Business Bankruptcy

Filing Bankruptcy

Alabama Attorneys filing bankruptcy petitions in Houston, Dale, Geneva, Barbour, Pike, and surrounding counties

In order to begin the bankruptcy process and obtain relief from creditors, the first step is to file a bankruptcy petition in court. At the moment of the filing, the bankruptcy estate is created and the automatic stay on collection actions takes effect. An individual may not file for bankruptcy under any chapter if a prior bankruptcy petition was dismissed during the preceding 180 days due to the debtor’s willful failure to comply with orders of the court or appear before the court. Also before filing a debtor must have received credit counseling from an approved agency within this 180-day window. Thus, it is important that a debtor be aware of the rules and take the required steps before filing to ensure the bankruptcy filing effectively gives the debtor the protection and relief sought. After the filing, the “estate” is created, comprised of all legal or equitable property  interests of the debtor. Also, the automatic stay prevents the IRS, the credit card companies, the banks, or any other creditors from attempting to collect any further debt from the debtor. The debtor may not transfer property that has been made part of the estate – thus, it is important the debtor take advantages of any applicable exceptions or exemptions to the bankruptcy estate. Additionally, certain pre-filing transfers of property, as well as the granting of security interests or liens, may be invalidated or delayed. The bankruptcy offers immediate temporary relief from creditors, as well as long-term relief or permanent relief through extended debt repayment plans under Chapter 13 or total discharge or debts under Chapter 7 liquidation. However, there are certain types of debts which are “non-dischargeable,” meaning debt that the bankruptcy cannot get rid of, including most tax debts and student loans, as well as child support obligations.

There are three different bankruptcy courts in Alabama; the Northern District, with locations in Birmingham, Tuscaloosa, Anniston, and Decatur; the Middle District, with locations in Dothan, Opelika, and Montgomery; and the Southern District, with locations in Mobile and Selma. The court websites contain information on court rules, locations, and filing procedures. The first step is to determine whether you should file for bankruptcy, or consider other debt relief options. Next, the means test is used to determine which type of bankruptcy an individual debtor should file for, by taking into account the debtor’s income and the amount and nature of debts. The debtor must prepare a schedule of assets and liabilities, as well as attend the mandatory credit counseling session. Finally, the debtor will file in the court that services his or her area.

Bankruptcy is largely an administrative process, and the debtor will not often go to the courtroom and see the bankruptcy judge. The one time a debtor will have to travel to the courthouse is for the “341 meeting” with the bankruptcy court trustee, which is held 20-40 days after filing a Chapter 7 petition. The trustee acts on behalf of unsecured creditors, by ensuring that the bankruptcy estate includes all debtor property that cannot be exempted or excepted.  Prior to the 341 meeting, the trustee reviews the debtor’s filing papers and financial information. During the meeting, the trustee will ask questions about information in the bankruptcy paperwork, in an effort to determine whether the debtor has any nonexempt property he or she can sell, or if the debtor has made any payments to creditors or transferred any money or property before bankruptcy that he or she can get back.

Businesses have two types of bankruptcies available: Chapter 7 and Chapter 11. In a Chapter 7 case, rather than a discharge, the business entity will be dissolved. The business ceases operations until continued by a Chapter 7 Trustee. A Chapter 7 Trustee is immediately appointed, and evaluates the business’s financial situation, with an eye toward assets that can be sold off to pay creditors.

Under a Chapter 11 bankruptcy, the debtor retains control of its day to day operations while working with the creditors and the Bankruptcy Court to negotiate a reorganization plan. Once all of the creditors are able to agree on the plan and the judge gives approval, the repayment plan becomes binding and the business must abide by its terms while operating and paying its debts.

If you are an individual or a business that is considering filing for bankruptcy, you need an expert bankruptcy lawyer you can trust. Let the Dothan Bankruptcy Attorneys at Parkman White, LLP answer all your Bankruptcy filing questions and guide you through the process.  Give us a call today at 334-792-1900, or email us for a consultation.