How Soon Can You File for Bankruptcy in New Jersey

Filing for Bankruptcy in New Jersey—How Soon Can You Do It?

If you are struggling financially, and have just moved to New Jersey, perhaps to get a fresh start, you may have concluded that a personal bankruptcy filing is the best way to address your financial concerns. Because bankruptcy law is federal, you may believe that the location of your filing doesn’t matter. This is not entirely true, though, as individual states have their different exemption schemes which determine what property an individual debtor in bankruptcy can keep free and clear of claims of unsecured creditors. Here’s how the bankruptcy residency requirements work.

The Effect of Residency on Bankruptcy Filings

The residency requirements do not prohibit you from filing for bankruptcy protection—they only have an impact on where you can file your petition. A bankruptcy can be filed in the federal court district where you have (A) resided or (B) had your principal place of business or (C) had your “domicile” for all or the greatest portion the past 6 months (180 days). A domicile is where you intended to be your permanent residence. This can be determined by various factors such as where you had your property, voted or had your driver’s license. But if you moved, you may be able to file in as little as 91 days.

Moved in that past 2 years? It could affect what you will be able to keep.

For many people who have moved from one state to another in the past 2 years, the more important question is what exemption scheme will apply. 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 domicilefor 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 apply are those where you were domiciled for most of the period from 2 and 2 ½ years before filing. Just be aware of this. Applying this rule is tricky and needs careful analysis by an experienced bankruptcy lawyer.

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 us at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Choosing the Right Bankruptcy Filing When You Owe Money to Your Ex-Spouse

Owe Money to Your Ex-Spouse?—Should You File Chapter 7 or Chapter 13?

Are you wrestling with unmanageable debt, including child support or alimony arrearages that weigh heavy on you? Have you wondered if those debts could be discharged or restructured in a Chapter 7 or Chapter 13 proceeding?

Domestic Support Obligations and Chapter 7

Under Section 507(a)(1) of the federal bankruptcy code, child support and alimony {also called “Domestic Support Obligations”} are given first priority in a bankruptcy proceeding, payable only after administrative costs of the bankruptcy. In Chapter 7, all Domestic Support Obligations, AND any other debts or obligations agreed to or imposed in a divorce judgment or settlement will not be discharged. Chapter 7, however, can be very useful if it eliminates other debt thereby making it easier to pay the Domestic Support Obligations. If there are assets available to pay creditors, Chapter 7 can result in the non-dischargeable DSO’s getting paid first.

Domestic Support Obligations and Chapter 13

Child support and alimony obligations also receive priority in a Chapter 13 reorganization. They must be paid in full over the 3 to 5 year life of the plan. You must also stay current on any ongoing support obligations during the bankruptcy period, and may lose all Chapter 13 protection if you fail to do so. If your Chapter 13 reorganization has not been approved, and you fall behind on current obligations, you risk denial of confirmation of your plan, conversion to a Chapter 7, or dismissal of your case.

The major advantage of Chapter 13 is that other divorce obligations besides DSO’s CAN be discharged in Chapter 13. This could include a payment to the ex-spouse required as part of a divorce property division between husband and wife.. These obligations become general unsecured debts receiving the same percentage payment as other creditors such as credit card obligations.

Planning and Timing are Critical.

Filing bankruptcy simply to make things more difficult for your spouse is usually ill-advised. But many a divorce has been made less difficult by using bankruptcy to relieve one or both spouses from debts that make it harder to meet family obligations. The interplay of family law and bankruptcy is complex and can be confusing. Early involvement of a qualified bankruptcy attorney with a knowledge of both areas is critical.

Contact 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 bankruptcy client. Our partners have extensive experience in both bankruptcy and family law. For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Choosing Between Chapter 7 and Chapter 11 When Continuing a Business

Staying in Business? What’s the Best Bankruptcy Option?

Business owners, like everyone else, sometimes make costly mistakes or experience a run of bad luck. If you find yourself and your business under a mountain of debt, bankruptcy may be a consideration. But what if you know that your problems are only temporary, that with a temporary respite from collections attempts and lawsuits, you can turn things around. What’s the best bankruptcy alternative?

The Chapter 11 Option—Reorganization

Chapter 11 reorganization is often the best option when a business can be saved as a going concern, but it threatened by debts from past mistakes or misfortune. In a Chapter 11 filing, the business owners and their attorney work with the creditors, putting together a plan that allows the business to keep operating as a new reorganized entity. The plan, when confirmed, replaces the existing debt structure with a new one usually involving extended payout and usually much lower partial payments to unsecured creditors. Getting these plans approved usually requires that a majority of the unsecured creditors holding at least 2/3 of the total value of unsecured claims have voted to approve the plan. Why would they do this? Because the debtor has offered them a better deal and a better outcome than just shutting the doors and selling all the assets. A successful Chapter 11 requires planning, good management, attention to detail, and the ability to fund the costs of reorganization. The road to success is well worn, but slippery. Having the right guide to get you through the process successfully is essential.

Contact 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. For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Choosing Between Chapter 7 and Chapter 11 When Closing Down a Business

Closing Down Your Business? What’s Your Best Bankruptcy Option?

If your business is failing, and you see no prospect for turning it around, you may want to simply close it down now. A bankruptcy filing can help you put your losses behind you and move forward. What’s the best alternative when you know your business has no future?

Closing a small business

The Chapter 11 Option—Reorganization

A Chapter 11 filing is not generally a good choice for a business that does not plan to move forward. In a Chapter 11 proceeding, your goal is usually a reorganization plan to repay your creditors over a specific period of time. Such reorganization plans generally allow you to keep your assets and negotiate new payment arrangements if you can obtain the required creditor approval through voting.

Orderly Liquidation.

For many small businesses, an orderly liquidation is the best course of action. This process involves winding down the business. This can be done in a Chapter 11 or in anticipation of a Chapter 7 liquidation filing. It can also be done outside of bankruptcy. As we have written elsewhere, there are a multitude of traps for the unwary, and anyone pursuing this course of action should have and rely on the advice of a qualified attorney experienced in business bankruptcy or reorganization.

The Chapter 7 Option—Liquidation

In a Chapter 7 proceeding, an individual is entitled to have most debts permanently discharged in exchange for a willingness to sell all assets not exempt under state or federal laws. Corporations, limited liability companies and similar entities do not receive a discharge. They are not entitled to exempt and keep assets the way individuals are. They just get liquidated. But when a business fails or closes, the individual owners are often saddled with debts they cannot handle. More often than not, the business owners need personal bankruptcy after the business closes. In some cases, it may make sense to put the business into bankruptcy, to avoid continuing harassment by creditors or the liability that can arise from the owners’ continued involvement.

All these choices are matters you should discuss with a qualified business bankruptcy specialist. There is a way out but careful planning and the right advice are critical.

Contact 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. For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Doctors Being Driven Into Bankruptcy

Bankruptcy Affects Doctors and Other Professionals

According to CNNMoney.com, a disturbing trend over the last few years has been the increasing number of physicians and medical professionals filing for bankruptcy protection. Though many of these bankruptcies are simply Chapter 11 reorganizations, for some bankruptcy sounds the death knell of their practices and careers.

The Causes of Bankruptcy among Doctors

Studies show that the recession, which has been deeper and longer than expected, has taken its toll on medical practitioners, particularly those who specialize in nonessential procedures. With fewer dollars to spend, many consumers are unwilling to part with even the low cost of a copay for an office visit. In addition, the proliferation of urgent care facilities has resulted in “bargain shopping” by people seeking medical treatment. Furthermore, as more and more companies cut back on the health insurance benefits they provide their employees, more employees are reluctant to spend their own dollars on medical care, and either don’t seek care or go to an emergency room at a hospital, where they may be treated without providing insurance coverage or payment.

Doctors also blame shrinking insurance reimbursements, changing regulations, increases in the cost of malpractice insurance and other business necessities. Especially hard hit have been chemotherapy providers, who have experienced dramatic declines in drug and medical supply reimbursements from patients’ insurance carriers. Also heavily impacted are doctors or medical professionals who work in areas where Medicare is prevalent or where many patients either have little or no insurance. In these areas, patients are unable to afford payments that insurance companies no longer make.

Doctors often have large amounts of debt to match their income. In our experience, doctors as a group present more complications than the typical debtor. Careful planning, having the advice and experience of the right attorney is essential to success. But as with so much else, with the right approach and attention to detail, the patient’s prognosis can be excellent!

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy 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

Representing Clients across South Jersey

Revel CEO resigns weeks before expected bankruptcy filing

Recent news of Revel Atlantic City CEO Kevin DeSanctis’s resignation has brought even more attention to the failing company and its imminent bankruptcy. The $2.4 billion resort is filing for Chapter 11 bankruptcy in order to save the company and wipe clean some of the debt that has been piling on. Unfortunately, the young casino has had difficulty bringing in gambling revenue in Atlantic City and has been unable to fulfill the high expectations of the casino market. Full article.

This bankruptcy filing shows that businesses large and small can run into trouble from bad luck, poor planning, or market conditions. See my article on ways businesses can avoid bankruptcy. However, when a business is in trouble, the biggest mistake owners make is not forming a workout or exit strategy early enough. As with so much else in life, timing is everything. So often, I see businesses that could have been saved had someone sat down to do some serious planning, including consideration of a bankruptcy, orderly liquidation or workout, much sooner.

For businesses, the options include an orderly liquidation, secured creditor workout, chapter 7 bankruptcy, or a chapter 11 reorganization. Each of these have risks and costs, as well as benefits. Careful planning including a detailed look at cashflow and opportunities to reduce expenses or strategically increase revenue is critical. Just as importantly, businesses need to have a multi-prong series of exit strategies. Not planning is a recipe for disaster. All this needs the advice of an experienced business bankruptcy specialist.

We have seen that many business owners delay considering these matters because they fear the personal consequences of a business bankruptcy or shut down. These can include loss of income from the business, loss of an enterprise they have put their heart and soul into, or personal liability. Many have given mortgages on their homes or have personal liability for bank debt and possibly payroll or sales taxes. But ignorance is not bliss. Things do not get better by ignoring them.

Careful planning requires that the individual owners know the options they face personally. At some point, in order to preserve the confidentiality of their discussions, it may be advisable that the individual owners have their own attorney separate from the corporate or business attorney. Options to be explored are workout strategies as well as bankruptcy. Here, the right advice is essential so that the owners can minimize or avoid future problems. The traps are many and easy to fall into.

For both businesses and their owners, being in financial trouble is scary and overwhelming. Hiring the right attorney to help you to plan and guide you through the options and choices is essential. The right attorney can help business owners take back control. There is no substitute for experience. Advice and representation from qualified legal counsel is the best money that can be spent.

Neuner & Ventura are experienced attorneys federally recognized as a debt relief agency helping people obtain debt relief using bankruptcy and other means. As a long-time business bankruptcy specialist, Steven R. Neuner has the background needed. Please contact Neuner & Ventura at (856) 596-2828 for a consultation.

Doing business with businesses in Chapter 11 and trustees in bankruptcy-the importance of getting paid and knowing the ropes

We often counsel businesses that are asked to perform services for a company in Chapter 11 bankruptcy or a trustee for a debtor. Our advice is simple. Make sure you have the proper paperwork and watch that you get paid. A recent decision out of the New Jersey Bankruptcy Court, In re Livore, 2012 WL 2400469 (2012)  underscores this. Mr. Livore owned several apartment complexes. He started in Chapter 11 but soon found himself in Chapter 7. The Chapter 7 trustee decided it was going to be profitable to run these apartment complexes and got section 721 court authority to do so, evidently thinking the complexes could managed,  and sold as a going concern with money left over for creditors. He hired a property management company and real estate brokers. He paid the management company’s bills in the ordinary course of business and paid brokers upon sale of some of the properties. After all that, he found that, contrary to expectations, there would not be enough money left even to pay his fees and expenses, and other “administrative expenses”. Under the Bankruptcy Code, all persons with “administrative claims” for goods or services supplied after the bankruptcy filing that benefit the bankruptcy estate being administered are supposed to be paid first, and if there is not enough money to pay them all, they are all supposed to receive the same pro-rata percentage of the funds available. So the Trustee filed a motion asking the court to order the management company to refund some of the money they got paid because on a pro-rata basis in hindsight, the management company had been overpaid, leaving less money  to pay everyone else with administrative claims, including  the trustee’s attorney and his accountant,   the US Trustee and others.

Chief Judge Wizmur denied the motion, saying in essence that when a trustee (and by extension any Chapter 11 or Chapter 13 debtor) hires someone in the ordinary course of business under authority granted under the Bankruptcy Code, the money paid to such people on an ongoing basis is theirs to keep, and cannot be “clawed back” to “even the pot” for other people who provided services but were not paid. She relied on Bankruptcy Code section 549 which describes when and how a trustee can recover unauthorized post-petition transfers. That section, she said, limited the trustee’s rights to recover payments made post petition to those that were made without court approval or contrary to bankruptcy code authority.  Since the property manager here was not a “professional” and the trustee had hired and paid him in the “ordinary course of business” after receiving the required court approval to operate the apartment buildings as a business, his doing so was authorized under Bankruptcy Code section 363(c)(1).

This decision is well supported. It is good news for most people who get paid by a Chapter 11 or Chapter 13 debtor or a trustee while a bankruptcy is ongoing. It is not good for those who let unpaid bills mount or who do not get the proper court authorization before doing work or supplying value.

The latter group includes those who provide “professional” services, such as brokers, accountants, lawyers and auctioneers. They still have to make sure that the trustee gets court approval of their employment right at the outset. Judge Wizmur opined that the property manager’s role did not rise to that level.

Anyone who deals with debtors in bankruptcy or their trustees needs to know what is required. At a minimum, a written agreement, and a careful understanding of the legal basis for being hired is critcal, as is prompt billing and payment. One interesting note: had the Trustee engaged the property manager with a written contract that preserved the trustee’s right to “clawback” payments made so as to give all administrative claimants the same treatment, the result might have been different.

 

Credit is a two-edged sword: Businesses, like people, have to be careful how they use it

This article in the August 2, 2012 New York Times, http://www.nytimes.com/2012/08/02/business/smallbusiness/for-small-businesses-bank-loan-alternatives.html?_r=1 details how businesses can borrow money from more expensive sources than bank loans, but at much higher cost. It is informative, but it should remind us all that credit is a two-edget sword. Used properly and with proper planning it can help us thrive but used carelessly it can destroy hard earned success and impose a blight on the future.

Too often we have seen business people who used debt, including factoring or asset based lending (described in this article) to paper over more serious problems. If a business wants or needs to borrow, the first questions have to be “why do we need this?” and “how are we going to pay it back?” If borrowing is used to invest in improvements to business operations, or to expand into a profitable new area, it can be the germinator of future success. But if new debt is being used to pay the owners or carry the business, caution is necessary. Too often we have seen businesses that “kicked the can down the road” by borrowing in this way. Sooner or later the day of reckoning comes.

As with anyone using credit, thought and planning is critical. Business owners need to carefully evaluate present and future cashflow. Evaluate how the new money is going to be used, and balance the benefit against the cost. If a business is losing money, borrowing to make up the loss will simply accelerate the losses. Consideration should be given to reducing expenses before borrowing more.

And throughout this process, the best money a business owner may spend is for accounting or legal advice from professionals experienced in business and turnaround issues. No matter the situation, it always helps to understand all the issues and alternatives, including use of Chapter 11 bankruptcy, or bankruptcy alternatives such as business workouts or assignments for the benefit of creidtors.

Third Circuit to injured plaintiffs- your claim can be discharged before you know it exists

When a defendant files for bankruptcy, anyone with a potential damages claim is at risk that their claim will be discharged and lost. But what about the plaintiff who does not know he/she has been injured? Under two recent rulings of the Third Circuit Court of Appeals, these claims can still be discharged so long as the claimant has been “exposed to a debtor’s product or conduct” before the bankruptcy was filed. In a more recent 2012 decision (Wright v Corning), that Court held that in a reorganization bankruptcy, even such claims where the exposure happened before the debtor’s plan has been confirmed (something that happens usually many months after the bankrutpcy is started) can likewise be discharged. The Court held that notice by publication is sufficient to alert claimants “that by being exposed to a debtor’s product or conduct, they might hold claims even if no damage is then evident”.

The facts in Wright v Corning illustrate the problem. In 1998, Wright purchased Owens Corning roof shingles which were installed on her house. The defects in these did not become apparent until 2009 when they started leaking. Corning filed its bankruptcy in 2000. Notice to potential claimants for defective shingles and other products was given by publication in local and national papers. In 2005, West purchased shingles which also turned out to be defective. This purchase was AFTER the bankruptcy filing, but BEFORE Corning’s reorganization plan was confirmed.

The Court, following the majority rule elsewhere, held that both sets of claims would be treated as debts that would be discharged by the bankruptcy filing and plan confirmation. This did not happen in this case because until 2010, the Court’s rule had been that such claims did not exist until the damages became apparent, and thus it was a denial of due process to sand-bag them, since at the time in 2005, they were entitled to rely on the old rule in effect. However, for any cases filed since 2010, claimants will not get such a “do-over”.

This should strike non-bankruptcy practitioners as unfair. However, the Court relied on the broad statutory definition of claim, which affords debtors seeking bankruptcy relief the broadest scope of protection against future claims.

Note that this same rule also applies when the defendant is an individual filing under Chapter 7 or Chapter 13.

Any time a potential plaintiff might have a possible claim, early and affirmative action in a defendant’s bankruptcy is critical. No doubt many deserving claimants whose damages become apparent after the bankruptcy will lose out. Hopefully, Congress will address this, or insurance will be available.

How small family owned businesses succeed, and how to avoid feeding a failing enterprise

Here is a great little article from the New York Times explaining what attributes are common to small family owned businesses. Recommended reading.

http://www.nytimes.com/2012/04/05/business/smallbusiness/how-they-beat-the-odds-to-keep-family-businesses-healthy.html?_r=1

In our experience the watchword for business owners is “fail to plan, plan to fail”. These businesses do the following:

1. They stay on top of their game, and stay flexible, ready to find and meet the needs of their customers and of the marketplace.

2. They make everyone pull his/her weight, and avoid favoritism to family members. I would add that business owners who develop a sense of entitlement to a certain income or livestyle can be the downfall of the business.

On the other hand, many business owners do not do the converse: make the business pull its weight, and if it is not then start asking hard questions.. Instead, they blindly put money into a failing business without asking the tough questions, why this is necessary. We all know some businesses are cyclical, and have to get through the lean months to make money in season. But if the good times are not enough to pay off the deficit run up during the lean times, all that happens is that the owners end up further and further in debt until they run out of money. Long before this happens the owners need to take a hard look at what is happening.

3. They seek out and get qualified advice from attorneys and accountants.  This follows from the “fail to plan…” thought above. Sometimes early advice from a trained and objective outsider can be just what is needed to get back on track.

With years of experience advising business owners, and in dealing with the aftermath of failed businesses, we know how these sad results can happen. Business owners who think they must contuinue to run a failing business need to explore the alternatives, and the ways they can avoid the vicious trap of feeding a failing business. Too often the end result is an avoidable or far-too-costly and painful business bankruptcy.

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