Camden NJ Bankruptcy Law Blog

Business Debt Exception To Means Test

When the Bankruptcy Code was amended, one of the purposes was to make it more difficult for high income earners to eliminate their debt in a Chapter 7 bankruptcy. As a result, sections were added to the Bankruptcy Code which essentially  add some limitations on expenses if you make more than the average family your size in your state. However, the "means test" as it is called, only applies if the debts are "primarily" consumer debts. If your business related debts, such as debts from personal guarantees for a failed business, constitute more than 50% of your debt, the means test does not apply. This generally makes it easier to fit into a Chapter 7 bankruptcy. New Jersey courts may interpret whether a debt is a consumer or business debt differently from other states, so it is best to consult an experienced bankruptcy attorney to make this determination

What is an Involuntary Bankruptcy

An Involuntary Bankruptcy is filed not by the individual or company that has the debts, but instead by creditors of that individual or company. The involuntary bankruptcy can either be a Chapter 7 or Chapter 11 bankruptcy. Three creditors with combined claims totaling $15,775 or more can force a company into bankruptcy. The claims cannot be contingent or subject to a bona fide dispute. The filing must be in good faith or the case will be dismissed and the creditors could be responsible for fees and costs incurred by the debtor. The requesting parties must show the debtor is not paying its debts as the debts become due. Creditors will file an Involuntary Bankruptcy for various reasons including trying to force liquidation of the assets to pay its claims or to get the trustee appointed to review the books and records to make sure the debtor is not improperly favoring some creditors over other creditors.

GYMBOREE APPEARS TO BE ON VERGE OF BANKRUPTCY

Gymboree appears to be on the verge of bankruptcy according to The Denver Post. http://www.denverpost.com/2017/05/05/gymboree-stores-closing/ A number of stores will likely close as part of the bankruptcy process. A number of brick and mortar retailers have struggled in recent years. According to the Gymboree website, southern New Jersey has stores in Cherry Hill, Deptford, Marlton and Blackwood NJ. There are also stores in Philadelphia Pennsylvania. It is not yet clear which stores will be closing.

Priority Claims in Chapter 13 Bankruptcy

Chapter 13 is a type of bankruptcy often used by debtors to save their home by paying mortgage arrears over time. However, when filing Chapter 13, a debtor is obligated to pay priority claims in full through the bankruptcy as well. Priority claims include domestic support obligations such as child support, certain types of taxes, claims for personal injuries from a motor vehicle accident when driver was intoxicated, and other types of claims are priority claims. In certain circumstances, this obligation could make retaining the home more difficult since instead of paying just the mortgage arrears, these priority claims must be paid as well. However, it could also make keeping the home easier since it may be more affordable by stretching these payments out over five years.

Bankruptcy Court Approves Circus Sale

As reported by the New York Times, Big Apple Circus, which began operating in 1977, filed bankruptcy and closed in the summer of 2016. A 1.3 million dollar bid by Big Top Works to buy the debtor's assets was recently approved by the Bankruptcy Court. The circus will return in the fall of 2017. Prior to filing, a fund raising drive was used in an attempt to keep the circus going, but it fell short of its needed goals. http://www.vivacityny.com/new-york-times-big-apple-circus-sold-to-the-highest-bidder-will-return-this-fall-the-new-york-times/

Am I eligible to file Bankruptcy?

Whether you are from Pennsauken NJ or Cherry Hill New Jersey or Northeast Philadelphia Pennsylvania, individuals often come into my office and ask the same question. Am I eligible to file bankruptcy? Most times individuals are eligible to file bankruptcy. There are some limits. For example, section 109 of the bankruptcy code provides that to file a chapter 13 bankruptcy you cannot have more than $394,725.00 in unsecured debt or more than $1,184,200.00 in secured debt. If you do, you cannot file chapter 13, but you can file an individual chapter 11. Sometimes the real question is can they receive a discharge. For example, if an individual has filed a chapter 7 bankruptcy within the last 4 years, they are not eligible to receive a discharge in a chapter 13. However, that does not prevent the individual from filing a chapter 13. If they are behind with their mortgage, a chapter 13 can be used to pay mortgage arrears over 3 to 5 years even if they are not eligible for a discharge. Regarding chapter 7, a discharge will not be received if a chapter 7 is filed within 8 years of a prior chapter 7. In addition, the ability to file a chapter 7 and receive a discharge may be effected by other factors such as income compared to expenses. If an individual has too much disposable income, they could be forced to convert to chapter 7 or have their case dismissed. Equity in assets is also a factor in determining whether someone should file a chapter 7 or chapter 13 bankruptcy. Whether bankruptcy is an option and which type of bankruptcy are important issues that should be discussed with an experienced attorney before deciding how to proceed.

Conversion of Chapter 11 business bankruptcy to Chapter 7 bankruptcy

When a business is struggling, often it will turn to a Chapter 11 bankruptcy in order to reorganize its debts. Through Chapter 11 a business can often reduce unsecured debts like claims of suppliers, restructure secured debt and pay priority tax debts over time, among other things. Often these changes are enough to allow the business to again be successful. But sometimes, for various reasons, it is not enough. What happens then? One possibility is the case is dismissed. Another possibility is the case is converted to Chapter 7. In that case, a trustee will sell the assets to the highest bidder. This is exemplified by the South Jersey bankruptcy of Geets Diner in Williamstown New Jersey. The restaurant had filed Chapter 11 in 2015. In August 2016 the case converted to a Chapter 7 bankruptcy. In January 2017 the assets, which included the land, building, equipment and liquor license were sold to the highest bidder. The restaurant will now be reopened by the new owners and the proceeds from the sale will be used to pay creditors of the debtor.

BANKRUPTCY MEETING OF CREDITORS

The bankruptcy code requires that a Trustee appointed by the US Trustee's office conduct a meeting of creditors. In a simple Chapter 7 or Chapter 13 meeting of creditors, typically no creditors appear. Business bankruptcies are more likely to have creditors appear. At the meeting, the trustee will ask the debtors questions under oath about their assets, liabilities, income and expenses. Your attorney will be there with you and generally will review your case with you prior to the meeting. A debtor may plead the fifth to avoid testfying about a pending criminal matter but the failure to testify could prevent the debtor from receiving a discharge. Section 344 of the Bankruptcy Code provides that a person required to testify can seek immunity, although whether it would be granted would be decided on a case by case basis.

Chapter 13 Bankruptcy Codebtor Stay

Section 1301 of the Bankruptcy Code is entitled "Stay of Action Against Codebtor". If an individual files a bankruptcy while living in, say, Pennsauken, NJ and his ex-wife, living in Philadelphia, PA had cosigned for a credit card while they were married, can the creditor pursue the ex-wife since she is not in bankruptcy? Not when a Chapter 13 is filed. Section §1301 of the bankruptcy code provides a "Codebtor" Stay in Chapter 13 Bankruptcy. A "Codebtor" Stay protects a vehicle from being repossessed and protects a debtor's residence from a foreclosure sale when only one of the individuals responsible for the debt files Chapter 13. A "Codebtor" Stay does not apply to Chapter 7 bankruptcies or business debts. There are other exceptions. For example, although a liability on a personal tax return would seem to be a consumer debt a number of cases have held that the co-debtor stay does not prevent the IRS from pursuing the spouse that did not file a bankruptcy on a joint return.

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