Frequently Asked Questions

A bankruptcy case can be filed by any person, a married couple, a corporation, partnership, or any other business entity. Bankruptcy can also be filed by a business trust.

Bankruptcy is not limited to people who have no assets, who have judgments against them, or who are behind on paying their bills. This is a common misperception, although most people who file for bankruptcy relief are in the midst of financial difficulties. The same is true of corporations, partnerships and other business entities. It is not necessary that they be out of business or in default to their creditors. Indeed, there are many strategic circumstances during which one might threaten or file a bankruptcy case before things are dire. One example is as a response to litigation or as a resolution of tax liabilities.

Bankruptcy is only one of the tools in our firm’s “toolbox.” We specialize in helping individuals and businesses with financial problems. Please contact us if you have any questions about whether bankruptcy or another alternative is the correct option for you.

When an individual or married couple files for bankruptcy relief, all of their assets become property of the bankruptcy estate. Before any assets can be administered by the court, the person(s) filing for bankruptcy relief are entitled to exempt (or withdraw from the bankruptcy estate) certain assets. Through careful pre-bankruptcy planning, we can minimize or eliminate entirely the risk that any assets will be lost by virtue of a bankruptcy filing. Not one of our clients in a bankruptcy case has ever lost an asset that he or she, based on our pre-bankruptcy planning, expected to keep.

The decision of whether or not to file a bankruptcy case is a serious one. Often we find other solutions to a client’s problem. As experienced bankruptcy and debt-resolution attorneys, a bankruptcy filing is only one of the tools in our toolbox. There are occasions when bankruptcy is the right tool.

Once it becomes clear that a bankruptcy filing should take place, the question of the best time to file arises. We carefully assess all factual and legal issues of each client on a case-by-case basis in order to ensure the best outcome. Because of this careful approach, our clients are never unpleasantly surprised: we have never had a client lose an asset in a bankruptcy case except in those very rare circumstances where the client knew in advance of this possibility and decided to proceed in any event.

Of course, the answer to this question is yes. A bankruptcy filing is a derogatory credit item. In our vast experience as attorneys representing people with severe financial problems, however, we have found that this question is simply the wrong question to ask, because nearly all people who consult a bankruptcy lawyer already have significant amounts of debt, are well behind on their obligations, or have judgments or tax liens recorded against them. As a result, their credit rating is already low or will soon be affected by imminent default to their creditors. It is unlikely that any lender or leasing company will advance credit to such people due to their current financial circumstances. Among the thousands of people we have represented in bankruptcy cases over the years, we have never interviewed a client for whom the credit rating was a deciding factor. Typically, it is the “tail that wags the dog” in the client’s mind. There are many more important factors, such as future savings, retirement planning, and current credit issues, about which we consult with our clients.

We are not specialists in consumer credit issues or credit ratings. Experts in this area have advised us that the rule is between 7 and 10 years. We recommend to clients that they consider that their credit will be impaired for 10 years. We can suggest ways that clients can begin to rehabilitate their credit immediately after the bankruptcy filing.

Yes we do. A bankruptcy filing is only one of the tools in the firm’s toolbox. We always recommend and do what we believe is best for the client. Debt negotiation is appropriate in certain circumstances and inappropriate in others. Over the years, we have represented hundreds of clients in successful debt negotiation.

The answer depends upon which type of bankruptcy you file. Chapter 11 of the Bankruptcy Code enables business operations to continue after the bankruptcy is filed. Chapter 11 is available to individuals and to businesses.

Our firm has experience and expertise in filing Chapter 11 for individuals as well as for businesses. Chapter 11 is most appropriate for individuals who have significant debt problems but also have significant equity in assets, such as their home or their business, which they wish to preserve. For businesses, Chapter 11 is intended to enable a transition from pre- to post-bankruptcy operations, though special financial reporting is required of businesses in Chapter 11. Essentially, they are required to provide a profit/loss statement and cash report each month. Because a business in bankruptcy does not pay its pre-bankruptcy creditors until the court permits it to do so (typically many, many months later), cash flow often improves immediately. In Chapter 7, a business is liquidated and operations do not continue.

Trade creditors are often less willing to provide credit to a company once a bankruptcy is filed, though this is not a blanket rule. Often, trade creditors are willing to provide new credit because they are entitled to priority status as a result of post-bankruptcy sales. We have devised strategies designed to help maintain relationships with suppliers. A company in Chapter 11 bankruptcy has additional administrative tasks, such as the opening of new bank accounts and the providing on a monthly basis of a profit and loss statement and cash report to the Office of the United States Trustee. Of course, there is also the burden imposed as a result of legal fees incurred in connection with a Chapter 11 case. Our firm has devised a creative way of easing this burden for our clients.

In a Chapter 11, the business or individual “exits” from bankruptcy by confirming a plan of reorganization. The plan establishes new contractual relationships between the entity in bankruptcy and its creditors. As an example, if a bank loan requires monthly payments of principal and interest at a rate of 8% with maturity in three years, the bankruptcy plan may provide for interest-only payments every six months, with a balloon payment in seven years.

If a tenant files for bankruptcy, you are generally entitled to the tenant’s full performance under the lease. However, the bankruptcy filing completely changes your ability to enforce your rights. As an example, you may not undertake any enforcement action for breaches in the lease without the express permission of the bankruptcy court – this includes the commencement of an unlawful detainer action. Landlords are well advised to contact bankruptcy counsel immediately upon learning that a tenant has filed for bankruptcy relief. Through early intervention, the landlord is often able to better protect his or her rights. It is important for an attorney to monitor the bankruptcy case closely, to meet all applicable deadlines and timely file a proof of claim.

No. While nearly all leases contain a provision stating that the filing of a bankruptcy petition constitutes a default under the lease and terminates the tenant’s rights, such provisions are not enforceable. Accordingly, the bankruptcy filing, in and of itself, has no impact on your rights under the lease.