Bankruptcy and Property of the Estate – Cause of Action and Claims

November 29, 2016

  • Part 1 - Notes on claims or causes of action that arise before, during, and after a bankruptcy case, and whether those claims are property of the estate.

“When” is a cause of action property of the estate?  The answer can be extremely complex. This is especially true when the debtor has a cause of action that may not have matured pre-petition. In answering this question, bankruptcy practitioners are required to determine when the cause of action matured. Thereafter, the bankruptcy practitioner must distinguish between pre-petition, post-petition, post-confirmation, and post-discharge causes of actions. Depending upon where the cause of action falls in relation to the bankruptcy filing, the debtor may or may not be entitled to keep all of the proceeds generated from the cause of action.  Alternatively, the bankruptcy estate might be entitled to the proceeds. 

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Payments To Secured Creditors After Bankruptcy

October 18, 2016

Your bankruptcy pleadings are signed and filed with the court.   Your creditors have been notified and now it is time to make your monthly mortgage or car payment.     We want to let you know that all creditors have their own procedures on how they handle clients who have filed for bankruptcy.   Below are some examples, however, it is best to make your payment as you have in the past, and if the payment is not accepted, then you will need to contact the creditor yourself.  

If you normally received a monthly bill/statement in the mail, this may be discontinued by the creditor, as technically they are not allowed to contact you.   Please be aware of the date the payment is due and if you don’t receive a bill please contact the creditor and ask how the payment can be made.   If the creditor is a local bank or credit union, it is best to go there directly to make the payment.    

1. Online Payments

Computer

If you normally made your monthly payment on line, go ahead and try to make it online.    A lot of creditors will have your account shut off from on line payments, therefore, you will have to contact them and inquire as to how you can make the payment.   Some creditors will require you to send in a payment to a special address and some will turn your account back on so you can make your payment online.   With this being said, it is best to try and make your payment a few days ahead of time, to allow for time if your payment has to be paid through the mail.  

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Purchasing a Distressed Business

October 10, 2016

A financially distressed business presents an opportunity and bargain for persons interested in purchasing its assets. With the threat of foreclosure by its creditors at its doorstep, the business becomes an inspired seller. However, there are several concerns when a distressed business is exploring its options to sell its assets. The two concerns are: (1) successor liability law and (2) fraudulent transfer law. Although both of these concerns present a problem for a financially distressed business, they can be avoided or limited by sage legal advice. To avoid these two doctrines completely, filing a bankruptcy and conducting a 363 sale of the business’s assets is often a cost effective approach that minimizes risks.

I. Successor Liability

When a purchaser acquires a seller’s assets, the general rule is that the purchaser is not responsible for any of the seller’s obligations existing at the time of the purchase. As with all general rules, there are exceptions. A purchaser will be liable for the seller’s obligations that existed before consummation of the sale: “(1) where there is an express or implied assumption of liability; (2) where the transaction amounts to a consolidation or merger; (3) where the transaction was fraudulent; (4) where some of the elements of a purchase in good faith were lacking, or where the transfer was without consideration and the creditors of the transferor were not provided for; or (5) where the transferee corporation was a mere continuation or reincarnation of the old corporation.” Foster v Cone-Blanchard Mach Co, 460 Mich 696, 702; 597 NW2d 506 (1999).

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How Much for a Cheap Bankruptcy

October 5, 2016

The True Cost of Chapter 7 Bankruptcy and Important Questions When Deciding What Attorney to Hire.

One of the issues that can arise when considering a bankruptcy is how you can afford it.  It can understandably be frustrating to meet with a Bankruptcy attorney, discuss your financial difficulties, and then hear that the attorney now wants money from you in order to file the case.  How much a specific bankruptcy costs often varies on the difficulty and complexity of the case.  After meeting with one of our attorneys for a risk free initial consultation, we will provide you with a specific quote for filing a bankruptcy proceeding.  This article is intended to address the process of deciding what attorney to hire, and questions you might have when you see an advertisement or sign promising a one size fits all “low cost” bankruptcy filing.    

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Can Bankruptcy Help Improve Your Credit Score?

August 9, 2016

Bankruptcy is rarely a positive credit event.  However, it is important to understand that in certain circumstances, filing for bankruptcy can actually help to improve an already damaged credit score within a relatively short amount of time.  In some cases, it is much easier to improve your credit score after filing a bankruptcy than it would be to try to improve the score without the bankruptcy.  In order to understand the relationship between your credit score and the effect of bankruptcy, it is important to understand some of the basic aspects of how your credit score is determined.

Debt

Multiple factors go into calculating a credit score.  These factors include payment history, debt to income ratio, amount of credit used, and the type of debt incurred. The following is a brief description of these categories in order to help explain why they are important when establishing your score.

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910 Rule

July 19, 2016

If your vehicle is worth less than you owe, or you are paying excessive interest, cramming down a car loan in Chapter 13 bankruptcy can reduce your balance and cut your payment. Only Chapter 13 debtors receive the benefit of “cramming down” their car loan.

Keys

Bad car loans can be devastating financially, and all too often they are a major factor in a debtor filing for bankruptcy. However, it is not only debtors with bad car loans who benefit from Chapter 13 cram downs. Unexpected depreciation of a vehicle’s value and high interest rates will quickly place almost anyone underwater on a car loan.

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Dischargeable Income Taxes in Bankruptcy

July 8, 2016

It is frequently assumed that any back federal, state, and local income taxes you may owe are not dischargeable when you file for bankruptcy; this however is far from the truth. When filing for bankruptcy some, if not all, back income taxes may be dischargeable. Below we have simplified the requirements that must be satisfied in order to discharge your back income taxes.

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In order for your back income taxes to be dischargeable, all aspects of the 3/2/240 rule must be met.  The 3/2/240 rule states that your back income taxes must have been due more than three years before filing for bankruptcy, you must have filed your tax return two years or more prior to filing bankruptcy, and your back income taxes must have been evaluated at least 240 days before filing for bankruptcy. In order to understand this rule in greater detail, we have broken down each requirement further.

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