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Thursday, April 17, 2014

THE PITFALLS OF ASSET DISCLOSURE IN BANKRUPTCY FILING

Everyone who files a bankruptcy petition signs their bankruptcy schedules under penalty of perjury.  Failure to list assets or accurately disclose your financial condition can lead to a denial of a bankruptcy discharge or allegations of bankruptcy fraud.  Here are a few tips to consider when filing bankruptcy:

1)      List ALL Assets.  You must list all assets you own when you file bankruptcy.  This includes obvious property like real estate and automobiles but also property like patents, business interests, counterclaims in lawsuits, and the right to receive tax refunds.   The simplest way not to receive a discharge is to fail to list all your assets.  One also cannot avoid listing of assets by simply transferring an asset to a friend or family member.  Any transfers of property within two years of the filing date of the bankruptcy must be disclosed.  The transfer of assets for no consideration is a clear fraudulent transfer.

2)      Accurately Value Your Assets.  Many people who file bankruptcy experience some uncertainty about how to value their assets.  It is important not to undervalue or overvalue assets.  For valuing real property, note if there have been any appraisals recently or comparable sales in your neighborhood.    For personal property, the correct value to use is “replacement value” which is not retail value or yard-sale value.  To accurately assess “replacement value” you must consider the age and condition of the property.  If you have antiques or jewelry and are unsure of value, you may want to obtain an appraisal.   For automobiles, use the NADA or Kelley Blue Book value.  Always list the basis of your valuation and be prepared to explain valuation to your bankruptcy trustee, especially if you have submitted recent financial statements to lenders that used different valuations for your property.

Lexington Kentucky Bankruptcy Attorney

Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.


Friday, April 11, 2014

Consolidated Pilot/Flying J Litigation heading to Kentucky

On April 7, 2014, the U.S. Judicial Panel on Multidistrict Litigation consolidated seven separate lawsuits (pending in six different jurisdictions) against, among others, Pilot Corp. (Pilot) and Pilot Travel Centers LLC d/b/a Pilot Flying J (Flying J).  The Panel transferred the consolidation “multidistrict” litigation to U.S. District Judge Amul R. Thapar’s court in the Eastern District of Kentucky.   The Panel noted that Judge Thapar is currently presiding over related criminal proceedings in the Eastern District of Tennessee, which gives him familiarity with the facts involved in the consolidated cases.  Allegations of fraud have been asserted against Pilot and/or Flying J in each of the seven lawsuits brought by various plaintiffs, including FST Express, Inc., J.F. Freight Company, Inc., Mario’s Express Service, Inc., National Retail Transportation, Inc., Keystone Freight Corp.,  Osborn Transportation, Inc., Shoreline Transportation of Alabama USA, Inc., Triple D Supply, LLC, and Wright Transportation, Inc.  And there could be more lawsuits to come.  As the Panel noted that, Pilot and Flying J claim that another 50 plaintiffs opted out of a class settlement, which makes it likely that additional related actions will be filed.

Lexington Kentucky Bankruptcy Attorney

Wes Harned is an associate attorney at DelCotto Law Group. His practice of law focuses on commercial litigation, civil litigation and Chapters 7 and 11 bankruptcies.


Thursday, April 03, 2014

USING BANKRUPTCY TO REMOVE A SECOND MORTGAGE

Bankruptcy offers many powerful tools available to consumer debtors.  One such tool is the ability to get rid of a second mortgage.  The general rule in bankruptcy is that you cannot get rid of a mortgage that is tied to your home.  And there is nothing you can do about your first mortgage.  But in limited situations, you can remove a second mortgage.

Let’s use my clients Bill and Sharon as an example – names changed to protect anonymity.  When Bill and Sharon came in to see me, their finances were a mess.  They qualified to file a Chapter 7 bankruptcy – which would have discharged them of their debts.  It would not have taken care of their first and second mortgage or their vehicle loans – as they wanted to keep all those items.  Upon closer inspection of the situation, I began asking them the value of their home.  They stated their home was worth $120,000 according to the tax value and a recent appraisal.  Their first mortgage was for $137,000 and they had a $30,000 second mortgage against the home as well!  They owed $167,000 total on a home worth $120,000.  There was nothing to be done about the first mortgage, but if I put them into a Chapter 13, then I could strip the second mortgage and they could pay that debt inside the plan for pennies on the dollar.  They would save $505 per month from that second mortgage payment and be out from under the second mortgage in five years. 

What I did to help Bill and Sharon can only be done in limited circumstances and an experienced bankruptcy attorney can help you determine if this remedy is appropriate for or available to you.  If you are drowning because of a first, second or even third mortgage on your property, make an appointment to speak with me to determine if relief is available for you.

Lexington Kentucky Bankruptcy Attorney

Clair Edwards is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping Kentuckians protect their homes, and finances. Clair is best known for her experience in filing Chapter 7 and 13 bankruptcies. In her divorce cases, Clair helps non contestant couples move forward with their lives.


Thursday, March 20, 2014

WHAT ABOUT TAX LIENS?

Filing Chapter 7 bankruptcy may wipe out certain tax liabilities (not all of them) but even so, tax liens that were already filed continue to survive the bankruptcy discharge.  The tax lien continues to attach to all the assets that you owned at the time you filed.  It does not attach to things you acquire after you file.  So, are there any actions you can take to deal with the lien? Yes.

One option is a “chapter 20”—that is what the bankruptcy world calls a Chapter 7 case followed by a Chapter 13 case.  After discharging debt in a Chapter 7, filing Chapter 13 to work out a plan to pay back a tax lien over 5 years is an option.  When there is no way to satisfy the lien in one lump sum payment, payment over time is a widely accepted way to satisfy the lien.

Another option is to do nothing at all.  What are the assets that the lien is attached to? Do those assets have any real value? Can you live without them and get new ones after bankruptcy? This is a very case-specific analysis about your own “stuff” and what to do with it.  Maybe calling the IRS to “come on down” and get your stuff means they never will. 

Finally, the IRS has procedures to negotiate offers to settle up the tax lien and get it released.   Go to www.irs.gov and get “Pub 1450” for more information.  Make an offer for a lien release, at the value of the assets.  Don’t overvalue—a 5 year old couch is not worth much.  If the IRS agrees to release, remember that they will issue the release to you, but it is up to you to get it recorded in the public record and that last step is very important.

Lexington Kentucky Bankruptcy Attorney

Laura Day DelCotto is the founding member of DelCotto Law Group. Her practice of law focuses on helping business owners rehabilitate or sell their companies. Outside of Chapter 11 bankruptcies Laura Day also dedicates her time to educating Kentucky municipalities on ways to avoid Chapter 9 insolvency.


Thursday, March 13, 2014

SCOTUS Speaks.

As usual, when the Supreme Court rules on a bankruptcy matter, there are always nuggets of insight that goes beyond the exact issue being decided. In Law v Siegel, decided on March 4, 2014, the Court issued a unanimous decision, which in and of itself has become something of an anomaly in recent bankruptcy cases, where the Court has been strongly divided.

The Court held that a bankruptcy court cannot surcharge a debtor’s exemptions to pay chapter 7 trustee administrative expenses, even when the expenses were incurred as a result of the debtor’s fraudulent misrepresentations in the case. Nothing too out of the ordinary there, as the Court has evidenced its “strict construction” interpretation of the Code’s statutory language many times before. The Court held that 11 U.S.C. Section 522(k)’s explicit wording prohibits surcharge upon exempt assets.

The Court also reiterated something it has said before: bankruptcy courts cannot use their “general equitable powers” in Section 105 to override specific language in other Code sections. This issue is more far reaching, and is often litigated in many different settings, including the most complex business chapter 11 cases. In the last few paragraphs of the Opinion, the Court pointed out that bankruptcy courts have a number of options to address misconduct in cases, listing several of them specifically. The Law case may strengthen arguments that, so long as Section 105 does not directly contradict some specific language found elsewhere in the Code, it remains a broad equitable remedy for courts to utilize. What is certain is that the case will begin to be cited as authority in a number of settings far removed from the world of exemptions.

Lexington Kentucky Bankruptcy Attorney

Laura Day DelCotto is the founding member of DelCotto Law Group. Her practice of law focuses on helping business owners rehabilitate or sell their companies. Outside of Chapter 11 bankruptcies Laura Day also dedicates her time to educating Kentucky municipalities on ways to avoid Chapter 9 insolvency.


Thursday, March 06, 2014

OPTIONS FOR DEALING WITH YOUR COMPANY’S TAX DEBT

With the current state of the economy, many business owners are facing declining revenues and as a result are falling behind on withholding and other tax payments.  If your business is dealing with tax debt, it is important to be proactive.  Taxing authorities can file liens and levy bank accounts and receivables.  Most companies cannot survive such aggressive collection action.  First, it is important to obtain a tax transcript to understand the correct amount of tax debt owed by the company.  Once you understand the extent of the tax problem, you will want to communicate with the taxing authorities to set up a monthly payment agreement or lump sum payment to settle the tax debt. You may also want to sell any unencumbered assets to satisfy the tax obligation. If you are unable to reach an agreement with the taxing authorities, you may want to file a Chapter 11 “reorganization” bankruptcy for your company.  In Chapter 11, your company would have five (5) years to pay past-due taxes and could also restructure other non-tax debt. For the company to also maintain current and ongoing tax payments, you may have to downsize your company or make other necessary budget adjustments in order for your company to cash flow. It is also important to note that as an owner-officer of the company, you will have personal liability on certain taxes like withholding and sales taxes. Hence, it is critical that you be proactive and develop a strategy for dealing with tax debt as collection activity will also affect you personally as the business owner.

Lexington Kentucky Bankruptcy Attorney

Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.


Thursday, February 20, 2014

WHEN DO I CALL A BANKRUPTCY LAWYER?

Labeling a lawyer a “bankruptcy lawyer” is a misnomer. The fears generated by the misperceptions lead to a strong feeling of not wanting to contact a “bankruptcy lawyer” for help and advice, ever.   Even the thought of consulting with a bankruptcy lawyer feels like admitting failure and defeat, when so many of our clients are looking for ideas and options, and a basic understanding of how the  bankruptcy process might work in their specific situation. 

The misnomer is too bad, because consulting with a good so- called “bankruptcy” lawyer is nothing like you might expect, and does not mean that you will be filing bankruptcy any time soon, and maybe never.   Bankruptcy is not for everyone, and is often the last resort for a bad situation, one with many factors beyond any one person’s control, with many factors to consider.

Please don’t wait until you are facing lawsuits, wage garnishments, and foreclosure sales.  Please don’t wait until your car is repossessed, or your vendors have cut you off, or you can’t meet payroll tomorrow, or the IRS has levied.    These problems are not going to disappear, so the sooner you get up the courage to consult with a professional to go over all the options, before they reach crisis level, the better.   Call sooner, not later.

Lexington Kentucky Bankruptcy Attorney

Laura Day DelCotto is the founding member of DelCotto Law Group. Her practice of law focuses on helping business owners rehabilitate or sell their companies. Outside of Chapter 11 bankruptcies Laura Day also dedicates her time to educating Kentucky municipalities on ways to avoid Chapter 9 insolvency.


Thursday, February 06, 2014

YOUR BUSINESS IS MY BUSINESS

Many lawyers at “big law” have no clue about actually running a business on a day to day level. They are “professionals” and certain dirty work is beneath them. They can send 5 or 6 lawyers to cover a hearing, and edit a brief to perfection, but they sometimes don’t really “get it” when you are telling them about budgeting, collections, operations, the daily grind of too much to do, and the list goes on and on. The vast majority of lawyers lack business training and have never run their own business. You are the expert in your business. You are the expert in understanding the day to day issues that are unique to your industry. One big reason I’m still passionate about what I do is the ongoing education I receive as we work within any industry. The successful meshing of Chapter 11 reorganization with your unique business and industry-wide issues is fun for me. The subtle strategy decisions that we make, always together, to aim for the best results. Our appreciation of the challenges of running a business make us different: we get it. Perfection is a myth.

Lexington Kentucky Bankruptcy Attorney

Laura Day DelCotto is the founding member of DelCotto Law Group. Her practice of law focuses on helping business owners rehabilitate or sell their companies. Outside of Chapter 11 bankruptcies Laura Day also dedicates her time to educating Kentucky municipalities on ways to avoid Chapter 9 insolvency.


Thursday, January 23, 2014

REJECTION OF COLLECTIVE BARGAINING AGREEMENTS

11 U.S.C. §§ 1113(b) and (c) of the Bankruptcy Code set forth the requirements for the rejection of a collective bargaining agreement.  11 U.S.C. §§ 1113(b) and (c) state as follows: 

(b)(1)  Subsequent to filing a petition and prior to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession or trustee (hereinafter in this section “trustee” shall include a debtor in possession), shall - (A) make a proposal to the authorized representative of the employees covered by such agreement, based on the most complete and reliable information available at the time of such proposal, which provides for those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and (B) provide . . . the representative of the employees with such relevant information as is necessary to evaluate the proposal.

(b)(2) During the period beginning on the date of the making of a proposal provided for in paragraph (1) and ending on the date of the hearing provided for in subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement.

(c) The court shall approve an application for rejection of a collective bargaining agreement only if the court finds that - (1) a trustee has, prior to the hearing, made a proposal that fulfills the requirements of subsection (b)(1); (2) the authorized representative of the employees has refused to accept such proposal without good cause; and (3) the balance of the equities clearly favors rejection of such agreement.

The statutory requirements are often applied as a nine-factor test that was first described in In re American Provision Co., 44 B.R. 907, 909 (Bankr. D. Minn. 1984), and subsequently adopted and applied in the case of In re Amherst Sparkle Market, Inc., 75 B.R. 847 (Bankr. N.D. Ohio 1987).  These nine factors are as follows:

(1)        The debtor must make a proposal to the union to modify the collective bargaining agreement;

(2)        The proposal must be based on the most complete and reliable information available at the time of the proposal;

(3)        The proposed modifications must be necessary to permit the reorganization of the debtor;

(4)        The proposed modifications must assure that all creditors, the debtor, and all of the affected parties are treated fairly and equitably;

(5)        The debtor must provide to the union such relevant information as is necessary to evaluate the proposal;

(6)        Between the time of the making of the proposal and the time of the hearing on approval of the rejection of the existing collective bargaining agreement, the debtor must meet at reasonable times with the union;

(7)        At the meetings the debtor must confer in good faith in attempting to reach mutually satisfactory modifications of the collective bargaining agreement.

(8)        The union must have refused to accept the proposal without good cause;

(9)        The balance of the equities must clearly favor rejection of the collective bargaining agreement.

Amherst Sparkle Marketat 849.

Lexington Kentucky Bankruptcy Attorney

Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.


Thursday, January 09, 2014

HOW TO DEAL WITH CHILD SUPPORT ARREARAGES

No matter which type of bankruptcy you choose, there are certain types of debts that will not discharge.  Back owed child support is one of these types of debt.  If you fall behind on court ordered child support payments, your ex-spouse can have the support enforcement agencies collect money from you.  But beyond collecting money, this agency can suspend your driver’s license – even a commercial driver’s license – and they can seize your tax return.  The support enforcement agency has many tools they can use against you.  A Chapter 7 bankruptcy will not help you in this situation as collection efforts because of back owed child support will not cease.  However, a Chapter 13 can.  A Chapter 13 is the wage earner’s plan and allows you to pay back what you have missed. 

Take a recent client of mine – Adam (name changed to protect anonymity).  When Adam’s child support of $750.00 per month was ordered by the Court, life was looking good for Adam.  He had a steady job and was able to meet all of his obligations.  Then over the next few years, life happened.  Things started spiraling out of control.  Adam lost his job and was on unemployment for about a year.  When he finally found a new job, his income was restored to what he had been making before unemployment, but it was too late.  Adam had fallen behind on his child support for about a year, for a total of $9,000.  Adam’s ex-spouse was not happy and had begun collection efforts through the state support enforcement agency.  During this time, Adam had fallen behind on his credit card payments and medical bills as well.  He was on the verge of being garnished at his new job!  When Adam came to see me, he thought his situation was hopeless.  But we talked and decided a Chapter 13 was right for him. 

Going forward, Adam will pay his monthly child support obligation of $750.00 per month.  In addition to this amount, he will pay the Trustee appointed to administer his case a payment of $350.00 per month for 60 months.  This $350.00 payment will go towards catching up his child support arrearage and paying that amount in full.  But it does not stop there!  This amount will also go towards his past due credit card debt and medical bills – these people will receive roughly ten cents on the dollar.  This Chapter 13 will not only stop the collection efforts of his ex-spouse and the support enforcement agency, but will also stop the pending wage garnishment.  Adam can breathe again, because we now have a clear cut plan of where he is going and how he can catch everything up.  When he finishes the Chapter 13, Adam will be caught up on child support and will be debt free!

Lexington Kentucky Bankruptcy Attorney

Clair Edwards is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping Kentuckians protect their homes, and finances. Clair is best known for her experience in filing Chapter 7 and 13 bankruptcies. In her divorce cases, Clair helps non contestant couples move forward with their lives.


Thursday, December 26, 2013

HOW LONG WILL MY BANKRUPTCY CASE LAST?

The length of your bankruptcy case depends on which chapter you file.  While a Chapter 7  Within 30-45 days after filing bankruptcy, a meeting of creditors is held with the trustee appointed to the case.  In a Chapter 7 case, approximately 60 days after this meeting, the debtor receives a discharge.  If there are no assets for the Chapter 7 trustee to administer, the case will typically be closed shortly after entry of discharge.  If there are assets to be liquidated in the case, it will remain open until the trustee has completed the liquidation and made distributions to creditors. bankruptcy case typically is a few months in duration, Chapter 13 cases are open for a 3-5 year period during which payments are made by the debtor to the Chapter 13 trustee. 

 

Lexington Kentucky Bankruptcy Attorney

Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.


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