Individual chapter 11 reorganization cases often play a role in Entrepreneur Rescue.[1] The Small Business Reorganization Act of 2019 (the “SBRA”) vitalized the process with Subchapter V. Subchapter V provides an expedited, simpler and less expensive route through chapter 11 of the Bankruptcy Code for small businesses and their owners.[2] As we’re often quoted, properly timing any bankruptcy case is essential. Poor timing can result in lost opportunities and higher risks. Properly timing a Subchapter V case is also essential. Mis-timing a Subchapter V case in the Entrepreneur Rescue process can result in ineligibility for Subchapter V and its benefits. Subchapter V and Entrepreneur Rescue Entrepreneur Rescue generally is initiated while the business is winding up. Liabilities are assessed. Non-exempt property is converted to exempt property. Loose ends from the prior endeavor are dealt with. A path forward is charted, Once the business is wound up, its owner may be burdened with debt. A form of bankruptcy relief for the entrepreneur may be considered. If the business owner has assets, a chapter 11 reorganization may be a good strategy. If the business owner has assets and satisfies Subchapter V debt limits, a Subchapter V chapter 11 reorganization could be a better strategy. Timing and a Subchapter V This is where timing becomes tricky. The Bankruptcy Code defines a “small business debtor” as “a person engaged in commercial or business activities.[2]” Some bankruptcy courts interpret this as requiring individuals seeking Subchapter V to have an ongoing business, not as having commercial or business activities which ended before they filed for Subchapter V. Thus, retirees with two closed pharmacies were inclinable for Subchapter V.[3] Similarly, an individual who owned and managed defunct businesses was disqualified from being a Subchapter V debtor.[3] In contrast, some individuals with defunct businesses were deemed qualified for Subchapter V.[4] The result may depend where the case is filed. What This Means to You It means that if: a,) your business is failing; b.) you’re considering closing it or selling it; c.) you are personally responsible for the business’ debts (e.g. guaranties, sale taxes) or have other unmanageable debts; and d.)  you have personal assets which may be exposed to creditors’ collection efforts; you should talk to bankruptcy professional before you close or end your relationship with your business. Discuss appropriate strategies for closing your business and reorganizing yourself using Subchapter V’s benefits and other strategies. Otherwise, closing your business on your own can create new problems and reduce access to useful tools. It’s like when you have a health issue. The sooner you seek professional help, the greater and better your options. This way you can close your business and preserve your access to Subchapter V’s benefits and other options at the same time. Any questions? We’re here to answer them. References 1. Entrepreneur Rescue is the process of preserving and reestablishing entrepreneurs whose ventures were unsuccessful. 2. Subchapter V of chapter 11 offers many advantages to small business debtors. It has a more streamlined process, which translates into less administrative costs. For example, the Debtor does not have to submit a disclosure statement for court approval. It also eliminates some of the most difficult hurdles of chapter 11, like satisfaction of the absolute priority rule. Instead of wiping out the ownership interests in a small business, it merely requires a showing that the debtor is paying its projected disposable income over the life of the plan. But to be able to take advantage of these and other benefits, a debtor must satisfy subchapter V’s eligibility requirements. In re Sullivan, 2021 WL 1250805, at *2 (Bkrtcy.D.Colo., 2021). 2. 11 U.S.C. § 101(51D)(A) 3. In re Thurmon, 2020 WL 7249555 (Bkrtcy.W.D.Mo., 2020) 3. In re Johnson, 2021 WL 825156, at *1 (Bkrtcy.N.D.Tex., 2021). The court also determined that an individual employed as an officer of a non-debtor business without ownership in or ultimate control over that business is disqualified from Subchapter V. 4. See, In re Wright, 2020 WL 2193240 (Bkrtcy.D.S.C., 2020), In re Bonert, No. 2:19-BK-20836, 2020 WL 3635869 (Bankr. C.D. Cal. June 3, 2020), In re Blanchard, 2020 WL 4032411, at *2 (Bkrtcy.E.D.La., 2020). The post Timing Subchapter V And Entrepreneur Rescue appeared first on Wayne Greenwald, P.C..

Summary: CitiMortgage filed the original Proof of Claim in Ms. Bivens’ Chapter 13 case, with the claim subsequently being transferred first to Ditech Financial and then to New Penn Financial, d/b/a Shellpoint Mortgage Servicing. Nearing the completion of her case, … Bankr. M.D.N.C.: Bivens v. NewRez- Misapplication of Payments by Mortgage Servicer Read More »

Summary: Despite its whimsical title, this note takes a rather dim view of the Subchapter V bankruptcies authorized by the Small Business Reorganization Act (“SBRA”), finding particularly problematic the replacement of the Absolute Priority Rule from Chapter 11, which precludes … Law Review: Jonah R. Hall, A Creditor’s Kerfuffle: How the SBRA Harms Creditors in Small Business Cases, 25 N.C. BANKING INST. 595 (2020) Read More »

   In Feldy Boys, LLC v. Polasky (In re Polasky), 221 Bankr. LEXIS 927, Adv No. 2:18-ap-594-FMD (7 April 2021) Judge Delano denied the Debtor-Defendant's request for attorneys fees, but allowed costs of $4,261.03 against the plaintiff.  The adversary proceeding involved a personal guaranty of a lease, and  included counts under §727(c)(d) and (e) as well as §523(a)(5).  Upon prevailing in the adversary itself, the Debtor sought taxation of fees in the amount of $95,970 under §57.105(7) of the Florida Statutes, as the guaranty provided for reimbursement to plaintiff of fees and expenses.  The Court first examined which state's law applies as to taxation of fees to prevailing parties.    The guaranty did not include a choice of law provision.  In determining which state's choice of law provisions to apply, court's use the choice of law rules of the state where the court sits, absent a compelling or significant federal interest.1  Florida's choice of law rule in contract cases is, in the absence of a choice of law provision in the contract, and excluding contracts for performance of services, the law of the state where the contract is made applies.  As to tort cases, the rule is the 'significant relationship' test, the state which has the most significant relationship to the occurrence and the parties.  As the lease at issue was executed in Ohio, the property at issue is located in Ohio, Debtor resided in Ohio when she entered the lease, and the relevant corporations which were parties to the lease were Ohio corporations, and the lease that was guaranteed provided that it would be construed under Ohio law.  Thus the court found that Florida choice of law provisions would determine that Ohio law would apply in determining the right to prevailing party fees.  Under Ohio law parties to litigation are responsible to pay their own fees absent a statutory provision to the contrary, where there has been a finding of bad faith, or where the contract provides for fee shifting.  As there was no provision in the lease or guaranty providing for the losing party to pay the prevailing party's fees, and Defendant did not cite any fee-shifting statute or allege bad faith, the Court denied the request for taxation of fees.  However the court found that the Debtor was entitled to reimbursement of costs under Rule 7054(b)(1) of the Fed. R. of Bankr. Proc.  This rule allows costs to the prevailing party except where a statute of the United States or the Rules provide to the contrary.  The costs allowed under such rule are listed in 28 U.S.C. §1920.  The court noted a 'strong presumption' in favor of awarding costs to the prevailing party in such suits, unless such costs are not within those allowed under §1920, were not reasonably necessary to the litigator, or the losing party is unable to pay.2    The costs sought by the Debtor included fees paid to transcribe the meeting of creditors, the Rule 2004 examinations of Debtor and her spouse, the deposition of Plaintiff's representative, the depositions of two real estate agents, and the two day trial.  Debtor attached invoices for each of these transcripts.  Fees for transcripts is an allowed expense under §1920.  While some of the transcripts were obtained prior to the filing of the complaint, the court found that such transcripts were obtained with a view to defending Plaintiff's claims against her.    The court denied the request for fees but allowed the request for costs in the amount of $4,261.03.Parties need to be aware that they may well be required to pay the debtor for their costs if they fail to prove their case, either under 11 U.S.C. 523(d) in the case of a complaint filed under §523(a)(2); or §57.105(7) for cases where Florida law determines taxation of fees to prevailing parties; or costs under the statutes cited in this case; and factor this risk into any decision to file an adversary proceeding against a Debtor.  1 In re Palm Beach Finance Partners, L.P., 2014 Bankr. LEXIS 5418, 2014 WL 12498025 (Bankr. S.D. Fla. 2014).↩2 In re Amodeo, 2019 Bankr. LEXIS 4108, 2019 WL 10734046, at *4 (Bankr. M.D. Fla. 2019).↩Michael Barnett, Esq.Michael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com  

A Bankruptcy Trustee may not recover payments made to a landlord concerning commercial rent arrears or to a supplier, on or after March 13, 2020, resulting from workouts before the bankruptcy filing,  under new Section 547(j) of the Bankruptcy Code.   These changes were made pursuant to the Consolidated Appropriations Act of 2021.  Congress made these changes to the bankruptcy code in an effort to encourage commercial landlords and suppliers to engage in workouts with tenants and customers due to the pandemic, by mandating that these payments would not be deemed preferential, if they were made after March 13, 2020.  The new law will remain in effect for two years, ending on December 27, 2022.  These changes to the law will prevent Chapter 7 bankruptcy trustees from commencing preference actions against commercial tenants or suppliers that meet the above requirements of the law. My Law Firm has been involved in many workouts where our clients have raised the issue of whether accommodations given to debtor(s) can be recovered by bankruptcy trustees if those debtors later file for Chapter 7 bankruptcy.  Although the bankruptcy code did provide defenses before the law change, such as the ordinary course of business and/or the new value exception to a preference, these law changes now provide certainty against preference actions in these types of workouts. If you have questions regarding preference actions, you should contact Jim Shenwick at (212) 541-6224 or jshenwick@gmail.comto discuss the facts or strategies involved in those cases.     

Summary: Pangea obtain an arbitration award against Mr. Lakian, who, on that same day, transferred his interest in real property located in Highlands, North Carolina, to the Eagle Ridge Living Trust, for which he was a trustee. Following confirmation of … N.C. Ct. of App.: Pangea Capital v. Lakian- Property Must be Residence for Homestead Exemption Read More »

Summary: Ms. Carter brought suit against her bank, Capital One, for complying with an IRS levy by taking $1,279.41 from her account, arguing that Capital One had violated the FDCPA. Finding that “an obligation to pay that ‘arises solely by … W.D.N.C: Carter v. Capital One- Complying with IRS Levy is not Debt Collection Read More »

Abstract: On April 1, 2021, the Biden Administration announced that Secretary of Education Michael Cardona will consider whether the President has legal authority to forgive up to $50,000 per debtor in student loan debt without further Congressional action. This paper collects the leading arguments for and … Law Review: Jackson, Howell Edmunds and Mark, Colin, May the Executive Branch Forgive Student Loan Debt Without Further Congressional Action? (April 5, 2021). Read More »

How Can a Bankruptcy Provide a Reputable Defense against Lawsuits? Filing For Bankruptcy Relief Can Stop Creditor Harassment In Arizona Most debt problems result in a lot of harassing phone calls and emails. You get to the point that you don’t want to answer your phone anymore because you know that it might be a creditor. You wish you could just ignore it and make it go away, but the calls just don’t stop. You start to think about whether you should file for bankruptcy. If you don’t come to the decision to file for bankruptcy early enough, the calls might turn into something more. You might actually be subject to a lawsuit, a foreclosure, or a repossession. You might think that filing for bankruptcy is no longer an option at that point. But it is. Here’s how filing for bankruptcy can prove to be a good defense against a lawsuit or other legal proceeding: The Automatic Stay When you file for bankruptcy, you trigger an automatic stay. Under the automatic stay, your creditors are prohibited from contacting you about your debt or from taking any action against you. The automatic stay will not keep creditors at bay forever, but it will put an immediate end to any action against you. You’ll be able to breathe a sigh of relief from the constant harassment, and you’ll be able to work with your Gilbert bankruptcy attorney and other advisers to figure out a way forward if you are facing other legal action. Any lawsuit that is pending against you will be put on hold with the automatic stay. However, if the debt is not discharged in the bankruptcy, the lawsuit can resume. Your creditor can also petition the bankruptcy court to continue with its lawsuit, and the court may grant permission. Talk to your bankruptcy attorney in Gilbert about your options. Chapter 7 Discharge If you qualify for Chapter 7 bankruptcy in Mesa, you may be able to put an end to any lawsuit with a Chapter 7 discharge. Chapter 7 allows you to discharge all unsecured debts, such as credit cards, personal loans, and medical bills. It covers basically anything that is not backed by an asset, such as your home or your car. If one of your unsecured creditors is suing you, you may be able to resolve the problem by filing for bankruptcy. If your debt is discharged in a Chapter 7 bankruptcy, the creditor will have no more legal footing to sue you. You will be freed of your obligation for the debt. Chapter 13 Restructuring If you don’t quality for Chapter 7 bankruptcy or you have debts that can not be included in Chapter 7, you may want to consider Chapter 13 bankruptcy. Under this bankruptcy filing, your debts would be restructured into a repayment plan that you can afford. At the end of the repayment plan, which is three to five months, some of your remaining debts may be discharged. Chapter 13 bankruptcy may be able to help you save your home from foreclosure. The amount you owe can be included in the repayment plan, giving you an opportunity to catch up on the payments and save your home. Always talk to a Gilbert bankruptcy lawyer about the kind of debt you have and the potential legal proceedings you are facing to learn how bankruptcy may be able to help. Your attorney can help you decide whether Chapter 7 bankruptcy or Chapter 13 bankruptcy will get you the best results, including the maximum debt relief. Your attorney will guide you through your legal options to help you get the best outcome possible. Call My AZ Lawyers today to schedule a consultation with an experienced Arizona bankruptcy attorney to learn more about your options for debt relief through bankruptcy. Our attorneys represent clients seeking protection through both Chapter 7 bankruptcy and Chapter 13 bankruptcy, and after a thorough review of your finances, we’ll help you decide which will give you the most benefits. We can help you get relief from creditor harassment and possibly even from legal action. We represent clients throughout the Phoenix area. Call My AZ Lawyers today to learn more about how bankruptcy may be able to help you get relief from debt or put an end to a lawsuit or other legal action against you.   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/ 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 How Can a Bankruptcy Provide a Reputable Defense against Lawsuits? appeared first on My AZ Lawyers.

If you are overwhelmed by debt or are facing a home foreclosure, you could be considering filing for bankruptcy. However, once you have made this choice, you probably do not know how to start the process. To understand what is required, contact an experienced Bucks County bankruptcy attorney at Young, Marr & Associates. Below, we […] The post How Do I File For Bankruptcy in Philadelphia? appeared first on .