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Chapter 11 Bankruptcy - Reorganization

The principal attorney in our law firm, William A. Cohn, was previously certified as one of only five Memphis area Board Certified Specialists in Bankruptcy, and one of only three in Consumer Bankruptcy. He is no longer certified in either area.

Chapter 11 - Reorganization
** All retainer fees and filing fees must be paid before Petition will be filed.
I. Chapter 11 Description
corporations, pay out plan partnerships, and

individuals with more than $250,000.00 in Unsecured Debts.

COST:

$2,500.00 Filing Fee PLUS:

Retainer:

Small corporation or business $12,500.00

Medium corporation or business $17,500.00

Complex:

$25,000.00 to $100,000.00

(The above is applied to an hourly rate of $275.00 per hour. When the retainer is depleted, the client will be billed monthly.)

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. 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.

IV. TAXES
Generally, taxes cannot be discharged in a Chapter 11 Reorganization, just paid out over a period of time. You are able to avoid paying additional penalties in this way, but interest must be paid.

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 11 Reorganization Plan and the IRS can be stopped from enforcing any liens or other collection procedures by the filing of the Chapter 11 Reorganization Bankruptcy Petition.

A complaint to determine the dischargeability should be filed. This is not a part of the simple Bankruptcy filing.

V. BANK ACCOUNTS
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.

Further, you will be required to open a new checking account called "Debtor in Possession" or "D.I.P." You will have to close the first account.

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

VI. CHAPTER 11
Chapter 11 is a reorganization of the finances of the debtor. It is designed for an individual 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.

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.

VII. ADVERSE SITUATIONS
Chapter 11 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 proposed Chapter 11 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.

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

WILLIAM A. COHN
Member: American Bar Association

Member: 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

Blackie's Body Shop, Inc.

B & P Enterprises, Inc.

One Memphis Place

Hayes & Sons Body Shop, Inc.

Hickory Hill Shopping Center

Millington Aviation Service, Inc.

Roach Industrial Service, Inc.

Chapter 7:
The Donut Shop, Inc.

Old Southern Tea Room, Inc.
(conversion from Chapter 11)

Null's Service, Inc.
(conversion from Chapter 11)


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