chapter 7

A new court decision by the Federal Appeals Court for 11th Circuit makes it easier people to get rid of their second mortgage on upside down real property through bankruptcy. 

A debtor’s LLC membership interest is treated differently in state court collection proceedings than it is in bankruptcy. In state court collections a judgment creditor’s remedy to execute a judgment against a multi-member LLC is limited to a charging lien. The lien gives the creditor a right to receive any distributions of money or property from the LLC to the debtor member.

Eligibility for Chapter 7 bankruptcy depends upon family income. An employee’s income is usually clearly determined by his payroll statements during the six months prior to filing. A self-employed debtor’s compensation from his own business typically varies month to month and is not cleanly stated on wage statements. Self-employed debtors can control their salary and distributions from their own business. I have been asked several times by self-employed debtors whether they can manipulate their income to make themselves eligible for Chapter 7.