Articles Posted in Chapter 13

When people think of bankruptcy they often think of it as being one thing, a bankruptcy. However there are actually six different “Chapters” in the bankruptcy code, four of which are available to individuals in the United States. The other two being for non-residents who want to file an international bankruptcy case or for a municipality that needs to reorganize.

The most common bankruptcy to file is Chapter 7. Chapter 7 is the liquidation form of bankruptcy. You are allowed to keep a certain amount of exempt property, the remainder of your assets are liquidated and dispersed to your creditors on a pro rata basis. Your unsecured creditors are generally discharged and your case is usually closed in four to five months. This can be limited by how much money you make per month. If you make too much money, you may not be able to file this chapter.

The next most common bankruptcy is Chapter 13. This is a reorganization bankruptcy where your debts are characterized and given priority based on those characterizations. Debtors in this kind of bankruptcy have to make payments toward their unsecured debts of their disposable monthly income for three to five years. There is a so called, “debt ceiling” to file this kind of bankruptcy, i.e. if you owe too very much money, you cannot file.

One of the most common reasons for filing a bankruptcy is due to illness or other medical problem. In fact, according to the Census Bureau, one in six Americans lives without health insurance.

Most of us live on the edge in the current economic climate. According to Census data the average American cardholder carries about $5,100 in revolving debt at any one time. All it takes is one accident or illness and we’re behind on our bills. Then the credit card companies increase interest rates and it quickly becomes impossible to get back on our feet.

Declaring bankruptcy is not an easy decision, but sometimes it’s the only thing that can get life back on track. Medical debts incurred for reasonable health and welfare can almost always be discharged in a bankruptcy and as long as you’re well enough to return to work, your life can start getting back to normal.

Both Chapter 7 and Chapter 13 bankruptcy filings are down 16.35% when compared to the year to date filings from last year. These filings, which are traditionally down at the end of December and early January traditionally peak in the month of March. This is likely because people hold off filing their cases for those two months due to the holidays and come around to filing as soon as March hits and the financial strain of the holiday season is over. You can see the peaks on the above graph. Blue represents 2010, while red represents this year thus far.

Hopefully, this is a sign of economic recovery, however it may just say that those who were going to bankrupt have already done so.

The Las Vegas Mobster Museum is headed to court, but not for racketeering. The museum that houses the world’s largest collection of organized crime artifacts (other than the FBI evidence room), has found itself faced with a Chapter 11 bankruptcy filing citing $5.8 million dollars in debt.

This museum’s debt is proportionally greater than the amount Capone owed to the IRS. When Capone was arrested in 1931 he owed $215,000 to the IRS. According to WestEgg.com this is the equivalent of about $3 million dollars today (after adjusting for inflation) and lead to Capone being given an eleven year prison sentence.

The Mobster Museum will be purchased for $2 million by JVLV Holdings LLC. The former developer, Jay Bloom, is faced with accusations stemming from overstated potential daily visitors and using corporate money to pay for personal automobiles, credit card bills and groceries. Depending on Mr. Blooms testimony, these transactions may be a violation of the bankruptcy code under 18 U.S.C. § 152. which protects against fraud in bankruptcy cases. Even if so, the maximum imprisonment under this statute is only five years, which is quite light when compared to Capone’s eleven. I guess this tells us something we already knew- that it’s bad to lie in bankruptcy court, but it’s far worse to lie to the IRS.

The filing fees for the Jacksonville District Court increased November 1st. The fees for filing are as follows:

Unfortunately, everyone is hard pressed for money these days. This includes the government, which appears to have lead to this cost increase. It does make one wonder if the people who are bankrupt are the ones who should be paying extra when they really are the ones who have the least.

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