Bankruptcy exists to "relieve the honest debtor from the weight of oppressive indebtedness and permit him to start fresh." Williams v. US. Fidelity & Guarantee, Co. 236 U.S. 549 (1915)

Bankruptcy and Commercial Litigation

Fritz & Hughes’s emphasis in bankruptcy is the representation of businesses and individuals in Chapter 11 and Chapter 7 cases and proceedings. The firm also represents clients in litigation and other matters involving debtor/creditor relationships, including loan workouts, collections, repossessions, foreclosures, and lien disputes. Fritz & Hughes works closely with buyers and sellers in transactions arising out of bankruptcy, insolvency and liquidation proceedings, including issues relating to asset securitization. Our attorneys also assist: financial institutions regarding bankruptcy and creditors' rights issues; bankruptcy trustees and examiners; and clients with pre-bankruptcy planning issues.

Types of Bankruptcy Cases

Chapter 7 “Liquidation”
A Chapter 7 contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 11 “Reorganization”
A Chapter 11 ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 13 “Payment Plan”
Chapter 13 is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 because the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

Less Common Types of Cases

Chapter 12 “Family Farmer or Fisherman”
A Chapter 12 provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee's disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.

Chapter 9 “Municipality”
A Chapter 9 provides essentially for reorganization, much like that under chapter 11, for “municipalities”, which includes entities such as cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

Chapter 15 “Cross-Border Cases”
A Chapter 15 is to provide an effective mechanism for dealing with cases of cross-border or multinational insolvency. Chapter 15 exists to provide guidance when a debtor or its property is subject to the laws of the United States and one or more foreign countries.