April 17, 2020From: twocents.lifehacker.comBy: Kristin Wong and Lisa RowanBankruptcy is a last resort for people and businesses alike. Many companies file for bankruptcy and continue business as usual; the lesser-known reality is that individuals can file for bankruptcy and emerge in one piece, too.Bankruptcy is poorly understood, so let’s talk about how it affects your finances.The differences between chapter 7, 13, and 11In general, people file for bankruptcy when there’s no way in hell they can meet their debt obligations. Popular assumption is that those people are bad with money and take out too much credit card debt. Sure, that happens, but often, people file bankruptcy after a major financial blow. It might be a lawsuit debacle or an unexpected illness.A lot of people think bankruptcy wipes out any and all debt obligations, but that’s not the case. You still have to pay up, and how you’ll pay up depends on what kind of bankruptcy you file: chapter 7, chapter 13, or chapter 11. There are other types of specific bankruptcies, too (chapter 12 is for farmers and fishermen, for example), but these three are the most common.With chapter 7, you may have to liquidate certain assets (like a car or a second home) to pay off at least some of the debt. Most of your assets are probably exempt, but it depends on your state, your financial situation, and whether or not that asset is deemed “essential.” You have to meet certain eligibility requirements to file, and income is perhaps the most important one. As legal site Nolo explains, there’s a whole set of criteria to determine your income eligibility, but generally, you have to have little to no disposable income.With chapter 13, you get a plan to pay off your debts within the next three to five years, but you get to keep your assets. After it’s all said and done, some of those debts will likely be discharged. You have to qualify, though, and that means your secured debts can’t be more than $1,184,200 and your unsecured debts cannot be more than $394,725. Secured debt is debt that’s backed by collateral, like your house or car.Chapter 11 bankruptcy works kind of like chapter 13, but it's typically reserved for businesses. Businesses can file for chapter 7 bankruptcy, too, but again, that means a liquidation of assets, so chapter 11 is usually a more attractive option. Companies get to keep their stuff and keep their creditors at bay while they continue their operations, but they have to come up with a plan to pay off at least some of their debt, or get it forgiven.What happens when you fileWhen you file for bankruptcy, you get an automatic stay. Basically, this puts a block on your debt to keep creditors from collecting. While the stay is in place, they can’t garnish your wages, deduct money from your bank account, or go after any secured assets.Ironically, bankruptcy isn’t free. The filing fee alone is between $300 and $350 for chapters 7 and 13. And then there are the attorney fees. You can file without a lawyer, but it’s not recommended since bankruptcy laws can be tough to navigate. Attorney fees for chapter 7 average around $1,500, while chapter 13 fees tend to be in the $2,000-$3,000 range. With many attorneys, the more complex your situation, the more you’ll pay.There are ways reduce the legal costs of filing for bankruptcy. Nonprofit Upsolve, for one, helps you generate your bankruptcy filing forms for free if your case is a simple one. Or, your local legal aid society may be able to connect you with low-cost legal services.You’ll also have to take a class or two. The government requires individuals to get credit counseling 180 days before you file, and you also have to take a debtor education course if you want your debts discharged.A couple of weeks after filing, you’ll have to attend a “creditors meeting,” which is basically what it sounds like: a court meeting between you, your bankruptcy trustee, and any creditors who want to attend. They’ll all ask you questions about your financial situation and decision to file bankruptcy.Your assets get liquidated with chapter 7 Nolo says that in most cases, chapter 7 debtors don’t have to liquidate their property (unless it’s collateral) because it’s usually exempt or it’s just not worth it. They explain:If the property isn’t worth very much or would be cumbersome for the trustee to sell, the trustee may “abandon” the property — which means that you get to keep it, even though it is nonexempt...Most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property, unless it is collateral for a secured debt…After the creditors meeting, your trustee will figure out whether or not to liquidate your stuff. If it does get liquidated, that means you’ll have to either surrender it or fork over its equivalent cash value to pay back your debt.You get a payment plan with chapter 13 With chapter 13, you get a plan to pay off your debts, and some of them have to be paid in full. These debts are “priority debts,” and they include alimony, child support, tax obligations, and wages you owe to employees.Your plan is based on how much you owe and what your income looks like, and it will include how much you have to pay and when you have to pay it.What happens to your creditYour credit score will plummet with a bankruptcy. The higher your score, the more it’ll fall. FICO notes that the more accounts are involved in your bankruptcy filing, the greater an impact you’ll see to your score.In general, chapter 7 bankruptcy remain on your credit report for 10 years, and chapter 13 stays on for seven.After bankruptcy is all said and done, most debts are discharged, but not all of them.In some cases, student loans can be discharged after a bankruptcy, but you have to pass a federal test for hardship.Other difficult-to-discharge debts include:Tax debtsAlimony and child supportDivorce-related debts, including property settlement debtsBankruptcy is usually a desperate remedy to a helpless situation. But knowing how it works and what to expect can help you navigate some of the misconceptions and figure out what the process actually entails.This post was originally published in 2016 and was updated on 4/17/2020 by Lisa Rowan. Updates include: Checked links for accuracy; updated formatting to reflect current style; revised article to focus on bankruptcy methods for individuals; updated monetary requirements and averages.

While the country is at a standstill, any financial strain you were experiencing prior to the COVID-19 outbreak is likely to increase. It is possible that you were contemplating or were in the midst of filing for personal bankruptcy when the crisis began. The United States Bankruptcy Court of the Eastern District of Pennsylvania remains […] The post Can I File Bankruptcy in Pennsylvania Because of COVID-19? appeared first on .

While the country is at a standstill, any financial strain you were experiencing prior to the COVID-19 outbreak is likely to increase. It is possible that you were contemplating or were in the midst of filing for personal bankruptcy when the crisis began. The United States Bankruptcy Court of the Eastern District of Pennsylvania remains […] The post Can I File Bankruptcy in Pennsylvania Because of COVID-19? appeared first on .

Filing Bankruptcy is Still Possible During COVID-19 Soc­­ial Distancing­­­ On 4/15/2020 My Arizona Lawyers bankruptcy attorneys and staff write: Filing Bankruptcy during COVID-19.  Check out our Coronavirus FAQ’s.  Whether you were on the brink of bankruptcy before the pandemic started, or if quarantine measures have drastically reduced your income, you may be wondering if bankruptcy is still an option for you. Like everyone else, bankruptcy professionals have had to change the way they operate- but filing is still possible. You Can Still Filing Bankruptcy During COVID-19 You will first need to decide which chapter of bankruptcy you need to file.  Next,  if you will use a lawyer, and decide which bankruptcy lawyer you are using. Plus, if you have low income and mostly dischargeable debts such as medical bills and credit cards, Chapter 7 may be the best option for you. Stopping Foreclosure and Repossession by Filing Bankruptcy Therefore, if you are trying to save a home or vehicle from foreclosure or repossession, have filed a Chapter 7 bankruptcy in the last 8 years, or have moderate to high income but simply can’t pay your debts, Chapter 13 bankruptcy in Phoenix may be a better choice for you. You should be able to discuss which chapters you qualify for in a bankruptcy consultation. Legal services have been declared essential in Arizona, so many law offices are still operating. Find an office that offers phone consultations. Our Arizona bankruptcy law firm offers FREE phone consultations for debt relief. Once you have picked a lawyer and determine which chapter you will file, you will need to submit your documents to your attorney so they can draft your petition. Plus,  some bankruptcy offices may offer a secure client portal to upload your documents.  Also, most BK law firms should accept email, fax, or standard mail. You should not need to drop off your documents in person during a stay-at-home order.  Additionally, you will also need to take a credit counseling course before you file, which can also be conducted online. Telephonic Bankruptcy Petition Signing The next step to filing your bankruptcy would typically be to come into the office.  Once in office, you would then review your petition with an attorney.  The bankruptcy attorney would then file your case. Although a petition signing wouldn’t be over the legal limit for a gathering right now, many offices are offering telephonic petition signings to protect themselves and their clients.  Our Phoenix bankruptcy office is also doing Zoom and Video petition signings.  Additionally, we offer a Zero Down Bankruptcy Filing Option. Another way of maintaining social distancing during your bankruptcy would be that your attorney can mail you a declaration of electronic filing with attached return postage. Though this is a slower process, it is safe.  Next, you will review the petition with your attorney over the phone.  Then, you sign the bankruptcy petition and mail back the declaration of electronic filing.  Finally, your bankruptcy lawyer will then electronically file your case. The next and potentially final time you would have to appear in person for a bankruptcy is your 341 Meeting of Creditors. Because the court typically schedules many cases to be heard in a 30 minute time frame, continuing as usual simply isn’t possible. Currently, all 341 hearings scheduled through May 10, 2020, will be held remotely. This date may extend as government officials assess the situation. If you, like many residents of Arizona, are struggling financially during an already-stressful pandemic, you don’t have to wait for quarantine orders to be lifted to seek out help. Our Arizona bankruptcy services offers free phone consultations and complete remote bankruptcies for the time being. Contact our bankruptcy office and schedule your free consultation today. Arizona Bankruptcy Law Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 637-3427 Email: info@myazlawyers.com Website: http://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 610-0132 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 231-2822 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Filing Bankruptcy is Still Possible During COVID-19 Soc­­ial Distancing­­­ appeared first on My AZ Lawyers.

Filing Bankruptcy is Still Possible During COVID-19 Soc­­ial Distancing­­­ On 4/15/2020 My Arizona Lawyers bankruptcy attorneys and staff write: Filing Bankruptcy during COVID-19.  Check out our Coronavirus FAQ’s.  Whether you were on the brink of bankruptcy before the pandemic started, or if quarantine measures have drastically reduced your income, you may be wondering if bankruptcy is still an option for you. Like everyone else, bankruptcy professionals have had to change the way they operate- but filing is still possible. You Can Still Filing Bankruptcy During COVID-19 You will first need to decide which chapter of bankruptcy you need to file.  Next,  if you will use a lawyer, and decide which bankruptcy lawyer you are using. Plus, if you have low income and mostly dischargeable debts such as medical bills and credit cards, Chapter 7 may be the best option for you. Stopping Foreclosure and Repossession by Filing Bankruptcy Therefore, if you are trying to save a home or vehicle from foreclosure or repossession, have filed a Chapter 7 bankruptcy in the last 8 years, or have moderate to high income but simply can’t pay your debts, Chapter 13 bankruptcy in Phoenix may be a better choice for you. You should be able to discuss which chapters you qualify for in a bankruptcy consultation. Legal services have been declared essential in Arizona, so many law offices are still operating. Find an office that offers phone consultations. Our Arizona bankruptcy law firm offers FREE phone consultations for debt relief. Once you have picked a lawyer and determine which chapter you will file, you will need to submit your documents to your attorney so they can draft your petition. Plus,  some bankruptcy offices may offer a secure client portal to upload your documents.  Also, most BK law firms should accept email, fax, or standard mail. You should not need to drop off your documents in person during a stay-at-home order.  Additionally, you will also need to take a credit counseling course before you file, which can also be conducted online. Telephonic Bankruptcy Petition Signing The next step to filing your bankruptcy would typically be to come into the office.  Once in office, you would then review your petition with an attorney.  The bankruptcy attorney would then file your case. Although a petition signing wouldn’t be over the legal limit for a gathering right now, many offices are offering telephonic petition signings to protect themselves and their clients.  Our Phoenix bankruptcy office is also doing Zoom and Video petition signings.  Additionally, we offer a Zero Down Bankruptcy Filing Option. Another way of maintaining social distancing during your bankruptcy would be that your attorney can mail you a declaration of electronic filing with attached return postage. Though this is a slower process, it is safe.  Next, you will review the petition with your attorney over the phone.  Then, you sign the bankruptcy petition and mail back the declaration of electronic filing.  Finally, your bankruptcy lawyer will then electronically file your case. The next and potentially final time you would have to appear in person for a bankruptcy is your 341 Meeting of Creditors. Because the court typically schedules many cases to be heard in a 30 minute time frame, continuing as usual simply isn’t possible. Currently, all 341 hearings scheduled through May 10, 2020, will be held remotely. This date may extend as government officials assess the situation. If you, like many residents of Arizona, are struggling financially during an already-stressful pandemic, you don’t have to wait for quarantine orders to be lifted to seek out help. Our Arizona bankruptcy services offers free phone consultations and complete remote bankruptcies for the time being. Contact our bankruptcy office and schedule your free consultation today. Arizona Bankruptcy Law Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 637-3427 Email: info@myazlawyers.com Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 610-0132 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 231-2822 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Filing Bankruptcy is Still Possible During COVID-19 Soc­­ial Distancing­­­ appeared first on My AZ Lawyers.

While the country struggles with a nationwide shutdown, the Bucks County Police Department has instituted new protocols and procedures to keep its officers and the community as safe as possible. Through the implementation of an online system, the Bucks County Police Department can handle non-priority calls while emergency calls continue to go through the 9-1-1 […] The post Can I Get Arrested on a Warrant in Bucks County During COVID-19? appeared first on .

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed by President Trump on March 27, 2020We hope that all are safe and doing well in these uncertain times. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed by President Trump on March 27, 2020, contains several changes to the Bankruptcy Code, which are detailed below.1) a) With respect to personal bankruptcy, the CARES Act amends the definition of “income” in the Bankruptcy Code for Chapters 7 and 13 cases so that coronavirus-related payments from the federal government will be excluded from being treated as income.   b) Coronavirus-related payments made by the federal government under the CARES Act will be excluded from the disposable income calculation for purposes of confirming a Chapter 13 Plan.          c) Finally, chapter 13 debtors will now be able to extend their plan payments for up to seven years instead of five years (under the prior law).2) A. The Small Business Debtor bankruptcy provisions were modified such that small business debtors with debt up to $7.5 million will now be eligible to file for bankruptcy, rather than the old limit of $2,725,625 in debt.B. Under the chapter 11 reorganization plan, small business debtors can now retain their equity or member interests in an LLC even if creditors are not being paid in full. The law requires a small business debtor to pay their “projected disposable income” over the next 3 to 5 years to creditors who were owed money at the time of the bankruptcy filing. Under the new law, a creditors’ committee is not formed, but the small business debtor will only have 90 days to file a reorganization plan, with very limited right to extend. Additionally, a “standing trustee” will be responsible for oversight of the small business debtor instead of a creditor committee. The standing trustee will be selected by the U.S. Department of Justice from a list of preapproved turnaround professionals.People with questions about the CARES act should contactJim Shenwick   212-541-6224    jshenwick@gmail.com

The Alexandria Bankruptcy Court Trustee Hearings are now by Telephone. Bankruptcy Trustee hearings are now telephonic. That’s the policy of the Alexandria VA bankruptcy court, effective April 9, 2020. (Richmond and Norfolk, too.) People who file bankruptcy are required by law to “appear” in front of the bankruptcy trustee to answer question.  (For most people, […] The post Bankruptcy Hearings: Now Telephonic by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed - .

  In In re Walker, 2020 Bankr. LEXIS 890, Case No. 3:19-bk-33182-SHB (Bankr. E.D. Tenn, 2 April 2020) the court was faced with a good faith objection to confirmation based on conduct in a prior divorce case.  A detailed factual background is necessary to understand the Court's ruling.    A divorce final decree was entered between the debtor, Mrs. Walker, and her spouse on 7 July 2008, which involved two jointly owned parcels of real estate: the former home of the debtor and an adjoining 36 acre tract of unimproved land.  The home property was subject to a mortgage taken out to improve the home.  In exchange for transferring title to the debtor, the divorce order required the debtor to pay her spouse 156 payments of $427/month.  When no payments were made from August 2014 through August 2015 Mr. Walker obtained an order permitting him to file a lien on the properties and gave Mrs. Walker 60 days to refinance the debt on the home, removing Mr. Walker's name and releasing him from the mortgage debt.  The order went on to provide that if that was not done the vacant land would be sold and proceeds used to pay on the mortgage debt.    Mrs. Walker sold the vacant land to her sister and brother in law 58 days after the above order and received $40,000 net proceeds, of which $4,211 went to catch up the mortgage, with the balance spent on personal expenses.  Approximately 2 months after the deadline to refinance the property, on 14 January 2016 Mrs. Walker filed a motion in the divorce court to extend time to finalize any pending refinancing, failing to disclose the sale of the vacant property; and misstating that a financing offer was pending.  Such misstatements were repeated at the hearing on the motion.  Mr. Walker filed a motion for contempt in the divorce court, and Mrs. Walker filed for relief under chapter 13 prior to the hearing on the motion for contempt.  In the chapter 13 case Mrs. Walker scheduled Mr. Walker as an unsecured creditor in the amount of $66,000, and her case was quickly confirmed without objection.   This case was subsequently dismissed due to a delinquency in payments to the trustee, and debtor's desire to refile to bring the mortgage into the plan.  A new case was filed 6 days later, again scheduling Mr. Walker as an unsecured creditor.   Mr. Walker objected to this plan as it provided no treatment of his claim; and on the basis that Mrs. Walker failed to disclose all monies received from the transfer of properties subject to his lien.  An agreement was reached provided for payment of $2,525 plus 5% interest to Mr. Walker, and this plan was confirmed on 14 February 2018.  This case was also dismissed after a motion by Mr. Walker to file a motion for criminal contempt in the state court, and a nondischargeability complaint by the Tennessee Dept. of Human Services for obtaining food stamp benefits by false statements to which the Debtor had consented to a nondischargeability judgment.  Upon dismissal of the 2nd case Mr. Walker filed a petition for criminal contempt and for a forced sale of the residence on 19 July 2018.  The state court ruled that only a court in the county where the property was located could enter an order forcing the sale.  On 12 September 2019 Mr. Walker filed a motion in the appropriate county seeking a sale of the property, and Mrs. Walker then filed her third chapter 13 on 30 September 2019.  Mrs. Walker had paid no timely mortgage payments between the 2nd and 3rd cases filed.  The court noted that in the 8 years between the initial divorce order and the 3rd bankruptcy case Mrs. Walker had purchased and financed at least 5 vehicles while she failed to pay Mr. Walker as required by the divorce order, or to refinance the mortgage as required by such order.  The court examined the requirements for confirmation of a chapter 13 plan.  11 U.S.C. §1325(a)(3) and (a)(7) require debtors to file and proceed in their cases in good faith, and propose plans in good faith.  Ultimately the courts are to examine whether the debtor's purpose in filing for chapter 13 relief is consistent with the underlying purpose and spirit of chapter 13 - ie financial rehabilitation through repayment of debt.1                A number of cases with fact patterns similar to this one have found a lack of good faith necessary for confirmation.  In In re Garzon, No. 18 B 26026, 2018 Bankr. LEXIS 3818, 2018 WL 6287986 (Bankr. N.D. Ill., Dec 3, 2018) the debtor owed his ex-wife $10,000 under a property settlement, and filed chapter 7 four months after entry of the decree without making any payments (subsequently filing a chapter 13 upon realizing chapter 7 would not discharge property settlements) and sold his home without paying anything to the ex wife prior to filing the new chapter 13.  The Garzon court concluded that the nature of the debt, his prepetition failure to pay his ex-wife, the contempt order by the divorce court, the concealment of the home sale, his payments to other creditors without paying the ex-wife, and an unfair plan proposing only minimal payments to the ex-wife commencing 20 months into the plan caused a failure to meet the good faith standard.   In In re Brandland, 570 B.R. 203 (Bankr. E.D. Va. 2017) the court denied confirmation and dismissed the case based on untruthful deposition testimony in the divorce case as to his ownership in a business that he had agreed to sell back to the original owners for $150,000  which he received 5 days prior to the divorce hearing.  Similarly in In re Bradley, 567 B.R. 231 (Bankr. D. Me. 2017) the court found a plan was not filed in good faith when the divorce decree required the debtor to pay her ex-spouse 15% of any lump sum workers compensation settlement, but the debtor failed to pay anything from the $155,000 settlement received, instead purchasing a new home, a new car, making home improvements, and paying $10,000 each to her three children.  Her 36 month plan provided to pay a total of $1,212 to unsecured creditors, the ex-spouse being the only such creditor.  Lastly, in In re Rippe, No. 12-10220, 2013 Bankr. LEXIS 4348, 2013 WL 5701605 (Bankr. N.D. Ind. Sept. 25, 2013) the court found a plan was not in good faith when the marital property settlement awarded the house and land to the debtor requiring that she refinance the property to remove the ex-spouse from the debt.  The Debtor had filed a notice of refinancing/sale of real estate which never closed an appeared not to be a bona fide arrangement.  Bankruptcy was filed on the day of the contempt hearing.  The plan provided payment in full of all creditors, but the the court found that given the debtor's conduct prior to filing, and her absolute right to dismiss this case the picture as a whole shows a lack of good faith.   These cases can be distinguished from a case finding good faith, In re O'Neal, No. 11-13535-WHD, 2012 Bankr. LEXIS 2412, 2012 WL 1940594 (Bankr. N.D. Ga., April 12, 2012) in which the debtor had been required to pay his ex-spouse $100,000 who was relieved of any responsibility for the mortgage on the home.  The debtor was entitled to any profit from the sale of the property so long as he paid the ex-spouse pursuant to the terms of the divorce order.  The debtor sold the home in a short sale and borrowed funds from his mother to make the first payment to his ex wife, but filed for chapter 13 prior to paying the balance.  The plan proposed a 10% dividend.  Despite such debt being nondischargeable in a chapter 7, the fact that the debtor paid $25,000 of the debt immediately after being ordered to do so by the divorce court, and was proposing to pay what he could afford for at least 3 years, and there being no evidence the debtor acted in any egregious manner in connection with the divorce proceeding or thereafter, the court found that the case and plan were filed in good faith.  Based on the above cases, the court in Walker found that the factors weighed against the debtor and Mrs. Walker's 3rd case and plan had not been filed in good faith.  The factors cited by the court were the frequency with which the debtor sought relief in bankruptcy; the circumstances under which the debt was incurred; the amount of payment offered by Mrs. Walker to Mr. Walker as indicative of her sincerity to repay the debt; Mrs. Walker's prepetition conduct as to this debt, including her intentional concealment and misrepresentation of facts to the divorce court and her spending the proceeds of the sale of the vacant property without complying with the divorce orders; her actions in electing to take on new debts in lieu of fulfilling her obligation to Mr. Walker; and her admitted motive in the timing of the filing of her 3 bankruptcy petitions.  The Court also took into account her admission in the Food Stamp adversary that she had obtained money by false pretenses, false representation, or actual fraud.   Based on such finding the court denied confirmation and dismissed the case, finding that the debtor could not propose a plan that would comply with the requirements of 11 U.S.C. §1325(a)(3) and (a)(7).1 Cusano v. Klein (In re Cusano), 431 B.R. 726, 735 (B.A.P. 6th Cir. 2010).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com 

Third party releases have long been a controversial feature of certain chapter 11 plans. They are neither specifically allowed nor prohibited by the plain language of the Bankruptcy Code. This has led courts to reach differing results. There are two important principles at play in these cases. On the one hand, bankruptcy exists to provide relief to debtors. On the other hand, bankruptcy plans are intended to provide the greatest possible return to creditors. If granting releases makes the plan possible, this is in the best interest of creditors.The Third Circuit waded into this debate to answer a very limited question:  does Article III permit non-consensual third party releases? The Court's answer, at least in the specific case before it, was yes. In re Millenium Holdings II, LLC, 945 F.3d 126 (3rd Cir. 12/19/19). What HappenedMillenium was a lab testing company. It borrowed $1.8 billion to refinance certain debts and pay a $1.3 billion special dividend to its shareholders. The government decided to revoke the debtor's billing privileges under Medicare following an investigation. Millenium agreed to pay the government $256 million. However, this left it unable to pay its debts. When the lenders were asked to restructure their debts, they asked some hard questions about the related party transactions and the disclosures that were made in connection with the loans. (Editor's note: This was a $1.8 billion transaction. How did the lenders miss the weaknesses in the house of cards?). Most of the lenders reached a restructuring support agreement with the debtor and its affiliates. Under the deal, the affiliates would pay the debtor $325 million and transfer their equity to the lenders. In return, they would receive complete releases. The deal was the result of extensive adversarial negotiations over a period of time. The Third Circuit found that "the deal to avoid corporate destruction would not have been possible without the third-party releases." Opinion, p. 9.Although 93% of the lenders agreed to the deal, one did not. Millennium filed a Prepackaged Joint Plan of Reorganization. Voya, one of the the hold out lenders, objected. The Bankruptcy Court confirmed the Plan and Voya appealed. The District Court remanded the case to Bankruptcy Court for a determination of whether the plan violated Stern v. Marshall. The Bankruptcy Court said it did not and the District Court affirmed.The Issues on AppealThe Third Circuit limited its review to two issues: 1.  Did the Bankruptcy Court have constitutional authority to confirm the plan? 2.  If the Court had authority, was the appeal equitably moot?The Third Circuit answered yes to both questions and affirmed the lower courts.So why those two issues? If the Bankruptcy Court lacked constitutional authority to confirm the plan, jts order would not be a final judgment capable of being appealed. Instead, it would have had to be sent to the District Court for de novo review.  On the other hand, if the Bankruptcy Court had authority to enter the order and the appeal was equitably moot, there would be nothing remaining for the court to review.Constitutional AuthorityWhen the Supreme Court decided Stern v. Marshall, 564 U.S. 462 (2011), many commentators feared that it would imperil the functioning of the Article I Bankruptcy Courts. (Article I Courts are those established by the legislative branch and whose judges are not confirmed by the Senate and do not have life tenure). However, despite Chief Justice Roberts's desire to bring more control to the Article III Courts, the existing structure soldiered on with a few tweaks.The Debtors and Voya made absolutist arguments to the Court. The Debtors claimed that Bankruptcy Courts always have constitutional authority to confirm a plan. Voya, on the other hand, argued that the Bankruptcy Court only had constitutional authority to decide matters necessary to adjudicating claims. It argued that granting the third party releases constituted an adjudication of its RICO and fraud claims which could only be done by an Article III Court. The Court of Appeals cautioned in a footnote that the Debtors' argument may be too expansive and it explicitly rejected Voya's argument as putting the cart before the horse. The Court of Appeals stated that: To Voya, that point is irrelevant. Voya contends that Stern demands an Article III adjudicator decide its RICO/fraud claims because those claims do not stem from the bankruptcy itself and would not be resolved in the claims-allowance process. It asserts that the limiting phrase from Stern, i.e., "necessarily be resolved in the claims allowance process[,]" cannot be stretched to cover all matters integral to the restructuring. (Opening Br. at 31.) In that regard, Voya argues that an assertion that something is "integral to the restructuring" is really "nothing more than a description of the claims allowance process." (Reply Br. at 13.)That argument fails primarily because it is not faithful to what Stern actually says. Had the Stern Court meant its "integral to the restructuring" language to be limited to the claims-allowance process, it would not have said that a bankruptcy court may decide a matter when a "creditor has filed a claim, because then" — adding its own emphasis to that word — "the ensuing preference action by the trustee become[s] integral to the restructuring of the debtor-creditor relationship." 564 U.S. at 497 (alteration in original). That phrasing makes clear that the reason bankruptcy courts may adjudicate matters arising in the claims-allowance process is because those matters are integral to the restructuring of debtor-creditor relations, not the other way around. And, as the Appellees correctly observe, Stern is not the first time that the Supreme Court has so indicated. In Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S. Ct. 2782,106 L. Ed. 2d 26 (1989) — a case that the Stern Court viewed as informing its Article III jurisprudence, 564 U.S. at 499 — the Court answered first whether an action arose in the claims-allowance process and only then whether it was otherwise integral to the restructuring of debtor-creditor relations. See Granfinanciera, 492 U.S. at 58 ("Because petitioners here ... have not filed claims against the estate, respondent's fraudulent conveyance action does not arise 'as part of the process of allowance and disallowance of claims.' Nor is that action integral to the restructuring of debtor-creditor relations."). If the first step in that analysis were all that was relevant, the second step would not have been taken. 945 F,3d at 137-139.  Reducing the issue to its most basic, Bankruptcy Courts have authority to enter final orders on matters integral to the restructuring of debtor-creditor relations. The fact findings of the Bankruptcy Court made clear that the third party releases were integral to the plan, which was a restructuring of the debtor-creditors relations. Therefore, the Bankruptcy Court had constitutional authority to confirm the plan and Voya's main argument failed. (Author's note: One thing that fascinates me about reading judicial opinions is how a few paragraphs out of a long opinion can carry the crux of the whole opinion. This is just such a case).Equitable Mootness Wraps Up the CaseThe Third Circuit made clear that it was not endorsing broad third party releases. However, it did not reach the issue of whether such releases were permissible under bankruptcy law due to equitable mootness. Basically, equitable mootness says that if a plan is confirmed and has been substantially consummated, it cannot be set aside where parties have acted in reliance upon it. Equitable mootness will not apply to a discrete part of a controversy which can be set aside and the parties placed back in their status quo position. However, if you can't unscramble the confirmed plan, you can't set it aside. What equitable mootness does is requires a party complaining about a plan to obtain a stay pending appeal or risk losing its appeal. Voya did not do so here and as a result, the court did not reach the merits. The key here is that the third party releases were essential to the plan. Without the third party releases, the insiders would not have funded the plan. Without the insiders funding the plan, there would be no plan.What It MeansBasically what this case means is take your best shot in the bankruptcy court because you may not have another shot on appeal. Stern v. Marshall is not a talisman which will fend off bankruptcy while equitable mootness makes it really hard to challenge a plan which, as here, was negotiated between multiple parties and involved a lot of moving pieces.What does this case say about nonconsensual third party releases in general? As a matter of law, it does not say much. However, what it says as a practical matter, is that it will be hard for one obstructive creditor to impede a deal that almost everyone else wants. I will talk about the status of third party releases in general in a subsequent post.Hat tip to Britt Suttell who pointed me to the opinion.