This panel examined energy and healthcare reorganizations.   The unifying theme of this panel was that industries that are highly regulated, highly leveraged and lack control over their prices are prime candidates for bankruptcy.   According to the moderator, Judge Margaret Mann, the panel hoped to make its presentation relevant to practitioners regardless of whether their typical client was a gas station or dentist as opposed to a major oil producer.   Judge Mann said that these two areas are "vital to the economy and heavily regulated." Bill Wallander explained that the energy industry was in a mess because oilprices dropped from $110 per barrel to $26, although they have recovered to $50.   He said that companies had made their plans based on being able to survive at $70-80 a barrel but that prices kept dropping.  He did add that companies that hedged were able to hold on later but that many did not have sufficient hedges.  Ana Alfanso stated that banks didn't see the drop coming either.   She stated that the crisis highlighted the problem with asset based lending.   She added that cash was a major issue because companies without cash could not drill.Harris Winsberg said that nonprofit healthcare providers suffer from having a poorer client base  and competition from for profits leading to doctor flight.  He added that cash was a big problem.  He said that ideally a hospital system should have 365 days of cash on hand but that he was seeing clients with just 3-5 days of cash on hand.   This cash shortage can become critical because the government can decide that a provider has been overpaid and recoup against future income.Thomas Califano stated that community hospitals have had difficulties with the drastic changes brought about by the Affordable Care as well as difficulty keeping up with changes in technology.Ms. Alfanso talked about issues with hedges in energy cases.   If a company is in the money, its lenders may want to exercise the hedges to pay down debt but if the hedges are terminated, the company can't use them for cash management. Mr. Wallander spoke about the problem of valuation in the energy industry.  This will affect which creditor holds the fulcrum security, that is, which secured claim is at the dividing line between being secured and unsecured.  Ms. Alfanso said that it may help to put valuation off when prices are changing.   She said that "if you wait long enough, the market can tell you where the fulcrum is." However, the Sabine case illustrated the downside of this approach because the adequate protection claims consumed all of the unencumbered assets.Bill Wallander stated that the end game in energy was to survive the volatility.    He said, "It is easy to get into chapter 11 but  harder to get out."   He added that  "if you don't get out you are pouring concrete down a hole instead of producing."Mr. Winsberg said that there is no typical health care case.   This was echoed by Mr. Califano who pointed out that healthcare cases bring a range of constituents not present in other cases, including patients, doctors, families, regulators and the public.     He pointed out that in healthcare "it's people's lives" that are at stake.   Califano added that non-creditor, non-economic interests played a role and that a nonprofit healthcare business had to consider the mission of the entity as opposed to just selling for the best price.The panel also offered a few pitfalls involving energy and healthcare cases.   In the energy field, plugging and abandoning wells can be an extremely expensive task fraught with environmental risk.  An interesting point is that if the bankruptcy estate cannot afford the plugging liability, the regulators can look to co-owners and previous owners.   In healthcare, the government has argued that the provider agreement is an executory contract which must be assumed in a sale so that the purchaser must take the assets subject to the overpayment liability.    Another percolating issue is whether bankruptcy courts have jurisdiction to decide medicare issues if the debtor has not exhausted its administrative remedies.Bill Wallander suggested that the flood of energy cases may slow down.  He said,   "The fire will burn as long as it has fuel.  We have processed a lot of companies through the bankruptcy process.   Plenty of companies can make money at $50."  He also said that improvements in technology will also reduce filings, that a better "special sauce" will allow them to drill better.         

Be honest Be honest with yourself, your attorney, the trustee, the court and anyone else involved in your bankruptcy case. The first question to ask is do you really need the help? Are you someone who has a small amount of debt that is manageable over the course of six months to a year or+ Read More The post 3 Tips For A Successful Bankruptcy Experience appeared first on David M. Siegel.

The first plenary session of NCBJ was Broken Bench Radio, a fast-paced discussion of hot topics in the form of a radio call-in show.   It covered insights from the Caesar's Entertainment case, upcoming Supreme Court decisions, recharacterization, equitable mootness, Chapter 13 updates, the CFPB and the Husky case.   Insights From Caesar's EntertainmentJames Sprayregen was the first caller in to the show.   He talked about the Caesar's Entertainment case.    He repeatedly alluded to the interesting issues that could have been decided, such as the involuntary petition filed against the company and the section 105 injunction in favor of the parent company, if only the case hadn't settled.   His best quote was "Settlement negotiations are never over and the activities in the courtroom are an extension of the settlement negotiations.Upcoming Supreme Court DecisionsProf.  Erwin Chemerinsky gave a brief public service announcement about two upcoming Supreme Court cases:  Czyzewski v. Jevic Holding Corp and Midland Funding, LLC v. Johnson.   The Supreme Court has granted cert in both of these cases.   Jevic is about whether a  settlement agreement resulting in a structured dismissal can violate the priority scheme under the Bankruptcy Code.   Midland Funding deals with the question of whether it is a violation of the Fair Debt Collection Practices Act to file a proof of claim that is barred by the statute of limitations.   This is an issue where the Eleventh Circuit, which says yes, is at odds with at least three other circuits.  I have a case on this issue pending before the Fifth Circuit so it is of special interest to me.RecharacterizationMichael Baxter was the show's second caller responding to a question from Prof. David Epstein about whether re-characterization of debt shouldn't be the same under both state law and bankruptcy law. Baxter discussed the cases applying an equity approach under section 105(a) and those looking to state law under section 502(b) before concluding that both lines of cases generally apply the same factors.   The Fifth Circuit follows the section 502(b) approach.Equitable MootnessEric Brunstad called in to discuss equitable mootness.   He distinguished equitable mootness from Article III mootness.   If there is no relief that a court can grant, there is not a live case or controversy and the case is moot under Article III.   However, equitable mootness, which generally applies to attempts to appeal a confirmation order after substantial consummation has occurred, depends on equitable discretion.   Brunstad is not a fan of equitable mootness.   He pointed out that the equitable mootness doctrine conflicts with the Stern/Wellness cases since it prevents an Article III Court from fulfilling its obligation to review the decision of an Article I Court.   However, he had to acknowledge that the Supreme Court refused to grant cert in the Chicago Tribune case in which he had filed an amicus brief arguing against the doctrine.Chapter 13 UpdatesRetired Bankruptcy Judge Gene Wedoff gave an update on the proposed new rules and forms for chapter 13 plans.    Under the rules, there would be a standard national chapter 13 plan in which issues relating to valuation, lien avoidance and allowance of claims would all be determined at confirmation.   Under the new rules, the deadline to file claims would be shortened to 70 days.   Special provisions would have to be included in a box for that purpose.   Districts could adopt their own plans but they would be required to follow the general format of the national plan and would be limited to one plan per district.    If approved, the new rules and form would go into effect on December 1, 2017.Consumer Financial Protection BureauSen. Elizabeth Warren gave a videotaped message about the Consumer Financial Protection Bureau.  She  said that the Bureau existed to protect families from fraud and that it had already recovered $13 billion for consumers.Actual FraudThe final caller was Debra Grassgreen who spoke about the Supreme Court decision in Husky Electronics v. Ritz.   The moderators pointed out that Husky allowed non-dischargeability based on actual fraud that did not involve reliance on a false representation or even a debtor-creditor relationship.   Her big take-away was that Husky could apply in corporate chapter 11 cases.   Under § 1141(d)(6)(A), the section 523(a) exceptions to discharge apply to a debt owed to a governmental unit.   Because the section only referred to section 523(a) and not section 523(c) (which requires certain non-dischargeability actions to be brought within a period of time), she raised the prospect that governmental units could conduct an investigation of the debtor and assert that their debts were non-dischargeable based on "actual fraud" years after confirmation.   This would be a major erosion of the value of a chapter 11 discharge.     

I am resuming my coverage of the National Conference of Bankruptcy Judges this year.   Last year the demands of work kept me off the blog.   NCBJ 2016 is taking place in San Francisco.  A few random observations.    People in San Francisco wear jackets even when it isn't cold.   There are mica specks in the sidewalk that make them glitter when the light hits them.   The Golden Gate Bridge looks incredible when it is lit up at night.I started NCBJ wondering why I agreed to wake up at 5:00 a.m. to go running.   This year was the Seventh Annual Wake Up and Run event.   About 70 runners got to experience the darkened streets of San Francisco and the waterfront for a 5k fun run. The turnout was impressive given the early hour and the prior night's festivities.  As usual, I finished near the back of the pack but I was not alone.   It was a good way to start the conference and see some of the City.   

Here at Shenwick & Associates, the debtors that we represent (we represent creditors, too) are primarily looking to get their debts discharged in bankruptcy. However, what most debtors don't know is that besides getting rid of unsecured and secured debt, some liens or judgments secured by property can be eliminated by making a motion under § 522(f) of the Bankruptcy Code, which permits a debtor to wipe out the interest that a creditor has in property if the debtor's interest in the property would be exempt but for the existence of the creditor's lien or interest.The most common types of liens that can be avoided under § 522(f) are judicial liens (a lien created when someone obtains a judgment against you and attaches the judgment against your property), but not including liens that secure a domestic support obligation); and nonpossessory, nonpurchase-money security interests. To qualify as a nonpossessory, nonpurchase-money security interest: (1) you (not the creditor) still possess the collateral; and (2) you used property you already owned as collateral for the loan, not money that you borrowed.A lien is considered to impair an exemption to the extent that the sum of: (i) the lien; (ii) all other liens on the property; and (iii) the amount of the exemption that the debtor could claim if there were no liens on the property, exceeds the value that the debtor's interest in the property would have in the absence of any liens.By way of example, let's assume that a house owned by a husband and wife has an appraised value of $500,000. The house is subject to a $200,000 mortgage. The husband and wife file for chapter 7 bankruptcy and have a combined $300,000 homestead exemption under New York State law. Prior to their bankruptcy filing, a judgment creditor records a $75,000 judgment against the house. The debtors may commence a motion under § 522(f) of the Bankruptcy Code to avoid or eliminate the $75,000 judgment docketed against the house.To discuss whether lien avoidance as part of a bankruptcy filing would be a beneficial strategy for your debt issues, please contact Jim Shenwick.

Why do debt collectors keep calling me at work after I tell them to stop? The Fair Debt Collection Practices Act protects you from debt collectors calling your workplace.  But, if you tell them you want them to stop, the debt collectors keep calling. How’s that? To get them to stop calling, you need to […]The post Debt Collectors Keep Calling Me At Work by Robert Weed appeared first on Robert Weed.

Code Provision There are times when you may need to convert a chapter 13 bankruptcy case to a chapter 7 bankruptcy case. Section 1307 of title 11 USC provides for conversion or dismissal. In essence, under section (a), a debtor may convert a case under Chapter 13 to a case under Chapter 7 at any+ Read More The post Converting A Bankruptcy Case From Chapter 13 To Chapter 7 appeared first on David M. Siegel.

Here at Shenwick & Associates, we've written extensively about the "means test," which is a complex calculation that debtors must pass to qualify for relief under chapter 7 of the Bankruptcy Code if they're over the median income for their state and household size. Since the means test was implemented as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, we've filed hundreds of Chapter 7 cases, and usually manage to vault potential debtors over the hurdle of the means test. Here are a few of our tips and strategies on how to pass the means test: Determine if a majority of a debtor's debt is non–consumer/business debt. If it is, they are exempt from the means test.Make sure that all of your expenses are listed:  Taxes are deductible from the means test–includes FICA, Social Security, federal, state and local income taxes. These can add up for most debtors, and has made the margin of difference between passing and failing in many cases.Involuntary deductions from wages, such as mandatory retirement plans, union dues, uniform costs, and work shoes, but not voluntary 401(k) contributions or loan repayments.  Term life insurance, health insurance and disability insurance.Payments on secured claims (for mortgage, car loans, etc.) coming due in the 60 months following filing, as long as the debtor is keeping the collateral.  Continuing charitable contributions, up to 15% of gross income.Child care expenses for babysitting, nursery school, daycare and preschool.  Out of pocket health care expenses, to the extent they exceed the national standards amount of $54/month per household member under 65 and $130/month per household member 65 or over.Add other members to the household to increase household size. Bring the kids back home!If possible, reduce your income and your spouse's income for six months (the lookback period for the means test).  Make sure your expenses from a business or rental property are fully listed to minimize your net income. In one case, a client who was providing independent transportation services failed to listed his expenses. Once we listed those and deducted them from his gross income, he passed the means test.If you have a spouse, make sure that you're deducting any part of your spouse's income not used for the household expenses of you or your dependents (i.e. for your spouse's tax debts or support of people other than you or your dependents).If you have questions about your unique financial situation and whether you might be eligible to file Chapter 7 bankruptcy, please contact Jim Shenwick.

  Judge Gravelle of the Bankruptcy Court in New Jersey ruled that a 2nd mortgage secured by property that was owned by debtor and a non-filing ex-spouse of the Debtor can be stripped in a chapter 13 case.  In re Mensah-Narh, No. 15-33385 (CMG), 2016 WL 5334973 (Bankr. D.N.J. Sept. 23, 2016).  The motion was filed as to the Debtor's residence.  The ex-spouse signed his interest to the Debtor by quit-claim deed after the bankruptcy was filed.  Both the note and mortgage were signed by both the Debtor and the ex-spouse.  There was no evidence the the record as to any requirement in the divorce for him to transfer his interest in the property to the Debtor.  Section 506(a)(1) of  the Bankruptcy Code permits debtors to modify secured claims by stripping down the secured portion of the claim where the value of the property is less than the secured portion.  Nobleman v. Am Sav. Bank, 508 U.S. 324, 328 n.3 (1991) made this available to debtors in chapter 13 cases.  While this is not available when there is any equity in the property after the prior mortgages per 11 U.S.C. 1322(b)(2); where the mortgage to be stripped is wholly unsecured, the relief is still available.  In re McDonald, 205 F.3d 606 (3rd Cir. 2000).    There appear to be few cases involving co-owned properties.  An opinion from the Southern District of Florida attempting to strip a lien of a homeowners association found that under Florida law a debtor who is not the sole owner of the asset encumbered by the lien cannot strip off a lien.    In re Fernandez, 2013 WL 5976249 (Bankr. S.D. Fla. Nov 3, 2013).  The factual situation in the Florida case involved an ex-wife that had discharged her liability in a prior chapter 7, and quitclaimed the property to the debtor 3 months after the filing of the bankruptcy.  The Court found that this three month period following the filing of her 7 case prevented the lien strip.  [Note 11 U.S.C 523(a)(16) making post-petition homeowners association dues nondischargeable in chapter 7].  A Minnesota decision denied the motion as to a mortgage where the ex-husband quitclaimed his interest in the home to the debtor after a divorce but prior to the bankruptcy filing.  In re Brown, 536 B.R. 837 (Bankr. D.Minn. 2015).  The court ruled that since the husband remained liable on the mortgage after the quitclaim deed.  It found that a non-debtor's liability the the mortgage holder is not a debt matchable to a claim that is allowable or cognizable in the bankruptcy case of a third party to that debt.  The obligation of the ex-spouse could not be considered an allowed claim as to the debtor, and 11 U.S.C. 524(e) provides that a grant of discharge does not affect the liability of any other entity on, or the property of any other entity for, such debt.    These two cases stand for the proposition that the transfer of ownership interest from the non-debtor ex-spouse to the debtor does not affect the obligation of the ex-spouse to the mortgage holder.  Judge Gravelle agreed with this analysis, but found that the filing of the chapter 7 by the debtor modifies the analysis.  The estate's interest in the property is an undivided 100% interest not subject to a tenancy by the entirety or a tenancy in common.  The fact that the quitclaim deed was executed post-petition is irrelevant, as the estate includes any interest in property that the estate acquires after the commencement of the case.  11 U.S.C. 541(a)(7).  The interest of the 2nd mortgage (a single lien securing joint obligations) in the estate's interest in the property (sole and undivided) may be unsecured to the extent the value of its interest (the total amount of the debt owed) is less than the amount of such allowed claim.   This leaves the issue of whether Debtor's treatment of the 'allowed claim' in the bankruptcy can affect the debt against a third party, ie the ex-spouse.  In Johnson v. Home State Bank the Supreme Court ruled that an in rem claim against property of a debtor that had previously discharged his in personam liability, remains a claim against the debtor.  The quitclaim deed gave debtor full ownership of the property, subject to the in rem claim as to the ex-husband.    The in personam liability of the ex-husband remains his separate obligation unaffected by her bankrutpcy.  Since the in rem claim as to the ex-husband is against property of the Debtor, it is also a 'claim against the debtor' pursuant to §102(s) and is subject to modification under the Code.  The in rem obligation, which is enforceable against the owners of the collateral, is an allowable claim under 11 U.S.C. 502(b)(1) because it is enforceable against property that is solely owned by the Debtor.  This can be contrasted with the in personam obligation of the ex-husband, which is not an allowable claim because there would be no way to collect from the debtor or otherwise enforce the obligation against her or her property.  Allowing Debtor to strip the lien would deny the mortgage the ability to pursue recovery against the ex-husband through the foreclosure process.  However, the alternative proposed by Brown and Fernandez ignores the plan language of the Code which makes clear that any in rem obligation as to property of the estate is an allowable claim subject to §506.  This decision is consistent with §524(e).  Courts in this district have held that a chapter 13 debtor's ability to strip off a wholly unsecured mortgage lien on a principal residence is not contingent upon discharge, but is instead effective upon completion of hte debtor' obligation under this plan.  In re Scotto-DiC Lemente, 459 B.R. 558 (Bankr. D.N.J. 2011) (discharge, and completion of plan payments are two separate and distinct events, and fulfillment of plan obligations does not always result in discharge).   Prohibiting lien stripping in situations where both mortgagees are not joint debtors would essentially preclude divorced debtors from availiing themselves of the ability to lien strip - a key feature of chapter 13 banrkuptcies.  The court set further hearings to determine whether the lien was, in fact, wholly unsecured.Michael Barnett, www.tampabankruptcy.com   

If you are struggling to meet your monthly financial obligations, and barely earning enough to make it paycheck to paycheck, a wage garnishment can be more than an inconvenience. It can be absolutely devastating. Ohio law allows for wage garnishments. It also provides relief for some garnishments by way of bankruptcy. What is a Wage Garnishment? When you fall behind in payments for your debts, your creditor may get a court judgment ordering you to pay. The creditor can also get an order from the court that allows them to garnish your wages. A wage garnishment order is a court order to your employer to take a certain amount out of your wages and send it to the creditor. Some creditors can order your wages to be garnished without a court order. This includes: State and federal government for payment of taxes Court-ordered child support Defaulted student loans In Ohio, with only a few exceptions, a creditor can only take up to 25 percent of your disposable income. Disposable income is what is left to you after taxes and other mandatory deductions have been withheld. Health or life insurance are not considered mandatory deductions, so you will have to pay those out of what is left after the garnishment. If there is more than one creditor who has garnished your wages, the maximum amount of your wages that can be held back is still 25 percent unless the garnishment is for child support. In that case, it is possible that up to 50 to 60 percent of your earnings may be garnished for child support. Impact of Filing for Bankruptcy on Wage Garnishment When you file for Chapter 7 or Chapter 13 bankruptcy, all collection action must stop. Since garnishment is considered a collection action, garnishments must stop during a bankruptcy. This does not apply to garnishments for child support. A bankruptcy attorney can inform you as to any other exceptions that might apply. Although the bankruptcy trustee sends a notice to your creditors that collection action must stop, you should contact the creditors that have gone after your wages and inform them that you have filed for bankruptcy. Also, you should give the payroll department of your company notice that you filed for bankruptcy to be sure the garnishment stops. Any garnishments that occurred after the date you filed for bankruptcy must be returned to you except those taken for child support. At the close of the bankruptcy proceeding, debts that are discharged that were the subject of a garnishment before are no longer debts. Thus, the garnishments will no longer be in effect. For more information on wage garnishment and bankruptcy, contact the Chris Wesner Law Office. We will evaluate your individual situation and together we will decide how to proceed. The post Wage Garnishment in Ohio appeared first on Chris Wesner Law Office.