There are specific time restrictions on when you can file certain bankruptcy cases.  For Chapter 7, you can only receive a discharge of certain debts every eight years.  There are also complex rules for filing Chapter 13 subsequently to a Chapter 7.  In the video below, we talk about Chapter 7 in particular and how+ Read MoreThe post How Often Can You File Chapter 7 Bankruptcy? appeared first on David M. Siegel.

Protecting Life Insurance When filing a chapter 7 bankruptcy, you are allowed to protect a certain amount of personal property. One of those items of personal property is life insurance. Life insurance is treated two different ways when filing bankruptcy. The first involves term life insurance. Term life insurance provides for a death benefit. What+ Read MoreThe post Is My Life Insurance Policy Protected IF I File Bankruptcy? appeared first on David M. Siegel.

VirginiaDebtRelief.org, one of those “Avoid Bankruptcy” outfits–is unusual because they claim to be rated A+ by the Better Business Bureau. These debt settlement operations work the same way–people stop paying their cards, put some money away for settlement, the company settles a couple small ones, collects a fee, and then the consumer gets sued on […]The post Is VirginiaDebtRelief.org really BBB rated A+ by Robert Weed appeared first on Robert Weed.

Chicago clients are concerned about utility bills and how a bankruptcy filing affects their services. They are happy to know that they can get service to continue to or have it turned back on if it was disconnected. The video below talks about ComEd in particular, but it applies to gas service and telephone service+ Read MoreThe post Bankruptcy Filing & Your Utility Services Such As ComEd appeared first on David M. Siegel.

Depending on the budget, you might have to pay back 100% to your unsecured creditors in a chapter 13 bankruptcy case. The trustee appointed for your case is going to interview you at a 341 meeting of creditors. One of the main purposes of this meeting is to determine whether or not you are putting+ Read MoreThe post Chapter 13 May Pay Back At 100% appeared first on David M. Siegel.

  In this chapter 7 case, the trustee moved to set aside a transfer by the debtor of her 1/2 interest in real property to a corporation owned by her husband, which transfer occurred 7 months prior to the bankruptcy.  The property was initially purchased in the name of the Debtor and her spouse, with an intent to lease to the corporation; but instead the corporation made the mortgage payments on the property.  The Debtor argued that this created a resulting trust, but the bankruptcy court rejected the argument and ordered the corporation to reimburse the trustee $43,400.  The district court reversed, finding a resulting trust was created under South Carolina law.  The 4th Circuit reversed the district court.  In re Pfister, 2014 WL 1492713 (4th Cir., 2014).    Under 11 U.S.C. 541(a)(1) the bankruptcy estate includes all property the debtor owns as of the moment the case is filed.  The trustee can reclaim property fraudulently transferred prior to the filing pursuant to 11 U.S.C. §§544, 548.  Constructive fraud may be a basis to reclaim the property.  11 U.S.C. 548(a)(1).  Constructive fraud occurs when within two years prior to the bankruptcy an insolvent debtor transfers property for less than reasonably equivalent value.  11 U.S.C. 548(a)(1)(B).    However, the property to be reclaimed may not exceed the property interest the debtor actually owned.  Thus, when a trust severs the legal and equitable interests in property, a debtor may have bare legal title without equitable ownership in the property.   The corporation alleges since it made all the payments on the mortgage, which provided the funds for the purchase of the property, it had equitable ownership in the property leaving the debtor with bare legal title.  The transfer of her bare legal title to the corporation seven months prior to the filing was hence a transfer of an asset of minimal value.  South Carolina law normally presumes that when real estate is conveyed to one person and the consideration is paid by another, it is presumed a resulting trust is created.  However, the presumption does not arise where the conveyance is taken to a wife, child, or other person to whom the purchaser is under a legal obligation to provide.  In such a case, the transfer is presumed to be a gift.  The 4th Circuit found that since the corporation paid for property deed to the debtor and her spouse, and since the spouse was the sole owner of the corporation, South Carolina law presumes the purchase was intended as a gift by the spouse to the Debtor.   The presumption can be rebutted by clear and convincing evidence that a gift was never intended.  This can be shown by clear and convincing evidence that 1) it paid for or committed to pay for the property, 2) with an intent to own it, 3) on the date of purchase.  Where the intent to own the property does not arise at the same time as the deed, then the resulting trust cannot be created.  The 4th Circuit found that at the time of the initial purchase of the property the corporation did not commit to pay for the property.  Equally important is the fact that at the time of the purchase the parties intended a rental arrangement, thus evidencing an intent that the corporation would be a tenant rather than the owner of the property.  

What Happens to Utility Bills in Bankruptcy? When debts pile up, it can become overwhelming to pay any bills. And during the summer especially, Arizona utility bills can be astronomical. And because utilities are very important, you may wonder what will happen to your service if you file a bankruptcy petition. Will you still have […]The post What Happens to Utility Bills in Bankruptcy? appeared first on Tucson Bankruptcy Attorney.

Typically, individuals who file bankruptcy have a choice between filing a chapter 7 “liquidation” and a chapter 13 “reorganization”. Individuals who are determined to have disposable income under the Means Test only have the option of filing chapter 13 and repaying their creditors. However, individuals still have to meet certain eligibility requirements to file chapter 13. First, only individuals may file chapter 13. Small businesses and corporations can only reorganize under chapter 11. Chapter 13 was designed to be a simpler, more efficient way to reorganize and therefore is only available to individuals. Furthermore, stockbrokers and commodity brokers are excluded from filing chapter 13. Second, individuals filing chapter 13 must have “regular income”, i.e. wages, business or rental income, alimony or child support, or retirement income. In other words, a chapter 13 repayment is not possible if there is no consistent source of income to repay creditors. Finally, when filing chapter 13, an individual cannot have more than $383,175 in unsecured debt and cannot have secured debts totaling more than $1,149,525. The debt limit includes non-dischargeable debt like student loans. Again, this reinforces the idea that chapter 13 is meant to be a simpler version of chapter 11 and the more debt a person has, the more complicated their bankruptcy will likely be. Only secured and unsecured debts that are “noncontingent and liquidated” count toward the debt limit. For example, Client A was being sued for $700,000 at the time he filed chapter 13 so he did not exceed the unsecured debt limit because the lawsuit was still pending. In Client A’s case, the money owed was contingent on entry of a judgment. If Client A had wanted to file bankruptcy after a judgment for $700,000 was already entered against him, he would no longer be eligible to file chapter 13. In a real estate market with many people’s homes underwater, it is important to note that when your house is worth less than your mortgage(s), the amount of negative equity counts toward the unsecured debt limit. For example, Client B owns a house worth $100,000 and has a mortgage with a balance of $150,000 on it. The undersecured portion of the mortgage, $50,000, counts toward Client B’s unsecured debt. So, if Client B has $350,000 in unsecured debt, by adding $50,000 to the unsecured debt, Client B is now over the unsecured debt limit by almost $17,000. If you are interested in reorganizing in bankruptcy, it is important to consult with an attorney. If your debts exceed the limits in chapter 13 and you make too much money to file a chapter 7, then your only bankruptcy option is chapter 11.

On April 14, 2014, the Bankruptcy Court for the Eastern District of Virginia issued an opinion limiting the credit bid of a party asserting that it held senior secured position in all assets of the debtors. In re The Free Lance-Star Publishing Co. of Fredericksburg, VA, et al., Case No. 14-30315-KRH (Bankr. E.D.Va. April 14, 2014).  The Free Lance-Star opinion coupled with the Bankruptcy Court for the District of Delaware’s opinion in In re Fisker Automotive, Inc. et al., Case No. 13-13087-KG (Bankr. D.Del. January 17, 2014) should be viewed as instructive for chapter 11 debtors, creditor committees, and aggressive lenders seeking to employ a loan-to-own strategy through a quick section 363 sale process. In 2012, the Supreme Court in Radlax Gateway Hotel, LLC v. Amalgamated Bank, 132 S.Ct. 2065 (2012) clarified that the holder of a senior secured debt may credit bid in a chapter 11 plan auction. However, Free Lance-Star and Fisker demonstrate footnote 14 from In re Philadelphia Newspapers survives. Footnote 14 of Philadelphia Newspapers provides, in relevant part, “A court may deny a lender the right to credit bid in the interest of any policy advanced by the Code, such as to ensure the success of the reorganization or to foster a competitive bidding environment. See, e.g., 3 Collier on Bankruptcy 363.09[1] (“the Court might [deny credit bidding] if permitting the lienholder to bid would chill the bidding process.”).” In re Philadelphia Newspapers, 599 F.3d 298, 316 fn. 14 (3d Cir. 2010)(emphasis added). While Fisker is an opinion limited to the facts of the case, the arguments raised by the Committee may be instructive – in the right situations – to frustrate, limit or deny a secured creditor’s attempt to credit bid. In Fisker, the debtor sought to sell the debtor’s assets through a private sale in connection with the secured party providing a $75 million credit bid. The debtor and committee presented a set of stipulations related to, among other issues, the committee’s motion to limit the secured creditor’s right to credit bid. The stipulations served as the factual basis for the court’s decision to limit the secured creditor’s credit bid. Therein, the competing bidder provided that it would not participate in an auction if the secured creditor was allowed to bid more than $25 million, or the purchase price of the DOE loan. As a result of the unresolved issues as to the validity of the debt buyer’s lien, and no bidding would take place unless the credit bid was capped, the court found ‘cause’ under section 363(k). The debt buyer’s bid was capped at $25 million. The debt buyer’s attempt to appeal the court’s decision were futile. As a result, a public auction went forward and the competing bidder purchased the debtor’s assets for $149.2 million. The unsecured creditors went from receiving approximately $500,000 under the debt buyer’s original credit bid, to potentially receiving approximately $35 million under a proposed settlement post-auction sale. Fisker’s result and reasoning may be clear, however, the manner in which the court determined the amount to limit the credit bid is open to discussion. It must be assumed that the stipulations drove the court’s decision. This gives rise to a different issue: If the facts justify limiting a secured party’s right to credit bid, how should a court determine the appropriate amount of the credit bid? The Free Lance-Star case may provide an answer. In Free Lance-Star, the debtor was a family-owned publishing, newspaper, radio and communications company. After securing a $50 million loan from Branch Banking and Trust (BB&T), the company fell on hard times. The loan was secured by certain assets of the Debtor. However, it was not secured by the debtor’s “tower assets” associated with the debtor’s radio broadcasting operations. Eventually, BB&T sold its loan to Sandton Capital Partners (“Sandton”) in late June 2013. Sandton wanted to push the debtor through a chapter 11 case and sell substantially all the assets to a related entity of Sandton, DSP Acquisition LLC (“DSP”). DSP took certain actions pre-petition which put the scope of DSP’s security interest at issue, and lead to the debtor seeking to limit DSP’s credit bid under §363(k). The debtor, similar to Fisker, sought to limit DSP’s credit bid on the grounds that the validity and scope of DSP’s lien was at issue, DSP engaged in inequitable conduct, and limiting the credit bid would foster a robust bidding process. At the combined evidentiary hearing on the debtors’ motion to limit credit bidding and cross-motions for summary judgment filed in an adversary proceeding seeking a determination as to the extent, and validity of DSP’s lien, the court determined DSP acted improperly and ‘cause’ existed to limit DSP’s credit bid. The court asked for testimony from DSP as to how much Sandton paid for the BB&T loan. No such testimony was provided. Typically, a debt buyer considers this information confidential. It was only known in Fisker because the debt buyer purchased a Department of Energy loan at a public auction a month prior to the filing of the Fisker case. The court, having determined that DSP acted improperly and did not have a valid perfected security interest in all of the debtors’ assets, found ‘cause’ pursuant to section 363(k) to limit the debt buyer’s credit bid. Without any evidence being offered by DSP, the court requested that the debtors’ expert witness provide testimony on the best procedure for fashioning a competitive auction sale and credit bid price. Here, the debtor’s expert eliminated the unencumbered assets (as determined by the court) and applied a market analysis to develop an appropriate cap for the credit bid. The court accepted this approach and limited DSP’s credit bid of approximately $38 million to $13.9 million. DSP has filed an appeal. Depending on the outcome of the appeal, employing a market analysis in connection with determining what amount a credit bid should be limited in order to generate a competitive environment for an auction is a novel, creative approach. This approach may lay the ground work for other courts to employ such a valuation method to reduce a credit bid where the facts justify limiting a secured party’s right to credit bid. No matter the outcome of DSP’s appeal, Fisker and Free Lance-Star demonstrate that debtors and committees have grounds to challenge a credit bid, especially where the validity of a secured party’s lien is questioned.  Holders of secured debt, whether debt buyers or the loan originators, should evaluate their lien rights and develop options in advance of a chapter 11 filing when using a credit bid in a loan-to-own strategy in a section 363 sale process.

Recently, the district court for the Northern District of Illinois ruled on one of the important unresolved issues in chapter 13 bankruptcy: If a chapter 13 bankruptcy is dismissed, what happens to money that the chapter 13 trustee is holding when the case is dismissed? The district court decided that the funds held by the trustee belong to the debtor, and the trustee needs to return the money to the debtor. I had the privilege of representing the debtors before the bankruptcy court. They had fallen behind in their payment obligations to the chapter 13 trustee, and then came current. They decided, thereafter, not to pursue their bankruptcy case any further. But the trustee had the money they’d paid to catch up. At the time of dismissal, the trustee was holding over $16,000. As their counsel, I wanted my clients to get their money back. The trustee, diligently endeavoring to maximize the creditors’ return, wanted to disburse the funds to their unsecured creditors. My firm and I undertook this endeavor on their behalf for free. Seeking to advance the law – and help our clients retain a ton of dough – we chose to pursue this litigation against the trustee entirely pro bono. This is a close legal question, but at the end of the day, the bankruptcy court – and now the district court – reached the right result, and ordered that the trustee should return the funds held at the time the case was dismissed. Technically speaking, under section 349(b)(3) of the bankruptcy code, a dismissal order revests property of the bankruptcy estate in the entity in which such property was vested before the commencement or filing of the case. Here, since the Trustee hadn’t yet paid to creditors the funds that my clients had paid to her, the funds belonged, post-dismissal, to my clients. This is an important unresolved issue in chapter 13 debtor practice. The bankruptcy court opinion has already been cited in several other cases and jurisdictions – in the Middle District of Tennessee and the Eastern District of Pennsylvania, for example. The crux of chapter 13 is a repayment plan that can last up to five years. It’s messy enough merely in theory, before one ever gets to the practice. (Imagine all the things that can happen to someone’s life and finances over the course of five years!) Once one gets to the practice, one quickly learns how often very smart people can disagree. So it’s always nice when, in some small way, I might be helping my colleagues and my clients get a little more clarity, not to mention helping my clients keep a lot more of their money.