“B” in the Bankruptcy Alphabet is for “Business Bankruptcy” for Individuals Trying to Trying to Retain a Valuable Car

 in the Bankruptcy Alphabet is for “Business Bankruptcy” for Individuals

By Christopher C. Carr, Esq., Chester County Bankruptcy Lawyer

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

The US Supreme Court has held that individual debtors may file under the provisions of Chapter 11 of the Bankruptcy Code.  This can be very valuable for persons owning high value cars in certain circumstances.

In contrast to a typical consumer bankruptcy under Chapter 7 or 13 however, Chapter 11 is generally designed for business reorganization bankruptcies. Chapter 11 cases tend to be complicated, as well as confusing and expensive for the debtor and the rules are generally less appropriate and less favorable for the consumer.  For example, unlike a Chapter 13 case, a Chapter 11 case may not be dismissed or converted to a Chapter 7 case as a matter of right by the debtor and creditors must generally vote on the plan.

It is advisable for a careful review to be performed by a bankruptcy attorney to ensure that a Chapter 11 is necessary as in the vast majority of cases a Chapter 11 will not be the correct choice for an individual.

But there is at least one very important circumstance under which an individual might choose an 11, one which may actually be very advantageous in the case of high cost rapidly depreciating automobiles.  A debtor who seeks to cram down (reduce the debt to the present day fair market value of the collateral) a lien on an automobile will be limited by the 910 day rule. If the vehicle was purchased less than 910 days before filing the bankruptcy petition then the debtor cannot cram down the lien in a Chapter 13 plan. However, under Chapter 11, no such time requirement exists. Hence if the vehicle is worth less than the loan a motion to determine secured status may be in order. The bankruptcy court can then value the vehicle and the debtor can pay off the vehicle in the Chapter 11 plan.  But unless the vehicle was  highly valuable when purchased the high cost even of a typical Chapter 13 case will outweigh the benefit of the cram down.

Let’s take a look at the economics from the client’s point of view. The minimum cost to the client of a simple Chapter 11 is $10,000 plus $1,039 filing fee as compared to approximately $3,000-3,500 for a 13 plus $274 filing fee.  It is well known that that most luxury automobiles lose approximately 15% per year in the early years of ownership (when the 910 day rule would prohibit a cram down in a 13) whereas the debtor may have paid only interest and no principal so far on the auto loan. At the 2 year mark a luxury car that sold for $80,000 might now be worth $66,000 but the debtor might still owe close to $80,000 assuming payments are up to date.  Under this example, all else being equal, the debtor might well want to elect to do a Chapter 11 so as to be able to cram the car down to its blue book value and save a maximum $16,700 after net fees and costs are deducted.  But now let’s say that the same hypothetical debtor owned a less prestigious vehicle with a purchase price of say $20,000.  If after 2 years of ownership, if it could be crammed down to $14,000, the net cost of a Chapter 11 would be greater than the $6,000 savings generated. This individual, if possible under the circumstances, might want to wait out the full 910 days and declare a Chapter 13 bankruptcy. There are additional factors which may favor a Chapter 11 which are beyond the scope of this article. Again, a thorough review of the matter is strongly advised however.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

Other attorneys playing the bankruptcy alphabet game (more “B” topics from consumer lawyers around the country):

Bad Faith Filing    Miami Bankruptcy Attorney, Dorota Trzeciecka

Bank Account    New York Bankruptcy Lawyer, Jay S. Fleischman

Bank Account   Daniel J. Winter, Chicago Bankruptcy Attorney

Bank Account Levy   Philadelphia Bankruptcy Lawyer, Raymond Kempinski

Bank Tips    Wisconsin Bankruptcy Lawyer, Bret Nason

Bankruptcy     Taylor Michigan Bankruptcy Lawyer, Christopher McAvoy

Bankruptcy Abuse Prevention and Consumer Protection Act Livonia Michigan Bankruptcy Attorney, Peter Behrmann

Bankruptcy Estate  Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein

Bankruptcy Mill   Chicago Bankruptcy Attorney, Kyle A. Lindsey

Bankruptcy Petition Preparers    Colorado Springs Bankruptcy Attorney Bob Doig

Bankruptcy Petition Preparers    Los Angeles Bankruptcy Law Monitor, Christine Wilton

Bankruptcy Timeline    Pittsburgh Bankruptcy Attorney Shawn N. Wright

Bar Date    Ormond Beach Bankruptcy Attorney, Lewis Roberts

Benefits of Chapter 13    Vermont-New Hampshire Bankruptcy Lawyer, Michelle Kainen

Best Efforts Test    St. Louis, Missouri Bankruptcy Attorney, Nancy Martin

Best Interest of Creditors    Honolulu Bankruptcy Attorney, Stuart Ing

Beware of these Credit Card Offers    Marin County Bankruptcy and Consumer Attorney, Catherine Eranthe Bifurcate    Tuscaloosa and Birmingham Bankruptcy Lawyer, Melinda Murphy Dionne

Borrow    San Francisco Bankruptcy Attorney, Jeena Cho

Budget    Columbus, Ohio Bankruptcy Attorney, Athena Inemboildis

Budget     Birmingham Bankruptcy Attorney, Elizabeth Johnson

Budget     Charlotte Bankruptcy Attorneys, Collum & Perry

Business    Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell

Business   Northern California Bankruptcy Lawyer, Cathy Moran

Business & Individuals    Philadelphia Suburban Bankruptcy Lawyer, Chris Carr

Business bankruptcy    Los Angeles Bankruptcy Blog, Mark J. Markus

Businesses and Business Debt   Newnan Georgia Bankruptcy Lawyer, Rick Palmer

Buy Low and Sell High   Cleveland Area Bankruptcy Lawyer, Bill Balena

Bad Credit    Houston Bankruptcy Attorneys, Busby & Associates

©Christopher C. Carr, Attorney at Law 2011, All Rights Reserved

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality Chester County Bankruptcy Practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!

I also provide Mortgage Modification Services.

I also provide Debt Settlement; IRS Tax Settlement & Mortgage Mod Services NATIONALLY.