Although a Chapter 11 filing can be an option of last resort for most businesses, being proactive and exploring options at the earliest opportunity can reap great rewards. Using a targeted Chapter 11 filing can work wonders, especially where asset sales are concerned. One recent example illustrates this principle very clearly. Business owners should understand that the Chapter 11 process is their friend in a crisis, not something to be avoided.
Author Archives: Phillips & Thomas LLC
The Field Sobriety Tests In A DUI Or DWI Case
When a person is stopped by a law enforcement officer for suspicion of having driven while under the influence (DUI) or intoxicated (DWI), the officer will often ask that the driver perform a series of “field sobriety tests.” These tests were established in 1982 by the National Highway Traffic And Safety Administration (NHTSA) as a way to impose (in theory, at least) some measure of uniformity and consistency in determining whether a person has been driving under the influence.
Myths And Misconceptions About Bankruptcy
One of the downsides of living in the media age is the fact that there are too many voices in the echo chamber. Many of these voices are people who are not informed on the subjects that they are speaking about. Worse yet, some of these voices have presences in the media and are in a position to offer “advice” and “guidance” on complicated subjects that plays to peoples’ fears, guilt, and shame.
We see this phenomenon sometimes when we meet with distressed and anxious people for the first time. Some people have been listening to information peddled by media financial celebrities who are selling books, audio products, or “financial advice.” Sometimes people have been listening to rumors from random friends and acquaintances.
Different Types Of Federal Crimes
Federal criminal practice is distinct and separate from criminal practice in state and municipal courts. It has its own particular rules, procedures, and body of case law. Federal crimes fall into four classifications: felonies, misdemeanors, infractions, and petty offenses.
There are further groupings and classifications within these four broad categories. There are sex crimes, financial crimes, banking crimes, drug crimes, etc. Various statutes and provisions of the US Code govern the different offenses. The Federal Sentencing Guidelines Manual, together with relevant statutes and case law, control sentencing.
Selling Bankruptcy Estate Property In A Chapter 11 Case
Business bankruptcy cases can be different from personal cases, in that assets will often need to be sold off soon after a petition is filed. This can happen in personal cases as well, of course, but businesses cases can sometimes carry with them a special sense of urgency. Cash often needs to be raised, or the business may need to shed itself of unwanted assets.
Real estate cases see this issue with some frequency, where closing and sale dates are negotiated in advance. Assets can be sold before, during, and after confirmation of a Chapter 11 plan. Sections 363 and 1123 of the Bankruptcy Code govern preconfirmation and postconfirmation sales of estate assets, respectively.
The Credit Counseling Class And Financial Management Class In Bankruptcy
One of the requirements that was instituted in bankruptcy cases in 2005 was the need for debtors to take two separate “classes” as part of their bankruptcy case. These classes can be completed through private companies specifically designed for the purpose of offering them. They typically cost between $25 to $40 to complete. The first class is called the “credit counseling class”, and it is supposed to be completed before the bankruptcy case is filed.
It can be done over the phone, or on the internet, and it typically takes about 45 to 60 minutes to complete. Once it is finished, the debtor and the attorney are provided with a completion certificate. This certificate is filed with the court when the case is filed. Basically, the debtor is asked a series of questions about his or her income and expenses.
Homeowners Dues, Homes Association Dues, And Timeshare Dues In Bankruptcy
One issue that sometimes arises in a bankruptcy case is the treatment of homes association dues, homeowners’ dues, and timeshare dues. Some property owners live in neighborhoods or developments that charge them a monthly fee for various services, such as grounds maintenance, snow removal, maintenance of public areas, and related things. Not all homes have these, of course. But some do, and it is important to understand how the treatment of these dues interact with bankruptcy law.
If a debtor files bankruptcy, any homeowners’ or association dues that are in arrears at the time of the filing are handled within the bankruptcy case. However, any post-petition dues that arise after the case is filed will need to be paid until the debtor’s interest in the property is terminated. For example, suppose a debtor files a Chapter 7 case and the monthly homeowners dues are $90 per month. At the time of filing there is $850 owed to the homeowners association. Also suppose that the debtor wants to surrender the property. The arrearage amount that existed at the time of filing ($850) is handled like the other unsecured debts (assuming there is no lien on the property), and would normally be discharged along with the other unsecured debts. However, the debtor technically still would be responsible for the ongoing monthly homes association dues until his rights in the property were terminated (normally, when the foreclosure sale is completed and any redemption period has run).
This issue can get complicated. The key questions that normally need to be asked are:
1. Has the homeowners association put a lien on the property? If so, lien avoidance or lien stripping issues can come into the picture.
2. Does the debtor want to stay in the property?
3. What chapter of the bankruptcy code has the debtor filed under? Things can change depending on if someone is in a Chapter 7, 11, or 13 case.
A common problem that can arise is when a debtor wants to surrender a timeshare or home in a bankruptcy case, but the mortgage company takes a long time to complete the foreclosure. The debtor has filed the case, but the mortgage company delays the foreclosure. Technically, the debtor is still responsible for the monthly homeowner dues from the filing of the bankruptcy until the termination of his or her rights in the property (after the foreclosure sale).
Fortunately, in the real world, this problem often has a way of working itself out. Homes associations are often willing to work out resolutions to these issues when they arise. Municipal governments are becoming more sensitive to the problem of abandoned properties sitting idle and awaiting foreclosure. It’s all part of the continuing fallout from the mortgage and financial crisis of the past few years. Make sure you consult with your attorney about any homeowners, homes association, or timeshare dues that you may have, so that you aren’t hit with any surprises.
Read More: Converting A Chapter 11 Bankruptcy Case In Kansas City
Secured Debts In Bankruptcy
When a bankruptcy case is filed, the various types of debts are classified into various categories: secured, priority unsecured, general unsecured, or administrative claims. This post will discuss secured debts and how they are often treated in a bankruptcy case. What is a secured debt? A secured debt is a debt in which the lender has some sort of collateral as a “security” for a loan.
In other words, the lender has the ability to repossess some collateral if the debt is not paid. Typical secured debts are home loans, car loans, boat loans, and furniture loans. In order for a creditor to claim secured status, they are required to do certain technical things, such as record their lien, and do a few other things.
Business Bankruptcy And Chapter 11: Explaining The General Principles To Clients
A Chapter 11 petition can be filed for an individual or a business. In either situation, there are significant responsibilities that a debtor has in the progress of a case. When the petition is filed, an entity called a “debtor in possession” is created. The debtor is the “debtor in possession” unless a trustee is appointed in the case.
Technically, the debtor-in-possession is considered a separate legal entity. And unless a trustee is appointed, the debtor-in-possession has all of the rights, powers, and duties of a trustee. The debtor is his or her own trustee. This can be a tremendous advantage that Chapter 11 gives debtors over other types of bankruptcy cases (Chapter 7 and Chapter 13). A Chapter 11 debtor can avoid liens, set aside transfers, file adversary proceedings, and do many other things to expedite the reorganization process.
A debtor will need to use his or her “cash collateral” during the course of the case. What is cash collateral? It’s defined as cash, negotiable instruments, documents of title, deposit accounts, securities, or other cash equivalents. A Chapter 11 debtor also is required to open up a special “debtor-in-possession” bank account that will be used during the course of the case. When monthly operating reports are filed, the bank account statement is attached as part of the monthly operating report.
Local courts also have a lot of authority in deciding on the general guidelines for cases. Bankruptcy Rule 9029 permits local courts to set up rules as they deem necessary, provided they don’t conflict with the federal rules of bankruptcy procedure.
An attorney is required in a Chapter 11 case. Your attorney will help you file your monthly operating reports, comply with court orders, submit information as requested to the US Trustee, and perform a myriad of other duties in your case. But what is especially important is that your Chapter 11 attorney be an explainer. Being able to explain complicated concepts and procedures to someone who likely has never participated in a bankruptcy case before is a critical skill, and one that is often underappreciated.
At Phillips & Thomas LLC, we take pride in our ability to be great explainers and conveyers of information. Bankruptcy cases, and especially Chapter 11 business or personal cases, are participatory in nature. It’s a collaborative process. For a case to be successful, the debtor needs to participate and show interest in the case. And this comes with understanding fully what is going on. At Phillips & Thomas, we know how to explain in detail the following things:
1. Accounting for the property of the estate in monthly operating reports.
2. Examining proofs of claim filed in a case, and objecting as needed or necessary.
3. Providing information as required or requested to the US Trustee, such as insurance information or tax records.
4. Making a final report and accounting to the court regarding the estate and the completion of the Chapter 11 plan.
Being able to explain and convey these concepts is a critical skill for the Chapter 11 attorney to have. Far too often, clients overlook the need for having an attorney who can explain these and many other involved concepts. We make sure that clients understand all of the key duties and responsibilities that come with being in a Chapter 11 case.
Read More: Converting A Chapter 11 Bankruptcy Case in Kansas City
Creditor Claims In A Bankruptcy Case
When a bankruptcy case is first filed, notices are mailed out to all of the listed creditors. The notices contain information about deadines for filing “proofs of claim”, and lists objection deadlines for issues a creditor may have with a case, or for the filing of an adversary proceeding (these are not common).
It is the creditor’s responsibility to see that its proof of claim is filed on time and in the right format with the bankruptcy court. Its failure to do so can mean that it will not share in any assets of the bankruptcy estate. If a claim is not timely filed, a creditor would have to show the court that its failure to file on time was due to some “excusable neglect.” This is not easy to show.
Kansas City Bankruptcy And Criminal Case Defense Information 
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