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.

The Automatic Stay Stops The Wage Garnishment When you file for bankruptcy, you obtain an automatic stay. The automatic stay is the instrument which basically tells creditors that they can no longer take certain actions in an effort to collect a debt from you. If you are being garnished and you decide to file bankruptcy,+ Read MoreThe post What Happens With My Wage Garnishment Prior To Filing For Bankruptcy? appeared first on David M. Siegel.

Positive Experience After Filing Bankruptcy The overwhelming majority of my clients who go through filing bankruptcy through my office find it to be a very positive and rewarding experience.  They get to start over again financially.  They are allowed to obtain credit immediately after filing and that might take the place of a credit card+ Read MoreThe post What Do Clients Experience After Filing Bankruptcy? appeared first on David M. Siegel.

Information For You Bankruptcy Attorney When you are filing for bankruptcy, your attorney is going to want to know a series of information from you.  Most importantly, he’s going to want to know what you own, what you owe, what you earn and what you spend.  In my office, we have developed a confidential bankruptcy+ Read MoreThe post What Information Do I Need To File For Bankruptcy? appeared first on David M. Siegel.

I’m Northern Virginia Bankruptcy Lawyer Robert Weed. For nearly twenty years, I’ve served people in Herndon from my office in Sterling, VA. Herndon bankruptcy rate–one family of every ten since 2007 Herndon is located in western Fairfax County.  Fairfax is the third highest income county in America, (Loudoun is first) and Herndon has higher income […]The post Herndon Bankruptcy Lawyer Information appeared first on Robert Weed.

The Percentage Will Depend Many clients want to know what percentage is going to get paid back to creditors if they file chapter 13 bankruptcy. The answer to this question depends on a number of different factors. First, the debtor’s income is factored into the equation right from the start. Second, we have to take+ Read MoreThe post What Percentage Gets Paid Back In A Chapter 13 Bankruptcy? appeared first on David M. Siegel.