San Francisco Bankruptcy Lawyer Blog

The Commissary Operations case (Case No. 308-06279) was handed down a decision on January 6, 2010. The United States Bankruptcy Court for the Middle District of Tennessee helped creditors defending against preference actions.

Section 503(b)(9) of the Bankruptcy Code gives first priority administrative status to claims for goods received by the debtor within 20 days of the bankruptcy filing. The Section was part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to provide additional protection to trade creditors by allowing suppliers of goods to assert an administrative expense claim for the value of goods sold and delivered to, and received by, a customer in the ordinary course of business within 20 days of the customer's bankruptcy filing.

In the Commissary Operations case, Bankruptcy Judge Marian F. Harrison ruled that the goods that make up the 20-day claims may also be included in the subsequent new value defense under Section 547(c)(4) of the Bankruptcy Code. The subsequent new value defense allows preference defendants to reduce their preference liability if they supplied the debtor with new products or services after the payments sought to be recovered were received. The defense applies when the debtor and the creditor have a running relationship.

In the Commissary Operations case, the debtor wanted to disqualify 20-day claims from being counted as new value. The court decided that result would deprive creditors of the priority given to them under the Bankruptcy Code.

Judge Marian F. Harrison said requiring creditors to choose between a 20-day claim and preserving their right to assert a new value defense that includes deliveries made to the debtor within the 20-days before to the bankruptcy filing would chill their willingness to do business with troubled entities.

Continue reading "Bankruptcy Code Section 503(B)(9) Claims" »

The FBI web site provides tips on how people can protect their finances. On the front page of the FBI site, there is a warning against an ongoing scheme relating to jury service. Some people identifying themselves as U.S. court employees have been calling people and telling them they are selected for jury duty. These people ask to the public they are calling to verify names and social security numbers, then perhaps ask for credit card numbers. If the person refuses, the person is threatened with fines.

The FBI makes people aware that they should not give out information to people they do not know personally. The court system does not contact people by phone and ask for personal information like social security number, date of birth or credit card numbers. Usually in jury service, people are sent a notice in the mail to telephone in or to go to a court in person. Jury service may require disclosing a social security number if a person is picked for jury duty and paid for the time served.

Do not provide any personal or confidential information to people over the telephone. This may be an identity theft attempt or to gather information for fraud. Impersonation fraud occurs when someone assumes another person's identity to perform a criminal act.

Besides not giving out personal information over the telephone, avoid identity fraud, by not throwing away ATM receipts, credit statements, credit cards, or bank statements in original form. Always shred the information.

Never give a credit card number over the telephone. If someone calls asking for donations, ask to call the person back to ensure the telephone is legitimate. Reconcile bank accounts monthly. If blank checks get lost in the mail, cancel the account and open another. Review a credit report once each year. Notify the credit bureau in writing of questionable entries.

Continue reading "Fraud Tips" »

In San Diego County, Mission Bay is the place to be for a biker who does not yet have his cycling mojo and does not want to suffer a cycling accident. This is an easy 14-mile ride, mostly along separated bike paths, that lets the biker experience great views of the Pacific Ocean around Mission Bay, home to SeaWorld San Diego, 27 miles of shoreline, and 15 miles of bay front beaches.

Navigating through bankruptcy is like trying to enjoy a bike ride while learning to ride in a new area for the first time. In bankruptcy, there are three types of property to keep in mind: real estate, unsecured personal property, and secured personal property.

The bankruptcy estate includes the property a debtor owns on the day he files for bankruptcy. Property means everything a person owns whether or not he owes money on it, such as furniture, cars, real estate. Property includes everything a person is entitled to receive such as wages, tax refunds, insurance policy proceeds. Property not part of the estate includes pensions subject to ERISA laws, items that belong to someone else, income acquired after filing are not included in the estate.

In San Diego, Florida Canyon in Balboa Park is for the adventure seeker. This biking route is approximately five miles of mountain trails. Carve the tight turns to stay out of an accident when close to downtown.

Making the decision to file bankruptcy involves a little danger in life. It is like the risk taking that someone accepts when he rides on mountain trails instead of smooth roads. Bankruptcy leaves a blemish on someone's credit history. On bankruptcy filings, a person has to list all his creditors. It is possible for a bankruptcy trustee to take away a debtor's credit cards. A credit card issuer may find out about a bankruptcy and cancel a credit card.

When filing bankruptcy, the debtor must submit documents and oral statements under penalty of perjury. If someone is not honest, like fails to disclose assets, the person can be criminally prosecuted for fraud. A debtor must keep the trustee informed of his address, job changes, and divorces. Bankruptcy filings are considered public so cases may be published in local newspapers.

Continue reading "Bankruptcy Estate" »

According to the Employment Development Department, as of March 12, 2010, President Barack Obama signed legislation approved by the U.S. Congress that extends the filing deadlines for a month on the four different federal extensions of Unemployment Insurance (UI) benefits. The legislation extended the deadlines for filing the federal extensions.

The legislation also extended the additional $25 stimulus payments on each week of UI benefits paid by the federal government. This is a great plus to the unemployed because the first $2400 of UI is not reportable as taxable income.

On March 10, 2010, the U.S. Senate approved legislation that would extend the federal extension filing deadlines through the end of December 2010, but not add more weeks of unemployment benefits. This legislation requires approval by the U.S. House of Representatives and signing by President Obama.

Unemployment benefits are normally for 26 weeks. The first federal extension of benefits is 20 additional weeks. The filing is automatic, and the unemployed person does not need to complete any forms.

A person who qualifies to file again for unemployment will need to file a new claim instead of continuing with a federal extension. The person may file a new claim 5 days before the old claim expires. When filing a new claim, the person will need to have a one week waiting period before collecting unemployment on the new claim.

Continue reading "Unemployment Extension 2010" »

Much of reaching financial security in order to enjoy life is like getting the bike mojo back to enjoy the ride. As in bicycle riding, where safety requires having the right gear, understanding traffic laws, and keeping a bike well maintained, credit counseling 101 teaches about informal debt repayment plans, bankruptcy filing laws, and calculating income status.

On gear, bicyclists are advised to always wear a helmet. When in an accident, helmets are sick, head injuries are not. With a debtor, counseling offers a proposal to settle with creditors. According to Nolo Press in "The New Bankruptcy, Will it Work For You?", if a credit counseling agency proposes a settlement that repays at least 60% of a debtor's debts, and the creditor does not accept the plan, the credit may be penalized by only being able to collect up to 80% of the total claim, when and if a debtor's property gets distributed in bankruptcy.

Aside from helmets, the most purchased safety equipment in cycling is probably the glove. Gloves protect the skin on the palms of hands when there is an accident on pavement. With credit counseling, the second value that people get is training on how to calculate income status. In 2005, the bankruptcy laws change to require higher income individuals with mostly consumer debts to file Chapter 13. In deciding to file bankruptcy, use the average gross income received during the 6 months prior to the month a debtor desires to file. This number is the current monthly income.

In bicycling, cyclists in competition prevent lost of self respect by using mouth guards. Mouth guards prevent blows to the chin from messing the teeth if there is an accident just like a boxer who makes sure his pearly whites are well protected in a fight. A debtor should not let the word "bankruptcy" get him down. Credit counseling will reveal that "buy, buy, buy" has been the seductive message in the United States. Bankruptcy is based on forgiveness, not redemption.

Cycling safety involves knowing traffic laws in order to survive a bike accident in difficult traffic situations. Knowing bankruptcy laws allows debtors not to succumb to discrimination in challenging financial situations. For instance, an employer may not terminate a worker because of a bankruptcy filing. Bankruptcy is not to work against someone who needs security clearance such as for a job with the CIA or FBI. Government agencies may not discriminate someone for a license, public benefits, or housing because of a bankruptcy filing.

Continue reading "Financial Safety" »

On February 25, 2010, the Securities Exchange Commission (SEC) filed civil charges in SEC v. Bonventre, Lit.Rel.No. 21424 against Daniel Bonventre for his involvement in Bernard Madoff's Ponzi scheme. Daniel Bonventre was Madoff's Director of Operations.

The Huffington Post reported in "Daniel Bonventre ARRESTED: Former Madoff Operations Executive To Face Criminal Charges" that Daniel Bonventre, an accountant, worked for Madoff since the late 1960s. At age 63, he faces conspiracy, securities fraud and tax charges. The SEC accuses Bonventre of falsifying records to disguise Madoff's fraud and illegally enrich himself.

Bonventre ran the back office at Bernard L. Madoff Investment Securities LLC (BMIS), and oversaw the firm's accounting and securities clearing. The SEC alleges Bonventre knew of the Ponzi scheme and made at least $1.9 million in personal profits from the scheme through fake, backdated trades in his own investor account at BMIS.

The charges are also considered criminal and thus, Bonventre has been arrested. The charges link Madoff's investment advisory business to the broker-dealer where Madoff's brother and sons, Andrew and Mark Madoff, worked.

Victims of Madoff's Ponzi scheme sued the president and directors of the SIPC alleging the SIPC trustee, Irving Picard, in charge of the Madoff matter is defrauding customers by basing claim calculations on amounts deposited less withdrawals, instead of on the statements Madoff sent to investors.

Continue reading "Madoff's Director of Operations" »

7KPLC reported on February 2, 2010 that a civil jury awarded $7.5 million against Robinswood School in Chennault, Louisiana, a school for the developmentally disabled. The family of Tony Courville claimed the man died because he was neglected by caregivers when he was suffering from pneumonia at age 39 in 2005. Robinswood School plans to appeal the case.

Couville's case is an example of medical malpractice, one form of personal injury. Other forms of personal injury are:

-automobile, cycle, or pedestrian accidents
-slip or fall accidents
-defective products accidents

Personal injuries may result in insurmountable debts from lost earnings and medical bills. When involved in a personal injury accident, preserve evidence. If it is a car accident, return to the scene to take any photos of the street names, traffic lights, worn or torn spots. Protect physical evidence like damage to a car, clothing, or body parts.

Witnesses assist in preserving evidence. Those who did not see you at the accident scene can still confirm your pain afterwards. Getting statements as soon as possible is important before memories fade.

Document injuries by reporting them to a doctor early before visible marks heal. Report your progress to a doctor. Periodic visits show the injury requires ongoing attention. Ask the doctor to note any back or joint injuries that will reoccur when you age.

Keep a diary of emotional distress from loss of sleep, appetite, family relations, and sexual relations.

Continue reading "Debts from Personal Injuries" »

Shreveportimes.com reported on February 9, 2010 that the Shreveport Police Department in Caddo Parish, Louisiana teamed with Union Pacific Railroad to conduct safety checks to decrease car and train crashes.

Police officers ticketed drivers who tried to beat trains across crossings and other infractions hazardous to drivers, train crews and the public.

It's heartbreaking when people get injured every day in vehicle accidents, resulting in insurmountable debt from lost opportunities, and medical bills for therapy and treatments.

Discharge in bankruptcy may clear a debtor of past debts. In a Chapter 7 bankruptcy liquidation case, if the debtor was dishonest or uncooperative, such as making fraudulent transfers or failing to keep adequate records prior to filing or by ignoring court orders after filing, the court may deny discharge. A Chapter 7 debtor cannot have debts discharged more than once every nine years. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 states in order to receive a discharge, an individual debtor must complete a personal financial management class.

To stay away from debt, if involved in a vehicle accident, pursue the responsible party, who is liable to pay you for your medical specials, pain and suffering, physical disabilities and disfigurements, loss of family, social, educational experiences, and emotional damage.

Continue reading "Vehicle Accident Damages" »

On March 10, 2010, CNNMoney.com reported "BofA to scrap overdraft fees on debit purchases". Bank of America announced plans to stop charging overdraft fees on debit card purchases by summer 2010 at the same time that the Federal Reserve announced new requirements to go into effect in July to prohibit financial institutions from charging overdraft fees for ATM and one-time debit card transactions unless a consumer agrees, or opts in, to overdraft service for the transactions.

Bank account overdraft fees are not always expected. Sometimes consumers may not have balanced their accounts correctly and think they have money when they do not. A Federal Reserve Board publication (http://www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm) helps consumers understand rules that protect them when a debit card or ATM transaction causes overdrawing with an account.

In July, financial institutions need to give consumers a notice that explains the financial institution's overdrafts, including the fees, and the consumer's options.

Besides complying with the Federal Reserve requirements, Bank of America plans to decline debit card purchases that would push checking account balances into the red.

Continue reading "Overdraft Rules" »

Vartanian and Nesbitt,Enforcement Actions Against Banks Exceeded 1000 for First Time in 2009, 94 Banking Rep. (BNA) 444 (Mar. 2, 2010) by Tom Vartanian and Larry Nesbitt analyzes federal bank enforcement actions. The authors describe how the financial turmoil has resulted in a surge in the number of enforcement actions taken in 2009.

The publication comes after the House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 in December 2009. This reform could change the federal preemption for national banks and federal thrifts to limit the ability of regulators to preempt state laws, as the OCC and OTS have done. The bill would eliminate preemption of state laws on operating subsidiaries of national banks and federal thrifts, giving state attorney generals certain powers over these institutions.

The Wall Street Reform and Consumer Protection Act of 2009 Bill deals with reverse mortgage lending, executive pay, Securities Exchange Commission enforcement powers, and creates federal oversight over the derivatives markets and credit rating agencies. The latest version of the Bill defeats an amendment that would have allowed bankruptcy judges to cram down mortgages during Chapter 13 proceedings.

Continue reading "Enforcement Actions Against Banks" »

The Securities Investor Protection Corporation (SIPC) is known as the first line of defense when a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. The SIPC either acts as trustee or works with an independent court-appointed trustee in a missing asset case to recover funds. In the Madoff case, the SIPC-appointed trustee is Irving Picard.

U.S. Bankruptcy Judge Burton Lifland ruled in March 2010 on the process for determining how much money investors may get to receive from the SIPC on the Madoff Ponzi scheme. The judge agreed with Irving Picard that investors could claim only the amount they first invested with Madoff (minus withdrawals).

After a full briefing by Trustee Irving Picard, the SIPC, the Securities and Exchange Commission (SEC), and customer claimants, supporting and opposing to Picard's motion on the proper interpretation of "net equity" under the Securities Investor Protection Act, and after a hearing, the Burton R. Lifland issued an opinion on March 1, 2010 approving Picard's "net investment" method of determining customer claims.

Continue reading "Madoff Investors" »

Fox News reported on March 12, 2010 in "Man at Wheel of 'Out-of-Control' Prius Has Troubled Financial Past" that James Sikes who reported an out of control Prius that required the assistance of police to help him stop, had filed for bankruptcy in 2008 in San Diego, CA.

Fox News reported that Sikes had more than $700,000 in debt, and that the Prius was his only car. Sikes was also involved in a civil case where a man who purchased his home claimed undisclosed problems costing $20,000.

Sikes told the news he did not plan to file a lawsuit against Toyota. Though people should not really question how someone would react in an emergency circumstance, and in hindsight may realize new things like how Sikes could have put the car to neutral, some people thought Sikes was trying to pull a scam.

On March 15, 2010, Reuters reported "Toyota: no evidence Calif. Prius surged out of control" that Toyota suggested authorities examine whether the incident happened as reported to police. Safety investigators said they found no evidence to support or disprove Sikes' version of events.

The story on Sikes comes after Anna Ayala came clean after 4 years in prison on her Wendy's chili episode five years ago according to San Jose Mercury in "Finger put in Wendy's chili was cooked first".

Continue reading "Out of Control Toyota Prius " »

On March 9, 2010, the San Francisco Chronicle reported "Lindsay Lohan suing for $100 million over E-Trade 'milkaholic' baby ad". The ad allegedly parodied Lohan's life for profit.

The right of publicity allows an individual to sue when the person's name, likeness, or other personal attributes are used without permission for a commercial purpose, such as advertising or to sell a product. Identity may involve any manner that evokes identity not necessarily a use of a person's name. California, Civil Code Section 3344 provides statutory damages, punitive damages, and attorneys fees and costs, among other remedies.

Injuries from the violations of the right of publicity are not simple to evaluate like injuries from a car accident. Usually the claims are for emotional distress, which are about as difficult to prove as soft tissue injuries. Soft tissue injuries are difficult to prove because they are not permanent. With soft tissue injuries, there is discomfort to the muscles or nerves, but a person cannot pinpoint them like broken bones or hard injuries that cause life disruptions.

In a lawsuit for violation of publicity rights, the injured party may need to go through mental exams or therapy like in an accident. Medical bills will be used to evaluate the seriousness of an injury. Diagnosis of the injury may run up the medical bills with tests and exams, but bills relating to treatment determine the seriousness. Medical bills from doctors, hospitals, clinics are given more weight than therapy and chiropractors. Therapy under a doctor's referral and control is more likely to be lumped as part of medical specials than therapy that was not recommended.

If a doctor prescribes medication, the injured party will more easily convince the responsible party that the injuries are serious depending on how strong and how long the medication is prescribed. Taking prescription drugs indicates that a doctor viewed the injury as painful.

Continue reading "Right of Publicity" »

According to a Chicago Tribune article "Tribune Co. creditors sue banks over buyout" on March 4, 2010, Tribune Co. creditors filed lawsuits against banks behind Tribune Co.'s 2007 leveraged buyout, claiming the $8 billion in loans arranged prompted the company to bankruptcy. Tribune Co. announced in December 2008 that it was voluntarily restructuring its debt obligations under the protection of Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

Tribune Co. is an example of a bankruptcy and restructuring case, where a court is asking whether unsuccessful leveraged buyouts (LBOs) constitute fraudulent transfers by the lenders or equity purchasers. A LBO occurs when a financial sponsor acquires a controlling interest in a company's equity and a percentage of the purchase price is financed through leverage (defined as borrowing). The assets of the acquired company are used as collateral for the borrowed capital.

Fraudulent transfers may involve actual or constructive fraud. Bankruptcy Code Section 548 provides standards for avoiding fraudulent transfers. Each state has its own fraudulent transfer law. Bankruptcy Code Section 544 incorporates state fraudulent transfer law.

Bankruptcy Code Section 548(a) gives the actual fraud standard. A debtor may avoid any transfer of the debtor's property, or any obligation incurred by the debtor, that was made or incurred on or within two years before the debtor filed for bankruptcy, if the debtor voluntarily or involuntarily made such transfer or incurred such obligation with "actual intent to hinder, delay or defraud" a creditor.

Bankruptcy Code Section 548(a)(1)(B) discusses constructive fraud. The Code allows avoiding any transfer where the debtor received "less than a reasonably equivalent value in exchange for such transfer or obligation" and either was: (I) insolvent on the date such transfer was made or obligation incurred, or became insolvent as a result of such transfer or obligation; (II) engaged in business or a transaction, or about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; (III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured; or (IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

Continue reading "Fraudulent Transfers" »

The Bankruptcy Court for the Southern District of New York confirmed the plan of reorganization of Crabtree & Evelyn, Ltd. in January 2010. The company filed bankruptcy around July 1, 2009 as reported by Rachel Feintzeig of The Wall Street Journal "Crabtree & Evelyn Files for Bankruptcy Protection". Crabtree & Evelyn, retailer of body and home products, is among the numerous U.S. retailers who have filed Chapter 11 bankruptcy protection. Many retailers who file bankruptcy do not successfully reorganize.

Crabtree & Evelyn closed on a $26.3 million exit loan from its parent company, Kuala Lumpur Kepong Berhad, a Malaysian company that also owns palm and rubber tree plantations. This loan provides cash to make payments under the plan of reorganization and pay amounts towards the company's strategic business plan. The company has resized its retail footprint by closing 35 of its retail locations and focusing on the remaining 91 retail locations. The company launched an e-commerce platform, at www.crabtree-evelyn.com.

Crabtree & Evelyn has introduced new products as part of its execution on its plans, such as the new Citron Honey & Coriander Hand Therapy Collection, naturally based hand creams, cleansers, and treatments.

There is a Crabtree & Evelyn located at 2 Embarcadero Center, Street Level in San Francisco, CA that markets it as a place that soothes the mind, body and soul.

Continue reading "Crabtree & Evelyn, Ltd." »

There has been an increase in bank failures, with 140 banks failures in 2009, compared to 26 bank failures in 2008.

Whether a bank is insolvent is made by its chartering authority (such as the state bank supervisor for state chartered banks, the Office of the Comptroller of the Currency for federally chartered banks, or the Office of Thrift Supervision for thrifts. Once a bank is insolvent, the regulator appoints the Federal Deposit Insurance Corporation (FDIC) as receiver.

FDIC as facilitates a bank's liquidation, dissolution, asset sale, or merger. The receiver for a insured depository institution may disaffirm or repudiate any contract or lease. Any contract to which a bank is party can be repudiated, including loan agreements, employment contracts, employee benefits, and leases.

If the receiver repudiates, the repudiation is treated as if the contract was breached on the date receiver's appointment date. The receiver, as the breaching party, is free from further obligations with the contract. The counterparties may recover damages from the repudiation. The receiver's liability for the repudiation is limited to actual direct compensatory damages, and there is no liability for punitive damages, lost profits, or pain and suffering.

Continue reading "FDIC and Bank Failures" »

On February 10, 2010, In the Matter of: TransTexas Gas Corporation, the US Court of Appeals for the Fifth Circuit addressed severance payments arising from a company's Chapter 11 bankruptcy. The court held that a severance payment to a former CEO, who resigned, was a fraudulent transfer. The former CEO was an insider, since he was still CEO when the severance agreement was signed, even though he was not employed when he received the actual payment. The bankruptcy court and company trustee have legal authority to go back up to one full year, and take back any severance payments to insiders that were not paid in the usual course of business, such as salary, health insurance, and expense reimbursement.

In the Matter of: TransTexas Gas Corporation, the court held the company did not receive equivalent value for the severance payment. Under the employment agreement, the CEO was not entitled to any payment if he resigned. Evidence existed the CEO could have been terminated for cause, in which event, he was entitled to only half of the severance he received.

In the Matter of: TransTexas Gas Corporation is an example that when a company files a bankruptcy petition, anyone owed severance is considered an unsecured creditor. If an employee is concerned about not receiving all his/her severance when a company files bankruptcy, negotiate in the employment agreement to receive a lump sum, sign and accept the severance as soon as possible.

Continue reading "Severance Payments in Bankruptcy" »

On December 31, 2009, Kemper Insurance Companies combined surplus for Lumbermens Mutual Casualty Company and American Manufacturers Mutual Insurance Company dropped from $62.7M in third quarter 2009 to $19.1M.

Each state has a department of insurance that monitors the finances of insurance companies. Kemper is monitored by the Illinois Department of Insurance. Since March 19, 2004, Kemper has been operating under a plan of run-off, which will end with liquidation. Federal bankruptcy laws do not apply to insurers because it is a regulated industry. The company's estate is administered by the Department of Insurance as Liquidator, and overseen by state court.

The Department of Insurance is appointed the Receiver of the company to manage the liquidation process, and collect contractual balances such as deductibles, deferred premium, retrospective premium and dividend recaptures from policyholders.

Policyholders must complete a proof of claim, a notarized written statement, for claims against the insolvent insurer based on a known loss or occurrence. The proof of claim is available at: http://www.osdchi.com/loss_accident_form.htm.

During liquidation, the Receiver transfers open claims to guaranty associations, nonprofit organizations created by statute for protecting policyholders from financial losses in claim payment because of insurer's insolvency. The associations assume responsibility for the payment of claims payable by the insurer had it not become insolvent. Associations obtain funds from assessments against solvent insurance companies. Insurance companies are required to be members of the state guaranty association as a condition of being licensed to do business in the state.

If there are assets in the liquidation estate, the Receiver will obtain court approval to make a distribution of assets. A policyholder should respond to an insurance company's liquidation by:

• Understanding exposure through identifying coverages, limits, deductibles
• Gather documentation on insurance proposals, invoices, endorsements
• Understand liquidation process deadlines
• Research how to file proofs of claims
• Engage an experienced attorney

Continue reading "Kemper Liquidation" »

In April 2009, Old Carco LLC (f/k/a Chrysler LLC) and related entities (the Debtors) filed Chapter 11 bankruptcy petitions (www.chryslerrestructuring.com). Since 2009, the old Chrysler was sold to Chrysler Group LLC, which Fiat partly owns. After an asset sale, the Debtors formed Old Carco to liquidate the Chrysler assets Debtors were unable to sell to Fiat.

In January 2010, the Debtors filed a Disclosure Statement and Proposed Amended Joint Plan of Liquidation (Plan), outlining the proposed wind down of the bankruptcy estates, and the treatment of claims against their estates. Upon Plan confirmation, a liquidation trust (Liquidation Trust) will be created to liquidate remaining Debtors' assets and distribute allowed claims from the liquidation trust assets (Liquidation Trust Assets).

Most classes of claims will receive no distribution, and the federal government will take a $4 billion loss.

The Liquidation Trust will retain avoidance actions, and all such proceeds shall constitute part of the Liquidation Trust Assets. The bankruptcy system generally rewards creditors who continue to extend financing to debtors and discourages creditors from accelerating debt collection. Avoidance actions allow debtors, or the trustees that represent them, gain the ability to reject, or avoid actions taken with respect to the debtor's property for a specified time prior to the filing of the bankruptcy.

Avoidance actions for the Chrysler case include: 1) preference actions against parties identified on the Debtors' schedules of assets and liabilities; and 2) fraudulent transfers against any party that received a transfer from the Debtors during the relevant statutory periods. The Liquidation Trustee of the Liquidation Trust may only pursue avoidance actions if directed to do so by the federal government.

Continue reading "Chrysler Joint Plan of Liquidation" »

Most mortgage agreements give the lender the right to collect fees incurred to protect its rights in property, including fees for property inspections, broker's price opinions, foreclosures, bankruptcy.

When the borrower files a bankruptcy petition, pending foreclosure or collection efforts depend on the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. If the lender intends to collect foreclosure or bankruptcy-related fees from a Chapter 13 debtor, the lender may include the fees in its Proof of Claim. If the lender does not include fees in its Proof of Claim, some bankruptcy courts require the lender to demonstrate the reasonableness of the fees and seek the bankruptcy court's approval before collecting fees.

The Bankruptcy Code prevents bankruptcy plans from modifying a mortgage lender's rights under a mortgage agreement, subject to the debtor's ability to satisfy a mortgage arrearage through the plan.

If lender fees are allowed, they will be included in the debtor's bankruptcy plan as part of the lender's secured claim and collected through the plan. The lender should file an application with the bankruptcy court to have the fees approved when the debtor falls behind paying, and the lender files a motion for relief from the bankruptcy stay and seeks the court's permission to foreclose. The court may deny the motion for relief, but allow the lender to add its attorney fees to the arrearage the debtor must pay during Chapter 13.

When a Chapter 13 debtor's bankruptcy case is dismissed, bankruptcy law no longer applies to fees collection. Collection of fees after dismissal of the bankruptcy case depends on the terms of the mortgage agreement and state law. Bankruptcy courts retain jurisdiction to enforce their orders after dismissal so it is not clear if lenders may collect fees when a Chapter 13 debtor's case is dismissed if the bankruptcy court did not previously approve the fees.

When the debtor receives a Chapter 13 discharge, the court enjoins a lender from collecting discharged fees. The lender should audit the borrower's account and to remove all attorneys' fees that have not been disclosed and approved. Attempts to collect the fees may subject the lender to sanctions for violating the discharge injunction.

Continue reading "Lender Fees in Chapter 13" »

Normally, in the treatment of executory contracts, the debtor in possession or the bankruptcy trustee is vested with a qualified right to assume, reject, or assume and assign unexpired leases and other types of contracts to which the debtor is a party where some performance by both parties remains.

In the Lehman Brothers, Inc. bankruptcy, some non-debtor counterparties took advantage of the Bankruptcy Code safe harbors to terminate ongoing securities and derivative contracts with Lehman during the days and weeks after the bankruptcy filing.

To facilitate a debtor's ability to retain and/or realize value from its pre-petition contracts, the Bankruptcy Code makes certain types of contract provisions unenforceable, such as anti-assignment clauses and clauses that permit a party to terminate a contract based on a debtor's insolvency or the filing of a bankruptcy case. Bankruptcy Code provisions provide the debtor time to:

• assess its situation;
• prevent forfeiture of property and contract rights;
• collect and sell assets;
• opportunity to reorganize;
• obtain performance from counterparties;
• avoid transactions that benefit one set of creditors to the detriment of others.

Those who did not take advantage of the Bankruptcy Code safe harbors with Lehman were compelled to perform. For instance, Metavante Corporation entered into an interest rate swap pre-bankruptcy petition. The bankruptcy court ruled swap qualified under the Bankruptcy Code safe harbors, and was an executory contract. Since Metavante didn't terminate the swap, it had to perform post-bankruptcy petition despite the fact that the Lehman bankruptcy constituted a default under the agreement.

Alison Doyle, a job search expert with many years of human resources experience, with a focus on online job searching, job search technology, social media, and professional networking, covers job searching for About.com. Doyle writes in her Alison's Job Searching Blog on February 12, 2010 about unemployment extensions.

During these difficult economic times, employees sacrifice their own personal time to keep a job to stay out of debt.

In California, companies are not required to provide any additional compensation or compensatory time to exempt employees who work longer than 8 hours per day, on weekends, during vacations, or during company-paid holidays in order to adequately perform their assigned duties.

A company may have a policy to award compensatory time to an exempt employee if the exempt employee's duties require him/her to work on company-paid holidays, or consistently require him/her to work outside of normal hours. Most policies allow the exempt employees to earn one day of compensatory time for every 8 hours worked outside of normal hours. Employees are required to record time worked in exchange for compensatory time on timecards. The timecards must be verified and signed by the exempt employee's direct manager.

However, these policies may create havoc in tracking employee time off when people start to work longer than 8 hours per day, on weekends, or during company-paid holidays out of his/her own personal choice, and not from the instruction of the employee's direct manager.

Continue reading "Compensatory Time" »