Chapter 7 bankruptcy helps more than just low-income folks. Some people who are living the high life – on debt instead of cash, that is – can also benefit from filing Chapter 7. When you file for a Chapter 7 bankruptcy, a bankruptcy trustee is assigned to your case. A list of all of your debts and assets are gathered, and then assets are liquidated to pay creditors. Secured creditors have first priority in receiving payment, and unsecured creditors are paid last. Unsecured debts are often forgiven, leaving the debtor with a clean slate once the bankruptcy is completed.
In Little Rock, a prominent, well-known real estate developer, Steve Clary, filed Chapter 7 bankruptcy. He declared recently that his $168.6 million debt has already been reduced by more than $100 million, and he now owes under $50 million. Clary declared this at a sentencing hearing in an Arkansas district court recently, where he was being sentenced for charges of misusing funds from a $4.5 million loan he obtained from Banc of America. The $1.6 million he is accused of misusing in mail fraud was included in restitution that was part of his sentencing.
A good portion of the debt reduction, according to Clary, came from property that was given back to the creditors who had secured loans. About $138 million of debt was unsecured. Clary and his wife claim that they want to pay all their creditors. While much of the unsecured debt can probably be forgiven in the bankruptcy, they can pay these creditors on their own by going into separate agreements with them if they wish.
This appears to be a case where this couple made some bad choices and ended up way in over their head, which could have led to Clary’s misuse of funds. Unfortunately, he will be serving a 30-month prison term for his crime, but his bankruptcy case will continue while he is in prison. When he gets out, he may be able to start fresh, with the heavy load of debt he was carrying lifted from his shoulders. It is never too late to try to turn debt around and get back on the right track; however, the sooner the better, before ending up in a serious situation like this man and his wife.
Source: arkansasbusiness.com, “Steve Clary Bankruptcy Case Remains Open” Mark Friedman, Nov. 18, 2013