reorganization plan the bankruptcy is discharged. Bankruptcy definitely affects your credit. Afterward it takes time to improve your credit score. Bankruptcy can be a good decision. It gives a debtor the opportunity to start over. The best thing to do if you have to file bankruptcy is to make sure all payments after the bankruptcy are made on time.
Margaret Norton is a Person Life Coach/Writer/Speaker who resides in St. Peters, Mo.
Chapter 9 bankruptcies are unfamiliar to many of us. Designed for financially distressed municipalities, many individuals mistakenly think Chapter 9 doesn’t affect them. But it could. In the 60 years that this type of bankruptcy protection has been available, only a little over 500 petitions have been filed. The best-known case was probably Orange County, Calif., in 1994.
Chapter 9 is different from other types of bankruptcy in that there’s no provision for liquidation of the assets and the trustee has less power. Only a municipality may file a Chapter 9. Bankruptcy Code defines a municipality as a “political subdivision, public agency or instrumentality of a State.
” This can include cities, counties, townships, school districts and public improvement districts. Revenue-producing bodies such as bridge authorities, highway authorities and gas authorities also qualify.In addition to being a municipality, the following four requirements must be met:the municipality must be specifically authorized to be a debtor by state law or by a government officer the municipality must be insolvent the municipality must have the desire to create a plan to adjust its debts the municipality must either:
obtain the agreement of at least a majority of their creditors
negotiate in good faith with creditors and fail to obtain the agreement of creditors
be unable to negotiate with creditors because such negotiation is impracticable
or reasonably believe that a creditor may attempt to obtain a preference.
The municipality must voluntarily seek bankruptcy protection. Once a petition is filed they are granted protection from their creditors. They are obligated to notify all creditors and make public announcements regarding their intention to file bankruptcy. A trustee is appointed but most decisions are made by a creditors committee. The municipality proposes a debt restructure plan. The court has strict guidelines the municipality must meet. If these guidelines are met and the court determines the proposed plan is in the best interests of the creditors, it is approved by the court.
Approving the plan allows a municipality to continue operating with little or no disruption in service. It’s usually a win-win situation for everyone involved.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Chapter 7 bankruptcy is sometimes referred to as liquidation bankruptcy. The personal possessions of the debtor can be sold. The proceeds from the sale are applied toward the outstanding debt.
After everything is sold, any remaining debt is forgiven, subject to approval of the bankruptcy court. A bankruptcy is always a negative on your credit report. It remains part of your credit for 10 years and significantly lowers your credit score. Creditors prefer a Chapter 13 to a Chapter 7. With a Chapter 13 you work out a repayment plan with your creditors. But debtors don’t always have the income required to pay their debt. Without the needed income the only option is a Chapter 7.
Chapter 7, as well as the other types of bankruptcy, does not allow all debt to be forgiven. Things like child support, alimony, tax liens, student loans, debts involving fraud, debts resulting from law suits, etc. must be paid. Bankruptcy code was amended in 2005. Debtors are now required to verify they’ve consulted an approved credit counseling agency before filing bankruptcy.
Another change is a “means test“. Your income, compared to the state median income, determines if you abused your finances. If the court feels you incurred credit card debt with no intention of ever paying it back your petition for bankruptcy could be denied.
There are cases of abuse, but many times individuals can’t pay back their debt. Circumstances beyond their control–sickness, divorce, death, job loss–results in lost income. Bankruptcy law was designed to give individuals like this a second chance. Once the bankruptcy petition is filed the creditors can no longer attempt to collect the debt. To file a Chapter 7 the debtor completes paperwork (list of all assets, list of all debts/creditors, financial statement, current income earned), which is filed with the federal bankruptcy court. The court appoints a trustee to the case.
You are allowed to keep certain property (exempt) like your home, car and vital necessities, if you have the income needed to continue making the payments. The trustee decides what items to sell and works with the creditors to determine balances owed. The debtor is required to appear before the bankruptcy judge. All creditors are given the opportunity to respond. After all assets are liquidated and applied to outstanding debt, the judge makes a determination. If they agree with the petition for bankruptcy, the remaining debt, with the exception of excluded items listed above, is discharged. If they don’t agree, the debtor can apply for a Chapter 13.
Filing for bankruptcy is not the end of the world. It takes time to rebuild your credit. You may have to pay cash for awhile or a higher interest rate if granted credit. Most creditors will not lend you money after a bankruptcy until you prove that you have reestablished your credit. The best way to do this is to make all payments on time after the bankruptcy.
Credit bureaus are the keepers of our credit history. Every time you purchase something from a company utilizing credit they have the option of reporting information about you to a credit bureau. As information about you accumulates, the bureaus generate a credit score to grade your financial behavior. This score helps or prevents you from getting future credit, jobs, insurance, etc.
In the U.S. there are three major credit bureaus: Experian, Equifax and TransUnion. There are hundreds of affiliate credit bureaus, each associated with one of the three bureaus named above. The credit bureaus collect, assemble and distribute accurate, timely assessments of a consumer’s financial behavior. The credit report assists lenders in making credit decisions. Good decisions on their part lead to profitability. Because credit bureaus are national, consumers are not limited to their local communities for making purchases. It’s a win-win situation for everyone involved.
By law, a credit bureau is only allowed to release information about a consumer to someone with a permissible purpose. A credit report consists of four main components: personal information, credit information, public records and requests for your credit history.
Personal information includes details of a personal nature reported to the bureau by the consumer, creditors or other sources. It can include name variations, driver’s license number, social security number, date of birth, spouse, current and previous address, employment history and telephone numbers.
Credit information gives a break down of each account on the report. It provides name of creditor, account number, date the account was opened, opening or highest balance, current balance, payment amount and if payments were made on time or late.
Public records include any information reported from the courthouse. This could be bankruptcies, judgments, federal and state tax liens and delinquent child support.
Request for your credit history contains a list of individuals or companies that have recently asked for a copy of your credit report. Sometimes the consumer gives permission for this while other times it’s due to pre-approved credit offers.
The best place to start in understanding your credit is requesting a copy of your individual report.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Chapter 9 bankruptcies
Credit bureaus are the keepers of our credit history. Every time you purchase something from a company utilizing credit they have the option of reporting information about you to a credit bureau. As information about you accumulates, the bureaus generate a credit score to grade your financial behavior. This score helps or prevents you from getting future credit, jobs, insurance, etc.
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