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  • How to Protect Your Personal Assets During a Chapter 11 Bankruptcy


    Chapter 11 bankruptcy is a type of bankruptcy case that allows an individual or business to reorganize their debts and continue their operations. In a Chapter 11 bankruptcy, the business or an entity is still considered a debtor. In this case, they are called the “Debtor in possession” (DIP). The debtor in possession is responsible for doing their business and managing the business and its assets during bankruptcy. This blog will discuss protecting your assets during a Chapter 11 bankruptcy.

    One of the main motives of Chapter 11 bankruptcy is to protect the debtor’s assets from creditors. In this type, the bankruptcy court will create a bankruptcy estate. It generally includes all of the debtor’s business and personal assets. Also the bankruptcy trustee will then oversee the bankruptcy estate. They are also responsible for distributing the assets to creditors.

    Protected Assets: Understanding Exemptions in Bankruptcy

    Certain personal assets are exempt from the bankruptcy estate. These assets are generally protected from creditors and cannot be taken to repay debts. These exempt assets usually vary and are dependent on the state in which the case is. The exempt assets include

    • Retirement accounts
    • Personal belongings
    • Earned wages
    • Life insurance

      Understanding Chapter 11 Bankruptcy

      Chapter 11 bankruptcy is designed for businesses. But in many cases, individuals with complex financial situations and high-value assets can also file under this chapter. Unlike Chapter 7 bankruptcy, which is about liquidating assets to pay off creditors, Chapter 11 allows business or individual entities to reorganize their debts and create a plan to repay creditors.

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    Key Players In Chapter 11 Bankruptcy

    Before going into details of asset protection strategies, it’s essential to understand the key players of a Chapter 11 bankruptcy. The key players include bankruptcy court, bankruptcy trustee, unsecured creditors, and personal assets. Let’s discuss these key players one by one to get a better understanding.

    Personal Assets

    Personal assets are the assets you own personally, which include your cars, savings accounts, home, and other valuable belongings.

    Bankruptcy Court

    This is the legal platform where bankruptcy proceedings take place. The bankruptcy court will inspect your case and ensure it is handled correctly according to bankruptcy laws.

    Bankruptcy Trustee

    In Chapter 11, a Bankruptcy trustee may be appointed to check and oversee the entire reorganization process. Their primary role is to ensure that your proposed plan is unbiased and fair to creditors. It also includes following legal guidelines.

    Unsecured Creditors

    Unsecured creditors are another crucial key player and element of a Chapter 11 bankruptcy. These are creditors who do not have collateral on your assets. They are most concerned about protecting their interests during a Chapter 11 bankruptcy.

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    Asset Protection Strategies During Chapter 11 Bankruptcy

    Although there are various asset protection strategies during Chapter 11 bankruptcy, a few of the most significant strategies include hiring an experienced bankruptcy attorney to understand the exceptions and creating a feasible repayment plan. It also has to negotiate with creditors and protect non-exempt assets. Let’s discuss them individually to get the best level of understanding.

    Hire Experienced Bankruptcy Attorney

    Hiring a professional bankruptcy attorney or law firm will always be in your favor and will give you the desired outcomes. They will guide you through the complex bankruptcy process and help you make informed and wise decisions about asset protection. Bankruptcy attorneys know all the right strategies and methods to win your case. Therefore, it is always suggested to get professional help.

    Developing a Feasible Repayment Plan

    Work closely with your bankruptcy attorney or bankruptcy firm legal experts to design and develop a realistic repayment plan that satisfies the bankruptcy court. Also, ensure that your repayment plan satisfies the trustee and unsecured creditors. This carefully created repayment plan should outline how you intend to repay your debts. This plan will be a road map, and following this will make the repayment process easy for you.

    Always Operate In Good Faith

    It is suggested that during this process, always operate in good faith. Demonstrating this throughout the bankruptcy process is necessary and will be in your favor indirectly. Honesty, open communication, and transparency are key to building trust with the creditors, court, and trustee. So, ensure the entire process is transparent and honest from the start till the end.

    Understand Exemptions

    Bankruptcy laws offer exemptions that allow you to keep certain types of assets safe from liquidation. Exemptions are generally different for different states and their laws. This typically includes your home, personal belongings, retirement accounts, etc. Your bankruptcy attorney can help you maximize these exemptions. This is done to protect your assets, give you maximum advantage,e and keep you as safe as possible. Consult a professional bankruptcy attorney to get the best outcomes for yourself.

    Negotiate With Creditors

    Open and honest communication with your unsecured creditors can be beneficial in many ways. Following this, You can negotiate more favorable terms for repaying unsecured debts. It also allows for reducing the potential pressure on your assets. Professional attorneys specializing in bankruptcy cases are also experts in negotiation.

    Strategically Protecting Non-Exempt Assets 

    If you have non-exempt assets that you want to protect, you should consider and execute effective strategies. These strategies include converting those assets into exempt assets and transferring them to a spouse or family member. You can also protect them by negotiating with creditors to buy back those assets. Get the help of professional bankruptcy lawyers to protect these assets. They will tell you the right strategies to protect these assets.

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    How to Protect Your Assets in Chapter 11 Bankruptcy

    Navigating a Chapter 11 bankruptcy can be complex, time-consuming, and challenging. With the professional help of bankruptcy lawyers and the right types of strategies, you can protect your assets while ensuring financial stability. Knowing that every bankruptcy case is unique and has distinctive challenges is essential. It’s crucial to consult with an experienced bankruptcy attorney or firm who can tailor a plan to your specific situation. 

    Taking the right and practical steps and demonstrating good faith through the process can increase your chances of emerging from Chapter 11 and protect your assets. Ensure that the bankruptcy attorney you hire is an expert in Chapter 11 bankruptcy cases. With consistency and professional help, you will get your desired outcomes.

    The Benefits of Reorganization Bankruptcy

    When facing financial challenges, an individual or a business owner may consider filing bankruptcy to save their finances. In reorganization bankruptcy, like Chapter 11, the main goal is not to liquidate assets but to create a strategy to pay creditors while continuing operations. During the filing bankruptcy process, it’s essential to focus and prioritize the development of an effective repayment plan to confirm and guarantee that your assets are protected and financial obligations are met.

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    Secured vs. Unsecured Debts In Bankruptcy

    In bankruptcy proceedings, distinguishing between secured debts and unsecured debts is essential. Secured creditors have collateral, like a car loan or mortgage, which allows them to claim assets if you default on payments. On the other side, unsecured debts lack collateral. This means it makes them riskier for creditors. During a bankruptcy, secured creditors generally prioritize receiving repayment from the sale of their collateral.

    In contrast, unsecured debt repayment often depends on the available assets in the bankruptcy estate. It is better to be well-informed about all these processes when going through bankruptcy, as it will determine the fate of your assets. Therefore, always stay conscious and well-informed on each phase of your bankruptcy case process.

    Get the Help You Need With Bankruptcy

    If you’re facing financial problems and need help with bankruptcy or other debt-related issues, contact The Pope Firm. Our lawyers are experienced in Chapter 11 bankruptcy and can help you get the best results. We also offer services of Debt Settlement, Student Loan Debt, Business Bankruptcy Options, Stop Creditor Harassment, Payday Loan Debt Help, Stop Foreclosure, Wage Garnishment Help, and Medical Debt. Don’t hesitate to schedule an appointment or visit us to learn more about how we can assist you.

    If you need assistance with personal or business bankruptcy and filing in Tennessee, reach out to The Pope Firm and Charles Pope, Attorney At Law.

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    Frequently Asked Questions

    Bankruptcy occurs when an individual, business, or other entity declares the inability to repay its debts. If you file for bankruptcy, that means that debt collectors must pause attempting to collect debts from you. Bankruptcy often allows you to erase most, if not all, of your debts.

    There are two types of debts, unsecured and secured. Some examples of unsecured debts are credit card bills, medical bills, or taxes. Secured debts can include car loans or mortgages, which use the purchased item as collateral. In many cases, filing for bankruptcy can keep this collateral protected and prevent foreclosure of your home or repossession of other assets.

    Bankruptcy is governed by federal legislation under the Bankruptcy Code, which falls under the greater United States Code. Both federal law and local law inform the bankruptcy procedure. Federal bankruptcy judges, appointed by the United States court of appeals, preside over court proceedings in these cases. In court, the judge and a court trustee, review your finances to determine whether or not to discharge the debts at hand.

    Each state has one or more bankruptcy courts. Tennessee has six bankruptcy courts throughout the state.

    Filing for bankruptcy can be a daunting process, and working with a firm with expertise in the field can provide you with necessary guidance.

    There are several types of bankruptcy. Most individuals, married couples, and small businesses choose to file under Chapter 7 or Chapter 13.

    What are the Differences Between Chapter 7 and Chapter 13?

    The primary difference between these two types is that Chapter 7 bankruptcy allows an entity to fully discharge its debts in a short period. A Chapter 13 bankruptcy involves reorganizing debts and creating a plan to repay those debts over an allotted time. After that time, Chapter 13 eliminates most of the remaining debts.

    Chapter 7 bankruptcy is typically filed by those with very limited income and unsecured debts, the most common of which is medical bills. Chapter 13 bankruptcy is most often filed by higher income bracket individuals and those with more assets, such as a car or a home. The motivation for filing Chapter 13 bankruptcy is often preventing assets from being repossessed or home foreclosure due to outstanding debts.

    What Other Types of Bankruptcy Are There?

    Two other types of bankruptcy are Chapter 11 and Chapter 12.

    Chapter 11 primarily applies to larger companies and corporations, but sometimes it is the right choice for small businesses as well. Chapter 12 applies to those who are considered family farmers.

    Various considerations get factored into who should file bankruptcy. Filing bankruptcy may be the right choice for you if you are overwhelmed by debt. Regardless of what type of bankruptcy you file, as soon as the process begins, you are granted an automatic stay. A stay is an injunction that prevents creditors from collecting any debts for an allotted time. An automatic stay halts the process of, for example, foreclosing on a home or repossessing a vehicle.

    A Chapter 7 bankruptcy will discharge most of your debts. Filing Chapter 7 is appropriate for those who make less than the median household income in Tennessee and whose assets would not be at risk. In this situation, your non-exempt property is sold to pay off creditors.

    Chapter 13 bankruptcy allows you to create a plan to repay your debts. If you have non-exempt property used as collateral in secured loans, you can restructure your finances to pay off any relevant debts over the next three to five years. Chapter 11 functions in a similar way, but is exclusively for businesses.

    Filing for bankruptcy can provide a fresh start for those bogged down with debt, either by restructuring finances or discharging debts entirely.

    How bankruptcy affects business depends upon the type of bankruptcy filed.

    Chapter 11

    Businesses classified as corporations, partnerships, or LLCs can file Chapter 11 bankruptcy. Chapter 11 allows for debt restructuring, while the business stays open. As in Chapter 7 and Chapter 13, an automatic stay activates as soon as your bankruptcy period begins. In an automatic stay, creditors cannot try to collect money or other assets from you.

    During this period, you work with your lawyer to restructure your debts and develop a plan to get your business back on track. This plan must be approved by some of your creditors and a bankruptcy court to go forward. You will be able to repay your debts over several years.

    Chapter 7

    Filing Chapter 7 bankruptcy discharges all of your business’s debts by liquidating your assets. The entire process can be completed quickly, often in several months. Chapter 7 allows for the discharge of most debts, excluding government taxes and fines.

    Chapter 13

    Only individuals can file for Chapter 13 bankruptcy. Thus, although businesses cannot file, you can file Chapter 13 as the sole proprietor of your business.

    When you decide to begin the bankruptcy process, the first step is to find a lawyer who is an expert in filing bankruptcy in Tennessee. Hiring a bankruptcy lawyer can indeed be expensive, but it is worth the cost. This professional can guide you through what type of bankruptcy is best for your situation and what to expect throughout the process.

    • Collect your documents: It is important to have everything from your paystubs to your credit report available before starting.
    • Take the means test. This test will determine if you are eligible for Chapter 7 bankruptcy and help guide you in making a repayment plan for Chapter 13 bankruptcy.
    • Meet with a credit counselor. In the state of Tennessee, most individuals must meet with a credit counselor from an approved provider before filing for bankruptcy.
    • Fill out bankruptcy forms. If working with a lawyer, you can expect they will use online programs to help you file your paperwork.
    • Pay your filing fee. It costs $335 to file for bankruptcy in Tennessee. Waiver of the fee is possible in some cases, but it is uncommon. However, it is possible to pay the fee in several installments instead of the entire balance upfront.

    Declaring bankruptcy wipes out many debts, but not all.

    What Debts are Usually Covered by Bankruptcy?

    Bankruptcy can clear most unsecured debts, including:

    • Credit card bills
    • Medical bills
    • Overdue utility payments

    Bankruptcy can also clear many secured debts, but it depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, you will have to give up any non-exempt items you put up for collateral. For Chapter 13, they will become part of your repayment plan.

    What Debts Are Not Covered by Bankruptcy?

    • Child support
    • Alimony obligations
    • Those related to personal injury or death in a drunk driving case
    • Any debts not listed on your bankruptcy papers

    No type of bankruptcy covers these debts. If you file for Chapter 7, they remain outstanding. Under Chapter 13, you pay these debts along with your other debts.

    What Debts May Be Covered?

    Bankruptcy rarely covers student loan debt. However, it may be in some cases with proof of undue hardship.

    Tax debt is also rarely covered, but bankruptcy may cover certain old unpaid taxes.