Bankruptcy Attorney Middletown, CT

If you find yourself facing bankruptcy, consulting with a bankruptcy attorney is typically your best course of action. It’s worth noting that bankruptcy filings are more common than many realize. Similar to numerous daunting and unpleasant procedures, bankruptcy’s reputation is often built upon a blend of partial truths and prevalent misconceptions. This can render the filing process quite intimidating, prompting many individuals to go to great lengths to avoid it. The reality, however, is that bankruptcy becomes far less intimidating once you gain a comprehensive understanding of it.

How Do I Know Which Kind of Bankruptcy to File For? 

When you decide to file for bankruptcy, you may be wondering if you are able to choose the type of bankruptcy you file for. For the most part, you will file for either Chapter 7 or Chapter 13. 

Chapter 7 Bankruptcy. Chapter 7 bankruptcy offers a path to a fresh financial start by eliminating many of your debts, allowing you to pay off creditors without the burden of long-term repayment plans. With this option, you are required to liquidate non-exempt assets, which means you could lose valuable property. However, the process is relatively fast, usually taking just a few months, and provides a way to move past overwhelming financial obligations. If your goal is to quickly discharge debts and you’re prepared for the potential asset loss, Chapter 7 may be the right solution.

Chapter 13 Bankruptcy. Chapter 13 bankruptcy allows you to reorganize your debts and create a manageable repayment plan, usually spanning three to five years. This option can be helpful if you want to keep your property, while catching up on missed payments. Instead of liquidating assets, you’ll pay off your debts over time based on your income. While it takes longer than Chapter 7, it can offer the benefit of protecting your assets and providing a more structured way to resolve financial issues. If you’re seeking a more gradual debt repayment plan, Chapter 13 might be the best choice.

Don’t worry about choosing. When you work with one of our expert bankruptcy attorneys in Middletown, CT, they will examine your finances closely, look at your debts, and look at your assets. They will determine which bankruptcy you are qualified for and help you create a plan. 

What if I Am a Small Business Owner?

Chapter 11 Bankruptcy. If you are a small business owner who is facing financial difficulties, you may be thinking about filing for bankruptcy. In this situation, a bankruptcy attorney in Middletown, CT may recommend filing for Chapter 11 bankruptcy. Chapter 11 bankruptcy is a specific chapter of the United States Bankruptcy Code that primarily deals with reorganizing businesses, including corporations, partnerships, and sole proprietorships. It is often referred to as “business bankruptcy” or “reorganization bankruptcy.” Chapter 11 allows financially troubled businesses to sustain their operations while formulating a strategy to settle debts and confront financial challenges.

The central feature of Chapter 11 is the composing of a restructuring or reorganization plan. This plan outlines how the business will restructure its operations and finances to become profitable again. It often involves renegotiating contracts, reducing debt, and potentially selling assets. Of course, this is one of the most critical, and most challenging, steps of the Chapter 11 bankruptcy process. The restructuring plan must clearly articulate how creditors will be treated and how rights will be altered. Further, it must fully conform to all aspects of Connecticut bankruptcy law.

For the Chapter 11 restructuring plan to become effective, it must receive approval from the bankruptcy court, usually through voluntary consent from every class of creditors. Creditors of the company are granted the opportunity to cast their votes on the plan. If the plan is rejected by the creditors, it often necessitates modifications. However, there are specific instances, as elucidated by a knowledgeable Middletown bankruptcy attorney, where a bankruptcy court might sanction a plan despite creditor objections. Hence, the presence of a proficient and seasoned bankruptcy attorney representing you and your company becomes paramount.

Failure to Adhere to Chapter 11 Reorganization Plan

An approved reorganization plan becomes a binding contract. Companies exiting Chapter 11 will be legally held to the terms of their reorganization plan. If a company fails to follow through with the plan, further legal action can be taken against it. Such action can include:

Dismissal of the Case

The court has the authority to terminate the Chapter 11 case. Consequently, the debtor forfeits the safeguards provided by bankruptcy and once more becomes susceptible to creditor legal actions.

Conversion to Chapter 7

The court may convert the Chapter 11 case into a Chapter 7 liquidation bankruptcy if it becomes evident that the debtor is not complying with the plan.

Appointment of a Trustee

If the court believes that the debtor’s management is not acting in the best interests of creditors or is not complying with the plan, it may appoint a trustee to oversee the case and ensure compliance with the plan.

Creditor Actions

Creditors may seek to have the bankruptcy case dismissed or converted to Chapter 7. Additionally, they can ask the court to enforce the plan’s terms or challenge the plan’s confirmation if they believe it was not properly approved.

Sanctions

The court holds the power to levy sanctions or penalties on the debtor or its leadership, which may include fines, limitations, or even charges of contempt of court.

Loss of Discharge

In some cases, failure to adhere to the reorganization plan can result in the debtor being denied a discharge of debts, meaning they will remain personally responsible for the debts even after bankruptcy.

Common Bankruptcy Myths 

Married Couples Have to File Together 

It’s not uncommon for one spouse to bear a substantial amount of debt solely in their name. In such situations, it is often advisable for that spouse to pursue bankruptcy individually. However, when the debt is jointly held, both spouses should consider filing together. When both individuals share liability for the debt and only one files for bankruptcy, creditors retain the right to demand full repayment from the non-filing spouse.

Bankruptcy Permanently Kills Your Credit 

While bankruptcy typically remains on your credit report for 7 to 10 years, it doesn’t permanently ruin your credit. In fact, within 6 to 8 months, you can begin to see improvements in your credit score if you consistently make payments and use any credit cards responsibly, avoiding overuse or misuse.

You Can Spend Recklessly Right Before Filing 

Some people mistakenly believe they can engage in a spending spree before filing for Chapter 7 bankruptcy, expecting all the debt to be erased. This is a misconception that can lead to trouble. Courts have ruled that accumulating charges right before bankruptcy constitutes fraud, and debt incurred this way is not eligible for discharge.

Bankruptcy Filers Are Financially Irresponsible

It can be tempting to waive all bankruptcy filers as reckless spenders who don’t know how to manage their own finances. The truth is this is often not the case. The three major causes the bankruptcy or divorce, severe illness, and job loss. Many avoid filing for bankruptcy as they fear is the admission of failure or character flaws. It simply isn’t the case and just because you need to file doesn’t mean you failed.

Bankruptcy Erases All Debts

Another common myth is that bankruptcy wipes out every debt you owe. While bankruptcy can discharge many unsecured debts like credit cards and medical bills, certain obligations remain. Debts like student loans, child support, alimony, and some taxes typically cannot be discharged. It’s important to understand which debts will remain. One of our Middletown, CT, bankruptcy attorneys can explain which debts remain.

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