Follow Advice For A Smooth Chapter 7 If you want a chapter 7 bankruptcy case to go smoothly, then you want to follow all of the advice of your attorney. This advice starts with being open and honest regarding your financial situation. Your attorney is going to want to know everything that you have in+ Read MoreThe post How To Have A Smooth Chapter 7 Bankruptcy? appeared first on David M. Siegel.

Our client needs to file for bankruptcy but can’t file her case until August.  Why?  She wants to discharge income taxes and must wait until they have been due long enough. In the meantime, creditors were suing her and getting judgments. Once a creditor in Illinois gets a judgment against you, it can take steps to collect the judgment.  Most frequently creditors will try to collect their judgment by using a citation to discover assets.  The creditor can direct the citation to discover assets to the debtor or to anybody else who the creditor thinks might have assets belonging to the debtor – like a bank or an employer for example. Most people facing judgments in Illinois don’t know that they can protect themselves with the same exemptions which they might use in bankruptcy. Sure, we can file a bankruptcy case to protect against a judgment. But not everyone can file a bankruptcy and it could be a problem for someone to file a bankruptcy right away.  Maybe it’s been less than 8 years since a prior bankruptcy.  And maybe we need to wait to let an important deadline pass.  There’s a 3 year waiting period from the last day to file a tax return for discharge of certain taxes.  There’s a 4 year waiting period from certain transfers which could be avoided as fraudulent transfers.  There’s a 1 year waiting period from payments of debts to friends family or relatives. In the meantime, we can claim exemptions for a judgment debtor to prevent a creditor from taking assets.  What did we protect for our client this week? We protected $2400 equity in her car using the automobile exemption We protected another $4000 equity in her car using the wild-card exemption We protected 85% of her wages using the wage exemption We protected 100% of the cash surrender value of her life insurance because it was for the benefit of her children We protected 100% of the money in her children’s bank accounts for which she was custodian because this was proceeds of social security, a public benefit. We protected 100% of the money in her IRA because this is fully exempt under Illinois law. These are just a few of the important assets which creditors can’t touch if they have a judgment against you. Click here for additional information about exemptions in Illinois and Wisconsin.  While our client will certainly have some challenges from now until the time that it is optimal for her to file her bankruptcy case, we at Lakelaw will continue to protect her outside of bankruptcy until we can get complete relief for her in bankruptcy. If you are facing judgments but can’t file bankruptcy today, call David Leibowitz at Lakelaw today at 847 249 9100.  We can intervene today to help you solve your immediate problems while we develop a lasting and permanent solution to your financial distress.  

For chapter 11 debtor's lawyers, Matter of Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998) is like the sword of Damocles--constantly hanging over counsel's head and threatening to deny compensation when a case goes south.   While 11 U.S.C. Sec. 330(a)(3) makes results one of several factors to consider in awarding compensation, Pro-Snax makes "identifiable, tangible and material" results a pre-requisite to getting paid.    While several Bankruptcy Judges have pushed back against Pro-Snax, there has not been a publi-shed decision from the circuit construing Pro-Snax since it came down.   However, that may change soon.My firm was on the receiving end of a Pro-Snax ruling (please don't tell anyone), which finally made it to the Fifth Circuit last week.    In oral argument, the Court indicated that this was not the only Pro-Snax case they were considering.   Here are some excerpts from the oral argument in No. 13-50075, Barron & Newburger, P.C. v. Texas Skyline Interests, Ltd., et al:Mr. Sather:   Since 1998 when a panel of this court decided the Pro-Snax case the lower courts have struggled with the meaning of Pro-Snax . . .Judge Owen:   So have we.Mr. Sather:  . . . a case that they have described as "difficult to apply" and "having clouded the issue."  Today the court has the opportunity to clarify whether the Pro-Snax court intended to modify Title 11 and in effect reverse Congress and intended to modify this Court's prior precedents on attorney's fees in bankruptcy or whether Pro-Snax can be harmonized with the statutory text and this court's prior precedents.   In case it's not obvious, we're taking the latter position.   We believe Pro-Snax can be harmonized with the other rulings from the Fifth Circuit as well as the statutory text.Judge Prado:  Our opinion could be the opinion that clarifies it for everyone? Mr. Sather:  There is another case pending before the court on the same issue that was argued in November.  Ironically, with Pro-Snax having been out for fifteen years, the two cases pending before the Court right now are, to what I can see, the first ones to say please tell us what the heck you were thinking when you decided that.    Judge Owen:  I've seen it four times this year at least, so why is it all of a sudden Pro-Snax is bubbling up in so many cases?Mr. Sather:  I think that when you get a bad ruling (against your own firm), there is a reluctance to appeal.   In this case, our firm was stubborn enough to bring it up.   But the strange thing is, Judge Gargotta, who heard the case said that in his five or six years on the bench, it was the first time the issue had come up.   So I think what happens is that the case is honored more in the breach than in the day to day operation of chapter 11 because most chapter 11 cases fail and you would expect therefore that most chapter 11 lawyers would have their fees denied.The take-away here is that the Fifth Circuit seems to definitely be thinking about Pro-Snax, which is a good thing.   The other thing is that it's really weird hearing your own voice on a recording.  The argument can be accessed on the Fifth Circuit's oral argument page.

The Bankruptcy Court Date When you file for Chapter 7 or Chapter 13 bankruptcy, you’re going to have to appear at a 341 meeting of creditors. It is called a 341 meeting of creditors because section 341 of the bankruptcy code requires a debtor to appear and be examined under oath. This 341 meeting of+ Read MoreThe post What To Expect At The Bankruptcy Court Date appeared first on David M. Siegel.

Chapter 13 Bankruptcy Attorney And Saving Property Being a Chapter 13 bankruptcy attorney puts me in a unique situation.  It allows me to help somebody either save a home from foreclosure or save a vehicle from repossession or otherwise reorganize unsecured and secured debt over a period of 3 to 5 years.  When people come+ Read MoreThe post Why Do I Like Being A Chapter 13 Bankruptcy Attorney? appeared first on David M. Siegel.

First Payment After Chapter Bankruptcy Is Filed If you have filed chapter 13 bankruptcy, you are required to begin making plan payments within 30 days after your bankruptcy petition is submitted to the court. These payments are held by the trustee until your confirmation is approved or denied by the court. If the court denies […]

After Friday, February 14, no one will care about your critique of the new bankruptcy forms. Speak before then, and you may influence whether these forms, as written, are modified before adoption. Text of the changes Page for making comments I’ve been told that putting one observation per comment is more effective than writing an extended analysis of an entire form. This door closes soon. Don’t get shut out. Note that officially, the comment period closes on Saturday, February 15th.  But a pop up notice on the site this morning says the site will be down for maintenance on Saturday.  Go figure. Or, better yet, go forth and multiple the comments.  

Often we receive inquiries as to why the trustee in a chapter 7 bankruptcy case is requesting a debtor's income tax refund.  The client will call and state that they received word that their trustee filed a notice stating he is taking an interest in the debtor's income tax return, meaning he is going to hold the debtor's case open until they receive their tax refund, and then determine if  they need to turn over any portion of it.  If the trustee determines that there is an unexempt portion of the refund, he will require the debtor(s) to turn over a certain portion of it.  The notice the trustee files with the court gives the debtor's creditors notice that he or she is doing this, and it also instructs the debtor's creditors to file proof of claims with the court (which is the creditor providing proof that you owe them money) so that IF the debtors have to turn over money, it will be distributed to those creditors equally.  You are allotted a certain amount of exemptions when you file for bankruptcy.  If you have property that exceeds those exemptions, you have to turn that portion over to the trustee who will then distribute it equally among your creditors.  Upon filing, all of your property becomes part of the bankruptcy estate, and the trustee has control over the bankruptcy estate.  He has the ability to instruct you to turn over unexempt property if he discovers that you have any.   When your attorney files your case, they use the numbers that the debtor provides for values of their property.  Prior to filing, if all of the property the debtor lists is exempt, there are typically not going to be issues with having to turn over any property.  However, if the debtor is expecting to receive a large tax refund, the trustee will sometimes file a notice that he believes there are going to be unexempt assets, such as your refund.  If he determines that you do have to turn over a portion of your refund, you will need to do so to ensure you receive your discharge.  If you fail to turn over the requested amount, should he ask for anything, the trustee can revoke your discharge, meaning you would still be liable for all of the debts you listed on your petition and you would no longer be able to file a chapter 7 bankruptcy on any of those debts.   So, when you file your taxes and determine how much you will be receiving back, it is important to forward a copy of the returns to your attorney's office immediately.  Your attorney will need to forward the copies of the returns to your trustee for review and then will let you know if you need to turn any portion of your refund over.  Because there is a chance he will make you turn some of the refund over, it is important that you do not spend any portion of your refund until your attorney has the chance to advise you that it is ok to do so.  Even if you spend the refund before the trustee can ask you to turn the refund over, he or she will still make you turn over that amount of money.  

On January 15, 2014, the Seventh Circuit Court of Appeals held that a party, who is not a creditor and did not elect to bid at an auction sale, does not have standing to contest the approval of the sale. In re New Energy Corp., Case No. 13-2501 (Seventh Cir. January 15, 2014).  New Energy Corp. (“Debtor”) operated an ethanol plant in South Bend, Indiana.  After filing chapter 11 under the Bankruptcy Code, the Debtor proposed to sell most of its assets through a public auction.  In order to post a bid and participate in the auction, a potential purchaser was required to post a bond of $250,000.  The auction was held on January 31, 2013 and the winning bid of $2.5 million came from a joint venture of Maynards Industries (1991) Inc. and Biditup Auctions Worldwide, Inc. The Debtor, along with the U.S. Trustee’s Office, on behalf of the Debtor’s creditors, and the Department of Energy (the largest single creditor), asked the bankruptcy court to confirm the sale. Natural Chem Holdings, (“Natural Chem”), was not a creditor and did not post the bond per the Debtor’s bid procedures.  Natural Chem opted to not post a bond because, under the terms of the auction, if it had been the high bidder and not come up with at least $3 million as soon as the sale was approved, the bond would have been forfeited as partial compensation for the creditors’ losses from delay and the need to re-run the auction.  Natural Chem opposed confirmation of the sale, as it wanted to lease the plant for a year with an option to buy it for $4 million or more.  Natural Chem’s proposal was incompatible with the cash-up-front structure of the proposed auction. Natural Chem asserted the joint venture amounted to collusion between bidders that spoiled the true nature of the auction sale process.  The bankruptcy court overruled Natural Chem’s objection.  Natural Chem did not seek a stay in the bankruptcy court, so the sale closed. On appeal to the district court, Natural Chem argued, pursuant to section 363(n) of the Bankruptcy Code, that “the sale price was controlled by an agreement among potential bidders at a sale.” This is a serious allegation.  Section 363(n) provides that there must be an agreement, among potential bidders, that controlled the price at bidding. Boyer v. Gildea, 475 B.R. 657, 662 (N.D. Ind. 2012). If collusion is found a sale may be avoided, or the Debtor (or party brining the motion) may recover consequential damages, costs, attorneys’ fees and punitive damages. 11 U.S.C. §363(n). Also, the parties found liable for collusion could also be criminally prosecuted under certain provisions of title 18 of the U.S. Code. Id. The district court affirmed the bankruptcy court, and provided that only the trustee can assert an objection to an auction sale premised upon section 363(n). Section 363(n) specifically states that a “trustee” has the power to void a §363(b) sale.  Natural Chem then filed an appeal to the Seventh Circuit. The Seventh Circuit upheld the bankruptcy court’s determination.  Here, Natural Chem did not preserve its right to object. Further, it confused why collusion among bidders is forbidden.  Judge Easterbrook provides, “collusion is a form of monopsony that depresses the price realized at auctions.” Collusion by two bidders would have depressed the price at auction, and made Natural Chem’s offer more attractive – assuming it posted a bond. Simply, a reduction in the high bid would have harmed the Debtor’s creditors, not Natural Chem. This is the trustee (or potentially a creditors’ committee) would be correct party to protest a collusive sale. Even if Natural Chem had standing to assert collusion under section 363(n), the agreement, or joint venture, between the bidders weighed against a finding of collusion.  As with In re Edwards, 228 B.R. 552 (Bankr. E.D. Pa. 1998), the motivation of the collaborating parties is not always to control the price, but rather, can be an attempt to obtain a favorable settlement agreement. In this regard, the Seventh Circuit noted that “joint ventures have the potential to improve productivity as well as the potential to affect prices. . . .” In short, Natural Chem chose to not play by the auction’s rules. That was its right – but, because it did not bid, it also was not harmed by the outcome. New Energy at p. 3.  In order to preserve objections to an auction process, a party must bid, or otherwise be a creditor with standing to object to the proposed sale. While some courts take an expansive view as to the type of parties that can bring an action under §363(n) of the Bankruptcy Code, the Seventh Circuit did not endorse such a perspective. “[T]he trustee rather than the bidder is the right party to protest collusive sales.” Id. at 4. Natural Chem’s proposal that the Seventh Circuit disregard the plain reading, “runs smack into the Supreme Court’s insistence that judges implement the Bankruptcy Code as written, rather than make changes that they see as improvements.”  Id. (citing RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S.Ct. 2065 (2012).  

At Lakelaw, we have filed a joint bankruptcy petition for a same-sex couple.  We had a couple we’ll call Daniel and Anthony.  The couple married in a state that permits same-sex marriage, since their home state, Wisconsin, does not.  Still, we filed the bankruptcy for them as a couple instead of filing separate bankruptcy petitions and consolidating (linking them together).  Thus far, the case has been a success and has met no objection from the Chapter 13 Trustee or United States Trustee. With news this weekend that the Attorney General of the US will recognize same-sex marriage and expand the benefits for lawful same-sex marriages nationwide (link to  http://www.cnn.com/2014/02/08/politics/holder-same-sex-marriage-rights/), this process will soon be even easier for thousands of same-sex couples in marriages from around the nation.  . Illinois is one of the 16 states that already recognizes same-sex marriage.  So a joint bankruptcy petition for a lawfully married couple regardless of their sexual orientation should not be a problem, as long as the couple meets the other requirements of the chapter of bankruptcy they seek.  It’s a good idea to speak with an attorney before filing to discuss those requirements from the bankruptcy code. We predict more states, even those like Wisconsin that do not recognize gay marriage, will see many more joint bankruptcy petitions from gay and lesbian married couples.  The new threshold question won’t be “are you in a marriage defined as a man and a woman?” but “is your marriage ‘lawful’?”  As more and more states permit same-sex marriage, the answer that question will more and more be yes. The changes don’t just impact bankruptcy.  The changes mean that spouses in same sex marriage get federal survivorship benefits and don’t have to testify against one another in a criminal trial.  But one of the biggest impacts will be the ability to go hand-in-hand toward financial relief by filing bankruptcy together.