Archives for January 2014

How to Find a Good New Jersey Bankruptcy Attorney

If you have decided that bankruptcy is the best option to resolve your financial challenges, you may have discovered that there is no shortage of bankruptcy attorneys in New Jersey. The obvious question then becomes—how do you find the one that will best meet your needs? It’s a very important decision, as your future financial well-being may depend on it.

The Key Factors When Looking for a Bankruptcy Lawyer

When evaluating potential bankruptcy counsel, you want to examine three important components:

  • What is the quality of the attorney’s work?
  • What level of customer service can you expect?
  • To a lesser extent, how much will it cost you?

It’s extremely important that consider more than one bankruptcy attorney. You may like the first one you contact, and you may end up hiring that person. But you need to have a comparison to know that you are getting the most skill and customer service for the most reasonable price.

Evaluating the Attorney’s Skill Level

You should look at your initial meeting with an attorney as being an interview for both parties. Pay attention to the types of questions the attorney asks you—how detailed are they? Some of the questions you want to ask:

  • How many bankruptcies has the attorney handled? How many years has the attorney been practicing in the bankruptcy courts? Is bankruptcy the focus of the attorney’s practice?
  • Is the lawyer listed in public or professional directories? What is the attorney’s rating with Avvo or other services?
  • What certifications does the lawyer have? The American Board of Certification issues these certifications to those who pass a qualifying examination, remain in good ethical standing, and maintain at least 20 hours per year of continuing legal education in the field for which certification is given. (Steven R. Neuner is now certified as a Business Bankruptcy Specialist and has held this certification for 20 years)

Determining How You Will Be Treated

The most skilled lawyer in the world can still leave you stressed out or anxious if the level of customer service is lacking. How interested does the attorney seem in your case? Does the lawyer spend time personally asking you questions or are you simply given a form to complete? In addition, how easy was it to get through to the attorney? If you left a message, how quickly did the attorney return your call?

Confirming the Cost of Bankruptcy

If you are considering filing for bankruptcy, it’s not generally in your best interests to simply look for the least expensive bankruptcy counsel. There is a lot at stake and your biggest concern should be value for what you need to spend, not the total cost. You need to have confidence in the other two factors—the attorney’s competence level and willingness to provide a high level of customer service—otherwise, you may save money with a “bargain basement” firm or “bankruptcy mill”, but you will increase your stress and anxiety, and you may end up not getting the outcome you want or need. This is a field where the cost of mistakes can be high.

Confirm with the attorney whether you will pay a “target” or flat fee for your bankruptcy, or whether you will be billed by the hour. “Target” or flat fees are generally available and allow you to reasonably predict your costs. If your case is complex or the time and complications are not predictable, this may not be advisable. But most responsible attorneys can and should explain how they arrive at their fees.

Also, do not forget costs. Filing a bankruptcy and doing it properly includes costs for filing fees and two required courses. A careful attorney will want to get a judgment search, a credit report and other “due diligence” to make sure that nothing important is missed. These costs are generally not great. You do not want to end up being “low balled”. Ask what costs are included.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. To set up an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Hand over all your money! 9th Circuit holds that a bankruptcy trustee can require a debtor to turn over entire bank account balance without credit for checks which cleared after bankruptcy was filed

In a personal bankruptcy, the debtor can usually exempt and therefore keep specified amounts of money in bank or savings accounts. If there is money in those accounts in excess of the available exemptions, the non-exempt cash belongs to the trustee to be used to pay creditors. Meanwhile, the debtor, with bills to pay,  has often written checks that, as of the date the bankruptcy is filed, have yet to  clear the bank account. What many people do not realize is that the bankruptcy value of these bank accounts is not the “checkbook balance”  after all checks have cleared, but “available funds”, ie. the amount of money that the bank has available on the filing date.  Nevertheless, many bankruptcy attorneys list the value of bank accounts based on what their client tells them, which is usually a guess, and disregard this important distinction.

As the Ninth Circuit reminds us, (Shapiro v Henson, 2014 WL 68998, decided January 9, 2014) this can create big problems if there are large checks outstanding (such as for mortgage payments) that clear the account after the bankruptcy is filed. Barbara Henson wrote large checks against her checking account shortly before filing bankruptcy. When the trustee demanded that she turn over the $6599.00 that was the bank “available funds” balance on the filing date, she refused, on the basis that the money had been paid out of the account towards checks written pre-bankruptcy but which cleared post-petition. The bankruptcy court agreed with Ms. Henson and denied the trustee’s motion for turnover. After the District Court affirmed, the case ended up before the Ninth Circuit Court of Appeals, which reversed.

The issue, as that Court saw it, was whether the Trustee’s power to compel turnover of bankruptcy estate property under 11 USC 542(a) is solely restricted to those entities having “possession, custody, or
control” (collectively “possession”) of such property at the time the motion for turnover is filed. In this case, the lower courts had held that the Trustee would have to pursue the parties who cashed the checks, not the debtor who no longer had the money. Based on the statutory language, the 9th Circuit held that because the debtor had possession of the funds “during the case” before the checks cleared, and because the statute allows a trustee to recover the property or its value, she was properly liable to repay the money even though it had been used to pay checks which cleared. This was supported bankruptcy “pre-code practice” before the current Bankruptcy Code was enacted in 1979. Finally, the Court cited the practical problems created by a rule  that limited the turnover power to those in possession of the property. Any such target could easily avoid liability by transferring the property away, thereby creating a “shell game” that frustrate the legitimate goal of recovering estate property for the benefit of creditors.

The Takeaway: As a bankruptcy filing approaches, debtors should use certified checks, cashier’s checks, or wire transfers for major withdrawals from bank accounts that have substantial value. Our practice is to have our clients provide us an “up to the minute” bank account balance at the time we file a bankruptcy, so we can be sure this problem does not arise. Nowadays, with online access to accounts and the ability to get available funds balances via a bank ATM, this should not be a problem.

In bankruptcy, as in so many other endeavors, sometimes sweating the details really makes the difference.

Our office is available to help individuals and businesses of all sizes find solutions to their financial problems.

 

Post petition payments and the “New Value” defense to preference suits-Third Circuit Court of Appeals holds they do not affect the outcome

One of the simplest ways for a defendant to defeat a preference lawsuit in bankruptcy is to show that after the defendant received the payments that the suit is trying to recover, it gave “new value” to the debtor which remained unpaid (or was paid by another avoidable payment). The defense, codified at 11 USC 547(c)(4), is intended to avoid penalizing creditors who continue to deliver value to a struggling debtor in the months leading up to bankruptcy. In essence, a creditor who, though paid, delivers new goods or value for which it remained unpaid can offset that “new” value against the amount it otherwise would have to pay back. The beauty of this defense is that the proofs are simple and the result has a mathematical certainty.

In a December 2013 ruling, the Third Circuit Court of Appeals in In re Friedmans’s Inc. held that whether “new value” was given is determined as of the Petition date, and that payments the creditor/defendant received after that date which reduced its unpaid balance are not a factor in applying the defense. The creditor, Roth Staffing, had supplied staffing services to the debtor. In the 90 days pre-bankruptcy, it had been paid $81,997 but had thereafter supplied over $100,000 in new services that were unpaid on the Petition filing date. By itself, this would be a complete defense to a preference action, since Roth had added more value than it had been paid for and as a result was worse off on the Petition date then before receiving payments. What made the case unusual is that post-petition, the debtor obtained a “Critical Vendor” order that authorized it to pay down Roth’s debt, in order to encourage Roth to keep the flow of critical staffing continuing. Under this order, Roth received another $72,413.00.

The debtor’s successor in interest filed a preference action against Roth. The issue was whether Roth had a complete defense based on the unpaid $100,000 when the bankruptcy was filed, or whether this was reduced by the $72,413 in additional payments it had received after the bankruptcy filing. The Third Circuit, affirming the District Court, held that Roth had no liability since as of the Petition date its payments received were less than the new value it had provided. In a matter of first impression on this issue, it held that the $72,413 paid post-petition was properly disregarded for purposes of the “new value” defense.

The Court supports its holding in a lengthy and interesting analysis of the preference statute and the policies behind it. For anyone facing a preference action and intending to use the “new value” defense, the case is a “must-read”.

Taking Advantage of New Jersey’s Generous Bankruptcy Exemptions

How Soon Can You Take Advantage of New Jersey’s Bankruptcy Exemptions?

When individuals file for protection under Chapter 7 of the federal bankruptcy laws, they are entitled to claim some of their property as exempt from the claims of unsecured creditors or from sale in the bankruptcy. Normally, the bankruptcy exemptions or state law exemptions available in the state of current residence are the ones that apply. But for people who have moved from one state to another in the past 2 years, this may not be the case. Determining exactly what exemptions are available is a major consideration for those seeking a fresh start in bankruptcy. Some states, like New Jersey and Pennsylvania, have kept the fairly liberal federal bankruptcy exemptions. But others have “opted out” and set up their own bankruptcy exemptions. This can be a problem if you did not have your current state of residence as your domicile for all of the 2 years before filing bankruptcy. If that is true, then the exemptions that will not necessarily the ones that apply in the state where you now live. Instead, the exemptions that will often apply are those for the state where you were domiciled for most of the period from 2 and 2 ½ years before filing. Some states impose residency requirements for bankruptcy exemptions, and if these would their use by someone who has moved out of state, the federal exemptions will still apply. Just be aware of this issue if you have moved. Applying this rule is tricky and needs careful analysis by an experienced bankruptcy lawyer.

Individuals filing for bankruptcy can also choose the applicable state’s “non-bankruptcy” exemptions which determine outside of bankruptcy what people with judgments against them can protect from a Sheriff levy. In New Jersey and Pennsylvania, most people choose the bankruptcy exemptions which are far more libieral than the state law exemptions. But in some special cases there may be a good reason to opt for state law such as where the non-bankruptcy protection of a particular asset such as a home ore life insurance cash value is significantly better. This option, however, applies across the board. You have to pick either the bankruptcy or non-bankruptcy exemption system for all your property. You are not permitted to “pick and choose”.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney.

For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

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