Can a Bankruptcy Filing Help You Save a Business?

Can a Bankruptcy Filing Help You Save a Business?

If your business is facing hard times, you may be inclined to shut it down, declare bankruptcy and give your creditors what you can. But bankruptcy can often be a way to save a business, particularly if the market’s starting to turn and you just need some time to get into the black. A Chapter 11 bankruptcy petition can do more than simply make your monthly payments more affordable. It can buy you that precious time without a lot of cash going out, where you can finally right the ship.

The Benefits of a Chapter 11 Bankruptcy Filing

When you seek to reorganize your business debt under Chapter 11, you’ll get the immediate and immense benefit of the automatic stay. The automatic stay prevents creditors from calling, writing or taking legal action to collect on any debt, other than through the bankruptcy process. You won’t have to deal with continual calls or threatening letters, and all legal proceedings will be suspended until your bankruptcy filing is complete.

In addition, once you file for Chapter 11 protection, you’ll have a certain amount of time to work out new payment arrangements with all of your creditors. Often, you can negotiate new arrangements that involve the waiving of fees and penalties, and work out payments that significantly reduce your monthly outflow.

You’ll usually be allowed to continue regular business operations while in Chapter 11, but you will have some restrictions on business activity without permission of the bankruptcy trustee or the court. For example, you may be prohibited from taking on new debt or buying or selling certain assets without the approval of the bankruptcy court.

It is never too early to consider these options. Chapter 11 is risky and expensive but may well be worth it. A high percentage of small businesses in Chapter 11 will fail, but with proper advance planning, the chances of success are much higher.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weprovide a free initial consultation to every client. To set up a meeting, 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

Will a Bankruptcy Filing Make It More Difficult to Earn a Living?

Will a Bankruptcy Filing Make It More Difficult to Earn a Living?

If you have been struggling to make ends meet, you may have been reluctant to seek protection in bankruptcy because you’re afraid it will either put your job at risk, or make it difficult for you to find employment in your chosen field. It’s an important question to address—can your employer take any action against you for filing for personal bankruptcy protection? Can a prospective employer disqualify you because you have a prior bankruptcy filing?

Your Current Job

The bankruptcy laws do not allow an employer to take any type of retaliatory action against an employee because of a personal bankruptcy filing. Accordingly, you can’t be fired, demoted, transferred or incur the change or denial of benefits of privileges because you file for bankruptcy. There are no exceptions—it doesn’t matter if you work in a top secret job, as a trust officer or a construction worker. In fact, you may be at greater risk if you don’t seek bankruptcy protection. Workers in sensitive positions who have financial problems are generally considered more likely to be susceptible to blackmail than workers who have sought bankruptcy protection. This is an area, however, where you have to handle it correctly with your employer to minimize problems.

These rules only apply, though, to actions that take place after a bankruptcy filing. If you have been notified of an impending change in employment status, including termination, before filing for bankruptcy, the bankruptcy laws won’t prevent such change.

Future Employment Opportunities

While private employers are free to exclude candidates who have filed for bankruptcy, state, local and federal governments and agencies cannot discriminate in hiring because of a bankruptcy filing. Even with private employment, a proper approach with the guidance of an experienced attorney can make all the difference. We have many clients who have found jobs after a bankruptcy.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weknow that the bankruptcy process can be intimidating and confusing. Weoffer a free initial consultation to every client. For an appointment, call our office 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

Good Reasons Not to Handle Your Own Bankruptcy Filing

Good Reasons Not to Handle Your Own Bankruptcy Filing

When you are facing financial challenges and have concluded that your best option moving forward is a bankruptcy filing, you may be tempted to handle the bankruptcy on your own, particularly if you are seeking protection under Chapter 7. It’s almost always a bad idea to do that—here are some of the reasons why.

  • Bankruptcy is complex—you might choose the wrong chapter and end up losing money or property. You might be disqualified if you  miss a step, like completing the two courses required. Or you might mess up the Means Test, which is complex. Even experienced attorneys such as us use specialized software and tools to get it right.
  • The forms and procedures are complex and ever changing. Filing the wrong forms could jeopardize your bankruptcy.
  • You may fail to file important documents, or miss critical deadlines
  • You may not get the relief you wanted, needed or expected—Some debts cannot be discharged in bankruptcy. For example, if you file bankruptcy primarily to rid yourself of child support or student loan payments, you won’t succeed, as those types of debts typically cannot be discharged.
  • You may not get all the benefits to which you are entitled—there are both state and and federal exemptions. Some property is excluded. But you won’t know what to do if you’re not trained as a bankruptcy lawyer or assistant.
  • You do not know the judges and the trustees, or the accepted procedures where you are filing.

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

Challenges to the Discharge of Luxury Purchases and Cash Advances

One of the advantages of a Chapter 7 bankruptcy is that it allows you to permanently discharge certain debts, meaning that you will no longer have personal liability for them. As a general rule, credit card debt can be discharged, but there are limits.

Under the bankruptcy laws, any debts arising from the purchase of luxury goods  within 90 days of your petition for bankruptcy  made from a single creditor will be presumed to be fraudulent and non-dischargeable, if the purchases total more than  $650. This result is not automatic. The creditor has to file a Complaint in the bankruptcy seeking non-dischargeability. If it does so, the burden is on the debtor to prove that the purchases or resulting debt were not made with intent to defraud the creditor. Stated another way, a creditor will not be required to prove that you did not intend to pay or that you intended to discharge the debt in bankruptcy. Instead, you will have to  introduce evidence to demonstrate that the purchase was not a luxury, but necessary for the support or maintenance of the debtor or a dependent or spouse, or that the purchase was not made for a fraudulent or improper purpose.

For purposes of the bankruptcy law, a luxury item is considered to be any goods or services not reasonably required by the debtor for his or her own support or for the support of any legal dependent. While the determination of whether an item is a luxury item depends on circumstances, items like food, gas, clothing and furniture are more likely to be considered non-luxury than jewelry, home appliances, books, or a computer.

The same presumption applicable to luxury purchases also applies to cash advances on a credit card or other open end credit plan made within 70 days of filing, to the extent that these total more than $925. This does not apply where the cash advance is for a business purpose.

We generally recommend that our clients stay away from these kinds of purchases or use of credit. Like any unusual or suspect financial dealings, these will commonly result in suspicion and greater scrutiny across the board. When anticipating a bankruptcy, it is generally best to play it straight and stay within the bounds applicable to the “honest but unfortunate debtor”.

That said, a certain amount of legitimate planning going into a bankruptcy is permitted. The wisest course of action is to consult with and follow the advice of an experienced and ethical bankruptcy lawyer.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, 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

Can Criminal Debts Be Discharged?

Suppose you’ve run into trouble with the law—maybe you’ve incurred criminal penalties for drunk driving or have been ordered to pay restitution for malicious destruction of property or embezzlement. If you are facing financial challenges, you may be considering a Chapter 7 bankruptcy filing, so that you can permanently discharge some of your debts. Can any of the obligations arising out of the criminal proceeding be discharged in bankruptcy?

The answer—it depends. There are some criminal obligations that are not subject to discharge. For example, any debt you owe for fines or restitution that accompany conviction for a crime simply cannot be discharged. In addition, any fine or penalty imposed by a government agency is not subject to discharge.

However, in New Jersey, certain motor vehicle convictions result in a “motor vehicle surcharge”. This is payable to a state insurance fund. For that reason, courts have ruled that these surcharges can be discharged in either a Chapter 7 or Chapter 13 bankruptcy.

If you have criminal fines, traffic tickets, or non-tax penalties, these will not be dischargeable. We recommend taking steps to pay these, or plan to be paying them.

That said, for many people, a bankruptcy which clears away other debt makes it easier to pay the fines or penalties that must be paid.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing.  We offer a free initial consultation to every client. For an appointment, call our office 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

Can Student Loans Be Discharged?

It’s getting to the point, for many, where the cost of a college education is one of the biggest of life’s expenses, greater even than the cost of a home. Not surprisingly, as many college graduates struggle to find good jobs, many consider bankruptcy as an option to get their finances under control. The key question—can student loan payments be discharged in a federal bankruptcy filing?

Though many people don’t know it, there are limited circumstances where student loan payments can be wiped out under the bankruptcy law. Under what is known as the Brunner test (so named because of the U.S. Supreme Court case that laid down the principles for discharge of a student loan), you can discharge student loan obligations if you can demonstrate that repayment would cause you an “undue hardship.”

Under Brunner, a debtor can eliminate student loan debt by showing all of the following:

  • The debtor does not have sufficient income to maintain a minimal standard of living for himself/herself and dependents
  • The debtor has no reasonable prospect that the current financial situation is likely to change
  • The debtor has made a good faith attempt to pay off student loan debt

It’s important to understand that, without evidence to the contrary, most courts will presume that a debtor’s income will increase over time and that a debtor will be able to attain a minimal standard of living. Accordingly, any debtor seeking discharge of a student loan payment will need to affirmatively demonstrate that his or her situation is not likely to change. A debtor may introduce the following types of evidence to support that claim:

  • A mental or physical disability
  • Lack of education or training
  • Poor quality of education
  • Lack of job skills
  • Age of debtor

Exploring the options for income based repayment or discharge of student loans through various federal programs is a good idea and also a necessary first step. You can find information about what types of loans you have at this site: https://www.nslds.ed.gov/nslds/nslds_SA/. Information about federal student loan forgiveness and cancellation can be found here: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation

If you resort to a bankruptcy, discharging student loans will require that you file a “bankruptcy lawsuit” in the bankruptcy seeking a judgment of dischargeability.  Achieving success is possible, but difficult at present. Hopefully courts or Congress will find a way to ease the path to dischargeability.

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

Rebuilding Credit after Filing for Bankruptcy

Fox Business highlighted the important steps that one must take to restore a credit rating after filing for bankruptcy. There are limited ways to get out of the financial hole that many Americans are being trapped in. The most important first step is the one most people find hardest. Develop a household budget and stick to it. Know how much money is coming in and where it has to be spent. Identify and close off the “money leaks”, those little expenses that add up (e.g Buying lunch at $5/day equals $100 a month; buying coffee out at $3 a pop; cigarettes, liquor).

A credit score is compiled from several factors, including payment history, length of credit history, and amount of debt relative to income. Whatever debt you still have (eg car loans or leases, or mortgage payments if current) needs to be paid on time without fail. Many of our clients will eventually get a new credit card. One early option here is to apply for a secured credit card. By having a secured credit card, you are only able to charge items on your card as you put money on the card account. Most secured credit card companies will report the activity of your card to the credit bureaus, which increases your credit score with time. There are a number of other ways to start to buy and pay off items in order to keep raising your score.

But having credit is not nearly as important as how you use it. We recommend that clients have a credit card, and use it only for limited purposes, such as buying gas, then pay it off in full each month.

For those who have not already done so, filing for bankruptcy may be a positive step in tightening your financial belt, and taking back control of your life. We insist that our clients put together a personal budget and make getting back to financial stability as their all-important long term goal. In this regard, one bankruptcy requirement (we call it the “ticket out”) can be quite helpful if taken seriously. I refer to the “debtor education” financial management course that is required to receive a bankruptcy discharge. This course, from a credit counseling agency approved by the United States Trustee, can be done on-line, usually in about an hour. It typically covers the basics of budgeting and avoiding the traps that put debtors back in trouble.

Completing the financial management course after filing bankruptcy, and filing of the certificate form is essential. If not done, the case will be closed without a discharge of debts. Since the discharge is the whole point of a banrkuptcy filing, all the benefit can be lost unless the case is reopened. This will require a new filing fee and additional work by a lawyer.is usually taken during bankruptcy, although it can be completed before filing.

The point is that the damage to ones credit from a bankruptcy is not permanent. Indeed, we believe that for those who are drowning in debt, a bankruptcy is the best step back onto the road to financial stability, and an ability to pay debt that in turn will result in a return to a better credit rating.

Nuener & Ventura are experienced attorneys who are federally recognized as a debt relief agency. Our attorneys can help you take back control of your lives. We know how to point you in the financially responsible direction that you need to head after filing for bankruptcy. Please contact Nuener & Ventura at (856) 596-2828 for a consultation to start a new financially responsible life.

Estate Planning property transfers and gifts-the hidden trap of fraudulent transfer liability

Lately I have read two articles in bar journals discussing aspects of “estate planning” involving transferring property to relatives or into self-settled “special needs” trusts. Neither article mentions much less discusses the New Jersey Uniform Fraudulent Transfer Act. Yet the prospect of a transfer being unwound by a creditor or creditor representative (such as a bankruptcy trustee) is a real concern. Both those engaged in such planning activites and their lawyers need to keep this in mind.

Under both state and federal law (11 USC 548), a transfer can be “avoided” and the transferred property or its value recovered by creditors where the transfer was either with intent to “hinder delay or defraud” creditors, OR the transfer was made for less than “reasonably equivalent value” in exchange, at a time the person making the transfer was insolvent, rendered insolvent, or put into a position of not being able to meet current or reasonably anticipated future debts.

Stated in simpler terms, you cannot give away your property that creditors could seize to pay your debts, unless you get money or value in exchange that is roughly equivalent to what it is worth. Of course, if you pay off all your debts and stay debt free for a reasonable period of time afterwards, this may not be a problem.

Claiming that you intended to do estate planning rather than depriving your creditors is a defense that any good attorney can defeat, especially if the transfer was made to close family members, or creditors were starting to hound you. Intent to defraud can (and usually is) proven by looking to various “badges of fraud”. Not getting fair value in exchange is one of them.

Transferring your assets into a trust for your own benefit does not protect them from the claims of creditors. These “self-settled” trusts cannot, under New Jersey statutes, be used to insulate the property from creditors.

Most importantly, the creditors who can pursue fraudulent transfer claims include “future” creditors, not just those who were owed money when the transfer was made. While a 4 year statute of limitations applies to many such  state law claims, even after the 4 years is up, a creditor can sue up to a year after he or she learns of the transfer. And federal agencies, such as the IRS (or a bankrutpcy trustee in a bankruptcy case where taxes are owed) has up to 6 years.

We often say that those who want to engage in “asset protection” need to do it at a time when they do not need it. Usually, the impetus to these efforts is some impending problem, legal, medical or otherwise. Like so much else, timely counselling by someone who knows this area and has both pursued and defended these types of claims is invaluable. With proper guidance and planning, the problems I have outlined here can be minimized or avoided.

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