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Cleveland TN Bankruptcy Law Blog

What are the differences between Chapter 7 and Chapter 13?

Residents of eastern Tennessee who are considering filing a bankruptcy petition have two basic options: Chapter 7 or Chapter 13. The differences between the two chapters are significant and should be understood by anyone who is close to making a final decision about whether and how to file for personal bankruptcy.

The essential difference between the two chapters is the difference in outcomes. Filers under Chapter 7 are usually looking to have all unpaid debts discharged, that is, unsecured debts such as credit card balances, bank loans and medical bills will be declared beyond the reach of creditors. Under Chapter 13, the debtor must submit a plan to the court showing how existing assets will be liquidated to pay current debts and how the unpaid portion of those claims will be paid off over time. Chapter 13 does not usually result in the discharge of a significant number of debts.

Tennessee-based health system seeks bankruptcy protection

Business mergers and acquisitions are often profitable if the merged entities have sufficient revenue to pay the expenses of the merger and handle any debt that was used to finance the merger. In 2016, Tennessee-based Curae Health bought three Mississippi hospitals from Franklin, a Tennessee.-based Community Health System. Now, Curae and its three hospitals are seeking bankruptcy protection because the merger failed to meet the financial projections that were used to justify the acquisition.

The president of the merged firm explained how pre-merger projections made the transaction seem prosperous. The projected EBITDA or earnings before interest, taxes, depreciation and amortization, appeared sufficient to pay the purchase price and retire corresponding debt. Curae executives also thought that its operating model would save the merged firm from 1-3 percent annually in operating expenses.

Senior citizens turning to bankruptcy in growing numbers

Unfortunately, financial troubles can happen. When a person finds themselves in this situation, no matter their age, it is important to consider what options they have to deal with their growing debt and whether they can obtain a fresh financial start.

A recent study is highlighting the growing number of senior citizens who are filing bankruptcy petitions. The Consumer Bankruptcy Project in New York City says that bankruptcies filed by older people are increasing at an "alarming" rate. While the number of bankruptcies in Tennessee has actually fallen in recent years, the state as a whole is regularly ranked in the top five states for the total number of people filing bankruptcy petitions.

Personal bankruptcy help with foreclosures

The mere idea of losing a family home to foreclosure can be overwhelming. There are certain personal bankruptcy options that can help that struggling homeowners and consumers should be aware of and understand.

The foreclosure process can sneak up on struggling homeowners at first and then may grow into a concern they do not know how to face. When facing the threat of losing their home, struggling homeowners should know what to do and be familiar with the options available to help them. Foreclosure defense options may be available through home loan modification or the Chapter 13 bankruptcy process, as one example, which may allow the struggling homeowner time to get caught up on payments and keep their home.

Bankruptcy help for businesses to get back on their feet

When a business is financially struggling, it is important for business owners to be aware that there are bankruptcy options that may allow them to address their debt-related concerns and remain in business. Chapter 11 bankruptcy provides an option to allow the business to continue to operate while restructuring its debt so it can meet its goal of returning to profitability.

Business bankruptcy options are available to both small businesses and larger corporations. Once the business has filed for Chapter 11 bankruptcy protection, an automatic stay goes into effect which prevents creditors from pursuing collection actions during the bankruptcy process and can provide some initial relief to a struggling business. Following the initial filing, the company will work out a reorganization plan with the bankruptcy court to repay their debts with the goal of developing a plan that allows them to remain in business.

Company's restructuring leads to restaurant closing

Chapter 11 bankruptcy protection provides businesses with an opportunity to stop, restructure and repair problems that are threatening the company's financial health. It can mean the difference between saving the company and having to shutter the doors.

That doesn't mean it's easy, however. The story of a Tennessee restaurant helps illustrate one of the painful aspects of Chapter 11.

What is a deed in lieu of foreclosure and what are its benefits?

Residents of southeastern Tennessee who face financial difficulty are worried about losing their homes. In some cases, unfortunately, the loss in a foreclosure proceeding is inevitable. If a lender completes a foreclosure proceeding and takes possession, the borrower's credit rating will be severely damaged. And, if the property does not provide enough cash to pay the balance on the loan, the borrower may be hit with a deficiency judgment. That is a court finding that the borrower owes whatever amount is required to pay the loan in full. If foreclosure appears to be inevitable, a borrower may consider a deed in lieu of foreclosure.

A deed in lieu of foreclosure is roughly analogous to a voluntary foreclosure. In its simplest form, a deed in lieu of foreclosure is a voluntary transfer of title to the lender, instead of a complete foreclosure proceeding. The principal advantage to both parties of a deed in lieu of foreclosure is avoiding both the delay and cost of a foreclosure proceeding. Moreover, if a bankruptcy proceeding has commenced, a deed in lieu of foreclosure, in some cases, may help the lender avoid the automatic stay.

Understanding mortgage foreclosures

Perhaps, no single word is as terrifying to a Tennessee homeowner as "foreclosure." Anyone who is behind on mortgage payments fears that the lender may commence a foreclosure proceeding at any time. And, the family home may be lost, which means that a bankruptcy will ensue. Fortunately, the reality of the foreclosure process is less harsh than most people imagine.

A mortgage loan has two parts: the promissory note, which is the promise to repay the loan with interest, and the mortgage, a legal document that gives the lender the right or lien to reclaim the property if the borrower fails to make timely payments. The mortgage spells out the procedures that the lender must follow to reclaim the property.

Important limits on the reach of the automatic stay in Tennessee

This blog has frequently mentioned the importance of the automatic stay under Section 362 of the United States Bankruptcy Code as a method of halting collection efforts by the debtor's creditors. The automatic stay goes into effect immediately upon the filing of the bankruptcy petition, and after the petition is filed, no creditor can pursue a collection action or request payment of an existing debt from the debtor. In spite of this enormous benefit, the automatic stay has important limitations that should be understood by anyone who wants to use it as a shield against creditor's claims.

The automatic stay does not affect the commencement or continuation of a criminal action against the debtor. The following civil actions are exempt from the effect of the automatic stay: to determine paternity, establish or modify an order for domestic support obligations, establish child custody or visitation and regarding domestic violence. Divorce proceeding are also exempt from the automatic stay, except for that portion of the proceeding concerned with determining the division of property that belongs to the bankrupt estate.

Bankruptcy and the small business

Many owners of small businesses in Bradley County do not make a sharp distinction between their business finances and personal finances. These owners treat their businesses as if the business were merely another category of personal finances. Unfortunately, for these businesses and their owners, the lack of a clear distinction may create unexpected hardships, if the business falls on hard times -- and especially, if bankruptcy appears to be the only remedy for the business.

Small businesses in Tennessee are organized in four types: sole proprietorship, general partnership, limited liability company (LLC) and corporation. Sole proprietorships and general partnerships are generally treated as though the business and the individual owner are the same entity. The owner is personally liable for the debts of the business.

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