Articles Posted in Chapter 13

As you may be aware, the L.A. Dogers filed for Chapter 11 bankruptcy protection in late June of this year. Chapter 11 is a reorganization bankruptcy available to both individuals and businesses where the creditors get to vote on whether or not to approve your proposed repayment plan.

Although McCourt is the owner of the Dodgers, it is the business, the “Los Angeles Dodger” that is filing the bankruptcy. McCourt withdrew an alleged $189.16 million dollars from the businesses funds according to the Los Angeles Times to settle his divorce with Jamie McCourt. To read more about the divorce side of things, see the Jacksonville divorce blog. Taking money from your own business probably wouldn’t be an issue if that business weren’t already insolvent.

In theory, Mr. McCourt has diverted money that could have gone to pay the business’ creditors to his now ex-wife. These transactions could be violations of the bankruptcy code. Things have gotten so contentious that Major League Baseball has petitioned the court to order the sale of the Dodgers. It is difficult to say what will happen in this case as new facts and arguments are coming every day, but the moral of the story is that you don’t drain the assets of an insolvent business and then try to file that business in a bankruptcy.

Credit Counseling is a pre-filing a requirement under 11 U.S.C. § 9(h) for all people who have filed for bankruptcy. Debtor Education is also required under 11 U.S.C. § 727(a)(11). These courses are available online, over the phone or in person and typically take about two hours. Only Credit Counseling Agencies approved under 11 U.S.C. § 111 can offer a valid course.

Douglas W. Neway, the Chapter 13 trustee, offers a free debtor education course to all Chapter 13 filers in the Jacksonville Division. These courses are held on every Monday (Holidays excluded) and run from about 2:00 PM to 4:30PM. At the commencement of the course the debtors are handed a Certificate of Debtor Education which their attorneys must file with the court. Considering that this course typically costs debtors about $30.00, I think it’s a fantastic idea to take it with the Trustee’s department for free (they let lawyers sit in for free too).

Now, not only does the course provide debtors with the necessary certificates at no cost, it also gives them the opportunity to ask the trustee (or members of his office) questions regarding practice and policies going forward. The trustee will not give legal advice to the debtors, but he can tell them what his office policies are. Considering that the debtors will be having direct contact with his office for five or so years, it only makes sense for them to be familiar with their office’s policies and procedures.

The Claims Bar Date is vitally important in any bankruptcy because it establishes the date by which all creditors must make a claim on your estate or be barred from collecting their debt. This date first appears on your Notice of Filing, which is automatically generated when your case has been filed. Any creditor who received notice of the bankruptcy must provide a claim within 90 days or be barred from collecting the debt owed. If a creditor is not properly noticed, they may be allowed to bring a late claim. Governmental Units are provided additional time to bring claims, but have a claims bar date as well.

Despite the fact that the creditors receive a Notice of Filing that comes with a claims form and instructions, some creditors never file their claim or file their claim improperly. You or your attorney can object to claims that are unfounded, incorrectly filed or state inaccurate sums owed. Knocking out claims can save Chapter 13 debtors significant amounts of money and can sometimes create the possibility of ‘paying out’ of a bankruptcy. Paying out occurs when all creditors who have filed claims get paid every penny they’re owed. When this happens, and there is no one left to pay, the case is closed.
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On October 1st, 2011, the Honorable Karen S. Jennemann became the Chief Bankruptcy Judge for the Middle District for a four year term. Judge Jennemann, a graduate of William & Mary has been practicing law in Florida for over 25 years. She presides in Orlando, Orange County, Florida.

Jennemann replaces the former Chief Judge, the Honorable Paul M. Glenn who presides here in Jacksonville, Duval County, Florida. Judge Glenn, who was appointed to the bench in 1993, has over 40 years of legal experience having graduated from Duke University in 1970.

Both Orange and Duval counties are in the Middle District bankruptcy court, so cases decided in either location are persuasive authority to one another when deciding new cases with similar facts. However, cases decided by the Chief Judge are generally considered to be more persuasive than those of a non-chief. This means that arguably, the most powerful decisions arising out of the bankruptcy court are now made in Orlando, not Jacksonville.

A gay couple was permitted to file a joint petition for Chapter 13 despite the Trustee’s argument that the Defense Against Marriage Act (DOMA) made their marriage illegal. Only legally married couples can file joint bankruptcy petitions.

On June 13, 2011 a California court ordered that a joint Chapter 13 case would not be dismissed for the sole reason of the debtors being a homosexual couple. 11 USC 302(a) permits a single petition for a debtor and such debtor’s spouse.

The court stated:

A finalized divorce may not be enough to protect you from marital debts. Just because a divorce decree states that your ex will “hold you harmless’ from a creditor does not mean that the creditor can no longer attempt to collect from you.

The division of property in a divorce is called property division. Often, one party gets an upside down house in exchange for not being ‘liable’ for a different debt. Each party is ordered to pay their allocated debts and to ‘hold harmless’ the other party. This order is enforceable in county court as a “Contempt Action” and can give such remedies as court fines, attorney’s fees and even imprisonment, but it can’t remove your name from that debt. Because your name is still on the debt, the creditor can attempt to collect from you if your ex stops paying. The most common ways to remove your name from a debt is to have the collateral refinanced or to remove your personal liability by bankrupting on the debt.

When the ex-spouse gets the home they often don’t have sufficient income to refinance. They often didn’t have sufficient income to refinance because they didn’t have sufficient income to make the payments on their own. Eventually, they get to the point of foreclosure or bankruptcy- sometimes without the other party’s knowledge. Many debtors don’t get notice of their ex’s non-payment until the house is in serious arrears. When this happens, they have the option of suing their ex for contempt, but even the threat of imprisonment will rarely solve the problem because you cannot get blood from a stone.

Because home mortgages often extend as long as thirty years, the risk of liability continues for a long duration. In these cases, a house left unpaid for decades after a divorce can still fall upon the credit of an otherwise innocent ex who simply wishes to move on with their life. When this happens the only ways to avoid foreclosure are often paying off the note in full or bankruptcy.
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