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GENERAL INFORMATION ABOUT BANKRUPTCY

Welcome to The Cohn Law Firm. William A. Cohn is the principal attorney, and has been practicing Bankruptcy Law since 1978. He is a Memphis Bankruptcy lawyer.

Call 901-757-5557 for a free appointment to discuss your situation.

I. THERE ARE FOUR TYPES OF BANKRUPTCY

a) Chapter 7 - Straight Bankruptcy/liquidation

For all entities

COSTS:

$335.00 Filing Fees (which is paid to the Court) and expense fee for credit reports, photocopies, check handling, postage, etc. For a total of $450.00

PLUS:

*$675.00 for individual (commonly called a "consumer bankruptcy")

*$775.00 for individual with sole proprietorship as a "side job" or for "extra income"

*$975.00 for husband and wife (commonly called a "consumer bankruptcy")

*$995.00 for husband and wife with sole proprietorship as "side job" or for "extra income"

*$1,250.00 for individual or husband & wife (which have 12 or more creditors) also for small business sole proprietors

*$1,450.00 for corporations and partnerships

* Includes all consultations & work exclusive of litigation and motions, and one phone consultation per week until 4 weeks after creditor's meeting. Allow 3 weeks for the petition to be typed and ready to sign for filing

ADDITIONAL ATTORNEY FEES FOR EACH OF THE FOLLOWING:

1. Motion to Avoid Lien (uncontested) $450.00
2. Motion to Redeem Secured property (uncontested) $250.00
3. Motion to Amend to Add Creditor $450.00 (plus $20.00 filing fee)
4. Typing and Filing of Petition in 5 days or less $500.00
5. Complaint to Determine Dischargeability $250.00 DOWN + $250.00/hour
6. DEFENSE of ANY Motion, Complaint, or Petition $250.00 DOWN + $250.00/hour
7. TRANSFER TO MISSISSIPPI Bankruptcy Court $375.00

** Attorney fees for the $650.00 fee and the $750.00 fee plus the filing fees and expenses must be paid in full before the Petition will be typed. For all other Chapter 7 filings $650.00 plus the filing fee and expenses must be paid before petition is typed and the balance before the petition is filed.

b) Chapter 11 - Reorganization/pay out plan
Corporations, partnerships, and individuals with more than $100,000.00 in Unsecured Debts.

COSTS:
$1,717.00 Filing Fee

PLUS RETAINER:

Small corporation or business $9,500.00

Medium corporation or business $15,000.00

Complex Case: $25,000.00 to $100,000.00

The above is applied to an hourly rate of $250.00 per hour. When the retainer is depleted, the client will be billed monthly.

c) Chapter 12 - Pay out plan for family farmers

COST:

Filing Fee of $1,039.00

PLUS RETAINER:

$5,000.00

d) Chapter 13 - fka "Wage Earner Plan"/pay out plan
For persons who earn wages, for small business owners, and for individuals who have a source of income - commonly called a "consumer" bankruptcy

COST:
$475.00 DOWN to cover filing fees, photocopies, postage, check handling, etc.

PLUS:
Attorney Fee Retainer $500.00

***The balance is part of the money deducted from your paycheck

An attorney fee of $3000.00 is set by the Court in a Chapter 13 case. Your payment of $500.00 is applied to the $3000.00 awarded, and the balance is paid as part of the money deducted from your payment of the plan. The Court can award additional fees upon the request of the lawyer.

Call 901-757-5557 for a free appointment to discuss your situation.


We do NOT recommend Chapter 13.
Only about 35% of Chapter 13 plans payout. Clients have over the years routinely complained that they go to Court many times and are always having their payments raised by the Chapter 13 Trustee. As lawyers, we have no control over payments. The Chapter 13 Trustee uses his computer at the Creditors' Meeting and tells the client and the lawyers the payment amount and schedule. Very often the Chapter 13 Trustees later advise that the debtor has not paid enough in and the payments must be raised. It has been the experience of the principal lawyer in this law firm that Lawyers' fees have routinely been substantially underpaid in relation to non bankruptcy areas of law (even though the Bankruptcy Code requires that attorney fees in Bankruptcy be similar to fees in non bankruptcy areas of law). In fact, Lawyers are usually actually paid only about 1/3 of what the Court "awards." Do you think that this would lead to good representation in Chapter 13 cases?

The principal lawyer in this law firm in 25 years has observed absolutely no heads of any large law firms appearing in Bankruptcy Court on Chapter 13 cases. Usually, this lawyer observes the low man on the totem pole in the law firm being sent. In this lawyer's opinion, far too much negotiation results. It has been this lawyer's observation that very few debtors who file Chapter 13 know: the amount of the lawyers' fees, the filing fees, the trustees' fees, and creditors' lawyers fees. Neither the judges nor the trustees tell the amount to the debtors if their lawyers do not. The judges have a great many cases and have their signature stamped on Orders which they call 'administrative orders'.

At least one judge, Judge Jennie Latta, to her credit, has openly attempted to improve the quality of the law practice in her court. However, the principal lawyer in this firm has, in the past, routinely encountered an unwillingness of the Bankruptcy Court judges and personnel and appointees to seriously consider changes consistent with their policies. As a client, does this assure you that your interests are properly litigated?

We therefore only recommend Chapter 13 as a last resort. Only if you are several months behind on your car note or house note and cannot bring the note current prior to filing, do we recommend Chapter 13.

A BETTER ALTERNATIVE:
We recommend that you file a Chapter 7. We do not agree that there is a moral or ethical basis to have you re pay your debts if you are not able to do so, if your efforts to do so are proving fruitless, or if your financial condition is causing family or marital problems. Our experience is that more marital problems are caused by financial burdens than any other basis. Your marital relationship and your family's health are far more important than re paying your debts in whole or in part.

Chapter 13 is nothing more than an additional payment burden for up to 5 years. Chapter 7 is usually over in 4 to 6 months. If a creditor files an objection to discharge and asks that its debt not be wiped out, you still wipe out all of your other debts in 4 to 6 months, with far fewer total court appearances than in Chapter 13. Chapter 7 saves you money, stress, and time.

NOTE: Chapter 7 and Chapter 13 are commonly called "consumer bankruptcies".

Call 901-757-5557 for a free appointment to discuss your situation.

II. SECURED DEBT vs. UNSECURED DEBT:
A. Secured debt is a debt where the Creditor can take back, repossess, or foreclose an item in satisfaction of his debt. In other words, a mortgage company can foreclose on your house; a bank or finance company can repossess your car or household goods; a furniture sales company can take your furniture back; or a jewelry store can take back your jewelry. Where the Creditor extends to you the credit to make the purchase for consumer goods, that is a secured debt also.

B. An unsecured debt is a debt where a creditor cannot repossess an item or foreclose on any item. Examples of this type of debt are: Credit cards, such as Master Card, VISA, and American Express; Signature Loans; Deficiencies on Cars that have been repossessed or houses that have been foreclosed; doctor bills, hospital bills, lawyer bills; and suppliers of small businesses that do not have a security interest in the goods.

III. CHAPTER 7:
Chapter 7 is a straight bankruptcy. It is a liquidation. A liquidation is where the trustee collects all of your assets and sells any assets which are not exempt, or sells the assets and pays the debtor the amount exempted (if there is a large equity in the asset). The net proceeds are used to pay the Trustee a commission and to be distributed to creditors. You wipe out your debts and get a "Fresh Start".

In a Chapter 7, after you file it, if and when your Order of Discharge is signed by the Court, it relates back to the day after you filed, and from then you do not owe anybody anything. Your debts are "discharged". All of your secured assets go back to the creditor (if you wish that to be the case). You do not owe any of your unsecured debts after that time. Certain debts cannot be discharged, such as alimony, child support, fraudulent debts, certain taxes, certain student loans, and certain items charged.

You must list all of your assets and all of your debts. We must now obtain your CREDIT REPORT to insure that we have all of your creditors. You are required by law to obtain the correct address of each CREDITOR (not collection agency) and certify their correctness and accuracy, or that debt may not be discharged.

You may keep certain secured debts such as your car or your furniture or house by reaffirming those debts. To do so, you must sign a voluntary "Reaffirmation Agreement". However, you cannot wipe out that debt (or discharge the debt) for another six years. In other words, if you decide that you want to keep your house or your car or your furniture, and you reaffirm the debt, you cannot bankrupt (or wipe-out) that debt again for six years. You will still owe that debt and you must continue to pay it just as you were to continue to pay it before you filed the bankruptcy. In order to reaffirm the debt, you must also bring it current. In other words, if you are three or four months behind, then you must pay the back payments which are due in order to reaffirm it. You can selectively reaffirm your debts - you can state that you wish to keep the house and the furniture, but that you want the car and the jewelry to go back to the respective Creditors.

Reaffirmation agreements can be set aside during the earlier of 60 days after the agreement is filed with the Court, or upon the Court's issuance of an Order of Discharge.

The law attempts to limit persons from filing Chapter 7 if their income is too large. It is assumed that the persons can pay some of the debt in a Chapter 13. Also, it requires full disclosure of ALL assets and their correct value and disclosure of ALL debts. There are worksheets which we must complete with you to determine if you qualify for Chapter 7.

You must ATTEND A CREDIT COUNCELING SEMINAR BEFORE you file your petition. This can be done on the internet, which we reccomend. You must obtain a certifican of completionand submit it to us.

A. Motion to Avoid Liens

If you have borrowed money and put your consumer household goods as security (collateral) you can dissolve the lien to the extent of your personal property exemptions ($4,000.00). You will thus be able to keep the household goods and not pay the debt.

B. Motion to Redeem

If you own personal property which has devolved to the point that it is not worth much, you can ask the Court to allow you to pay the actual value of the property to the Creditor. This is called "redeeming" the property. For a payment of $100.00 or so, you can thus keep the secured property and wipe out the debt.

C. Motion to Amend to Add Creditor

The Court will allow you to add a creditor which you forgot to list. This should be done before the Order of Discharge is received.


IV. CHAPTER 13 (Wage Earner) Bankruptcy:
We do not recommend filing Chapter 13 unless there are absolutely no alternatives available to you. The administration of the Chapter 13 plans by the Court and by the Chapter 13 Trustee can be frustrating. Our clients have reported to us that it is very difficult to understand the information furnished, when you can get the information, and the Chapter 13 Trustee's office and the Courts will have both you and the lawyer in Court on many occasions, and many times you will have to wait half a day on each of those occasions in a big room similar to a train station terminal (but not as big).

A Chapter 13 bankruptcy used to be called a "Wage Earner" plan. It is a type of bankruptcy where you pay out your debts for no more than 5 years.

A Chapter 13 Plan is like a consolidation loan at a bank. In a consolidation loan, you borrow the money from the bank, you pay off your creditors all at once , and you pay the bank back each month at $100.00/$200.00/$300.00 per month or whatever the amount necessary to pay off the loan.

In the Chapter 13 plan the Chapter 13 Trustee is the bank. You pay your $100.00/$200.00/$300.00 or whatever the amount to the Chapter 13 Trustee each month. He takes each payment and divides it up and pays your creditors. Secured creditors get 100 cents on the dollar plus interest. Unsecured creditors also get 100 cents on the dollar, unless we can show that because of the amount of income and expenses you cannot fund a Chapter 13 plan sufficiently to pay out 100 cents on the dollar. In that case the unsecured creditors may get less than 100 cents on the dollar: 70%..50%.. or even 10 cents on the dollar. There is an automatic injunction when you file your Chapter 13 which stops any creditor from suing you, from issuing a garnishment against you, from repossessing your car, from foreclosing on your house, or from doing any other act to collect the debt. This automatic injunction is what makes the Chapter 13 plan work by keeping the creditors away from the debtor.

If your property (such as a car) was repossessed before the filing of your Chapter 13, we can ask the Court to Order the creditor to return the property to you. It can take 3 to 4 weeks to obtain possession of your car, and you will probably have to pay repossession and storage fees which have accumulated to regain the vehicle.

Call 901-757-5557 for a free appointment to discuss your situation.

V. THE AUTOMATIC INJUNCTION
The automatic injunction is in effect on all bankruptcies. Anytime you file a petition for relief in the Bankruptcy Court, there is an automatic injunction preventing any creditor from doing anything to collect a debt. However, if you have filed Chapter 13 more than once in the last year, the automatic stay will not be in effect for as long as allowed prior to 2005.

VI. TYPICAL RECOMMENDATIONS
Typically, we see two situations develop in Consumer Bankruptcies. A. The first situation is where a client has secured debts in which he is current or only one or two months behind. In other words, he may be one or two months behind on his house note, one or two months behind on his car note, and the same for his furniture and jewelry note. However, he comes to us and says "I have been sick and I have a tremendous amount of medical bills (unsecured debt)"; or "I'm going through a divorce (or some sort of domestic problem); and I am at my limit on all my credit cards and I owe a tremendous amount" (of unsecured debt). He says if he just didn't have all of this unsecured debt and that if he wasn't making monthly payments on this unsecured debt, then he would be able to make his payments on his secured debt. In that instance, we recommend a Chapter 7 straight bankruptcy because he is able to discharge all of the unsecured debts and obtain a "Fresh Start". After reaffirmation of this debt and payment of delinquent installments, he can easily keep up his monthly notes. B. The other situation is where the client arrives and states that he is three or more months behind on his house note, three or four months behind on his car note, several months behind on his jewelry and furniture note, and that even if he discharged all of his unsecured debts he still would not be able to bring his secured debts current. He may not even have any unsecured debt. However, he does not wish to lose his assets, but merely needs time to pay off any arrearages that he owes. This person is a candidate for a Chapter 13 wage earner plan. It allows him to pay off his debts and to preserve his assets. That is our recommendation in such a circumstance.C. There is a gray area in between the two recommendations. Many people also feel that they have a moral and ethical obligation to pay out their debts. In those circumstances, a Chapter 13 (Wage Earner) Plan would be our recommendation. In the gray areas, it is largely a decision of the client.

D. If the Bankruptcy Chapter that you choose does not work out, you may be able to convert to another Chapter. You have the absolute right to dismiss a Chapter 13, or to convert a Chapter 13 to a Chapter 7.

VII. STUDENT LOANS:
Government issued student loans are not dischargeable EXCEPT FOR a hardship discharge. The debtor must file a complaint to determine dischargeability. This is not a part of a simple Bankruptcy filing. Additional attorney fees would be incurred. It may be the case that the debtor would not have this debt discharged.

VIII. TAXES:
Generally, taxes cannot be discharged in a Chapter 7 straight bankruptcy.However, under certain limited circumstances, Federal Income tax can be discharged in bankruptcy if they are more than three calendar years old, all tax returns have been timely filed, and the tax has not been assessed by the IRS within the 9 months before the filing of the Bankruptcy petition. Liens placed by the IRS can also prevent discharge. You need to consult with the attorney if this is a problem.Obviously, taxes CAN be paid out in a Chapter 13 wage earner plan and the IRS can be stopped from enforcing any liens or other collection procedures by the filing of the Chapter 13 Wage Earner Plan.

A complaint to determine the dischargeability should be filed. This is not a part of the simple Bankruptcy filing. Additional Attorney fees would be incurred.

IX. BANK ACCOUNTS AND ASSETS:
Any time you file a bankruptcy, if you have a checking or savings account or any other kind of deposit account with a bank to whom you owe any money for a loan or credit card or other matter, then you should close out your checking and savings account and certificate of deposit or any other account that you have, and move it to a bank to whom you owe NO money. This will prevent that bank from obtaining a set-off of your funds.
Assets that are not exempt will be seized, sold, and distributed to creditors by the trustee in a Chapter 7. If you are an independent contractor, or sole proprietor, monies that you earned from a contract before you filed your petition are assets which the Chapter 7 Trustee can take and distribute to creditors.

Call 901-757-5557 for a free appointment to discuss your situation.

X. CHAPTER 11:
Chapter 11 is a reorganization of the finances of the debtor. It is designed for an individual with substantial assets or doing business, a partnership, or a corporation. It is a method of paying back debts over a period of time. It is a democratic procedure where creditors are allowed to vote on whether to accept or reject the plan proposed by the debtor. Sometimes, a plan can be "crammed down" over the creditors' objections.The Debtor has 120 days from the date of filing to propose a plan. This is a "breathing" period when virtually no action can be taken against the debtor except for discovery of information. Certain relief is available to Creditors in certain limited situations, especially involving cash collateral.A proposed Chapter 11 Plan can be denied confirmation if not approved by vote of the creditors, or it fails to meet certain guidelines required by law. New plans can be proposed.Chapter 11 involves quite a bit of paperwork and is extremely expensive. It requires the debtor or its officers to attend many Court appearances.

Because of the complexity and expense of this type of Bankruptcy, a conference should be scheduled with the attorney for additional information.

XI. CHAPTER 12:
Chapter 12 is a Bankruptcy for family farmers. It is a cross between Chapter 11 and Chapter 13 where a payout plan is utilized.

Because of the complexity of this type of Bankruptcy, a conference should be scheduled with the attorney for additional information.

XII. ADVERSE SITUATIONS:
Chapter 7 discharge can be denied by the Court under certain circumstances such as concealing property, destroying or falsifying records, or fraud. These also can be criminal matters.A discharge under Chapter 7 can also be denied as to specific debts when a creditor files an "Objection to Discharge." Only that creditor's debt or a portion of that debt may be kept from being "wiped out." Examples are certain taxes, support, loans obtained by false financial statements or by fraud, and loans obtained when you are insolvent ( that is, when you borrow money by loan or by credit card and your debts exceed your assets-at the time of the loan-, and you are unable to repay the money borrowed).It is a criminal offense in Tennessee to sell secured goods, but not to give them as gifts or throw them away.Real Estate can be sold by the trustee in a Chapter 7 if there is a large equity in the property. This sale can occur after the discharge is granted.Proceeds from a personal injury or other lawsuits must be paid to the trustee in a Chapter 7 if the net proceeds exceed $7500.00 ( the amount of your exemption or personal injury). Many other lawsuits do not have an exemption. Consult with your attorney about this.A proposed Chapter 13 Plan can be denied confirmation (approval by the Court) if the Court, after a hearing, feels the proposed plan to be unfeasible (not enough available income to fund the plan), not proposed in good faith, or not paying the correct amounts according to the law.

A proposed Chapter 11 Plan can be denied confirmation if not approved by vote of the creditors, or if it fails to meet certain guidelines required by law.

Call 901-757-5557 for a free appointment to discuss your situation.

XIII. MISCELLANEOUS:
A Bankruptcy will stay on your credit record from the time of filing until the credit reporting agency's roll over period. This is usually eight years, and can be as much as 10 years.

There are always other circumstances that need to be addressed and questions that need to be answered. Please feel free to ask the attorney what happens in these circumstances.

XIV. COURT APPEARANCES:

When you appear in Court, dress conservatively and maturely. A coat and tie are preferred on men, and a dress is preferred on women. Court is not a place for show. Do not over-dress. Keep jewelry to a minimum. Do NOT wear furs. Do NOT wear expensive jewelry.Do NOT wear: shorts, tank tops, sandals, sleeveless shirts, or T-shirts.

Talk to another attorney and talk to us.
Judge the difference.

WILLIAM A. COHN A Memphis Bankruptcy AttorneyBankruptcy Lawyer Memphis Member: American Bar AssociationMember: Commercial Law League of America Author of: "Deferring Vesting of Property in a Chapter 13 Wage Earner Plan"

Commercial Law Journal (August, 1983).

Representative debtor clients:

Chapter 11:
Nomad Construction Company,Mid South Equipment Sales, Inc.Blackie's Body Shop, Inc., Mid South Equipment Rentals, Inc.One Memphis PlaceHayes & Sons Body Shop, Inc., Hickory Hill Shopping Center, Millington Aviation Service, Inc.Roach Industrial Service, Inc.David Simmons,
MDChapter 7:The Donut Shop, Inc.,Old Southern Tea Room, Inc. (Conversion from Chapter 11) Null's Service, Inc.


Call 901-757-5557 for a free appointment to discuss your situation.