Attorney Susan C. Browning

In Part One of our Ohio Bankruptcy Basics series, we discussed Ohio Chapter 7 Bankruptcy, which can be read at this link. In Part Two of our series, we discussed Ohio Chapter 13 Bankruptcy which can be read at this link.

What is Chapter 11?

Chapter 11 is a reorganization of your debt. There are four types of Chapter 11 cases:

  1. Typical Chapter 11 is filed for a business entity that exceeds the Small Business debt limit or individual Chapter 11 filing that exceeds Chapter 13 debt limits
  2. Small business
  3. The new Small Business Restructuring Act (enacted February 2020) small business filing
  4. Single-asset real estate filing

This blog will focus on the typical individual and business filing variety.

Some reasons for filing a Chapter 11 may include the fact that the debtor is over the Chapter 13 debt limits and does not otherwise qualify to file a Chapter 7; the debtor may be an entity which would not be eligible to file a Chapter 13; or, there may some benefit the debtor may obtain in a Chapter 11 that they cannot get in a Chapter 13 or Chapter 7.

An involuntary bankruptcy can be filed by a debtor’s creditors in certain circumstances.

Filing the petition

A Chapter 11 case begins with filing the petition. The debtor in the case stands in a different position than in a Chapter 13 in that the debtor becomes a debtor in possession, meaning the debtor possesses and administers the assets of the case in a fiduciary capacity. While there is not typically involvement of a Chapter 11 trustee except in certain circumstances, the United States Trustee (‚ÄúUST‚ÄĚ) is heavily involved in the case and receives a fee based on disbursements to creditors. The role of the UST is to make certain that the debtor in possession is performing the required duties. The UST also nominates a creditor‚Äôs committee to assist in making sure the debtor in possession is perming its duties properly.

A debtor in possession is expected to close open accounts and transfer funds to new accounts when filing for Chapter 11. In addition, the debtor must procure insurance for the assets of the estate. The debtor in possession must also file monthly reports regarding assets, expenditures, and income. Creditors will tend to be very involved in the Chapter 11 process as compared to the typical Chapter 13.

There will be a meeting of creditors where the debtor in possession is required to lay out the broad strokes of the anticipated plan. This will inform the UST of how the debtor intends to treat the creditors in the Chapter 11 plan.

Disclosure Statement and Chapter 11 Plan

A debtor in possession may file a disclosure statement and Chapter 11 plan. There is no set deadline for filing the disclosure and plan; however, some local practices may vary. In the first 120 days after filing, only the debtor in possession may file a plan and disclosure. After this time, creditors may file a competing plan. This is called an exclusivity period. A hearing on the disclosure statement will be set and the debtor in possession gives notice to the creditors and serves the plan on the UST, SEC, and any creditors who request a copy.

The disclosure statement gives an extremely detailed view of how the debtor got where they are, how they will fund their plan, what will be done with assets, and how much will be paid to creditors and in what manner. It must provide adequate information to allow the creditors to vote on the plan. The plan will classify creditors based on being substantially similar. Debtor may treat similarly situated creditors differently but may not unfairly discriminate against other similarly situated creditors. The disclosure will include a liquidation analysis which tells the creditors, court, and UST what the creditors would likely get in a Chapter 7 liquidation case. The disclosure describes anticipated income and expenses, evaluates collateral, liens and provides appraisals on real and personal property. The disclosure statement is a method to garner support for the plan and encourage creditors to vote for confirmation of the plan by proving its feasibility.

In comparison, the plan is a condensed version of the disclosure statement advising all parties of what is being paid and in what manner with more formal legal terms.

Once the disclosure statement is accepted, the plan may be served on all creditors.

Some of the permissive provisions that may be part of the plan include spreading out the terms of repayment, and in many cases much longer than the five years allowed in Chapter 13 cases. Loans can be re-amortized at a lower interest rate, strip off liens, as well as cramdown property to its value (except for residential property that is debtor’s primary residence).

Voting and Confirmation

Once the disclosure statement is approved, the debtor may begin to solicit votes from creditors for the plan to be confirmed. The disclosure statement, plan and ballots are sent to the creditors along with a deadline to accept or reject the plan.

For a creditor to vote on the plan, their claim must be scheduled by the debtor or a proof of claim must be filed by the creditor. This same process applies to any equity security holder of debtor except that a proof of interest is filed by the holder.

The debtor in possession needs to have at least one accepting impaired class vote in favor of the plan to be confirmed. An impaired class is one that is not being paid pursuant to original contract terms. Only impaired classes may vote. Impaired classes do not include administrative claims or priority claims.

A class is deemed to have accepted the plan if more than half of the claimholders accept the plan and the accepting creditors make up at least two-thirds of the total claim dollar amount in that class.

A confirmation hearing will be held to determine if the plan will be confirmed. The court must determine if the plan was proposed in good faith, is feasible, and satisfies all other code requirements. The court will take up any objections to confirmation of the plan at the confirmation hearing.

Discharge, Administration and Final Decree

A discharge in chapter 11 operates very differently than in Chapter 7 and 13. Confirmation of the plan alters the relationship between creditors and debtor. It places debtor in the position of replacing the old contract obligations owed to creditors with new contract obligations. A discharge is generally received after confirmation unless the debtor is an individual. An individual debtor must complete payments before receiving a discharge. In addition, as is the case in Chapter 7, some debts under the code are non-dischargeable.

Modifications may be made to a plan after confirmation but must meet the guidelines under the bankruptcy code. The case must not be substantially consummated which means debtor has begun payments, transferred property under the plan.

Debtor must administer the case as well as provide reports to the court. Once the case has been fully administered, the debtor will request a final decree from the court.

Please look for the next blog four in our 4-part series on the new Subchapter V: Small Business Restructuring Act (‚ÄúSBRA‚ÄĚ) which will be published soon.

If you are struggling financially and would like more information about bankruptcy, please contact Susan Browning, 513.943.6650 at the Finney Law Firm for a FREE CONSULTATION.

 

 

 

 

 

 

Attorney Susan Browning

In Part One of our Bankruptcy Basics series, we discussed Ohio Chapter 7 Bankruptcy, which can be read at this link. In Part Two of our series, we discuss Ohio Chapter 13 Bankruptcy.

The previous blog provided information regarding chapter 7 bankruptcy. However, chapter 7 is not necessarily the right choice in every case. What do you do when you do not qualify for chapter 7 or you might lose an unprotected asset in chapter 7?

What is chapter 13 bankruptcy?

Chapter 13 is a payback of your debt over a period of time. The debtor submits a chapter 13 plan to pay creditors a percentage of their debt. A chapter 13 debtor must have regular income in order to make monthly payments to the trustee. The trustee then distributes the funds to the creditors as directed in the plan. There are three main reasons for filing a chapter 13 bankruptcy.

First, Chapter 13 bankruptcy is designed for debtors who make enough money to pay back a percentage of their debt. If your income exceeds the median income for your household size and your reasonable and necessary expenses do not offset that income, the court determines that the amount remaining, ‚Äúdisposable monthly income‚ÄĚ, can be used to repay your creditors a percentage of your debt. This percentage can vary from 1% to 100% depending on each debtor‚Äôs circumstances. You must have a regular source of income to file chapter 13.

Second, Chapter 13 is a tool to discharge debt and keep assets you may otherwise lose in a chapter 7 because there is too much unprotected, ‚Äúnon-exempt‚ÄĚ, value. In this case, over the length of your chapter 13 plan, you would pay back at least the value of what the unsecured creditors would have received in a chapter 7.

Third, there are some benefits a debtor can take advantage of in a chapter 13 that are not available in a chapter 7. If you are behind on your mortgage or car payment, you can avoid foreclosure or repossession by catching up the payments in the chapter 13. You may even be able to improve the terms of your car loan. In some cases, a debtor can get rid of a second mortgage if the value of the real estate is less than what is owed on the first mortgage. Chapter 13 debtors can catch up on debt payments that are not dischargeable such as taxes and domestic support obligations.

How long is a chapter 13?

Payments in a chapter 13 plan will last from three to five years depending on your income and/or the goal of your chapter 13 plan. If your income is below median income for your family size, you may be able to complete your Chapter 13 plan in 36 months. However, depending on what you are paying back in the Chapter 13, you may need up to 60 months to make the payments affordable. If your income is above median income for your household size, you will be required to make payments for 60 months.

 What if something happens and I cannot make my monthly payment?

Inevitably there will be changes to your financial situation during the three to five years you are paying into the chapter 13 plan. During that time period, you must notify your attorney of any changes to your financial circumstances. If there have been changes that make it difficult to make payments, your attorney will attempt to modify your chapter 13 plan. These modifications must be approved by the chapter 13 trustee, creditors, and the bankruptcy court.

What happens at the end of my Chapter 13 plan?

After you have made all your required payments into your Chapter 13 plan, the remainder of your unsecured dischargeable debts are discharged. Your car loans that were being paid through the plan will be paid off, and if you made all required payments, you should be current on your mortgage. Non-dischargeable debts, such as student loans, will remain after the bankruptcy case is over.

If you are struggling financially and would like more information about bankruptcy, please contact Susan Browning, 513.943.6650 at the Finney Law Firm for a FREE CONSULTATION.

 

Attorney Susan Browning

 

This blog addresses the basics of a Chapter 7 bankruptcy filing. It is the first in a four-part series covering Chapter 7, Chapter 13, Chapter 11 and Subchapter V.

In today’s economic climate, you may find yourself experiencing a financial downturn, whether it stems from the COVID-19 crisis, the current political unrest or is something you have been struggling with for some time. The bills are stacking up, late fees are being assessed, minimum payments are increasing, and you can no longer keep up. In addition, creditors are contacting you constantly and possibly lawsuits are being filed. You need to take some action, but where do you begin? This blog series is designed to give you some preliminary information regarding the different types of bankruptcy. You can stop the harassing phone calls and letters by contacting a bankruptcy attorney at Finney Law Firm.

Part One: Basics of Chapter 7

Chapter 7 bankruptcy can eliminate or ‚Äúdischarge‚ÄĚ most, if not all, of your unsecured debt and put you back on the track to financial stability. Although some exceptions exist, generally you can get rid of credit card debt, unsecured loans, medical debt, overdue utility bills, as well as contractual obligations. There are certain debts that cannot be discharged in bankruptcy including recent taxes, student loans and domestic support obligations.

Most importantly, the bankruptcy court puts in place an ‚Äúautomatic stay‚ÄĚ that prevents creditors from contacting you or taking any action to collect from you.

Upon filing bankruptcy, you must list all your assets, all your unsecured and secured debts, as well as all your monthly income and expenses.

Chapter 7 bankruptcy is a ‚Äúliquidation‚ÄĚ. As frightening as that term sounds, most clients escape a chapter 7 without any assets being collected and sold. The first step is to assess what assets you own and determine their value. If there is a lien on the property, we would examine if there is any value above and beyond the amount that you owe. This figure would be your equity. Pursuant to state law, certain types of assets are protected or ‚Äúexempt‚ÄĚ up to an allowed amount. If your equity does not exceed that amount, that asset is exempt property and is safe from liquidation.¬† To the extent the equity exceeds the state law exemption the asset would be nonexempt property and subject to turnover to the bankruptcy trustee

When filing Chapter 7 bankruptcy, a debtor must qualify financially. You must be below a certain income level for your household size as provided by the Census Bureau and IRS . This is calculated using the last six months of income to average your monthly income. Even if you exceed this income level, the court will take into account your necessary and reasonable monthly expenses to determine if the income is offset to the extent that there is very little left over to pay your unsecured creditors.  If your income exceeds your reasonable expenses  you may examine filing a chapter 13 bankruptcy which is a repaint plan over a period of time.

In addition to this preliminary income requirement, there will be an inquiry into your recent financial history. You will disclose certain transactions that have occurred over the last several years. You will provide information including, but not limited to, income, transfers of property, payments made to creditors and family members, and association with any businesses.

How to move forward

If you have made a decision to move forward, I will conduct an initial consultation to determine if you are a candidate for bankruptcy, a follow-up meeting for document and information gathering, as well as an appointment to  review and sign the bankruptcy forms included in the voluntary petition. You will also attend a brief hearing with me by your side in front of a bankruptcy trustee. The trustee’s role is to review your petition to determine if you have any unprotected, non-exempt property to distribute to creditors. If so, the trustee will collect and sell the asset and distribute proceeds to the creditors. If no assets are available for distribution the trustee will note it on the docket. The creditors will then have 60 days to object to discharge of your debts. If no creditors object in that timeframe, you will receive a discharge by mail and the case closes a short time after.

Of course, there are many more facets to Chapter 7, but this covers the topic with very broad strokes. Future blogs will delve deeper into individual issues. Part 2 of this blog series will cover the Basics of Chapter 13 and will be released soon.

Please contact Susan Browning at Finney Law Firm, 513.943.6650, to determine if bankruptcy is the right option for you. Remember, the initial consultation is free.

Attorney Susan Cress Browning

The Coronavirus Aid Relief and Economic Security Act (CARES Act) was enacted on March 27, 2020 in response to the dramatic impact COVID-19 has had on the economy.  In particular, there are several provisions that provide relief for current and future consumer and business bankruptcy debtors.

Stimulus payments are not “income”

The first of these provisions provides that economic impact payments provided to debtors from the government due to COVID-19 is not to be considered income for the purposes of calculating current monthly income or for calculating disposable monthly income for a chapter 13.  These funds will not cause you to be disqualified from Chapter 7 or increase your payback in a Chapter 13.  The practical reason for this is that these are funds that will not be received on a regular basis and therefore should not be considered as regular income for the debtor.

Chapter 13 plans may be modified to extended

Additionally, if you are in a Chapter 13 case that was confirmed prior to enactment of the CARES Act, you may file a motion to modify your bankruptcy plan to extend your plan up to seven years from the date of confirmation. ¬†The debtor must be able to show a ‚Äúmaterial financial hardship‚ÄĚ due to the COVID-19 crisis.¬† The concern with this provision is, what aid is available for the debtor who has filed but has yet to have their case confirmed?¬† They are certainly not immune from the financial crisis that has befallen our community. ¬†¬†It is possible that lawmakers will take up this issue, recognizing this limitation will impact many chapter 13 debtors.

New Small Business Reorganization Act

For those businesses who have struggled during this crisis, the CARES Act sought to boost the benefits afforded by the recently enacted Small Business Reorganization Act (SBRA).  The Act increases the debt limits created by the SBRA from $2.725 million to $7.5 million.  This will be a significant boon to those businesses that were previously unable to benefit from the SBRA provisions and have now been affected by the COVID-19 downturn in the economy.

The benefits of the CARES Act will only be available, per the Sunset provision of the Cares Act, for one year from enactment.  The concern is that this pandemic will have lasting effects that extend well beyond this timeframe and one year will not be long enough to provide a meaningful benefit to bankruptcy debtors.

Health and Economic Recovery Omnibus Emergency Solutions Act

In further efforts to restore our nation’s economic balance, the House passed legislation called the HEROES Act (Health and Economic Recovery Omnibus Emergency Solutions Act).  The goal of this law is to prevent discrimination against bankruptcy debtors who request hardship assistance from creditors, increase debt limits for Chapter 13, and allow debtors additional time to catch up mortgage arrearages in Chapter 13.  This legislation is expected to stall in the Senate.

Conclusion

We will update this once new information becomes available.

Call Finney Law Firm to set a convenient consultation with Susan Browning, 513-797.2857. We now also offer telephone and virtual FREE CONSULTATIONS.

 

Attorney Susan Cress Browning

As we are all aware by now, the COVID-19 crisis has had a dramatic impact on the day-to-day workings of our lives.  It has disrupted health, employment, education, childcare, finances, transportation, etc.  So too, the judicial system did not come out unscathed.  Even the United States Supreme Court is relegated to teleconference hearings reportedly with Justice Ginsberg participating from a hospital bed.  Given that in times of economic uncertainty, such as this, many people turn to the Bankruptcy system for a fresh start, what effect will the shutdowns and re-openings have on the bankruptcy system from beginning to end?

In the last month we have seen stay at home/shelter-in-place orders in effect to slow the spread of the Coronavirus.  Many business offices deemed non-essential have been forced to shutter their doors.  At Finney Law Firm we have been considered essential from the start.  We provide a necessary service to our clients and even more so in your time of financial hardship.

Case filing and attending hearings

Understanding the current impracticality, the courts have eased the long-standing requirement that bankruptcy debtors sign their paperwork in the attorney’s office.  Our lead bankruptcy attorney, Susan Cress Browning, will thoroughly review your filing with you to ensure accuracy and understanding of its contents.

However, the Southern District of Ohio Bankruptcy Court has imposed a temporary procedure allowing for remote signing.  See General Order No. 37-2.  Finally, bankruptcy cases require attendance by the debtor at a Meeting of Creditors.  These have traditionally been brief, in-person hearings.  This practice has been temporarily modified to allow for teleconference hearings.  It is expected that the in-person hearings will be revived once the Coronavirus crisis subsides.

Even though the landscape may look different during this troubling time, keep in mind that there is legal help available through Finney Law Firm and access to that assistance is more convenient than ever before.

Providing information and documentation

Once you determine bankruptcy is the right option for you, Ms. Browning will request important information and documentation.  This may be provided in numerous ways.  Our confidential questionnaire can be supplied by mail, email or fax.  It will soon be available directly on our website by simply clicking a link and inputting the data in a confidential platform.  As you gather these documents for review, Ms. Browning and her staff are readily available by phone or email to answer any questions you may have.  Our online questionnaire provides a direct link to email Ms. Browning and her staff as you are filling out the information.  You are not alone during this frightening time.

Contact us

With the current loosening of restrictions, we are available to assess your situation with greater ease and with less strain and discomfort to you, the debtor.  Bankruptcy has traditionally been an in-person, pen-to-paper field of law.  Given the state of our country, we have all had to learn to interact and communicate effectively by virtual means.  As restrictive as this seems, it has effectively created a new avenue for our clients to pursue a bankruptcy filing while carrying on with their daily lives.

At Finney Law Firm, you can participate in a FREE CONSULTATION with Susan Browning by visiting one of our two convenient locations:

  • Eastgate – Finney Law Firm – 4270 Ivy Pointe Blvd Suite 225, Cincinnati, OH 45245
  • Mt. Adams ‚Äď Finney Law Firm – 1077 Celestial St #10, Cincinnati, OH 45202

We now also offer telephone and virtual FREE CONSULTATIONS.  You can schedule to speak to Susan by phone at a time convenient to you by calling 513.797.2857.  You can also choose to have a virtual meeting through one of the following platforms, Zoom, Google Meet or Microsoft Team Meetings.

Call Finney Law Firm to set a convenient consultation with Susan Browning, 513-797.2857.

 

Attorney Susan Cress Browning

During this unprecedented age of Covid-19 you may be experiencing life changes like never before.  With quarantines, business shutdowns, layoffs, furloughs, as well as a downturn in self-employment opportunities, financial hardship is rampant.  Managing your debt may prove to be a struggle right now and it is extremely important to know what options may be available to you to guide you through this difficult period. 

Whether you find yourself unable to pay your mortgage, make rent, stay current on a car payment, make minimum credit card or medical bill payments or keep up with student loans, the suggestions below may help you to buy some time in order to make plans for the long term.  Please keep in mind that each lender, collection agency or creditor will have different guidelines on whether and how they will offer some reprieve in this time of crisis. 

Have you lost your job?   

Please contact the Ohio Department of Jobs and Family Services to determine if you qualify for unemployment compensation.  The government is offering additional compensation to those who qualify.  Make certain you get detailed information on how to apply and how often.  Information regarding unemployment insurance is available at here  or call Ohio Department of Jobs and Family Services at (877)644-6562.   

Ohioans who are unemployed as a result of the coronavirus (COVID-19) pandemic¬†but who don‚Äôt qualify¬†for regular unemployment benefits can begin¬†pre-registering for Pandemic Unemployment Assistance (PUA), a new federal program that covers many more categories of workers, the Ohio Department of Jobs¬†and Family Services (ODJFS) has announced. To pre-register for PUA benefits, Ohioans should visit here¬†and click on ‚ÄúGet Started Now.‚ÄĚ The benefit amount will be¬†similar to¬†traditional unemployment benefits, plus an additional $600 per week through July 25. The pre-registration tool will allow individuals to get in line early and pre-register their account, so that as soon as the agency has the technical ability to process their claims in May, they can log in and complete their paperwork. For those eligible, PUA benefits will be retroactive to the date they qualified, as early as February 2. The program will provide up to 39 weeks of benefits to many who historically have not qualified for unemployment benefits, such as self-employed workers, 1099 tax filers, part-time workers, and those who lack¬†sufficient¬†work history.¬† Anyone with questions should call (833) 604-0774.¬†

For additional family assistance please contact Ohio Department of Jobs and Family Services here. 

 Are you the owner of a small business? 

If you are the owner of small business you may qualify for government assistance through the CARES Act (Coronavirus Aid, Relief, and Economic Security Act): please visit these sites for assistance: here and here and learn more about the Paycheck Protection Program here. 

Do you qualify to receive the stimulus payment from the federal government? 

Read here.

Are you Struggling to make monthly payments? 

Small Business loans are offering assistance whereby the Small Business Administration will make your payment for a period of time.  These payments may not require repayment. Read here.

 

Contact your mortgage or automobile lender by phone or on their website if you are unable to make your regular payments.  Some lenders are offering programs to lower or skip payments that, most often, will be repaid at a later date.  Pay close attention to the terms of these agreements.  Be sure you understand how the missed payments will be caught up.  If your mortgage lender is not participating in such a program, it may benefit you to apply for a mortgage modification program.  Contact your lender by phone or visit their website for guidance on this application process. 

Are you a veteran? 

Please visit the following Veteran’s Administration website to get answers to your questions regarding benefits here.  

Do you need to discuss your debt problems with an attorney? 

If you find yourself unable to work cooperatively with your creditors it may be time to discuss your situation with a bankruptcy/debt relief attorney.  Please contact Finney Law Firm to schedule a FREE CONSULTATION with attorney Susan Browning (513.797-2857) today.  Susan offers flexible scheduling as well as phone and virtual consultations.  Finney Law Firm maintains two convenient locations in Cincinnati: Eastgate and Mt. Adams.