Category Archives: General Bankruptcy Questions

Good Faith Bankruptcy

Good Faith BankruptcyGood Faith Bankruptcy – What is a good faith bankruptcy and why do we care  so much about it?  Here’s the issue – the bankruptcy code requires that a debtor’s petition is filed in “good faith”.  However, whether a person has filed their petition in good faith is subjective and a test by the Court can not begin to address all of the reason’s a petition is filed in good faith and in bad faith.  But generally, the Court historically looks at the 11 factors there were presented in the case of In Re Kull, 12 B.R. 659 (S.D. Georgia 1981.) Following is a list of the the 11 factors the Court considers when determining a good faith bankruptcy:

  1. the amount of the debtor’s income from all sources (for example was all the income disclosed);
  2. the living expenses of the debtor and his dependents;
  3. the amount of attorney’s fees
  4. the probable or expected duration of the Debtor’s Chapter 13 plan;
  5. the motivations of the debtor and his/her sincerity in seeking relief under the provisions of a Chapter 13 bankruptcy;
  6. the Debtor’s degree of effort (for example, did the debtor complete all the schedules);
  7. the Debtor’s ability to earn and the likelihood of fluctuation in his earnings;
  8. special circumstances such as inordinate medical expense;
  9. the frequency with which the has sought relief under the Bankruptcy Reform Act and its predecessors (has there been multiple filings);
  10. the circumstances under which the Debtor has contracted his debts and his demonstration bona fides, or lace of same, in dealing with his creditors; and
  11. the burden which the plan’s administration would place on the trustee.

Good Faith Bankruptcy – For more information about Bankruptcy Laws, contact the Remboldt Law Firm at 404-348-4081. Free consultations can be scheduled by calling 404-348-4081.  If bankruptcy is a good solution for your financial concerns, payment plan are available if needed and weekend appointments are also available.

Avoidance Action Timely Filed

Avoidance Action Timely FiledHow do you know if a Court would see an avoidance action timely filed? Here’s an example of a court’s process.

The order for relief was entered in debtor’s case on September 13, 2004. The trustee filed avoidance actions on September 13. 2006, seeking to avoid several transfers of real property and marketable securities that were made to debtor’s spouse. The spouse subsequently filed a motion to dismiss on the basis of the action being time-barred under § 546(a).  The bankruptcy court and district courts both overruled her dismissal motion.  The spouse then sought a ruling from the Eighth Circuit Court of Appeals, In re Raynor, 406 B.R. 375 (8th Cir. BAP2009).

The Eighth Circuit Court of Appeals likewise found that the avoidance action of the Trustee was timely filed under § 546(a) the court found that the specified avoidance actions “may not be commenced after the earlier of the later of 2 years after the entry of the order for relief.”

The Eighth Circuit Court of Appeals found that although the language was “inelegant,.. it was nevertheless unambiguous and included the 2-year anniversary date so long as the complaint was filed before midnight of that date.   Accordingly, the trustee’s avoidance action timely and not time-barred.

If you have questions about real property and securities transfers to a spouse when you are considering filing a bankruptcy, or if a transfer avoidance action timely filed – you should seek the advice of an experience bankruptcy attorney to discuss your options.

For more information about Bankruptcy and if an avoidance action timely filed – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Determining the Initial Transferee in a Corporate Transaction

Determining the Initial Transferee in a Corporate TransactionDetermining the Initial Transferee in a Corporate Transaction – How does the bankruptcy court go about determining the initial transferee in a Corporate Transaction? Here is a recent court case example.

The principal of the corporate Debtor obtained a divorce from his wife pre-petition. Pursuant to the divorce decree he had a continuing support obligation to his ex-wife and their children.

During the applicable four-year fraudulent conveyance reach-back period. multiple checks totaling $68,684.25 were written to the ex-wife from the corporate Debtor’s bank accounts. The Trustee sought avoidance and recovery of these payments under §544(b), applicable state law. and §550.

The ex-wife asserted that her former husband, the Debtor’s principal was the initial transferee. She argued that though the corporate checks were made to her.  The “economic reality of the transactions” amounted to her ex-husband withdrawing corporate money to pay the support obligations. She also argued that the Debtor’s corporate financial records identified the payments as advances to its stockholder, or as a distribution of capital to him.

The Bankruptcy Court ruled for the Trustee, and appeal was taken to the First Circuit BAP. Antex, Inc., 397 B.R. 168 (1st Cir. BAP 2008). The Appellate Panel acknowledged that lower courts were split on the question of whether the principal of a debtor corporation was the initial transferee of corporate funds paid to satisfy a personal obligation.  However, the Court noted that all of the circuit courts addressing the issue (being the Fourth , Ninth, Tent h and Eleventh Circuits) had all concluded that the debtor principal was not the initial transferee. These courts found the principal lacked “legal domination and control” or , stated another way, the “right to put those funds to one’s own purpose.” The checks were direct transfers from the Debtor’s corporate account to the ex-wife and, once issued, the principal had no right to use the
money for any other purpose .  Furthermore, characterizing the payments as “advances to a stockholder” or as “distributions of capital” did nothing to establish the requisite “legal dominion and control” by the principal. If you have questions about how the courts go about determining the initial transferee in a corporate transaction – you should seek the advice of an attorney.

Determining the Initial Transferee in a Corporate Transaction – for more information about determining the initial transferee in a corporate transaction – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Does a Motion To Dismiss Trump Motion to Convert

Does a Motion To Dismiss trump a Motion to ConvertDoes a Motion To Dismiss trump Motion to Convert?  After being served with the Chapter 13 Trustee’s Motion To Convert the case to Chapter 7, the Debtor filed a Motion To Voluntarily Dismiss the case.

In a recent case, the Trustee opposed the dismissal motion filed by the Debtor, noting that there appeared to be substantial undisclosed, non-exempt assets in his estate. The Debtor asserted that 1307(b) provided him an absolute right to dismiss prior to adjudication of the conversion motion. The Trustee argued that 1307(c) limited the Debtor’s right to dismiss. In re Jacobsen, 378 B.R. 805 (Bkrtcy. E.D. Tex. 2007).

Judge Rhoades noted a split of authority on this issue, with some courts holding that 1307(b) trumps subsection (c) “even where cause exits to convert the case under subsection (c).”

However, the Court found that both the language and policy of the Code require a different finding. If Congress had intended subsection (b) to prevail over subsection (c) it could have included language that the court could convert or dismiss a case “except” as provided in subsections (b) and (e).” Further, the Court found that its 105(a) powers support this reading of 1307. Mandating conversion, rather than dismissal, was in the best interest of the bankruptcy estate. Therefore, a conversion order was necessary to further the purpose of this substantive provision of the Bankruptcy Code.

Does a Motion To Dismiss trump a Motion to Convert – for more information about Bankruptcy and whether you have an option to dismiss your chapter 13 case when the trustee files a motion to convert the case to chapter 7  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

 

Unauthorized Bankruptcy Mortgage Refinancing.

Unauthorized Bankruptcy Mortgage RefinancingConsidering an Unauthorized Bankruptcy Mortgage Refinancing? If you file a bankruptcy, you must get the bankruptcy court’s permission to refinance your mortgage (or enter into any new debts) while your assets are still part of the bankruptcy estate, controlled by the Court and the Trustee to avoid an unauthorized bankruptcy mortgage refinancing.

Here’s some court cases that explain the issues with the unauthorized bankruptcy mortgage refinancing.  The two courts involved are the First Circuit BAP and the Eighth Circuit BAP both addressed unauthorized post-petition refinancing.

In In re Marrero, the lender on the two mortgages obtained stay relief in order to foreclose because the debtor was behind on the mortgages. The Debtor, in order to avert the foreclosure, refinanced the indebtedness without notifying or obtaining authority from the Trustee or the Court. In the process, the lender cancelled the two earlier mortgages, and replaced them with a single new mortgage in its favor.

The Trustee moved the court to avoid the refinanced mortgages.  Affirming the Bankruptcy Court, the BAP held that the Trustee could avoid the new mortgage as an unauthorized post-petition transfer under S549(a). The Court found that the Mortgage Company could not use the good-faith defense of S549(c), since the lender had known about the bankruptcy case. Further, once the new mortgage was avoided by the Court, the property became unencumbered, because the prior mortgages had been released. The Trustee could, therefore, sell the property.

For more information about Bankruptcy and the unauthorized bankruptcy mortgage refinancing  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

 

 

Bankruptcy and Cars

Bankruptcy and CarsBankruptcy and Cars

Bankruptcy and Cars.  What options do I have to keep my Car is I file Bankruptcy and I have a loan on my car? When you file a bankruptcy, you will have the option to declare your the intention to “retain collateral and continue to make regular payments” on a car loan.  You should not that the Court finds that: 1) the automatic stay expires 30 days after filing, 2)the collateral was no longer property of the bankruptcy estate, and 3) repossession of the vehicle did not violate the say after 30 days. For more information you can review the case:  In re McFall, 356 B.R. 674 (Bkrtcy. N.D.) Ohio 2006).

Under S 521(a)(2) a debtor who has financed their car, and filed bankruptcy, has 30 days to declare their intention to reaffirm, redeem, or surrender their car (or other personal property); and another 30 days after the 341 hearing to perform that intention. If the debtor does not reaffirm, redeem, or surrender their car (or other personal property) timely, then X362 (h) provides that the stay is lifted as to the property and the creditor is able to recover the car (or other collateral), since it ceases to be part of the property of the bankruptcy estate. Thus, in such cases, not only can the creditor take the collateral, but the Trustee in a Chapter 7 case also loses the bankruptcy estate’s interest in it as well and is not able to take possession of the property.

For more information about Bankruptcy and cars and your concerns regarding your car – especially if it is financed  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.