Orange County Bankruptcy Attorney
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Do You Need a Bankruptcy Lawyer in Orange County?
No person or organization wants to be unable to meet its financial obligations, but bankruptcy can sometimes be the best way to eliminate, minimize, or organize overwhelming debt while returning to financial stability or maintaining normal business operations. Liquidation through Chapter 7 or reorganization through Chapter 11 can offer an individual a “fresh start” or can give a growing company the breathing room it needs to get its financial affairs in order. Our attorneys have a combined bankruptcy experience of over 75 years, and we can help you assess whether bankruptcy is your best option or whether some other form of debt reorganization or financial work-out would be preferable. To speak with an Orange County bankruptcy attorney with our firm, call us today at 949-333-7777.
When bankruptcy appears to be the best course of action for you or your company, experienced legal representation is a must from the very beginning of the process. Marshack Hays Wood takes a comprehensive approach to bankruptcy preparation, filing, and litigation, including assessing assets and liabilities, analyzing risks to discharge, determining the best type of bankruptcy proceedings for your situation, and strategizing and navigating the complex liquidation or reorganization process.
What Is Bankruptcy?
Bankruptcy is a court process that a person, business, or municipality enters into when they cannot afford to pay their debts and other obligations. There are several different types of bankruptcy, all outlined in the Bankruptcy Code. Bankruptcy provides a financial “fresh start” for individuals and businesses that are overwhelmed by debt or need refuge from their creditors while reorganizing operations. Individuals are able, after liquidation or reorganization, to “discharge” many kinds of debt so that they can move forward and seek to reestablish financial stability.
Secured claims are not dischargeable, and some other kinds of debts are also automatically excluded from discharge or may be excluded by order of the bankruptcy court. Businesses, while not entitled to a discharge, may seek to wind down through liquidation or continue operations through reorganization. Creditors will often find that an individual or business’s bankruptcy is an opportunity to ensure payment or partial payment of existing claims while minimizing the expense and hassle of debt collection.
What Is a Bankruptcy Discharge?
According to the United States Courts, a bankruptcy discharge “releases the debtor from personal liability for certain specified types of debts.” Basically, a debtor will no longer be held responsible for any unsecured debt that is discharged through their bankruptcy filing. It’s important to remember that, depending on the bankruptcy chapter you file under, the timing and the specifics of the discharge may vary. It is also possible for debtors to lose their right to a discharge.
Debtors can lose their entitlement to a discharge by acting in bad faith, concealing assets, fraudulently transferring assets prior to bankruptcy, failing to keep financial records, or failing to cooperate with their trustee, among other reasons. It is important for debtors to consult with experienced bankruptcy counsel prior to filing a bankruptcy petition to ensure that the case goes smoothly, all appropriate disclosures are made, exemptions are maximized, all non-exempt assets are turned over, and no transfers or actions will prevent the debtor from getting his or her discharge.
It is advisable for creditors to consult with experienced bankruptcy counsel when they receive notice of a debtor’s bankruptcy to ensure that their claim is timely filed, any special priorities or rights to which they are entitled are protected, and they do not run afoul of the federal injunctions that automatically arise when a bankruptcy is filed.
The attorneys of Marshack Hays Wood have a combined bankruptcy practice of more than 75 years, representing Chapter 7 and Chapter 11 Trustees, lenders and institutional creditors, individual creditors, and individual and corporate debtors in Chapters 7, 11, and 13.
How Much Does It Cost to File Bankruptcy in Orange County?
Although it may sound counterintuitive, it does cost a certain amount of money to file bankruptcy no matter where you file. In California, the general cost to file Chapter 7 is $338, while Chapter 13 costs $313. But what happens when you cannot afford to pay even this amount? In these cases, you can apply for a fee waiver or arrange to pay the fee in installments.
Keep in mind that these fees do not include bankruptcy attorney fees. You may feel tempted to handle your bankruptcy case on your own, but we strongly advise against this. Working with an Orange County bankruptcy lawyer can help you avoid costly mistakes that may result in a dismissal of your case or in creditor lawsuits.
What Is Bankruptcy Litigation?
As the name suggests, bankruptcy litigation encompasses disputes arising from, or connected with, a bankruptcy proceeding. Such disputes can involve businesses, individuals, government agencies, or organized groups. The attorneys at Marshack Hays Wood represent clients in all aspects of bankruptcy litigation.
What Are Common Examples of Bankruptcy Litigation?
Although resolution of disagreements without legal action is always preferable, it is not always possible. Resolving disputes involving insolvency is challenging because finite resources mean that some parties will not be fully compensated. It is important to choose skilled attorneys capable of maximizing your recovery and protecting your right.
Common examples of bankruptcy litigation include the following.
Preferential Transfer Lawsuits
When a bankruptcy case is filed, the trustee can recover all payments made by a debtor during the 90-day period leading up to the bankruptcy petition. Creditors have various defenses to these claims, the most common of which include an ordinary course of business defense, a new value defense, and a contemporaneous exchange for value defense.
Fraudulent Transfer Lawsuits
A bankruptcy trustee can also recover a transfer made by a debtor during the four years before the bankruptcy case was filed if the transfer was made (i) with the intent to “hinder, delay, or defraud” any creditor or (ii) while the debtor was insolvent and the debtor did not receive reasonably equivalent value for the transfer. Creditors have various defenses to these claims, including good faith and the payment of fair value.
Dischargeability Lawsuits
Typically, a debtor is able to discharge debts through the bankruptcy process. There are, however, circumstances under which a debt cannot be discharged. For example, a debt resulting from fraud cannot be discharged as long as the creditor takes steps to have the bankruptcy court declare the debt to be non-dischargeable.
Objections to Plan
When a debtor is using a plan to reorganize, creditors can object to the plan and argue that certain aspects should be changed. Some of the most common objections relate to the plan’s feasibility (the debtor’s ability to make the proposed payments), the amount offered to creditors (whether the debtor is using its “best efforts”), and whether the debtor is unfairly attempting to retain valuable assets without paying creditors in full (the absolute priority rule).
Cash Collateral Disputes
After a bankruptcy case is filed, a debtor cannot use cash or cash equivalents that are subject to a lien without a court order authorizing the use. To obtain such an order, the debtor must “adequately protect” the creditor against the risk that the value of the collateral will be diminished by the use.
Lien-Priority Disputes
When a debtor offers the same property to multiple creditors as collateral, disputes can arise with respect to the priority of the creditor’s liens. The senior position is the most valuable.
Lien-Stripping Disputes
Under certain circumstances, a debtor can force a creditor to remove a lien from the debtor’s property if the property is over-encumbered (the value of the property is less than the value of the creditor’s lien plus senior liens). If a creditor can show that the property is not “under water,” then the lien cannot be stripped away.
Proof of Claim or Objections to Claim
Creditors are entitled to file a proof of claim against the debtor, explaining the amount and basis for the debt owed. When a proof of claim is properly filed, the underlying debt is presumed to be valid. A proof of claim can be disputed if the challenger presents evidence regarding the validity of the debt. When a proof of claim is challenged, the ultimate burden of persuading the court that a debt is valid is on the claimant.
Types of Bankruptcy
There are several types, typically called “Chapters,” of bankruptcy. Which Chapter a debtor chooses will be dictated by his or her circumstances, and will significantly affect what rights a creditor has. What follows is a brief overview of the available Chapters.
Bankruptcy is complex and holds pitfalls for the unwary. Any decision you make about a bankruptcy – yours or someone else’s – should be made in consultation with an experienced Orange County bankruptcy attorney.
Below, we outline the bankruptcy chapters that our Orange County bankruptcy lawyers handle at Marshack Hays Wood.
Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy – also referred to as “liquidation” – a trustee is appointed to marshal and liquidate available assets to pay a debtor’s creditors. Chapter 7 is available to individuals and businesses, and there are no applicable debt limits. However, most debtors must be able to pass the “means test” to be eligible for Chapter 7 bankruptcy. This is a formula which takes into account a debtor’s income to determine whether that debtor may file under Chapter 7 or is required to file under some other Chapter.
Because California has very generous exemption statutes, over 95% of individual debtors filing Chapter 7 get to keep all of their assets and get a discharge of their dischargeable debts. A debtor who files Chapter 7 gets to keep “exempt assets” and must surrender “non-exempt assets.” The exemption statutes in California are very extensive. Some assets are protected in full and other assets are protected up to a dollar amount. For example, certain retirement accounts are fully exempt. On the other hand, equity in a residence is exempt either in the amount of $75,000, $100,000, or $175,000, depending on several factors.
In Chapter 7, most debts are dischargeable, but some are not. The list of non-dischargeable debts can be found in Section 523 of the Bankruptcy Code. Debts that are non-dischargeable include certain types of tax debts, certain types of domestic support obligations, certain debts incurred through fraud or willful malicious behavior, and certain debts that arise from breach of fiduciary duty.
Business entities are certainly permitted to file Chapter 7, but there are few major differences. One, business entities do not get discharges of their debts under Chapter 7. Two, business entities do not get to exempt any assets.
Chapter 9 Bankruptcy
Chapter 9 is a specialized type of bankruptcy and reorganization that specifically applies to municipalities. Federal bankruptcy law allows a variety of municipalities that may take advantage of Chapter 9 proceedings, including cities, townships, counties, community college districts and school districts. The purpose of Chapter 9 is to establish a reorganization plan between a municipality and creditors for repayment of outstanding debt.
What Happens When a Municipality Files for Bankruptcy?
Negotiated terms of Chapter 9 reorganization can offer a municipality many benefits, including lowering interest rates and extending the debt terms to make repayment more attainable. In some cases, reduction of principal balances may also be proposed. Liquidation bankruptcy is rarely an option in municipal bankruptcies.
A Chapter 9 bankruptcy proceeding usually follows five main steps:
- Local municipality files for bankruptcy, resulting in an automatic stay against debt collectors
- The Court determines the municipality’s eligibility
- Local municipality develops a Plan of Adjustment
- Creditors approve the Plan of Adjustment
- The Court approves the Plan of Adjustment
Municipal bankruptcy was first established in 1934 during the Great Depression and has been revised many times since then. Since its inception, only about 500 municipal bankruptcy petitions have been filed, making this one of the rarest types of bankruptcies to be seen in courtrooms today. Because it is not commonly practiced, it is important to find legal representation from a firm that is experienced in this type of reorganization and familiar with the specific laws governing Chapter 9 bankruptcy in the state where it is filed.
How Does a Municipality File for Bankruptcy?
Many local governments across the country are facing steep budget deficits and high debt. As a last resort, some of these municipalities have filed for bankruptcy. In order to file Chapter 9, a municipality must meet four basic requirements.
- The municipality must be authorized to file Chapter 9 under the bankruptcy laws of the state.
- The municipality must be insolvent (unable to pay debts when they are due).
- There must be a desire by the municipality to adjust its debts.
- The majority of creditors must be in agreement with the Chapter 9 proceedings.
In addition, proper legal representation is a must to protect the interests of the municipality for the benefit of all parties involved. In addition to the different ways in which these bankruptcy cases are handled, the complexities are multiplied due to the size of the municipality and the number of parties involved.
Does Marshack Hays Wood Handle Chapter 9 Bankruptcy Cases?
Finding a legal team with experience in Chapter 9 bankruptcies is easier said than done, given their relatively rare occurrence. Fortunately, California municipalities can find experienced legal help for Chapter 9 proceedings from the professional legal team at Marshack Hays Wood. Our bankruptcy attorneys have the special skill and experience to navigate these complex legal matters for the benefit of our clients.
Our law firm understands the challenges financially stressed municipalities face in reorganization planning prior to filing a petition. However, early planning is essential to ensure leverage is maintained for the benefit of bondholders, key vendors and unions. We work with all aspects of Chapter 9 proceedings to ensure they progress as smoothly as possible for everyone involved. When Chapter 9 is the only option, the experienced bankruptcy attorneys at Marshack Hays Wood are ready to help municipalities complete the reorganization process successfully.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy, also called “reorganization,” is available for individuals and businesses who want to continue operations and retain assets rather than surrender assets for liquidation. As in Chapter 13, in Chapter 11 the debtor proposes a “plan of reorganization” that sets forth the means and procedure for payment of creditor claims. Creditors vote on the plan, which is subject to rigorous requirements set forth in the United States Bankruptcy Code. The plan is subject to bankruptcy court approval and oversight.
Ideally, a trustee is not appointed and the individual or business retains all assets and serves as the “debtor in possession.” In some cases, committees of creditors are organized to assist in the case, and those committees can wield significant power in negotiation and confirmation of a Chapter 11 plan. Chapter 11 reorganization plans involve restructuring, and range from relatively simple to incredibly complex. We strongly recommend working with experienced bankruptcy lawyers for a Chapter 11 filing.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a reorganization proceeding rather than a liquidation. It offers individuals or sole proprietorships the ability to propose a plan to repay all or a portion of their debts over three to five years. The Chapter 13 bankruptcy trustees, appointed by the Office of the United States Trustee, help Chapter 13 debtors to organize their assets, communicate with creditors, and make payments.
Debtors with a higher income – who are therefore not eligible for Chapter 7 – may choose Chapter 13 reorganization instead. Chapter 13 offers the additional benefit of allowing a debtor to retain their house and even modify certain kinds of secured claims. Debt limitations apply, and debtors with income too high for Chapter 7 and debts too substantial for Chapter 13 are restricted to filing under Chapter 11.
Should I Declare Bankruptcy?
Bankruptcy is a complex legal process that almost always requires the assistance of an experienced attorney. Whether you are considering liquidation or reorganization, there are aspects of bankruptcy that may not be immediately evident and can substantially affect the outcome of the case. Your attorney can help you spot those issues.
You will also want to consider the collateral effects of a bankruptcy: how long will it take your credit to recover? Will bankruptcy impact your business relationships? Will it affect your spouse or your dependents? Bankruptcy is not a decision to be taken lightly or with imperfect understanding, and it is not a cure-all. However, in the right circumstances, it can provide the “fresh start” to honest but unfortunate debtors for whom the system was designed. If you have more questions, or would like to discuss your options, please contact us. We can help.
Rather than working with a shady debt relief agency that cannot guarantee you legal protections, work with an experienced bankruptcy attorney. We will help you file your bankruptcy petition so that you can receive the legal protections of the automatic stay. Some of the protections of the automatic stay include the ability to stop creditor harassment, stop wage garnishment, stop creditor lawsuits, stop foreclosure, and much more. We will also help you adequately prepare for any appearances you must make in the Orange County bankruptcy court.
What Type of Bankruptcy Is Right for Me?
The answer to this question largely depends on your individual circumstances and needs. If you’re drowning in credit card debt or other obligations, you can greatly benefit from bankruptcy relief. In order to find out which chapter is right for you, you’ll need to take a bankruptcy means test. This test will determine whether or not you qualify for chapter 7 specifically. If you do not qualify for chapter 7, you will likely file chapter 11 or chapter 13.
The best way to understand which chapter will meet your needs is to speak with a bankruptcy law firm about your case.
Do I Need to Hire a Bankruptcy Lawyer?
Although you are not required to hire a bankruptcy lawyer, we strongly recommend doing so. Attempting to tackle a complicated bankruptcy case on your own can be extremely difficult, especially if you have no experience with these cases. Even small mistakes or missed deadlines could lead to a dismissal of your case. Working with a local Orange County law office will ensure that you do not miss any filing deadlines, that you fill out your paperwork properly, and that you adhere to all local, state, and federal laws.
Contact the Orange County Bankruptcy Attorneys at Marshack Hays Wood
If you find yourself in a financial crisis and you’re unsure of where to turn, the Orange County attorneys at Marshack Hays Wood are here for you. We provide legal assistance to individuals, companies, and even small business owners who are struggling with financial difficulties and debts. To schedule your free consultation with a highly skilled attorney, contact our law office at 949-333-7777 today. We handle multiple types of bankruptcy in Orange County, including Chapter 7, Chapter 9, Chapter 11, and Chapter 13.
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We see the big picture! The attorneys at Marshack Hays Wood are well-versed in protecting creditors and their rights both before and after a bankruptcy case is filed.
