Dismissed Chapter 13 bankruptcy gives creditors options

Dismissed Chapter 13 bankruptcy gives creditors options

| Nov 27, 2012 | Chapter 13, Firm News

A federal bankruptcy court serving Memphis, Tennessee, has dismissed the bankruptcy case of an investor who had sought to develop an entertainment venue. Before filing for Chapter 13 last February, the business owner had apparently fallen behind in her payments to several contractors whom she had retained for her construction project.

The bankruptcy court dismissed the case when the investor failed to make her monthly Chapter 13 payments as scheduled. A person needing a fresh financial start following failed business ownership can get debt relief by filing Chapter 13. However, in exchange, the debtor agrees to turn over a portion of his or her income each month, which will in turn go to pay the creditors. Chapter 13 can help a business owner pay off large business debts for which he or she may have had to co-sign but still keep the business afloat.

However, if the person does not pay each month as required, the court may dismiss the bankruptcy or require the person to pursue another type of bankruptcy. Once the bankruptcy gets dismissed, creditors— in this case, the contractors— are free to use all legal means to collect their debts.

This is not necessarily a good thing for creditors if the debtor has no money or assets with which to satisfy the debt. It is possible in this case that the contractors preferred to accept a share of the investor’s monthly payments, knowing that they would get nothing otherwise.

However, if this investor has money or assets, the creditors may be able to seize them despite the debtor’s wishes. For this reason, it is very important for any Chapter 13 debtor to make his or her monthly payments timely. In order to do that, however, debtors may need the assistance of an attorney who can help them obtain an affordable monthly payment that they can both pay and still have a reasonable quality of life.

Source: Sequoyah County Times, “Justice bankruptcy dismissed, contractors to hold bag,” Dianna Dandridge, Nov. 2, 2012