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In our last blog post, we discussed a visual effects company that is filing for Chapter 11 bankruptcy under the U.S. Bankruptcy Code. There are, however, multiple bankruptcy options for businesses facing financial difficulty. Two of these options are Chapter 7 and Chapter 11 bankruptcy. The chart below compares these options.

The digital production company that created the effects in James Cameron’s “Titanic” has declared bankruptcy. According to the Chief Restructuring Officer, Michael Katzenstein, Digital Domain Media Group Inc. was simply “running out of cash” and unable to restructure its debt.

The absolute priority rule determines who should receive payment first in event of a business liquidation through Chapter 11 bankruptcy. It goes into effect when one or more creditors listed as a “senior” class under the rule (such as bank creditors) objects to the bankruptcy plan.

Two clients with rental properties attempted by all other means available to them to lower the monthly payments to amounts that better matched the rent the properties now generate to no avail. One of them even hired a different purported “Chapter 11 attorney” who did nothing for her, except waste her time and money. Finally, after retaining the Orantes Law Firm and obtaining confirmation of their cases, they now have lowered their monthly mortgage payments to amounts that allow them continue to operate their rental properties and support themselves.

In the last blog post, we discussed debt that is not dischargeable in bankruptcy. There is, however, a lot more to bankruptcy discharge than which debts are dischargeable and which are not.

First, many people considering bankruptcy are frightened that they will lose their house, their car, even the clothes on their backs. This is not true. You will not lose everything in order to pay back creditors. In fact, you may lose nothing at all.

Under federal bankruptcy law, there are some debts that cannot be discharged during bankruptcy. It is important to understand what these debts are if you are considering filing for bankruptcy, especially if you are trying to decide whether to file for Chapter 7 or Chapter 13.


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