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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
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Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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Brent, I still am confused about the chapter11 discharge.And

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Brent, I still am confused about the chapter11 discharge. And I thought my field of Neurology was hard. My goal is to get a fresh start. I still do not understand how a 60 day discharge on a chapter 11 is possible. This has been mentioned in several article on the internet, but not explained. Chapter 7 would be my best bet. with my exemptions I do not think I would need to liquidate any assets. However, my total debt is over 1.5 million which I think knocks me out of 7 and 13. For some time I have been taking my income from my Cpter s medical corporatio as a loan for 2 years The Irs has audited me about this but becuase I have been sick and Technically disabled from Neurology, it is no problem with them. My salary is been 20-30k/year for the last 2 years where as my income from my loan is 150-200K I am still getting my income from my disability insurance. However, I owe my corportation over 200k. The bank I am dealing with is out for blood. I cannot see them agreeing to any chapter 11 plan. Ido not think that the other Creditors are going to agreeto a cramp down. So in a nutshell, I qualify for a 7 from a low asset base and covered by exepmtions. I qualify from a income base since much of my income is from a corporate loan not salary.( Again this is not something new, i have done it for several years) I do not qualify from a liability limit. Mine is probably 2 mill now. So if we file chapter 11 and cannot get a viable plan that would be accepted by creditors, would that not force me into 7? I really want a fresh start like 7 and with my low asset, is that not a real possibility? Just yesterday the bank foreclosed on my old house,bougt it for 500K. Added my car note balance of 5 K to that and did away with the car note. Still has be on the books for 490K for the remainder of the 1st mortgage. Wrote down the 700K 2nd and took if off the books. I am told that I still owe and they will probably turn over to collection agency So i need a FRESH Start. I am 61 and my kids are in college. I have a good job with a good potential income again. My wife has a large inhertance coming to her in the next 3-5 years. What is the best way to get out of this finacial mess quickly and fully to have a fresh start. I am meting with the other cpa and lawyer this week. I would like your input as a 3rd, maybe tie-breaking opinion. Thanks for your help xxxxxxxxxxxxxxxxxxxxxxxxxxx
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 3 years ago.
Thank you for your question.

The Chapter 13 thresholds are adjusted for inflation every year and change March 15. For Florida, the numbers above which a Chapter 7 case is presumed to be an abuse of the BK Code are:
1 person 2 3 4
$40,029 $50,130 $54,594 $65,135
As you know, this is calculated on a 6-month running average.

The consumer Chapter 11 thresholds are

If you haven't gone here yet, I recommend it because it is straight from the source, Even attorney websites trying to serve a public education function can get outdated. It's rare, but I've even seen a small few be wrong. Try this: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter11.aspx

From one of the sub-pages there, this explains how a Chapter 11 Plan can be approved even over a creditor's objection--short version is that the Debtor has to commit all "disposable" income to the Plan.

In the case of individuals, chapter 11 bears some similarities to chapter 13. For example, property of the estate for an individual debtor includes the debtor's earnings and property acquired by the debtor after filing until the case is closed, dismissed or converted; funding of the plan may be from the debtor's future earnings; and the plan cannot be confirmed over a creditor's objection without committing all of the debtor's disposable income over five years unless the plan pays the claim in full, with interest, over a shorter period of time. 11 U.S.C. §§ 1115, 1123(a)(8), 1129(a)(15).

Business and consumer Chapter 11 cases have several important differences. One is that a "liquidation" Plan discharges an individual but not a business from all debts not otherwise paid in the Plan. The debtor still has to complete the Plan. When the debtor is an individual, confirmation of a liquidation plan will result in a discharge (after plan payments are made) unless grounds would exist for denying the debtor a discharge if the case were proceeding under chapter 7 instead of chapter 11. 11 U.S.C. §§ 727(a), 1141(d).

When the debtor is an individual, confirmation of a liquidation plan will result in a discharge (after plan payments are made) unless grounds would exist for denying the debtor a discharge if the case were proceeding under chapter 7 instead of chapter 11. 11 U.S.C. §§ 727(a), 1141(d).

So, child support an alimony debts, liability judgments for drunk or drugged driving, and so forth, still don't get discharged in a Chapter 11 case.

What can get confusing is that the Plan is said by the statutes to "discharge" the debts in Chapter 11, but there is also a 60-day time limit set by the court after which no creditor can object to discharge of their special little debt. So, even though the discharge is not fully and completely granted until the Plan is completed, it is considered done much earlier. The Debtor knows that even non-dischargeable debts under Section 523 still get discharged 60 days after the notice of deadline goes out. That deadline applies to all chapters applicable, 7, 11, and 13.

Thank you.

BAB.
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1905
Experience: Twelve years experience in all aspects of debtor & creditor BK.
Brent Blanchard and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

Brent, I read the chapterXXXXXcode and I think the answer I am still lacking is based on this part of the code..

 

 

A debtor in a case under chapter 11 has a one-time absolute right to convert the chapter 11 case to a case under chapter 7 unless: (1) the debtor is not a debtor in possession; (2) the case originally was commenced as an involuntary case under chapter 11; or (3) the case was converted to a case under chapter 11 other than at the debtor's request. 11 U.S.C. § 1112(a). A debtor in a chapter 11 case does not have an absolute right to have the case dismissed upon request.

A party in interest may file a motion to dismiss or convert a chapter 11 case to a chapter 7 case "for cause." Generally, if cause is established after notice and hearing, the court must convert or dismiss the case (whichever is in the best interests of creditors and the estate) unless it specifically finds that the requested conversion or dismissal is not in the best interest of creditors and the estate. 11 U.S.C. § 1112(b). Alternatively, the court may decide that appointment of a chapter 11 trustee or an examiner is in the best interests of creditors and the estate. 11 U.S.C. § 1104(a)(3). Section 1112(b)(4) of the Bankruptcy Code sets forth numerous examples of cause that would su

A debtor in a case under chapter 11 has a one-time absolute right to convert the chapter 11 case to a case under chapter 7 unless: (1) the debtor is not a debtor in possession; (2) the case originally was commenced as an involuntary case under chapter 11; or (3) the case was converted to a case under chapter 11 other than at the debtor's request. 11 U.S.C. § 1112(a). A debtor in a chapter 11 case does not have an absolute right to have the case dismissed upon request.

A party in interest may file a motion to dismiss or convert a chapter 11 case to a chapter 7 case "for cause." Generally, if cause is established after notice and hearing, the court must convert or dismiss the case (whichever is in the best interests of creditors and the estate) unless it specifically finds that the requested conversion or dismissal is not in the best interest of creditors and the estate. 11 U.S.C. § 1112(b). Alternatively, the court may decide that appointment of a chapter 11 trustee or an examiner is in the best interests of creditors and the estate. 11 U.S.C. § 1104(a)(3). Section 1112(b)(4) of the Bankruptcy Code sets forth numerous examples of cause that would support dismissal or conversion. For example, the moving party may establish cause by showing that there is substantial or continuing loss to the estate and the absence of a reasonable likelihood of rehabilitation; gross mismanagement of the estate; failure to maintain insurance that poses a risk to the estate or the public; or unauthorized use of cash collateral that is substantially harmful to a creditor.

pport dismissal or conversion. For example, the moving party may establish cause by showing that there is substantial or continuing loss to the estate and the absence of a reasonable likelihood of rehabilitation; gross mismanagement of the estate; failure to maintain insurance that poses a risk to the estate or the public; or unauthorized use of cash collateral that is substantially harmful to a creditor.

So my threshold is less than the 4 person threshold. There is no hope for my income to increase in the future because of my disability and changes in medical reimbursement.My net worth is negative.

 

So why can't I file 11 and then use my one time conversion to convert 11 into 7? I have basically no liquid assets. and at this point i have no free income to put into a plan.

So why could I not convert th 11 To 7. This would give me a fresh start and I would hqve the exemptoms to nor lose any of the few assets I have.

 

??? I am sorry, I just do not understand this concept, but I am sure that things important to us would beunder the the threshold. So we would file 11 and then how long af long after could i convert to 7?

 

Thanks DR S

Expert:  Brent Blanchard replied 3 years ago.
Thank you for your follow-up.

I can't get into too much detail without this turning into a personal legal consultation.

The statute is not the worst example of Congressional un-helpfulness, but as the courts are applying it, in practice it is treated as pretty plain in its language and use. For the subparagraph (a) option, no real guidance or standards (for the other parts, "for cause" is defined and has a lot of case law for guidance as well), no time limit, just not a lot there other than the debtor can do it.

Here's one docket entry for how a court approved a one-page notice of conversion by a debtor:

Upon filing of the Debtor(s) notice of or motion for voluntary conversion pursuant to 11 USC 706(a), 1208(a) or 1307(a), or pursuant to Fed.R.Bankr.P. 1017(f)(2), and it appearing from the records of the court that the case has not been previously converted under section 1112, 1208 or 1307 of title 11, was not originally commenced as an involuntary case under chapter 11, and that the debtor, if this case is being converted pursuant to 11 USC 1112(a) or 1208(a), is the debtor-in-possession, and in accordance with the authority granted to the clerk pursuant to General Procedure Order No. 2003-6, IT IS ORDERED that this case shall be and it hereby is converted to chapter 7. (related document(s) 22 Debtor's Notice or Motion of Voluntary Conversion From Chapter 11 to Chapter 7).

The final outcome would depend on whether any creditor(s) don't like the conversion to Chapter 7, and whether they can convince the BK judge that creditors in general would be better-served if an 11 case converted to 7 is converted back to 11. It has been called an "absolute" right for a [clean--debtor in possession and such in the statute] debtor to convert an 11 to a 7, but there is no absolute right to keep the case as a 7 over the objections of the creditors. Of they squawk, it's off to a hearing and the judge will decide.

Here's how one court explained that:
11 U.S.C. @ 706(b) allows a bankruptcy court to convert a case under Chapter 7 to Chapter 11 upon the request of a party in interest after notice and a hearing. These decisions to convert are within the discretionary powers of the bankruptcy court based on the court's determination of what will most inure to the benefit of all parties in interest. H.R.Rep. No. 595, 95 Cong., 1st Sess. at 380 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News at 6336; In re Graham, 21 B.R. 235, 237 (Bank.N.D.Iowa W.D.1982).

That reference to a House of Representatives Report indicates the court did not consider the "plain language" enough, so there was reason to look at what the "Congressional intent" was by looking at the legislative history.

Just remember, there is a discharge in Chapter 11, effective immediately upon approval of the Plan. It's just that the discharge can be "lost" if the Debtor fails to complete the Plan or the case otherwise gets into big enough trouble.

Thank you.

BAB.
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1905
Experience: Twelve years experience in all aspects of debtor & creditor BK.
Brent Blanchard and 2 other Bankruptcy Law Specialists are ready to help you

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