I am on the Chapter 11 Advisory Committee for the Bankruptcy Court for the Eastern District of New York, a committee comprised of Bankruptcy Judges in the District and experienced bankruptcy practitioners. At a recent meeting there was a discussion of bankruptcy filings in the Eastern District and National trends. Despite the fact that many individuals and businesses are in financial distress, it has been somewhat counterintuitive to my non-bankruptcy lawyer colleagues, friends and acquaintances to comprehend that bankruptcy has been on the decline and that business for bankruptcy lawyers has been extremely slow.
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Author: Andrew M. Thaler Chapter 11 reorganization allows the debtor to reject undesirable leases. If the debtor opts to reject the lease, the landlord is left with a breach of contract claim. In most instances rejection claims against the bankruptcy estate will be for less than the remaining rents under the lease as the claim is capped pursuant to the bankruptcy code.
Alternatively, the debtor can elect to assume the lease. Assumption requires the debtor to cure all prepetition defaults, including payment of all past due rents, on assumption. The debtor has 120 days, which can in certain circumstances be extended another 90 days, to assume or reject the lease. During the time debtor decides to assume or reject the lease, all post-petition obligations, including payment of rent must be paid. The court may “for cause” extend the time for performance of any post-petition rent, for up to an additional 60 days. Author: Andrew M. Thaler The filing of bankruptcy operates as an automatic stay of the enforcement of a judgment against the debtor or property of the estate, the commencement or continuation of litigation against the debtor, the taking of possession or control of property of the estate, and more. Creditors are often placed in a position of not knowing what to do when they learn that a debtor has filed bankruptcy. Some common scenarios are where, prior to bankruptcy, (i) a creditor seized the debtor’s vehicle, (ii) the Sheriff garnished and is holding debtor’s wages, or (iii) creditor’s counsel engaged in litigation have pending outstanding interrogatories, subpoenas, motions or other court hearings.
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. |
AuthorsThis blog is maintained by: Spiros Avramidis
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