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https://www.reuters.com/legal/transactional/bankruptcy-filings-are-creeping-back-up-early-2022-2022-04-05/(Reuters) - Bankruptcy filings have started to increase this year and the number of new cases filed in March jumped significantly from February, but remain below last year's numbers, according to data released on Tuesday by legal research firm Epiq.The total number of new commercial and consumer bankruptcies filed in March grew 33.5% over the month prior, according to Epiq, with consumer filings increasing by 34% and commercial cases jumping by 26%. Those figures build on the slight upward trend that began in February, which brought 3% more new bankruptcies than January, according to Epiq’s data.But, the overall number of filings are still down compared to last year. The first quarter of 2022 brought a 17% decline in new filings compared with the same period in 2021, with consumer cases down 16% and commercial cases down 25%.Bankruptcy filings have largely dipped since the COVID-19 pandemic hit the U.S. in March 2020, as government aid programs helped keep individuals and businesses afloat. But experts say that as those aid packages dry up, people and companies alike will start seeking debt relief via bankruptcy again.“Amid rising interest rates, growing inflation concerns, worker shortages and supply chain challenges, access to bankruptcy is imperative for struggling consumers and businesses,” Amy Quackenboss, executive director of the American Bankruptcy Institute, said in a statement on Tuesday.Chapter 11 cases, which encompass larger commercial bankruptcies, were up 38% in March over February, but down 43% for the first quarter of 2022 compared with the same period in 2021.Small business bankruptcy filings known as subchapter V cases, a new type of filing that went into effect in February 2020 under the Small Business Reorganization Act, hit record numbers last month. Epiq said the 81 cases filed the week of Mar. 21 is the highest weekly total ever for that type of bankruptcy.That spike came just before the $7.5 million debt limit for businesses that file under subchapter V was set to drop down to $2.7 million, though legislation is underway to permanently bring the debt limit back up to $7.5 million.Individual filings could also increase if Congress passes legislation that would increase the debt limit under Chapter 13 of the bankruptcy code to $2.75 million from the existing $1.2 million. The bill, which was introduced in the Senate last month and has bipartisan support, aims to simplify eligibility for Chapter 13 protection and make it easier for self-employed people to qualify for bankruptcy relief.
Preoccupied Congress Fails to Act, Sending Debt Limit Back Down to $2.7 Million and Reducing Availability of Subchapter V Protection for Small Businesses See article at https://lnkd.in/dMyGQWq6
Due to a lack of action by Congress, the Small Business Bankruptcy Law known as Sub V, debt limit, will be reduced to $2.7 million, which will limit the number of distressed companies that will be able to file for Sub V bankruptcy protection. Jim Shenwick 212 541 6224 [email protected]
The Covid/19 pandemic has changed how we work forever, and bankruptcy practice is no exception.
Just two years ago this is what we did:
- We met most new clients in person during office meetings.
- Most cases were signed in person.
- An 80-page bankruptcy petition was signed with ink signatures on paper.
- Debtors attended a Section 341 Meeting of Creditors at the courthouse.
- Agreements to reaffirm home and car loans were signed on paper and mailed to creditors.
All that changed in March 2020 when the pandemic forced courts to close down. Since that time we have signed all cases electronically and meetings with the bankruptcy trustee (required under Section 341 of the Bankruptcy Code) have been conducted over the telephone.
Although many questioned whether telephone 341 meetings would be effective since the trustees cannot see the person testifying under oath, the general feeling is that little has been lost in the process. Trustees seem to be as effective conducting telephonic exams as they are with live in-person examinations.
Some trustees have even said that telephonic meetings are actually better since fewer debtors miss the hearings due to work or family conflicts. They can call in during work hours and can attend even if they are sick.
I think some trustees are as delighted to avoid dressing up for hearings that stretch out all day in federal courthouses as are debtor’s counsel who frequently work from home.
The big news received this week is that the United States Trustee’s Office will be implementing a new nationwide Zoom 341 hearing system to be unveiled in the next year.
Wow, this is really a big deal. It means that in-person 341 hearings are permanently a thing of the past. It also means the US Trustee’s office has carefully evaluated the effectiveness of remote hearings and have found them to be successful.
Zoom 341 hearings will offer several advantages over voice conference calls:
- Facial Expressions: Trustees will be able to see the debtor’s testify and read their facial expressions.
- Shared Screens: Trustees will be able to share their computer screen with the debtor to bring attention to specific lines of the bankruptcy petition, tax returns, bank statements or other documents. That rarely occurred during in-person hearings.
- Waiting Rooms: Zoom technology allows meeting participants to be keep in an electronic waiting room until their meeting is up.
- Meeting Queues: Zoom may allow participants to know how many cases will be called before their turn.
- Muting Feature. Whether meetings take place in person or on conference calls, trustees are frequently annoyed by folks who talk during other people’s hearing. Zoom technology may empower the trustees to mute all voices not involved with the case.
The obvious problem with Zoom meetings will be that some debtors will struggle with the technology. Not everyone uses a smartphone or computer. So there will probably need to be rules that allow low-tech debtors to call in on the phone. Perhaps attorneys may need to file motions to allow such calls for those debtors.
No doubt, Zoom 341 hearings will create new complications and technology frustrations, but overall the move to Zoom hearings is a great advancement.
Debtors will not need to take a day off work to attend routing meetings that generally last no more than a few minutes. Debtor attorneys may continue to evolve their remote office practices. Shared screens may actually cause the trustees to ask more penetrating questions by showing debtors documents that contradict their testimony.
The downside of Zoom 341 meetings? Yep, everyone needs to start dressing up again.
Image courtesy of Flickr and Radiofabrik-Community
Interesting article about Boris Becker bankruptcy filing and allegedly hiding assets. The article can be found at https://www.espn.co.uk/tennis/story/_/id/33570612/boris-becker-acted-dishonestly-hiding-wimbledon-australian-open-trophies-declaring-bankruptcy?platform=amp Jim Shenwick, Esq 212 541 6224 [email protected]
So, you’ve already filed for bankruptcy. With the automatic stay in effect, creditors, especially the abusive ones, wouldn’t be able to bug you. However, it’s inevitable to face renewed financial difficulties soon after emerging from bankruptcy.
If you’re thinking of filing for a second time, you may want to learn about the governing rules on repeat filings. It’s because you can lose the automatic stay for multiple bankruptcy filings.
To avoid forfeiting your rights to bankruptcy benefits, read this blog post. Let our bankruptcy attorney from Northwest Debt Relief Law Firm discuss everything you need to know about the automatic stay provision and the effects of losing this privilege due to serial filing. But before diving into these discussions, here’s a quick refresher course on automatic stay.
What is an automatic stay?
An automatic stay is a provision in the US Bankruptcy Code that temporarily prevents creditors, collection agencies, government entities, and others from contacting or requesting money from their debtors.
Immediately after a debtor files for bankruptcy, the automatic stay takes effect. Its enforcement will protect debtors against creditors who want to start or continue pursuing a debtor or the debtor’s property.
However, this petition does not apply to non-debtor entities, such as corporate affiliates, corporate officers, co-defendants, or guarantors.
What activities are subject to the automatic stay?
As mentioned, the automatic stay protects debtors from the creditors’ collection activities. When the creditor receives a notice from the court regarding the debtor’s bankruptcy, the following activities are subject to this federal court order:
- Foreclosure proceedings
- Tenant eviction
- Utility disconnections
- Collection of overpaid public benefits
- Multiple wage garnishment
Unless the creditor properly files and serves a motion for relief from the automatic stay, the injunction will not be removed or modified. Of course, it depends on the bankruptcy judge granting the motion.
What activities are not subject to the automatic stay?
There are, however, debtor proceedings and obligations that are not subject to an automatic stay. Child support and alimony payments are sample obligations not protected by the automatic stay provision. Others include:
- Money owed because of a criminal proceeding
- Interception of a tax refund for domestic support obligations.
- Action by a landlord of a nonresidential lease that expired before the filing of a petition
- Tax obligations, including audits, demand for tax returns, and tax assessment
- Domestic proceedings, such as dissolution of marriage and domestic violence
What is the consequence of violating the automatic stay?
Once the automatic stay is in effect, the creditor must honor the provision and refrain from contacting the debtor. Should the creditor violate this federal injunction, the debtor can file a lawsuit against the creditor’s company. Violators could face serious repercussions that may result in court fines.
It’s important to remember that these consequences only apply when there’s a willful violation. Sometimes, miscommunication occurs between the creditor and the bankruptcy court, resulting in an unintentional violation.
In other words, the debtor typically may only recover damages if the creditor has a deliberate intent to violate the automatic stay. For instance, the creditor inadvertently moved to foreclose the debtor’s estate. If the violation is proven, the creditor must return the property immediately to the debtor.
How long will an automatic stay in effect?
An automatic stay remains as long as the bankruptcy proceeding continues and the court issues a bankruptcy discharge to the debtor. However, there are instances where an automatic stay can be cancelled or lifted:
- When the property serving as collateral has no equity
- If the litigation doesn’t affect the bankruptcy case
- The debtor has more than one bankruptcy case pending at the same time (repeat bankruptcy filing)
These conditions only mean that the automatic stay isn’t absolute.
Creditors—for their benefit—could file a motion to lift the stay before the bankruptcy case is closed, as long as they get the judge’s permission first. An automatic stay will not also apply in cases where litigation can’t move forward. These situations include criminal matters, domestic proceedings, and support obligations.
Lastly, multiple bankruptcy filings can affect your automatic stay timeline or cancel it altogether. It’s because the bankruptcy law determines the time limits on the type or chapter you choose during your filing. And these limits apply only to bankruptcies where you have received a debt discharge.
Losing an automatic stay for repeat bankruptcy filings
Bankruptcy is in place to provide debtors financial safety net. And an automatic stay is imposed to give further relief to such a crisis. However, some rules are just meant to be violated, whether intentionally or accidentally. And a court order such as an automatic stay is no exemption.
The accounts of serial filing in the past led to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”)
One of the amendments was to limit or eliminate the automatic stay protections for repeat filings within one year.
Yes, you can lose your rights to an automatic stay if the court finds out that you’ve acted in bad faith while filing a second case.
If you’re wondering when to file for bankruptcy protection again, you have to recognize first what type of bankruptcy you filed before and what kind of bankruptcy you want to file now. In this regard, let’s talk about the two most common types of bankruptcy.
Chapter 7 bankruptcy
Chapter 7 or liquidation bankruptcy, is a typical legal process to clear your debt. It works by protecting the property you need to live a dignified life. But if you have numerous properties, the bankruptcy trustee may liquidate (sell) them and use the sales proceeds to pay creditors.
While bankruptcy falls under federal law, every state has its way of deciding the type and amount of property you can exempt. Some states are more generous than others; thus, exemptions may vary.
If you previously filed Chapter 7 bankruptcy, you’ll need to wait eight years after your first filing to be eligible for another discharge under Chapter 7.
So, filing another bankruptcy within a year of your first case’s dismissal will result in the denial of discharge in the second case. Also, the automatic stay will terminate within 30 days of the new case filing. The court might also find your filing abusive, which might prevent you from using Chapter 7 and exercising your automatic stay rights.
Chapter 13 bankruptcy
Unlike a Chapter 7 case, Chapter 13 bankruptcy allows debtors to restructure bills over three to five years; in some cases, they may pay less than what they owed.
A typical Chapter 13 filer has a regular income and can repay creditors some amount that may not be the total unpaid balance. Other debtors only need some time to catch up on bills without facing collection lawsuits or wage garnishments.
Just like in Chapter 7, the automatic stay takes effect right away once you file for Chapter 13 bankruptcy. Remember, though, that you’re only allowed to file for a second Chapter 13 bankruptcy two years after the first filing. Violating this rule will also lead to terminating your automatic stay.
Seek expert advice from bankruptcy lawyers in Portland
The quickest way to relieve yourself from debt is to file for bankruptcy. Whether you file a Chapter 7 or 13 case, the weight of living in debt is somehow made bearable because of an automatic stay.
However, we talked about how the same financial issues could arise soon after a previous debt has been resolved. As a result, you might file for a second case the same year without knowing the time limits or waiting periods on bankruptcy discharges. If you’re found acting in bad faith, you might lose your automatic stay.
The question now is, how can you avoid committing such a mistake?
First, you need a bankruptcy attorney in Portland to help you understand the best debt relief option that fits you. Hiring a bankruptcy lawyer will make your filing easier.
Second, seek expert advice when switching one chapter case to another. Ask your lawyer when filing for multiple bankruptcy cases is a smart decision.
Reach out to Northwest Debt Relief Law Firm to get the assistance you need. We believe that bankruptcy is not necessarily the end of financial freedom—it can be the beginning. So, talk to our most trusted debt relief lawyers to receive the best legal services. This decision could be your first step to living a debt-free life.
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The post Can You Lose an Automatic Stay for Repeat Bankruptcy Filings? appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief Law Firm.
Readers of our posts are aware that at Shenwick & Associates we do personal and business bankruptcy filings and workouts for many clients. In addition, we review settlement agreements for clients so that the settlement payments are not captured by section 547 of the Bankruptcy Code as a preference (also known as "preference proofing a settlement agreement"). This week we were retained by 2 clients who wanted their settlement agreements reviewed regarding preference exposure.This work is usually referred to us by the client or the client's litigator. There are generally 3 signs that indicate that a defendant may file for bankruptcy protection either after the settlement agreement is signed or after making some or all of the payments required by the settlement agreement.
- During settlement negotiations, the defendant discusses filing for bankruptcy.
- During settlement negotiations, the defendant discusses closing its business or
- The defendant asks for more than 30 days to make the initial settlement payment.
In the event that a defendant files for chapter 7 bankruptcy within 90 days of making a payment to the plaintiff, that payment may be a voidable preference and subject to recapture or clawback by a bankruptcy trustee in a chapter 7 bankruptcy proceeding.Clients will be extremely upset and point fingers if their settlement payments are clawed back by a bankruptcy trustee or they need to defend a lawsuit (adversary proceeding) by a bankruptcy trustee seeking to recapture those payments.What can be done to preference proof a settlement payment? Below are some suggestions and strategies, but a risk will always remain until 90 days have passed from the date of payment.
- Seek financial statements from the defendant or better yet a financial statement under penalty of perjury (an Affidavit of Net Worth), Have your CPA or a bankruptcy attorney review those financial statements.
- Seek a guarantee of the payments from a 3rd party.
- Make the plaintiff a secured creditor by receiving a mortgage on real estate or a security agreement and ucc-3 on another asset like accounts receivable.
- Structure the settlement agreement so payments are made sooner rather than later.
- Have the defendant stipulate to a judgment or a confession of judgment and have the plaintiff provide a satisfaction, 90 days after payment is made.
- Delay providing a release to the defendant until 90 days have passed from payment.
- Use the “earmarking doctrine” which provides that payments that are supplied by a 3rd party such as a bank or a malpractice insurer and earmarked for payment to a creditor are not preferential.
- Language should be included in the settlement agreement that preserves the plaintiff’s claim if any settlement payments are recaptured.
- Finally the settlement agreement should state that if the defendant files for bankruptcy the automatic stay, provided for in section 362 of the bankruptcy code is deemed lifted with respect to the Plaintiff.
Although no single factor may win the day, a plaintiff should attempt to obtain as many of the above points as possible.Plaintiffs or their counsel having questions about settlement agreements and preferences should contact Jim Shenwick, Esq. 212-541-6224 or [email protected]
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