Jump to Navigation

Cleveland TN Bankruptcy Law Blog

Understanding the role of creditors in a business bankruptcy

A previous post here discussed business and commercial bankruptcy filings. One important aspect of the Chapter 11 business and commercial bankruptcy process is working with creditors and the meeting of the creditors. Once a petition for bankruptcy has been filed, a temporary stay goes into effect which prevents creditors from pursuing any collection actions. This period of time allows for the reorganization plan to be developed and contracts and leases with creditors can be renegotiated.

Creditors usually have an incentive to work with the filing party because if the filing party were to file for Chapter 7 liquidation business bankruptcy the creditors usually would not fare better than under a Chapter 11 business bankruptcy. Creditors are placed in different classes related to the handling of their claims. First priority is given to state and federal taxes owed, employees who are owed money and stockholders. Each is placed in their own class, as is true of each secured creditor. Unsecured creditors are all placed in one class. The reorganization plan may modify the amounts owed and repayment terms related to these creditors.

Commercial bankruptcy filings increase

It was recently reported that commercial bankruptcy filings have increased year-over-year, however, total bankruptcy filings declined for the first 9 months of the year and during September alone. The number of commercial bankruptcy filings for the first 9 months of this year increased 28 percent over filings for the first 9 months of 2015. In total, there were 28,789 commercial bankruptcy filings for the first 9 months of this year and 22,444 for the first 9 months of 2015.

Filings for Chapter 11 commercial bankruptcy increased 5 percent during the first 9 months of 2016 totaling 4,311 filings compared to 4,091 during the first 9 months of 2015. Business bankruptcy filings overall increased 38 percent from 3,072 in September of 2016 compared to 2,219 in September of 2015. Chapter 11 bankruptcy filings increased 8 percent from 337 in September of 2015 to 364 in September of 2016. Leading states with the highest per capita bankruptcy rate for the first 9 months of 2016 include Tennessee with a rate of 5.67 when considering total filings per 1,000 population.

What are bankruptcy exemptions?

Filing for bankruptcy can be a fearful time, but it does not necessarily have to be. Individuals filing for bankruptcy relief may have concerns about their home, cars and personal property but it is important to understand that the bankruptcy process provides important protections for filers seeking debt relief. Chapter 7 bankruptcy is considered an asset liquidation bankruptcy that allows the filing party to liquidate assets to repay their debts. However, some assets are exempt from the process.

Chapter 7 bankruptcy provides a fresh financial start for filing parties through the ability to liquidate non-exempt assets to repay debts and any remaining debts are then discharged through the bankruptcy process. Certain categories, and types, of property, however, may be exempted from the liquidation process. There are both state and federal exemptions and it is important to be familiar with the exemptions in your state and the exemptions that can help you protect the assets you are seeking to protect.

Personal bankruptcy options may help avoid foreclosure

When faced with losing a family home, it is important to be familiar with options that can help. Personal bankruptcy is one option that may allow homeowners facing foreclosure to avoid losing their homes and enjoy debt relief. Many people make a diligent effort to pay their bills, yet still fall behind and find themselves facing the stress of past-due bills and overwhelming debt. There are different options that may help with foreclosure, and personal bankruptcy is one to consider.

Chapter 13 bankruptcy may help a struggling homeowner, with a reliable source of income, reorganize his or her debt and avoid foreclosure, however, it is important to act as soon as possible. Filing for bankruptcy causes an automatic stay to go into effect which will halt creditor collection actions against the filing party. At that point, the filing party may be able to bring past due home loan payments current over time. Overall, Chapter 13 bankruptcy provides the filing party with the opportunity to reorganize his or her debt into a manageable repayment plan and possibly avoid foreclosure.

A closer look at Chapter 13 bankruptcy

Struggling with debt can be overwhelming. Chapter 13 bankruptcy is one option that is available to provide relief from the stress associated with overwhelming debt. Chapter 13 bankruptcy is considered a 'reorganization bankruptcy' that allows the filing party to reorganize his or her debt to repay it according to a more manageable repayment plan. The debts will be repaid over a period of time, typically three to five years depending on certain circumstances, rather than selling property to repay debts, which is commonly associated with a Chapter 7 bankruptcy.

Because Chapter 13 bankruptcy provides for the repayment of debts according to a schedule determined in the repayment plan, the filing party must have a regular and reliable income that is able to repay the debts in order to apply for Chapter 13 bankruptcy. In addition, certain debt limits are in place, and are important to be familiar with, when filing for Chapter 13 bankruptcy. As part of the process, the filing party must attend credit counseling and pay a fee to apply.

Tennessee-based restaurant chain files for Chapter 11 bankruptcy

Business bankruptcy provides an option to help struggling businesses through a difficult time. Tennessee steakhouse chain Logan's Roadhouse recently filed for Chapter 11 bankruptcy protection. The restaurant chain plans to restructure and close restaurants that are performing poorly. The restaurant chain has experienced years of declining sales, and has seen a reduction in customer traffic. The bankruptcy filing is said to be representative of a trend in the restaurant industry away from traditional dining. Several restaurant chains have filed for bankruptcy, faced closures, have rebranded or experienced other challenges.

The company saw a 10 percent decline in revenue towards the end of 2015 down to $131.3 million. The company's bankruptcy filing noted an additional 4 percent drop in the first half of 2016 and an 8.8 percent drop in customer traffic during that same time period. As part of the restructuring, the restaurant chain plans to enhance the experience of its customers in the restaurants that will remain open, with the expectation that consumers are seeking less expensive and quicker dining alternatives.

Different options are available when struggling with medical debt

Education for struggling consumers regarding medical debt and bankruptcy can be helpful across the country. Medical bills are a leading reason consumers file for bankruptcy. In fact, more than half of all personal bankruptcies are due to medical debt. When medical expenses are a significant portion of overall expenses, it is important that struggling consumers are familiar with the different options available to them, including bankruptcy options.

Medical debt can be a significant concern, and struggle, for the majority of Americans in some communities. The Consumer Financial Protection Bureau reports that 20 percent of Americans will be turned over to medical collections during the current year. In some states, for example, one community resource center for struggling consumers might report 7 in 10 consumers who come to them seeking assistance have medical debt of some nature. It seems to be problem regardless of the whether the individuals are insured or not One representative reported, in fact, that the majority of consumers they help who are struggling with medical debt have insurance.

What should I expect when filing for Chapter 11 bankruptcy?

If you have considered different bankruptcy options for your business, and may be considering Chapter 11 reorganization bankruptcy, you may wonder what to expect from the process. The initial process is similar to any bankruptcy; once the filing party has filed for bankruptcy, an automatic stay is put in place to prevent any further creditor collection actions while the bankruptcy process progresses.

In particular, a Chapter 11 bankruptcy is a business bankruptcy option that allows the business to reorganize its debts and continue to operate, unlike a Chapter 7 liquidation process. As a consequence, of course, the processes are different. The Chapter 11 option allows the business to continue to operate during the bankruptcy process while developing a reorganization plan for debts. Approximately 20 to 40 days following the filing of the bankruptcy petition and submission of required schedules, the first creditor meeting is held. Questions will be asked concerning the company's assets and liabilities and income and expenses.

Tennessee has the highest number of personal bankruptcies

While Tennessee's economy is healthy, a recent report revealed that it also leads the nation in personal bankruptcy filings. From the beginning of April 2015 to the end of March 2016, Tennessee had the highest rate of personal bankruptcies in the United States at a rate of rate of 553 filings per 100,000 residents. The median for the same time period in the U.S. was 224 filings per 100,000 people.

Personal bankruptcy rates depend on several factors, including median income and consumer protection laws in the state. States with fewer consumer protections tend to see more bankruptcy filings, including filings to protect household goods and wages. Fortunately, there are several bankruptcy options that can help struggling consumers enjoy a fresh financial start and future.

Tennessee-based restaurant chain files for Chapter 11 bankruptcy

Business bankruptcy is available to provide helpful options for companies seeking to return to a successful history. A Tennessee-based restaurant recently announced it was filing for bankruptcy and closing 18 of its 25 restaurants in Tennessee. The plan to close underperforming restaurants is part of an overall plan to improve the financial performance of the restaurant chain. The company filed for Chapter 11 reorganization bankruptcy. The parent company for the restaurant chain has secured $25 million in bankruptcy financing for the restructuring plan.

The restaurant chain had a difficult first half of 2016. Foot traffic for the chain fell by nearly 9 percent and sales fell by 4 percent. As of last October, the restaurant chain had $525.4 million in liabilities and $12.9 million in cash. The bankruptcy filing provides that the restaurant chain has 25,000 creditors, $416 million in debts and an estimated $100 million to $500 million in assets. The restaurant chain also operates restaurants in other states.

What's Your Situation:

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Subscribe to This Blog's Feed Visit Our Bankruptcy Website

Our Office Location:

Richard Banks & Associates

393 Broad Street, N.W.
Cleveland, TN 37364-1515
Map & Directions

Phone: (423) 244-0009
Toll Free: (866) 596-8527
Fax: (423) 478-1175

FindLaw Network

Privacy Policy | Business Development Solutions by FindLaw, a Thomson Reuters business.