Why is it Too Late for Asset Protection Planning after a Claim or Litigation Arises?Jay Adkisson has written a very informative article about why it is difficult to do Asset Protection Planning after a claim or lawsuit arises. The article was published in Forbes. At Shenwick & Associates we get many telephone calls and emails from clients about Asset Protection Planning and we summarize that article below.   Clients often ask whether they can protect their assets after a lawsuit threat appears on the horizon. Mr.  Adkisson explains in his article, that once a claim exists, meaningful asset protection planning is unavailable. Under the Uniform Voidable Transactions Act (and its predecessor, the Uniform Fraudulent Transfers Act), a “claim” arises the moment the underlying event giving rise to liability occurs—not when a demand letter arrives, not when a complaint is filed, and not when a judgment is entered. Any transfers made after that point are vulnerable to attack as voidable transactions. Many debtors mistakenly believe they are safe if payments are current or no lawsuit has been threatened, but the law provides no such protection. Mr. Adkisson states that post-claim transfers often trigger serious consequences far beyond simply unwinding the transaction. -Creditors can sue the transferee—often a spouse, child, or friend—and obtain a judgment for the value of the transferred asset. -Courts may award attorney’s fees, civil conspiracy damages, or even punitive or trebled damages if the transfer was intended to evade creditors. In bankruptcy, these transfers can result in denial of discharge under § 727, converting what might have been a dischargeable debt into a permanent financial burden.  Asset protection planning must occur before any claim exists. However, if a claim exists or litigation has been commenced clients are still allowed to utilize Federal & State Exemption statutes.Clients or their advisors with questions about Asset Protection Planning should contact Jim Shenwick, Esq. 917 363 3391  [email protected] Shenwick, Esq  917 363 3391  [email protected] Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

Law Review: Janger, Edward J., Consumer Bankruptcy, Household Debt, and the Big Picture -- Pamela Foohey, Bob Lawless and Deborah Thorne, Debt’s Grip (November 24, 2025). Brooklyn Law School, Legal Studies Paper No. 806, American Bankruptcy Law Journal... Ed Boltz Tue, 12/02/2025 - 17:23 Available at: https://ssrn.com/abstract=5798042 Abstract: Debt’s Grip opens with a bracing number:  one in 11 Americans will file for bankruptcy; approximately 34 million people will file at some point in their lifetime. (1)This, of course, is just the visible part of the iceberg.  The percentage of people who experience financial distress either pervasively or at some point in their lives is a multiple of that 1:11 figure.  Foohey, Lawless and Thorne (“FLT”) seek to show who those bankruptcy filers are, how they got there, and what that means for the bankruptcy system.  Along the way, they offer an indictment of the role that debt plays in our economy.  This essay seeks to tell, in abbreviated fashion, the story told by Debt’s Grip, and then offers an appraisal, both of the limits of the methodology, of the policy prescriptions for consumer bankruptcy, and of their suggestions for structural reform.   The takeaway is threefold:  (1) the data they provide generates a thirst for more data from outside the bankruptcy system; (2) the proposal for consumer bankruptcy reform is constructive but falls short of the comprehensive rethink the system may require; and (3) sadly, the need for structural reform is clear, but has never been less in the cards. Summary: Ted Janger offers a generous but clear-eyed reading of Debt’s Grip, the latest product of the Consumer Bankruptcy Project’s (CBP) now-four-decade exploration of who files bankruptcy and why. The book’s authors—Pamela Foohey, Bob Lawless, and Deborah Thorne—appear in the article under the simple abbreviation FLT. Janger abbreviates Foohey, Lawless & Thorne simply as “FLT,” which I cannot help noting that those initials also echo the physics shorthand for “faster-than-light” — an oddly fitting coincidence, given how routinely their empirical work has illuminated the consumer-bankruptcy universe long before Congress manages to catch up. FLT’s central thesis is familiar to anyone practicing in the trenches of consumer bankruptcy: the people who file are honest but unfortunate, clinging to the middle class with fingernails worn to the quick, and filing only when every other option—borrowing, privation, prayer—has been exhausted. Janger walks readers through the key themes: Debt is now the default shock absorber for nearly every American household crisis. “Life in the sweatbox” is not a metaphor; it is an empirical category. Filers are not the poorest—they are the strugglers who tried to save something. Race, gender, and age intensify risk: Black households file at disproportionately high rates. Black debtors are routed into Chapter 13 at double the rate of whites. Single mothers and older Americans struggle the longest. The “can-pay debtor” is a myth, confirmed across decades of CBP data. Debt is functioning as a shadow social safety net, a role it is fundamentally unsuited to play. FLT propose reforms—most mirrored in the Consumer Bankruptcy Reform Act of 2024—including mortgage modification, student-loan discharge, federal exemptions, and a unified consumer chapter. Janger sees the merit but doubts the politics. The article ends with realism shading towards pessimism: the CBP’s data points to structural solutions, but Washington is currently dismantling what little consumer protection infrastructure existed. Commentary: If Debt’s Grip is the MRI of American household financial life, Janger’s review is the radiologist’s report: “multi-system failure, chronic, progressive.” FLT—our “faster-than-light” researchers—continue their decades-long project of showing the world what consumer bankruptcy lawyers see daily: that modern debt relief is not a tool of prosperity, but of triage. The Missing Strugglers: the unseen majority Janger’s most stinging observation—drawn from FLT and work like Dalie Jimenez’s “Missing Strugglers”—is that bankruptcy filers are only the ones who finally fell. The unseen universe of non-filers—those facing garnishments, lawsuits, utility cutoffs, medical collections, and credit-card minimum-payment purgatory—remains largely unmeasured. Bankruptcy’s data tells the story of those who broke. It tells us nothing about the millions still bending. Debt is no longer investment—it is life support As in your earlier commentary, the review reinforces that consumer credit today functions not as a ladder but as a life raft. People do not buy luxuries with credit cards; they buy time, groceries, brakes for the car, emergency dental care, asthma inhalers. Student loans—once the golden ticket to upward mobility—now resemble a regressive tax on ambition. Mortgages, stripped of any modification authority in bankruptcy and even before the absurd suggestion of having a 50-year term, can be more of a trap than asset for the working poor. Reform: applying bandages to an arterial wound FLT (and Janger) correctly support the essential reforms: mortgage modification federal exemptions dischargeability of student loans elimination of the means test unification of consumer chapters But even if enacted, these would treat symptoms of a deeper illness: the privatization of risk and the abandonment of social investment. As your earlier post put it, you cannot cram down the cost of eldercare. You cannot discharge wage stagnation. You cannot lien-strip insulin prices. The long view: the CBP will still be here when Congress wakes up The CBP has been documenting household financial distress for forty years. It will almost certainly be needed for forty more. Reform is unlikely in the short term; political winds are blowing in the wrong direction. But eventually—after enough damage—there will be an appetite for structural solutions. When that time comes, FLT’s faster-than-light research may be the map policy makers finally follow. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document ssrn-5798042.pdf (572.34 KB) Category Law Reviews & Studies

My fellow author at ConsiderChapter13.org Jen Lee called for the bankruptcy bar to do a better job of pitching the manifest strengths of Chapter 13. Ditch the jargon and focus on the facts that are Chapter 13’s strenght. Her advice to use head to head comparisons with alternative approaches to debt for the client is […] The post Putting the spotlight on Chapter 13 appeared first on Bankruptcy Mastery.

The last thing you want is for a personal injury settlement to be taken by greedy creditors rather than going to the very real damages you have incurred and need help covering if you don’t intentionally protect your settlement with exemptions or by filing Chapter 13. The federal exemption for personal injury settlements during bankruptcy is just over $30,000 in 2025. While you may be able to use several exemptions to increase the amount of the personal injury settlement you can exclude, it may not be totally protected if you file Chapter 7, especially if you do so without our attorneys’ help. Call Young, Marr, Mallis & Associates at (215) 701-6519 to get a free case discussion with our Pennsylvania bankruptcy lawyers. How Can You Protect a Personal Injury Settlement During Bankruptcy in Pennsylvania? Your personal injury settlement should go towards the damages you incurred from negligence, not creditors. Protecting a personal injury settlement from bankruptcy is very important, and our lawyers can help with this by ensuring you claim the right exemptions. Using Federal Exemptions There is a specific federal “personal injury exemption” that you can use to exclude up to $31,575 of a personal injury settlement in 2025 if you choose federal exemptions. You may also use the federal wildcard exemption that lets you exclude up to $1,675 of any property, including a personal injury settlement. You may also use up to $15,800 of an unused federal homestead exemption. “Stacking” federal exemptions may let you exclude up to $49,050 of a personal injury settlement from bankruptcy in 2025. Using State Exemptions Pennsylvania doesn’t have a specific exemption for personal injury settlements if you choose state exemptions. Its wildcard exemption only lets debtors exclude up to $300 of any property they want, which might barely scratch the surface of your personal injury settlement. Filing Chapter 13 You may protect a personal injury settlement by filing Chapter 13 bankruptcy rather than Chapter 7, which requires asset liquidation and puts your personal injury settlement and other property at risk. We can see if you qualify for Chapter 13 by assessing your income and running you through a “means test” to determine whether you can settle your debts through a repayment plan that spans three to five years. Can You Use Federal and State Exemptions to Protect a Personal Injury Settlement from Bankruptcy? As mentioned, there are federal and state-specific exemptions for assets during bankruptcy. You have to choose which set of exemptions will help you the most, whether federal or state. You cannot choose both types. You must decide between federal and state exemptions to protect a personal injury settlement and other assets. Federal exemptions are considerably better than Pennsylvania’s regarding personal injury settlements and other property, as the applicable state exemption, the wildcard exemption, only lets you exclude up to $300. What if You Don’t Protect Your Personal Injury Settlement During Bankruptcy? If you don’t intentionally protect your personal injury settlement during bankruptcy, it may be used to settle your outstanding debts with creditors. This could put you at risk of getting into medical debt if you cannot pay upcoming medical bills with your settlement, so don’t underestimate the importance of protecting this sum of money during bankruptcy. If you don’t disclose your recent personal injury settlement or any other assets when you file for bankruptcy, you might face considerable penalties and could lose a large portion of your settlement to the bankruptcy court, as well as creditors. Furthermore, your bankruptcy case might be dismissed, putting you at risk of wage garnishment, vehicle repossession, and even mortgage foreclosure from creditors no longer inhibited by bankruptcy’s automatic stay. FA Qs About Protecting a Personal Injury Settlement from Bankruptcy Can Creditors Take Personal Injury Settlements Before Bankruptcy? If you are in considerable debt and haven’t yet filed for bankruptcy, creditors might file a lawsuit against you to seek repayment and go after your largest assets, like your home, car, and even a recent personal injury settlement. Do You Have to Disclose a Personal Injury Settlement During Bankruptcy? You must disclose a personal injury settlement when you file for bankruptcy, as it’s one of your assets. Exemptions may not cover the entire settlement, and the bankruptcy court may use the rest to help repay creditors. Can Filing for Bankruptcy Protect Your Personal Injury Settlement from Creditors? Filing for bankruptcy may protect your personal injury settlement from creditors if you file Chapter 13 specifically. Chapter 13 doesn’t involve any asset liquidation, and the debtor’s debts are consolidated at a single interest rate and repaid in installments. Should You File Chapter 7 Bankruptcy if You Have a Personal Injury Settlement? Filing Chapter 7 bankruptcy is risky if you recently received a personal injury settlement in Pennsylvania, as you most likely cannot exclude all of it from your case. Do You Need a Lawyer to Protect Your Personal Injury Settlement During Bankruptcy? Without a lawyer, you might cause the wrong liquidation exemptions, fail to meet important bankruptcy deadlines, fail to receive a debt discharge, and face many other issues during your bankruptcy case. How Do You Claim Exemptions to Protect Your Personal Injury Settlement from Bankruptcy? Our Pennsylvania bankruptcy lawyers can use the bankruptcy form Schedule C to identify the exemptions we want to make and for what specific assets. Fail to list any exemptions, and they will not be included in your bankruptcy case. Should You Use Your Personal Injury Settlement to Avoid Bankruptcy? While your personal injury settlement should go towards medical bills and other expenses from an injury, you shouldn’t have to use it to cover previous debts. Filing the right bankruptcy chapter and choosing the right liquidation exemptions can protect the settlement during bankruptcy, so you don’t have to worry about losing it. Reach Out About Your Pennsylvania Bankruptcy Case Now Call Young, Marr, Mallis & Associates for help with your case from our Pennsylvania bankruptcy lawyers at (215) 701-6519.

M.D.N.C.: Custer v. Simmons Bank & DMI: Cause of Action for Loss-Mitigation Fees Survive, Bad Threats Don’t — A Middle District Tune-Up on Servicing Litigation Ed Boltz Fri, 11/21/2025 - 15:08 Summary: In a detailed but pragmatic opinion, Chief Judge Catherine Eagles offers a tidy roadmap for mortgage-servicing litigation in the Middle District — clarifying what sticks at the pleading stage (loss-mitigation fee violations, RESPA damages, UDTPA claims) and what gets tossed to the curb (negligence, joint venture fantasies, and the perennial “they threatened foreclosure!” count that courts treat like the boy who cried wolf). The result: Custer’s strongest claims live another day, and mortgage servicers get a reminder that North Carolina’s Mortgage Debt Collection and Servicing Act (MDCSA) actually has teeth — especially the 30-day fee-disclosure rules in N.C. Gen. Stat. § 45-91.  Personal Jurisdiction: If You Service in NC, You Answer in NC: Simmons Bank tried the predictable “we’re nowhere near North Carolina” argument — but once you service a North Carolina mortgage, communicate with a North Carolina borrower, and collect North Carolina payments, the long-arm statute and Due Process Clause converge in perfect harmony. Judge Eagles had no trouble finding specific jurisdiction, especially where DMI was acting as Simmons’ agent and the alleged misconduct arose out of the servicing relationship itself. Practice Point: Servicers who acquire loans on NC property should stop pretending they’re “not doing business” here. The MDNC is not impressed by that argument.  No Rule 8 “Shotgun Pleading” Here: Simmons also lobbed the increasingly popular “shotgun complaint” argument. Judge Eagles — correctly — found this complaint was not one of those sprawling, defendant-lumping monstrosities that courts love to mock in footnotes. Custer actually separated his allegations and counts with some clarity. Claim-Splitting Defense Rejected: DMI argued that Custer improperly brought two separate cases: Custer I – a narrow class action about illegal pay-by-phone fees. Custer II – an individual action about loss-mitigation misconduct, RESPA violations, and wrongful account handling. Even though both involve the same subservicer and overlapping time periods, the factual nuclei were distinct. Judge Eagles correctly held that North Carolina plaintiffs are not required to put every egg in the same basket just because one of them got mentioned in a demand letter.    This  support the argument that while an Objection to Claim in a Chapter 13 case might appropriate deal with the disallowance of illegal mortgage servicer  fees under   N.C.G.S. § 45-91,  a debtor could raise claims for damages in separate actions or even in other forums than the bankruptcy court. Surviving Claims 1. NCDCA — Loss-Mitigation Fees (Count I) This is the heart of the opinion. Custer alleged that DMI: charged “Loss Mitigation Attorney Fees,” failed to send the required clear and conspicuous explanation within 30 days, and passed through stale fees older than 30 days — all in violation of § 45-91(1)(b) and § 45-91(3). Judge Eagles recognizes that violations of the MDCSA constitute unfair acts under Chapter 75, and emotional distress is a cognizable injury under the NCDCA. This claim stays in. Why This Matters:  The MDCSA may be North Carolina’s most underutilized consumer-protection statute. Servicers routinely treat the 30-day disclosure rule as optional. It isn’t — and Custer shows courts will enforce it. 2. NCDCA — False Representations About the Amount Owed (Count III(b)) Custer alleged that after signing a loan-mod agreement: the servicers sent him incorrect payment amounts, misrepresented the amount owed, and later admitted they had done so. That’s enough to survive dismissal. Even a single incorrect statement, if used to collect a debt, satisfies N.C. Gen. Stat. § 75-54(4). 3. RESPA — Loss-Mitigation Handling (Count II) DMI argued Custer failed to allege “actual damages.” Judge Eagles disagreed. Allegations that: RESPA delays forced him into a worse modification, increased capitalized interest, and brought him closer to foreclosure are more than sufficient. This tracks the increasingly borrower-friendly reading of RESPA damages that’s shown up in recent Fourth Circuit and district-court decisions. 4. UDTPA (Count IV) Servicers argued that the NCDCA provides the exclusive remedy and bars a standalone UDTPA claim. Not necessarily so. Judge Eagles notes that: the MDCSA and SAFE Act impose duties beyond pure “debt collection,” the defendants have not yet admitted they are “debt collectors” under the NCDCA, and a factual record is needed before declaring exclusivity. The UDTPA claims survive, at least for now. Commentary: This is important.   Servicers love arguing that Chapter 75 only applies through the NCDCA. This opinion confirms what practitioners know: mortgage servicing involves more than “debt collection.”   Servicers have independent statutory duties — especially under § 45-93 — and violating those duties can support a UDTPA claim. Dismissed Claims: 1. NCDCA — Communicating With a Represented Consumer (Count III(a)) Custer didn’t identify any specific communication after the attorney-rep notice. Courts don’t accept “they kept calling me” without dates or examples. This was correctly dismissed. 2. NCDCA — Threatening an Illegal Foreclosure (Count III(c)) Simply alleging “they pursued foreclosure” isn’t enough. North Carolina courts have long held that lawful foreclosure threats are not UDTPA violations unless the borrower alleges the foreclosure itself was unlawful. This claim dies — again, correctly. 3. Negligence (Count V) Custer conceded dismissal. 4. Joint Venture (Count VI) The “Simmons + DMI = Joint Venture” theory gets a swift judicial eye-roll. Joint ventures require: shared profits, and mutual control. Servicer and subservicer do not share profits, and DMI does not get to boss Simmons Bank around. Dismissed with prejudice. Takeaways: 1. The MDCSA is no longer the forgotten stepchild of NC consumer law. Judge Eagles treats § 45-91’s fee-disclosure rule as a meaningful, enforceable statute — and one that can trigger treble damages via Chapter 75.  These protections are well known in bankruptcy courts from cases including Saeed, Peach and most recently Rogers.  Mortgage servicers should now be on notice that violations of these restrictions and notice requirements will result in requests  for treble damages. 2. Servicing misconduct during loan modifications is fertile litigation ground. RESPA, MDCSA, NCDCA, UDTPA — all survived in some form. North Carolina homeowners are uniquely well-protected if counsel knows the statutory landscape. 3. Not every misdeed equals a foreclosure-threat claim. Courts require specificity — and borrowers must allege the threat itself was unlawful. 4. Joint venture theories between servicers and subservicers should be permanently retired. We can stop wasting keystrokes on them. Final Commentary: Custer v. Simmons Bank & DMI is a solid example of how North Carolina’s layered statutory scheme protects mortgage borrowers — and how servicers’ casual treatment of fee disclosures, modification timelines, and payment accuracy can open them to real litigation risk. As more cases like Custer develop, expect to see: More MDCSA enforcement, More RESPA damages claims tied to loan-mod failures, and More UDTPA claims survive despite NCDCA “exclusivity” defenses. Debtors in bankruptcy cases seeking treble damages for violation of   N.C.G.S. § 45-91 (whether in bankruptcy court claims objection or subsequent suits in federal district court.) North Carolina continues to be one of the few states where mortgage servicers can’t treat homeowners as an afterthought — and the federal courts are beginning to treat these statutes as more than decorative wall hangings. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document custer_v._simmons_bank.pdf (280.21 KB) Category Middle District

 Chapter 7 Business Bankruptcy Filings in SDNY and EDNY In today’s challenging economic climate, many businesses are struggling due to declining sales, high interest rates, tariffs, supply-chain pressures, or other factors. As a result, an increasing number of business owners in the Southern and Eastern Districts of New York are choosing to close their doors and file for Chapter 7 bankruptcy. Filings commonly rise after the holiday season, following Christmas and Chanukah. Most business filers are Subchapter S corporations or LL Cs. A Chapter 7 bankruptcy for a business is a liquidation proceeding. While many cases are “no-asset” cases, if the company does have assets, the Chapter 7 Trustee will hire a liquidator or auctioneer to sell those assets and generate funds for distribution to creditors. Trustee Document Requests After a business files for Chapter 7, the Trustee will typically request financial documents, including: Bank statements Tax returns Credit card statements Accounting records Contracts and leases Any documents reflecting asset transfers These materials are reviewed by the Trustee, Trustee’s counsel, or the Trustee’s accountant to identify preferential payments, fraudulent conveyances, and other questionable or prohibited transactions. Common Transactions the Trustee Will Scrutinize Below are transactions frequently examined or challenged in a Chapter 7 business case: Preference Payments Transfers made to creditors within 90 days before filing (or within one year if to an insider such as a family member, officer, or business partner) that give one creditor more than others. The Trustee may “claw back” these payments to ensure equal treatment. Fraudulent Conveyances Transfers made to hinder, delay, or defraud creditors—or transfers for less than reasonably equivalent value—typically within two years under the Bankruptcy Code, and longer under New York’s Debtor & Creditor Law. These often involve “sweetheart deals,” including transfers to family members, insiders, or related entities. Personal Expenses Paid by the Business Payments for the owner’s personal insurance, car expenses, meals, vacations, or similar items can be flagged by the Trustee as improper or excessive. Gifts or Large Transfers to Friends or Family Significant transfers to insiders may be reversed if the Trustee determines the business did not receive value in return. Sales of Assets Below Fair Market Value Selling equipment, inventory, or property for less than fair market value, particularly shortly before filing, raises red flags for fraudulent transfer claims. Unusual or Inconsistent Transactions Any activity that departs from ordinary business practices—such as sudden depletion of assets, hidden accounts, cash withdrawals, or unreported income—will be reviewed carefully. Undervalued Transactions Transfers where the business received significantly less than fair market value, sometimes going back up to five years under applicable state law. Transfers Intended to Defeat Creditors Any transfer made to move assets out of reach of creditors (e.g., shifting assets to a family member or affiliate) is subject to reversal. Transactions Where Consideration Is Paid to a Third Party If property goes to one person but payment goes to someone else, the Trustee may challenge the transaction as improper. Transfers to Insiders or Related Entities Deals involving officers, directors, family members, or other businesses under common ownership are examined with particular scrutiny. If you or your advisors have questions about Chapter 7 business bankruptcy filings in SDNY or EDNY, please contact: Jim Shenwick, Esq. ? 917-363-3391 ? [email protected] Schedule a phone call: https://calendly.com/james-shenwick/15min We help individuals and businesses with too much debt.

Bankr. M.D.N.C.: In re Lombrano- No Automatic Stay for 3rd Filing Ed Boltz Thu, 11/20/2025 - 15:29 Summary: In In re Lombrano, Judge Kahn confronted the all-too-common BAPCPA problem of repeat filings colliding head-on with the automatic stay provisions. Ms. Lombrano—pro se—had filed three bankruptcy cases in under five months, two Chapter 7s (one dismissed for filing defects and jurisdictional issues, the next for nonpayment of the fee) followed by this Chapter 13. Facing eviction, she filed an “Urgent Motion to Impose Stay.” Facing her motion, she did not appear at the hearing. Facing the statute, the Court had essentially no choice.  Accordingly, the stay was denied. But the real significance of Lombrano comes from what doesn’t apply: the familiar “narrow reading” of § 362(c)(3) from In re Paschal and In re Jones—a doctrine still followed in the Middle District (even though it originated under Judge Small in the EDNC), but entirely unavailable when two prior dismissals appear on the debtor’s recent record. Why § 362(c)(3) Doesn’t Help Here: Paschal/Jones Narrow Interpretation Becomes Irrelevant Had there been only one prior dismissal within the year, Ms. Lombrano might have benefitted from MDNC’s continued adherence to: Paschal, 337 B.R. 274 (Bankr. E.D.N.C. 2006) Jones, 339 B.R. 360 (Bankr. E.D.N.C. 2006) Under those decisions, § 362(c)(3) terminates the stay: Only as to the debtor, Not as to property of the estate, and Only as to creditors who acted following the prior dismissal. This nuanced and debtor-protective interpretation frequently gives repeat filers at least some breathing room, and it remains the prevailing rule in the MDNC (even though the EDNC has occasionally shown signs of wavering from Judge Small’s original view). But none of that applies when the debtor has two prior dismissals. With two prior dismissed cases in the past 12 months, this filing falls squarely under § 362(c)(4): No automatic stay arises at all. The debtor must request that the stay be imposed. The debtor must overcome a presumption of bad faith. And must do so by clear and convincing evidence. The Court is prohibited from granting retroactive relief (§ 362(c)(4)(C)). Most importantly: § 362(c)(4) completely displaces Paschal/Jones. You don’t get to argue that the stay remains in place as to estate property. You don’t get to argue that it terminates only as to certain creditors. There is no stay—period—unless and until the Court decides otherwise. And here, Ms. Lombrano didn’t appear, didn’t testify, and didn’t rebut the statutory presumption. As Judge Kahn succinctly concluded: the stay cannot and will not be imposed. Commentary: A Predictable, Avoidable Outcome Cases like Lombrano should be stapled to the intake materials of every consumer bankruptcy practice. They illustrate three recurring truths: 1. § 362(c)(3) is irritating but manageable. Especially in the MDNC, the Paschal/Jones narrow reading keeps the practical effect modest—even after one prior dismissal. 2. § 362(c)(4) is a brick wall. Two prior dismissals transform the stay from automatic to aspirational. The debtor must earn the stay back. And pro se litigants almost never clear the “clear and convincing” bar. 3. Showing up matters. A stay-imposition motion under § 362(c)(4) is an evidentiary hearing, not a formality. Miss it, and the case collapses under its own procedural weight. 4. Timing matters even more. Had Ms. Lombrano obtained counsel after the first dismissal (or even the second), someone could have course-corrected: By addressing the filing-fee issue, Or fixing the jurisdictional defect, Or ensuring future filings were prosecuted properly. Instead, three filings in rapid succession triggered the worst possible statutory outcome. Takeaway: In the Middle District, debtors with two dismissals in a year cannot look to the friendly shelter of Paschal and Jones—those cases simply do not apply. Once § 362(c)(4) governs, the stay never arises, the evidentiary burden is steep, and as Lombrano shows, failing to attend the hearing makes denial virtually automatic. In short: You rarely get a third chance to make a second impression—especially in bankruptcy court. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_jones.pdf (142.66 KB) Document in_re_lombrano.pdf (404.86 KB) Category Middle District

Bankr. E.D.N.C.: In re Williams- Yet another Forged Bankruptcy Court Order Ed Boltz Wed, 11/19/2025 - 16:32 Summary: Judge Warren’s latest sanctions order reads like a greatest-hits compilation of the Eastern District’s prior encounters with bankruptcy document forgery—Wilds, Purdy, and now Williams—but with one glaring distinction: unlike Ms. Sugar, whose saga wound its way to the Fourth Circuit and back on the strength of a plausible (and ultimately successful) reliance on counsel argument, Deja Williams had no attorney to blame but herself. And that turns out to matter—a lot. The Facts: Fiverr, a Fake Order, and a Leasing Agent Who Asked Too Many Questions Ms. Williams filed two prior Chapter 13 cases—both dismissed for failure to comply with the most basic statutory requirements—and then filed a Chapter 11 for her salon business, Hairoin, which was promptly tossed because the LLC never obtained counsel. When those bankruptcies appeared on her credit report, they posed an obstacle to securing a commercial lease. The solution she chose? A $15 fake bankruptcy order purchased from a seller on Fiverr, complete with the name and signature block of a bankruptcy judge in Raleigh. Unsurprisingly, when she tendered this “order” to a leasing agent, the agent did what landlords too rarely do: she attempted to verify it. That inquiry led straight back to the Clerk’s Office, straight into a reopened case, and straight onto Judge Warren’s sanctions docket. The Court’s Ruling: Five-Year Bar and $1,500 Fine: Citing Wilds and Purdy, Judge Warren held that Ms. Williams’ conduct—though remorseful—was “hardly distinguishable” from prior EDNC forgery cases. The sanctions: Five-year bar on filing any bankruptcy, personally or for any entity she owns or is affiliated with $1,500 civil fine Referral to the U.S. Attorney for possible prosecution under 18 U.S.C. §§ 157 or 505 This places Ms. Williams squarely in the same penalty tier as prior debtors who forged court documents—though, critically, without the criminal sentences seen in Wilds and Purdy. Why Sugar Got Mercy—and Williams Did Not: Here is where In re Williams departs from the Sugar line of cases. When the Fourth Circuit remanded In re Sugar, Judge Agee instructed the bankruptcy court to consider the “effect of record evidence that she acted on advice of counsel.” On remand, Judge Warren found that Ms. Sugar’s reliance on her prior attorney was “justified and reasonable,” ultimately vacating severe sanctions in light of that mitigating factor. Ms. Williams had no such shield. Representing herself in all her cases, she could not invoke “advice of counsel”—good, bad, or nonexistent. There was no attorney to mislead her, no mistaken advice to lean upon, and no professional to blame. Her fabrication was: intentional, deliberate, and fully self-directed. In other words, this is the Sugar case with the safety net removed. When you fly pro se and forge a court order, there is no soft landing. Commentary: The Perils of Pro Se Practice in the Age of Fiverr The growing availability of AI-generated and gig-marketplace “legal documents” is giving rise to a new species of bankruptcy misconduct—one cheaper, faster, and more recklessly accessible than anything in the Wilds era. A $15 fake “vacate” order generated overseas is the modern equivalent of forging an attorney’s signature on the office Xerox machine. But courts—and the U.S. Attorney’s Office—are treating it the same. This case also serves as a reminder that pro se debtors don’t get a discount on the standard of honesty owed to the court. They may get leniency when mistakes arise from misunderstanding, but not when the misconduct is calculated. And unlike Ms. Sugar, who ultimately benefited from the rehabilitative power of the “advice of counsel” doctrine, Ms. Williams stands alone. If you are your own lawyer, you also become your own scapegoat. Takeaway: In re Williams reinforces the EDNC’s unwavering approach: forging court documents—no matter the motive, circumstances, or sophistication level—gets treated as a severe affront to the integrity of the system. And while the Fourth Circuit has built space for mercy when a debtor’s missteps stem from reliance on counsel, those who represent themselves don’t have that option. When you choose to go it alone, you own the consequences—including, as here, a five-year bar and a criminal referral. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_williams.pdf (295.07 KB) Category Eastern District

After spending so much time, effort, and money creating and contributing to your child’s 529 college savings plan in Pennsylvania, you do not want to risk it being liquidated during bankruptcy. Our lawyers can explain the different ways you can protect a 529 plan and other assets as you repay creditors. There are federal and state exemptions that protect 529 plan contributions during bankruptcy. Pennsylvania’s exemptions for 529 plans can be all-encompassing, so you may choose state exemptions if the 529 plan is the asset you are most concerned about safeguarding. Don’t file for bankruptcy before confirming the 529 plan is not up for liquidation, especially if you have an out-of-state plan. Get a free and confidential case review from our Pennsylvania bankruptcy lawyers by calling Young, Marr, Mallis & Associates today at (215) 701-6519. Is Your Child’s 529 Plan Protected from Bankruptcy? 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You can’t use federal and state bankruptcy exemptions when you file for bankruptcy. There are other federal and state exemptions you may need to claim that affect your decision, which our lawyers can help you make. Why Should I Protect My Child’s 529 Plan? If you don’t intentionally claim exemptions to protect contributions to your child’s 529 plan, creditors might take funds in the account to cover whatever debts you owe. Call Us About Your Bankruptcy Case in Pennsylvania Today Get a free case analysis from our Philadelphia bankruptcy lawyers by calling Young, Marr, Mallis & Associates now at (215) 701-6519.

Law Review (Note): Maxwell Newman, The Advice of Counsel Defense: No Longer a Fraudster’s Shield, 29 N.C. BANKING INST. 558 (2025 Ed Boltz Mon, 11/17/2025 - 14:32 Available at:  https://scholarship.law.unc.edu/ncbi/vol29/iss1/19 Abstract/Introduction: In 2023, consumers reported fraud losses in excess of $10 billion, a fourteen percent increase from the prior year, the first time fraud losses have reached that benchmark. According to the International Criminal Police Organization, “[f]inancial fraud is increasing worldwide as the public embraces new sophisticated technologies” such as artificial intelligence, large language models, and cryptocurrencies. The successful fraud prosecutions of Sam Bankman-Fried, former CEO of the failed cryptocurrency exchange FTX, and Elizabeth Holmes, former CEO of the failed medical diagnostic company Theranos, have been widely reported on by major media outlets. Despite this notoriety popularizing these fraudsters into mainstream figures, the media attention has also heightened focus on financial fraud defense strategies, increasing the overall visibility and conversation around white-collar criminal litigation. What particularly fascinated spectators in the Holmes and Bankman-Fried cases were the back-and-forth fights over the existence of fraudulent intent. Bankman-Fried and Holmes each sought to portray themselves as naïve entrepreneurs who were suckered into making the business decisions that placed them in handcuffs.This is a common strategy used by financial fraud defendants. Intent is subjective and circumstantial, rendering it difficult for the government to prove through direct evidence. Financial fraud defendants often take advantage of this ambiguity to argue that their conduct was not criminal because they acted in “good faith.” Evidence of the defendant’s good faith may take various forms. The advice of counsel good faith defense garnered significant attention after it was invoked by Holmes and Bankman-Fried. This defense “is based on the common sense principle that a defendant should not be held liable for actions taken based on reasonable reliance on the advice of counsel.” Problematically for defendants, this defense seems not to work as well as it once did, bringing about the question of why. This Note will argue that the same digital technology that enabled the explosion of financial fraud has also destroyed criminal defendant’s ability to invoke the advice of counsel defense in financial fraud proceedings. This Note proceeds in four parts. Part II provides background on the element of intent in financial fraud cases, the good faith defense in general, and the advice of counsel good faith defense in particular. Part III analyzes how Holmes and Bankman-Fried used the advice of counsel defense. Part IV examines factors that have contributed to the declining effectiveness of the advice of counsel defense. Finally, Part V concludes that the advice of counsel defense no longer offers fraudsters a legal safe haven—and indeed may be heading towards extinction. Summary: Newman’s note opens with the modern paradox of white-collar prosecution: technology has made fraud both easier to commit and easier to prove. Using the recent prosecutions of Elizabeth Holmes (Theranos) and Sam Bankman-Fried (FTX), the author traces how the once-potent “advice of counsel” defense—long invoked to negate intent—has withered in the digital age. The article begins by reviewing the historical development of the good-faith and advice-of-counsel defenses from Derry v. Peek (1889) through the evolution of U.S. fraud statutes. It highlights how the defense originated as an evidentiary rebuttal to the element of intent rather than a true affirmative defense, and how circuit splits emerged regarding jury instructions and prerequisites for invoking the doctrine. Newman’s central argument is that the defense has become practically unworkable in modern white-collar cases. Two forces have driven this change: Technological transparency—Digital footprints, email archives, and ubiquitous data retention have given prosecutors direct access to internal deliberations that expose defendants’ intent despite any legal advice they may have received. Judicial tightening—Courts now require defendants to meet stringent evidentiary showings before mentioning counsel’s role, often demanding full waiver of privilege and limiting jury instructions under Rule 403 to prevent confusion or “halo effects” from attorney involvement. Holmes and Bankman-Fried both attempted to argue that they relied on legal advice in structuring corporate partnerships, drafting terms of service, and handling disclosures. In each case, courts curtailed the defense—requiring formal proof of each element (full disclosure to counsel, genuine reliance, good-faith compliance) and pretrial notice. Ultimately, both were convicted, and Newman concludes that “the advice of counsel defense no longer offers fraudsters a legal safe haven—and indeed may be heading toward extinction.” Commentary: Reconsidering “Reliance on Counsel” After In re Sugar: While Newman’s note reads the defense’s demise from the high-profile collapses of FTX and Theranos, it did not have the benefit of the more recent decision from the Fourth Circuit’s treatment of In re Sugar (2025),  which shows that the doctrine remains alive—if properly cabined—in bankruptcy practice. Judge Agee’s opinion remanded the case “so that the bankruptcy court can consider the effect of record evidence that [the debtor] acted on advice of counsel as part of its decision about the appropriate remedy for Sugar’s conduct.” That is not the language of extinction; it is a recognition that reliance on counsel can still mitigate culpability even when it does not negate a statutory violation. The Fourth Circuit drew a careful line: advice of counsel does not erase misconduct but does matter in calibrating sanction or discharge relief. On remand, Judge David Warren applied that directive with remarkable candor. Three years after the original sanctions order, he held that “her reliance upon her prior counsel’s advice was justified and reasonable, and that the sanctions the court imposed, while properly based upon the facts, testimony and arguments of counsel at that time, are not supported by the uncontroverted facts that have now … been presented to the court.” In other words, once the evidentiary record finally showed genuine good-faith reliance, the court vacated its prior penalty and restored the debtor’s discharge. A Different Kind of Reliance What separates Sugar from the failed defenses of Holmes and Bankman-Fried is not merely scale but structure. Corporate officers invoke “advice of counsel” to deny criminal intent while still retaining privilege, often as a strategic gambit. Consumer debtors invoke it to explain compliance failures under the supervision of the court itself. The former tests the patience of juries; the latter goes to equity. Judge Warren’s approach exemplifies how bankruptcy courts have long balanced accountability with rehabilitation. The debtor’s reliance on counsel did not immunize her from the Code’s disclosure duties—but once proven reasonable, it warranted restoration of her fresh start. That is precisely the moral space bankruptcy occupies between strict liability and moral blameworthiness. Why Sugar Undermines Newman’s “Extinction Thesis” Newman is right that digital evidence and judicial skepticism have narrowed the corporate use of the defense. Yet Sugar shows that in bankruptcy—the most transparent and supervised of all federal forums—the defense not only survives but is institutionally essential. Trustees and judges depend on it to distinguish between: Bad advice followed in good faith, which merits education and correction; and Bad faith disguised as reliance, which warrants denial of discharge or sanctions. Far from “no longer a shield,” reliance on counsel remains a legitimate equitable factor in the Fourth Circuit, particularly where the debtor’s conduct occurred under mistaken but honest professional guidance. Newman’s article, steeped in the spectacle of white-collar collapse, reads as an obituary for the defense. Sugar instead reads as a resurrection story—one more consistent with bankruptcy’s rehabilitative DNA than with criminal law’s retributive logic. Where the FTX and Theranos defendants wielded counsel’s advice as a weapon, the Sugar debtor offered it as an explanation. The difference is moral as much as doctrinal. In short, if Holmes and Bankman-Fried buried the advice-of-counsel defense in the boardroom, Judge Agee revived it in the bankruptcy courtroom. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document the_advice_of_counsel_defense_no_longer_a_fraudster_s_shield.pdf (535.8 KB) Category Law Reviews & Studies