If you fail to make monthly credit card payments or default on a loan, a creditor in Pennsylvania has a right to sue you in civil court. In addition to what you contractually owe a creditor, you could be required to pay additional court and attorney fees if a judgment is entered against you. You […] The post Can You File for Bankruptcy to Avoid a Lawsuit in Pennsylvania? appeared first on .

   Bankruptcy can be a great help to most debtors, but when a debtor tries to game the system, and fails to disclose relevant information, the discharge can be denied.  In In re Dhaliwal, 2021 Bankr. LEXIS 1462, Adv. No. 20-3391 (Bankr. S.D. Tex. 18 May 2021) the were multiple issues in the debtor's disclosures.  Debtor owned a 2016 Kenworth T680 truck liened to Paccar Financial Corporation, which had broke down in February 2019 with estimated repairs costing $21,500.  The extended warranty declined coverage.  Debtors continued payments through July 2019.  Debtors sold their California home on 30 September 2019 obtaining $90,000 in proceeds from the sale, which was used to repay relatives and friends for funds borrowed from them.   They filed chapter 7 bankruptcy on March 26, 2020 indicating that the truck would be surrendered, but despite this and an order lifting the stay, Paccar has been unable to locate the vehicle.  Debtors also failed to list the $90,000 received from the sale of the home.  11 U.S.C. §727(a)(2)(A) allows the court to deny the discharge in a chapter 7 bankruptcy if the debtor has intentionally concealed or permitted to be concealed property with the intent to hinder, delay, or defraud the chapter 7 trustee and creditors.  The elements required to make such a showing are 1) a transfer or concealment of property; 2) belonging to the debtor; 3) within one year of the filing of the bankruptcy; and 4) with intent to hinder, delay, or defraud a creditor or officer of the estate.1   The court found the debtor's explanation for the missing truck - that the engine of the truck was taken apart Pape Kenworth in Bakersfield, California, but that they left the truck there being unable to afford the repairs - to not be credible.  The truck was taken to the repair shop in February 2019 but was inspected by the Federal Motor Carrier Safety Association in August 2019 finding only an air leak in a tire and a leak in a hub.  The failure to disclose the $90,000 proceeds from the sale of the home and subsequent transfer of such funds to family and friends also supports a denial of discharge under §727(a)(2)(A).   Debtors claimed they misunderstood the instructions from their attorney.   While the intent to defraud must be actual rather than constructive, the court noted that a presumption of actual fraudulent intent arises when property is transferred gratuitously or transferred to relatives.2  The court denied the request to hold the debt nondischargeable under 11 U.S.C. 523(a)(2)(A), which bars discharge for a debt for money, property, services, or an extension, renewal or refinancing of credit, to the extent obtained by (A) false pretenses,  a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition; (B) use of a statement in writing (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive.   As this looks back to the loan itself, and there has been no evidence of bad intention when the loan was obtained, the court found no basis to deny the discharge of this debt under such statute.   Plaintiffs also sought to deny the dischargeability of the debt under 11 U.S.C. §523(a)(4), which precludes discharge for commission of fraud, defalcation, or embezzlement while acting in a fiduciary capacity, or for embezzlement or larceny.   The fiduciary duty requirement is narrowly applied, requiring a technical or express trust.  No such trust was alleged here.  While the section can also apply to larceny or embezzlement, such facts were not alleged by Paccar.  Finally, Plaintiff sought to deny the discharge under 11 U.S.C. 523(a)(6), allowing a debt to be held nondischargeable for willful and malicious injury by the debtor to another entity or property of another entity.   The burden of proof is again on the creditor to show such facts by a preponderance of the evidence.  The Supreme Court has ruled that the section does not apply to negligently inflicted injury, but rather requires acts done with the actual intent to cause injury.3  This standard can be met if a debtor acted with objective substantial certainty or subjective motive to inflict injury.4  The court found this standard was met as failing to advise Paccar as to the location of the truck, as well as concealment of the proceeds of the sale of the home were certain to result in harm.  Thus the debt to Paccar was also found to be excepted from discharge under §523(a)(6).1 Pavy v. Chastant (In re Chastant), 873 F.2d 89, 90 (5th Cir. 1989).↩2 In re Chastant, 873 F.2d at 90.↩3 Kawaauhau v. Geiger, 523 U.S. 57, 59, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998).↩4 In re Williams, 337 F.3d 504, 508-509 (5th Cir. 2003).↩Michael BarnettMichael Barnett, PA506 N. Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

Summary: In split decision, the Fourth Circuit (following the similarly split decision from the 5th Circuit) held that the 2018 increase in fees paid by chapter 11 debtors to the U.S. Trustee Program applies to pending cases and violates neither … 4th Cir.: Siegel v. Fitzgerald: 2018 U.S. Trustee Fees Upheld and Bankruptcy Administrator System is Constitutional Read More »

Summary: DFWMM Holdings sought to have its judgments determined to be nondischargeable and the Mr. Richmond’s discharge denied, supporting its allegations by arguing that Mr. Richmond made false statements in the bankruptcy case by failing to disclose that his claimed … M.D.N.C.: DFWMM Holdings LLC v. Richmond- Reliance on Attorney as Affirmative Defense to Fraudulent Intent Read More »

For the past year, we’ve lived in a surreal world. Many people could not work, and those who could often work primarily -- if not...

Summary: Calmore & Hygiena George, residents of St. Croix in the U.S. Virgin Islands, purchased a townhome in Charlotte for their four daughters, all of whom were attending college there. There were no mortgages or liens against the property. Ms. … N.C. S.Ct.: In re George- Insufficient Service for Non-Judicial Foreclosure Read More »

 Iman Five StarsJames promised me he would make one of the toughest experiences easy, and he did precisely that. Listen to James, the man knows.

When the National Rifle Association filed for bankruptcy in Texas, some pundits speculated that the gun advocates might have been seeking a firearm friendly forum. However, on May 11, 2021, Judge Harlin "Cooter" Hale dismissed the case based on lack of good faith. In re National Rifle Association of America and Sea Girt, LLC, No. 21-30085 (Bankr. N.D. Tex. May 11, 2021). You can find the opinion here. The opinion demonstrates the vitality of the good faith doctrine, which requires debtors’ filings for relief to advance a proper bankruptcy purpose. In the NRA's case, the answer was no. What Happened The National Rifle Association is a non-profit company organized under the laws of New York in 1871. In August 2020, the New York Attorney General filed suit to dissolve the NRA, alleging that: (1) the NRA exceeded the authority conferred upon it by New York law, conducted its business in a persistently illegal manner, and abused its powers contrary to the public policy of the state of New York by operating without effective oversight or control by its officers and directors; and (2) the directors or members in control of the NRA looted or wasted the corporate assets, perpetuated the corporation solely for their personal benefit, or otherwise acted in an illegal, oppressive, or fraudulent manner. The NRA perceived this suit as an existential threat to its mission to promote responsible gun ownership and the Second Amendment. The NRA wanted to escape the jurisdiction of the New York courts which it believed were biased against it.  On November 23, 2020, the NRA hired the Neligan Law Firm to advise it on bankruptcy and restructuring options. The next day, it formed Sea Girt, LLC, a subsidiary which it incorporated in Texas. On January 7, 2021, the NRA’s board granted considerable powers to Wayne LaPierre, the entity’s executive vice-president. The board was not told that LaPierre planned to use these powers to file bankruptcy. On January 15, 2021, Sea Girt, LLC and the National Rifle Association filed Chapter 11 petitions in the United States Bankruptcy Court for the Northern District of Texas. Various creditors cried foul. A long-time donor moved for appointment of a trustee. Ackerman McQueen, one of the NRA’s largest creditors, moved to dismiss or appoint a trustee. The attorneys general of New York and the District of Columbia filed their own motions to dismiss. Sixteen states filed amicus briefs in support of the NRA, as did Texas. The Court conducted a twelve-day trial beginning on April 5, 2021 and heard from twenty-three witnesses. On May 11, 2021, the Court issued its memorandum opinion granting the motion to dismiss and denying the motions to appoint a trustee or examiner. The Court’s Ruling The Court summarized its ruling as follows: The question the Court is faced with is whether the existential threat facing the NRA is the type of threat that the Bankruptcy Code is meant to protect against. The Court believes it is not. For the reasons stated herein, the Court finds there is cause to dismiss this bankruptcy case as not having been filed in good faith both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a state regulatory scheme. Opinion, p. 2. A Detour Into the Meaning of Good Faith Section 1112(b) of the Bankruptcy Code allows a court to dismiss a chapter 11 case for “cause.” There is a long line of Fifth Circuit cases holding that cause includes filing in bad faith. When a creditor makes a prima facie showing of bad faith, the burden shifts to the debtor to demonstrate good faith. The essence of good faith/bad faith is whether the filing “serves a valid bankruptcy purpose.” Opinion, p. 12. In the Fifth Circuit, the bad faith doctrine developed largely in the context of single asset real estate filings.  In the case of In re Little Creek Dev. Co., 779 F.2d 1068, 1072-73 (5th Cir. 1986), the Court held that it was not bad faith to file a chapter 11 petition to avoid posting a supersedeas bond. The court ruled that good faith was determined by the totality of the circumstances. However, in dicta, the Court included a checklist of factors indicating that a case was filed in bad faith. Unfortunately, these factors defined most single asset real estate filings. While this provided a handy guide for creditors’ lawyers seeking to lift the automatic stay, it did not shed light on the doctrine. Several years later, the court decided In re Humble Place Joint Venture, 936 F.2d 814, 816-17 (5th Cir. 1991). Humble Place involved a debtor that owned raw land. Its representative made the unfortunate comment that the debtor’s business consisted of mowing the grass and waiting for the market to turn. The Fifth Circuit noted that the primary purpose of the plan was to relieve the guarantors from liability on their guarantees and not to benefit the debtor—an impermissible purpose. More importantly, the Court gave examples of when a single asset real estate filing (or any other case) might be made in good faith. It stated: There are several instances in which even one-asset real estate ventures would invoke Chapter 11 in good faith: the asset may be an operating business, like a ranch or a hotel; the development might be nearing the end of construction whose completion would markedly enhance the asset's value; and even a venture including undeveloped property might file to protect true owner equity when market conditions suggest the remedy of a debt restructuring, as opposed to simple liquidation, and the likelihood of prompt resale. In re Humble Place, 936 F.2d at 818.   The Third Circuit captured the essence of the doctrine when it stated: A debtor who attempts to garner shelter under the Bankruptcy Code, therefore, must act in conformity with the Code's underlying principles. Official Comm. of Unsecured Creditors v. Nucor Corp. (In re SGL Carbon Corp.), 200 F.3d 154, 161 (3rd Cir. 1999). Or as stated by Judge Hale, “a Chapter 11 petition is not filed in good faith unless it serves a valid bankruptcy purpose.” Opinion, p. 12. Why Was the NRA Bankruptcy a Bad Faith Filing? The NRA’s argument for having a good faith filing was stated in a brief where it said: The NRA filed for protection under chapter 11 in good faith, not to circumvent judgments in other courts (in fact, no judgments have been rendered), nor to escape an impending trial (because there is none), but because it is in a situation where it must be able to continue its operations in the face of existential threats, in order to maximize the value of its estate and to protect the interests of its members, employees, vendors, and legitimate creditors. Opinion, p. 16. So, what was the “existential threat”? Judge Hale found the following testimony from Mr. LaPierre to be illuminating: Q: Okay. So it comes down to the reason you filed Chapter 11 is because you have this New York attorney general enforcement action which is asking for dissolution of the NRA; is that correct? [Counsel for the NRA]: Objection; misstates his testimony. [Counsel for the Movant]: Well -- THE COURT: Well, I’m going to go ahead and let him answer that. Try to give an answer to that, Mr. LaPierre. THE WITNESS: Yes, Your Honor. Yes, we filed the Chapter 11 to -- because the New York State attorney general is seeking dissolution of the NRA and [seizure of] its assets, and we believe it’s not a fair, level playing field. . . . . Q: So really what we’re down to is that it’s -- the New York attorney general action is the reason you believe you need to be in bankruptcy, and, really, solvency and all your other litigation, those are not issues that would require you to be in bankruptcy; is that correct? A: That’s correct. Opinion, p. 23. The Court concluded that obtaining a litigation advantage over the New York Attorney General was not a good faith ground for filing. (T)he Court believes the NRA’s purpose in filing bankruptcy is less like a traditional bankruptcy case in which a debtor is faced with financial difficulties or a judgment that it cannot satisfy and more like cases in which courts have found bankruptcy was filed to gain an unfair advantage in litigation or to avoid a regulatory scheme. The purpose of this bankruptcy filing may not have been to end the NYAG Enforcement Action immediately, but it was to deprive the NYAG of the remedy of dissolution, which is a distinct litigation advantage… The Court does not know what specific mechanism the NRA plans to use, but its intention is clearly to “take dissolution off the table.” Opinion, p. 29. While the NRA may have hoped to find a friendly forum for its gun rights mission in the Lone Star State, this Texas judge found that its justification was all hat and no cattle. What It Means My personal hope is that Judge Hale’s decision in National Rifle Associationwill cause practitioners and courts to focus on whether a debtor has a proper bankruptcy purpose and that I will never have to see the Little Creekchecklist again. To summarize some of the lessons from this case: ·        Trying to find a favorable venue is not necessarily bad faith; ·        Trying to evade a state regulatory scheme is almost certainly bad faith; ·        Trying to gain an unfair litigation advantage is almost certainly bad faith; and ·        Trying to file bankruptcy when you are not having trouble paying your creditors is almost certainly bad faith. On the other hand, the quintessential valid bankruptcy purposes are to maximize value and pay creditors.  Many years ago, I wrote In Chapter 11, faith refers to a belief in reorganization. Debtors who are pilgrims on the path to reorganization exhibit good faith; debtors with other purposes or motives display bad faith. Stephen W. Sather & Adrian M. Overstreet, The Single-Asset Real Estate Debtor: A Selective Overview, 2 J. Bankr. L. & P. 343,358 (July 1993). This was a case where the debtor had other motives or purposes and thus, its bankruptcy case was properly dismissed.  

After Bankruptcy, are you getting your mortgage statements? After you file bankruptcy, you are still supposed to keep getting your mortgage statements.  But, are you? This question came up at the 29th Annual Meeting of the National Association of Consumer Bankruptcy Attorneys.  (I’m at that meeting this week, which was supposed to be in Orlando, […] The post After Bankruptcy, are you getting your mortgage statements? by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.

Debt Collection Harassment: How To Stop Calls After Bankruptcy How To Deal With Creditor Calls & Letters After a Bankruptcy Filing In Arizona One of the first signs that you’re having problems with debt is that you are getting letters and phone calls from your creditors asking you to pay and warning you about the penalties for failing to do so. As the debts continue to be unpaid, you may start getting incessant phone calls and letters. You may dread answering the phone or heading to the mailbox. When you file for bankruptcy, you can put an end to those calls and letters. A bankruptcy filing triggers what is known as an automatic stay. That means that all debt collection activity has to cease until your bankruptcy filing is resolved, which is usually through a discharge. Even legal action like foreclosure or a lawsuit will be paused during this time. If the bankruptcy is discharged, it may be that the legal action is permanently suspended. Any debts that are discharged in the bankruptcy will no longer be legally collectable. You should not get any calls or letters about those debts ever again. The Bankruptcy Notice To Creditors: Miscommunication & Improper Timing Sometimes, you may get calls or letters after your automatic stay has gone into effect simply because the creditors have not received the notification or because they have not entered it into their systems yet. They have people working in call centers off lists, and it can take a bit for information to trickle down sometimes. These creditors may not be intending to violate the automatic stay; their representatives just may not realize that it’s in place. If you get any calls, you can gently but firmly notify them that you have filed for bankruptcy and refer any questions to your Glendale bankruptcy attorney. If you get any letters, call the number on the correspondence and notify them of the same. Take Notes & Keep Records Of Creditor Harassment Notifying the creditors that you have filed for bankruptcy in Glendale should be enough to put a stop to the phone calls and letters, even if they did get their wires crossed about the automatic stay in the first place. But some creditors will still push boundaries and do things they aren’t supposed to do. You need to keep records of the calls and letters you receive. Take notes about what is said during the phone call. Then you can have a record of what information has been shared to use in any legal action you need to take. Take note of the date and time that you receive calls or letters. Write down the name of the person you talk to, as well as notes about what they say. Talk To Your Arizona Bankruptcy Attorney About Legal Action If creditors persist in harassing you about the debt, you have legal options. You may be able to sue the creditor, and you may be able to get restitution for the harassment. Talk to your bankruptcy attorney about what you are experiencing and what your options are. Typically, contact from your Gilbert bankruptcy attorney will be enough to put an end to the action. But you may need to file a lawsuit against especially aggressive creditors. Filing for bankruptcy should give you immediate relief from harassing phone calls and constant correspondence from creditors. Once your bankruptcy is discharged, you should also get great financial relief. However, if your creditors persist in harassing you after your bankruptcy filing, you do have legal options. Always work closely with your Ahwatukee bankruptcy attorney to navigate this process and to understand what your rights and your options are. You don’t have to continue to suffer under the weight of debt or the constant harassment of creditors. Get Help From Professional Bankruptcy Lawyers In Glendale, AZ Call My AZ Lawyers today to learn more about bankruptcy protection and how it may offer you the debt relief you need. Our bankruptcy attorneys represent clients in both Chapter 7 bankruptcy, offering a total discharge of unsecured debts, and Chapter 13 bankruptcy, offering a restructuring of debt into an affordable payment plan. We’ll help you understand which option is right for you based on your income and the kind of debts or assets that you have. We serve clients throughout the Phoenix metro area, including Mesa, Glendale, Tucson, and Avondale. We have several offices and flexible hours for your convenience. Contact us today to schedule a consultation with a bankruptcy attorney to learn more.   Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: info@myazlawyers.com Website: https://myazlawyers.com/ Phoenix Location: 343 West Roosevelt, Suite #100 Phoenix, AZ 85003 Office: (602) 609-7000 Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Debt Collection Harassment: How To Stop Calls After Bankruptcy appeared first on My AZ Lawyers.