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CHAPTER 11 BANKRUPTCY (REORGANIZATION) 2018-08-09T23:22:24+00:00

CHAPTER 11 BANKRUPTCY (REORGANIZATION)

Through Chapter 11 of the United States Bankruptcy Code, ANAND LAW is able to assist individuals and businesses to retain real properties, prevent foreclosure and restructure debt. Some examples of what can be accomplished through a Chapter 11 Reorganization are:

  • Stop foreclosure sales and retain real property;

  • Re-structure mortgage debt so that outstanding balances are equal to the market value of real properties;

  • Re-structure mortgage debts by lowering interest rates;

  • Remove unsecured & cram down undersecured real property mortgage liens;

  • Remove unsecured & cram down undersecured HOA liens;

  • Remove certain tax liens;

  • Eliminate unsecured debt.

If you are facing foreclosure, a Chapter 11 bankruptcy may be the best, and possibly only, way to save your property. If you own multiple properties which are over-encumbered, a Chapter 11 bankruptcy may allow you to reduce the balances owed on each loan to the current market value of the property.

THE CHAPTER 11 REPAYMENT PLAN

If you qualify, a Chapter 11 will allow you to retain your primary residence and income-producing properties, while paying off a percentage of your unsecured debts. You will be required to make monthly “plan” payments to the Bankruptcy Trustee. The Bankruptcy Trustee then pays your unsecured creditors.  ANAND LAW can devise an economically feasible plan which will allow you to retain your property/properties and pay off unsecured debtors at an affordable rate.

FORECLOSURES AND CHAPTER 11 BANKRUPTCY

If you are facing foreclosure, filing for Chapter 11 bankruptcy may allow you to save your home. If you have over $1,184,200 in secured debt, you do not qualify for a Chapter 13 bankruptcy, and a Chapter 11 bankruptcy may be the only or best way to save your primary residence and any rental properties.  ANAND LAW can navigate the bankruptcy and real estate laws in order to allow you to halt foreclosure and make reasonable payments to continue living in your home.  We will evaluate your situation to determine whether Chapter 11 or another alternative, such as litigation, is best for you.

REMOVING AND ‘CRAMMING DOWN’ LIENS IN CHAPTER 11 BANKRUPTCY

In a Chapter 11 bankruptcy, you can remove fully unsecured liens from your rental properties.  You can also “cram down” liens that are partially unsecured from renal properties; in other words, if a mortgage balance is greater than the market value of a property, it can be reduced down to that market value.  You are able to remove and cram down:

  • Junior mortgages (including HELOC)

  • HOA liens

  • Tax liens

  • Judgment liens

CHAPTER 11 VS. CHAPTER 13

Whether to file for Chapter 11 or Chapter 13 primarily depends on the total amount of secured debt you have.  If you have under $1,184,200 in secured debt, you a Chapter 13 may be the better option for you, but may not be depending on the number of properties you have; the market value of each; and, the amounts of debt on each.  As with a Chapter 11, a Chapter 13 can be used to prevent foreclosure, retain property (including a rental or business property), and remove liens.  Anand Law can evaluate your situation and determine what is best for you. Click here for more information on Chapter 13 bankruptcy.

ANAND LAW HAS SUCCESSFULLY:

  • SAVED PRIMARY RESIDENCES FROM FORECLOSURE

  • SAVED RENTAL PROPERTIES FROM FORECLOSURE

  • REMOVED MORTGAGE AND HELOC (HOME EQUITY LINE OF CREDIT) LIENS

An Adversary Proceeding (“AP”) is a full federal lawsuit, that is connected to a bankruptcy case, and in other ways similar to a normal lawsuit with discovery, motions and trial.   A Motion may be brought to request certain relief, and in other instances an AP is required.  Rule 7001 Federal Rules of Bankruptcy Procedure (“FRBP”) lists several categories which require an AP and can’t be brought by motion, and then there are exceptions to these categories.  Anand Law handles APs on behalf of  both Plaintiffs and Defendants, including but not limited to, suits related to fraud/misrepresentation, violations of lending laws, wrongful foreclosure, breach of fiduciary duty, and willful and malicious injury. 
Rule 3007 of the Federal Rules of Bankruptcy Procedure (“FRBP”) requires an objection to be “filed and served at least 30 days before any scheduled hearing on the objection or any deadline for the claimant to request a hearing.” In addition to the FRBP, the Local Rules must also be complied with.  The Local Bankruptcy Rules (LBR) also require 30 days notice.  See LBR 3007-1(b).  Each Judge also has their own so-called “Local Local Rules,” and compliance with these is also required.

An objection may be filed as a Motion or an Adversary Proceeding (“AP”), but compliance with other rules is required, and in certain instances an AP is required.  One such instance is “a proceeding to determine the validity, priority, or extent of a lien or other interest in property” (see FRBP 7001(2)).  

‘Cramming down’ refers to reducing the amount of the lien to the market value (i.e. removing the portion of the lien that is unsecured).  Liens that may be crammed down include mortgage, HELOC (home equity line of credit), HOA (Homeowners’ Association), and judgment.

This depends on a variety of factors, including what your score currently is, what chapter you file for, and if you successfully complete your bankruptcy.  While filing for bankruptcy may lower a credit score, it will not necessarily do so. In fact, if you already have a low credit score, filing can actually increase your score, especially after successful completion of a Chapter 13 or Chapter 11 bankruptcy plan in which you pay off some of your debt. Chapter 7 bankruptcy can also, in certain instances, increase a low credit score, after successful discharge.  It is also important to know that you can always re-build your credit after bankruptcy, and ANAND LAW can guide you on how to do so.

In order to understand the unpredictability of how bankruptcy may affect your credit score, it is helpful to understand how credit scores are calculated.

CALCULATION OF YOUR CREDIT SCORE

Credit bureaus (also known as “credit reporting agencies”) act an intermediary between consumers, businesses and lenders.  The credit bureaus collect data from various sources, and then use this data to create your credit score.  The bureaus use third-party companies, each who employ their own methodology, to calculate these scores.

THE MAJOR CREDIT BUREAUS AND SCORING AGENCIES

There are dozens of credit reporting agencies, but the three national agencies that a majority of lenders and businesses use are Experian, Equifax, and Transunion.  Similarly, there are many credit scoring companies, but the two most common are FICO and VantageScore.  Experian Equifax and Transunion came together to create VantageScore, and all continue to use them to generate credit scores.

The credit scores are based on how the various data collected interacts with each other.  There are approximately 220 million consumers that credit reports have been created for, and approximately 36 billion pieces of credit data utilized in credit reports every year to create the credit scores (source: VantageScore).

The exact methodology used is complicated and uncertain, but factors include: payment history with lenders, banks, and credit card companies; amounts owed; length of delinquencies; length of accounts in good standing; and, types of credit being used.  Scores from each bureau may differ for a variety of reasons, including the timing of the data provided.

IMPROVING YOUR CREDIT SCORE

Regardless of the credit bureau (e.g., Experian, Equifax, or Transunion), or the scoring agency (e.g., FICO or VantageScore), you can improve your credit score, no matter how bad it is, and no matter the reason for it being low (whether due to bad payment history, repossessions, judgments, liens, foreclosure, or other).  In general, you can improve your credit score by using credit (e.g., through a credit card, line of credit, or loan), and paying bank all use of that credit on time.  The longer you consistently pay on time, and the higher the amount of credit being used, the better your credit score will be.  You can re-establish your credit even after repossessions, judgments, liens, or foreclosure by maintaining a pattern of using credit and repaying the lender timely.  There are lenders willing to extend credit to nearly anyone, regardless of their score, and even lenders that extend credit to individuals in active bankruptcy proceedings.  However, it is important to note that, in general, the lower your credit score, the more it will cost to obtain the credit (i.e., the higher interest rate you will receive)–this makes it even more critical that you pay on time.  The bottom line is that it is not hopeless–with some patience and organization to manage your finances, you can re-establish and build your credit score.

The fact that you have filed a bankruptcy will not prevent you from getting credit. While you should expect getting credit to be more difficult and expensive, there are actually many lenders that target people recently discharged from a bankruptcy since they have no other debt, are ready to establish their credit and they can’t file for bankruptcy any time soon.

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