Transfers Of Assets While Insolvent Considered Fraudulent-Image via Wikipedia

In a recent reversal of a bankruptcy judge’s decision on what he defined as “fraudulent transfers” the bankruptcy court found that judge was in error.

In October 2009 Judge John K. Olson of the U.S. Bankruptcy Court for the Southern District of Florida ruled that the payment to the lenders, which came from $500 million Tousa Inc. and its subsidiaries borrowed in July 2007, were fraudulent transfers made while the company was insolvent.

But U.S. District Judge Alan S. Gold of the U.S. District Court for the Southern District of New York reversed that decision on appeal by the lenders in an opinion that criticizes Judge Olson for making legally and factually unsupportable conclusions.

In particular, Judge Gold made repeated reference to Judge Olson’s having adopted in whole or in part 446 of the 448 proposed findings of fact and conclusions of law submitted by the debtors’ unsecured creditors.

Judge Gold said the practice of adopting one party’s proposed order almost verbatim “has been heavily criticized and discouraged by the U.S. Supreme Court and by the 11th Circuit.”

But what is a fraudulent transfer and why had the bankruptcy judge ordered the return of the money in the first place?  Well, the argument in this particular bankruptcy case was that Tousa (the debtor) was already insolvent and knew they were insolvent when they took out the loan and used it to make payments to their other lenders.  That is the key argument in why the transfers were designated as fraudulent.  If we were looking at a personal bankruptcy it would be the equivalent to a debtor taking out an unsecured personal loan to pay their mortgage without any intention of repaying that personal loan.  If the debtor then filed bankruptcy and attempted to discharge the personal loan, the lender could challenge the discharge and/or demand that the payments be returned if they could prove it was a fraudulent transfer and that the debtor was insolvent at the time they took out the loan and made the payments to the other lender.

(source: http://westlawnews.thomson.com/Bankruptcy/Insight/2011/03_-_March/Bankrupt_homebuilder%E2%80%99s_lenders_win_reversal_of_$400_million_award/)

Four Reasons Why Filing Pro Se In Bankruptcy Could Be Costly-Image by Nemo's great uncle via Flickr

As the recession drags on and more debtors turn to bankruptcy for help, many businesses are propping up offering bankruptcy “services” such as online “advice” and forms.  Some are suggesting that debtors skip the expense of working with a bankruptcy attorney and do a DIY bankruptcy filing Pro Se.  However, what they fail to mention that while these pro se debtors may save money in the short-term, the long-term costs of filing bankruptcy without a bankruptcy attorney can be costly. Let’s take a look at how a pro se bankruptcy filing could cost you:

1. Filing bankruptcy has always required the expertise of a professional but after the 2005 bankruptcy reform laws were passed, the process became even more complex.  Just filing the paperwork for bankruptcy is very involved and one mistake could put a debtor at risk for losing their automatic stay protection.
2. Creditors who are looking to squeeze every dime they can out of bankruptcy debtors see pro se filers as easy pickings.  A debtor without a bankruptcy attorney is more likely to have their bankruptcy case and discharge challenged.
3. Bankruptcy law is complex and often changes.  Different rulings by different judges could impact the debtor’s bankruptcy case in a way they cannot foresee unless they constantly stay on top of bankruptcy trends. This lack of knowledge increases the chances of a debtor’s bankruptcy case being dismissed due to debtor mistakes.
4. The bankruptcy trustee will not take responsibility for educating a pro se debtor.  The bankruptcy trustee is there to protect the interests of the creditors and the bankruptcy estate.  For example, if the debtor fails to claim an exemption, the trustee won’t remind them. Pro se debtors have no advocates when they step into bankruptcy without an attorney.

(source: http://www.mortgage11.com/2011/02/filing-bankruptcy-online-with-totally-free-bankruptcy-legal-advice/)

1. A debtor can expect that their bankruptcy attorney will take the time to explain the bankruptcy process to them before their file. 
2. The bankruptcy attorney should also be upfront about any fees associated with their service.
3. The bankruptcy attorney will make sure that he/she has told the debtor exactly what they need to include in their bankruptcy filing.
4. The bankruptcy attorney will do their due diligence to file the bankruptcy accurately and in a timely fashion.
5. The bankruptcy attorney will represent the debtor in full for the bankruptcy case.  If they are filing a Chapter 7 bankruptcy, the attorney will represent the debtor at the meeting of the creditors, file a certificate of post-petition debtor education and do other necessary things in their case all the way until the debtor’s bankruptcy discharge.
6. If the debtor is filing Chapter 13 bankruptcy, the bankruptcy attorney will represent the debtor throughout the life of their bankruptcy plan.  The bankruptcy attorney will be available to make any necessary changes to the plan.  For example, if the debtor needs to reduce or increase the bankruptcy payments, the bankruptcy attorney will be available to help them through that process.
7. The bankruptcy attorney will be available to defend the debtor if there are adversary proceedings in their bankruptcy case.
8. The bankruptcy attorney will be upfront about any limits to their service or representation.

1. If the nonpaying spouse files bankruptcy the bankruptcy trustee will take a look at the house and other assets to find out if he/she can sell them to pay creditors. If there is no equity in the house, then the bankruptcy trustee won’t sell the house; but the mortgage will still need to be paid.  And the only way that the debtor in bankruptcy can be legally relieved of their obligation to pay is to surrender the house to the lender in bankruptcy.  If this happens, the mortgage lender will sell the house in foreclosure.  However, if the full amount of the mortgage is not covered by the sale of the home, the lender will go after the assets of the spouse who is not in bankruptcy.  In the end the non-filing spouse could end up with no house and a large bill to pay after their spouse files bankruptcy.
2. If the nonpaying spouse files bankruptcy and there is equity in the home, the bankruptcy trustee will try to sell it and pay creditors with the filing-spouses’ share of the equity.  The non-filing spouse’s equity share will be paid to them.  But as the housing market is still depressed the payment the non-filing spouse receives may be smaller than it would have been if they had sold the house during a recovery.

The ideal solution is for the divorced couple to amicably resolve the issue with the house.  Working with a divorce and bankruptcy attorney might help them resolve the issue.

Many people get into financial trouble because they fail to make the distinction between a want and a need.  Bankruptcy is a valuable tool for getting your financial health back in order.    If you are successfully discharged from a bankruptcy, remember the choices and events that lead to your bankruptcy… so that you don’t relapse financially.  Just because credit card companies are advertising that “consumers are ready spend,” doesn’t mean that you should.  Medical expenses and credit card debt are two of the main debt obligations that lead to financial distress.  Many times you can’t control medical expenses, but you do have more options when it comes to controlling your credit card.

If you are already struggling with debt, the general message of using your cards wisely is even more important.  As the economy struggles to rebound, many people are having the same trouble rebounding from their high credit card bills.  Depending on the types of debt obligations you have, you can work out effective repayment or discharge plans through bankruptcy.  A bankruptcy attorney can review the different options with you to see which type of bankruptcy best fits your situation.   Instead of racking up more debt this holiday season, considering giving yourself the gift of relief by getting your debt under control.

The book says:

“Bills’ bankruptcy documents showed that his monthly income exceeded expenses by $500.  As a result, the United States Trustee charged that his Chapter 7 case needed to be dismissed because he could repay a significant amount of his debts.  Bill then discovered that he’d underestimated some of his expenses and that actually he was barely making ends meet.  Uh-oh!  Although Bill amended his schedules, the court was skeptical because it looked like Bill had cooked up these additional expenses just to avoid having his case dismissed.”

As you can see, mistakes can be made, and they can be costly.  It would have served Bill well to hire a bankruptcy attorney that deals with these situations on a daily basis.  Bankruptcy is a great tool for people to get a second chance with their financial life, so make sure you are doing the right thing by having a bankruptcy attorney on your side.

Additionally, another lesson can be learned from this too.  Once you pick a bankruptcy attorney, make sure that you tell them everything about your financial life.  You can’t afford to hold back or sugar coat anything.  You must be honest and open about every detail.  This will allow the attorney to decide what the right choice for your situation is.

At any rate, if you are considering bankruptcy, take the time to contact a bankruptcy attorney.  There isn’t any obligation, and it could save you a lot of money and headaches.  You don’t want to make the same mistakes Bill did.

If you are familiar at all with bankruptcy you will know that significant changes were made to United States bankruptcy laws in 2005.  One of the most noteworthy changes was in regards to means testing.  Wikipedia described the amendments by saying, “The amendments effectively subject most debtors who make above an income, as calculated by the Code, above the debtor’s state’s median income to an income based test.  This test is referred to as the means test.  The means test provides for a finding of abuse if the debtor’s income is higher than a specified portion of their debts.  If a presumption of abuse is found under the means test, it may only be rebutted in the case of special circumstances.  Debtors whose income is below the state’s median income are not subject to the means test.”

If you’re in a rough financial situation, don’t fear because the means test is generous in regards to which bankruptcy you qualify for.  Almost everyone seeking bankruptcy qualifies under the means test.  Anyway, the rules regarding the test are confusing to a newbie, so it would be best to speak with a bankruptcy attorney for help.  You can also use a means test calculator to help you determine if you qualify, but it won’t include all the details that you will need.

If you are struggling under the weight of mounting debts, bankruptcy can be your second chance.  Contact a great bankruptcy attorney.

The article said of Dubai’s recent fall, “That renaissance has now ground to a virtual standstill, thanks to the same negative economic circumstances that have dragged down just about every other economy.  Foreigners are no longer swept up by the glitzy promise of Dubai.  An estimated 1,500 visas are being canceled each day in the city, and the total population is expected to decline by 8% this year by some estimates.”

As a reason for the population decline, the article went on to say, “Weakness in Dubai’s financial sector led to thousands of layoffs, which led to thousands of mortgage and loan defaults.  However, unlike the United States, defaulting in the Emirates is a crime, almost always leading to prison time.  It’s no wonder, then, that the suddenly unemployed tend to flee the country.  According to numerous published reports, approximately 3,000 cars that once belonged to foreign residents are now sitting abandoned at Dubai’s airport gathering dust, the Pompeii-like remnants of lives interrupted.”

Anyway, it is interesting how different things can be in other countries.  Hearing the stories of these unfortunate people losing their jobs can truly make you feel lucky.  In the United States there are long standing laws that give debtors and the unfortunate second chances.  It is proven that giving people second chances with their finances benefits everyone the most in the end.

If you are struggling financially, be thankful that you live in the United States, and then use the tools that are provided to you to get your second chance.  There is no better person to help you than a bankruptcy attorney, so contact one today.  You will be able to setup favorable repayment plans, or you can have debts completely wiped out.

Amendments to the Bankruptcy Code in 2005 placed limits on the duration of the automatic stay for those who are repeat filers: debtors with a prior case pending in the last year that was dismissed get a stay of 30 days; debtors with two or more cases pending in the past year but dismissed get no stay at all.  In these situations, the automatic stay isn’t automatic at all–the debtor must request a stay from the court in order to get that protection.

The following acts are prohibited under the automatic stay:

* Beginning or continuing law suits;

* Collection calls;

* Repossessions;

* Foreclosure sales; and

* Garnishment or levies;

The automatic stay will remain in effect until:

* A judge lifts the stay at the request of a creditor;

* The debtor gets a discharge; or

* The item of property is no longer property of the estate.

Once the debtor’s bankruptcy is discharged, the automatic stay is replaced by a permanent injunction prohibiting creditors from all of those actions relating to discharged pre-petition debts that the automatic stay previously prohibited.

The automatic stay is not a “get out of jail free” card and will not stop the following:

* Criminal proceedings;

* Actions for a family support order or the modification of such order; or

* Actions to collect support from property that is not property of the estate

* Tax audit, demand for tax returns or assessment of tax (actual collection of tax is still stayed).

Those who willfully violate the stay can be held liable for actual damages caused by the violation and sometimes for punitive damages.  Courts can confine the right to damages to individual debtors and deny damages for stay violations as to corporate debtors in certain cases.  Since courts typically take several days or even weeks to mail creditors notice of the bankruptcy, the debtor or debtor’s counsel absolutely should give actual notice of the automatic stay to creditors to make sure they do not take any actions in the meantime.   Most creditor actions taken after the stay is in place are considered void or voidable, meaning any action the creditor takes in violation of the stay will have no legal effect on the debtor.

Since bankruptcy is such a complex proceeding, consumers may wish to consider consulting an experienced bankruptcy lawyer in order to discuss the ins and outs of bankruptcy protection and the automatic stay as pertains to their specific cases.

There are three basic times of bankruptcy businesses can file.  Sole proprietorships exist as legal extensions of their owners.  Thus, the owner is responsible for all assets and liabilities of the company.  These types of companies are eligible to file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy protection.  Corporations and partnerships, on the other hand, exist as separate legal entities and their owners are not personally liable for company assets and liabilities.  These types of companies can file for either Chapter 7 or Chapter 11 bankruptcy.

Chapter 7 bankruptcy is typically the best choice in situations where you know the business just isn’t going to make it out of bankruptcy intact.  Usually referred to as liquidation, most companies only use this form of bankruptcy when the business debts are just so overwhelming that there is no feasible way to restructure the finances.  Chapter 7 is also a good idea in cases where the business lacks any substantial assets.  For instance, if the company is really just an extension of the owner’s skills or services, it usually isn’t worth it to reorganize so Chapter 7 just makes the most sense.

How does Chapter 7 bankruptcy protection work?  Simply enough.  The court appoints a trustee to oversee the distribution of the assets among the creditors.  Typically this involves selling off eligible assets and then paying as much as possible to the creditors.  However the trustee distributes the business assets, once they’re all divvied up and the trustee is paid, the business receives a “discharge” and the bankruptcy proceedings come to an end.  At that point, the business owner is releases from all obligations relating to those debts.  Partnerships and corporations, however, do not receive a discharge.

Chapter 11 is more appropriate for businesses that just need some breathing room to get things back on financial track.  Under Chapter 11 bankruptcy, the company is reorganized under a court-appointed trustee and remains in operation throughout.  The business files a reorganization plan detailing how it plans to handle its debts.  Creditors get the opportunity to vote on the plan.  Should the court find that the plan is fair and equitable, the plan will be approved.  Reorganization plans provide for payments to be made to creditors over a period of time which may exceed twenty years.  This type of bankruptcy protection is fairly complex and not always successful.

Chapter 13 bankruptcy is also a form of reorganization bankruptcy, although it is usually reserved for consumers.  Sole proprietorships can also take advantage of this type of protection.  You file a repayment plan with the bankruptcy court setting out how you plan to repay your debts.  The amount you’ll be required to repay depends upon how much you earn, the amount of your liabilities, as well as the value of your assets.  In situations where your personal assets are involved with your business assets–such as with sole proprietorships–you may be better able to avoid losing your home if you file Chapter 13 bankruptcy rather than Chapter 7.

The first step to take if you think you may need to file for small business bankruptcy is to find a good, reputable bankruptcy attorney with a proven track record to consult with.  Many of them offer free consultations and can advise you on whether it’s a worthwhile course for you to pursue.