BAPCPA Man #13: Halloween and Bankruptcy

What does BAPCPA Man dress up for on Halloween?  Read below and find out.

Note: This cartoon is posted on the NYBankruptcyNet site with the express permission of the creators of BAPCPA Man.

Click here to see a larger version of BAPCPA Man #13:  Halloween & Bankruptcy.

If the prospect of filing for bankruptcy in New York is scaring you and you’re looking for an escape from the nightmares, please feel free to contact me for a free initial consultation.  I’ll answer your questions and help you deal with all of your creditor demons.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Preference Actions: What is the “Ordinary Course of Business” Defense?

In a previous post (“Defenses to Preference Actions – Part I“), I explained that there are three common defenses to preference actions (also often called “preference lawsuits”) that you can use if you’ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee.

The first one I’ll explain is called the “Ordinary Course of Business” Defense.

Simply put, under the “Ordinary Course of Business” Defense a creditor makes the case that the payment they received from the debtor was not a payment for an outstanding debt, but rather a payment made in the “ordinary course of business.”

Example:

You’ve been providing materials, goods or services to the debtor for several years (i.e., before it became known as “the debtor”).  Every month you sent an invoice to the debtor.  Every month the debtor paid it.  Then one day the debtor filed for bankruptcy.  So you ended your relationship with the debtor and that was that.

Or so you thought.

Now it’s a year later (a trustee has 2 years from the date of a bankruptcy filing to initiate a preference action against a creditor), and you get a demand letter in the mail saying you owe money to the debtor’s estate.  The amount is the same as the last transaction you did with the debtor, right before they filed for bankruptcy.

“This is crazy,” you think.  “As an avid reader of the NYBankruptcyNet blog, I know full well what a preference is.  And I don’t think my transaction constitutes a preference.”

And you’re right.  A payment made in the ordinary course of business by the debtor to  the vendor, or a payment made to the vendor under “ordinary business terms,” is a valid defense against a preference action.*

You know that.  I know that.  And if the trustee is up on her bankruptcy law, then she knows that as well.  Great, so everyone can just forget this ever happened and go home, right?

Wrong.  Because the trustee’s duty is to recover as much as possible for the debtor’s estate.  So if you want to keep your money, you’re going to either have to prove your case in the bankruptcy court or negotiate a settlement with the trustee.

Still, it’s better than having no defense.  And it means that with the help of an experienced bankruptcy lawyer, you can sidestep the preference action.  Or at least negotiate a better result than you would without the “Ordinary Course of Business” Defense.

If you’re the subject of a preference action in New York, please contact me for a free consultation.

As a New York bankruptcy lawyer who has experience on both sides of New York preference lawsuits-–the trustee side as well as the creditor site–-I know the lay of the land, and I’ll help you figure out the best strategy for your situation.

*Note:  Before the 2005 bankruptcy law went into effect, the Ordinary Course of Business Defense required you to prove that the transaction was (1) in the ordinary course of business and (2) that the payment was made under “ordinary business terms.”  Under the new law, it’s “or” instead of “and,” which means you only have to prove one or the other.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

The “Art” of Bankruptcy

"Sorry about the financial problems, Annie, but we can't pay you for this."

In the wake of Annie Leibovitz’s recent near-bankruptcy, I thought it might be worth taking a look at the current intersection of bankruptcy and the art world.

1.  Starting with Annie Leibovitz, the media has been reporting that a recent Obama family photo portrait was done by Leibovitz right before she worked out a deal to stave off bankruptcy.  It’s not clear there’s a connection, however, as White House officials stated that Leibovitz was not paid for the portraits.  Read this article on the L.A. Times Blog for more details.

2.  Next we go to the auction of Lehman Brothers art.  On November 1 in Philadelphia, Freeman’s will be auctioning off 700 pieces of art from Lehman’s collection.  Go here for the article from Business Insider.  And go here to see the actual pieces of art that are up for sale.

3.  The Deal has an interesting article on all the art now on the market as a result of various bankruptcies.  The article leads with, “Art collectors have bankruptcy to thank for three upcoming auctions,” and proceeds to give the juicy details and highlights for each of the auctions.

Clearly art has its role in the world of bankruptcy.  And not just because of all of the starving artists out there (most of whom are likely judgment proof).

If you’re contemplating bankruptcy in New york or facing financial struggles, and you’re looking for an experienced bankruptcy artist to guide you through the process, please feel free to contact me for a free initial consultation.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Bankruptcy Bill takes on Fantasy Bankruptcy again

Bankruptcy Bill and his pal Struck Finn continue their fantasy-football-applied-to-bankruptcy conversation.

Note: This cartoon is posted on the NYBankruptcyNet site with the express permission of the creators of BAPCPA Man.

Click here to see a larger version of the image.

If you’re facing bankruptcy issues, have questions about bankruptcy or are considering filing for bankruptcy in New York, please contact me for a free initial consultation.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Defenses to Preference Actions – Part 1

In previous posts on this site (What is a Preference?  And why should you care? and Preference Actions:  How to Defend Against Them), I’ve addressed the topic of preference actions (also commonly referred to as preference lawsuits).

If you read those two posts, then you know that, from a creditor’s perspective:

1. Preference actions seem unfair at first, but they’re fully legitimate under the bankruptcy laws and they’re a reality that you have to deal with; and
2. There are things you can do in preparation for defending yourself, and they require a fair amount of effort and thought.

However, you can take some comfort in knowing that there are some very legitimate defenses to preference actions against you.  The three most common defenses are:

1. “Ordinary Course of Business” Defense
2. Contemporaneous Exchange Exception
3. New Value Defense
   

If you’re faced with a preference action, you don’t have to know all the legal nitty gritty or all the case law.  (That’s my job.)  But you may find it helpful to be aware that these defenses exist and also be familiar with the basic concept of each defense so you can gauge whether you think you have a case worth fighting.

We’ll cover each of these defenses in ensuing posts on this blog.

In the meantime, if you’re facing a preference action or preference lawsuit by a trustee in New York, please feel free to contact me for a free initial consultation.  I’ll be happy to answer all of your questions about bankruptcy, trustees and of course preference actions and help you figure out the best strategy for protecting your assets.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

http://sendables.jibjab.com/view/iMBjXuKayYap6fb4

Foreclosure increase + jobless recovery = Trouble

You may have noticed a couple pieces of bad news circulating in the media the last few days.

One is that foreclosures have continued to climb, according to the quarterly statistics put out by RealityTrac.  Why the increase?  Apparently banks have been delaying a lot of foreclosures as they’ve tried to implement the federal foreclosure program.  Another likely reason is that a growing number of adjustable rate mortgages (ARMs) are starting to kick in and make it impossible for those homeowners to keep up with mortgage payments.

And yet another reason is the increasing rate of unemployment.  Not only are people losing their jobs, but the alleged economic “recovery” is not doing a great job of creating new jobs.

The co-existence of these two trends is, of course, very troubling.  The greater the rate of foreclosures, the bigger a toll it will take on the economy.  And that of course likely means more bad news on the employment front in the near future.

What’s the solution?  A moratorium on foreclosures for those who have lost their jobs has been suggested by James H. Carr, the Chief Operation Officer for the National Community Reinvestment Coalition.  “We do need to think more carefully about a bridge so people aren’t being kicked out of their homes as they are looking for employment,” Carr said in a recent Washington Post article.

Whether this is likely to happen is another matter.  According to the same article, the Mortgage Bankers Association says the mortgage industry is meeting over the next month to discuss solutions.  Though of course the mortgage industry at this point has a much better reputation for creating problems than solving them.

In the meantime, if you’re a New Yorker facing bankruptcy, foreclosure or other financial struggle due to job loss, or you’re worried about losing your job and want to understand your bankruptcy and non-bankruptcy options, please feel free to contact me for a free initial consultation where you can get all of your questions answered.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

BAPCPA Man introduces you to Chapter 7 and Chapter 13

BAPCPA Man races under avalanches and leaps across crocodile-infested rivers to introduce you to the concepts of Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Note: This cartoon is posted on the NYBankruptcyNet site with the express permission of the creators of BAPCPA Man.

Click here to see a larger version of the image.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Bankruptcy Bill and fantasy football…er, bankruptcy

Bankruptcy Bill reveals how big firm bankruptcy lawyers employ the fantasy football concept for their own entertainment.

Note: This cartoon is posted on NYBankruptcyNet with permission from the creators of  Bankruptcy Bill.

Click here to see larger version of image.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Lenny liquidated in 11?

An extra $56K, thanks to Bill Buckner.

You may have seen recent reports that Lenny Dykstra’s World Series ring was sold at auction to a Queens man for $56,000.

And if you’ve been following the travails of Lenny Dykstra, or you’ve been reading previous posts on this blog (e.g., “Why Did Lenny Dykstra File for Chapter 11?” or “Dykstra Learns More About Chapter 11 as Trustee Appointed in the Case“), then you know that Mr. Dykstra is currently going through a Chapter 11 bankruptcy.

So where did this auction come from?  Was it part of the Chapter 11 bankruptcy process?

In this case, the answer is no.  Dykstra actually sold the World Series Ring along with other baseball-related possessions to a pawn broker earlier this year prior to his bankruptcy filing.  According to the article on Gothamist, he was even apparently hoping to bid on the items himself.

That said, Chapter 11 bankruptcy does have an auction process for sale of assets, which can involve complex bidding procedures, especially in the case of a large corporate debtor entity.  And a trustee, like the one appointed in the Dykstra case, can use an auction to try and maximize the value of assets.  But that’s not the situation in Dykstra’s case.

And meanwhile, since we’re on the topic of liquidating assets, it’s worth noting that while Chapter 7 cases are often referred to as “liquidations” (a term that frightens many people contemplating bankruptcy), many debtors do not in fact have their assets liquidated.  That’s because enough of their assets are protected by the statutory exemptions that there are no assets that can be liquidated.

If you have questions about filing for bankruptcy in New York, about Chapter 7, Chapter 11 and Chapter 13 bankruptcy, as well as about exemptions and anything else related to bankruptcy in New York, please feel free to contact me for a free initial consultation and I’ll be happy to answer all of your questions and help figure out the best strategy for you.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Are any debts non-dischargeable in a bankruptcy case in New York?

The goal of a bankruptcy case is to get the discharge.  This is true whether your bankruptcy is in Brooklyn, Queens, Manhattan, Long Island or anywhere else in New York or the rest of the U.S.  And it’s the same whether it’s a Chapter 7, Chapter 11 or Chapter 13 bankruptcy.

The discharge is what gives you the “clean slate” or the “fresh start.”  It means you are no longer obligated to pay the unpaid portion of unsecured debts such as credit card debt, and that those creditors are no longer permitted to seek payment from you.

However, there are also certain types of debts that are “non-dischargeable.”  That is, you still have to pay them in full even after your bankruptcy case is complete.  Here’s a list of some of those non-dischargeable debts:

1. Any debts that you failed to include on your list of debts for your bankruptcy filing.

2. Debts resulting from criminal activity (e.g., fines levied by the court) as well as debts resulting from death or injury caused intentionally by you or caused while under the influence of drugs or alcohol.

3. Student Loans.  There’s been discussion in Congress (as I noted in a recent post) of a more lenient standard for discharging student loans.  But until you hear otherwise, you still have to pay them back regardless of any bankruptcy filing.  The only exception is “undue hardship,” with heavy emphasis on hardship.

4. Tax liabilities incurred within the previous 3 years.  And that goes for federal, state and municipal taxes.

5. Debts that were fraudulently incurred.  The classic example is where you max out your credit cards prior to a bankruptcy filing (which I discussed in a previous post) under the mistaken belief that you’ll be able to just wipe away all of that debt once you file.  Fraudulent debts also include any debts you incurred where you lied or misrepresented yourself, e.g., to get a loan, as well as any attempt to pay off taxes (non-dischargeable debt) with a credit card (which would otherwise normally be considered dischargeable debt).

6. Alimony and court-ordered child support.

7. Secured debt, i.e., your mortgage, your car or debt incurred that is backed by collateral.  Technically, these are dischargeable, but you can’t discharge the lien or security interest the creditor has in the collateral.  (“Debts are dischargeable, but liens survive.”)  So for all intent and purpose, you need to pay these back in full or the secured creditor has the right to the collateral (e.g., the house or car) via the bankruptcy process.

On this topic, it’s worth noting that there has been discussion in Congress on a “mortgage cramdown bill” that would, if passed, empower a bankruptcy judge to change the terms of the loan or reduce the principle of the loan as part of the bankruptcy process.  As with student loans, however, until you hear otherwise, assume that mortgages must be paid in full and cannot be discharged in a bankruptcy case.

To learn more about the bankruptcy process, please feel free to contact me for a free initial consultation.  You can get all of your questions answered about what you can keep and what you can’t as well as which of Chapter 7, Chapter 11 or Chapter 13 would be the right option for you.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.