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Means Test Income - Are Voluntary IRA Withdrawals Included in “Current Monthly Income?”

1/29/2020

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Part 1 - Case Law

Author: 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.”
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          ​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.

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New Bankruptcy Law to Make Small Business Chapter 11 Less                            Complicated And More Affordable

1/22/2020

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Author: Andrew M. Thaler

The 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.
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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. 

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Matrimonial Attorney Violates Automatic Stay Despite State Court Having Held No Such Violation Occurred in Contempt Sentencing Hearing.

1/8/2020

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Author: Andrew M. Thaler

The 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.
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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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Workers’ Compensation Awards and Chapter 7 Bankruptcy: Is it Exempt From Creditors?

12/4/2019

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Author: Andrew M. Thaler
              Spiros Avramidis

         As discussed in prior articles, it is imperative that debtors consult with an experienced bankruptcy attorney to receive accurate advice on what property is protected from creditors.  One tricky area that occasionally arises is whether workers’ compensation benefits are exempt. The answer: it depends.

​         The starting point of any exemption analysis is whether a debtor is utilizing the exemption scheme available under either Federal law or New York law. The applicable statute under Federal law is 11 U.S.C. § 522(d)(10), which provides that “[t]he following property may be exempted … (10) The debtor's right to receive … (C) a disability, illness, or unemployment benefit.”[1] While the applicable New York statute is Debtor & Creditor Law § 282(2)(e), which provides as exempt “[t]he debtor's right to receive or the debtor's interest in: … (c) a disability, illness, or unemployment benefit.”[2]

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What do you mean my lien doesn't pass through in a confirmed Chapter 11?

1/22/2016

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Author: Spiros Avramidis

The Second Circuit held that a confirmed Chapter 11 plan can extinguish a lien if "(1) the text of the plan does not preserve the lien; (2) the plan is confirmed; (3) the property subject to the lien is 'dealt with' by the terms of the plan; and (4) the lienholder participated in the bankruptcy proceedings." In re Northern New England Telephone Operations LLC, 795 F.3d 343, 345 (2d Cir. 2015).         

To some, this holding may seem contrary to the general rule that "liens pass through bankruptcy unaffected." Dewsnup v. Timm,  502 U.S. 410, 417 (1992). However, the Court found a caveat to this general rule in 11 U.S.C.  § 1141(c), which states: "[e]xcept as provided in subsections (d)(2) and (d)(3) of this section and except as otherwise provided in the plan or in the order confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the debtor."

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