Bankruptcy - South Carolina Bar

Chapter 7 Bankruptcy

United States Bankruptcy laws are designed to provide relief to individuals and businesses that are experiencing extreme financial difficulties. Information on Chapters 12 and 13 of the Bankruptcy Code is also available.

Chapter 7 refers to straight or liquidated bankruptcy. Under Chapter 7, a debtor (or husband and wife debtors) files a petition for relief, which automatically entitles the debtor to a court order protecting the debtor from the people or businesses to whom he owes money, who are called "creditors." With the petition the debtor must list all property and all debts. Once the petition is filed, a trustee is appointed to supervise the bankruptcy, and the debtor can no longer control his property until the case is closed or the property is released by the court. The trustee has the right to ask any questions about the debtor's property and debts. The trustee can sell, mortgage, rent or dispose of the debtor's property. The debtor may be able to keep some of his property.

The debtor must come to a meeting where the trustee and creditors can ask questions of the debtor. Most bankruptcy cases can be finished within three months or so, but some can last for years if the debtor has a great deal of property.

At the end of a case the debtor will ordinarily receive a discharge order. This order formally discharges or erases many debts, except certain types of debts such as alimony, support, recent taxes, student loans or debts obtained by fraud and some others.If a debt is discharged, the debtor will not be required to pay it, although it can be repaid voluntarily. A discharge does not ordinarily affect mortgages on real estate or car loans and some other liens. Often court judgments and certain other liens can be erased.

While individuals may represent themselves, bankruptcy can be complicated. There are exceptions to much of what is set forth here. Anyone considering bankruptcy is urged to consult a lawyer.

This information was prepared to give you some general information on the law. It is not intended as legal advice about any particular problem. If you have questions about the law you should consult a lawyer. If you do not know a lawyer, you can call the South Carolina Bar Lawyer Referral Service weekdays between 9 a.m. and 5 p.m. The number is 803-799-7100.

Chapter 12 Bankruptcy

The United States Bankruptcy laws are designed to provide relief to people who are experiencing extreme financial difficulties. Some chapters of the Code most often used by farmers are Chapter 7, Chapter 11 and Chapter 12. This information concerns Chapter 12 only, the chapter referred to as The Family Farmer Chapter.

Chapter 12 adjusts the debts of a family farmer who has regular income. Under Chapter 12 an individual or couple or, sometimes, a corporation or a partnership file a petition for relief which entitles them to a court order protecting them from their creditors. The farmer filing bankruptcy is called the "debtor." There are certain eligibility requirements; these include a debt ceiling of $1,500,000 and income of at least 50% from farm sources. At least 80% of all debts must be farm related.

In order to file under Chapter 12, a debtor must pay a filing fee of $200 and file a petition. Within 15 days after filing, the debtor must provide a more comprehensive list of liabilities and assets, a statement of income and expenses and must make a deposit of $500 to the Chapter 12 trustee. Within 90 days the debtor must file a plan of repayment disclosing how his creditors will be repaid. The debtor must file a monthly financial report showing all disbursements and receipts. He must list all property and all debts and complete certain other statements.

When the petition is filed, a Chapter 12 trustee is appointed and the debtor has some limitations over his property. The Chapter 12 trustee has the right to inquire extensively into the debtor's assets and liabilities. The trustee can sell, mortgage, rent or dispose of the debtor's property, subject to the input of the debtor and subject to the approval of the court. Exemptions are allowed, but limited to the equity in property, which is determined by deducting the value of any liens against the property from the value of the property. Secured claims, called liens, ordinarily must be paid even after a debtor files for bankruptcy.

Within 20 to 60 days after the petition is filed, the debtor must come to a meeting where the trustee and creditors ask questions of the debtor. At this meeting the trustee may make suggestions or comments as to how the plan of repayment should be made. There will be another meeting called a "preconfirmation conference." At this conference the trustee will meet with the debtor the debtor's attorney, and the creditors who are interested, and try to work out any kind of disputes over claims, liens, and the plan of repayment. Within 45 days of the filing of the plan, the confirmation hearing will be held. At this time, the court will decide whether or not the plan of repayment will be approved. The creditors have an opportunity to comment on or object to the plan of repayment.

If the plan of repayment is approved by the court, then the farmer/debtor must make payments periodically through the trustee. The trustee is permitted to retain up to 10% of all payments made. The trustee then distributes these payments to the creditors in accordance with the plan of repayment that was approved by the court.

A Chapter 12 plan can last for no more than five years. Many unsecured debts may be paid less than 100% of the amount due, if the court approves this in the repayment plan. Throughout the life of a plan the debtor will be accountable to the court and the trustee and must cooperate with the trustee, at all times.

If the debtor completes the plan of repayment, then the debtor will receive a discharge order from the Bankruptcy Court at the conclusion of the plan. At that time all of the debts that were treated under the plan will be discharged unless there are secured debts and the debts have not been paid in full. Certain types of debts such as taxes, alimony and child support cannot be discharged unless paid in full.

Filing for Chapter 12 will impair the debtor's credit rating and may be reported by the Credit Bureau for up to ten years. Some creditors may distinguish favorably between those debtors who file under Chapter 12 as opposed to those who file under Chapter 7.

While individuals can represent themselves, Chapter 12 is complicated. There are exceptions to much of what has been set forth here. Anyone considering filing under Chapter 12 is urged to consult and employ a competent bankruptcy lawyer.

Chapter 13 Bankruptcy

United States Bankruptcy laws are designed to provide relief to individuals and businesses that are experiencing extreme financial difficulties. Information on Chapters 7 and 12 of the Bankruptcy Code is also available.

Chapter 13 is commonly referred to as the wage earner plan. If a debtor (or husband and wife debtors) has any sort of income, from any source, he can file a petition for relief under Chapter 13 and repay his creditors, in part or in full, through a Chapter 13 trustee. Within 2 weeks of filing bankruptcy, the debtor must file a plan for repaying all or a part of his debt to creditors. The creditors can accept or reject the plan, but the final decision as to approval of the plan is up to the Bankruptcy judge.

Within a month of filing bankruptcy, the debtor must make monthly payments to his Chapter 13 trustee. Once a plan of repayment is approved by the judge, the trustee pays this money to the creditors according to the repayment plan. These payments to the trustee normally continue for three to five years. A Chapter 13 filing may allow the debtor to stop foreclosure by bringing all past due payments and penalties current by making payments to the trustee according to the Chapter 13 plan. Most mortgage payments must then continue to the mortgage company or bank

If the debtor follows the repayment plan by making all payments called for by the Plan, the debtor receives a discharge order by which the bankruptcy judge formally forgives or discharges the debtor of all debts that can be discharged. Debts which may not be discharged are alimony, support, recent taxes, student loans or debts obtained by fraud and some others. A discharge does not ordinarily affect mortgages, car loans or most other liens.

Filing for bankruptcy relief damages credit ratings; it can be reported by credit bureaus for ten years. Although credit may be difficult to obtain after bankruptcy, there is no law prohibiting a person who files bankruptcy from obtaining credit. Some creditors are more likely to give credit to those individuals who file under Chapter 13 than Chapter 7. While individuals can represent themselves, bankruptcy can be complicated. There are exceptions to much of what is set forth here. Anyone considering bankruptcy is urged to consult and employ a lawyer.

Consumers' rights in business bankruptcy

United States Bankruptcy laws are designed to provide relief to individuals and businesses that are experiencing extreme financial difficulties.

If you are a creditor, or have some other claim against a business which files under the United States Bankruptcy Code, you must stop all phone calls, letters or legal actions you might have begun against the business. You should file a claim with the Bankruptcy Court within 90 days after the business filed bankruptcy, unless the period for filing claims set by the court is longer or shorter than 90 days. If information you receive from the Court does not specify how long you have, or if you are not sure, contact the Bankruptcy Court in writing.

There will be a meeting of all of the creditors as early as possible. If you have filed a claim or are listed as a creditor, you will be notified of this meeting date and location. This is your best opportunity to have your questions answered by the business. At this meeting you can ask about the business' intentions to pay your claim.

There will be a U.S. Trustee appointed official or "trustee," supervising the case, except in some filings under Chapter 11 of the Bankruptcy Code. The trustee should respond to your reasonable written questions, but keep in mind that the trustee may get paid for each response, which may reduce the amount of money available to pay you and other creditors. Creditors should try to get have their questions answered by the attorney representing the bankrupt business before asking the trustee.

After you have contacted the Bankruptcy Court either by dialing VCIS at 1-866-222-8029 with a touch tone phone or in writing, you will be told under what chapter of the Bankruptcy Code the business has filed. In bankruptcy filings under Chapters 11, 12 and 13 of the Bankruptcy Code, the business can conduct business as usual. In filings under Chapters 11, 12 and 13 the business will file a plan of repayment or reorganization that will describe how, when and how much you will be paid. You can file a written objection to that plan.

Chapter 12 and 13 cases can take three to five years to complete. Chapter 11 cases can go on even longer; most are completed within three years.

When completing your claim, be sure to specify if your claim is secured or unsecured. If you have paid the business for goods or services of an individual nature which you have not received, you can claim up to $900 as a priority, or secured claim. Any amount of the claim over $900 would be unsecured. If you have a lien on, or title to property in the possession of the business, you can claim a fully secured claim. Most other claims are unsecured. If you are not sure, you should contact a bankruptcy lawyer for assistance.