The year 2009 was the year of the bankruptcy for individuals and business. Personal filings in 2009 were second only to the 2.1 million personal bankruptcies filed in the historic 2005. Businesses throughout the mid-south have suffered from poor economic times. Their financial anguish evidenced by business filings for protection under federal bankruptcy laws. According to AACER (www.aacer.com/), business bankruptcies increased nationwide by 38% from the year 2008. Tennessee was still positioned in the top three states in 2009 nationwide for personal bankruptcies, and in the top half for business bankruptcy filings.
The continued economic distress promises to be an issue with small businesses in 2010. Bankruptcy is a very difficult business decision, and a moral character check for Christian business owners. There are distinct differences in the code that should be considered before rendering a decision. In short, Chapter 7 filings are liquidation proceedings and subject to a "means" test. Individuals, partnerships and corporations are eligible for Chapter 7 protection. Chapter 7 bankruptcies are often referred to as "fresh start" filings. In essence, many financial committments are foregone.
Chapter 11 is a small business case. Frequently it allows businesses the chance to "reorganize" its inner workings. It is defined as a case with a "small business debtor." 11 U.S.C. § 101(51C). Determination of whether a debtor is a "small business debtor" requires a two-part test. The debtor must be engaged in commercial or business activities. These activities cannot be primarily owning or operating real property. Further, total non-contingent liquidated secured and unsecured debts must be $2,190,000 or less. Finally, the debtor's case must be one in which the U.S. trustee has not appointed a creditors' committee, or the court has determined the creditors' committee is insufficiently active and representative to provide oversight of the debtor. 11 U.S.C. § 101(51D).
Chapter 13 is sometimes called the wage earner chapter. It is available to individuals and businesses with regular income from any source, not just wages. Once the court confirms the plan, it is the responsibility of the debtor to make the plan succeed. The debtor is responsible for making payments to the trustee. The plan requires debtor(s) to live within an often resrictive budget.
Christians debate over the use of bankruptcy protection. On one hand, accountability and the moral obligation to repay those who are owed is of high priority. On the other hand, mercy is one of the most profound adornments found in the Bible. Scripture directly cites a need for the forgiveness of debtors even in the event of inappropriate handling of finances. While all are debated, many Christians in the Mid-South prefer the use of Chapter 11 reorganization or Chapter 13 wage earner plans. DeSoto County Clerk and Shelby County Clerk records are clearly demonstrative of this preference.
My local pick, Attorney James W. Amos, 2430 Caffey Street, Hernando, MS 38632