Breaking Down Business Bankruptcy Chapter 13

When running a business or reviewing our personal finances, more often than not, we find ourselves lacking funds for something. If it’s something luxurious, most of us simply won’t get it unless it’s absolutely necessary. After all, bad credit loans are something all of us try to avoid. Still, when we need something for our company to grow, we’ll try to get a loan. The more money we need, the bigger the loan’s drawbacks. So what happens if we can’t pay those loans back? Bills and debts start piling up, and you don’t know which way is up anymore. If you’ve drained every option and even bad credit loans are no longer an option, it might be time to declare bankruptcy. Is that the right choice for you, and how will you get back on your feet afterward? Well, the US government came up with a few solutions, one of them being Chapter 11. But what is Chapter 11 bankruptcy? Chapter 11 ​​Bankruptcy Explained By definition, Chapter 11 bankruptcy involves reorganizing a debtor’s assets, debts, and business affairs, which is why it’s also known as "reorganization" bankruptcy. Although it’s available to individuals and businesses alike, it’s mostly used by companies. Commonly, the debtor is allowed to keep their possessions, is viewed as a trustee, may continue to run their business, and (with court approval) borrow money again. When a reorganization plan is developed and proposed, creditors vote on it; if it passes and fulfills specific legal prerequisites, it is approved by the court. The purpose of the Chapter 11 bill was to help businesses regroup and set up a strategy for the future. This plan may contain modifying payment due dates and interests and can even remove a debt entirely. How Does Chapter 11 Work? All bankruptcy chapters, including Chapter 11, halt the collection process. Once filed, the "automatic stay" forbids most creditors from hunting you, giving you enough room to breathe and figure out your next move. This temporarily stops: Payment demands Removal or any kind of foreclosure Collections trials Till taps, property confiscation, bank levies Unlike other chapters, Chapter 11 allows the debtor to act as the trustee, meaning that they can continue everyday business functions as a "debtor in possession" while Chapter 11 restructuring takes place. However, the business can not make all decisions without court permission. Restricted decisions include sales of any assets other than inventory, creating or closing a rental agreement, taking out new loans, and controlling business operations. The court also controls payment decisions and contracts related to attorneys, vendors, and unions. Ultimately, the debtor cannot take out a loan that will begin after the bankruptcy is complete. Is Chapter 11 the Best Bankruptcy Option for You? There are nine chapters in Title 11 of the US Code, each focusing on different bankruptcy strategies. Chapters 1, 3, and 5 explain the legalities of bankruptcy for all parties involved, including the debtor, creditor, and court.  The other chapters explain who can file for bankruptcy and how to do so according to who they are or whom they represent: Chapter 12 is for family farmers or family fishers with regular income.  Chapter 15 is used in international cases. Chapter 13 is for individuals with stable income and has certain debt restrictions. Chapter 7 is the liquidation bankruptcy chapter for people who cannot create a reorganization plan and provides them with information on liquidating their remaining assets. How to File for Chapter 11 Bankruptcy Now that Chapter 11 bankruptcy has been explained, let’s go over the procedural part. It begins by filing a petition at the debtor’s residential area or incorporation location’s federal bankruptcy court. It may be a voluntary petition, filed by the debtor, or an involuntary one, filed by creditors that meet specific requirements. Then, the creditors vote if the plan within the petition is acceptable. Since the next option is usually filing for a Chapter 7 bankruptcy, meaning liquidation, creditors are typically cooperative. However, if a creditor objects to the plan, the court will get the input from creditors and other interested parties, before deciding on the best course of action. The determining factors include: Success probability Good faith The creditors’ best interest If it is fair and equitable So how long does Chapter 11 take? Well, there are technically no limitations. Some cases take only a few months, but it often takes six months to two years for a case to close.

When faced with debts that you cannot pay, it may seem like there is no way out. However, a bankruptcy discharge could release you from personal liability. Before taking any steps, it’s important to know what bankruptcy discharge means and how you can file for an order of discharge in your personal situation. Given that the average American has over $21,000 in debt from personal loans and credit cards alone, discharged bankruptcy is a relevant topic for many people across the country. Here’s all you need to know about discharged bankruptcies. The Bankruptcy Discharge Definition When it comes to the bankruptcy discharge meaning, LawInsider.com defines it as “a court order that ends bankruptcy proceedings as old debt and hence releases the debtor from the responsibility of repaying certain types of debt.” In essence, a discharged bankruptcy will free you from any obligation to repay the debts covered by the order of discharge. This also means that creditors can no longer take action against you in relation to those debts. Those actions include debt collection, attempts at legal action, and communication with you via letters or telephone calls. A discharged bankruptcy may occur when you file a Chapter 7, 11, 12, or 13 bankruptcy. Before filing for a discharge order, though, it’s important to recognize the downsides of bankruptcy while also researching which debts can or cannot be discharged.  How Can You Get a Discharge of Bankruptcy Order? Under most circumstances, debtors are automatically given a discharge during their bankruptcy case unless creditors object. So, by informing your attorney to file for bankruptcy, an order discharging debtor liability will be included as a part of the legal proceedings.  Assuming no litigation involving objections is posted, the Federal Rules of Bankruptcy Procedure will ensure that copies of the order of discharge are provided to the debtor (you), the debtor’s attorney, the US trustee, the case trustee, the trustee’s attorney, and all creditors. The notice of bankruptcy discharge proof also informs creditors that your financial liability has been dropped and advises them not to pursue any further action. The length of time that it takes to acquire a discharged bankruptcy order depends on the bankruptcy chapter filed. Generally speaking, the timeframes are as follows: Chapter 7 (for liquidation): Courts grant discharges following the expiration of a creditor’s complaint objection period, which is usually between 60 and 90 days after your 341 meeting. This generally happens four months after you, the debtor, files a petition at the bankruptcy court. Chapter 11(for an individual chapter 11 bankruptcy): The courts grant an order of discharge once you have completed all payments under the bankruptcy agreement. Chapter 12 (for an adjustment of debts of a family farmer or fisherman): The courts will also grant the discharge after payments have been completed. Due to the nature of this bankruptcy hearing, it usually takes between three to five years to secure the discharge after the filing date. Chapter 13 (for an adjustment of debts for an individual with regular income): The order may be granted by the courts as soon as the agreed payments are finalized. Again, it often takes three to five years after the date of filing.  It should also be noted that you may be required by the Bankruptcy Code to complete an instructional financial management course. However, there are exceptions to this ruling, including a lack of adequate local educational programs or if the debtor is living with a disability. Understanding the Inclusions of Discharged Bankruptcy Orders When trying to work out how a bankruptcy discharge is relevant to your personal financial situation, you’ll naturally want to know what types of debt can be discharged. After all, bankruptcy discharge orders don’t cover everything. Section 523(a) of the Bankruptcy Code details a number of exceptions under each chapter of bankruptcy.  When filing a Chapter 7, 11, or 12, there are 19 categories of nondischargeable debts, while the list is a little smaller for Chapter 13. Below are a few examples: Certain tax claims  Child support payments  Spousal or alimony payments  Government penalties Guaranteed educational loans Cooperative housing fees While secured debts cannot be included, a valid lien or sale of the secured asset can be used to repay the debts, with the shortfall (remaining balance) subsequently being included in the order of discharge. It should also be noted that obligations affected by fraud or maliciousness won’t automatically be exempted from a discharge. It will be up to creditors to post an objection to these. If they do not, they will be included in the order discharging debtor responsibilities. Before filing for bankruptcy, it’s important to do your homework or speak to an attorney/financial advisor about the debts that can be discharged and the ones you would be liable to pay. Bankruptcy Closed vs. Discharged A bankruptcy discharge order doesn’t necessarily translate into a case closed. In a simple Chapter 7 bankruptcy without assets being lost, the closure should occur a few days after your discharge. When assets are being lost, any relevant litigation must be finalized before closure can occur. In cases where a repayment plan is needed, the closure won’t happen until after the trustee has confirmed the final report for payment distributions. Generally speaking, it is only the Chapter 7 bankruptcy cases involving difficult assets that are kept open for long periods. Although rare, it is also possible for debtors, creditors, or trustees to reopen the bankruptcy case if a debt hasn’t been listed or if false information has been provided. What Else You Need to Know About Bankruptcy Discharging Before thinking about bankruptcy, you must consider the impact it will have on your financial future. For starters, you will still be required to pay secured debts, while the impact on your credit score will last for up to eight years.  Many people who file a bankruptcy worry about what it means for their career, but the good news is that employers are prohibited from discriminatory treatment of debtors based on their bankruptcy status. This covers both public and private businesses. Furthermore, bankruptcy courts may permit those who file for bankruptcy to run businesses even before the discharge. That’s why it’s important to stay up to date on the best business banking options. A second discharge in a Chapter 7 case will be rejected if you have already received a discharge within the last eight years for a Chapter 7 or 11. This duration is reduced to six years for Chapter 12 and 13 cases. This is unless all unsecured debts from the previous discharge have been cleared. Finally, you will be advised to keep hold of your bankruptcy discharge proof letter in case creditors attempt to take action against you after the confirmation. Should this happen, you will be in a position to file a motion with the court. Should you lose your copy of the discharge order, it is possible to request another from the clerk at the bankruptcy court for a fee. Electronic documents may also be available via the clerk’s PACER system. Conclusion By now, you should have a solid understanding of the bankruptcy discharge meaning in law and how it can impact your future following any proposed bankruptcy. Under the right circumstances, it can be an attractive option that removes some of your financial burdens while also putting an end to annoying calls and debt collection actions.

Just as we often resort to financial institutions such as banks to ask for a loan when we can't afford expensive purchases, businesses can also do it when they lack the capital to fund their operations. However, instead of going to a bank to ask for a loan, most business owners opt for signing a bond with investors, not only because it allows them to borrow larger sums of money but also because bonds have longer maturities.  At this point, you may be saying, “Hold on, what are bonds and how do they work?” Well, this article is all about bonds, so keep reading to find out. What Are Bonds? Simply put, a bond is a source of funding that companies obtain through the public through investment banking. Even though bonds are similar to loans since they both involve money borrowing and interest rates, one significant difference sets them apart.  Unlike loans, which come from financial institutions and have short repayment periods, investment bonds come from individual investors or even other, larger corporations and have longer maturities. But in essence, yes, bonds are a type of loan. When you issue bonds, you're committing to repaying the entire amount and paying periodic interest payments to the bond issuer. The payment of interest depends on the arrangement between the two parties, but they are often made twice a year, and the rate is lower than compared to an actual loan from a financial institution. Understanding Bonds - How Do They Actually Work? When companies or other entities like governments need to raise money to fund their operations or maintain ongoing ones, finance new projects, or simply pay existing debts that are about to mature, they may issue bonds directly to investors. After the decision to issue a bond has been made, business owners present their case to investors, who decide if investing is a good idea after analyzing the company’s financial situation. If investors believe you're in a good position to pay the money back in the stipulated time lapse, they will purchase the bond and become bondholders. Keep in mind that, after being issued, investment bonds can be sold by the initial bondholder to other investors. That means a bond investor is under no obligation to hold a bond all the way through its maturity date and can sell it on the secondary market whenever they want if they decide to do so.  Bondholders may decide to 'resell' bonds if they believe they could increase in value and get gains on the sale. However, just as bonds could increase, they could also decrease in value from the original purchase, resulting in a loss of money for the investor. If you have a good credit score, chances are that you will find an investor interested in buying your bond quite easily. Unlike other recognized investment opportunities like buying stocks, bonds provide investors with a predictable income stream that allows them to preserve capital while investing, which is why they are so popular among risk-averse investors.  Characteristics of Bonds You need to be familiar with certain concepts when dealing with bonds. Here are some of the key elements that you will find in every type of bond: Face Value. Also known as the par value, it refers to the amount of money the bondholder will receive at the bond's maturity date; however, the par value isn’t actually the price of the bond, which is what most people struggle to understand at first.  Depending on a w number of variables, the price of investment bonds can change over time before reaching maturity. When that happens, the bond’s price stops being the same as the face value. When a bond trades at a price higher than its face value (for whatever reason), it is said to be selling at a premium, and when it sells for lower than the face value, we say that it’s trading at a discount. Maturity date. This is the term used to refer to the deadline for the bond issuer to pay the face value of the bond to its holder. Coupon rate. Always expressed as a percentage, it refers to the nominal interest rate a bond issuer agrees to pay to the bondholder each year until the bond matures. That means that if an investor agrees to a bond with a coupon rate of 6% and a face value of $1,000, they'll receive an annual interest of $60 during that period. Coupon dates. The established dates on which the bond issuer will make interest payments to the bondholder. Although there's no rule for setting coupon dates, most bond terms usually include two for every year before the bond matures. Now that you know the most important bond characteristics, we can talk about bond categories, so you’ll better understand the pros and cons of each type of bond. Types of Bonds There are four main categories of bonds: treasury bonds, government bonds, municipal bonds, and corporate bonds. Let's learn more about them. Treasury Bonds These are bonds issued by the US Department of the Treasury on behalf of the federal government. With this type of bond, you must pay federal income tax on interest, but the interest is generally free from state tax. Most investors see these as the safest bond investment possible, mainly because they are backed by the US government, so the chances of not getting your money back are practically nonexistent. Government Bonds The Federal Government issues this type of bond to raise money to support its expenditures. Just like treasury bonds, one of the characteristics of bonds issued by the government is that they are considered zero-risk investments; however, most are taxable at the federal and state levels. Municipal Bonds Also known as munis, these are bonds issued by states, cities, and municipalities. Although they are not as safe as the two types of bonds mentioned earlier, municipal bonds bring tax benefits to bondholders, such as not having to pay federal taxes on the interest. Corporate Bonds These bonds are issued by both private and public companies. This type of bond can be either high-yield (higher interest rate & risk) or investment-grade (lower interest rates because the risk is lower). The interest you earn on corporate bonds is always taxable. Final Thoughts In conclusion, bonds are a type of security sold by corporations and government agencies to gather money from investors to fund their activities. They are similar to loans in that one entity effectively lends the funds to another, but the differences are in where that money comes from and how long it takes issuers to pay it back. There are several different types of bonds that represent different opportunities for investors. Some are safer investments with lower interest rates, while others are riskier but with a much better interest rate and a higher possibility of getting significant gains out of them. Lastly, you can always hire an investment firm or a business loan broker to ensure you get the best value out of your business investment.