Monthly Archives: September 2021

The federal bankruptcy law is designed to provide people going through a tough financial time with an opportunity for a fresh start.

To help you determine if you need a fresh start, you can use our Credit Card Debt Calculator to determine how long it will take to pay off your credit cards if you do nothing.

There are many reasons why people file for bankruptcy relief. Often, it is because of a loss of income due to losing a job or even just a decrease in income that prevents the person from paying all of their bills.

Another life event that may cause someone to file for bankruptcy relief is a medical emergency or prolonged illness that results in massive medical costs that are not covered by insurance. Even the death of a spouse can create a financial crisis where the only alternative is to file for bankruptcy protection. It could even be that someone has made very poor financial decisions in the past and have over-extended himself or herself to the point where it is now impossible to meet all of their financial obligations given their current income.

The bottom line is that people file for bankruptcy relief because some type of life event or circumstance has caused them to be unable to continue paying for their basic living expenses in addition to paying their bills.

The ultimate goal in filing for relief under either Chapter 7 or Chapter 13 bankruptcy is a discharge of your debts.

If you qualify to file for a Chapter 7 bankruptcy case, you will receive a complete discharge of most of, in not all, of your unsecured debts when the case is completed. This means that once the bankruptcy case is closed, you will no longer be legally responsible for the payment of the debts that are discharged through the bankruptcy case.

The automatic stay provisions of Section 362 of the U.S. Bankruptcy Code prevent creditors from attempting to collect any debt that is discharged through a Chapter 7 bankruptcy action. This includes collection actions, wage garnishments, judgments and seizure of property.

If you file a Chapter 13 you will create a 3 to 5 year repayment plan. At the end of the successful competition of your plan your debts will be discharged.

The advantage of a Chapter 13 plan is that it may allow to keep your home or other property on which you are behind in payments or which are not covered by your exemptions. You will also enjoy the protections of the automatic stay when you file a Chapter 13 bankruptcy.

The property a debtor can keep through the bankruptcy is determined by the specific exemptions available under state law. Bankruptcy Information allows you to search for state exemptions. In addition, residents of certain states are allowed to choose federal exemptions instead of state exemptions.

Before deciding upon the appropriate course of action you may wish to explore somealternatives to bankruptcy and review thefrequently asked questionssection of the site in order to gain a better understanding of the bankruptcy process.

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BankruptcyInformation.com - Personal Bankruptcy Information

It comes to us from a July 2021 North Carolina district court decision reversing a $115,000 sanctions order by a North Carolina bankruptcy court. The story offers a lesson and a moral. The lesson is that the bankruptcy court cannot sanction a creditor if there is an objectively reasonable basis for concluding that the creditors conduct is lawful. The moral of the story is that a creditor can avoid the time, expense, and risk associated with litigating contempt and sanctions issues by taking basic steps to ensure that confirmed Chapter 11 plans are clear and precise.

In 2009, the Beckharts filed Chapter 11. At the time, they were almost a year behind on a loan secured by the property at Kure Beach. The loan servicer objected to a plan confirmation because it did not specify how post-petition mortgage payments would be applied to principal and interest. The bankruptcy court confirmed the plan without clarifying the issue, but the servicer did not ask the court to reconsider its order nor did it appeal.

The Beckharts paid for five years. Shellpoint acquired the loan from the original servicer and treated it as in default based on unpaid accrued arrearages. Periodically, Shellpoint sent default letters to the Beckharts, who disputed the default. Counsel for Shellpoint advised that the confirmation order had not changed the loan contract terms and that the loan remained in default. The matter escalated with the Beckharts filing complaints with the Consumer Financial Protection Bureau. Shellpoint commenced foreclosure, then represented to the Beckharts it was ceasing foreclosure, but then posted a foreclosure hearing notice on the Beckharts' door (allegedly due to error).

In January 2020, the Beckharts moved the bankruptcy court to find Shellpoint in contempt and award them monetary sanctions. The court held a hearing in June and, in September 2020, found Shellpoint in contempt. The court tagged Shellpoint with $115,000 in sanctions for lost wages, "loss of a fresh start," attorney's fees, and travel expenses.

Bankruptcy courts have the power to hold a party in civil contempt and to impose sanctions for violation of a confirmed plan. The test for liability is based on a recent United States Supreme Court decision -- Taggart v. Lorenzen. (To read our discussion of Taggart, click here.) The Taggart test prohibits sanctions if there was an objectively reasonable basis for concluding that the creditors conduct might be lawful. There can be contempt for violating the discharge injunction only if there is no fair ground of doubt as to whether the order barred the creditors conduct.

In reversing the bankruptcy court, the district court noted that the plan and confirmation order did not state how much the debtors would owe on confirmation, did not say how the $23,000 in arrears would be paid, and did not set the amount of the first payment. Confusingly, the confirmation order also said that the original loan terms would remain in effect, except as modified. Finally, the district court pointed out that Shellpoint was repeatedly advised by counsel that their behavior was authorized, and reliance on the advice of outside counsel is a sufficient defense to civil sanctions. Based on all these facts, the district court found that Shellpoint acted in good faith and interpreted the confirmation order in a manner consistent with the contractual terms of the loan, and that was objectively reasonable.

Creditors can take some comfort in the "no fair ground of doubt" test, which is more forgiving than a strict liability standard. Creditors can also solicit and act on the advice of counsel before engaging in perilous conduct, which provides another layer of protection. But the most important takeaway is the self-evident principle that creditors should insist on clear and specific plan terms. Shellpoint ultimately prevailed and avoided sanctions, but only after over 18 months of litigation. All of that could have been avoided had the loan servicer insisted the plan specify how the Beckharts' payments would be applied to satisfy the arrearage.

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Use Clarity to Avoid Contempt in Bankruptcy | Ward and Smith, PA - JDSupra - JD Supra

A LONG LEGAL chapter in Americas opioid epidemic, which continues to kill tens of thousands of people a year, at last came to an end on September 1st when a federal judge in New York approved the bankruptcy plan of Purdue Pharma, which developed and manufactured OxyContin, a highly addictive painkiller. The deal settled thousands of lawsuits against the firm filed by states, localities, tribes and individuals. Purdue will be reorganised as a public-benefit company called Knoa Pharma, and its future profits will go towards alleviating the damage done by opioid addiction. Members of the Sackler family, who own Purdue, will relinquish control of the firm and contribute $4.5bn to the settlement. But nine states and Washington, DC, opposed the final deal and some will appeal against it. Their objections stem from a legal arrangement shielding parties associated with bankrupt companies from liability. Many people want it changed.

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Bankruptcy comes with costs and benefits. The debtor must disclose all assets, which are distributed to creditors. But in return the debtorin this case Purdueis freed of legal liability. As a condition of their participation in the deal, the Sacklers sought and won immunity from civil lawsuits related to the opioid epidemic, without declaring bankruptcy themselves. The arrangement is known as a non-debtor release from liability (or a third-party release). It originated in the 1980s to protect insurers in bankruptcies arising from asbestos liability, and was codified by Congress as a protection in those cases. As a result of the settlement, the Sacklers (not all of whom were involved in the management of the company) will not relinquish most of their fortune, estimated at $11bn. Richard Sackler, Purdues former president and chairman, last month told a court that neither he nor his family nor the company is responsible for Americas opioid crisis.

Last year five members of the family paid $225m to settle civil charges brought by the federal government that they sold OxyContin while knowing it to be unsafe, ineffective and medically unnecessary. Lots of states and individuals would probably file similar suits if they could. But non-debtor release means that will no longer be possible, since the terms apply to all parties with a claim against the Sacklers, even if they did not participate in the deal or assent to it. Only a fraction of those who used OxyContin have filed claims related to their use of the drug: about 130,000. But the number of OxyContin usersall of whom were potential claimantsis probably at least ten times that, estimates Adam Levitin of Georgetown University Law Centre. They will get no piece of the settlement and no opportunity to sue the Sacklers for opioid-related claims.

The use of a non-debtor release has also been mooted in the reorganisation of two groups that filed for bankruptcy amid child-abuse lawsuits, the Boy Scouts of America and USA Gymnastics. For defendants in sprawling litigation, moving to a bankruptcy court and securing a non-debtor release is appealing: it binds absent parties, foreclosing future claims from victims who have not yet come forward. Some Democrats want to ban the arrangement, which they say has been expanded beyond its original intent. In July a group of senators, including Elizabeth Warren of Massachusetts, introduced a bill to close what they call a loophole used by bad actors.

In the case of Purdue, the settlement does at least mean that money will be disbursed. But those who had hoped the family would have to pay more will be disappointed. The Sacklers negotiated how much money they would turn over, and its as little as they thought they could get away with, says Lindsey Simon of the University of Georgia. The settlement will probably survive an appeal, bringing an unsatisfying legal resolution to a long chapter of a painful public-health crisis. For many, alas, the pain continues.

This article appeared in the United States section of the print edition under the headline "Released"

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How asbestos saved the Sackler family from bankruptcy - The Economist

What game is Sen. Joe Manchin playing? A week after calling to hit the pause button on Democrats bid for $3.5 trillion in new social spending, hes reportedly saying he might be OK with up to $1.5 trillion.

This is on top of the $1.2 trillion infrastructure bill that is largely his baby, now awaiting House approval.

Even cut down, this splurge would still hobble the economy, as Manchin himself outlined last week in The Wall Street Journal: Over the past 18 months, weve spent more than $5 trillion responding to the coronavirus pandemic. Now Democratic congressional leaders propose to pass the largest single spending bill in history with no regard to rising inflation, crippling debt or the inevitability of future crises.

Now the West Virginia Democrat is willing to bend part way an open invitation for bargaining thats all too likely to wind up far above what he today says is acceptable.

Fine: He wants the $1.5 trillion in social spending to be paid for, meaning no new borrowing. But he knows perfectly well that Congress routinely covers new outlays with various fictional assumptions.

And even if it doesnt do so this time, that means hefty tax hikes that also slam the economy. The Senate blueprint for the bill includes boosting rates on individuals and corporations, which would stifle business investment, slow the economy and bring the nation back to Obama-era stagnation, with the working class in particular losing ground.

Maybe Manchin is just giving the left some reason for hope, so the likes of The Squad dont torpedo his infrastructure bill out of spite. Otherwise, hes just bargaining over how hard to hit an economy still struggling to get back to boom times.

A trillion here, a trillion there, and the progressive loons will still spend America into disaster.

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Joe Manchin may bargain the nation into bankruptcy yet - New York Post

The companies, which operate Ryan's, Old Country Buffet, Tahoe Joe's Famous Steakhouse, HomeTown Buffet, Fire Mountain, and Furr's Fresh Buffet, turned to bankruptcy afterCOVID-19 significantly disrupted operations and severely limited demand.

Before the pandemic, the companies operated roughly 90 stores across 27 states.But as federal, state, and local governments implemented shelter-in-place orders, customer spending and foot traffic declined and the restaurants liquidity took a major hit. At the time of the filing,all of the stores had closed except six Tahoe Joes locations in California. Those six restaurants had a combined revenue of roughly $21 million per year before the pandemic.

As with almost every one of our peers, buffet restaurants took the brunt of the loss of sales during the pandemic and as such, the path to success requires hard choices to be made, including the rationalization of our overall footprint, said Jason Kemp, co-founder and CEO of VitaNova, a company that provided management services to the restaurants.

The precipitous decline in sales at the restaurants resulting from occupancy restrictions and the banning of family-style buffet dining forced the companies to take extraordinary steps, including the closing of multiple locations, he continued.

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6 Restaurants that Filed Bankruptcy in 2021 - FSR magazine