Many prospective clients of the firm are experiencing actual or threatened utility cutoffs due to income disruption caused by the COVID 19 crisis. Many calls to our office are exploring bankruptcy as an option to address their predicament. This article addresses alternate solutions and whether bankruptcy is a good option for utility disconnections.
COVID 19 has had far reaching and unprecedented financial effects on our communities. Due to layoffs, furloughs, and shutdowns, we have seen a showing of togetherness and unity (community concern) as our leaders have come to the aid of those less fortunate and provided financial assistance. We have seen income assistance by way of unemployment payments, PPP, and COVID stimulus payments. In addition, we have seen moratoriums on foreclosures, evictions and utility disconnections. Fortunately, the two former have been extended until the new year. However, many areas are seeing the end of a moratorium on utility shutoffs and an increase in disconnection notices. The purpose of this blog is to make the consumer aware of what options may be available in and out of the bankruptcy arena.
Kentucky Utility Shutoffs
In Kentucky, the moratorium put in place on March 16, 2020 has been lifted as it applies to non-residential customers effective, October 20, 2020. However, the Kentucky Public Service Commission is requiring utility companies to provide payment plans of at least six months to residential consumers who are behind due to COVID-19. For those of you facing arrearages please contact your utility company to set up a payment plan. In addition, these links will connect you with Kentucky Community Action and Kentucky Cabinet for Health and Family Services where you will be directed to further resources.
Ohio Utility Shutoffs
Ohio, however, has lifted the moratorium as to utility disconnections and customers are beginning to receive shutoff notices. This has prompted a spike in phone calls to our office regarding what can be done prevent disruption of utility service. If utility arrearages are your main concern, it makes sense to attempt to remedy the situation outside of bankruptcy first and leave bankruptcy as your last resort. First, contact your utility provider to inquire as to whether they offer a payment plan and what those payments might entail. If the plan provided is not feasible for your budget, consider contacting a local social services agency to determine if you qualify for their assistance programs. These links will connect you to Ohio’s website for Home Energy Assistance Program as well as their list of social service agencies by county.
As we all know, there is a sense of urgency when you receive a disconnection notice for your utilities. If you find that you are not receiving the assistance you need, do not qualify for assistance or have insurmountable additional debt, bankruptcy may be an option. Utility arrearages may be included in bankruptcy as a dischargeable debt. One caveat is that once you file for bankruptcy, you will be required to place a deposit with the utility company to begin a new account. In many cases, this is a small amount to pay in comparison to the mounting utility bills some debtors face.
If you are experiencing financial hardship and would like further information about the bankruptcy process, please contact Susan Cress Browning (513.797.2857) at Finney Law Firm, LLC for a FREE CONSULTATION. I will discuss your financial situation with you to determine what options you have and what is the best direction to take to resolve your debt issues.
In our final blog in the series, we explore a new Bankruptcy solution now available to small businesses called the Small Business Reorganization Act – or Subchapter V to a Chapter 11 Bankruptcy.
Finally, More Favorable Relief for Small Businesses
There have always been economic fluctuations in operating a small business that have necessitated relief under the Bankruptcy Code. However, this has historically proven to be a lengthy and expensive process. Legislators recognized these deterrents to small business debtors getting a fresh start and drafted a new Subchapter to the Bankruptcy Code to improve the process and allow more small business debtors to take advantage of its provisions.
The enactment of these provisions, which pre-date COVID-19, are timelier and more appropriate than the drafters could have ever thought possible. With shutdowns, social distancing, and mask orders, now more than ever, we are seeing small businesses struggle, especially in the restaurant and food service industry.
Small Business Reorganization Act- Subchapter V
The Small Business Reorganization Act became effective February 19, 2020. The purpose of the Act was to streamline the process making it less expensive, and easier and quicker for small businesses to file for Chapter 11 Bankruptcy.
To take advantage of Subchapter V, the debtor must qualify as a small business debtor and must be engaged in commercial or business activities. It is likely that this definition would include the winding up of a business as well as the continuation of business in Chapter 11. This requires that at least 50% of the debtor’s debts come from commercial or business activity.
In addition, there is a debt limit that a debtor must not exceed in Subchapter V which is set at $2,725,625 million. However, the Coronavirus, Aid, Relief, and Economic Security Act (“Cares Act”), effective March 27, 2020, changed this to $7.5 million for one year following the effective date. This amendment will allow even more debtors to take advantage of the new Subchapter V provisions.
The filing procedure of a Subchapter V case is different from a standard Chapter 11 case. The debtor must make an election upon bankruptcy filing to take advantage of the provisions. Parties in interest may object to the debtor’s election of Subchapter V status.
Once a debtor becomes a Debtor in Possession, controlling the assets and operations of the business, it has powers of a trustee. A Debtor in Possession must provide its most recent balance sheet, statement of operations, cash-flow statement, and federal tax return.
A Debtor in Possession, or senior management, must file a monthly operating report, procure insurance, attend meetings and hearings, and file statements of financial affairs including required schedules.
A disinterested Subchapter V Trustee is appointed to facilitate, provide oversight, and monitor the case. Some of the Trustee’s duties include: Facilitating in the development of a consensual plan; Appearance at status conferences, confirmation, modification hearings, hearings on valuation of secured property and sale of estate property; reviewing and objecting to Proofs of Claim; accounting for property received by the estate; opposing discharge in proper cases; and, filing final reports.
These duties are expanded in a case where the Debtor in Possession is removed due to fraud or misconduct.
Some procedural benefits to Subchapter V are that no creditor committees are formed and no disclosure statements and hearings on disclosure statements are required unless ordered by the court.
The United States Trustee is not paid by the debtor in Subchapter V; rather, the Subchapter V Trustee is paid for services by the debtor as an administrative expense.
Initial Status Conference
The court will hold an initial status conference within 60 days after filing. The debtor, debtor counsel and Subchapter V Trustee must attend, and creditors may elect to attend. The purpose of this conference is to further the expeditious and economical resolution of a case under Subchapter V.
A debtor is required to file a report 14 days ahead of the first status conference, detailing what efforts have been made to procure a consensual plan agreeable to the creditors.
Debtor and Trustee may hire a professional to assist in the case. However, Trustee, debtor attorney and any other professionals must be disinterested.
A distinct change for debtor attorney is that they may be owed up to $10,000 in pre-petition fees without being considered a conflict of interest. However, these fees may only be paid as a general unsecured creditor. If debtor paid the attorney an avoidable preference the attorney is disqualified from representation.
The court will set the confirmation hearing, deadlines for acceptance or rejection of the proposed plan, objections to confirmation and filing Proofs of Claim.
A plan of reorganization must be filed by the debtor within 90 days of filing.
Only the debtor may propose a plan. This differs from Chapter 11 where creditors may propose a competing plan after the exclusivity period ends.
There is no disclosure statement or hearing required unless ordered by the court. However, a statement of the history of operations of the business is required in the plan when submitted. In addition, a liquidation analysis, and projections of disposable income available to pay the plan are required to determine its feasibility.
A proposed plan may be a consensual plan if all classes of creditors consent to the plan. This requires that more than 50% of the creditors in each class approve the plan and those creditors represent at least 2/3 of the total dollar amount in the class. A consensual plan must pay administrative and priority claims on the effective date of the plan. If a creditor fails to file a timely ballot it, is deemed to have accepted the plan.
If a consensual plan is not accepted, then the debtor may propose a cramdown plan without approval of any creditors.
The cramdown plan will propose to pay debts to be discharged over a three to five-year period. Long- term debts may be paid over a longer time but will not be discharged. Priority debts and administrative claims may be paid over the three to five-year plan period. Unsecured creditors may receive a percentage of their claim or they may receive nothing.
Secured creditors’ claims can be crammed down to the value of the collateral. The remainder of the claim will become an unsecured claim. However, secured creditors can elect treatment that requires that their claim be paid in full, but they receive no interest.
One of the biggest changes in bankruptcy law is the ability of a debtor to modify a mortgage on their principal residence if the loan was not used to purchase the property and was primarily used for business purposes. In this situation, the loan would be secured only to the extent that the value of the residence supports it. The balance will be deemed a general unsecured claim. This may be particularly relevant in SBA loans that require a lien on personal residence.
The debtor may modify the plan at any time prior to confirmation.
For the court to confirm a plan it must be fair and equitable and must not unfairly discriminate.
A consensual plan requires that all classes must vote in favor of the plan. For a class to accept the plan, more than 50% of creditors in the class and at least 2/3 of the monetary claims in that class must vote to accept.
If any or all classes fail to approve the plan, the debtor may propose a cramdown plan. This plan is funded with projected disposable income despite whether the debtor is an individual or business entity. Projected disposable income is the income a debtor has that is not reasonably necessary for the maintenance and support of debtor and dependents, including payment of domestic support obligations, and that which is necessary for the continued operation of the business. In the case of a business filing, projected disposable income is the income of the business beyond what is necessary for the continuation, preservation, or operation of the business. There is more room for discretion in this analysis based on individual circumstances and businesses than in other bankruptcy chapters.
The projected disposable income is paid for a three-year period or such longer time as the court may determine, not to exceed five years.
Feasibility is determined by the ability of the debtor to make the payments. The debtor must be reasonably certain to make the payments. In addition, there must be set remedies in the event debtor fails to make the required payments.
Creditors can object to confirmation of the plan.
In a consensual case, the Subchapter V Trustee is terminated when the plan is substantially consummated. This is generally when property has been transferred and distributions have begun. The debtor will make payments to the creditors.
In a nonconsensual plan, the Trustee will make payments to the creditors, unless the plan provides for the debtor to do so, and the trustee will continue as the trustee in the case.
A consensual plan may be modified at any time prior to substantial consummation if creditors do not reject the modified plan and it meets all other confirmation requirements.
A cramdown plan may be modified at any time prior to the last payment made by the debtor if it meets all other confirmation requirements.
Only the debtor may modify the plan.
Discharge in a Subchapter V case depends on whether the confirmed plan was consensual or a cramdown plan.
In a consensual plan, discharge will be issued upon confirmation of the plan for both an individual and a business entity. However, if the plan is a liquidation of most or all the debtor’s assets, the business would no longer operate, and the debtor would not be eligible for discharge in a Chapter 7, then a discharge will not be entered.
Discharge will be granted despite whether any creditor filed a Proof of Claim or accepted or rejected the plan. Debts owed to governmental units and certain taxes will not be discharged by an individual or business entity.
Discharge will not be granted to an individual when the debt is for certain taxes, fraud, larceny, breach of fiduciary duty, domestic support obligations, and/or unscheduled claim, just to name a few.
In a cramdown plan, the discharge will be entered as soon as practicable after the three to five-year period. Only the debts scheduled to be paid in the three to five-year commitment period will be discharged. Long term debts will not be discharged.
In a cramdown plan an individual may not discharge claims based on fraud, domestic support obligations, larceny, breach of fiduciary duty, unscheduled claims, certain taxes etc. Due to the language of the statute it is unclear whether a business entity may discharge debts of this type.
Remedies for default will be spelled out in the confirmed plan. In a consensual plan, the creditors have agreed and possibly negotiated for default terms. In a cramdown plan, the court and Subchapter V Trustee determine whether the default language is acceptable.
Default provisions could include sale of non-exempt property, conversion to Chapter 7 if assets are available for liquidation, dismissal if conversion would add no value to the estate, and debtor may be removed as Debtor in Possession, and/or relief from stay may be granted for pursuit against secured property.
When plan is consensual, dismissal results in the confirmed plan replacing old obligations and creditors must pursue their rights under those new terms.
In a cramdown plan where dismissal occurs, creditors and debtors return to their pre-bankruptcy status including costs and fees accumulated during the pendency of the bankruptcy.
With these distinctions made between the new Small Business Reorganization Act Subchapter V and other bankruptcy options it is hopeful that this Act will be a new tool in the small business debtor’s arsenal to navigate the bankruptcy process and alleviate debt concerns.
In reading the above, you will note that this process can be quite complex. This article is written to outline those complexities and to give contrast to the other types of bankruptcy relief in the other three parts of the blog.
If you are struggling financially, please contact me so I can explain solutions available to you in a FREE Consultation. Susan Browning, Finney Law Firm, (513) 943-6650, or email at email@example.com
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:
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
The new Small Business Restructuring Act (enacted February 2020) small business filing
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 (“UST”) 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’s 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 (“SBRA”) 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.
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 and below is one way to do that.
Part One: Basics of Chapter 7
Chapter 7 bankruptcy can eliminate or “discharge” most, if not all, of your 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. Most importantly, the bankruptcy puts in place an “automatic stay” 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 debts, as well as all your monthly income and expenses. Chapter 7 bankruptcy is a “liquidation”. 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 “exempt” up to an allowed amount. If your equity does not exceed that amount, that asset is safe from liquidation.
When filing Chapter 7 bankruptcy, a debtor must qualify financially. You must be below a certain income level for your household size as prescribed by state law. 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.
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 a bankruptcy petition review and signing appointment. You will also attend a brief hearing with me by your side in front of a trustee. The trustee’s role is to review your petition to determine if you have any unprotected assets 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.
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 “material financial hardship” 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.
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.
Finney Law Firm is pleased to announce that Attorney Susan Cress Browning, a veteran consumer bankruptcy attorney, has recently joined our firm and anchors our bankruptcy law group.
Susan has a passion for the practice of consumer law. Her membership in several legal associations have afforded her the opportunity to learn from and educate some of the most respected consumer law practitioners in the country. This invaluable experience, combined with her strong compassion and commitment to her clients, has culminated in Susan’s successful consumer bankruptcy practice.
Susan earned her Juris Doctorate cum laude at Northern Kentucky University’s Salmon P. Chase College of Law in 2002. Her practice includes the filing and management of Chapter 7 and Chapter 13 consumer bankruptcy cases. She is admitted to both Ohio and Kentucky Bars and to both State and Federal Courts.
She will be located in our Mt. Adams office and will meet with clients at either of our office locations. Please contact Susan (513-797-2857) for a free consultation.
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.
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 – 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.
During thisunprecedentedage 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 struggleright 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 cardor 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. Pleasekeep 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 Servicesto 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’t 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 hereand click on “Get Started Now.” 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?
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 websiteif you are unable to make your regularpayments. Some lenders are offering programs to lower or skip payments that, most often,will be repaidat 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.
We’ve all heard of bankruptcy being used as a shield to protect against creditors’ attempts at debt collection. However, in the practice of law especially, the automatic stay is no longer an issue reserved for those who file bankruptcy, nor does it exist solely within the confines of the bankruptcy courts. Sure, the bankruptcy court generally governs matters involving the “stay” but, particularly in our increasingly adversarial society, these issues tend to bleed over into other legal proceedings as well, such that every litigator (and perhaps every litigant) should be apprised of the ways in which the automatic stay could impact them and their claims.
The bankruptcy petition triggers the automatic stay – imaginary armor that then cloaks the debtor (the person who files bankruptcy), halting all collection efforts by creditors (those seeking to collect money from the debtor). Uponfiling bankruptcy, a debtor is immediately protected by the automatic stay which prohibits, among other things, “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case. . . .” 11 U.S.C. § 362(a)(6). The automatic stay imposes on creditors an affirmative dutyof compliance. Sternberg v. Johnston, 595 F.3d 937, 943 (9th Cir. 2010).
In other words, once you file bankruptcy, your creditors (whether that be the telephone company merely seeking to collect a past-due bill, or someone intending to sue you on a $1 million tort claim) are no longer allowed to take any steps toward recovering that which they think you owe them, in court or otherwise. They cannot call you, they cannot send you a letter threatening action against you if you refuse to pay, they cannot file a lawsuit against you, and they cannot continue to pursue claims that are already pending against you without explicit relief from the bankruptcy court in which your petition is filed. Violating the automatic stay is a very serious offense that often results in an award of damages and attorney’s fees against the violating party. 11 U.S.C. 362(k).
Perhaps you represent a defendant in a contract case, your client filed for bankruptcy (invoking the stay), and the plaintiff’s attorney then serves you with discovery request asking your client to admit that he owes the money sought in the lawsuit. The automatic stay protects your client. Or, maybe you are a passenger who was injured in a car accident, and you are preparing to sue the at-fault driver (a debtor in bankruptcy) for reimbursement of medical expenses. The automatic stay likely prevents you from doing so.
In a practical sense, the affirmative duty of compliance placed on creditors even goes beyond just monitoring their own conduct to ensure that they are not violating the stay – it imposes a duty to police against others, namely courts, violating the stay, as well. This may seem a harsh result, but the Sixth Circuit has explicitly held that creditors cannot sit idly by and allow stay violations occur. See generally Wohleber v. Skurko, 2019 Bankr. LEXIS 653 (6th Cir. March 4, 2019).
In the Wohleber case, the husband-debtor was subjected to a post-petition sentencing hearing arising out of a pre-petition contempt proceeding (i.e., he failed to pay a property settlement previously ordered by a domestic relations court and the hearing was to determine his consequences). At the hearing, the debtor was put in jail until he paid the amount ordered by the domestic relations court (also pre-petition). The husband-debtor later argued that the wife-creditor and her attorney violated the automatic stay by allowing the sentencing to proceed. The bankruptcy court, initially, rejected this argument on the grounds that neither the wife-creditor, nor her attorney took any affirmative action to collect the debt post-petition. However, the Sixth Circuit reversed, holding that the wife-creditor and her attorney had an affirmative duty to “prevent the use of the sentencing hearing and [subsequent confinement] of the [debtor-husband] to coerce payment of the dischargeable property settlement.” Id., at *44.
In sum, the automatic stay is not a concept reserved for bankruptcy courts and the attorneys who practice primarily within it. Instead, it intersects with nearly every area of the law and, frequently, in litigation. Because the stakes are so high for stay violations and missteps can be costly, it is important that creditors (or potential creditors, or their counsel) are in-tune with what the stay means and the type of conduct it prohibits. It is likewise important for debtors to know their rights so that they can recognize improper conduct if and when it occurs to their detriment.
But you have been slow to assign the collection to an attorney for fear of the legal fees and expenses. This concern certainly is well-founded.
However, Finney Law Firm (a) has the experience, tools and “attitude” to maximize your return from that activity, and (b) is willing to work with you on creative fee relationships, so that the risk and cost of the collection activity does not fall fully on the your shoulders.
In every piece of prospective litigation, I attempt to analyze with the client the three components to litigation success: (a) liability (establishing the legal basis the other party owes you money [for example, is the contract clear and the breach easy to establish?]), (b) damages and (c) collectibility.
Let us start at the end: does this target defendant have a pot to pee in?
If you were to get a judgment of any size against him, could we collect from this debtor the sums needed to make the litigation worthwhile form the inception? Many times the answer is “no.” If so, you might want to walk away from the matter.
Does the debtor own a house? A business property? If so, we can fairly quickly ascertain the mortgage indebtedness versus the value of the property.
Does the debtor own a business? Car? Other assets? Many times debtors structure their lives and their assets in such a way that a creditor really can’t get anything from them — their house in in their wife’s name, and their other assets are well-hidden.
The client many times relates to us that liability is “open and shut.” We file suit and the other side “surely will settle.”
Unfortunately it does not always pan out that way. Clients frequently don’t understand the facts of their own case, don’t know all the facts, and wear rose-colored glasses about their prospects of success. Further, even the simplest fact pattern that clearly leads to liability can be time-consuming and laborious in Court to bring to conclusion.
The client needs a realistic understanding of their chances of success and the Court path to a final enforceable judgement.
And that brings us to the damages calculation. Defendants, Plaintiffs and Courts all have differing perspectives on how to calculate damages numbers. And a separate blog entry would have to explore that issue in more depth. But take, for example, the sale of a house. Our client is the seller. The buyer is clearly in breach. But the seller sixty days later re-sells the house to another buyer for $5,000 more than the buyer in breach agreed to pay. (And in today’s go-go real estate marketplace, that’s not an uncommon occurrence). What “damages” has the seller sustained from a clear breach of contract? Other than the time-value of holding the property (taxes, insurance, utilities and maintenance), likely none.
So, once you file suit and convince the Judge to sign the entry granting an award of damages against a defendant, you are “off to the races,” Right? Well, not exactly.
We have to first identify assets and income streams. Does the target own a piece of real property? A bank account? A job? Securities accounts? Do they own a closely-held business? The Finney Law Firm has gum-shoe and cyber assets and relationships that help us to learn of the income and assets of clients in the collection process.
Tools for enforcement
Our tools to force payment of a legal judgment include:
Attaching bank accounts.
Liening and foreclosing on real property.
Seizing and selling personal property such as office furniture and equipment, cars and manufacturing equipment. (This one usually gets their attention and frequently a quick check!)
A creditor’s bill to force a third party who owes the deadbeat money to instead pay it to you. These are very powerful.
A receivership to place income-producing assets in the hands of a third party whose job it is to assure you are paid from the income stream of the asset or its liquidation.
A Judgment Debtor Examination forces a creditor to tell you — under oath — where they are “hiding” their assets so that you can go and grab them.
Use of subpoena power to learn from third parties where assets are being hidden.
Working through the intricacies of bankruptcy court to either avoid the collections limitations the Court imposes or maximize the collection through their offices.
Involuntary bankruptcy. It takes three creditors banding together to place a debtor into bankruptcy, but this tools forces all the debtor’s cards on the table and stops them from playing games with assets that should belong to you.
Fraudulent transfer actions can un-do illegal transfers of assets to friends and family members. Most powerfully, the act of the fraudulent transfer to these third parties causes them to become defendants in that new action — putting them on the hook for the debt, plus punitive damages and attorneys fees — for participating in the scheme.
Creative fee relationships
We are not oblivious to the challenges our clients face of withering legal fees and endless court appearances to collect a small and simple debt. But at the same time, the tremendous work many times required to get a judgment and pursue it through collection also is known to us.
However, if we are going to recommend that a client proceed with a collections action — which necessarily means the economics should work out positively for the client — we are always willing to engage in a discussion about creative fee relationships (hourly fees, flat fees and contingent fees) to achieve the desired end.
The idea on a contingent fee is the more you collect, the more we make — everyone should be happy if the “ring the bell.” But on the flip side, it it turns out to be a dry well — and many collection actions that seem promising on the front end turn out to be a dry well on the back end — then we share in the pain.
Collections work can be great fun, outmaneuvering a defendant who knows he owes the debt, but is using his wits — legal and illegal — to prevent you from getting to those assets.
So, let your deadbeats become our firm’s problem and allow us to turn that bad debt into an asset. Call Chris Finney (513-943-6655) or Julie Gugino (513-943-5669) to learn how we can help you.