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Authors: Andrew M. Thaler & Spiros AvramidisThe Coronavirus pandemic has and will continue to cause financial hardship for many individuals and businesses in the weeks and months ahead. The Coronavirus Aid, Relief and Economic Security Act known as the “CARES Act”, which was recently passed into law by Congress, provides financially distressed consumers and small businesses greater access to bankruptcy relief. Major takeaways from the CARES Act include:
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Author: Andrew M. ThalerFaced with a problem, the stress of not knowing what to do can be debilitating and result in procrastination and indecision. In the world of debt, knowledge is power. An understanding of debtor and creditor rights enables one to not only know what is likely to happen in the future but to take proactive measures to alter, to your benefit, what might otherwise happen if nothing is done. Developing a strategy to tackle worrying debt can lead to a fresh start, and financial stability. On the other hand, putting one’s head in the sand is usually a poor option because doing nothing leaves everything to chance.
The first step is to identify that there is a problem. The second step is to deal with the problem head on by getting proper and timely advice on how to solve the problem. Unfortunately many people wait too long, or never seek the advice they need in order to make good life choices. As they say, an ounce of prevention is worth a pound of cure. This is the first in a series of articles that illustrate how having pertinent knowledge can drastically affect the outcome. Part 1 - Case LawAuthor: Spiros Avramidis In determining a potential debtor’s ability to qualify as a debtor under Chapter 7, a debtor must pass the “means” test, which is primarily a calculation of the debtor’s “current monthly income” minus allowable expenses. Therefore, correctly calculating a debtor’s “currently monthly income” is vital in passing the means test. Importantly, a debtor’s “current monthly income” will also affect the calculation of “disposable income” under a Chapter 13 because the definition of “disposable income” specifically references “current monthly income.”
An interesting question that arises when determining a debtor’s “current monthly income” is whether a voluntary withdrawal from an individual retirement account (“IRA”) within the applicable six-month period is included in “current monthly income.” The unfortunate answer is: it depends on the jurisdiction. Author: Andrew M. ThalerThe Small Business Reorganization Act of 2019 will take effect on February 22, 2020. The new law permits a small business debtor (“SBD”) to reorganize under what is known as Subchapter V of chapter 11.
A person or entity engaged in commercial or business activity with aggregate secured and unsecured debts of $2,725,625 can qualify to be a SBD (The new law does not count contingent and unliquidated debtor in calculating total debts such as unresolved tort claims and guarantees). More than 50 percent of its debts must arise from such activities. “Single Asset Real Estate” cases are excluded from eligibility. Author: Andrew M. ThalerThe Bankruptcy Code provides for the imposition of an “automatic stay” of the commencement or continuation of actions against the debtor that were or could have been commenced before the bankruptcy filing or to recover pre-petition claims against the debtor unless an exception applies.
In a recently decided case, the Debtor was embroiled in state court divorce proceedings. Debtor was found to be in willful violation of the state court’s pre-petition order. The state court scheduled a contempt sentencing hearing which took place after the debtor filed bankruptcy. The state court found that the automatic stay did not apply to the hearing and ordered the immediate incarceration of the Debtor for 90 days or until such time as he paid $20,000 to Debtor wife’s attorney for attorneys’ fees incurred in connection with the divorce that had been reduced to judgment pre-petition. |
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