Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is Chapter 11 Bankruptcy?”
A suburb of Louisville, Kentucky announced that it was seeking Chapter 9 bankruptcy protection this week, an attempt to save the city from mounting interest and fees associated with a judgment it is unable to pay. City administrators say they are using the bankruptcy as a chance to buy time, suspending payments to creditors, in the hopes of creating a new plan and readjusting debts to a more manageable level.
The city, Hillview, has only 9,000 residents but is struggling with liabilities estimated at between $50 and $100 million. The straw that broke the camel’s back was a recent $11.4 million verdict that the city says it has no ability to pay. The verdict was nearly four times the city’s annual budget. Hillview’s attorney says that without the recent lawsuit, the city would not have required bankruptcy protection.
The massive judgment has so far gone unpaid and is racking up interest, growing to a total of $15 million. The city has appealed, so far to no avail. The bankruptcy is a strategic move designed to prevent the interest from growing and allowing the city room to breathe and hopefully find a workable solution to the crisis it currently faces.
Though ordinary families in North Carolina would never use Chapter 9 of the Bankruptcy Code to seek relief, many hope to receive similar breathing room. With regard to interest, can individuals hope to catch a similar break by filing for bankruptcy protection? Normally, interest on unsecured debts stops accumulating once a person files for bankruptcy. These unsecured debts include things such as credit cards, personal loans and medical bills. However, interest on secured debts and back taxes do not stop accumulating interest.
Those who file for bankruptcy protection can also receive the kind of breathing room that Hillview was seeking thanks to the automatic stay, which goes into effect immediately after filing for bankruptcy protection. The automatic stay prevents most creditors from continuing collection activities. This can be a tremendous relief to debtors who are likely exhausted by the mounting bills and increasingly aggressive collection tactics employed by some creditors. The automatic stay provides exactly the kind of breathing room and opportunity to regroup that Hillview was looking for.
The automatic stay not only prevents most collection efforts, it also prevents utility companies from disconnecting your service or threatening disconnection for at least 20 days. The automatic stay also temporarily stops your home from being foreclosed on, though the creditor will likely be able to proceed with the foreclosure at some point. The same goes with evictions; though the automatic stay may temporarily prevent an eviction, landlords who already have a judgment of possession against you won’t be impacted by the automatic stay. Finally, the automatic stay also stops wage garnishments, returning a potentially sizable share of your paycheck to your pocket.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
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