An investment professional with $3,800,000 debt to the IRS debt from the 2001 taxes lost a §521(a)(1)(C) proceeding when he made over $22 million income following the 2001 tax year and lived a lavish lifestyle.  In re: MATTHEW L. FESHBACH & KATHLEEN M. FESHBACH, Debtors. MATTHEW L. FESHBACH & KATHLEEN M. FESHBACH, Plaintiffs, v. UNITED STATES DEPARTMENT OF TREASURY & INTERNAL REVENUE SERVICE, Defendants., No. 08:11-AP-00803-CPM, 2017 WL 4694180 (Bankr. M.D. Fla. Oct. 17, 2017).  The Mr. Feshbach had been using an investment strategy that deferred tax liability, but a law change and bankruptcy of a company he invested in caused his gains to be realized resulting in a tax liability of over $3 million for the 2001 tax year.      The Feshbachs then made a number of offers of compromise for the taxes which were withdrawn before determination or rejected by the IRS.  They also entered into an installment agreement, which they complied with for slightly over 2 years, but the debtor's declining health caused them to default on such agreement.  The IRS rejected the offers on their belief that the Feshbachs had the ability to pay the debt in full.  The Feshbachs made another offer of compromise, which was again rejected.  Upon denial of the appeal on this rejection the debtor filed for relief under chapter 7 in 2011.  The Feshbacks filed an adversary proceeding to determine that the taxes were dischargeable which was contested by the IRS.   The IRS concluded that the Feshbachs had made over $13 million in the nine years prior to filing the chapter 7, and had spent $8.5 million on household expenses and charitable contributions during approximately the same time period.  These expenses included over $721,000 in personal travel, over $500,000 on clothing, a rented house in Aspen, and a personal chef.   The Court concluded that the expenses established that the Feshbachs led a lavish lifestyle.  11 U.S.C. § 523(a)(1)(C) provides that a discharge does not discharge a debtor “for a tax ... with respect to which the debtor ... willfully attempted in any manner to evade or defeat.”  The IRS must show more than mere nonpayment of taxes to deny discharge of the debt.  Rather, the government must show, by a preponderance of the evidence, that the debtor engaged in affirmative acts constituting a willful attempt to evade or defeat payment of taxes.  Griffith v. United States (In re Griffith), 206 F.3d 1389, 1395-96 (11th Cir. 2000) (en banc). There are two prongs required to determine nondischargeability of §523(a)(1)(C) taxes.  The creditor must show  that the debtor "attempted in any manner to evade or defeat” a tax.  The second requirement is that the conduct avoiding the tax was done voluntarily, consciously or knowingly, and intentionally.    The Court looked to prior precedent on the issues.  In the Griffith case the 11th Circuit found that a debtor attempted to evade the IRS by transferring substantial assets to himself and his new wife by tenancy by the entireties and transferring other assets to a new corporation of which his wife was the sole shareholder.  Other Florida decisions have ruled that spending money on expenses other than the IRS debt does not automatically constitute an attempt to evade the IRS, United States (In re Pisko), 364 B.R. 107 (Bankr. M.D. Fla. 2007), Kight v. IRS (In re Kight), 460 B.R. 555 (Bankr. M.D. Fla. 2011), the court must look to the facts of each case.     The Feshbach's argued that they were required to spend on dinner parties and the lifestyle in order to create an environment to add value to his business relationships in order to earn money to repay the IRS.  The Feshbachs produced no evidence (other than his own testimony) of a relationship between a money manager's spending on household and personal expenses and the confidence clients put in him.   The Court also rejected their argument that on one at the IRS told them tor reduce their expenses.  While denying that was accurate, the Court also noted that unless the IRS had approved the debtors' budget the IRS would not be liable for something their officers did not say.  There was also no explanation of how the over $500,000 in charitable contributions would have aided their repayment of the IRS debt. Finally, the $233,000 spent on the Aspen vacation rental was not adequately explained.  The second prong finding debtor's such conduct was intentional requires the IRS to show 1) that the debtor had a duty to file and pay taxes, 2) that he was aware of such duty, and 3) that he knowingly and intentionally violated that duty.  No fraudulent intent is required to be shown.  While the debtors admit the first two requirements, they contest that they knowingly and intentionally failed to pay the IRS.  To support this argument, they point to their efforts to resolve the taxes with the IRS.  The IRS argues that their efforts were an attempt to delay collection and avoid full payment of the debt. The Court found that during the period they were making offers to the IRS, they were continuing lavish spending and could either have retired the debt or set aside sufficient funds to insure they could continue the installment payment arrangement.    The debtor's argument that they relied on a professional as to the amounts to offer in the offers of compromise was not accepted by the Court.  While reasonable reliance on a professional's advice can be a defense to a willful evasion charge,  Zimmerman v. United States (In re Zimmerman), 204 B.R. 84, 88 (Bankr. M.D. Fla. 1996), as amended, (Dec. 11, 1996), Mr. Feshback was a financial professional with substantial knowledge of the tax laws.  Further they should have realized that the IRS would not have accepted the repayment offers made.   The debtor's argument that there was no showing that they could afford a lump sum payment to pay the debt in full at any time was likewise misplaced.  It is not required that debtor's be able to pay the debt in full at one time, and the Feshbach's could have reduced expenses and been able to repay the debt over time.  They also argue that the IRS did not establish any badges of fraud.  However, since fraud is not required under a §521(a)(1)(C) action, this argument also must fail.  The final issue examined by the Court is whether a partial discharge of the debt would be warranted.  The Court concluded that this is not an option under §521(a)(1)(C).  The statute itself refers to the debt as a whole, thereby preventing a splitting of the debt into a portion dischargeable and a portion nondischargeable.  §105 does not assist the debtor in that cannot use such equitable powers to contravene the language of a statute.    Thus the Court ruled the entire debt at issue to be nondischargeable.Michael Barnett www.tampabankruptcy.com      

Everything You Need to Know About Divorce and Bankruptcy   You have probably heard the commonly-cited statistic that about half of all marriages end in divorce. A sizable number of those whom have experienced divorce will also find themselves in need of bankruptcy protection. Family law and bankruptcy law intertwine in several ways. This post […] The post Everything You Need to Know About Divorce and Bankruptcy appeared first on Tucson Bankruptcy Attorney.

Here at Shenwick & Associates, we’re paying close attention to the travails of “underwater” holders of New York City Taxi and Limousine Commission medallions and practical solutions to their plight.  In a recent blog post, we reviewed a New York City Council Committee on Transportation hearing last month on the issue.  Earlier this month, Committee on Transportation Chair Ydanis Rodriguez introduced a proposed local law, Int. 1740-2017,  which would create a new nontransferable taxicab license to allow current taxicab owners to operate one additional vehicle under a single existing medallion license. Presumably, under this proposal, the medallion owners would have an additional stream of revenues, and thus, theoretically, make taxi medallions a more attractive investment.In an amN Ystory about the proposal, reactions were mixed.  Bhairavi Desai, the executive director of the New York Taxi Worker’s Alliance, which represents 19,000 drivers, called the bill a “starting point” but wouldn’t support it in its current form. “My concern would be what’s going to happen to the drivers on the road because this wouldn’t save the drivers who are in a race to the bottom,” said Desai. “In order to be hailed you have to been seen and this could help address that issue and help the industry, but to really protect drivers there should be a commission-like system with a guaranteed income and a cap on black cars.”I’m not sure that this proposal would assist medallion owners who own overleveraged medallions for at least two reasons: 1. Based on the laws of supply and demand, if the number of medallion operators increase, the value of each existing medallion will decrease; and 2. My clients indicate that there are already too many taxis, Uber, Via and Lyft cars on the road and this proposal would increase or double the number of medallions and increase competition for medallion owners. My clients indicate that they are presently working 20-30% longer hours each week for 20% lower earnings. For more information on taxi medallions, debtor and creditor relations and bankruptcy, please contact Jim Shenwick.

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the laws governing filing for bankruptcy were changed to make it more difficult for consumers to have their debts discharged under Chapter 7 of the Bankruptcy Code. Now, when you file your Chapter 7 bankruptcy petition, you must also file along with it a “Statement of Current Monthly Income and Means Test Calculation.” You also must include a schedule of current income and another schedule of current expenses. If your income is more than the median income of Ohio residents, you must pass a means test to “determine whether the chapter 7 filing is presumptively abusive.” Presumption of Abuse: The Means Test and Median Income The median income for Ohio residents as of April 1, 2017, depends on the number of members in the household. The median income for a one-person household is $3,854 monthly or $46,442 annually.  The median income increases by increments up to a household of 10 which has a median monthly income of $11,120 or an annual median income of $133,440. Your income is determined by averaging your income over the six-month period of time prior to the filing of your bankruptcy petition. If your income is more than the median, you must then overcome the presumption of abuse by passing the means test or proving to the court that special circumstances exist such that your case should not be dismissed or not be converted to a Chapter 13 bankruptcy. Overcoming the Presumption of Abuse If your income for the previous six months is more than the median income of Ohio, you may still qualify for Chapter 7 depending on whether or not you have a certain amount of expendable income after subtracting allowable expenses from your income. Allowable expenses are the same as those articulated in the Collection Financial Standards of the Internal Revenue Service (IRS). These allowable expenses include certain amounts for: Housing. Food. Housekeeping supplies. Apparel and services. Personal care products and services. Cost of health and disability insurance. Certain miscellaneous expenses. Possibly extra justifiable expenses for minor children when those expenses are not covered by any other provision. Reasonable and necessary expenses to support the care of an elderly, chronically ill or disabled family member. Additional amounts for home energy or food and clothing above the allowable amount if documentation is provided to justify the extra expense. The allowable amounts depend on where you live. Payments for secured debts are not considered allowable expenses, but are taken into consideration when the court determines the amount of disposable income. If, after deducting all allowable expenses from the total income, your disposable income is less than the amount described by the Bankruptcy Code, your petition will not be considered abusive. If it exceeds the described amount, your petition will be presumed abusive. If the presumption of abuse exists, the Trustee will notify the creditors of this. Within 10 days after the first creditors meeting, the trustee must file a statement that the petition is presumed to be abusive, that a presumption of abuse does not exist or that the petitioner has failed to provide documentation to complete the means test. This statement will be provided to the creditors. Exceptional Circumstance Justifying Exception to Presumption of Abuse Even if your disposable income is too high for Chapter 7, you may still overcome the presumption of abuse if you can prove exceptional circumstances exist. One example commonly given is that the debtor incurred debt during a time of receiving overtime pay. The overtime work is no longer available, decreasing the income. Other examples of exceptional circumstances may be unexpected high medical bills, a surprise increase in rent, recent unemployment or being called to active military duty. Trustees’ Response to Presumption of Abuse Finally, if a presumption of abuse exists, the Trustee must file one of the following: A motion to dismiss the petition based on the presumption of abuse. A motion to convert the petition to a Chapter 11 or 13 bankruptcy. A motion finding that exceptional circumstances exist and that the Chapter 7 petition may proceed. A statement explaining why no motion will be filed. If you are considering filing for Chapter 7 bankruptcy, you have filed and you are concerned about the means test, or the court has notified your creditors that your filing is presumed to be abusive, you need the assistance of a qualified and experienced bankruptcy attorney. Contact the Chris Wesner Law Office, LLC, for a free consultation. The post Presumption of Abuse in Bankruptcy appeared first on Chris Wesner Law Office.

  A finding that a transfer of funds from a joint account to the wife's account created an avoidable fraudulent transfer was reversed and remanded in  In Re: KEITH A. YERIAN, Debtor. SUN Y PAK, Appellant, v. RICHARD BLACKSTONE WEBBER, II, as TRUSTEE, Appellee., No. 6:15-BK-1720-KSJ, 2017 WL 4654538 (M.D. Fla. Oct. 17, 2017).  The case involved an E-Trade account containing $257,000 which was transferred in February 2012 by Mr. Yerian to his spouse four months after he was sued by his ex-spouse for debts relating to a business venture.  The E-Trade account was jointly owned by Debtor and Pac, titled 'JTWROS' (Joint Tenancy with Right of Survivorship).  Mr. Yerian then filed for relief under chapter 7 of the bankruptcy code in 2015.  The chapter 7 trustee sued Yeridian and his spouse, Pac, seeking to avoid the transfer as a fraudulent transfer under 11 U.S.C. 544, 548, and 550 of the Bankruptcy Code.   Pac defended the suit arguing alternatively that 1) the account was her individual funds; and 2) that the account was exempt by funds held in Tenancy by the Entireties.  The Bankruptcy Court rejected the initial argument, finding her testimony not credible as to ownership, and ruled in favor of the trustee, but did not address the Tenancy by Entireties argument.   When a bankruptcy is filed, a bankruptcy estate is created encompassing all of the debtor's legal and equitable interests in property, except those specifically excluded.  11 U.S.C. 541(a).  Among the interests excluded from the bankruptcy estate is any interest in property the debtor held as tenancy by the entireties (TBE) or joint tenant to the extent such interest is exempt under applicable non-bankruptcy law.  11 U.S.C. 522(b)(3)(B).  Florida law exempts tenancy by the entireties property so long as only one spouse files bankruptcy.  Beal Bank, SSB v. Almand & Assocs., 780 So.2d 45, 52–53 (Fla. 2001).  Such property is exempt from the creditors of an individual spouse if the debt is not joint.  Such exemption extends to transfers of TBE property under the Florida Uniform Fraudulent Transfer Act, even if the circumstances of the transfer indicate fraud.  See Fla. Stat. § 726.102(2)(c) (defining as exempt “an interest in property held in [TBE] to the extent it is not subject to process by a creditor holding a claim against only one tenant”); see also, e.g., In re Anderson, 561 B.R. 230, 240 (Bankr M.D. Fla. 2016) (under FUFTA and the Bankruptcy Code, “a transfer of property that is exempt from creditors may not be the subject of an action to avoid a fraudulent transfer”).  Joint Tenancy accounts are not accorded the same protection under Florida law.  The Beal case listed the requirements for TBE property: marriage, possession, interest, title, time, and survivorship.   Beal Bank, 780 So.2d at 52. Since Joint Tenancy accounts can have the same characteristics, to clarify the matter Beal announced a presumption that property jointly held by married couples is held TBE.  Id. at 58.  This was then codified in §655.79 of the Florida Statutes.   The steps in determining whether the TBE presumption applies are 1) the property must meet the six requirements (marriage, possession, interest, title, time and survivorship).  Second, the Court must inquire whether there was an express disclaimer of TBE ownership.   If there was an actual choice in creating the account, that choice will determine the issue.  However, if the writing merely stated that the account was joint tenancy without offering TBE, then the presumption applies and the account is presumed to be TBE.  When the presumption applies, the creditor has the burden of proof to show by the preponderance of the evidence that the property is not TBE.   This could be done by showing that the parties fraudulently created the TBE property, by showing, among other things, actual intent to hinder, delay, or defraud when the property was created.  Also, the presumption does not apply if the financial institution does not offer TBE accounts, or expressly precludes TBE ownership.  The bankruptcy court erred by not applying the TBE exemption once it was determined that the E-Trade account was jointly owned, despite titled joint tenancy with right of survivorship, and that the parties were married when the account was opened.  The court should have then gone on to examine the circumstances when the account was opened, ie whether E-Trade offerred TBE accounts and whether the couple expressly disclaimed it.    The trustee's position that the account lacked the unity of possession and interest failed, because both of these are required for joint tenancy accounts as well.    The case was remanded to determine if the trustee could overcome the presumption of Tenancy by the Entireties.Michael Barnett www.hillsboroughbankruptcy.com

So many emotions and thoughts are running through your mind right after a car accident. You are worrying about the health of all those people who are involved in the accident. You want to contact your family and friends to let them know what happened. From talking to police and ambulance workers to inspecting your vehicle for damage and gathering insurance information, the number of things that are happening at that moment can be overwhelming. The last thing on your mind is the possibility that you may end up in dealing with debt. Ohio Car Accident Debt Is a Mounting Concern Car accident debt varies from person to person based on a range of different factors: How much car damage there is Who was at fault Whether both parties have car insurance What’s covered by each person’s individual policy Medical injuries Seeking alternative transportation Lost wages if you can’t return to work Most often, we think people who fall into car accident debt skipped out on obtaining car insurance or health insurance. However, this type of debt can happen to anyone even if you are covered. One of the stumbling blocks that you will encounter is coordinating your costs created by the car accident to what you believe the insurance company will pay when filing a claim. In this manner, you are trying to lower the amount of out-of-pocket expenses. Insurance Claims Downsides Sometimes insurance claims don’t go as smoothly as planned. It can take months for a claim to go through because it must be handled by multiple agents of the insurance agency, including the claims adjuster and the medical claims representative. By the time you receive compensation, it may be too late. If you needed medical procedures, the bill may not be paid because the insurance company is still going through the claim’s process. So the medical bill can be turned over for debt collection after the car accident. Even if the claim is accepted, you may not get as much compensation as you expected. This may cause even more stress as you still have mortgage or rent, food, and transportation expenses that you still have to pay from your own bank account. If you are unable to return to your job immediately, and you don’t have an emergency fund that can cover your costs for the next few weeks or even months, you end up in a tough situation. You may sit there trying to decide on which bills have to be paid immediately, and which ones will have to go into default since you just don’t have enough money to pay for everything. From having an insurance claim denied to not being paid properly or on time, a person who has experienced a car accident can end up waist-deep in debt. Dealing with Car Accident Debt The best way to deal with car accident debt is to start before the accident even occurs. Look over your insurance policy and get a clear picture of what will be covered for an accident. This strategy can help prepare you for what will happen during the claims process. Also, make sure you have an emergency fund in place so you can pay for medical bills and other expenses until you are compensated. If an accident does occur, you need to have a plan of action in place to get a claim out as soon as possible. You want to provide complete medical and insurance information to all parties that need it to lower your chances of having a claim denied due to providing incorrect information. Also consider getting in touch with legal representation, especially when there are doubts on who was involved with an accident. An experienced attorney can go over your insurance policy, claims and police reports to help you figure out your rights and what type of compensation you can obtain from the insurance company. During a time when so much is happening to you, you don’t want to come across any surprises that can force you to go into deeper debt. Don’t let car accident debt collection scare you or cause you undue stress. Contact the Chris Wesner Law Office, LLC today for a consultation so we can inform you about your rights and what options are available to you. The post Ohio Car Accidents Creating Massive Debt for Accident Victims appeared first on Chris Wesner Law Office.

When you file your petition for bankruptcy under Chapter 13, you must also file your plan to repay the amount of your debt which is in arrears. You must show enough income to do that over a three to five-year period all the while keeping your all your debts current. The Notion of Automatic Stay On the date of your bankruptcy filing, an automatic stay is issued against all creditors. Under Chapter 13, the automatic stay is in force until the end of the repayment period. If the plan is complied with, there may be remaining debts that are discharged. The purpose of the automatic stay is threefold: to give the debtor relief from collection action; to allow the debtor time to comply with a proposed reorganization plan; and, to freeze the debtor’s assets so that all creditors will be treated fairly. The only way creditors can continue collection action is by a court order which they may get by filing a Motion to Lift the Automatic Stay with the bankruptcy court. For Chapter 13, such a motion is generally brought by the holder of a mortgage, automobile loan or other secured debt. There are ways you can fight this motion, but if you fail to respond within 14 days, the moving party may ask the court for an order lifting the stay based on your failure to respond. Chances are that the court will grant that request. It is important to respond and challenge the issues raised in the motion. You can also challenge the motion for not complying with the rules for filing such a motion. Procedural Problems with the Motion The first thing to do is to carefully analyze the moving papers to be sure that all the rules were followed. Some flaws that may defeat the motion completely, or at a minimum allow the debtor more time to confirm the plan, are: The moving party failed to properly serve the papers on the required parties, which includes the debtor, debtor’s attorney, trustee and any other party known to have an interest in the property at issue. The proper evidentiary documents were not attached. The moving party is required to attach details of the collateral for which it wants to collect including a description of the property and its current value. The amount of the original loan, the original monthly payment, the amount in arrears, and the current monthly payment according to the repayment plan must also be attached. The moving party has no standing. This is often a failure of a mortgage holder. It is common for mortgages to be bought and sold. The entity that brings the motion must attach proof that they are in fact the holder of the mortgage. There was inadequate notice of the hearing date. Substantive Objections to the Motion for Relief If the filing papers are in order, the grounds upon which the motion can be brought according to the Bankruptcy Code 11 U.S. Code § 362 (d) are that there is inadequate “protection of an interest in property” and that “(A) the debtor does not have equity in such property; and such property is not necessary to an effective reorganization.” You can rebut this in the following ways. Your reorganization plan is likely to be confirmed. If the creditor is, as it usually is, brought by a mortgage lender who is hoping to foreclose on your home, you can fight this by showing that you have filed a reorganization plan that has a reasonable possibility of being confirmed within a reasonable amount of time. An application for a loan modification is under consideration. A loan modification agreement is in effect which lowered the monthly payments from those that were on the original loan. The property in question is necessary for an effective reorganization. The property is provided for in the reorganization plan. All post-petition payments are current. The reorganization plan has been confirmed and it provides for all prepetition in arrears to be paid over the course of the plan. Relief from the stay cannot be based on facts that occurred prior to the confirmation of the reorganization plan. For all of your objections, you must attach documentation to support your claims. The party making the Motion for Relief from the Automatic Stay Chapter 13 has the “burden of proof on the issue of the debtor’s equity in the property,” but the burden on all other issues is on the debtor. If you need assistance in fighting a Motion to Lift the Automatic Stay in Chapter 13 Bankruptcy or have any other questions concerning bankruptcy, contact a qualified bankruptcy attorney at the Chris Wesner Law Office LLC today about your concerns. The post Fighting Motion to Lift Automatic Stay for Chapter 13 Bankruptcy appeared first on Chris Wesner Law Office.

When you file for bankruptcy relief, you may be referred to as the ‘petitioner’ or the ‘debtor.’ Unfortunately, even if you have good reasons to file bankruptcy, there is no guarantee that your debts will be forgiven. For example, if you do not follow the proper procedures or neglect to comply with the bankruptcy laws, your case could be dismissed. A Chapter 7 bankruptcy case is rarely dismissed; however, dismissal for a Chapter 13 case is rather common. The reason for the dismissal determines whether a case is dismissed with prejudice or without prejudice. Protecting the Petitioner During the Bankruptcy Process As you move through the bankruptcy process, you are protected from your creditors by an injunction that is referred to as an ‘automatic stay.’ This injunction is used to protect you from nearly all the collection activities that your creditors use. The automatic stay goes into effect the day that you file your case. What to Expect Following a Chapter 7 or Chapter 13 Bankruptcy Discharge, or Dismissal If your case is successful and you obtain a discharge, you are not required to pay back any of the debts that were discharged in your bankruptcy case. However, if you are not successful and your case is dismissed, it is deemed void, which means that you are still liable for all your debt. In addition, directly following the dismissal, your creditors are permitted to initiate or continue any litigation (pursuant to Ohio state law) to garnish your income or foreclose on your property. Reasons for a Dismissal Once you have filed for bankruptcy, you are required to follow certain procedures to obtain a discharge and be relieved of your debts. If these procedures are not followed, your case may be dismissed. Typically, the majority of Chapter 7 and Chapter 13 bankruptcy cases are dismissed because the debtor fails to: file the necessary forms with the court; meet the established deadlines for documentation, as set forth by the court; provide the bankruptcy trustee with the required supporting documentation for his or her case; appear at the meeting of creditors; make timely plan payments (in a Chapter 13 bankruptcy case); or successfully complete a financial management course (debtor education). What Does It Mean If a Bankruptcy Case Is ‘Dismissed without Prejudice’? When a Chapter 7 or Chapter 13 bankruptcy case is dismissed without prejudice, the petitioner can immediately refile. Most of the bankruptcy cases that are dismissed without prejudice occur due to issues related to procedure. For example, if the petitioner fails to file the necessary forms with the court. Although the petitioner can refile immediately following this type of dismissal, he or she may need to file a motion to extend or impose the ‘automatic stay’ in the refiled case. Otherwise, collection activities will resume. Limits on Automatic Stay Even when a bankruptcy case is dismissed without prejudice and the petitioner refiles right away, there may be limits placed on the automatic stay. For example, if a case is refiled within 12 months of dismissal, the automatic stay is limited to 30 days; however, if the petitioner had two or more bankruptcy cases dismissed within 12 months of the current re-filing, automatic stay will not be granted. What Does It Means When a Case Is ‘Dismissed with Prejudice’? Whereas a case dismissed without prejudice can be refiled immediately, the opposite is true when a bankruptcy case is dismissed with prejudice. A petitioner whose case is dismissed in this manner may not re-file for a specific length of time or, in some cases, prohibited from ever filing bankruptcy on the debts that existed at the time of the initial filing. Possible reasons that lead to a bankruptcy case being dismissed with prejudice include, the debtor: filed his or her case in bad faith to delay creditors; tried to hide assets; willfully disregarded orders from the court; or abused the bankruptcy system in some other way. According to bankruptcy law, a debtor whose case was dismissed with prejudice cannot file another bankruptcy case within 180 days of the prior case if: the debtor requested that the case be dismissed after he or she filed a motion for relief from an automatic stay; or the debtor willfully failed to follow the court’s orders. Since bankruptcy judges are given far-reaching discretion when it comes to dismissing bankruptcy cases, he or she can determine the penalty the debtor receives based on the severity of the acts that led to the case being dismissed with prejudice. Ideally, a Bankruptcy Plan Will Lead to a Discharge When completed successfully, a Chapter 13 or Chapter 7 bankruptcy plan absolves the petitioner of all the debt listed in his or her case. Therefore, creditors are not permitted to pursue the individual for payment (as applicable by Ohio state law). Once a debt has been discharged, if a creditor continues to pursue the petitioner for payment, he or she should talk to a bankruptcy lawyer. If you have bankruptcy questions or want to learn more about how to file for bankruptcy, contact the Chris Wesner Law Office at 1.877.350.6039 today. The post Can You Refile If Your Bankruptcy Case Was Dismissed? appeared first on Chris Wesner Law Office.

Jevic--The Inside Story and the Impact on Future Chapter 11s featured participants from the case offering their perspective on the case and what it meant.   Dan Dooley of MorrisAnderson was the Chief Restructuring Officer for Jevic.   Domenic Pacitti of Klehr Harrison was Debtor's counsel.   Rene Roupinan of Outten & Golden represented the WARN Act claimants.   The panel was moderated by Judge Gregg W. Zive (Bankr. D. Nev.).    I have previously written about Jevic here.Jevic Holding Company was a trucking company based in New Jersey.   It had been acquired by Sun Capital and was financed by CIT Group.    CIT requested that the debtor liquidate itself in Chapter 11.   The Debtor apparently gave WARN Act notices.   However, New Jersey had its own state statute which was stricter than the national statute.When the case was filed, the CRO Dan Dooley, negotiated a wind-down budget which included $3.0 million for paying accrued wages and related payroll obligations.   After the company was liquidated, the Debtor was holding $1.7 million which was subject to Sun's lien (it was also a secured creditor).   There were two other important pieces of litigation.   The WARN Act claimants sued the Debtor and Sun Capital.  They alleged that the Debtor and Sun were a unitary employer.   The Official Committee of Unsecured Creditors sued Sun and CIT to unwind the leveraged buyout as a fraudulent transfer.     Eventually a settlement was reached where Sun allowed the $1.7 million to be used to pay creditors and CIT paid another $2.0 million to cover priority and administrative claims.  However, in the settlement Sun did not want any money to go to the WARN Act claimants because they were also suing Sun.  As a result, a structured dismissal was set up which provided that the settlement funds would be paid to creditors but not to the WARN Act claimants.   This involved skipping over the WARN Act claimants' priority claims.   The Bankruptcy Court approved the structured dismissal and the Third Circuit affirmed under the "rare circumstances" doctrine.   The Supreme Court reversed finding that a debtor could not violate the priority scheme under the Bankruptcy Code in a non-consensual an end of case distribution.  The Court left open the possibility that paying creditors out of sequence would be allowed in cases such as paying employee wage claims and critical vendor claims where doing so would advance Code-related goals.Mr. Pacetti (the Debtor's lawyer) explained that they used a structured dismissal because there are only three ways to end a chapter 11 case--a plan, conversion or dismissal.  11 U.S.C. Sec. 349(b) says that the parties shall revert to the status quo ante unless the court "orders otherwise."  The structured dismissal was an attempt to have the court "order otherwise."    Judge Zive focused on the Court's reference to allowing priorities to be skipped based on a Code-related objective.   He raised the case of Motorola, Inc. v. Official Committee of Unsecured Creditors (In re Iridium Operating, LLC), 478 F.3d 452 (2nd Cir. 2007).   In Iridium,  the debtor had claims against its parent, Motorola, and Motorola had administrative claims against the estate.    In settlement of other litigation, a fund of money was created to fund a litigation trust to sue Motorola.  Any money remaining in the litigation trust would go to the unsecured creditors.  Motorola objected to diverting funds which could have paid its administrative claim to the trust.   The Second Circuit generally found that the settlement was permissible because having a well-funded creditors' trust would increase the value of the claims against Motorola.  However, it remanded for an explanation of why the residual funds in the trust would go to the unsecured creditors instead of being distributed in priority order.Mr. Dooley stated that the Code-related objective here was maximizing the pie.Judge Zive said that other areas where priority-skipping would be allowed would be wage orders, critical vendor motions and roll-ups as part of DIP financing.   He said these are all orders that allow the case to proceed.   Ms. Roupinan was asked how Jevic would change WARN Act litigation.   She said that requiring parties to follow the absolute priority rule would provide clarity and predictability and improved ability to negotiate.Mr. Pacetti said that in skipping priorities, it was important to consider what the stage of the case is.  First day motions will get greater latitude than end of case distributions.  He also stressed the importance of making an evidentiary record.Judge Zive seconded this notion stating that any time you want the court to do something you should provide sufficient facts.  He gave the example of routine motions for cash management and continuing bank accounts which could result in de facto sustantive consolidation.  Ms. Roupinian asked whether priority-skipping would be ok if all parties consented.   She asked what would happen if the U.S. Trustee was the only party objecting.Judge Zive replied that the policy of the U.S. Trustee is not the Bankruptcy Code.  He said that "if everyone is consenting, I don't have a problem with that."   However, he focused on what constituted consent?   He said that if a party is given notice and fails to object, they have waived their objection.Mr. Dooley said that the take-away from the case was that it was really about the absolute priority rule, not structured dismissals.Judge Zive said that one of the problems with Jevic was that there was no going concern value to protect and no jobs.  As a result, the Code-related objective was much weaker.   A few moments later, he emphasized that priority skipping can be allowed to protect going concern value, jobs, etc. but that "there has to be a significant reason."   The panel also discussed gifting, that is, where one creditor gives up value so that it can go to a creditor with lesser priority.   Judge Zive pointed out In re LCI Holding Co., 802 F.3d 547 (3rd Cir. 2015) where lenders acquired the debtor's asset via a credit bid but deposited funds in escrow for professional fees and paid some funds directly to unsecured creditors.   Where the funds were paid directly by the secured lender, they were never property of the estate and thus the court had no jurisdiction over them.  Mr. Pacetti that lawyers should cut deals earlier in the case and read Jevic for what it says.   However, Ms. Roupinian said that parties should either follow the absolute priority rule or get consent.Judge Zive said that courts would be skeptical about non-consensual priority-skipping and that lawyers should get the evidence that shows why the settlement is proper.Mr. Dooley said that doing priority skipping "requires real proof."   He also said that structured dismissals must be squeaky clean and that first day orders may be more carefully examined.  He said that the ruling will embolden the U.S. Trustee.   The take-aways from the panel were build your evidentiary record, identify a Code-related objective and do your deal at a time when it will still advance the reorganization.  

Asset Protection Trusts--How to Make Them and How to Break Them examined a phenomenon emerging in the laws of several states, including Nevada.   This panel was moderated by Ron Peterson of Jenner & Block with Neal Levin of Freeborn & Peters, Judith Greenstone Miller of Jaffe Raitt Heuer  Heuer & Weiss, P.C., Rebecca Hume of Kobre & Kim, and Judge Brian F. Kenney of the U.S. Bankruptcy Court for the Eastern District of Virginia.According to Judith Greenstone Miller, there are now seventeen states that allow Debtor Asset Protection trusts ("DA Ps").    Some states have a statute of limitations as short as eighteen months to challenge a DAP while others may allow up to four years or more for an existing creditor that did not have knowledge of the transfer.   Some states require an affidavit of solvency.Michigan was the seventeenth state to allow DA Ps in March 2017 and amended the Uniform Fraudulent Transfer Act (UFTA) to exempt a "qualified disposition."    There are also variations in state law between those following the Uniform Fraudulent Transactions Act (UVTA) and the Uniform Voidable Transfers Act.   While UFTA does not have a specific choice of law provision, UVTA does. Ms. Miller explained that DA Ps require giving up control and that high net worth indiiduals don't like to give up control.    DA Ps are attractive to individuals with plenty of assets now who fear future liabilities such as doctors. In Michigan, DA Ps must be irrevocable.   The Trustee must reside in Michigan.   The settlor must execute an affidavit that the transfer of assets into the trust will not render them insolvent and that they are not subject to pending litigation other than as described.     They may retain the power to direct investments and request distributions of income and principal although they cannot demand a distribution.   The sole means to challenge a DAP is to bring an action under the UVTA by clear and convincing evidence.      The statute of limitations in Michigan is shortened from six years to two years, although it starts at the time of the qualified disposition.   If a claim arises after the disposition, the statute of limitations is two years from when the claim arises.   Beyond the state statute of limitations, the only resort is to Sec. 548 of the Bankruptcy Code for actual intent to hinder, delay or defraud.   If a transfer is set aside, the property reverts to the settlor and only to the extent necessary to satisfy the claim.   Neal Levin described Nevada's DAP law, which he described as an "absolute shield" for assets.  It has been around since 1999 and has a two year statute of limitations with a six month discovery rule.  There is no requirement for an affidvait of solvency.   The burden of proof is clear and convincing evidence. Additionally, the settlor retains incredible control over the trust assets.   He said that the only exception to the Act's protections is an action under the UVTA.Judge Brian F. Kenney described the Virginia law as being one of the least protective.  He said that his state statute says that a transfer is not voidable solely because is was made to a self-settled trust without consideration.   As with the law of several other states, Virginia's statute contains a provision shielding professionals who structure a transfer from liability.    However, at the same time, Virginia adopted a statute providing for sanctions against any party within its jurisdiction who transfers assets with knowledge of a judgment.   Thus, there is some conflict in the law.Rebecca Hume came all the way from the Cayman Islands to discuss foreign asset protection trusts which she described as a war between the world and the debtor's assets with a gate that only the debtor has a key to.   She described the Cook Islands as the worst jurisdiction for creditors with the Island of Nevis close behind.   The law of the Cayman Islands provides that issues relating to Cayman Islands trusts must be governed by the law of the Cayman Islands and that any order of a foreign court attempting to assert control over a Cayman Islands trust would be unenforceable.   In the Cook Islands, a claim must be brought within two years of when the transfer was made.   The creditor must prove a fraud beyond a reasonable doubt.   Further, the creditor must hire a lawyer in the Cook Islands and may not enter into a contingent fee arrangements.   She said she knew of only one case where a Cook Islands Trust was set aside. Judge Kenney said that Sec. 548(e) was added to the Code to address the problem of DA Ps.   He said that it allows a ten year lookback for a self settled trust and requires an intent to hinder, delay or defraud.    This standard relies on the traditional badges of fraud analysis.     The Trustee has two years to commence an action but that the statute could be equitably tolled.Ron Peterson asked Judge Kenney what he could do to a debtor who was ordered to repatriate assets from a Cook Islands Trust but refused to do so.   He said that under Sec. 105(a), he has the power to enforce his orders.   He said that as a practical matter, incarceration for civil contempt will often be referred to the U.S. District Court because the District Court has more tools available to deal with incarceration.   In one case, a debtor named Sala raised the defense of impossibility but the Court ruled that where is the impossibility is self-created, the defense would be rejected.   He described it as a game of chicken between the debtor who is willing to sit in jail without giving up his funds and the Court that keeps him there.In U.S. v. Grant, Neal Levin said that the settlor's widow raised the impossibility defense saying "I asked for the money back but they said no."   The Court found that this was not sufficient to purge the contempt.  Mr. Levin pointed out that one-third of the world's wealth is kept in off-shore jurisdictions.    He said that it was important to work with professionals in the affected jurisdiction.  Ms. Hume said that many offshore jurisdictions allow the settlor to retain great control over the trust and would only impose an independent trustee when "things get dicey."  She said that settlors frequently retain the policy to change the trustee.   She pointed to a court of appeals decision which required a settlor to disclose where trusts were located and what was within them.   She described a Privy Council decision where a settlor had a power to revoke the trust but refused to exercise that power.   The Council held that it could appoint a receiver over the power of revocation which allowed the trust to be revoked and the money collected.Mr. Levin talked about how most wire transfers pass through New York banks.   Because these banks are in the United States, the U.S. Courts have jurisdiction over them and they can be brought into the case. Ron Peterson pointed out that the U.S. has treaties with countries such as Switzerland and that the U.S. Attorney can be brought to enforce the treaty in limited instances.Mr. Levin pointed out that on the other side are "the forces of evil" such as foreign judges who view their responsibility as limited solely to enforce their laws and foreign professionals who want to protect their fees.    He also said that the United States is now considered to be the largest recipient of offshore funds as foreign citizens are transferring funds to DA Ps in the United States.  He described the problem of professionals helping people conceal their assets as a "pervasive problem."Ms. Hume pointed out that the Cayman Islands are now parties to various statutes requiring disclosures of cash transfers so that there is greater transparency and less advantage to hiding assets in the Cayman Islands. The main take-away from the panel was that when dealing with DA Ps or offshore trusts, the key is to engage qualified professionals who understand the local law in order to avoid committing malpractice whether trying to set up one of these vehicles or challenging one.