Michigan consumers may be familiar with Tom Martino, a prominent consumer advocate. He has been in the headlines lately not to promote his services but in relation to his continuing struggles to settle his Chapter 7 bankruptcy. As his case demonstrates, there are a number of bankruptcy options available to consumers and business owners, and choosing the right path can make the process much easier for all involved, including creditors.
Martino first filed for bankruptcy protection in Sept. 2011. At that time, he filed for Chapter 7 bankruptcy, believing that this option would be the best method of liquidating his assets and liabilities, which he ultimately listed at nearly $2.3 million in assets and approximately $46.4 million in debts. However, Martino claims that the trustee assigned to his case has failed to act in a timely manner to settle his case, and he has asked the bankruptcy court to allow him time to convert his filing from Chapter 7 to Chapter 11.
By converting to Chapter 11, Martino's bankruptcy would become self-directed, allowing him greater control over how and when to pay creditors. Martino filed a motion in July 2012, asking the court to delay the discharge order in his case to give him time to convert to Chapter 11. Because the appointed trustee did not move to protest the change, the court granted the request. A Chapter 11 bankruptcy is considered a debt restructuring to allow repayment of the debt. A Chapter 7 bankruptcy is a liquidation type bankruptcy where non-exempt assets are sold off to pay creditors and remaining unsecured debts are discharged and thus no longer required to be repaid.
While most Michigan Chapter 7 bankruptcy filings are far more linear than this example, it is important for consumers and business owners to know that there is a great deal of flexibility possible during a bankruptcy proceeding, which can allow for changes and adjustments to be made during the process. Circumstances can always shift during the course of a bankruptcy proceeding, and understanding one's rights under the law can ease the way for asking for modifications to the process. As with any financial decision, being well-informed of all options and the benefits of each is the best way to ensure a positive outcome.
Source: Denver Business Journal, "Martino files to convert bankruptcy to Chapter 11," Heather Draper, Oct. 8, 2012