Small and medium sized business owners are going to find it substantially more difficult to file a bankruptcy with the new non-discretionary bankruptcy rules, that seem to demand that things move along to favor the creditors.

The reality is that previously nine out of ten Chapter 11 reorganizations ultimately converted to Chapter 7 liquidation anyway. That's odds 10-1 against successfully completing a Chapter 11 plan and emerging from the Federal Court, debt free. On the assumption that most businesses do not file any form of bankruptcy unless the situation with debt is fairly critical and law suits by demanding creditors are steadily increasing, what is likely to happen in the future? Under the new rules, few companies will survive the stranglehold of creditors in the courts.

Among the changes, the law puts new restrictions on the time during which debtors can exclusively file a reorganization plan before creditors may propose an alternate plan, putting added pressure on filers to reorganize faster.

The law also limits the amount of time debtors have to decide whether they want to retain or reject nonresidential real estate leases, creating concern that a debtor will now have to make decisions about leases prematurely. Under the new law, debtors have 120 days to make the decision, up from 60 before, but possible extensions of that time have been significantly limited.

Revisions to the law create streamlined filing procedures for small business cases, those in which the business debtor owes less than $2 million, not including money owed to company insiders. It also creates a tighter timeline under which those companies must file a plan of reorganization.

While the banks and credit card companies are expecting to benefit from the new bankruptcy laws, many consumers and small business owners will find themselves in limbo. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, limits who can qualify for bankruptcy under Chapter 7, instead many filers will be forced into a Chapter 13 Repayment Plan. Unfortunately, most consumers however will be caught in between and left out in the cold.

Many of the major credit cards have doubled their minimum monthly payments to 4% monthly, adjustable rate mortgages have already started going up and foreclosures have increased 50% in the past two years and many student loans went up 2% last month. Consequently, the new bankruptcy laws will either drive many debtors into repayment plans they cannot afford, or leave them in limbo:

Most business owners do not know there are bankruptcy alternatives and that an attorney can help you avoid bankruptcy and negotiate a settlement of your debts. And, most people do not realize the difference between the various types of bankruptcy and could easily find themselves paying back a large proportion of their debt anyway, forced by the courts to make those payments. Some are even mandated into credit counseling programs and forced into a lengthy repayment plan. So they wind up with a bankruptcy and repay their debts anyway!

Though there are many different types of debt relief companies advertised, most creditors will not negotiate with them. However, an attorney experienced in handling clients debts, can act on your behalf and help you avoid the devastation of bankruptcy.

There are alternatives:
Bankruptcy Alternatives
http://www.nldc.us/debtoptions.html

Source: EMEDIAWIRE