Bankruptcy Lawyer New London, CT
As a bankruptcy lawyer in New London, CT from Eric Lindh Foster Law, LLC knows, those who find themselves in a financial bind may realize that filing for bankruptcy is a necessary step to relieve unmanageable debt and protect themselves from foreclosure. While many people in Connecticut may only be familiar with the consequences of bankruptcy, it can actually be a good solution to provide relief to those who are struggling with debt. In fact, bankruptcy may be the most suitable and beneficial option. There are many types of solutions to obtain relief from debt, but it is worth exploring if bankruptcy is one that you should consider. There are a few types of bankruptcy, so knowing your options will help you make a more informed decision. Reach out to a trusted bankruptcy lawyer if you would like to learn if bankruptcy is the right option for you.
Filing for bankruptcy may be the worst-case scenario for many people, since it does come with many consequences that impact your finances. However, bankruptcy may be the best way to achieve a clean financial slate for people facing certain situations.
Chapter 7 is the most common type of bankruptcy, as it is the simplest and fastest process compared to other chapters. The time it takes for the court to discharge your debts and complete the Chapter 7 bankruptcy process is usually four to six months. A chapter 7 case is suited for individuals or business entities that want to eliminate the majority of their debt by liquidating any non-exempt assets. Typically, all unsecured debt (or debt without collateral) can be forgiven, but the downside is that you also risk the loss of property.
Before you file for Chapter 7 bankruptcy, be aware that not all types of debt are eligible to be wiped out. Debt such as credit card debt, unsecured personal loans, and utility bills may be wiped out, but student loans and debt from fraud will not be erased. Review the type of debt that you have and talk to a lawyer if you are not sure if your debt qualifies under Chapter 7 bankruptcy.
To determine eligibility, check if your monthly income is less than the median in your state. If it is, you can file. If it’s not, your eligibility becomes dependent on your debt-to-income ratio and your disposable income. Chapter 7 is designed for those who cannot afford their debt, so it’s possible for you to qualify if you have a high monthly income with little to no disposable income.
In contrast to Chapter 7, Chapter 13 bankruptcy is a much different process. It takes longer to complete, taking roughly three to five years. However, it comes with several key benefits that Chapter 7 bankruptcy does not provide.
Chapter 13 bankruptcy involves implementing a repayment plan. All foreclosure proceedings are paused, and some of your debt payments are renegotiated based on your monthly income. This chapter is beneficial for those who still have a source of income and don’t want to lose their assets. It allows you to retain your assets while agreeing to a payment plan that is suitable for you. It also tends to make debt more manageable, as your debts will be consolidated into one three- or five-year loan that your bankruptcy representative will distribute to your creditors appropriately.
To be eligible, you must have at least four years of tax returns, be employed, and have enough income to handle the new monthly payments. There is also a debt cap. Your unsecured debt must be less than $394,725 and your secured debt must be less than $1,184,200. Additionally, you can only file as an individual. If you’re a business owner, your business will still be included in your financial records, but you cannot file in the name of the business.
A New London, CT bankruptcy lawyer knows it is not just individuals who sometimes face financial hardships. Many businesses also find that one of the only choices they have left to keep their doors from closing is to file for bankruptcy protection. This type of bankruptcy is referred to as Chapter 11.
Once a company files a Chapter 11 bankruptcy petition, they gain certain key rights and responsibilities. The filing company becomes responsible for offering a reorganization plan that assigns updated legal rights to the creditors. The reorganization plan will specify how much, and when, each class of creditor is to be paid. All impacted creditors will have an opportunity to vote to accept or reject this reorganization plan. However, in some cases, the debtor company may be able to get their plan approved over the rejections of creditors. This is referred to as a cramdown.
Cramdowns: The Requirements
A New London, CT bankruptcy lawyer knows that, as a rule, reorganization plans must be approved by each class of affected creditors. However, the United States Bankruptcy Code includes a ‘cramdown’ provision, which provides an exception, but this can only be done if the plan meets certain strict legal requirements. Specifically, a cramdown can only occur if the company’s reorganization plan:
- Has at least one class of creditor voting in favor of it
- Ensures that each objecting creditor class receives no less under the plan than they would if the company was liquidated
- Is feasible, meaning that the likely result of the plan cannot be future liquidation or further necessary restructuring
- Does not unfairly discriminate against any objecting creditor class
Finally, in addition to those requirements, a cramdown can only move forward if the reorganization plan treats each objecting class fairly and equitably.
Cramdowns in Bankruptcy Law: What You Need to Know
Cramdowns allow debtors to repay their debts by reducing the amount owed and paying off the difference in a manageable monthly payment over time, rather than paying off the full debt all at once. Cramdowns are available under Chapter 13 of the Bankruptcy Code and are only available if creditors are willing to negotiate with the debtor and agree to accept less than they’re owed in exchange for an accelerated plan of repayment. To learn more about cramdowns, including the requirements, read this comprehensive guide on bankruptcy law to understand everything you need to know about cramdowns before filing bankruptcy in New London, CT.
How To Ask For A Cramdown
A cramdown is when a bankruptcy court approves a reorganization plan that includes paying some creditors less than what they are owed. To ask for a cramdown, you must file a motion with the bankruptcy court. The motion must include:
- a proposed plan of reorganization;
- evidence that the debtor cannot reasonably effectuate a voluntary restructuring with creditors; and
- why the cramdown is necessary and in the best interests of creditors and the estate.
When Can I Stop Making Payments On My Debt?
You may be able to stop making payments on some types of debt if you file for bankruptcy. This is called a cramdown. Cramdowns are only available for certain types of debt, and there are requirements that must be met in order for a cramdown to be granted. Here’s what you need to know about cramdowns and bankruptcy. The first requirement for obtaining a cramdown is that the repayment plan proposed by the debtor must be reasonable and feasible. For example, an agreement might stipulate that the debtor will repay $300 per month over the course of 12 months. The second requirement is that the cramdown offer must not discriminate against other creditors or unfairly advantage one creditor over another. For example, it would not be reasonable or feasible to offer one creditor payment in full while requiring others to take partial payment or none at all. Finally, even if both requirements are met, creditors can still refuse the cramdown agreement offered by the debtor and pursue other collection methods instead.
How Long Will My Filing Last?
A bankruptcy filing can last anywhere from a few months to several years, depending on the type of bankruptcy you file and your particular circumstances. Chapter 7 bankruptcy, for example, is typically over within a few months, while Chapter 13 bankruptcy can last for three to five years. In either case, though, you’ll need to work with your lawyer and follow the court’s rules throughout the process.
What Happens At The End Of My Filing?
After you have filed for bankruptcy, the court will appoint a trustee to oversee your case. The trustee’s job is to collect and sell your assets in order to pay off your creditors. In some cases, the trustee may decide that it would be more beneficial to cram down certain debts. This means that the debt would be paid off at a lower amount than what is owed. In order to qualify for a cramdown, the following requirements must be met:
- The debt must be secured by collateral (such as a car or house).
- The value of the collateral must be less than the amount of the debt.
- The debtor must have made payments on the debt for at least two years.
Contact a bankruptcy lawyer today for help with your case.
The Absolute Priority Rule
Determining whether or not treatment is “fair and equitable” is complicated in any legal case. As a New London, CT bankruptcy lawyer can explain, for cramdowns, there is a two-part standard for assessing a reorganization plan’s fairness and equitability. The plan must ensure that no payment can be made in excess of the claim and that it conforms to the absolute priority rule.
The absolute priority rule states that all objecting creditors cannot be forced to accept partial payments, via a cramdown, if a lower priority level of creditor or equity holder is receiving any payment at all or is allowed to maintain their current interests. The absolute priority guarantees that, when a cramdown occurs, unsecured creditors cannot get paid at all before objecting secured creditors are paid in full.
A CT bankruptcy lawyer in New London knows there is no one size fit all when it comes to bankruptcy. There are various other chapters, each with specific benefits and eligibility requirements. If you are a family farmer, a municipality, or a group that spans multiple counties, look into other chapters that may be better suited for you.
Recovery After Bankruptcy
From a lower credit score to difficulty applying for new loans, the initial consequences of bankruptcy can make you feel discouraged. However, restoring your credit can be done gradually and more quickly if you make wise financial decisions and maintain positive spending habits. Being more aware of how you spend and manage your money will prevent you from making preventable mistakes.
Staying on top of your credit and sticking to a reasonable budget are two of the most effective ways you can improve your finances. Regularly reviewing your credit report and following your budget is a good way to improve your financial health.
Being educated about bankruptcy can help you make the right decision for you. Even if you do decide that you should file for bankruptcy, it is not the end of the world. Filing for bankruptcy can offer a way out of crushing debt and allow you to get on a path to financial freedom. It may be difficult, but you will be able to put yourself in a much better financial position.
You have the option of filing for bankruptcy without an attorney. However, because of the long-term legal and financial repercussions of filing for bankruptcy, it is strongly advised that you seek seasoned guidance from a bankruptcy lawyer that you can trust. A lawyer has experience helping clients who are going through complex financial crises. Bankruptcy is a serious decision, and you want to be able to be as informed as you can about its effects and the legal and financial consequences it will bring. Hiring a lawyer is recommended when you are trying to find debt solutions and resolve a complex financial matter. If you’re thinking about filing, protect yourself from making costly mistakes, and call a Connecticut bankruptcy lawyer in New London from Eric Lindh Foster Law, LLC today.
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Bankruptcy Law FAQ
How Do I Know If I Should File for Bankruptcy?
Bankruptcy can affect your credit for a while, so it should typically be used as a last resort. If you just have a couple thousands of dollars in debt, for example, it may not be worth it to declare bankruptcy. However, if you have large amounts of debt and are facing wage garnishment or foreclosure, it may be time to consider bankruptcy. Once you file for bankruptcy, an automatic stay will be put in place, which stops foreclosure, wage garnishment and other collection efforts.
Does Bankruptcy Discharge All Debts?
No, not necessarily. Bankruptcy discharges most unsecured debts, like credit card bills and medical bills. However, bankruptcy won’t typically eliminate student loan debt, alimony, child support or tax debts. Additionally, if you incur debt 90 days before declaring bankruptcy, that debt will not be discharged.
What Is a Means Test?
A means test is used in bankruptcy to find out if a person’s income is low enough to qualify for Chapter 7 bankruptcy. The test calculates eligibility by subtracting certain expenses from your average income during a six-month period.
What Things Should I Avoid Before Declaring Bankruptcy?
If you plan to file for bankruptcy, there are several activities you have to avoid partaking in. Otherwise, your bankruptcy case could get rejected. Common mistakes people make when filing for bankruptcy include hiding assets, paying off loans to friends and relatives and making big purchases on credit cards.
Do You Need a Lawyer to File for Bankruptcy?
Although there’s no law that requires you to hire a lawyer to file bankruptcy, it is in your best interest to do so. Bankruptcy can be a complex process, so it’s important to have someone experienced and skilled on your side. A bankruptcy lawyer can make sure that you file your paperwork accurately and on time and prevent you from making costly mistakes.
How Can You Rebuild Your Credit After Bankruptcy?
One of the consequences of filing for bankruptcy is a lower credit score. However, you can rebuild your credit rating over time. Create a realistic budget and pay your bills on time every month. If you can’t qualify for a traditional credit card at first, consider applying for a secured credit card, which requires you to submit a cash deposit.