Published Wednesday, August 4, 2010 @ 6:52 pm

In these tough financial times, finding people with a steady job, much less a job that provides a higher income, can be difficult. As a result, it may be surprising to find a lot of these high-income debtors are currently considering bankruptcy. But in this economic downturn, many of these men and women are suffering from unexpected challenges to their steady income and business, and, as a result, joining millions of other Americans by seeking the safe harbors of bankruptcy to protect what they’ve worked for.

If you happen to be one of these high-income debtors, you may be wondering what bankruptcy can offer and if you’re even eligible. Well, take heart, high incomers, there’s a bankruptcy solution for you, compliments of the Bankruptcy Code.

The Bankruptcy Code seeks to encourage higher-end entrepreneurs to take risks in their business dealings.  To do so, the Code was written in a way that allows individuals with mostly non-consumer debts accumulated during the course of business to be able to discharge their debt in Chapter 7 bankruptcy. In this way, high income individual can receive the same bankruptcy relief as individual debtors seeking a personal bankruptcy to dispense with their consumer debts without fears that they would not pass the “Means test.”

Bankruptcy’s “Means Test” is a formula for determining your ability to pay back your debts. Your inability to pass this test limits your bankruptcy options from both Chapter 7 and Chapter 13, to simply being able to file under a Chapter 13 plan. As a result, while a traditional Chapter 7 personal bankruptcy liquidation may not be available for some high-income debtors, the Code has made allowances so that these same debtors can, in turn, qualify to liquidate their debts if the majority of these debts are non-consumer debts.

The next logical question then is what is non-consumer debt? A couple of examples include:

Credit Card Debts Stemming from Business Purchases
Did you use a credit card to purchase computers, printers or other office supplies for your business? Use plastic for business repairs or additions?  If you’re a high-income debtor and have credit card debt incurred to buy equipment and supplies for your business, you may be able to discharge those debts in Chapter 7 bankruptcy.  Conversely, due to “means test” problems, high income debtors may not qualify to discharge debts from credit card purchases of personal computers, furniture or to remodel their home.

Loans Related to Business Expenses or Inventory
High-income debtors can also discharge debts like personal loans if they are used to purchase inventory for a business or provide for other related expenses.  As before, the means test would prohibit discharge of similar personal loans if they were used to help with a home mortgage or other personal costs.

Don’t wait for your own entrepreneurial bubble to burst. Join the millions of American who have found immediate help to keep their lives on track while retaining their hard-earned cash. If you are a high income debtor who has been affected by the economic crisis, knowing a qualified bankruptcy attorney can help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond our own “Great Recession.”  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Friday, May 28, 2010 @ 5:38 pm

In the new HBO series Treme, viewers follow the lives of New Orleans residents a mere three months following the physical, emotional and economic devastation of Hurricane Katrina. The cast of characters represents a cross-section of ordinary New Orleanians—from police to piano players—trying to rebuild their lives, their homes and their unique culture in the aftermath of the 2005 storm. Like a bellwether for our nation’s tough financial times, Treme captures the proverbial “perfect storm” that led to one city’s economic fallout, full of stark imagery of people losing everything and attempting to rise from the ashes in any way they can.

Prominently featured in this series are New Orleans musicians, a subgroup especially hit hard by the city’s downward spiral—a situation that increased crime, dropped tourism, and seemingly attempted to steal the heart and soul of the city: its music. In many scenes, we see these musicians desperately seeking gigs, moving on from traditional venues, and, in some cases, literally losing the tools of their trade: their prized musical instruments.

Unfortunately, the sights and sounds of Treme have become all-too-familiar in recent years in many parts of the country, with many inside and out of The Big Easy, finding it none-to-easy to keep their heads above water.  Like a devastating hurricane, a wave of financial difficulties can come quickly and unexpectedly, leaving average Americans wondering where they can turn for help.

For those who have been hardest hit in the working class—like Treme’s  musicians, teachers, and  restaurateurs—bankruptcy can provide the most effective way to pack back debts and pay it forward on the road to financial freedom. But, in some cases, bankruptcy seems like a quick ticket to losing personal property, a prospect that can seem difficult to those who rely on the aforementioned “tools” to continue their “trade.”

Take for example, the musicians featured in Treme. Whether you’re the show’s “Annie,” a savvy sidewalk violinist or a traditional trombonist like the character Antoine Baptiste, your instruments (or other personal property) are your lifeblood. As such, many worry that bankruptcy means losing your stuff, including expensive instruments, and, in turn, losing your livelihood.

But bankruptcy isn’t necessarily the legal equivalent of singing the blues. In reality, rather than the court striking the chord to carrying away all of your possessions like a legally-sanctioned storm, you are in fact legally entitled to claim much of your property as exempt. This can include cars, furniture, and even your precious musical instruments.

In fact, under bankruptcy law in many states, you can claim musical instruments and equipment as a component of your “household items.” And, if you are a professional or semi-professional musician, you may claim a certain amount of equipment as necessary for your occupation.

But, of course all of this depends on the particulars of your unique situation.  From New Orleans to Northern California to New York, bankruptcy can affect people of all backgrounds and walks of life, in many different way. As a result, many need to turn to the assistance of an experienced bankruptcy attorney to hit the right note as they play for a better financial future.

As a result, if you’re an average working class American looking to hold on to your priceless personal property, knowing a qualified bankruptcy attorney can yield the right kinds of support, information and insights—at a low cost. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Wednesday, May 19, 2010 @ 8:20 am

In a move that, as The New York Times described it, “will affect most American corporations,” the Labor Department has announced its latest mandates for company compliance with plans to end wage violations, increase workplace safety and adhere to equal employment laws.

As The New York Times’ Steve Greenhouse reported, “The effort, aimed in part at reducing the incidence of employers not paying overtime and improperly classifying workers as independent contractors, will require them to document many of their decisions and share that information with their workers and the government. In announcing the department’s intentions on Thursday, Deputy Labor Secretary Seth Harris said his department wanted to foster a culture of compliance among employers to replace what he described as a ‘catch me if you can’ system in which too many companies violated employment laws.”

Within these broader strategies for corporate compliance is the potential for added protections for employees considering the benefits of bankruptcy.

The broader strokes of this literal “work-in-progress” are two-fold:

(1) Workplace Safety. New Labor Department rules would require employers to stop “planning” and start “doing,” by developing formal policies for eliminating safety and security hazards in the workplace and directly engaging in these plans in order to evaluate their effectiveness.

(2) Worker Classification. In this effort, the Labor Department is targeting companies who avoid paying workers their due overtime pay and improperly classifying employees to avoid providing proper benefits. In doing so, these changes will require these same companies to document these classifications, providing written explanations of the reasons behind that classification and sharing those explanations with workers and government agencies.

Like clockwork, business interest groups are fighting these Labor Department plans, arguing the new rules mean new burdens on already beleaguered employers without “necessarily improving compliance with labor laws.”  And with these proposed changes still in the development stages—giving big business another opportunity to attack the finalized plans—experts say it’s likely to be a year before the changes can be implemented.

Despite these challenges, as Greenhouse reports, “Department officials say they hope the plan will greatly reduce problems in industries with widespread wage violations, like restaurants and discount retailing, and those with widespread safety violations, like coal mining and construction.”

Labor Department Benefits and Bankruptcy. In addition to activating more transparent corporate compliance of internal safety practices and classification policies, this new plan may also extend to employment law protections, reinvigorating enforcement of workplace anti-discrimination policies aimed at protecting employees who have bad credit or are bankruptcy bound. Currently, federal bankruptcy law contains some provisions which prevent unfair treatment of employees who have filed for bankruptcy.

While some employers can run a credit check on prospective employees, under federal law, these same companies must actually get written permission from applicants in order to run their credit check. In the meantime, consumer advocacy groups are showing their support for legislative bans on these types of credit checks, pointing out that credit reports can also contain inaccurate information.

While credit checks are sometimes used in the hiring process, your decision to file bankruptcy should never affect your employment status with an employer.

Until these worker-friendly benefits are in place, consulting with a qualified bankruptcy attorney when facing concerns about your bankruptcy impacting your employment, could be your next, best step.

A qualified bankruptcy attorney can assist jobless and employed citizens with even the worst credit histories to conquer their fears of losing it all.  Specifically, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Friday, April 23, 2010 @ 1:05 pm

Since the Great Recession began in 2007, small businesses across the country have been squeezed.  Exacerbated by the flagging economy, small business owners everywhere are not only facing high employee health care costs and lagging consumer and commercial spending, but also fewer credit options. And while loans have always been the lifeblood of the small business, all across our great nation, mom and pop endeavors with even the most solid credit histories face tremendous obstacles in qualifying for much-needed capital. And because small business accounts for some 65% of employment in a nation already facing off-the-charts job losses, any squeeze on small firms is a serious matter—with last year’s disconcerting lending figures illustrating just how serious—for the long haul.

As The Huffington Post reports in their recent article, “Small Business in Debt Rescued by Loyal Customers,” the small businesses situated in the tiny town of Point Lookout, on Long Island, are no exception. “Like many small towns, Point Lookout is served by family-run businesses that struggle to compete with chain stores and suppliers. In the recession this struggle becomes even harder. Point Lookout’s Merola’s grocery store found itself deeply in debt and on the brink of bankruptcy, despite being beloved by town residents.”

HuffPost refers to a recent The New York Times article featuring one such town resident named Dana Conklin, who stepped in to save the struggling grocery store. Conklin, a loyal Merola customer and Point Lookout native, “suggested a one-time fund-raising drive so that customers could help pay the bills and keep the store going until business picked up in the spring and summer. And one by one, customers trooped in with checks or mailed them in — at last notice, more than 150 of them covering almost half of the store’s $100,000 debt to the supplier.”

While these altruistic acts show the unique importance of small business in tiny hamlets like Point Lookout, NY, many small businesses haven’t been so lucky, with many “overhauling their practices to get a leg up in the recession.” For the family-run Merola grocery store, that means operating “smater and tougher — probably fewer jobs for local kids, employees paying for part of their health care, and the market aggressively seeking new niches, like, say, delivering food to people on the beach.”Regardless of changes the business itself makes, as The Huffington Post rightly points out, “customer loyalty and commitment will be an invaluable asset in the fight.”

And based on last year’s anemic lending figures and the continuing trend of evaporating loans for small business, many mom and pop endeavors are also seeking shelter through the benefits of bankruptcy. The truth remains, if you are no longer able to sustain or expand your business in your current financial situation, filing for bankruptcy may be your best bet. And, in this case, the best move a beleaguered small business owner can make is to consult an experienced bankruptcy attorney who specializes in small business cases. Skilled bankruptcy attorneys like those at The Law Offices of John T. Orcutt can get to work early, navigate any uncertain waters of bankruptcy court and work in your best interests during the duration of your small business bankruptcy. The attorneys at The Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Thursday, April 1, 2010 @ 10:48 am

Are you feeling too broke to break out of debt? For those ready to end the cycle of debt, it is important to understand that bankruptcy is not a one-size-fits-all solution, and bankruptcy filings are complex cases catering to your individual economic needs.

Bankruptcy, like so many areas of the law, is in a constant state of evolution, having been refined and redefined over the decades and through several important pieces of legislation. The first major bankruptcy legislation since the Chandler Act of 1938— Bankruptcy Reform Act of 1978—brought some of the most significant changes to the U.S. Bankruptcy Code. Within this Act, there were a host of important changes that the Act brought to the U.S. Bankruptcy Code—changes that can help you in these tough financial times:

(1) The Bankruptcy Reform Act of 1978 introduced Chapter 13 bankruptcy protection. Referred to as a wage-earner reorganization bankruptcy, this new type of bankruptcy can now stop foreclosure on your home or restructure your consumer debt into a more manageable payment plan— allowing debtors to pay back what they owe over time, often at a percentage of the cost.

(2) For the first time, this act also allowed married couples to file a joint bankruptcy. Because husband and wife file a single bankruptcy case pursuant to these rules, only one filing fee is paid to the Clerk. These days, considering the fact that the filing fee for Chapter 7 and Chapter 13 bankruptcy can be hundreds of dollars, and attorney fees ranging even higher, this results in major savings. Married couples should consider filing jointly filing when most debts are jointly held between as is often the case of credit card debts, mortgage loans and automobile loans.

(3) The legislation also introduced additional exemptions for filers, allowing individuals, for the first time, to keep most, if not all, of their property. Assets you can keep in bankruptcy can include certain retirement plans, education funds, and even real property under homestead exemptions.

(4) The act reorganized various chapters of the Bankruptcy Code. Specifically, Chapters 5, 6, & 7 were changed to Chapter 11 bankruptcy. For the first time, businesses filing for bankruptcy after the act began using Chapter 11 bankruptcy. Today, Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations and partnerships. It has no limits on the amount of debt and is the usual choice for large businesses seeking to restructure their debts.

With the legislation Bankruptcy Reform Act of 1978 bankruptcy reforms were highly substantive and substantial, shaping the law to the needs of a public eager to get a fresh financial start. These specific efforts and exemptions are the primary reason that it is important to have a good bankruptcy attorney on your side; someone who is familiar with the process and knows precisely how the latest laws can assist you.

Well, it’s finally time to halt the hesitation, dismiss the deterrents, and suffer no more; because, in fact, the opposite can be true in the world of bankruptcy law. Days, weeks, and months wasted without speaking to a qualified bankruptcy expert can actually add up to higher bills, increased interest and greater stress—creating a costly cycle of creditor-debtor “cat-and-mouse”—that you continue to pay for—with the constant risk of losing even more.

Specifically, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Wednesday, March 24, 2010 @ 8:00 pm

In this economy, qualifying for a bank loan or line of credit can feel impossible—even for people with perfect credit—and much more so if you’re trying to bounce back from a recent bankruptcy. But a bit of patience (targeting smaller community banks rather than large corporate banks) and a bit of help (getting others to vouch for you) can improve your odds tremendously—even in this uncertain economic climate.

As Robert C. Seiwert, senior vice-president of the Center for Commercial Lending & Business Banking at the American Bankers Association told Businessweek,  “A bankruptcy can hurt your chances of getting new credit for at least seven years. What gets damaged in a bankruptcy is the view of your character. A banker wants to know, even if you have the money to repay a debt, will you? If you get into trouble, will you work with the bank or walk away?”

As a result, the key is doing a bit of little local legwork: finding community banks who will see you for more than just your credit score. “The bulk of community banks evaluate your application by sitting down and talking with you, looking at your specific collateral and your cash flow,” Seiwert told Businessweek.

So what do you do when you find a bank community or small regional bank? Rule one when approaching your friendly neighborhood loan officer: be honest. Explain what happened leading up to your bankruptcy; how you’re back on financial track; and exactly what you need to keep moving. “If you can show that you did your best to make good on your obligations after the fact, or that you intend to pay back that loan now that you’re profitable again, that will go a long way to restoring that chink in your character that the bankruptcy suggests,” Seiwert told Businessweek.

Rule two is to play the financial field. Talk to multiple bankers, evaluating which of the local banking bunch seemed most welcoming to you and your business—even if they initially turn you down. “Stay in the loop with those bankers. Contact them occasionally and let them know about your progress,” Seiwert said. “It’s absolutely critical that you keep following up” to improve your chances of getting a line of credit in the future.

Rule three, is to start off small. Gradually work your way up to a larger loan or credit line as you improve your credit score. If you pay your loan on time for a series of years, your local bank will be more inclined to offer you more.

Another rule of the financial road is to seek nontraditional partners. In addition to depending on the kindness of banking strangers, turning to your businesses’ customers or colleagues to make an introduction for you at a bank to help you get your foot in the financial door. If either is willing to co-sign on your loan, or loan money directly to you as well, all the better. And never forget that people with excellent credit make for great business partners in this process, convincing banks to accept your risk to work with them.

So, if you’re bankruptcy bound and seeking solutions for continuing your business, the bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button and let these experts smoke out your next best financial steps.

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Published Tuesday, February 2, 2010 @ 2:30 pm

Many of our clients automatically assume they will lose their rental property if they file for bankruptcy. Isn’t that the whole idea of bankruptcy? That you give up everything you have, with a few exceptions, in exchange for getting the debt collectors off your back?

Well, no. Many factors come in to play in determining whether or not you will be forced to sell your rental property, including whether you file chapter 7 or chapter 13, how much money you owe on the property and how much income you receive from it.

Let’s start with chapter 7. If you file chapter 7, you get an exemption for the equity in your primary residence – how much depends on the state you live in – but rental property doesn’t qualify for the standard residence exemption. Therefore, you will only be able to protect the property from sale if you can cover it under your available wildcard exemption. The North Carolina wildcard exemption is $5,000.00 per filer- not much. However, your state may have additional protections if you own the property jointly with your spouse. In North Carolina, if you own the property jointly with your spouse, the property is only subject to claims of joint creditors. If all of your debt is in the name of one spouse or the other, the property may be protected- regardless of the amount of equity. Talk to a experienced bankruptcy attorney, who can examine how you hold title and if you have any joint debt.

But what if you don’t have any equity in the house, or minimal equity? What if, for example, the house is worth $100,000 and you owe $120,000, or even $99,000? The trustee’s job is to determine whether or not there is money for your creditors, not to take away everything that belongs to you. He will determine the property’s worth, then subtract the projected sales costs, selling it and paying taxes on the proceeds. If it’s not worth the trustee’s time and effort, it’s unlikely that he will try to sell it.

With Chapter 13, there are additional caveats and concerns. In general, you should be able to keep your rental property in a Chapter 13 filing. In fact, since the rental property is not your primary residence, you might be eligible for cramdown under chapter 13 – meaning that if you owe more than the property is worth, the bankruptcy judge is able to alter the terms of the mortgage to reflect the property’s current value rather than the amount you originally agreed to pay for it. This could lower your monthly mortgage payments, as well as the long term amount you have to pay to the bank for the property. Cramdown isn’t allowed on primary residences, but it is allowed on other secured debts, including rental property.

Do note, however, that rental property can, under certain circumstances, cost you money. The trustee in a Chapter 13 case will look at all the costs associated with the property – your mortgage payments, plus taxes, insurance, upkeep and repairs. If these costs outweigh the income the property brings in, the trustee may object to your plan on the basis that the money you’re spending on the property should be distributed to your unsecured creditors. In such a case, surrendering the property may be your best option. However, this is a very fact-sensitive issue and depends on how your jurisdiction interprets very complex provisions of the bankruptcy code. Only an experienced bankruptcy attorney can advise you on your specific situation. Bottom line- if you’re deeply in debt, talk to a bankruptcy attorney and get the real facts. In North Carolina, call the Law Offices of John T. Orcutt. Convenient office locations in Raleigh, Durham, Wilson and Fayetteville. Call today: 1-800-899-1414 or visit www.billsbills.com for more information.

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Published Monday, January 4, 2010 @ 12:08 pm

In states like North Carolina—composed largely of rural areas dotted with farmland and abutting the ripe fishing grounds of the Atlantic—Chapter 12 bankruptcy can be exceptionally helpful to working farming and fishing families who might otherwise be bankruptcy bound.

In part one of the four-part series, entitled Chapter 12 Bankruptcy, we introduced the concept of Chapter 12, provided a brief overview of the special rights related to this protection, and shared who (or in some cases, “what”) qualifies as a family farm or family fisherman under the Bankruptcy Code. In this section, we’ll discuss how a Chapter 12 bankruptcy works, from initial petition filing to debt repayment planning.

If you qualify under the Bankruptcy Code’s broad definitions of a “family fisherman” or “family farmer,” a Chapter 12 case begins by filing a petition with the bankruptcy court where you live or the location of the “principal place of business” for your corporation or partnership. A qualifying husband and wife “family farmer” or “commercial family fisherman” may file. Unless the court orders otherwise, the petition includes a statement of your assets and liabilities; current income and expenditures; current business contracts and leases; and a general statement of your financial affairs.  In order to satisfy all of these petition requirements, you’ll need to gather a list of all creditors and the amounts and nature of their claims; the source, amount, and frequency of your income; a list of all of your property; and a detailed list of your monthly farming/fishing expenses, as well as living expenses, including food, shelter, utilities, transportation, feed, fertilizer, etc. In order to completely evaluate your household’s financial position, married individuals must gather this information for each spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

Upon filing for Chapter 12, you must pay a filing fee and a miscellaneous administrative fee with the clerk of court. With the court’s permission, and with specific deadlines, these fees may be paid in installments. Failure to pay these fees may result in dismissal of your case.

Filing the petition under Chapter 12 provides an automatic stay that stops most collection actions against you or your property. Under the automatic stay protection (a protection that exists under all forms of bankruptcy), any creditors—public or private—are not allowed to call you or send you collection letters. During the proceeding, they cannot continue any legal action against you, foreclose on your home, or repossess your car and other assets. And–even if a garnishment order has been issued–the automatic stay stops garnishment of your wages. Additionally, a Chapter 12 filing has the added benefit of protecting co-debtors (those liable with the debtor) from eager creditors seeking collection of consumer debts incurred by a personal, family, or household purpose.

When you file for Chapter 12 bankruptcy, an impartial trustee is appointed to evaluate the case and serve as an agent, for collecting your payments and making distributions to your creditors. Following your filing, the Chapter 12 trustee will hold a “meeting of creditors” at which you will discuss your financial affairs and the proposed terms of your repayment plan. From this meeting, parties typically resolve problems and repayment schedules. Afterwards, you, your trustee, and interested creditors attend a hearing confirming your personal Chapter 12 repayment plan.

Whether your bankruptcy is simple or complex, you’ll need an expert attorney to navigate the waters. Contact the experienced attorneys at The Law Offices of John T. Orcutt. Please note that while the Law Offices of John T. Orcutt does not file under Chapter 12, our office can evaluate your personal financial situation and refer your case to an experienced Chapter 12 practitioner if needed. Call us today: 1-800-899-1414.

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Published Wednesday, December 30, 2009 @ 10:49 am

You don’t have to be Chrysler or GM to consider bankruptcy. Maybe you are a small business owner with just a few employees and are struggling to keep everyone on the payroll while you fight off creditors, waiting for the next big contract to come through. You’re not alone. Here are the things you might consider as you look down the road.

This article assumes you’ve exhausted your credit and financial resources and are considering bankruptcy. Your best option when considering bankruptcy is to consult with a qualified bankruptcy attorney who can counsel you on your specific situation. You may find that bankruptcy is not the best move for you, but a qualified attorney will help you make that decision.

There are several different kinds of bankruptcy which may come in to play for you, as a small business owner. Here is a brief overview.

Chapter 7 Bankruptcy:
This is sometimes called “straight bankruptcy,” as it is what most people associate with the term “bankruptcy” comes up. Depending on which set of exemptions are available to you under state or federal law, there is often a lengthy list of items of property which you can exempt from liquidation when you file for Chapter 7 bankruptcy.  However, if there are any assets outside of your available exemptions, the Chapter 7 trustee will likely seize and sell that property and distribute the resulting proceeds amongst your unsecured creditors.

Chapter 11 Bankruptcy:
You may have heard of a company that goes into “reorganizational bankruptcy.”  Most often, this refers to Chapter 11 bankruptcy. Although this type of bankruptcy is often used by large corporations, small business may also file for protection under Chapter 11. As with the other forms of bankruptcy, certain rules and qualifications apply which may not make Chapter 11 a proper fit for your business’s needs.

Chapter 12 Bankruptcy:
If your business is a family farm, or a family fishing business, Chapter 12 bankruptcy may be your best option. Chapter 12 is tailored to the special conditions that come from individuals, families or small businesses which make their living from the land, streams or sea.

Chapter 13 Bankruptcy:
You may consider Chapter 13 bankruptcy if your business is just yourself, or if your business is unincorporated and operates as a sole proprietorship.  As with personal Chapter 13 bankruptcy, this process gives you a chance to reorganize and repay many of your debts under court protection, rather than wiping debts clear from your books.  Under some circumstances, you may not have to pay any of your unsecured debt.  Only an experienced bankruptcy attorney can properly advise you on your particular set of circumstances. Chapter 13 stops the clock on debt collection while you make progress to get back on your financial feet by paying a monthly amount as part of your Chapter 13 personal reorganization.

As with any major decision in your personal or professional life, you should consult with an attorney who is an expert in bankruptcy before moving ahead. A qualified bankruptcy attorney will give you sound advice on whether or not bankruptcy is the right choice for you, and under which of the various chapters of bankruptcy you should file for protection from your creditors.

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Published Monday, December 7, 2009 @ 12:57 pm

The rise of mega-bankruptcies in the last two years has literally changed the face of how our financial system works, incorporating new precedents for pre-arranged Chapter 11 filings and instituting new standards of government intervention. Now the results of these sweeping insolvencies are being translated into legislative activity.

For a number of weeks, lawmakers have been considering a new method by which to systematically dismantle struggling companies that if allowed to crumble under current laws, would pose a significant risk to the economy. In other words, the debate is really about how the government deals with companies that are “too big to fail.”

Naturally, there is debate among the parties but in general, the plan calls for creating a government standard for strategically dismantling large companies. At the heart of the floor disagreements is how creditors are treated under the new plan.

The current bankruptcy code follows an order for who should be paid when a company becomes insolvent. It starts with securitized debt (such as bonds issued to investors), then unsecured senior debt, subordinated debt, preferred stock and then common stock.

However, that order would change under the proposed rules, which grant seniority to the FDIC (Federal Deposit Insurance Corporation.) Basically, the new plan uses the resources of the government, not bankruptcy court, to decide who gets what. The new approach, called the “systemic resolution bill,” would first pay funds to the FDIC to cover its expenses, next the government itself if any bailout funds were used, and then the traditional repayment priority would begin.

Creditors often involved in these types of bankruptcies are voicing support for the current bankruptcy system, citing primarily that government interaction at this level would lead to legislative bottlenecks and surely delay a company’s ability to repay them and effectively handle the sale of its assets. Additionally, their stance is that the bankruptcy process entails an independent judicial review and enables the negotiation of payments.

The bill would allow the FDIC to decide the payout to creditors and delays judicial review until after the resolution is completed. There are also a number of ancillary issues involving bankruptcies of this type, such as contingent claims and indemnities, that the FDIC has not yet considered.

Systemic-resolution proponents argue that the bankruptcy system is already ill-equipped to handle massive, economy-damaging bankruptcies, citing that the Lehman bankruptcy remains tied up in court as a result of countless loose-ends. Michael Krimminger, an adviser working with the FDIC on the formulation of the plan insists that “… there is a reason large financial firms have not been allowed to fail — because no one has had enough confidence in the bankruptcy code to handle it. We must have a process that can close the largest financial firms without creating a systemic crisis.”

Krimminger and others in his court believe that the government plan would handle things much more efficiently. However, none of the bill’s detractors are willing to listen to that argument.

They also believe that the bill will severely impact the market as a whole by spreading doubt about how such companies will be end up in the market once inside the government blanket. Other companies monitor bankruptcies for a number of financial reasons that can play out on Wall Street in daily trading, especially if another financial crisis hits. In other words, the plan could make the impact of large bankruptcies even worse because of the lack of “sunshine” (public information) the FDIC allows.

Is this plan a legitimate effort to alleviate a burden from the bankruptcy code or another attempt by the government to control corporate America? Stay tuned …

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Published Tuesday, December 1, 2009 @ 7:35 am

Exacerbated by the recent recession, self-employed or small business owners everywhere are facing fewer credit options, high health care costs, and lagging consumer spending. Those struggling to stay afloat in these tough financial times must ask themselves even tougher questions. Do I have the motivation to continue my business? Could the business prosper if it wasn’t keeping up with old debts? Could my business persevere if it shed equipment, employees or space? Could I sell my business? Could I start another business if I did sell?

If after answering these questions you find you are no longer able to sustain or expand your business in your current financial situation, filing for bankruptcy may be your best bet.

For those business people who no longer have the time, energy or drive to continue their business interests in their current capacity, Chapter 7 bankruptcy liquidates business assets to repay looming debts. A court-appointed agent will sell these assets and pay the proceeds to creditors; beginning with secured creditors first, followed by any unsecured creditors. While this type of bankruptcy normally leads to the demise of the business, it, in turn, provides a quick resolution for individuals and a dependable dissolution for partnerships and corporations.

In the alternative, for business owners seeking solutions to the very problems that led to bankruptcy, Chapter 11 allows for a much-needed financial reorganization. Following a Chapter 11 filing, the court appoints a conservator who, like the agent in the previous example, oversees the business assets to best pay off creditors, while still keeping the business afloat. In short, Chapter 11 stops creditors, allowing the court-appointed conservator to reorganize and optimize business finances for a better future.

The best part for self-employed and small business owners filing Chapter 11 is that they can legally continue operating their business and earning an income as a “debtor in possession,” receiving the benefits of “automatic stay” protection. Debtors in possession are protected from creditor actions such as lawsuits and asset seizures, even if a creditor obtained a judgment before the bankruptcy filing. An added benefit of filing bankruptcy as a debtor in possession is that bankruptcy law allows you to take out more loans that take precedence over all other creditors.

Conversely, like businesspeople filing for Chapter 7, Chapter 11 debtors in possession are bound by specific bankruptcy rules and restrictions, including prohibitions on using encumbered assets as collateral and selling assets without the approval of interested creditors. As a result, the best move a bankruptcy bound small business owner can make is to consult an experienced bankruptcy attorney who specializes in representing small business owners.

While a bankruptcy for your business is sometimes advisable, many small business owners don’t have any assets left and don’t intend to continue the business, or intend to continue under a different name. If so, it may make more sense to simply let the corporation die on its own without a bankruptcy. However, if you’re like most small business owners, you have probably personally guaranteed most, if not all, of your business debt. While a business bankruptcy will effectively hold off creditors from getting to your business, those same creditors can choose to pursue you personally. Whether you are dissolving the business or continuing on, its important to pull your credit report to determine how much of your debt has been personally guaranteed. Your attorney can then advise you how a personal bankruptcy can save you and your family from your business creditors.

Skilled bankruptcy attorneys like those at The Law Offices of John T. Orcutt can get to work early, navigate any uncertain waters of bankruptcy court and work in your best interests during the duration of your business and/or personal bankruptcy. In North Carolina, call 1-800-899-1414 to discuss your situation today. Always a free initial consultation.

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Published Saturday, July 11, 2009 @ 8:07 am

Chapter 11 bankruptcy is in the news a lot these days. Like individuals, more and more large corporations are struggling to weather the current economic downturn. Just think of GM, Chrysler, Lehman Brothers, and the like. Chapter 11 bankruptcy essentially does for corporations what Chapter 13 does for individuals: it allows them to reorganize their debts into an affordable repayment plan.

With all the talk about large corporations, you may think Chapter 11 bankruptcy is reserved just for them. But individuals and small business owners can also file under this chapter. You might be wondering why someone would ever do so. Well, in most cases, it’s because there’s no other choice.

Chapter 7 “liquidation” bankruptcy is a powerful tool for individuals, because it lets you completely wipe out a host of unsecured debts. But you have to satisfy the “means test” to qualify, which means your income can’t exceed a certain level — typically, the median income for a family of your size in your state.

If you can’t satisfy the means test under Chapter 7, or you want to keep certain property that would otherwise be subject to liquidation in a Chapter 7 case, Chapter 13 bankruptcy can be a great alternative. You can reorganize your debts into an affordable repayment plan and, at the end of the plan, the remaining amount on the debts is generally discharged. But there are limits to the amount of debt that can be included in a Chapter 13 plan. The figures change every few years, but right now there is a cap of $336,900 for unsecured debts and $1,010,650 for secured debts. (As of 5/23/09)

These limits don’t pose a problem for most people. For some debtors, though, the ceiling just isn’t high enough. Think of people of high net worth who suffer a major financial blow, or people carrying substantial debts tied to a small business on the verge of collapse. These individuals probably make too much to qualify under Chapter 7 and owe too much to qualify under Chapter 13. While these cases have been historically rare, with the boom-bust economic cycle we’ve experienced over the last several years, this scenario is likely to become more and more common.

This is where Chapter 11 bankruptcy can help. In Chapter 11, the debt limits of Chapter 13 go out the window. There are other advantages too. Unlike under Chapter 13, there is no five-year time limit for the repayment plan. Also, instead of having to make monthly payments like you would under Chapter 13, you can make the payments at different intervals — such as quarterly or biannually — if that would be more convenient. In addition, the court does not appoint a trustee to represent the creditors; the creditors deal directly with you. This can give you a greater degree of control over the process. On the downside, Chapter 11 bankruptcy is generally more complicated – often requiring a lot of time and effort on the debtor’s part — and significantly more costly.

The gist is, if you think you might not qualify for bankruptcy because of too much debt, or too high of income, it is crucial to seek the advice of an experienced bankruptcy attorney before ruling out bankruptcy. It could be that you really do qualify under Chapter 7 or 13 and it’s just a matter of understanding exactly what goes into the calculation when determining your income and your debts.

Call a bankruptcy attorney today to discuss your options. In North Carolina, contact The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson.

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Published Friday, July 10, 2009 @ 8:10 am

While details of super-sized corporate failures, like GM and Chrysler, are being splashed across front pages of newspapers and websites, grabbing our attention and garnering an inordinate amount of debate, the reality is that the vast majority of commercial bankruptcies are filed by entrepreneurs and small-business owners. The first five months of this year have shown a 52% increase in the total number of commercial bankruptcy filings. On average, during the first six months of 2009, some 350 commercial enterprises file for bankruptcy daily — an increase of 240% from 2006, the first year after the bankruptcy law was changed.

Today’s economic landscape has proven to be especially toxic to small business owners. Factors such as higher gas prices, lower consumer discretionary spending, and the credit squeeze have all put a strain on small businesses. Ironically, the bankruptcies of the very large companies can also contribute to the pain. “When you have the GMs of the world filing for bankruptcy, they are canceling contracts and discharging debts that they owe to their suppliers,” says B. William Ginsler, a bankruptcy lawyer in Portland, Ore. “And those are small businesses that are less solvent than larger corporations.”

The decline of the transportation industry, which includes the auto and airline businesses, has been the biggest trigger in small-business bankruptcy filings, according to new data from an Equifax bankruptcy study. Downturns in the construction, manufacturing and retail industries are also contributing to the increase in filings.

These days, small businesses are working harder than ever to stay viable. But more and more are finding that the economy is an obstacle too onerous to overcome. Many small businesses owe so much money to creditors that there is no future. Bankruptcy is still the only option for many small-business owners who are hanging by a thread.

Bankruptcy doesn’t always necessarily mean that the company must stop operating. In many cases, the business may continue or be sold as a going concern after a Chapter 11 filing. Larger bankrupt companies, such as Six Flags, use Chapter 11 of the Bankruptcy Code to “reorganize” its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court. But bankruptcy reorganization under Chapter 11 requires significant time on the part of the owners and managers, and expert legal counsel.

Other small business owners may choose to file for Chapter 7 bankruptcy and shut their businesses for good. Under Chapter 7, a trustee is appointed to “liquidate” (sell) the company’s assets and the money is used to pay off the debt, which may include debts to creditors and investors. Often, a small business owner’s personal finances are so intertwined with those of the business that he would be left open to personal liability under Chapter 7. In fact, in most small business cases, the owner has personally guaranteed most of the business debt. In these cases, it makes more sense to shut the business down and file for personal bankruptcy under Chapter 7 or Chapter 13.

If you are concerned about your business in these tough economic times, it’s time to speak to a bankruptcy attorney. In North Carolina, contact the Law Offices of John T. Orcutt. Call 1-800-899-1414 today.

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Published Tuesday, June 16, 2009 @ 5:04 pm

Chapter 11 bankruptcy has received a lot of discussion of late. From General Motors to Chrysler to even Six Flags amusement parks, corporate reorganization has been the talk of Wall Street. Most of the conversation has been about the impact on jobs, cars, stock markets and CEO pay.

Unfortunately, a lot of this news fails to educate the general consumer about the benefits and nuances of bankruptcy. So let’s use all these corporate restructurings as examples to discuss how Chapter 11 bankruptcy has changed and what it means to come out of it successfully.

At one time, a Chapter 11 plan was successful if the company eliminated superfluous debt, lessened overhead (salaries, employee count) and had specific steps in place to strengthen its revenue. The new definition deals more with liquidating assets, such as subsidiaries and disparate business plans that may not be in step with the company’s original core competencies and product lines. This is mainly a result of corporate growth trends in the last couple of decades. More and more companies became global, acquiring several companies to help them diversify and in turn, taking on more debt, more employees and a longer balance sheet.

A lot of this new approach to Chapter 11 has to do with lenders wanting quicker return on what is owed. Instead of a lengthy, strategic process about what is best to streamline and where layoffs should be focused, debt holders apply pressure to sell assets and raise capital. Chrysler for example, didn’t aim to be a smaller, more nimble version of “Chrysler” again. They just simply sold the majority of the business assets to another car maker. In this case, Italy’s Fiat.

Chrysler was in and out in 42 days, which is an exceptionally short amount of time, considering a typical Chapter 11 takes about 18 months. Still, experts believe that number is a little misleading because Fiat purchased only the strongest assets and that a portion of Chrysler is still in bankruptcy. The “old” part of the company will continue to operate and find ways to satisfy creditors.

The term “successful” in relation to corporate restructurings under Chapter 11 is relative. Jobs are always lost, shareholders get stung and operations collapse. This new approach to handling it makes it a priority to salvage the best components so somewhere along the line, there is a silver lining for a segment of the people and organizations involved.

Another factor that can determine Chapter 11 success is the company’s market position upon emergence. How well are they positioned into whatever economy they’ll be facing? Today’s conditions are not overly conducive to becoming profitable right away. The fear is that a company, while operating under very tenuous conditions, would have to file again. Industry jargon calls that a “Chapter 22.”

Like personal bankruptcy, Chapter 11 is designed to help corporations realign their interests, trim excess operational fat and come back out swinging. In the age of global conglomerates and disparate product channels, it’s becoming a entirely new process. If you are giving some thought to leveraging the benefits of bankruptcy for yourself or a small business, it helps to track what’s going on elsewhere and of course, to read through this blog. There is a lot to learn and in this blink-fast economy, things change in a hurry.

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Published Monday, April 27, 2009 @ 8:56 am

A unique bankruptcy case is underway in New York that holds in its outcome the fate of some very prized items of sports memorabilia.

Among the seized items is the black sports bra that United States Womens soccer star Brandi Chastain modeled moments after securing the World Cup for the country in 1999. Any sports magazine that’s worth its postage published the famous picture of the half-dressed defender, making the aformentioned undergarment a sought-after bit of sports history.

Ms. Chastain’s bra and other items in question were donated for temporary display to the Sports Museum of America that has been open for only about a year. It is filing for Chapter 7 bankruptcy protection and is a for-profit organization. Most museums are non-profit entities. What makes this case somewhat unique, at least for the owners of its showcase items, is that the court is asking for money to reclaim what’s theirs.

World renowned skateboarder Tony Hawk gave the museum a skateboard he rode as a child. Now, the court is asking him for $1,500. The King, (no, not Elvis) Richard Petty, donated a pair of his well-recognized sunglasses and, like more than 500 other unusual sports items, they are being held in a storage facility in urban New Jersey until they can be bought back to satisfy creditors. If not purchased prior to the proceedings being finalized, they will hit the auction block.

The situation has turned out to be quite a surprise for the athletes involved because they donated the items under the promise they would be returned when it was time to cycle in new items. Things became additionally complex after a number of items that were to be returned to their owners were sent to the wrong addresses, creating a management headache for the bankruptcy attorneys involved. Now, they are saddled with handling the museums poor record keeping.

Richard Petty, perhaps the most recognized figure in all of car racing, also provided the museum with a signature cowboy hat, a racing suit worn by his son Kyle and even a helmet–the only helmet–worn by his equally famous father, Lee Petty. The items came from the Richard Petty Museum in North Carolina.

According to available records, not all of the items on display were taken to the storage locker to be held. The respective Halls of Fame for baseball, football and basketball were able to have their items returned before the museum faltered. However, benefactors of one of our country’s most heralded athletes, Jesse Owens, lost a gold medal and cyclist Lance Armstrong may have to buy back one of his Tour De France yellow victory jerseys.

The museum’s bankruptcy plan does call for it to re-open. Instead of an initial annual admission goal of 450,000, they would need to restructure finances to accommodate 250,000 people a year.

Oh, and Ms. Chastain’s bra is worth $250. She said she has another one.

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