Appointment of a Chapter 11 Trustee in a Business Bankruptcy Case

Pittsburgh Business Bankruptcy

Bankruptcy May Protect Your Business

The Debtor in Possession

Business bankruptcy cases under Chapter 11 of the United States Bankruptcy Code generally give rise to a new entity known as a “debtor in possession.”  Under section 1108 of the Bankruptcy Code, the debtor in possession continues to operate the business.  While there are constraints upon how the debtor in possession must operate the business while remains in a Chapter 11 bankruptcy case, the norm is the business keeps its leadership intact to guide it through the reorganization process.  The policy of allowing the debtor in possession to continue the day to day operations of the business is usually very sound.  The management of the business typically understands the company better than any outsider does and, very often, has a strong incentive to restore the enterprise to profitability (if only to retain employment).

However, if the case is converted to a case under Chapter 7 of the Bankruptcy Code, the debtor in possession ceases to exist and a Chapter 7 trustee is appointed to oversee the liquidation of the business.  Sometimes an independent trustee is appointed to oversee the business affairs of a debtor with a strong prospect of reorganization.

Appointment of a Chapter 11 Trustee

For Cause Appointment of a Chapter 11 Trustee

Section 1104(a) of the United States Bankruptcy Code provides that any time between the filing of the bankruptcy case and before confirmation of a Chapter 11 plan, a court is empowered to appoint a Chapter 11 trustee.  The United States Trustee or a party in interest may request the appointment of a Chapter 11 trustee for cause.  Cause includes “fraud, dishonesty, incompetence or gross mismanagement of the affairs of the debtor by current management.”  The “for cause” appointment of a Chapter 11 trustee makes sense for the  same reason that it makes sense to retain existing management:  to maximize the debtor’s opportunity to effectively reorganize.  If the debtor’s management has demonstrated that it is not competent the manage the affairs of the debtor, than that debtor and its creditors are better served by replacing that management.

Nevertheless, the cases are clear that the appointment of a Chapter 11 trustee is an exception.  The debtor’s existing management is entitled to deference.  Furthermore, even if the appointment of a trustee would put the debtor in better hands, that might not mean that it would make the debtor better off.  If a court orders, a Chapter 11 trustee may be elected during a meeting of the debtor’s creditors.  The new trustee must learn enough about the business of the debtor to oversee its operations.  Also, the Chapter 11 trustee will typically be compensated from the debtor’s estate.

Appointment of a Chapter 11 Trustee Based on the Best Interests of Creditors or Interest Holders

The Bankruptcy Code also permits the appointment of a Chapter 11 trustee when that appointment is in the best interests of the creditors, equity security holders or other interests of the debtor’s estate.  This “best interests” appointment of a Chapter 11 trustee does not require a finding of negligence or wrongdoing on the part of the debtor’s existing management.  Whether a court appoints a Chapter 11 trustee under this test turns only on an analysis of the interests of those creditors.  However, because a business is typically best served by its experienced, pre-bankruptcy management, it is not typically in the best interests of interest holders to appoint a Chapter 11 trustee.

Appointment of a Chapter 11 Trustee When Grounds Exist to Convert or Dismiss the Bankruptcy Case

Additionally, a court can appoint a Chapter 11 Trustee when there are grounds to convert or dismiss a bankruptcy case but, conversion or dismissal of the case is not in the best interests of the creditors or the estate.  A case may be converted to a case under Chapter 7 or dismissed for a number of reasons including but not limited to failure to pay certain fees, failure to attend a meeting of creditors, failure to timely provide information to the United States Trustee or failure to comply with an Order of Court.  After finding that cause exists to convert the case to a case under Chapter 7, pursuant to section 1112 of the Bankruptcy Code, a court could decide to appoint a trustee instead of converting the case.

Limitations on Right to Appeal Appointment of a Chapter 11 Trustee

Recent case law suggests that the rights of an ousted debtor in possession has limited ability to appeal the Order appointing a Chapter 11 trustee.  Once a Chapter 11 trustee is appointed, it manages the affairs of the debtor and exercises its rights and responsibilities as a debtor.  Thus, the right to appeal an Order appointing a Chapter 11 trustee belongs to the Chapter 11 trustee.  Nevertheless, an ousted debtor in possession has some recourse to appeal the adverse decision of a bankruptcy court.  However, it must timely appeal and move to stay the Order appointing the Chapter 11 Trustee pending appeal.

The appointment of a Chapter 11 trustee is strong medicine.  Whether you are a creditor who would like to see the management of a debtor displaced or a debtor in possession seeking to maintain control of your business, you should talk to your bankruptcy attorney regarding the appointment of a Chapter 11 trustee.

(412) 925-8194

Business Bankruptcy Lawyers Pittsburgh

Pittsburgh Business Bankruptcy Finding the Right Commercial Bankruptcy Law Firm Might Save Your Business

When Your Business is in Jeopardy, You Should Rely Upon the Vast Experience of an Extraordinary Pittsburgh Bankruptcy Law Firm


Pittsburgh Business Bankruptcy

Bankruptcy May Protect Your Business

Pittsburgh has a “no quit” approach to the world. Pittsburgh’s resilience is evident from its early days as powerhouse of American industry through its financial self-reinvention as a modern day center of innovation in medicine and technology. Unsurprisingly, our sports teams recognize that a game “ain’t over until it’s over” and the Pittsburgh Steelers, Pittsburgh Pirates and Pittsburgh Penguins are known for their many come from behind victories.  With that in mind, it should come as no surprise bankruptcy is an option of last resort for many Pittsburgh businesses.  Still, a strategic commercial bankruptcy can sometimes result in a stronger, more profitable business enterprise going forward.  A business bankruptcy case does not carry the same stigma as a consumer bankruptcy case.  Sophisticated business people understand that entrepreneurs often undertake considerable risk in their business ventures.  Business risk involves the inherent potential for both profit and for loss.  When the debts of a business become so excessive that they threaten the ability of that business to continue as a going concern, a business bankruptcy case could offer a way back to solvency.

“A strategic commercial bankruptcy can sometimes result in a stronger, more profitable business enterprise going forward.”

First, consider the affect that a bankruptcy case might have on your business in terms of reputation within your industry.  Certain types of businesses suffer from the mere fact of having filed a bankruptcy case.  If you think your customer base would be substantially diminished as a consequence of filing a bankruptcy case, you should weigh that against the benefits you expect from filing a bankruptcy case (a temporary 20% loss of revenue may be tolerable if it eliminates a large chunk of debt).  Second, talk to your bankruptcy attorney about the benefits your company could see as a result of filing a bankruptcy case.  Your bankruptcy attorney should identify issues that are likely to arise in your particular case.  If your business has aggressive creditors, your bankruptcy lawyer should be able to anticipate the strategy those creditors will take in the bankruptcy case.

What Type of Business Bankruptcy Makes Sense for Your Business?

There is more than one type of commercial bankruptcy.  If you expect to continue operating your business after filing your bankruptcy, you will most likely file a Chapter 11 bankruptcy case.  Under Chapter 11 of the United States Bankruptcy Code, you will retain operational control over your business as a “debtor in possession.”  You will be able to conduct the day to day affairs of your business and to make transactions in the ordinary course of that business.  However, if you wish to undertake any transactions outside of the ordinary course of business (things like selling all of the assets of the business), your bankruptcy lawyer will need to seek the approval of the Bankruptcy Court.

Under Chapter 7 of the Bankruptcy Code, you will give up control of your business and turn over all accounts and records to a Chapter 7 Trustee who will liquidate the assets of the business for the benefit of its creditors and distribute proceeds according to the priorities set forth in the Bankruptcy Code.

Business Bankruptcy Exit Strategy

Before you file your business bankruptcy, you should know what your exit strategy will be.  In most successful business bankruptcy cases, the debtor files a plan of reorganization.  In order to become effective, the Bankruptcy Court must confirm the plan of reorganization and the bankruptcy disclosure statement describing it.  A plan may be approved by the creditors or confirmed over the objection of creditors through a process known as “cram down.”  To be confirmed, a plan must meet several tests, including that it must be fair and equitable, be in the best interest of creditors and meet all other requirements of the Bankruptcy Code.

Increase your chances of success by consulting with an experienced business bankruptcy lawyer in Pittsburgh today.

Medical Debt in Bankruptcy – Pittsburgh

A bankruptcy discharge typically eliminates medical debt from doctor bills, prescription costs and other costs arising from an injury, illness or disease. It does not matter how cautious your financial planing may be; a serious medical problem that is not covered by medical insurance can eliminate your savings and leave you insolvent.

Pittsburgh is fortunate to have excellent physician, specialist and hospital availability. However, our medical technology and professionals can be costly. If you find that health care debt has left you short on cash, it is time for you to talk to a Pittsburgh bankruptcy attorney about your options.

In a chapter 7 bankruptcy case, unpaid medical bills are almost always eliminated. In chapter 13 cases, where debtors enter into plans to repay some or all of their debts over a period of several years, medical debt may be paid in part through a plan with the remaining balance discharged at the conclusion of the plan.

Do not access your 401(k) or IRA to pay medical debt before talking to an experienced bankruptcy lawyer. In most cases, your retirement assets are entirely exempt in a bankruptcy case. That means that you can generally erase your medical bills without drawing down your retirement savings.

Do not enter into a repayment plan that you don’t believe will be feasible. Remember, as much as you may want to settle your debts, you will still need to pay your mortgage or rent, pay your utilities and purchase groceries, gasoline and other necessities. Before you commit to an unreasonable repayment plan, talk to an experienced debt lawyer to see whether some other strategy might produce a better result.

Most people do not want to file a bankruptcy case. For many who have conscientiously repaid their debts their entire lives, being faced with medical bills that they have no ability to repay can be frustrating. Many proud, honest but unfortunate people are resistant to the bankruptcy process. You do not need to face the challenge of medical debt alone. To discuss all of your options, call for a free consultation with an experienced debt lawyer today.

(412) 925-8194

How the Automatic Stay Works in Bankruptcy Case

The United States Bankruptcy Code provides for an automatic stay upon the filing of any bankruptcy petition. 11 U.S.C. § 362. The effect of the automatic stay is both immediate and broad. The stay halts law suits, stops sheriff sales and lien enforcement, attempts to garnish, repossess property or evict. With few exceptions, filing a bankruptcy case will halt any adverse legal action. In fact, section 362(k) of the Bankruptcy Code provides that debtors are entitled to damages for violations of the automatic stay and, when those violations are willful, a court can award punitive damages to the debtor.
In a Chapter 13 Bankruptcy case, a debtor might file a bankruptcy petition to prevent a sale and, under the provisions of Chapter 13, propose a plan to repay the mortgage arrears over a period of three to five years. In a Chapter 7 Bankruptcy case, the automatic stay could be used to prevent a judgment from getting entered against the debtor and, thereby avoid the fixing of a judgment lien on that debtor’s real estate. Also important to most debtors, the automatic stay prevents creditors from attempting to collect debts. This means that the harassing telephone calls from creditors and collection agencies will end.
From a logical perspective, the automatic stay must have broad application and be strictly enforced–otherwise the fresh start provided by a bankruptcy case would not exist, creditors would simply continue to attempt to collect upon their debts. The automatic stay provides debtors with breathing room.
How long does the automatic stay last? It ends when the debtor receives a discharge and the case closes but it can end sooner. A creditor can petition the bankruptcy court for relief from stay under section 362(d) of the Bankruptcy Code. Typically, an unpaid first mortgage creditor that will not be paid through a Chapter 13 plan will seek relief from stay to foreclose upon the debtor’s interest in the property subject to the mortgage. If a creditor is granted relief from stay, the stay is modified to the extent permitted by the Order of the Bankruptcy Court to allow that only that creditor to pursue its claims.
The automatic stay is one of the most important tools in the bankruptcy toolbox. To find out whether the automatic stay can help you protect your assets and interests in property, you should contact a Pittsburgh Bankruptcy Attorney for a free initial consultation.
(412) 925-8194

Bankruptcy Exemptions Examined after Schwab v. Reilly

Bankruptcy Exemptions in the Wake of the Schwab Decision

A recent decision of the United States Court of Appeals for the Third Circuit addressed the issue of whether a debtor who claimed a homestead exemption could benefit from a mortgage avoided by a chapter 7 trustee.

In In re: Messina, 2012 U.S. App LEXIS 16289, *3 (3d Cir., Aug. 6, 2012), the debtors claimed the maximum allowable bankruptcy exemption in their residence despite that they had two mortgages, the combined amount of which exceeded the fair market value of the property. However, because the debtors’ first mortgage was not executed before a notary, the debtors listed it as an unsecured obligation. Id. The trustee did not timely object to the debtors’ claimed exemption. Id. at *4. The trustee avoided the defective first mortgage under section 544(a) of the Bankruptcy Code and relevant state law. Id. at *5. The trustee then sold the property pursuant section 363(f) of the Bankruptcy Code and moved to value the debtors’ exemption at $0, reasoning that the first mortgage remained enforceable upon the debtors on the petition date. Id. at *7. The debtors cross-moved for an order requiring the trustee to pay them the value of their claimed exemption from the proceeds of sale. Id.

On March 6, 2006, the United States Bankruptcy Court for the District of New Jersey entered an Order valuing the Messina debtors’ exemption at $0 and denying the debtors’ cross-motion. On appeal, the District Court reversed the Bankruptcy Court and found the trustee’s objection to the debtors’ exemption to be time barred. Messina v. Neuner (In re Messina), 2007 U.S. Dist. LEXIS 92609, *29-30 (D.N.J. Dec. 17, 2007) citing Taylor v. Freeland & Kronz, 503 U.S. 638 (1992). The United States Court of Appeals for the Third Circuit remanded the case to the District Court to consider the impact of the, then recent, decision of the United States Supreme Court in Schwab v. Reilly, ___ U.S. ___, 130 S. Ct. 2652 (2010) upon its ruling. On remand, the District Court determined that, under Schwab, Bankruptcy Rule 4003(b) did not preclude the trustee from objecting to the debtors’ exemption since an asset recovered as a result of an avoidance claim (i.e., the sale proceeds) is distinct from the property claimed as exempt (i.e., the debtors’ equity interest in their home). Messina v. Neuner (In re Messina), 2011 U.S. Dist. LEXIS 9637, *21-22 (D.N.J. Jan. 31, 2011). The Court of Appeals affirmed that decision. In re: Messina, 2012 U.S. App LEXIS 16289, *23 (3d Cir., Aug. 6, 2012) (“…avoidance of the [ ] mortgage was a separate asset… [the debtors] claimed an exemption in the residence, not in the proceeds from the sale of the residence.”).

The Messina case interprets the decision of the United States Supreme Court in Schwab to extend beyond limiting debtors to the actual dollar value of their claimed exemption. At least in the Third Circuit, debtors must distinguish between an exemption in an asset and an exemption in the proceeds from the sale of that asset in the event that a trustee avoids a lien on that property.

The Chapter 7 Bankruptcy Process

If your financial situation is dour and you do not expect it to improve, you may want to consider a Chapter 7 bankruptcy. You’ll know you are experiencing difficulties when you begin to miss credit card, car note, house note and other payments. You also may begin to experience significant harassment by these creditors aimed at forcing you to pay. They may call you at all hours, inundate your mailbox with dunning notices and generally make your life miserable. Eventually, some might turn your debts over to collection agencies that may employ the same tactics only with more intensity.

A Chapter 7 bankruptcy is often referred to as “liquidation” and is a common form of “consumer” bankruptcy. It can generally wipe out the following types of balances:

*Credit card balances
*Utility bills
*Judgments obtained by unsecured creditors
*Debt from lines of credit
*Billings and invoices from healthcare organizations
*Personal unsecured loans
*Deficiency judgments (balance owed after a home foreclosure or car repossession)

You can file bankruptcy without a lawyer but the bankruptcy process is complex and will require you to understand and complete financial schedules and statements. In fact, a typical complete bankruptcy petition will run up to 50 pages. Also, Bankruptcy Code contains strict deadlines within which you must complete certain filings and tasks.

The Means Test

Usually, the first step is to consult with a bankruptcy attorney. Your attorney will explain the Means Test. The first part of this test is a comparison of your last six month’s income to the median income for your state. In Pennsylvania, currently it is $44,688 (single), $53,011 (two-person family),
$67,262 (three-person family) and $78,780 (four-person family).

If your income was less than that over the prior six month period, you will qualify for Chapter 7. If your income exceeds those levels, whether you qualify for relief under Chapter 7 will depend upon other factors.

Gathering Creditor Information

Once the means test is settled the bankruptcy attorney will gather your creditor information from your credit report and add them to your bankruptcy schedules so that they (your creditors) will receive a notice of your bankruptcy filing. By law, nearly all kinds of adverse creditor actions are immediately stayed.

The attorney will also record the amount you owe to each creditor. You will be asked to check your petition, schedules and related documents for accuracy and completeness.

Certain kinds of debt are not dischargeable. Tax obligations for which you have not filed a tax return and recently incurred taxes are usually not eligible for discharge in a Chapter 7 bankruptcy. Also, unless your federally guaranteed student loans impose an undue hardship, you will remain responsible for them after your bankruptcy case is closed.

After you are certain that all of the eligible debts are listed and your bankruptcy petition is complete and accurate, the attorney will file your bankruptcy case.

Asset Exemptions

In a Chapter 7 case, the trustee has the authority to liquidate assets and distribute the proceeds to your creditors according to the priority scheme set out in section 507 of the United States Bankruptcy Code. However, under section 522 of the Bankruptcy Code, most or all of your property can be kept from the reach of the trustee by the conscientious application of exemptions. Available exemptions vary from state to state but, typically, exemptions exist for your primary residence, automobile, household furnishings and other items.

Meeting of Creditors

Soon after you file your bankruptcy case, you will receive a notice for a meeting of creditors. This usually occurs within four to six weeks after the bankruptcy petition is completed. At the hearing, the trustee will ask you questions regarding your assets, income and other information contained in your bankruptcy petition. The trustee will report to the bankruptcy court regarding the information you provide during the meeting of creditors. For most consumer debtors, this is the only hearing they will attend in their bankruptcy case.

Contact Robleto Law now to find out more about the bankruptcy process and for an immediate, confidential consultation about your financial situation by calling the number at the top of the screen, or simply fill out our quick contact form.

Types of Commercial Bankruptcy

Declaring bankruptcy is almost always a difficult decision. Just as individuals might file personal bankruptcy cases to address problems in their financial lives, commercial bankruptcy is available to financially distressed businesses. Though many people view bankruptcy a last resort, it can be a good decision. For individuals, most common types of bankruptcy are chapter seven and chapter thirteen bankruptcies. Less talked-about online are commercial bankruptcies. If your business is failing and it owes more money than it is taking in, a commercial bankruptcy might allow it to restructure some or all of its debt while continuing to operate.

Commercial bankruptcy can impose some restrictions on the day-to-day operations of your business, but it can also be critical to turning things around and becoming profitable once again. For nearly all types of American businesses, there are two relevant types of bankruptcy cases: cases under Chapter 7 and cases under Chapter 13 of the United States Bankruptcy Code.

Commercial Bankruptcy – Chapter Seven

Chapter seven bankruptcy is available to both individuals and businesses and is the most common type of bankruptcy declared in the United States. While many assume that declaring bankruptcy frees a business from paying on its debts, that is only half true. A business that is liquidating under Chapter 7 must pay its creditors pursuant to the priority scheme set out in section 507 of the Bankruptcy Code. If, after that distribution, creditors remain unpaid, the debtor does not receive a discharge–it’s just that nothing remains from which those creditors can be repaid.

Upon filing chapter seven bankruptcy, a bankruptcy Trustee is named to examine and, if necessary liquidate the assets of the business. A business that files a case under Chapter 7 must immediately cease all business operations and turn over its books and accounts to the Chapter 7 Trustee.

Commercial Bankruptcy – Chapter Eleven

So far as business operations go, chapter eleven bankruptcy is much less disruptive than chapter seven bankruptcy. The business can keep its pre-bankruptcy management and continue to operate as a “debtor-in-possession.” Chapter 11 bankruptcy is often referred to as “corporate restructuring.” Less profitable or only slightly valuable parts of the business – often certain departments or little-used assets –can be liquidated to fund a plan of reorganization. Debtors in Chapter 11 cases will usually seek to preserve mission-critical and highly profitable assets.

Just as in a case under Chapter 7, the “automatic stay” applies in chapter eleven bankruptcy cases to stop adverse creditor actions. The automatic stay will stop the collection calls and eliminate any court action against your business until the automatic stay is lifted or dissolved. This is often a significant relief to many business owners, especially those facing asset sales or seizures.

Sole Proprietorship

Sole proprietorships are businesses that are owned by a single individual and have no legal existence apart from that individual. Nevertheless, individuals who act as sole proprietors have bankruptcy rights that are slightly different from the normal, consumer bankruptcy debtor. If their debt arises primarily from the operation of their business, they may be eligible for Chapter 7 relief in situations where other, non-business debtors would be required to file a case under Chapter 13 and repay their creditors some or all of what they owe.

Bankruptcy is never an easy choice, but when expenses exceed income for a number of months or years, commercial bankruptcy might be a reasonable option for your business. Call (412) 925-8194 now for an immediate, confidential consultation and to discuss options for you and your business.

The History of Bankruptcy

Despite the somewhat negative connotations that some people associate with bankruptcy, this type of consumer protection has been in existence since at least the time of the Greeks. This indicates that societies have nearly always recognized that sometimes, the best choice for the individual and for the community is to declare bankruptcy and start over with a “clean slate.” The following is a brief account of the history of bankruptcy; an approximate time span of nearly 4,000 years.

Bankruptcy among the Greeks

When Greece was the world’s leading military power and cultural center, only men could become debtors. But when a man became insolvent and could no longer pay his debts, he could be forced into indentured servitude for years in order to repay his debts – often under deplorable conditions.

However, because women, children and slaves were considered the property of men, they could also be sold into slavery or indentured servitude. This means that going bankrupt could literally cost a man his entire life including his family.

Bankruptcy among Romans

Two thousand years later the term bankruptcy is theorized to have been born in the form of its earliest Latin ancestor for the words “broken bench.” During this time, lenders often operated from a public bench that would be broken in the event the lender went bankrupt. This is the equivalent of a modern “out of business” sign.

Unfortunately, Romans often jailed or tortured people who were unable to pay their debts, and many were sold into slavery or traded for property, cash, influence or power.

Spain’s National Bankruptcy

Spain became the first country to officially go bankrupt. This occurred under the rule of Phillip II as he presided over one of the darkest periods in human history: the Spanish Inquisition. The Inquisition brought in a lot of money, but it was also hemorrhaging money as well, and with Phillip’s blundering expansionist nature, it wasn’t long until the entire country was overextended and unable to repay its debts, declaring a series of bankruptcies in the middle of the sixteenth century.

Other countries would follow over the next two hundred years, including France and Russia. (Wikipedia entry for Sovereign Default. Accessed 07/20/2012)

Bankruptcy in Early America

The Revolutionary War bankrupted the newly founded America, but the country quickly recovered and for many years thereafter took a dim view to bankruptcy. Consumers and businesses that went broke were often subject to ridicule and even criminal charges and jail time.

1898 Bankruptcy Act

Numerous bankruptcy laws and acts were passed between the end of the 1700’s and 1898, when corporations were officially extended bankruptcy protections and the basis for most modern bankruptcy laws were put into place by congress.

Bankruptcy Act of 1938

This Act expanded significantly upon the 1898 Act, most importantly improving the voluntary status of petitioners and the appointment of trustees to handle bankruptcy cases.

1978 Bankruptcy Reform
This Act made bankruptcy far more attractive to people and businesses struggling with debt. The Act spelled out the numerous bankruptcy types that we know today, including Chapter 7 liquidation and Chapter 13 reorganization – the two most common types of bankruptcy.

A lot has changed with bankruptcy over the years, but one thing that hasn’t changed is the fact that if you’re drowning in debt and you need help, bankruptcy may be the right choice for you. Find out for yourself right now with an immediate, free consultation from an expert with our Pittsburgh Bankruptcy Firm. Call the number at the top of your screen and learn more about taking advantage of consumer protections that were set aside to help people in financial distress. Don’t wait – make the call now.

Do I need a Bankruptcy Attorney?

In today’s internet-based age of Do It Yourself divorces, incorporations and other legal matters, it’s not surprising that many people consider filing for bankruptcy protection on their own. In fact, some websites on the internet even claim to allow people to file for bankruptcy for just a few hundred dollars. While this might appear to be a good value on the surface, the fact of the matter is that you get what you pay for. Therefore, unless you’re already an experienced bankruptcy professional, you could be setting yourself up for significant troubles down the road – troubles that will come after your bankruptcy protection rights have already been fully exercised.

The following are 4 primary reasons why bankruptcies should always be handled by an attorney who specifically practices in this area of law:

1.) Ever-changing Bankruptcy Laws

Bankruptcy legislation and laws are constantly changing and evolving – and these are not just small changes. Some of them are major and can have a significant impact for everyone involved in a bankruptcy case, including debtors, lenders, attorneys and trustees. Keeping up with these laws isn’t easy and generally requires a full time bankruptcy practice in order to manage changing information and regulations.

Attempting to handle your own bankruptcy case without an up-to-date understanding of recent changes to bankruptcy laws can result in serious legal and financial consequences that could further deteriorate what is already a sensitive situation. While it might seem prudent to save a little money by managing your own case, the end result could be much, much more expensive if you’re not aware of the most current laws.

2.) Tricks of the Trade

Dog trainers, chefs, auto mechanics, doctors and virtually all professions have certain “tricks of the trade” that require immersion in the field to understand and wield successfully. Bankruptcy attorneys are no different and can often cite and establish precedent, uncover special rules and use their influence in the field to create outcomes that, quite frankly, a layperson couldn’t hope to accomplish on their own.

3.) Potential for Costly Mistakes

Bankruptcy cases are complex at a minimum and unmanageable at worst. Mistakes made during a case can have serious implications for years and for some people, for life. For instance, a legitimate mistake such as unaccounted for assets could possibly lead to criminal charges or the dismissal or your case altogether. Other mistakes such as not including all creditors or not providing correct income information could lead to serious consequences.

Even simple mistakes such as filling out a form wrong or submitting it in an incorrect format or with improper timing can lead to lengthy delays in your case and other penalties.

4.) Not Being Taken Seriously

As the old adage goes, “The man who represents himself has a fool for a lawyer.” This is true for all of the reasons outlined above, but ultimately, it’s also true because if you represent yourself in a bankruptcy case it’s likely that you won’t be taken seriously and may find it much more difficult to navigate the waters of bankruptcy court than you had thought. This could come in the form of fewer concessions made, more rigid enforcement of documentation requirements, and even passive hostility from the trustee, judge, or others involved in your case.

Bankruptcy is a solemn concern and one that should not be entered into lightly or without proper counsel. Seeking representation from an experienced bankruptcy attorney is critical in order to ensure that your case stays abreast of the most recent laws, utilizes the most effective tricks of the trade, is filed and managed free from mistakes and is taken seriously by officials. To get this level of assurance and security for your bankruptcy case, call us for an immediate, confidential consultation from a proven Pittsburgh bankruptcy attorney.

Fewer US Bankruptcies after the Affordable Care Act? Probably Not.

Speculation abounds that the Affordable Care Act – commonly referred to as Obamacare – will have a significant impact on the number of bankruptcies in the United States. Many experts think that as a result of healthcare being more affordable and accessible, fewer people will declare bankruptcy as a result of medical bills. However, the issue isn’t as clear cut in this regard as it may seem, and there’s compelling evidence to suggest that the ACA will have little to no impact whatsoever on the number of bankruptcy filings.

The Affordable Care Act is speculated to reduce the number of bankruptcies because it will significantly lower the total medical debt of many people. The Act is theorized to accomplish this feat via the following provisions:

*Medicaid is to be expanded at the state level, offering more people care at higher income levels

*People at certain income levels will have their health insurance costs subsidized by the federal government

*The same rates will be available to people regardless of age and location. The same coverage will also be available

*More people will be able to get approved for coverage despite pre-existing conditions

All of these benefits will reduce the rate of bankruptcy filings because they will reduce the amount of medical debt that many Americans are saddled with. In thousands of cases filers often quote medical bills as being a primary reason for declaring bankruptcy. In fact, a 2007 research study published in the American Journal of Medicine stated:

“Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.” (1)

So at first glance it’s easy to see why some people might rush to the easy conclusion that the Affordable Care Act will alleviate a large number of bankruptcies considering that the number one cause of filings is related to overwhelming medical bills. However, this doesn’t appear to be the case, and the very same study offers up its own evidence to the contrary.

In direct continuation from the above referenced passage:

“Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance.”

In reality, the study tells us that even though medical bills were cited as the primary cause of bankruptcy, 75% of those who filed already had medical insurance. Therefore, it’s not exactly prudent to argue that the ACA will reduce the US bankruptcy burden. In fact, the issue seems to go much deeper than just medical bills. And considering that people who could not afford healthcare before won’t be in much of an improved position to afford it now, it’s difficult to imagine exactly how the ACA is going to affect bankruptcy filings in the years to come.

However, the effects of the Act won’t be seen for some time, and before they can be reasonably measured it’s possible that the Act will be repealed or drastically revised. In the meantime, bankruptcy remains a powerful consumer protection regardless of the types of debts involved.

To learn more about your personal financial options and to find out if bankruptcy or reorganization is right for you, call the number at the top of your screen now for an immediate bankruptcy consultation, or use our simple contact form and we’ll get back to you straight away.



(1) David U. Himmelstein, MD, Deborah Thorne, PhD, Elizabeth Warren, JD, Steffie Woolhandler, MD, MPH, Department of Medicine, Cambridge Hospital/Harvard Medical School, Cambridge, Mass;Department of Sociology, Ohio University, Athens; and Harvard Law School, Cambridge, Mass. Medical Bankruptcy in the United States, 2007: Results of a National Study