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Which Bills Should I Keep Paying Before an Arizona Bankruptcy?

Which Bills Should I Keep Paying Before an Arizona Bankruptcy?

There are so many factors and potential issues that can affect the best course of action in a bankruptcy case. A bankruptcy petition must be filed correctly so that the debtor can enjoy all of the benefits that bankruptcy has to offer. There are also certain actions that a debtor should engage in and avoid before filing a bankruptcy petition with the court. If you are preparing a bankruptcy filing, you should even be aware of which expenses you are paying. You can save money by stopping payment on some of your expenses, but it can create problems if you stop paying other bills. Read on to learn more tips about which bills to continue paying while you prepare to file for bankruptcy. If you have more questions or are seeking quality representation from a Phoenix bankruptcy attorney, call 602-509-0955 for your free consultation with our firm.

Image of a lawyer's hand holding a gavel in an office, representing the decision-making process in bankruptcy cases


Filing for bankruptcy doesn’t erase secured debts. If you are still paying off the mortgage on your home, your mortgage is a secured debt and the house is a secured asset. Keep making your payments or your creditor will proceed with a foreclosure once your case is complete. Your creditors can also request permission from the court to proceed with a collection effort, such as a home foreclosure, while the case is still active through a Motion for Relief from the Automatic Stay.

Second Mortgage

Depending on your circumstances, continuing to pay a second mortgage may only be a drain on your resources. If you owe more on your home than it’s worth and have a second mortgage, Chapter 13 bankruptcy provides an opportunity to discharge that secondary home mortgage. If you are unsure about your home’s value compared to your mortgage balances or which chapter of bankruptcy you will file, you can discuss your situation for free with one of our Arizona bankruptcy lawyers by calling 602-509-0955.


Most renters prefer that their landlords never find out about their bankruptcy filings. This is possible because there is an option on bankruptcy petitions to exclude landlords from the debtor’s mailing list of creditors. But if a bankruptcy debtor wants to use their filing to cancel their rental lease, clearly the landlord will need to be notified. This option can be used when the debtor can no longer afford their rent and has a more affordable option available- the typical fees associated with breaking a lease will be wiped away with bankruptcy. Otherwise, failure to pay your rent during your bankruptcy can give your landlord cause to evict you once the bankruptcy- and the protections provided to you by the automatic stay- are complete. Back rent from a prior eviction is a debt that can be cleared by a bankruptcy filing.


Unpaid utility bills can be discharged by a bankruptcy filing, but your utility providers don’t have to keep providing you with services if you discharge their bills in bankruptcy. For some bills, finding a new provider can be simple enough- for example, if you discharge your Verizon cell phone bill in your bankruptcy filing, you can switch to T. Mobile, AT&T, or another one of their competitors. But you won’t always have a choice in provider for every type of utility. If you move to a new home, you may only have one choice for utilities like electricity and home internet. Here, you may have to repay the balance owed to your utility provider to renew services despite your legal obligation to pay the debt already being cleared.

Insurance Coverage

Filing for bankruptcy won’t affect your health insurance, auto insurance, etc. Keep paying these monthly expenses so that your coverage doesn’t lapse- this will end up costing you more than staying current with your bills.

Credit Cards

What happens with your credit cards in bankruptcy will depend on the chapter that you file. They are wiped out by Chapter 7, but a Chapter 13 bankruptcy debtor may end up paying off some or all of their credit card debts in their payment plan. So if you plan to file for Chapter 13 bankruptcy and have a while to wait before filing but need an available balance on your credit card, you might want to make a payment. Otherwise, it usually isn’t strategic to continue paying off a credit card when you know that you will be discharging it in bankruptcy shortly. That isn’t to say that you should max out all of your credit cards- there are limits on spending before filing meant to prevent this type of abuse of the bankruptcy system. Don’t spend over $800 on luxury items in the 90 days before your bankruptcy filing. You should also avoid cash advances on your credit cards over $1,100 in the 70 days before your bankruptcy filing. If your credit card companies suspect you of fraud, you could be subject to one or more adversary proceedings during your bankruptcy case. For more assistance with your questions and concerns about your credit cards before filing for bankruptcy, call 602-509-0955 for your free phone consultation with our firm.

Personal Loans

Personal loans are unsecured debts that can be erased by bankruptcy. Some personal loans are through financial institutions, but they can also be from friends and family. Discharging your financial obligation to repay someone you know probably won’t discharge your moral obligation to pay back someone that you know. But it isn’t recommended to pay back your friends and family while preparing for a bankruptcy filing. This is considered a preferential payment because you would be paying back “insiders” in favor of your other creditors. If the trustee finds evidence of preferential payments in your bankruptcy petition, it can have disastrous consequences. The trustee can utilize a “clawback,” where the trustee would demand the return of any funds paid to insider creditors. This can create delays and extra costs in your case.

Child Support

Child support is not discharged by bankruptcy and is one of the only debts that is immune to the Automatic Stay. Only a Chapter 13 bankruptcy that fully pays back child support can stop a child support wage garnishment. Failure to pay child support doesn’t just create debt- it can have negative repercussions such as a driver’s license suspension or even criminal penalties. The expenses that should be paid in favor of child support are few and far between.

Have a Monthly Expense Not Described Here? Contact Our Firm for a Free Consultation.

Paying some bills when you anticipate a bankruptcy filing soon might be a waste. Your bankruptcy lawyer can help you strategize where to direct your funds while preparing for bankruptcy so that your case can proceed smoothly. Proper planning can help you get the most out of your bankruptcy. At Phoenix Bankruptcy Lawyers, we have represented countless clients in situations like yours to clear debts and move forward with a clean slate. When you’re ready to get started with your free consultation with one of our experienced Phoenix and Tucson bankruptcy lawyers, you can call 602-509-0955.


Phoenix Bankruptcy Lawyers

668 N. 44th St. Set 320
Phoenix, Arizona 85008

Phone: (602) 509-0955

Who Loses Money in a Chapter 7 Bankruptcy Filing?

Who Loses Money in a Chapter 7 Bankruptcy Filing?

Blog by Phoenix Bankruptcy Lawyer, Alison C. Briggs

Chapter 7 bankruptcy is a legal process that provides individuals and businesses with a fresh financial start by eliminating most of their unsecured debts. While it offers significant relief to those struggling with overwhelming debt, it’s essential to understand that not everyone benefits equally from a Chapter 7 bankruptcy filing. In this blog, we will define Chapter 7 bankruptcy, discuss the individuals and entities impacted by such a filing, and suggest why it’s wise to hire a Phoenix Bankruptcy Lawyer, specifically from My AZ Lawyers, one of the leading debt relief firms in Phoenix.

Lawyer in Phoenix, AZ gesturing during a consultation with scales of justice and a gavel on the desk, symbolizing Chapter 7 bankruptcy legal services.

Defining Chapter 7 Bankruptcy in Phoenix

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is a legal process that allows individuals and businesses to discharge or eliminate their unsecured debts, such as credit card debt, medical bills, and personal loans. In a Chapter 7 bankruptcy, a bankruptcy trustee is appointed to sell non-exempt assets, if any, and distribute the proceeds to creditors, with the remaining eligible debts discharged.

It’s important to note that not all debts can be discharged in a Chapter 7 bankruptcy. Certain obligations, like child support, alimony, student loans, and some tax debts, are generally not eligible for discharge.

People Impacted by a Phoenix Chapter 7 Bankruptcy Filing

  • Debtor: The debtor, or the person or entity filing for Chapter 7 bankruptcy, is the most directly impacted party. They stand to benefit from the elimination of unsecured debts but may lose non-exempt assets in the process. Exempt assets, which vary by state, are protected from liquidation in a Chapter 7 bankruptcy.
  • Creditors: Creditors are individuals or entities to whom the debtor owes money. In a Chapter 7 bankruptcy, creditors may lose money as their unsecured debts are discharged, and they may receive only a fraction of what they are owed from the liquidation of non-exempt assets. Secured creditors, who have collateral securing their loans, may not lose as much as unsecured creditors.
  • Bankruptcy Trustee: The bankruptcy trustee is appointed by the court to oversee the bankruptcy process, including the sale of non-exempt assets and the distribution of proceeds to creditors. The trustee’s role is to maximize the amount of money that can be distributed to creditors.
  • Co-signers and Guarantors: If someone has co-signed a loan or acted as a guarantor for the debtor, they may be held responsible for the debt if the debtor’s obligation is discharged in Chapter 7 bankruptcy. This can lead to financial losses for co-signers and guarantors.
  • Spouse and Family Members: If the debtor is married and files for Chapter 7 bankruptcy individually, it may still impact the non-filing spouse to some extent, as joint debts and shared property could be affected. However, the non-filing spouse’s separate assets and credit are generally protected.
  • Employees and Business Partners: In cases where a business entity files for Chapter 7 bankruptcy, employees may lose their jobs, and business partners may face financial losses if the business assets are liquidated to pay off creditors.

Why Hire a Phoenix Bankruptcy Lawyer from My AZ Lawyers

Filing for Chapter 7 bankruptcy is a significant legal and financial decision that can have far-reaching consequences. Here’s why it’s advisable to hire a Phoenix Bankruptcy Lawyer from My AZ Lawyers:

  • Expertise: Attorneys at My AZ Lawyers specialize in bankruptcy law and have extensive knowledge and experience in guiding individuals and businesses through the Chapter 7 bankruptcy process. Their expertise ensures that you receive the best legal advice and representation.
  • Customized Solutions: Each bankruptcy case is unique, and a skilled attorney can assess your specific financial situation to determine the most suitable approach for debt relief. They will help you understand your options and create a tailored strategy to protect your assets and discharge eligible debts.
  • Asset Protection: Bankruptcy lawyers understand the exemptions available under Arizona law to protect your assets from liquidation. They can help you make informed decisions about which assets you can retain during bankruptcy.
  • Legal Advocacy: When you hire a bankruptcy attorney, you have an advocate who will represent your interests throughout the bankruptcy process. They will communicate with creditors, the bankruptcy trustee, and the court on your behalf, relieving you of the stress of handling complex legal matters.
  • Avoid Mistakes: Filing for Chapter 7 bankruptcy without legal guidance can lead to costly mistakes and potential loss of assets. Bankruptcy attorneys ensure that you adhere to all legal requirements, helping you achieve the best possible outcome.

Chapter 7 Bankruptcy in Phoenix

Chapter 7 bankruptcy can provide much-needed financial relief for individuals and businesses drowning in unsecured debts. However, it’s crucial to recognize that not everyone benefits equally from a Chapter 7 bankruptcy filing, as creditors, co-signers, and others may incur losses.

To navigate the complexities of Chapter 7 bankruptcy in Phoenix effectively and protect your interests, it’s highly recommended to hire a Phoenix Bankruptcy Lawyer from My AZ Lawyers, a reputable debt relief firm in Phoenix. Their legal expertise and personalized guidance can make a significant difference in achieving a successful bankruptcy outcome while minimizing potential financial losses. Remember that seeking professional legal counsel is a crucial step toward securing your financial future.


Phoenix Bankruptcy Lawyers

668 N. 44th St. Set 320
Phoenix, Arizona 85008

Phone: (602) 509-0955

Bankruptcy Filing May Signal the End of This Popular Restaurant Chain

Bankruptcy Filing May Signal the End of This Popular Restaurant Chain

Boston Market has long been an affordable chain restaurant that families can rely on for a convenient meal, especially if they like rotisserie chicken. However, the chain’s owner, Jay Pandya, filed a personal bankruptcy in the state of Pennsylvania on December 8, 2023. Pandya’s filing comes in the wake of numerous lawsuits from a variety of creditors. Vendors and franchisors are pursuing him for unpaid bills, and employees are pursuing him for unpaid wages. This can quickly become a business owner’s worst nightmare, especially with a company that has seen falling profits in recent years. Personal bankruptcy can shield Pandya from his creditors, who will need a motion for relief from the automatic stay if they wish to continue with a lawsuit while his bankruptcy is in good standing. Unfortunately, Boston Market’s story shows that people have less disposable income available for dining and this could result in many people losing their jobs. Personal bankruptcy can shield you from creditors and clear debts that you can’t afford to pay. To learn more about bankruptcy in Arizona, call 602-509-0955.

A gavel on a desk with a blurred lawyer behind it, representing legal action related to bankruptcy

How Boston Market Ended Up Here

This filing is only part of a long period of financial struggles for Boston Market. Pandya came to own Boston Market when his company, Engage Brands (under the Rohan Group of Companies) purchased it in 2020. Pandya also owns Yum Brands, which owns fast food companies like KFC, Pizza Hut, and Taco Bell. Yum Brands also used to own Long John Silver’s and A&W Restaurants. Pandya as an individual is a huge player in the fast food industry. But Engage Brands originally acquired Boston Market while it was in the midst of financial struggles and Yum Brands declared bankruptcy during the pandemic.

Boston Market’s legal and financial woes may have irreparably damaged its reputation as a business. In May 2023, Boston Market’s Denver headquarters were seized by local authorities. This seizure also included three restaurant locations in Aurora, Colorado. A distraint warrant, which allows the Department of Revenue to seize business assets and change the locks on the doors, was issued due to Boston Market’s back taxes and unpaid wages. The amount owed was reportedly about $300,000. They were able to settle the balance and reopen their Colorado doors. Just a few months later, Boston Market faced a similar issue in New Jersey. In August 2023, 27 Boston Market locations in New Jersey were shut down due to the chain’s failure to pay $630,000 in wages to 314 employees. The total unpaid wages, fines, and other fees came out to approximately $2.5 million. Over the past few years, Boston Market has closed several hundred locations and not opened any new ones. While Pandya’s bankruptcy is a personal one, his control over the company affects many people. It will be up to the court to decide, through his bankruptcy, if keeping Boston Market in business will be in the creditors’ best interests.

Examples of Successful Restaurant Bankruptcy Cases

Most businesses either file for Chapter 11 bankruptcy or Chapter 7 bankruptcy. Chapter 11 bankruptcy can be used to reformulate a business, emerge, and continue operating, or shut down. Chapter 7 bankruptcy only offers business debtors the choice to shut down. Many restaurants have used bankruptcy to deal with debts and creditors, with many of them being forced to do so due to the pandemic. Examples of restaurants that have previously declared bankruptcy include:

  • Chuck E. Cheese 
  • California Pizza Kitchen
  • Sizzler
  • Souplantation/Sweet Tomatoes
  • Ruby Tuesday
  • Bar Louie
  • Rubio’s
  • Cici’s Pizza

Personal Bankruptcy & Protection from Creditors

For the average person, filing for bankruptcy will be much simpler than the case of someone who owns Boston Market and other restaurant chains. But whether you file for Chapter 7 bankruptcy, Chapter 13 bankruptcy, or even Chapter 11 bankruptcy, it will activate the automatic stay. The automatic stay protects bankruptcy debtors from their creditors in a plethora of ways. 

Filing for bankruptcy can stop a creditor from filing a lawsuit and put one that has already been filed on hold. If the creditor has already obtained a money judgment against the debtor, it might qualify to be cleared by a bankruptcy filing. A creditor could use that money judgment to pursue a wage garnishment or bank account levy against the debtor, which will also be stopped by the automatic stay. The automatic stay also stops repossession and foreclosures. If you are concerned about an action a creditor may take against you and want to learn if bankruptcy will help, call 602-509-0955 for your free phone consultation.

How to Choose Which Chapter to File

There are different chapters of bankruptcy to suit different debt relief needs. Most of the time, individuals will be best off using Chapter 7 or Chapter 13. Chapter 11 can be an expensive and complicated ordeal and generally requires significant involvement from creditors in the form of a creditor committee. Small businesses can bypass the creditor committee through a small business or subchapter V filing. 

A major factor in the choice between Chapter 7 and Chapter 13 is income eligibility. Chapter 7 is the most commonly filed form of consumer bankruptcy but has strict income limits. A debtor whose household income exceeds the state median for their family size will need to qualify for Chapter 7 bankruptcy through the means test. Because Chapter 13 pays off debts in a payment plan, debtors can have a higher income and still qualify where they might not qualify for Chapter 7. It also allows debtors to keep assets that might not be protected by bankruptcy exemptions in Chapter 7. 

When you’re behind on the payments for a secured asset (like your house or car) that you wish to keep, chapter 7 bankruptcy might not be as useful to you as Chapter 13. Chapter 7 bankruptcy will only stop a repossession or foreclosure for a few months if the debtor can’t become current on their past-due balance. Chapter 13 can make it more affordable by essentially spreading that amount out over several years. A creditor will usually have no cause to proceed with a foreclosure or repossession after the successful completion of a Chapter 13 bankruptcy. 

Countless factors can impact which type of bankruptcy will be more effective in your situation. Our skilled Arizona bankruptcy lawyers can walk you through them, free of charge, with your initial phone consultation. To schedule yours today, call 602-509-0955

Arizona Bankruptcy Lawyers with High-Quality and Caring Service

A bankruptcy filing from someone like the owner of Boston Market shows that unmanageable debt can happen to anyone. Skillful bankruptcy representation can clarify the process and reduce the risk of obstacles and delays. An accurate bankruptcy filed in compliance with Arizona and federal bankruptcy law will result in a less stressful overall experience. Our bankruptcy attorneys have years of experience representing clients all across the valley and in Tucson. We offer flexible payment plans and you may even qualify to file for zero dollars down. To learn more about the services we offer at Phoenix Bankruptcy Lawyers, call 602-509-0955 to schedule your free consultation. 


Phoenix Bankruptcy Lawyers

668 N. 44th St. Set 320
Phoenix, Arizona 85008

Phone: (602) 509-0955

Pandemic Relief Protections In Bankruptcy Extended By House Of Representatives

Pandemic Relief Protections In Bankruptcy Extended By House Of Representatives

Coronavirus Aid, Relief, and Economic Security Act Bankruptcy Protections Have Been Extended

With widespread vaccinations on the horizon, the coronavirus pandemic may finally be drawing to a close in the foreseeable future. However, there is likely to be an economic aftershock that will be felt for years to come. To mitigate these negative effects, lawmakers passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. Now, these protections have been extended until March 27, 2022, by a majority vote in the House of Representatives. The bill, which was approved by a vote of 399-14, now heads to the Senate.

Coronavirus Aid, Relief, And Economic Security Act Bankruptcy Protections Have Been Extended In Arizona

CARES Act Bankruptcy Protections

One of the major parts of the CARES Act were stimulus payments for eligible Americans. Generally, those who make $75,000 or less as an individual or $150,000 or less combined as a married couple qualify for stimulus payments. Especially for the millions of Americans who lost their jobs or had their income reduced due to the pandemic, these stimulus checks can be a godsend. However, they are more effective when used to pay living expenses rather than to pay off debt. If someone already has a debt problem that has been aggravated by the pandemic, stimulus checks are at most a temporary bandage over a deeper issue. That’s why pandemic benefits like stimulus checks and increased unemployment benefits are generally exempt in bankruptcy. They do not count as income for bankruptcy qualification purposes, and trustees can’t seize them to pay towards the bankruptcy estate.

The CARES Act provided additional flexibility for bankruptcy filers. The debt limit for the small business provision of Chapter 11 was increased from $2.7 million to $7.5 million. The CARES Act guarantees that bankruptcy filers will still be eligible for mortgage forgiveness, eviction moratoriums, and exempt from utility shutoffs. It also allows those in an active Chapter 13 to apply for a financial hardship reorganization. These bankruptcy protections are among those that have been extended until March 27, 2022.

Types of Consumer Bankruptcy In Phoenix, Arizona

If the guarantee that further pandemic stimulus payments are exempt from bankruptcy makes you feel more confident about filing bankruptcy, it’s time to decide which chapter to file.

For those who have lost income due to the pandemic, the silver lining may be that they now qualify for Chapter 7 bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy only available to those under certain income limits. Only those who make less than their state’s median income based on family size, or pass the Means Test, can file Chapter 7. The filer can only keep their assets if they are protected by state bankruptcy exemptions, or if their state allows them to use applicable federal exemptions. While the limitations in Chapter 7 are strict, the benefits it provides are significant. Most unsecured debts, such as credit cards, medical bills, and personal loans, are discharged in Chapter 7. The process generally only takes between 4 and 6 months. Once debts are discharged, the debtor can move forward with a fresh financial slate, and take steps to rebuild their credit.

Chapter 13 bankruptcy is a payment plan that lasts 3-5 years. The plan will last 3 years for those who make less than their state’s median income, and 5 years for those who make more than their state’s median income. The plan will be organized based on the types and amounts of debts, and the debtor’s disposable monthly income. Debts will be paid in an order of four different categories, starting with legal and trustee fees and ending with unsecured debts like medical bills and credit cards. These debts can be discharged at the end of the payment plan, even if they aren’t paid in full. The debtor will be protected from creditors by the Automatic Stay for the entire 3-5 years, with limited exceptions.

Chapter 7 and Chapter 13 have similarities in requirements and benefits. The person seeking to declare bankruptcy must file a petition- a long and detailed legal document describing the debtor’s financial situation- in the appropriate jurisdiction. This petition will be reviewed by an attorney appointed to their case known as a trustee. Debtors must complete two credit counseling courses in both chapters, one before filing and one within the 341 hearing. Both chapters require the debtor to attend a hearing known as a 341 Meeting of Creditors. Filing either chapter activates the Automatic Stay, which stops most forms of creditor collection. This includes wage garnishments, bank levies, foreclosures, repossessions, utility shutoffs, and more.

There are reasons besides income restrictions and asset exemptions that someone might choose to file Chapter 13 bankruptcy instead of a Phoenix Chapter 7 bankruptcy. There are mandatory waiting periods between bankruptcy filings, which are generally shorter when the subsequent bankruptcy is a Chapter 13. This can make Chapter 13 the only option for someone facing an emergency situation like a foreclosure or repossession. If someone is behind on child support and other nondischargeable debts, Chapter 13 will allow an opportunity to catch up on these payments where Chapter 7 would not. Chapter 13 also allows for the opportunity to discharge secondary home mortgages, and provides a far longer Automatic Stay period.

Contact Our Phoenix Bankruptcy Attorneys For Assistance

Are you struggling financially because of the pandemic? Bankruptcy may be a viable solution to your financial issues, and the extension of the CARES Act bankruptcy protections acknowledges that. However, filing your bankruptcy incorrectly could create more hassles like extra fines, asset seizures, and even dismissal. This will cost you in legal fees, and your debts will remain with you. An experienced bankruptcy attorney in Phoenix will help you avoid these potential pitfalls. Whether it’s calculating your disposable monthly income, determining your eligibility, drafting your petition, dealing with your creditors, and more, our staff and attorneys are here to help. To learn more about the benefits of filing bankruptcy with our firm, as well as our flexible payment options that will get you filed for as low as $0 down, schedule your free consultation today. Our Phoenix Bankruptcy attorneys can help.

Contact our Phoenix Bankruptcy Law office or use our online form to request your free phone consultation.


Phoenix Bankruptcy Lawyers

668 N. 44th St. Set 320
Phoenix, Arizona 85008

Phone: (602) 509-0955

business bankruptcy in Arizona due to Covid-19 blog

Fashion Retailer Francesca’s Files Chapter 11 Bankruptcy

Our Phoenix Bankruptcy Attorneys Discuss the Many Businesses Facing Bankruptcy Due to Covid-19

business bankruptcy in Arizona due to Covid-19 blogThe coronavirus pandemic continues to wreak havoc on the global economy as we draw closer to the end of the year. While unemployment rates have since stabilized, unemployment had reached levels comparable to those during the Great Depression. With millions of Americans experiencing a decrease in income in 2020, among the lowest of people’s priorities are fashion, accessories, and jewelry. Major clothing retailers declaring bankruptcy has become almost a daily occurrence. The latest to join these ranks is Francesca’s, a boutique-style fashion chain that can be found at many shopping malls.

More Information About Francesca’s

Francesca’s was founded in 1999 in Houston, Texas, where it is still headquartered. The brand has approximately 700 stores in the United States, about half of which are located in shopping malls. Like many other retailers, Francesca’s was forced to close in March 2020, and some of these closures have become permanent. Francesca’s originally announced that it would be permanently shutting down 140 of its locations. After declaring Chapter 11 bankruptcy on December 3, 2020, it has amended the store closures amount to include 97 additional locations, bringing the total to 237 store closures. The closures are expected to be completed by the end of January 2021.

Out of the 237 Francesca’s locations that are closing, two of them are located in Arizona. The chain’s Flagstaff and Glendale locations are among those to be closed by the first month of 2021. Arizona shoppers looking for holiday gifts may want to consider visiting these stores and Francesca’s website for liquidation sales.

A Brief Overview of Chapter 11 Bankruptcy

Chapter 11 bankruptcy is far more complicated than Chapter 7 and Chapter 13, the two most common types of bankruptcy that your friends or family members may have filed. In turn, attorney’s fees, filing fees, and other bankruptcy-related expenses are much higher in a Chapter 11, so this type of bankruptcy is typically only used by organizations and individuals with millions of dollars in assets and liabilities. However, there are Chapter 11 small business provisions for companies that aren’t as affluent.

Usually, a company will have a fairly good idea of what their strategy is to restructure debts and emerge from the bankruptcy. The company must submit a proposal of how to do so, and submit it to a panel of their top creditors. The creditors will then vote on the proposal. If the panel approves the proposal, the bankruptcy will proceed according to plan as long as it is also approved by the court. If the panel doesn’t vote to approve the company’s proposal, they may submit their own.

Other Types of Bankruptcies Available to People in Phoenix

As mentioned above, the two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 is available to certain types of businesses, and both are available to individual filers. A trustee is assigned to oversee each type of case, and filers of both chapters are required to complete credit counseling courses and attend a hearing known as a 341 Meeting of Creditors.

Chapter 7 is known as a liquidation bankruptcy because it discharges most debts without any repayment. For that reason, there are strict income eligibility limits for Chapter 7. There are also limits on how much equity filers can have in their assets, which are known as “exemptions.” A Chapter 7 bankruptcy typically takes about 4-6 months from the date of filing to be discharged.

Chapter 13 is also called a wage earner’s bankruptcy because this type of bankruptcy only works when the debtor has a steady source of income. If a debtor has too much income to qualify for Chapter 7, but still is struggling to manage debts, Chapter 13 is a 3-5 year debt reorganization payment plan. However, there are debt limitations for Chapter 13 filers- $419,275 for unsecured debts, and $1,257,850 for secured debts. It also allows filers to pay down debts that can’t be discharged in Chapter 7, like mortgage and car payment arrearages, child support, and student loans. A Chapter 13 plan lasts 3 years for filers who make less than the state median income for their family size, and 5 years for those who make more than that amount.

Francesca’s Bankruptcy Plan

Like many struggling businesses with a heavy focus on brick and mortar sales, one of Francesca’s top creditors is Simon Property Group. One of Francesca’s other lenders, Tiger Finance, has provided $25 million in financing to help the company with fees associated with breaking leases for the locations that are closing. Francesca’s plans on finding an investor to sell to as part of the bankruptcy process. Some companies convert creditors’ balances into ownership shares, but Francesca’s debt to asset ratio was too high to make this plausible.

Other Companies to Declare Bankruptcy During the Pandemic

Francesca’s is far from the first major business to declare bankruptcy as a result of the coronavirus pandemic. Fashion has been one of the hardest hit industries, with Neiman Marcus, JCPenney, J. Crew, Men’s Wearhouse, Brooks Brothers, Ann Taylor, Lane Bryant, True Religion, Lucky Brand, and Stein Mart have all declared bankruptcy in response to the pandemic. Home retailers like Pier 1 Imports, Sur La Table, and Land’s End have all sought bankruptcy protections in 2020 as well. Another hard hit industry, fitness, includes bankruptcy filers like Gold’s Gym, 24 Hour Fitness, and GNC. Restaurants are also struggling, with Sweet Tomatoes, California Pizza Kitchen, Chuck E. Cheese, Rubio’s Coastal Grill, Ruby Tuesday, Sizzler USA, and more filing their bankruptcy petitions.

Only a few of these businesses will be closing down for good as a part of their bankruptcies, but many will be downsizing by closing locations. This only adds to the compounding unemployment problem, leaving less people with income to spend at struggling businesses. However, most businesses that seek out Chapter 11 bankruptcy protection have a plan to revamp their business model and emerge a more efficient and profitable company. With widely available coronavirus vaccines on the horizon but government protections and benefits expiring soon, it is hard to say which of these businesses will survive in the long run.