My wife and I made the decision to open a residential cleaning business. We needed enough money to get the equipment, do a bit of advertising and get the licensing and insurance to protect ourselves and our customers. For about two years, things went very well, but then, things took a terrible spin for the worst after we hired a few employees to help us with the workload. Since then, we have gone bankrupt and have gone back to working full time jobs. If you are struggling with your business and considering bankruptcy, this blog can give you some answers to the many questions that you have.
When you declare bankruptcy, you are putting in place a series of actions rather than taking a single action. Whether it be chapter 7 or chapter 13, the filing in federal court opens the doors for several different legal actions that could delay or affect the way your case is settled. Read on to learn more a few of these adversarial bankruptcy situations.
The Course is Smooth
In the vast majority of cases, your bankruptcy is nearly unremarkable from beginning to end. Here's how you might want things to look:
1. You meet with your bankruptcy attorney and fill out the required paperwork to get the bankruptcy paperwork drawn up.
2. You sign the paperwork, and your chapter 7 gets filed in the federal court, putting an end to collection actions by your creditors.
3. You comply with any educational requirements.
4. You appear for your creditor's meeting.
5. You receive your final bankruptcy paperwork marking the end of the entire process.
When it's Not So Smooth
Almost every party to the bankruptcy, which includes you, the bankruptcy trustee and every one of your creditors can file an action against another party at any time during the above process. Whiles these suits are infrequent, they can occur.
The process begins with the filing of a complaint which must be responded to, much like any other lawsuit. Any suits filed will have its own case number beyond your bankruptcy case number. In some cases, the parties respond back and forth with requests for information (discovery) and sometimes even a deposition. Eventually, the parties will appear before a judge to litigate the issue. Your bankruptcy cannot proceed until all associated suits are resolved.
Why is a Suit Necessary?
There are as many reasons for filing as there are filers, but below you can find some examples of the various parties and their complaints for relief.
1. You are suing a creditor for failing to honor the automatic stay. Your creditors must "stay" or stop collection activities as soon as they are informed of the chapter 7 filing. If any creditor proceeds with collection activity that impacts your property or financial situation you have grounds to sue them.
2. You are suing to seek a hardship discharge from an otherwise non-discharged debt. For example, student loan debt is normally not forgiven with a bankruptcy but may be if certain hardship conditions are met.
3. You may also sue to remove liens from a property.
4. A creditor may sue you due to fraudulent activity. For example, if you purposely ran your credit card debt up in the last few weeks prior to filing, you might be responsible for that debt if you lose the case.
5. A trustee might sue to recover funds from a transaction the debtor engaged in before filing. For example, if you gave a sum of money to a niece as a gift, the trustee may try to recover those funds to pay a creditor.
The above examples might make it seem as if these proceedings happen all the time, but you can avoid most of these issues by following the rules and consulting with your bankruptcy law office.
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