The Hon’ble Supreme Court in the matter of Uttara Foods and Feeds Pvt. Ltd. v. Mona Pharmacham observed that “relevant rules under the Code needs revision to ‘obviate unnecessary appeals to the SC in matters where an agreement between a Corporate Debtor and the creditors has been reached”. The said judgement of Hon’ble Supreme Court formed the basis for insertion of Section 12A. Subsequently, the constitutional validity of section 12A was also upheld in the matter of Swiss Ribbons by the Hon’ble Supreme Court.

Regulation 30A of the CIRP Regulations, 2016 specifies the manner for such withdrawal after admission. It provides that a withdrawal application may be submitted to the Adjudicating Authority: (a) before the CoC is constituted, through the Interim Resolution Professional, or (b) after the Committee of Creditors (CoC) is constituted, through the IRP or Resolution Professional (RP). If the application is made after an invitation for Expression of Interests (EOIs) has been issued, the applicant must give reasons justifying the withdrawal.

It further provides that (i) Where the withdrawal application is under (a) above, the IRP shall submit it to the AA on behalf of the applicant within three days of being informed of such a settlement having been arrived or otherwise (ii) Where the withdrawal application is under (b) above, the CoC shall consider it within seven days of being informed of such a settlement having been arrived. Where the CoC approves the application with the requisite 90 percent voting share, the RP shall submit the application, along with the approval of the CoC, to the AA on behalf of the applicant within three days of such approval.

The withdrawal application should be made on Form FA of the Schedule and submitted along with a bank guarantee towards the estimated costs incurred in relation to the corporate insolvency resolution process of the Corporate Debtor including costs of the Interim Resolution Professional/ or costs of the Resolution Professional till the date of filing of such an application. 

Recently, Hon’ble National Company Law Appellate Tribunal (NCLAT) has dealt with the question of withdrawal of an application under Section 12A filed after constitution of committee of creditors in the matter of M/s. Ashish Ispat Private Limited vs. Primuss Pipes & Tubes Limited. The author by way of this article has analysed the facts and findings of the case and assessed the implication of the judgement passed in the said matter by Hon’ble NCLAT on the operational aspects of Section 12A.

Brief facts of the case have been enumerated as below:

• Ashish Ispat Private Limited (“Operational Creditor”) filed application under Section 9 of Code against Primuss Pipes & Tubes Limited (“Corporate Debtor”) seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) of the Corporate Debtor.
• The said application was admitted on 04.08.2021.
• Interim Resolution Professional (“IRP”) made a public announcement in Form A on 06.08.2021.
• The Operational Creditor and Suspended Director of Corporate Debtor amicably settled the dispute and executed a Memorandum of Understanding on 25.08.2021.
• The IRP received Form-FA to withdraw the application in terms of Section 12A of the Code and accordingly IRP filed application bearing IA No.267 of 2021 for withdrawal of Section 9 on 25.08.2021.
• Committee of Creditors was formed on 27.08.2021 with two financial creditors. One of the creditors having 17% of voting shares dissented to the withdrawal and the Hon’ble Adjudicating Authority observed that application cannot be considered unless consent from the requisite majority of the Committee of Creditors is obtained. Aggrieved by the same, Operational Creditor and Suspended Director of Corporate Debtor preferred an appeal before Hon’ble NCLAT.
• The Operational Creditor submitted that Application for withdrawal was filed before the constitution of Committee of Creditors and the said application was sought to have been allowed by the Adjudicating Authority without obtaining consent of the Committee of Creditors. 
• That one of the members of Committee of Creditors objected stating that there was a breach of settlement and Section 12A could not have been allowed.

The issue that came for the consideration of the Hon’ble NCLAT is whether the approval of the Committee of Creditors for withdrawal of Application was required or not when the application under Section 12A was preferred prior to the constitution of the Committee of Creditors. Summarily, Hon’ble NCLAT held that the statutory scheme under the Code makes it clear that when application is filed prior to constitution of Committee of Creditors, the requirement of ninety percent vote of Committee of Creditors is not applicable and the Adjudicating Authority has to consider the application without requiring approval of 90% vote of Committee of Creditors.

The Hon’ble NCLAT referred to and relied upon the judgement of Swiss Ribbons Private Limited & Another vs. Union of India & Others wherein Hon’ble Supreme Court held that at any stage, before a Committee of Creditor is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement and accordingly allowed the appeal filed by the Operational Creditor. The Hon’ble NCLAT also referred to and relied on the judgement of the Hon’ble Supreme Court in the matter of Kamal K. Singh vs. Dinesh Gupta & Anr. and its previous judgements in the matters of Anuj Tejpal vs. Rakesh Yadav & Anr. And Sunil Tandon v Manoj Kumar Anand, IRP & Ors. And observed that in view of fact that entire dues of the Operational Creditor were paid; application for withdrawal was filed on 25.08.2021 i.e., before constitution of the Committee of Creditors; therefore, there is no requirement seeking approval of ninety percent of the Committee of Creditors for considering the application. 

The judgement delivered by the Hon’ble NCLAT can be regarded as a welcome step which allows closure of CIRP which is unwarranted in some cases, more so in cases where the initiation of CIRP is misplaced in view of overall performance and scheme of affairs of the corporate debtor. Further, it also opens up windows which is otherwise closed by virtue of Section 29A of the Code and allows right people to seek withdrawal from clutches of the Code.

Author:

Ravi Charan Pentapati

Partner, Link Legal 

Disclaimer:

The contents of this article are for general information and discussion only and are not intended for any solicitation of work. This article should not be relied upon as legal advice or opinion.

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Why do Insurers Stall Payouts?

There are many reasons why an insurer may decide to stall a settlement, but here are the most common ones.

Company policy: Some insurance companies instruct their in-house adjusters to stall compensation using any means possible. They do this by creating roadblocks at every corner, which are designed to frustrate the victim. That allows the company to make more money in the background as most people will accept a smaller settlement to get their lives back on track.

Destruction of evidence: Evidence gets lost all the time, especially if a case takes forever to complete. Witnesses may move to another city, lose their memory, or change their minds, leaving you with nothing to back up your claim. This tactic has worked for top dollar compensation cases with great success.

Frustrating victims: An insurer may decide to stall a claim, hoping the complainant will walk away out of frustration. They usually use this one on small claims that would not be worth waiting for. That includes busted tail lights, broken windows, and other minor damages.

The end-game of all these tactics is making more money when victims settle for less or decide to walk away. Some of these tricks are as old as the insurance concept, and they’re not going anywhere. 

Signs That Your Insurer Is Stalling

An insurance company that wants to stall a settlement keeps switching adjusters on your case. When this happens, the new adjuster demands to see additional documents, hoping to catch something the previous guy missed. This paperwork usually takes time to put together, and the insurer uses that to frustrate victims.

Other times, the adjuster might throw many legal complications on your case, making it look like an overly ambitious task. They do this by interpreting the law in their favor and hoping the victim will fall for it. 

When they eventually run out of excuses, the insurance company may blame the delay on a pending review. If this decision takes them more than a week, maybe the adjuster is trying to buy more time.

What To Do If Your Insurance Is Stalling

If you notice one or more signs of stalling, use these tactics to get things back in motion.

Be persistent: Calling and emailing persistently is the easiest way to smoke out a stalling insurance adjuster. During each call, ask about the progress and when you can expect results. Nobody likes handling “stubborn” clients, and that might be the reason you get fair compensation.

Keep Evidence Safe: The evidence you have should stay in a safe place where you can retrieve it on demand. If it’s a digital file, have a copy in a storage disk and keep backups in your favorite cloud platforms. Remember, the size of your compensation depends on how you build the case.

Get several Estimates: If your insurance is trying to lowball repairs, get several quotes from reputable car repair shops or builders. That helps you demonstrate why the suggested compensation package won’t get the job done. 

Mention Bad Faith in the hearing: Insurers are supposed to help their clients overcome surprise costs most quickly and easily possible. If this does not happen, the jury might think the insurer has bad faith and may be subjected to paying the complainant’s legal fees plus the settlement.

Write a Formal Complaint: Writing a formal complaint is another great way to get the insurers’ attention. Tell them you’ve waited for way too long and haven’t bounced back from the unexpected expense. Keep a copy of this letter as it will serve as evidence if stalling continues.

Ask to talk to the Supervisor: If you keep getting excuses, it’s time to escalate your complaints to the supervisors. Call any public phone number the company puts online, then ask to talk to a supervisor. This will attract the right eyeballs to the case and hopefully result in fair compensation.

Cooperate with the insurer: Some people always look for a fight when they want things done their way. Don’t be that person. The idea is to listen to what your insurance adjuster says and share your concerns positively. Also, provide documentation on time and always show up for appointments.

Involve an Attorney: An attorney knows when an insurance company is stalling for no reason and when the adjuster genuinely needs more time to get things done. This professional will also try to get the best possible settlement for the case as they know their way around the law. You will never have to call the insurance again or deal with any form of stalling.

How Long Can an Insurance Company Delay a Settlement?

The truth is, this time varies from state to state. But most states protect their citizens by placing a short period between the time an insured person puts in a claim and when the insurance sends the check. This saves people from having to deal with delayed settlements. However, insurance companies have sneaky ways of pinning delays on clients, and that’s why you need to know how the system works.

That said, hiring an attorney is the easiest way to get your insurance claim in good time. You will never have to deal with adjusters or supervisors, which is always a welcome idea in today’s busy world. 

Still, you can choose to go ahead without legal representation and use our tips to maneuver your way to a timely and fair settlement. It is also super important to remember that insurance companies make money if they don’t payout, which is usually their goal. 

The post What Can You Do If Your Insurance Company Is Stalling? appeared first on Legal Desire Media and Insights.

Filing for bankruptcy is a serious matter, and it’s not a decision people come to without lots of thought and legal assistance. If you need to get out of debt, and you think bankruptcy is your only option, your first step is to hire a personal bankruptcy attorney to help you.

You want to be sure your attorney is the best for you, and that you’re doing everything you can to help make your case for bankruptcy. These dos and don’ts should be helpful in guiding you.

DO Hire a Bankruptcy Attorney from Your Area

If you’re facing financial trouble and think that you may need to declare bankruptcy, calling a national debt relief hotline advertised on late-night TV isn’t going to be your saving grace. 

To declare bankruptcy or work toward debt settlement, you need the help of a local bankruptcy attorney. You can use your state’s Bar Association website to locate a suitable lawyer in your area, or you can simply search online for options. Read reviews and testimonials, and ask for a free consultation with your top choices.

DON’T Hire a Bankruptcy Attorney Based on Cheesy Billboard or Bus Ads

The ability to purchase legal ads like billboards or other physical displays does not correlate with skill in navigating a bankruptcy case or achieving the best outcomes. Falling for dramatic, emotional ads with vivid imagery probably won’t get you the best attorney for you.

Researching your options, however, will help you get in touch with bankruptcy attorneys who are ready to work for you and help you find freedom from overwhelming debt. Look for experienced attorneys with a demonstrated history of success in bankruptcy cases. If that attorney ends up being one whose face is plastered on ads around your community, that’s fine. But you only know that you’ve made the right choice because of your research, not because you were swayed by pricey marketing tactics.

DO Ask About How Much You’ll be Charged for Legal Services

Before hiring a personal bankruptcy attorney, you need to have all the information up front so you can make a smart decision. Not every attorney’s rates will be the same, and some may charge you an arm and a leg for the same quality of services as another.

On a related note, you get what you pay for. An attorney with abnormally low rates may be just as much of a red flag for you as one with ridiculous high ones. 

DON’T Think You Know More Than Your Attorney

Working toward declaring bankruptcy and all the legal processes that go with it can be emotionally taxing. When put in these situations, people tend to become defensive or argumentative to save face, especially when it comes to facing down their past financial decisions. 

Remember that you hired your Denver bankruptcy attorney because they are experts and want what’s best for you. Your lawyer works for you to help you achieve the best possible outcome for your specific situation. And everyone’s situation is different, so comparing your lawyer and their services to another one based on what an acquaintance told you is unwise.

Listen carefully to what your attorney has to say, provide them with all the information they need to help you, and follow their guidance.

DO Be Transparent About Your Financial Situation

Don’t let embarrassment get in the way of being clear about your financial situation when you meet with your bankruptcy attorney. Bring along relevant financial statements and bills so that you are sure to share everything during your meetings.

If a proposed resolution doesn’t feel like it will work for you, talk to your lawyer about it immediately, rather than hiding away your feelings. 

DON’T Leave Anything Out

Your bankruptcy attorney can only work for you if you provide all relevant information when it’s requested. It’s up to you to gather all the information about your finances and double-check that you haven’t forgotten any credit cards, bank accounts, loans, liens, and more. 

If you do realize you’ve forgotten something, contact your bankruptcy attorney immediately and provide the missing information. Forgetting items can negatively affect the bankruptcy process, and even delay it longer than necessary.

Best of Luck!

Now that you know more about hiring a bankruptcy attorney, it’s time to get started on your research process. Filing for bankruptcy can take a long time, but with the right attorney working for you, you’ll feel immediate stress relief when you begin. 

The post The Dos and Don’ts When Hiring a Personal Bankruptcy Attorney appeared first on Legal Desire Media and Insights.

The Hon’ble Supreme Court (“SC”) in Babulal Vardhar ji Gurjar Vs. Veer Gurjar Alumunium Industries Pvt. Ltd., overruled the decision of National Company Law Appellate Tribunal (“NCLAT”) dated 14.05.2019. After relying and subsequently elaborating on plethora of judgements it thus settled that an application by the financial creditor for initiation of CIRP can be made within 3 (Three) years from the date of default, and any claim thereafter is a debt barred by time in the eyes of law. However, a conflicting situation that may have arisen pursuant to the said judgement of SC is the revival of a time barred claim upon written acknowledgement of the same in the balance sheet of the CD in light of Section 18 of the Act. This contention has been fairly left unsettled and shall act as the bone of contention in various impending litigations that shall ensue from hereinafter.

Brief facts of the Case:

The date of default i.e. NPA, of the CD accrued on 08.07.2011. Thereafter, a demand notice was issued on 15.11.2011 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”). The total amount of default aggregated to INR 1,011,573,308 with interest charged over and above. The recovery proceedings were initiated against the CD. Even when the said proceedings were pending before the Debt Recovery Tribunal, Aurangabad for final disposal, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) was filed by the financial creditor, on 21.03.2018 before the Adjudicating Authority (“AA”). The AA admitted the application and passed an order to the effect of initiating CIRP of the CD. 

Thereafter, the CD preferred an appeal under Section 61 of the Code before the NCLAT. The NCLAT dismissed the appeal stating that even though proceedings under Section 19 of the SARFAESI are pending the same will not annul the proceedings under the Code. The CD, aggrieved by the aforesaid order dated 17.09.2018 preferred a civil appeal before the SC. The SC after listening to the arguments advanced was of the opinion that, the major issue pertaining to the applicability of the limitation was not even considered and deliberated by the NCLAT. Hence, the SC relegated the parties for fresh consideration before NCLAT.

NCLAT Impugned order dated 14.05.2019

A. Rejected qualms of CD of debt being time barred 

The NCLAT after having reconsidered the facts and the well settled precedents in place proceeded on the view which were categorically inter alia as follows:

1. The limitation period pertaining to ‘Other Application’ under heads of Article 137 of the Act i.e. 3 (Three) years shall apply to an application under Section 7 of the Code.
2. The Appellate Tribunal was of the view that the application in question was not barred by limitation in the manner that the right to apply under Section 7 of the Code accrued to the financial creditor only on 01.12.2016, i.e. when the Code came into existence.
3. The Appellate Tribunal also observed that 9 (Nine) properties of the CD had been mortgaged with the financial creditor and pursuant to an Order of the DRT possession of the same were also recovered by the financial creditor. In light of the above the Appellate Tribunal stated that the limitation period vis-a-vis enforcement of mortgage securities shall be governed as per Article 62 of the Act and shall be 12 (Twelve) years.
4. NCLAT also pointed out the fact that CD had made a prayer for ‘One Time Settlement’ in the month of July, 2018 but did not recorded any specific finding about the same.

SC judgement dated 14.08.2020

1. No possibility of revival of time barred debts

The SC concluded its already settled stance on the applicability of Act to applications made under the Code and sided with CD’s proposition that time begins to run from the ‘date of default’ of the CD. As a result of which no new life or revival shall be rendered to the time-barred debts. The Apex Court was of the opinion that one shouldn’t be myopic while apprehending the scope and reach of the Code. It further went on to hold that the Code was not a debt recovery machinery at the hands of the creditors rather was enacted to protect the CDs and revive the economy nationally. 

The Apex Court relying on catena of judgements such as B.K. Educational Services Private Limited v. Parag Gupta And Associates (AIR 2018 SC 5601), Innoventive Industries Ltd. Vs. ICICI Bank (2018 1 SCC 407), Swiss Ribbons Private Limited and Anr. Vs. Union of India and Ors. (2019 4 SCC 17), K.Sashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150), Jignesh Shah and Anr. Vs. Union of India and Anr. (2019 SCC Online 1254), Sagar Sharma & Anr. Vs. Phoenix Arc Pvt. Ltd. & Anr. (Civil Appeal No. 7673 of 2019) etc., put forth the following findings:

1. The Code is a beneficial legislation intended to put the CD back on its feet and is not a mere money recovery legislation; 
2. The CIRP is not intended to be adversarial to the CD but is aimed at protecting the interests of the CD; 
3. The intention of the Code is not to give a new lease of life to debts which are time-barred; 
4. The period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Act and is, therefore, 3 (Three) years from the date when right to apply accrues; 
5. The trigger for initiation of CIRP by a financial creditor is default on the part of the CD, that is to say, the right to apply under the Code accrues on the date when default occurs; 
6. The default referred to in the Code is that of actual non-payment by the CD when a debt has become due and payable; and
7. In case default had occurred over 3 (Three) years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on facts, the delay in filing may be condoned; and 
8. An application under Section 7 of the Code is not for enforcement of mortgage liability and Article 62 of the Act does not apply to this application.
    

B. Abandoning of Section 18 approach vis-à-vis written acknowledgement in Balance Sheet

While the Apex Court yet again laid down the strait-jacket formula with respect to calculation of limitation applicable to an application under Section 7 of the Code and subsequently strengthened the well founded and established point of law. The SC was also of the opinion that the presence of the debt in the balance sheet of the CD will not amount to a ‘written acknowledgement of debt’ as per Section 18 of the Act. In doing the aforesaid, the Apex Court might have missed a suitable opportunity to clear the air that surrounds the said proposition.

The Section 18 of the said Act states as follows:

“Effect of acknowledgment in writing:

• Where, before the expiration of the prescribed period for a suit of application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

• Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. 

Explanation.—For the purposes of this section,—

• an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right;

• the word “signed” means signed either personally or by an agent duly authorised in this behalf; and

• an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.”

Therefore, a bare reading of the aforesaid Section makes it amply clear that a debt is resuscitated as and when an acknowledgment of its liability is made in writing. The same paves way to the birth of a fresh period of limitation of the said debt.

Therefore, reflection of a liability in the debtor’s financials has a pivotal role to play and results into a written acknowledgement of debt as per Section 18 of the Act. Similar position has time and again been propagated by various High Courts and the Apex Court itself. The point of law was directly taken up by a Division Bench of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff. (1961 SCC OnLine Cal 128) The Court held:

“It is true that the balance-sheets were required to be made both by the Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the company’s liabilities. Those admissions though made in discharge of their duty are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of Section 19 of the Limitation Act merely on the ground that it is made under compulsion of law … The balance-sheet contains admissions of liability; the agents of the company who makes and signs it intends to make those admissions. The admissions do not, cease to be acknowledgments of liability merely on the ground that they were made in discharge of a statutory duty.”

The Apex Court in M/s. Mahabir Cold Storage v. CIT, Patna (1991 Supp (1) SCC 402) held that the registers of a company are of prima facie evidence; and the balance sheet disclosing loans and borrowings and forming part of annual returns, indeed constitute the admission and acknowledgment of the CD of its indebtedness. The Delhi High Court in Sheetal Fabrics v. Coir Cushions Ltd. (2005 SCCOnLine Del 247) was also of the view that the balance sheets along with other attachments such as Director’s Report etc. shall be read together and in conjunction to ascertain the position of liability. 

The Calcutta High Court in Darjeeling Commercial Co. Ltd. v. Pandam Tea Co. Ltd 1981 (SCC OnLine Cal 236) and Bhajan Singh Samra v. Wimpy International Ltd. 2011 (SCC OnLine Del 4888) has held even winding-up proceedings shall deem to be maintainable pursuant to  the unpaid debts being acknowledged in the balance-sheets of the respondent-company, and such acknowledgements saving the debt from being barred by limitation.

Despite a crystal-clear, settled and reaffirmed position of law on the aforementioned proposition, SC was of the opinion that reflection of debt in the balance sheet of the CD in the present case does not result into the written acknowledgement of the debt and shall not revive a time-barred claim as no averments or pleadings were made in this respect in the pleadings of the financial creditor.

At this juncture, it is imperative to note that NCLAT in its impugned order dated 14.05.2019 had also observed about the consistent presence of financial creditor’s debt in the balance sheet of the CD. The NCLAT had also analysed the Annual Report of the CD and therefore it is safe to say that the same must have been examined prior to the appeal to the SC. Therefore, the SC’s decision to abandon the proposition put forth pertaining to written acknowledgement merely on the grounds that the same was not pleaded was a pedantic approach and nothing short of hair-splitting of technicalities. The adversary party in the present case was fully aware of the case it has to meet and hence arguments to this respect were also advanced before the SC itself. Notably, the financial creditor did not travel beyond the scope of its existing pleadings. Therefore, in case the SC would have relied upon the Section 18 approach in regard to the written acknowledgement of debt in the balance sheet of the CD the same would have been essential to the essence of the appeal and the point of law in question. 

Conclusion

The SC’s judgement although clearly put forth and resettled that the limitation period of 3 (Three) years shall govern the applications under Section 7 of the Code. However, the absence of substantial and cogent reasoning as to why the debt already present in the balance sheet of the CD shall not revive the period of the time-barred debts appears to be a misleading position and a lost opportunity. Undoubtedly, the same shall give way to multitude of litigations where the Corporate Debtors would want to hide behind the curtains of this precedent even though the debts stand acknowledged as a result of its statutory duties, namely in balance sheets, directors report etc. Therefore, it is expected that sooner than later the Apex Court revisits the said position and rectify and facilitate the intermingling of the Act and the Code to meets the ends of justice.

Author:

Ms. Kritya Sinha is an Advocate practising in New Delhi, India.

Her areas of practise primarily includes Corporate and Commercial Laws. In case of queries she can be reached at adv.kritya@gmail.com.

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What is bankruptcy?

Bankruptcy is a legal procedure directed by the federal government. It aims at assisting individuals in repaying or eliminating part or all their debt. Moreover, bankruptcy can have several benefits for people who are struggling with debt. These benefits include:

• Fresh start: Bankruptcy can help you get a fresh start financially. Once you receive a discharge of your debts, you’ll no longer be legally obligated to pay them.
• Protection from creditors: Once you file for bankruptcy, your creditors are legally prohibited from contacting you or taking any legal action against you to collect their debts.
• Lower credit card interest rates after rebuilding your credit: Once you’ve filed for bankruptcy and have begun to rebuild your credit, you may qualify for lower interest rates on credit cards. When you file for bankruptcy, most of your debts are discharged, which means that they’re no longer considered valid debts. This can help improve your credit score by removing negative items from your credit report, such as late payments, charge-offs, and collections. However, it’s essential to note that it may take years for your score to recover. 

However, though bankruptcy offers immediate relief on what you owe, it’s important to note that it has a long term effect on your credit score as mentioned earlier. Not only that but it also has some risks, which include the following:

• Loss of property: In some cases, you may have to surrender some of your property to the trustee in order to pay off your debts.
• Legal fees: Filing for bankruptcy can be expensive. You’ll need to pay legal fees to an attorney who can help you file your case.

Whether or not you should file for bankruptcy is a personal decision. You should weigh the benefits and risks of bankruptcy carefully before making a decision. If you’re considering filing for bankruptcy, you should talk to an experienced bankruptcy attorney who can help you understand your options.

What to do before you file for bankruptcy

Bankruptcy is a complicated process, and you should not attempt to go through it blindly. Here are some steps you should take before you act:

• Update your paperwork- Organize your list of debts and verify the amounts for each.
• Take a look at the available options- Do all you can to repay your debt before filings.
• Financial coaching- Get a financial coach to help customize a financial plan to help get you in the right direction.
• Look for professional help- If filing for bankruptcy is the only viable option, you will need a professional to walk you through the murky waters.

Types of Bankruptcy

The process is quite complicated, and as such, the average person requires the assistance of a professional bankruptcy attorney to help the process smooth. Various rules and regulations must be adhered to and met before and during the bankruptcy proceedings. To start with, you have to show that you are unable to repay your loans. You also have to undergo a sit-in with a credit counselor who is government approved.

If there is no other alternative and you want to start bankruptcy proceedings, you will have to choose the type to file either chapter 7 or chapter 13. Let’s take a look at each type:

Chapter 7 bankruptcy

The chapter calls for a federal court trustee to watch over the liquidation of assets not exempted. The money received from the sale goes towards paying creditors. Chapter 7 bankruptcy has some dire consequences, such as loss of property and adverse credit reports that last for ten years from the filing date. Additionally, you won’t be able to use the chapter to file for bankruptcy again for at least eight years.

Chapter 13 Bankruptcy

It’s different in that you can keep your property partially or wholly after paying your debt. Your bankruptcy lawyer will help negotiate a 3 to 5 years loan repayment plan. After repaying in the agreed period, your debt is discharged even after only a part of what you initially owed.

Though the bankruptcy chapter also reflects negatively on your credit score, it may be the better option because it gives you a chance to retain some assets. Better still, chapter 13 bankruptcy fades off your credit after seven years, but you can use the same chapter to file again after two years.

Debts not forgiven

Bankruptcy can eliminate and reduce many debts; however, it does not set you completely free if you have various unforgivable debts. Such debts include:

• Child support
• Student loans
• Taxes alimony
• The government imposed fines and penalties
• Court fines and penalties
• Student loans

Conclusion

Bankruptcy can be a viable option of debt settlement when you have exhausted all the other alternatives. Doing more research on bankruptcy options and engaging a bankruptcy attorney can help ease your mind as you go through the process. For more information, go to murrylaw.net

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As New Jersey bankruptcy attorneys in Hackensack, one of the questions that constantly comes up is whether or not someone needs a bankruptcy lawyer to file. After all, we’ve all heard how expensive lawyers can be. Doesn’t hiring a lawyer for bankruptcy seem counterintuitive? The fact of the matters is that few non-lawyers have the knowledge or experience to successfully file for Chapter 7 or Chapter 13 bankruptcy or to navigate their way to the conclusion. Here are some of the things that a bankruptcy lawyer can do for you.

Determine Which Type of Bankruptcy You Qualify For

Chapter 7 and Chapter 13 have very different income requirements. If you make too much money, you may not qualify for Chapter 7 no matter how much you owe. Chapter 13 will allow you to restructure your debt and develop a three-year to five-year payment plan if you have the income to support it. With Chapter 7, you liquidate your non-exempt assets and pay your creditors through those. Both types of bankruptcies have their pros and cons and an attorney can help you decide which is right for you.

Help You Decide Whether You Should Declare Bankruptcy

Not everyone in debt can declare bankruptcy, and some who are able to probably shouldn’t. You may benefit from credit counseling instead of bankruptcy, and a good bankruptcy attorney can help you figure that out.

Enforce the Automatic Stay

With both Chapter 7 and Chapter 13 bankruptcy, the judge issues an automatic stay. This prevents creditors from pursuing debts while the stay is in force. To be able to come after you, they need to have the stay lifted—legally. A bankruptcy lawyer can make sure that all of your creditors are obeying the law.

Determine Whether You Can Keep Your Home

If you’re determined to keep your home, you may be able to do so even in bankruptcy. A Chapter 13 bankruptcy allows you to keep your residence as an exempt asset as long as it’s not already in foreclosure, but there may be a possibility even with Chapter 7. The state of New Jersey, for instance, allows you to exempt a certain amount of your home equity. It is, however, difficult to retain your home in Chapter 7 bankruptcy when you have a significant amount of equity above the exemption.

Represent You in the 341 Meeting

The 341 meeting, also known as the meeting of creditors and security holders is an opportunity for your creditors to ask you questions about your finances. While the meeting isn’t supposed to be adversarial, it can be intimidating for the uninitiated. Your attorney can prepare you for the meeting and attend it with you.

Bankruptcies in the state of New Jersey and elsewhere tend to be complicated and involve the filing of forms, paperwork, and financial affidavits. While the attorney will usually charge a retainer up front, some of their fees can be incorporated into the bankruptcy settlement.

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