Click here to view the September 14, 2020, opinion of Judge William S. Stickman IV.
Robleto Kuruce is proud to announce that, once again, Super Lawyers Magazine has recognized and honored both of the firm’s partners in its selections for 2020. Super Lawyers works to identify exceptional attorneys based upon their professional achievements and the recognition of their peers.
The publication named Aurelius Robleto as a Pennsylvania Super Lawyer in the field of Business Bankruptcy. Mr. Robleto was humbled and expressed his gratitude to the publication, as well as to his peers and the clients of Robleto Kuruce, who made the award possible.
For a third consecutive year, Super Lawyers has recognized Renée Kuruce as a Rising Star in the field of Business Bankruptcy in the state of Pennsylvania. Each year no more than 2.5 percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. According to her law partner, “Renée’s third consecutive Rising Star award acknowledges her continued commitment to professional excellence and helping the firm’s clients reach their goals.”
Relief for Debtors Harmed by Response to Corona Virus
Social distancing is proving to be an effective response to the Corona Virus public health crisis. Unfortunately, those same measures will harm the economy. Most analysts agree that commercial and consumer bankruptcy filings will rise sharply. In response, Congress has acted with temporary Bankruptcy Code revisions. Now, consumer debtors may be able to decrease their monthly payments by extending the terms of their chapter 13 repayment plans. The amendments will also benefit businesses affected by the COVID-19 pandemic. The amendment expands eligibility for the relaxed, “small business debtor” bankruptcy process. The bankruptcy relief provided under the CARES Act could provide meaningful relief to debtors in business and personal bankruptcy cases.
Temporary Revisions to Chapter 13 of the Bankruptcy Code (COVID-19)
Chapter 13 bankruptcy is a voluntary “reorganization” bankruptcy for individuals. Ordinarily, chapter 13 debtors cannot extend their plan payments beyond a term of five years. That five-year maximum can prevent struggling families from saving their homes from mortgage foreclosure. Typically, debtors fund their chapter 13 plans from the income they receive during the term of the plan. Thus, plan duration and debtors’ income impose a limit on plan funding. That limit may prevent debtors from curing mortgage delinquencies through a chapter 13 plan. Bankruptcy lawyers call that problem “infeasibility.”
Bankruptcy Code revisions in the CARES Act permit modification of plans, extending up to seven years. Debtors must have court approval to extend their confirmed plans beyond a 60-month term. Debtors must also have experienced a “material financial hardship due.” The hardship must, “directly or indirectly, to coronavirus disease 2019 (COVID-19) pandemic.”
Protections Related to Stimulus Payments
The CARES Act Bankruptcy Code revisions ensure that stimulus payments won’t affect debtors’ “current monthly income” and “disposable income.” Those calculations have important implications to the chapter 13 process. Current monthly income determines whether a plan term may be three years or must extend to five. Disposable income determines whether a debtor meets the “best efforts” requirement for plan confirmation. Chapter 13 debtors often pay unsecured creditors less than 100% of their claims over the life of the plan. However, such debtors must devote all of their “disposable income” to fund the plan. If disposable income increased as result of payments from the government, they could threaten the viability of chapter 13 for some debtors. Congress wisely avoided that potential problem through its Bankruptcy Code revisions.
Small Business Reorganization Streamlined Process
The CARES Act amends Small Business Reorganization Act of 2019, increasing the debt threshold from $2,725,625 to $7.5 million. Considering the advantages offered under the streamlined “Small Business” bankruptcy, that amendment could provide a cost-effective reorganization option to many more companies.
The chapter 11 process for small businesses may be attractive to financially distressed companies, concerned about the potential cost and delay of a traditional chapter 11 filing. The cost-saving features include the elimination of the requirement of payment of quarterly fees to the United States trustee, and the absence of official appointed committees (e.g., a committee of unsecured creditors). Instead, a standing trustee oversees case administration and ensures Bankruptcy Code compliance.
The time saving characteristics of a small business chapter 11 may also be attractive. Small business debtors do not require a hearing on a disclosure statement. Unlike an ordinary chapter 11 case where parties in interest can file a plan after the debtor’s right to exclusivity expires, only the debtor may file a plan in a small business case.
Small Business Bankruptcy – Additional Advantages
Among the most enticing features of the new small business law are its simplified approach to “cramdown” and the “absolute priority rule.” Here, cramdown refers to confirmation of a plan over creditor objections. The small business process eliminates the requirement of an impaired class of creditors who voted in favor of the plan. In simplified terms, the “absolute priority rule” mandates that lower priority interest holders must not receive any value under the plan while any senior creditors have unpaid claims. Since an owner’s interest in a debtor exists at a lower priority than general unsecured claims, some courts have interpreted the absolute priority rule to prevent debtors from discharging debt without affecting ownership interests.
Bankruptcy Amendments Sunset Provisions
The CARES Act Bankruptcy Code revisions diverge from the existing statutory scheme. For that reason, the Bankruptcy Code revisions are temporary and will terminate after one year. The bankruptcy amendments give individuals and small businesses some advantages in their reorganization bankruptcies. However, only time will tell whether those adjustments will be enough to protect those hit hardest by the economic ripple effects of COVID-19.
Contact Robleto Kuruce if you have questions about the COVID-19 amendments, or simply want to learn about your bankruptcy options. Experienced bankruptcy lawyers will give you answers during a no-contact, free consultation.Call now (412) 925-8194.
Chapter 13 Lawyer, Pittsburgh
Information on Chapter 13 Bankruptcy and Finding an Experienced Lawyer
Are you considering filing a chapter 13 bankruptcy case without a lawyer? Before deciding to file a bankruptcy petition without an attorney, you should consider that less than 3% of debtors who file chapter 13 cases on their own are successful. Chapter 13 bankruptcy cases often involve complex calculations, procedural hurdles and occasionally counterintuitive laws that balance the interests of debtors and creditors. Missteps by debtors who have had no legal guidance often result in their cases being dismissed. Since most chapter 13 debtors seek bankruptcy protection in order to save their homes from foreclosure, the consequences of dismissal of chapter 13 cases can be catastrophic. Before you decide to file bankruptcy without a lawyer, why not allow yourself the benefit of a free initial consultation to help you understand the road ahead?
The No-Cost Chapter 13 Bankruptcy Consultation
While bankruptcy lawyers are not required to provide free consultations, many attorneys will agree to meet with people in financial distress for an initial discussion. For people facing mortgage foreclosure in Pittsburgh, there is simply no reason not to take advantage of a no-cost discussion with an experienced bankruptcy lawyer in Pittsburgh.
A free initial consultation will give you an opportunity to ask questions about the chapter 13 process. Additionally, a bankruptcy attorney with experience in chapter 13 cases may be able to provide valuable insight into how chapter 13 cases are handled in your jurisdiction. Procedural differences among bankruptcy courts can often be profound, and understanding those nuances prior to filing your case can be critical to achieving your bankruptcy goals.
The initial consultation will also be an opportunity for you to “interview” the attorney offering to represent you throughout your chapter 13 case. It is important that your lawyer can effectively communicate with you. You should be able to get complete answers to your bankruptcy questions. The initial consultation serves as an opportunity for you to build a relationship of trust with your bankruptcy attorney.
Keep Your Car and Other Assets After Filing a Bankruptcy Case
“In most cases, debtors with experienced bankruptcy counsel find that they are able to keep all of the assets that they want to retain.”
Lien Rights of Creditors Bankruptcy Cases
Many of the consumer debtors that we have represented have owned assets subject to a loan. Most of our clients have purchased their vehicles under a vehicle retail installment contract (in plain terms, a car loan). If your car loan is current when you file your bankruptcy case, you can continue to make your car payment and keep your car.
If you are behind on your car payments, you may still be able to keep your car by catching up on your missed payments over time in a case under chapter 13. In fact, some borrowers who are behind on their car payments when their cases are filed, keep their cars by catching up on the payments directly after their cases are filed, without chapter 13 repayment plans. Every case is different, and clients should discuss the most prudent course of action in their particular cases with a highly experienced and knowledgeable bankruptcy attorney.
Other secured loans (that is, loans used to purchase assets where the lender retains the right of repossession) are treated similarly to automobile loans. For many reasons, loans secured by mortgages are governed by other rules. However, the basic framework remains the same and, if you continue to pay for your mortgage on time, your lender usually cannot foreclose upon your mortgage.
Reaffirmation of Debts
Your vehicle lender or other secured creditor may request that you sign a reaffirmation agreement. A reaffirmation agreement is an agreement between a lender and its borrower that the pre-bankruptcy rights of both parties will continue in force even after the borrower’s debts are discharged. You may be able to keep your car without reaffirming the loan. Reaffirming a debt may have serious consequences, and debtors should discuss their particular situations with their bankruptcy attorneys before deciding whether a reaffirmation agreement is in their best interests.
The Interplay Between Equity and Exemptions
Debtors who owe much less on their vehicles than they are worth may face another challenge. An unencumbered asset (that is, one that isn’t subject to a lender’s lien) in a case under chapter 7 of the Bankruptcy Code, may attract the attention of a chapter 7 trustee who may wish to sell the asset and distribute the proceeds to unsecured creditors. Similarly, in a chapter 13 case, parties in interest may object to the confirmation of a chapter 13 plan if the “liquidation alternative test” is not met. The liquidation alternative test requires debtors to pay their unsecured creditors at least as much as they would receive in a hypothetical case under chapter 7. In some chapter 13 cases, unencumbered assets may require debtors to increase their chapter 13 plan payments to provide a greater distribution to the holders of unsecured claims.
Exemptions are the first line of defense that debtors have against losing their unencumbered assets. The Bankruptcy Code enumerates certain exemptions that allow some debtors to retain their vehicles and homes. However, state law determines whether debtors residing in that state may use the federal exemptions contained within the Bankruptcy Code, or another exemption scheme provided under that state’s law. Pennsylvania residents are fortunate in that they may choose between the federal and Pennsylvania state exemption schemes. Selecting the most advantageous set of exemptions and wisely applying available exemptions should be something that you discuss with your bankruptcy attorney before your case is filed. In most cases, debtors with experienced bankruptcy counsel find that they are able to keep all of the assets that they want to retain.
You may be able to continue to make your car payment and retain your vehicle after bankruptcy
• • •
If you have bankruptcy related questions, you may wish to discuss them with an experienced bankruptcy attorney. Our law firm offers free initial consultations.
We are a debt relief agency. We help people file for bankruptcy relief under the United States Bankruptcy Code.
© 2018 Robleto Law, PLLC
Pittsburgh Bankruptcy Lawyers
Part Two in Our Series on Debts Discharged Through Bankruptcy. Pittsburgh Bankruptcy Lawyers Addressing the Common Question: Are All Debts Discharged in Bankruptcy?
Pittsburgh: Take Charge of Your Bankruptcy Discharge!
Whether certain kinds of debts may be discharged through a bankruptcy case is a hot topic for many debtors. Making the decision to file a bankruptcy case is often a challenging one. People in financial trouble want to know whether filing a bankruptcy case will allow them to break free from their debts.
In many cases, debtors may be particularly concerned with the elimination of certain classes of debts. This second in a two-part series continues our look at the dischargeability of various debts. If you have questions concerning the discharge of debt, you should discuss your particular circumstances with an experienced bankruptcy lawyer.
Debts Included in Bankruptcy Discharge
The United States Bankruptcy Code is embodies various policy determinations which balance the interests of debtors in getting a fresh start against the interests of creditors in being paid the debts that they are owed. For instance, domestic support obligations and many kinds of tax debts are typically outside the scope of a discharge and those kinds of debts are also accorded “priority” status so that they are paid ahead of other kinds of claims. In a continuation of our earlier article on bankruptcy discharge, Pittsburgh bankruptcy lawyers will consider wither car loans, tax debts, mortgage obligations and various other kinds of debt may be discharged in bankruptcy.
For your free consultation, call 412-925-8194
Are Car Loans Dischargeable in Bankruptcy?
As many in Pittsburgh have discovered, car loans are dischargeable in bankruptcy. Often however, the catch is that, if you want to keep a vehicle that you still owe money on, you’ve got to payoff the loan balance. For many people, that means simply continuing to pay their car loan payments before, during and after bankruptcy. For others, it means curing their pre-bankruptcy arrearages and then paying the remainder of their car loans after the bankruptcy case closes.
Another issue that sometimes arises relating to vehicle loans in bankruptcy cases when debtors own cars that just aren’t worth what they owe upon them. When that happens, bankruptcy debtors have a few choices. First, a debtor in that situation can simply surrender his or her vehicle and make no further payments. Second, a debtor could “reaffirm” the car payment, essentially allowing, it to pass through the bankruptcy case unaffected. Third, the debtor can often retain the vehicle and continue to pay as agreed. The difference between the second and third options is that, after a discharge, a debtor is no longer personally responsible to repay the car loan. However, if a debtor in that situation does not repay, the lender maintains its right to repossess the vehicle. If you want to save your car through bankruptcy, know you rights. Talk to your bankruptcy lawyer about your particular situation to determine which may be the right choice for you.
Are Tax Debts Discharged in Pittsburgh Bankruptcy Cases?
Tax debts in bankruptcy cases require special consideration and even experienced bankruptcy lawyers must pay close attention to discharge of tax debts. Generally, taxes are entitled to priority treatment, meaning they are paid ahead of other lower priority claims. Moreover, many tax obligations are not dischargeable in bankruptcy. However, in some situations, you may be able to discharge your taxes in a bankruptcy case. Talk to your bankruptcy lawyer about your particular situation to find out if you can discharge your taxes. Discharging your taxes in bankruptcy may be the foundation of your fresh start.
Are Child Support, Spousal Support, Alimony and Domestic Support Obligations of Pittsburgh Courts Discharged in Bankruptcy?
Generally, child support and other domestic support obligations are not debts discharged in a bankruptcy case. Still, there is distinction between a domestic support obligation and an equitable distribution claim following a divorce. Certain claims arising from a divorce may be dischargeable even when other are not. Your Pittsburgh bankruptcy lawyer can provide you with advice about whether your divorce debts can be discharged in bankruptcy. Don’t trust amateur advice, every situation is different. Call today for your free initial consultation.
Talk to bankruptcy attorney at no cost by calling 412-925-8194
Are Mortgage Debts for Pittsburgh Properties Discharged in Bankruptcy?
Pittsburgh homeowners may be surprised to learn that the loans for their mortgages are often debts discharged in bankruptcy. It is important to recognize that the loan related to the mortgage and the mortgage lien are distinct concepts. For that reason, it is possible for a debtor to receive a discharge relieving her of any personal obligation to continue to make payments, while at the same time leaving the mortgagee’s lien rights intact. The practical impact of discharging the obligation without addressing the lien is that the secured creditor may still be privileged to seek recourse in its collateral (that is, foreclose and sheriff’s sale). If you really want to protect your home though a bankruptcy case, work with your bankruptcy attorney to develop a bankruptcy plan that will save your home.
Debts Discharged May Depend on Many Factors
Pittsburgh bankruptcy lawyers find that the debts swept up in a bankruptcy discharge often vary from case to case. For that reason, every bankruptcy case is unique and requires its own analysis. Some bankruptcy lawyers offer free initial consultations. Don’t go to a bankruptcy lawyer who may charge you a fee for a discussion about a bankruptcy case that you may never file. Talk to an experienced Pittsburgh bankruptcy lawyer today about which debts you can eliminate in bankruptcy.
Call now for your free initial consultation – 412-925-8194
WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE FOR RELIEF UNDER THE UNITED STATES BANKRUPTCY CODE.
© 2017 Robleto Law, PLLC – Bankruptcy Lawyers in Pittsburgh.
Bankruptcy Debts Discharged, Part One – Discharge of Student Loans, Credit Card Debt, Medical Debt and Criminal Fines Restitution in Bankruptcy
Bankruptcy debts discharged in any particular consumer case may depend on a number of factors. For people contemplating whether to file a bankruptcy case, the questions about whether certain debts may be discharged through bankruptcy are common. While debtors should discuss their individual circumstances with an experienced Pittsburgh bankruptcy lawyer, certain rules of thumb may help to determine whether a particular debt may be dischargeable in bankruptcy. This two-part series will explore whether certain kinds of debts can be discharged in bankruptcy.
FREE CONSULTATION – 412-925-8194
Are Student Loans Discharged in Pittsburgh Bankruptcy Debts Discharged?
Student loan debts are sometimes the most oppressive financial obligations for debtors in bankruptcy cases. Many people believe that student loans are not dischargeable in bankruptcy. In fact, student loan obligations may be discharged in a bankruptcy case. While the United States Bankruptcy Code requires a showing of “undue hardship” to discharge most student loan obligations, student loans may still be discharged in a bankruptcy case. What constitutes “undue hardship” may depend on the governing case law in the court in which you file your bankruptcy case. In the region in which the Pittsburgh Bankruptcy Court is situate, the Brunner standard applies to define the meaning of “undue hardship” and imposes a three-part test which debtors must meet to have their student loans discharged.
Discharge of student loan obligations in bankruptcy must be done by filing an adversary proceeding, or a lawsuit, against the student loan creditor. That law suit will seek a determination that repayment of student loan debts constitutes an undue hardship and that the student loan obligation is dischargeable in bankruptcy.
You may be eligible to discharge your student loan obligations. Talk to an experienced bankruptcy lawyer today
to determine if you can discharge your student loan debt.
Are Credit Card Obligations Bankruptcy Debts Discharged in Pittsburgh?
Generally speaking, credit card obligations are dischargeable in bankruptcy. Congress has emplaced certain protections in the Bankruptcy Code to prevent abuse by limiting discharge for cash advances in the days leading up to the filing of a bankruptcy case. Pittsburgh bankruptcy courts enforce the Bankruptcy Code with exacting attention. In like fashion, the Bankruptcy Code may bar discharge of late-incurred charges for luxury goods. Consumers must honestly discuss their credit card use before the filing of a case with their bankruptcy attorneys. Honest disclosure to your bankruptcy lawyer can often prevent unneeded difficulty in the entry of a discharge order.
FREE CONSULTATION – 412-925-8194
Are Medical Debts Bankruptcy Debts Discharged?
Pittsburgh bankruptcy cases where the bankruptcy court enters a discharge order almost always result in medical debts being discharged. Usually medical debts are unsecured obligations that do not enjoy priority protection under the Bankruptcy Code. For that reason, medical debts are dischargeable in most Pittsburgh bankruptcy cases. While a particular obligation arising from medical debt could be non-dischargeable in bankruptcy, such exceptions are exceptional. Discuss whether your medical debt may be discharged before you file your bankruptcy case in Pittsburgh with your own Pittsburgh bankruptcy lawyer.
Are Pittsburgh Criminal Fines or Restitution Orders Bankruptcy Debts Discharged?
Typically criminal fines and restitution are not discharged in bankruptcy cases. States are empowered to exercise their police power and, with some exceptions, federal bankruptcy law under the United States Bankruptcy Code does not inhibit that exercise of the rights of states. If you have question whether a particular debt might be dischargeable in your bankruptcy case, consult an experienced bankruptcy lawyer in Pittsburgh during a free initial consultation.
FREE CONSULTATION – 412-925-8194
Up Next: Bankruptcy Debts Subject to Discharge Including Mortgages, Car Loans, Tax Debts, Child Support and Alimony and Judgment Awards in Pittsburgh
Watch for our next installment in this series where we will continue to take up the question of exactly what kinds of debts can be discharged in a bankruptcy case. If you have any particular concerns about whether a certain debt may be discharged in a bankruptcy case, you should contact an experienced Pittsburgh bankruptcy lawyer today for a free initial consultation. In Pittsburgh, call 412-925-8194 today.
(c) 2017. Robleto Law, PLLC. Robleto Law, PLLC is a law firm of bankruptcy attorneys based in Pittsburgh, Pennsylvania. Our help may involve bankruptcy relief under the United States Bankruptcy Code. We are a debt relief agency. We help people file for relief under the United States Bankruptcy Code.
Bankruptcy Pittsburgh. Engaging the Best Bankruptcy Lawyer for your Case May Be More Important than you Know.
In Pittsburgh, as in many other fine cities throughout the United States, businesses and consumers in financial turmoil must find the best bankruptcy lawyer to meet their unique circumstances. Many will begin their search with the cost of a lawyer central in their minds. In Pittsburgh, bankruptcy matters generally proceed as they do in other major cities; those with the best bankruptcy lawyers generally realize the most favorable outcomes. For that reason, those who seek out a cheap bankruptcy lawyer or the cheapest bankruptcy in Pittsburgh find they may have paid what they wanted but overpaid for what they received.
Those considering filing bankruptcy in Pittsburgh should consider the cost of Pittsburgh bankruptcy lawyers. Generally, by the time debtors meet with their bankruptcy lawyers, they’ve become accustomed to tightening their belts. However, engaging the cheapest bankruptcy lawyer may quickly prove to be false economy. In truth, finding the best bankruptcy lawyer for a Pittsburgh bankruptcy must a full examination of the value of that bankruptcy attorney. Of course, debtor must ask how much does it cost to file bankruptcy in Pittsburgh? But, when considering the cost of filing bankruptcy in Pittsburgh, debtors must really take into account the complexity of their cases, the extent to which adverse parties may be involved in their bankruptcy cases and what other complications may arise over the course of each bankruptcy case.
FREE CONSULTATION – 412-925-8194
A chapter 11 bankruptcy case in Pittsburgh demands the watchful eye of an experienced Pittsburgh bankruptcy lawyer. When your business is on the line, along with the livelihood of its owners and employees, focusing on the cheapest bankruptcy lawyer in Pittsburgh is a clear error. For business reorganizations in Pittsburgh bankruptcy courts, realistic officers will hire competent business bankruptcy lawyers. When your business is on the line in bankruptcy, Pittsburgh bankruptcy lawyer selection could be the most important choice you may have to make.
Chapter 13 debtors face similar issues as do business bankruptcy debtor but on a different scale. In a chapter 13 bankruptcy, Pittsburgh consumers often need to save their homes, vehicles and other assets that may be critical to the very survival of their families. As with chapter 11 bankruptcy, Pittsburgh needs bright, motivated lawyers to champion the cause of its consumer debtors who need to reorganize their financial burdens.
In chapter 7 bankruptcy Pittsburgh falls in line with other jurisdictions. In chapter 7 bankruptcy, individual debtors in Pittsburgh generally seek a clear pathway to discharge and a fresh start. It is important that in chapter 7 bankruptcy Pittsburgh debtors select a bankruptcy lawyer who will understand their particular circumstances and give them advice that will permit a Pittsburgh bankruptcy judge to award discharge.
In contrast to any other chapter 7 bankruptcy, Pittsburgh business chapter 7 cases demand the close attention of experienced, intelligent, creative and cautious bankruptcy Pittsburgh lawyers. Commercial chapter 7 cases are very different from the ordinary chapter 7 bankruptcy cases. A debtor must always have a good reason to file a bankruptcy in Pittsburgh that is never more pronounced than when it comes to commercial chapter 7 cases. Business debtors wind up their affairs and do not receive a discharge. On the other hand, certain other interested parties do receive the attention of a chapter 7 trustee, the United States trustee and the United States Bankruptcy Judge presiding over their case. There are occasionally (but not often) valid reasons to file a chapter 7 bankruptcy case for an entity that will not continue as a going concern.
At each level and for each chapter of the United States Bankruptcy Code, finding the best bankruptcy lawyer for a bankruptcy Pittsburgh may be the most important Pittsburgh bankruptcy decision a debtor could make. Contact us today for a free initial consultation. Learn how bankruptcy Pittsburgh can help you move forward with debt relief, a fresh start and a clean bankruptcy Pittsburgh.
Call for Your Free Consultation with a Pittsburgh Bankruptcy Lawyer to Discuss Whether Your Debts May be Discharged in Bankruptcy.
FREE CONSULTATION – 412-925-8194
We are a Debt Relief Agency. We Help People File for Relief under the United States Bankruptcy Code.
(c) 2017 Robleto Law, PLLC- Bankruptcy Lawyers in Pittsburgh.
Bankruptcy Exit Strategies in Chapter 11 Bankruptcy Cases Following the Decision of the Supreme Court in Jevic
Business bankruptcy lawyers carefully watched the case of Czyzewski v. Jevic Holding Corp. as it wended its way from a bankruptcy court in Delaware, through the Court of Appeals for the Third Circuit and on to the Supreme Court. At issue in the case was whether a bankruptcy court could enter a dismissal order that provides for distributions in defiance of the priority provisions of the Bankruptcy Code without the consent of affected creditors. Justice Breyer, writing for the majority, explained that the Court’ simple answer to this complicated question is “no.” Czyzewski v. Jevic Holding Corp., 580 U.S. ____, No 15-649, slip op. at 11 (Mar. 22, 2017).
Our simple answer to this complicated question is “no.”
The Court found important that the two other paths for resolution of a chapter 11 bankruptcy case, plan confirmation or conversion, expressly prohibit courts from circumventing the waterfall of claim priorities. The absolute priority rule in section 1129(b)(2) prohibits cramdown of a chapter 11 plan upon impaired creditors if the holders of junior claims or interests are to receive anything under the plan. In a case converted to a case under chapter 7, the trustee is charged with distributing property in keeping with the priority provisions of the Bankruptcy Code. Section 726 tracks the absolute priority rule scheme set out for cases under chapter 11.
Structured Dismissal Orders in Chapter 11 Bankruptcy Cases After Jevic
We expect that many bankruptcy courts will be inclined to read Jevic narrowly and apply its bar only to those cases where parties seek structured dismissal orders that dishonor the waterfall arrangement of priority of distributions in bankruptcy cases when the adversely affected creditors object to that treatment. We are certain that, irrespective of how structured dismissal jurisprudence may develop after the Jevic case, business bankruptcy lawyers will continue to press the envelope in terms of creative resolutions in commercial bankruptcies.
What Are the Bankruptcy Schedules, Anyway?
The bankruptcy schedules are the primary forms that debtors use to reveal their basic financial information. Disclosure of debtors’ financial condition is an essential condition of relief under the United States Bankruptcy Code. The bankruptcy schedules, along with the statement of financial affairs are designed to elicit almost every detail of debtors’ financial condition. From a modest consumer debtor in a case under chapter 7 of the Bankruptcy Code with a few thousand dollars in debt to an extraordinarily sophisticated financial services company with liabilities in excess of one billion dollars, all debtors must submit complete and accurate bankruptcy schedules.
The following is a concise and plain description of those bankruptcy schedules as they apply to individual debtors in consumer bankruptcy cases. On December 1, 2015, a new set of forms became effective to all newly filed bankruptcy cases. Those forms arose from the Judicial Conference Forms Modernization Project. The new forms track the same information as their predecessors but the design is retouched. Additionally, the new forms exist in separate sets, applicable to individual debtors and non-individual debtors (think corporations, partnerships and other business organizations). This review will focus on the new bankruptcy forms schedules A/B, C, D, E, F, H, I and J, as applicable to individual bankruptcy debtors.
Bankruptcy Schedule A/B – Property
Bankruptcy schedule A/B seeks information relevant to a debtor’s interest in property. Previously, schedule A pertained only to a debtor’s interests in real estate and schedule B sought a listing of all other interests in property that a debtor may have. Schedule A/B merges those two previously distinct schedules into an integrated, itemized list of various sorts of property. The first category in schedule A/B is real property (in the parlance of part 1 of bankruptcy schedule A/B, “Each Residence, Building, Land, or Other Real Estate”). Next, a debtor lists vehicles, followed by personal and household items. Within those two asset classes, there are further subitems (e.g., electronics, collectables and jewelry). Next on schedule A/B, a debtor must list all financial assets and business related property. If a debtor owns farm or commercial fishing-related property, that property must also be detailed on this bankruptcy schedule. Responses to the specific inquiries on schedule A/B will generally reveal all of a debtor’s property but the final category does not leave the matter to chance and requires a debtor to describe all property not disclosed in response to the prior questions.
Bankruptcy Schedule C – Bankruptcy Exemptions
Bankruptcy schedule C requires that a debtor list all of the property claimed as exempt and therefore unavailable to pay the claims of creditors. Because Congress left it up to the legislature of the individual states to determine the property that debtors in bankruptcy cases could exempt from creditors, exemption law may vary from state to state. In many states, a debtor may rely only upon the exemptions available under state law. In other jurisdictions, a debtor in a bankruptcy case may only apply the “federal” exemptions set out in section 522(d) of the Bankruptcy Code. The Commonwealth of Pennsylvania permits a debtor to elect the federal exemption scheme or Pennsylvania exemption law.
Depending on the circumstances of any particular case, the decision whether to use the federal or state exemptions may have very serious consequences and may impact a debtor’s right to keep certain assets. After the selection of the appropriate exemption menu, careful application of each exemption is also very critical. Misapplication of exemptions to assets could result in a debtor being required to turn over property to a chapter 7 trustee to be liquidated for the benefit of the debtor’s unsecured creditors. In a chapter 13 case, the same mistake could mean that a debtor would be forced to pay a considerably higher amount of money each month. When it comes to selection and application of bankruptcy exemptions on schedule C, a highly experienced bankruptcy lawyer will help ensure that a debtor maximizes the value of exemption rights in a bankruptcy case.
Bankruptcy Schedule D – Secured Claims
In schedule D, a debtor is called upon to list all secured creditors. A secured creditor is one that has recourse to a debtor’s property to protect its right to receive payments. The two most common kinds of secured creditors for most consumers are mortgagees and vehicle lenders. However, certain tax claims including real estate taxes may also be secured obligations. Additionally, a creditor with a judgment against a debtor may also hold a secured claim. That is so because a judgment acts as an automatic lien on all real property that the judgment debtor owns in the property in which the judgment is entered. A judgment may also form a lien on other property of the debtor if the judgment creditor has taken the necessary steps to perfect its lien before the filing of the bankruptcy case.Ignored secured claims can prevent a debtor from getting a meaningful fresh start even if that debtor receives a discharge. Absent a debtor taking some affirmative measure to avoid or limit a secured claim, a lien will generally survive a bankruptcy case even if a debtor otherwise does everything right and receives a bankruptcy discharge. As with bankruptcy exemption and selection application, an effective bankruptcy lawyer may prove to be critically important to a debtor developing a strategy for the treatment of secured claims.
Bankruptcy Schedule E/F – Unsecured Claims
The new schedule E/F merges the priority claims together with other general unsecured claims against a debtor. The Bankruptcy Code gives priority to certain types unsecured claims. Each priority claim is listed in order such that first priority claims must be paid in full before any second priority claim may be paid. The priority scheme is designed to provide protection to certain kinds of creditors. Thus, domestic support obligations, wage claims and certain kinds of taxes are designed priority claims and must be identified that way. Although the new schedule collapses priority and general unsecured claims onto a single bankruptcy schedule, schedule E/F still requires debtors to list priority claims in a separate section on the schedule and to identify the nature of the claim. Your Pittsburgh bankruptcy lawyer will help you correctly identify and classify priority claims.
Bankruptcy Schedule G – Executory Contracts and Unexpired Leases
Debtors must also list all “executory” contracts and unexpired leases. Prior to a bankruptcy case, many people ask: what is an executory contract? An executory contract is one that has neither terminated nor expired and upon which substantial performance remains due from both parties. Just like an unexpired lease, an executory contract is a living, binding legal agreement. Debtors often face difficult decisions about whether to assume or reject an executory contract or unexpired lease. A clear explanation of the impact of rejection or assumption from a bankruptcy lawyer can make that difficult decision making process far easier.
Bankruptcy Schedule H – Codebtors
As the instructions on bankruptcy schedule H explain “[c]odebtors are people or entities who are also liable for any debts you may have.” It is important to list all codebtors with names and addresses and identify the debt upon which each codebtor shares liability. In many cases, the discharge of indebtedness of a debtor in a bankruptcy case may impact a codebtor’s financial life. It is important to discuss joint liability during a candid conference with a bankruptcy attorney.
Bankruptcy Schedule I – Income
Debtors must disclose their income from all sources. Income information is important and, as entered in the means test, may impact a persons qualification for relief under chapter 7. A debtor must have a regular source of income in order to qualify as a debtor for a case under chapter 13. Schedule I is detailed and seeks information about income from all sources and requires information about deductions from payroll. Additionally, if a debtor has a non-filing spouse, that income must be disclosed too unless they are separated and living apart. Your bankruptcy lawyer can help you to address the implied problem of having someone else’s income imputed to you (even if it is your spouse).
Bankruptcy Schedule J – Expenses
Bankruptcy Schedule J enumerates almost every typical consumer expense and debtors must honestly report their regular monthly expenses. Calculation of monthly expenses is an important exercise for the debtor and provides critical information to all parties in interest in the case. Very often the “monthly net income” calculation reached by subtracting expenses from income gives debtors a sense of how their cash flows on a monthly basis. Schedule J can also help debtors in chapter 13 cases determine whether they can present a chapter 13 plan that they can pay and is therefore, feasible.
It is important to note that bankruptcy schedules I and J seek the sort of information as does the means test. However, because the income on the means test is a backward-looking analysis of the six-month period preceding the filing of the bankruptcy case, the income information may diverge from that stated in bankruptcy schedule I. Similarly, the allowable expenses on the means test of primarily grounded in standard expenses having nothing to do with the actual expenses relevant to the debtor. Discuss these important distinctions with your bankruptcy lawyers.
Pittsburgh Bankruptcy Lawyers and Important Discussions about Bankruptcy Schedules
Disclosure is of income, expenses, assets and liabilities are a cornerstone of every bankruptcy case. The bankruptcy schedules are designed to facilitate that disclosure. Complete and accurate responses to all of the questions in the schedules is vital to the bankruptcy process. Before you file your bankruptcy case, carefully read and understand the information contained in those schedules. Candid disclosure is an important step in a bankruptcy process which allows honest but unfortunate debtors some relief from their debts with a fresh start.