Statute of Limitation (SOL) and Filing Bankruptcy

Macon Georgia Bankruptcy Lawyer | Bankruptcy Attorney Macon GA

Bankruptcy is a legal process by which individuals and businesses can either be discharged of their debts or be granted a repayment plan following which they can repay their own debts under court supervision. Individuals can file for bankruptcy under chapters 7 and 13 while businesses can file for bankruptcy under chapters 7 and 11.

Chapter 7 liquidates all assets and properties of individual or business to pay off the creditors.

Chapter 13 is a wage earner’s plan wherein individuals are allowed to pay their debt over a period of time through a repayment plan. Chapter 11 allows a restructuring and reorganization of businesses so that revenue generated can be used to pay off the creditors. 

Statute of Limitation (SOL)

Most of the legal situations have a statue of limitation or SOL. The only exception is for crime of murder. The SOL requires that certain measures or remedies are adopted or filed within a specified period of time. Once this time period elapses, potential plaintiffs will not be allowed to make claims.

Criminal infractions, personal injury, insurance, tax, negligence, debt issues etc claims must be initiated within the time period specified by the state or federal SOL. Irrespective of evidence or data in connection with criminal or civil charges is not initiated by government, business or individual within SOL expiration, case will not be heard by the court.

There are certain debts that are not subjected to SOL and also cannot be discharged in a bankruptcy. These are student loans, due child support and federal or state taxes.

The SOL is regulated by both federal as well as state rules. Hence states have different rules as well as SOLs for collection of debts. Thus making payments prior to or while the SOL period is ongoing, might expire the timing and return the SOL clock to zero. Hence filing a bankruptcy will not stop or erase the collection clock automatically since federal taxes have a separate SOL. This offers debtors protection while the government is protected when the SOL is extended.

Bankruptcy and SOL

SOL offers some protection to debtors who can henceforth look towards the future. Chapter 7 liquidation bankruptcies have less preferential treatment when compared to the chapter 11 reorganization bankruptcies. Federal bankruptcy statue deems that claims must be filed within two years after appointment of trustee and before closure or dismissal of case. State statutes vary with this creating a lot of confusion. The air has been cleared a bit by applying two year SOL to debtors in possession regardless of appointment of trustee while SOL protection has been extended by IRS in cases of outstanding taxes to an increased six months. Chapter 7 bankruptcies do not have any SOL applied to it.

Call a Macon bankruptcy lawyer if you are considering bankruptcy.