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Parties Involved When Someone Files for Bankruptcy

The question comes frequently to our office – who is involved when someone files for bankruptcy?  In reality, less parties are usually involved than most people think.   Let’s discuss who is involved when someone files for bankruptcy.

The Debtor

The debtor is the primary person (or persons) involved when filing for bankruptcy. The debtor is the person or company who needs their debts relieved.   Usually the debtor files a bankruptcy petition asking the court for bankruptcy relief.  Debtors range from a single filer, to a married couple, all the way to the largest corporations in America.

The Case Trustee

The Case Trustee (or Interim Trustee) is the person in charge of your Chapter 7 or Chapter 13 case.  The trustee makes sure that your case is handled correctly, making sure that all bankruptcy rules are followed. The Trustee is also responsible for your property during the bankruptcy case, making sure that all property (or income) that should go to your creditors is properly turned over to repay your debts.

The Bankruptcy Court and Judge

You are always assigned a bankruptcy Judge during your bankruptcy case.  However, most cases never come up in front of the Judge because there are not disputes in most bankruptcy cases.   The Bankruptcy Court is the forum and mechanism in which you file your case.  The bankruptcy court’s clerk office is responsible for receiving your bankruptcy petition request and managing the basic administrative functions of your bankruptcy case.

The United States Trustee

The United States Trustee is the “sheriff in town” during the bankruptcy process. This party makes sure that all bankruptcy rules are being followed and that no bankruptcy fraud is occurring.  This office is also required to randomly “audit” a certain amount of bankruptcy cases each year just to make sure that the system is being properly followed through a “spot checks.”  Their direct involvement is not common on most bankruptcy cases.  The United States Trustee also takes a more active role in larger Chapter 7 and Chapter 11 bankruptcy business cases.

The Creditors

The other major party – perhaps the most important in some ways – are the creditors.  All creditors of the debtor are notified when a bankruptcy is filed. The creditors are allowed to make objections in very limited situations.  All creditors must file a proof of their claim if they want to be paid by any amounts collected during the bankruptcy process.  However, in most Chapter 7 cases, the creditors can do very little during the process.  In the majority of Chapter 7 cases, the creditors do very little except just receive their bankruptcy notice and then write-off or cancel their debt when they receive the Chapter 7 discharge notice.

Photo of judge with gavel, Parties in bankruptcy

Timeshares and Bankruptcy

Exotic-Beach-HQ-Wallpaper-6

Timeshares can frequently be handled according to your preference in bankruptcy: you can either KEEP them or even better for many people  . . . YOU CAN GET RID OF THEM.    A discussion of timeshares and bankruptcy should probably be broken down into three topics: 1) How to retain timeshares in bankruptcy, 2) How to surrender timeshare responsibilities in bankruptcy, and 3) How to recognize timeshares too valuable to retain in bankruptcy.

How to Retain a Timeshare in Bankruptcy

Many times the value of a timeshare is either too insignificant to administer in bankruptcy or your State’s bankruptcy exemptions will protect it in bankruptcy.   Because your timeshare may fit within this value range, it may be possible to retain your timeshare even though you are filing for bankruptcy.

In order to retain a timeshare in bankruptcy in Indiana, we first check to see how much similar time shares sell for.   Many times there is either a very low-price-fetching or NO market for many timeshares.   Other times timeshares may value in very low such as for $1000-$3000 for the timeshare right.  Timeshares in this range will be protected many times by Indiana’s “tangible property and OTHER REAL ESTATE” bankruptcy exemption.   Therefore, if this exemption is properly taken and the Trustee “abandons” your time share, you usually can keep your time share property.   Remember, ALL regular fees and ongoing maintenance amounts must continued to be paid if you plan on retaining the timeshare.

How to Surrender Timeshare Responsibilities in Bankruptcy

To many of our clients, keeping a time share through bankruptcy is the LEAST concern on their mind.   Most of our clients would prefer to GET RID OF THE TIMESHARE property.   They can no longer afford the fee and maintenance on the property.   What sounded great during the timeshare presentation has now become a nightmare.   Fortunately, timeshare responsibilities can be fully surrendered in bankruptcy.

Because bankruptcy can discharge debt and reject contracts, timeshare debt and ongoing contract responsibilities can be FULLY eliminated through a bankruptcy filing.  To surrender a timeshare, you need to file bankruptcy, list the timeshare creditor, and clearly state your intention to surrender in the Statement of Intention section of the filing.  You may also be requested to “deed” back the property to the timeshare company at some point.

How to Recognize Time Shares that are Too Valuable to Retain in Bankruptcy

Although it is very rare, some timeshares are too valuable to retain in bankruptcy.   Most time shares only can generate some $2000-$3000 or less in value in an open market because they simply possess too little rights with too many ongoing fees – these type of timeshares can almost always be retained during bankruptcy.  But, as in every area in real estate, some timeshare situations can be vastly different than the industry “norm.”  Timeshares, in theory, can be worth even hundreds of thousands of dollars: it is VERY possible that a time share can exceed whatever Indiana (or other state) exemption allots for your bankruptcy protection.

Time shares that could be of VERY substantial value should always be fully analyzed by a real estate Agent, appraiser, or timeshare expert.  A professional valuation of the timeshare will allow your bankruptcy attorney to help you make the plans necessary for retaining as much value from the timeshare situation as possible.   Remember, all time shares are not treated equally: value is the key to how your time share will be treated in bankruptcy!

Conclusion: You Can Usually Achieve Your Goal with Timeshares and Bankruptcy

Whether you want to surrender or retain your timeshare, you can usually achieve your goal in bankruptcy.  Bankruptcy usually allows you to completely reorganize your financial status no matter what situation you are facing.  Therefore, timeshares are usually no major obstacle to the debt relief you can achieve in bankruptcy.

 

 

 

Will Bankruptcy Stop Car Repossession?

car-loan-after-repossession

Several of our Indianapolis bankruptcy clients ask, “Will bankruptcy stop car repossession?”  The answer is YES, filing either an Indiana Chapter 7 or Chapter 13 bankruptcy will immediately stop an automobile from being repossessed.  When filing a Chapter 7 or Chapter 13 bankruptcy it is sometimes even possible to have a vehicle that was recently repossessed returned to you IF they have not yet sold the vehicle.

When you file a Chapter 7 bankruptcy the repossession is immediately stopped, and it is likely that the repossession can be postponed for 2-6 months.  If you cure the loan or come up-to-date on the loan before the bankruptcy case is closed, then you can usually keep the vehicle forever as long as you keep making payments on the loan until it is paid off.

Chapter 7 is not the only way to stop repossession.  Chapter 13 can be a very powerful tool to stop the repossession.  Chapter 13 not only immediately stops repossession, but it also has a mechanism in it that will restructure the vehicle payments.  This mechanism allows you to pay arrears (payments that are past due), and it also allows you to restructure the car loan so that you can pay it over time often in lower monthly payments.

There is one misconception that I would like to address about vehicles and bankruptcy.   Many times our clients are stressed out because they worry that they will lose their car if they file bankruptcy.  Most of the time you can keep your car when you file bankruptcy.  However, you must continue to make the payments either directly to the creditor or to the Trustee in Chapter 13 cases.  The rare time that you can’t keep your car when filing bankruptcy is if your car is very high-valued and paid-off.  In this rare circumstance, the vehicle’s paid-off value can exceed Indiana’s bankruptcy exemptions.  Since this is very rare, you can almost always keep your cars when you file for bankruptcy.

If you are behind on your vehicle and it is going to be repossessed, there is still hope.  Don’t hesitate to give our office a call today to schedule a free face-to-face consultation.

-Indianapolis Bankruptcy Attorney John Bymaster