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Garnerville Bankruptcy Law Blog

American Chopper host caught in tangled bankruptcy

Personal bankruptcy can be a smooth process that can provide significant relief from overburdening debt. Occasionally, however, the real world intervenes, and the bankruptcy process becomes extremely tangled. Paul Teutel, the host of the Discovery Channel's popular program "American Chopper," is embroiled in a personal bankruptcy in the Southern District of New York that involves at least two significant complications.

Teutel is the owner of a 2009 Corvette ZR1 that is currently in the possession of a firm that was hired to customize it. The car is now able to reach 60 miles per hour in 3.2 seconds and reach a top speed of 200 miles per hour. For these and other improvements, Teutel was charged $51,000, which he has not paid. Now, Teutel wants his Corvette to be returned, in part, at least, because he doesn't want to pay the storage fee of $50 per day. The hearing on Teutel's motion to regain possession of the car will be heard by the bankruptcy judge.

Sears is on the brink of dissolving; will it be saved?

Sears has several stores in Rockland County and elsewhere in downstate New York. The court handling the closely-watched business bankruptcy set a recent deadline for the submission of bids to buy the company. If no qualifying bids were submitted, the court stated that it would begin the process of dissolution. According to reports, only one bid was submitted, and it has several problems.

The major problem with the existing bid is that the man behind the bid is also Sears' CEO. Eddie Lampert has been Sears' CEO for several years, and he is also the founder and CEO of ESL Investments, the company that submitted the potentially life-saving bid. ESL offered to pay $4.4 billion to purchase 425 of Sears' stores. The bidder also told the court that it had a commitment of $1.3 billion from several investment banks that would be used to finance the purchase.

Embezzlement forces literary agency to file Chapter 7 petition

A previous post here discussed how sexual abuse lawsuits are forcing companies to seek protection under either Chapter 7 or Chapter 11 of the Bankruptcy Code. But, there is another issue that may cause companies to seek bankruptcy protection: embezzlement by a trusted employee.

The debtor noted in a recent article is the literary agency Donadio & Olson that is based in New York City. The agency recently filed a Chapter 7 petition in the bankruptcy court for the Southern District of New York, listing assets of $47,241.90 and debts of $186,613.90. The embezzling employee was sentenced to prison on December 17 after pleading guilty to various crimes relating to the embezzlement, and the judge released letters written by the firm's two principals that described the events that led to the bankruptcy filing and the dissolution of the agency.

Sexual abuse lawsuits force organizations to look at bankruptcy

Many factors can force a business to consider bankruptcy, ranging from management errors to unexpected loss of customers to natural disasters. Another kind of threat to an organization's financial well-being has forced several organizations to consider file a Chapter 11 petition: lawsuits from victims of alleged sexual abuse. One of the nation's most iconic organizations, the Boy Scouts of America, an organization with many connections in Rockland County, is apparently seeking advice about bankruptcy in response to a number of lawsuits alleging that young boys were abused by BSA employees or volunteers.

The Wall Street Journal recently reported that the Boy Scouts has hired a law firm to provide advice about a possible Chapter 11 filing. Executives of the organization have denied that bankruptcy is on the horizon, but they have also acknowledged that they are exploring "all options available." The plight of the organization is also worsened by declining membership. In its peak years, the BSA counted 4 million members; its current membership is down to 2.3 million.

Understanding involuntary bankruptcy

One of the principal concerns of dealing with a person or corporation that is in financial difficulty is the possible mismanagement of the debtor business. Assets may be sold for less than fair market value or simply hidden from creditors. The debtor may decide to pay some creditors and not others. The bankruptcy code has a provision that creditors can use to protect themselves: involuntary bankruptcy.

Unlike an ordinary Chapter 7 or Chapter 11 proceeding, an involuntary bankruptcy is commenced by creditors of the debtor. The code specifies that three or more entities, each of which holds a non-contingent claim against the debtor, may file a petition asking the court to declare the debtor bankrupt and place its assets under court control. Other creditors who hold claims that are not contingent and not secured may join the petition.

Understanding the CARD Act

In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act, giving rise to the convenient acronym, "CARD Act." The Act is intended to protect consumers from deceptive and abusive practices by credit card issuers. Despite the widespread use of credit cards by residents of Rockland County, very few people are aware of the act or are knowledgeable about its key provisions.

The CARD Act targets two kinds of deceptive practices used by card issuers to obtain new customers. One class of protections is intended to protect persons under the age of 21 from accumulating credit card debts, and especially college students. In one key provision, card issuers are prohibited from visiting college campuses to offer gifts in exchange for completion of a credit card application. Card companies are also prohibited from mailing solicitations for credit card accounts to persons under the age of 21 unless they have specifically agreed to receive such solicitations.

David's Bridal files a Chapter 11 bankruptcy petition

Another large retailer has decided to seek protection from its creditors by filing a Chapter 11 bankruptcy petition. David's Bridal, the largest seller of wedding clothing and accessories in the United States, with stores in Yonkers, Long Island and 300 units elsewhere, filed a Chapter 11 petition on November 18. The company is hoping to obtain sufficient financing to enable it to emerge from bankruptcy with greatly reduced debt and enough cash to revive its operations.

David's began as a small bridal shop in Florida in 1950. It gained a reputation for selling reasonably priced wedding dresses and related apparel and grew steadily. In 2012, the company was purchased by a private equity company in a $1.05 billion leveraged buyout. The wedding apparel industry has seen rapid changes over the last few years. For example, the average amount spent a wedding gown grew from $1,211 in 2012 to $1,564 in 2016. New rivals emerged, with lower prices and fewer fancy and expensive frills. Another retailer offers off-the-rack dresses that can be tried on by customers without making an appointment. David's has had difficulty in competing with shrinking marriage rates, intense price competition and a shift in customer tastes away from elaborate and expensive fitting.

Which debts cannot be discharged in a personal bankruptcy?

Many people in Rockland County have filed Chapter 7 bankruptcy petitions thinking that all of their debts will disappear at the close of the proceeding. Unfortunately, several different kinds of debts are exempt from discharge. Knowing which debts cannot be discharged may assist in making the decision about whether to file a bankruptcy petition.

Any debt that is not listed on the schedules filed with the petition will not be discharged. Student loans cannot be discharged, unless the debtor can show that repayment would constitute an undue hardship. Federal, state and local taxes cannot be discharged. Likewise, government-imposed restitution, fines, penalties and court fees are exempt from discharge. Many people seek bankruptcy protection to escape child support and alimony obligations, but these debts cannot be discharged. Debts stemming from damages assessed against the debtor for driving while intoxicated cannot be discharged. Debts owed to pension plans and condominium dues are also beyond discharge.

The right help when it comes to filing for bankruptcy

Many people in Rockland County who are considering bankruptcy are deterred by the thought of adding to their financial problems by adding attorneys' fees. The answer to the question of whether an attorney is necessary in a bankruptcy filing can be complex, and it always depends upon the individual's financial situation.

The first question to ask is how much money is involved. How much does the debtor owe? Does the debtor have assets that can be sold to help pay the debts? If the debtor has very little in the way of assets, the debtor may be eligible for a "no asset" Chapter 7 bankruptcy. In this type of proceeding, the bankruptcy trustee makes a judgement that the debtor has no assets that can be liquidated to pay, and the case is summarily processed and an order of discharge is issued. Most people considering bankruptcy, however, usually own a home or an automobile that was purchased by borrowing money, and they are far from paying off the indebtedness. In fact, delinquent payments on mortgages and auto loans are some of the chief reasons that people look to bankruptcy. Another question that should be answered is the nature of the debt. Credit card obligations are probably the single most common cause of bankruptcy. A bankruptcy proceeding may be able to eliminate most, if not all, credit card debt.

Barriers to a discharge in a personal bankruptcy

Most people in Rockland County who have endured the rigors of a personal bankruptcy filing felt that the outcome justified the effort, because many debts were discharged. Sometimes, however, the debtor will fail to attend to one or more necessary details and will learn that a discharge will not be granted.

One of the more common errors is the failure to pay the filing fee. The fee is $335 for a Chapter 7 proceeding and $310 for a Chapter 11 proceeding. Most bankruptcy courts will allow the filer to pay the fee in installments. Another common omission is the failure to take the mandatory credit counseling and financial management courses. Both of these omissions can usually be charged to negligence on the part of a person who is under the stress of the bankruptcy proceeding.

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