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Garnerville Bankruptcy Law Blog

Westchester construction firm files Chapter 11 petition

Firms who file bankruptcy petitions offer many different reasons why they are in financial peril. In a recent filing in White Plains federal court, the president of a construction firm based in Armonk, NY, blames lack of revenue for the firm's inability to pursue legal claims and recover money allegedly owed to it.

Verrino Construction Services Corp. was founded in 2000. It has operated as a contractor, subcontractor and construction manager on commercial and residential projects in Westchester and New York City. VCS filed a Chapter 11 petition asking for protection against claims that exceed $1 million. In its filing, the firm listed a total of 20 unsecured claims that total nearly $1.5 million, including $389,758 to Funding Circle USA, $239,315 to Breeze National, $193,876 to Independence Carting, and $189,331 to Chase Bank.

Reviewing lesser known bankruptcy exemptions

One of the first tasks faced by a Rockland County resident who has decided to file a Chapter 7 bankruptcy petition is choosing between exemptions provided by the United States Bankruptcy Code or New York law. The two lists are different from each other, and choosing the list that best suits the debtor's financial circumstances can be crucial. Some exemptions are better known than others. For example, New York law allows a debtor to declare up to $10,000 of value in real estate as exempt, whereas federal law limits the exemption to $15,000. If real estate constitutes a person's largest asset, this difference alone may determine the choice. However, many debtors do not own a home, and the lesser known exemptions may be more important.

Both exemption lists allow $2,400 to be set aside for one automobile. If a husband and wife are filing, each is entitled to one such exemption. Federal law permits an exemption for unmatured life insurance contracts, professionally prescribed health aids and $1,000 in jewelry. The state provides an exemption for life insurance proceeds that have been left with the insurance company pursuant to an agreement. Both federal and state exemption lists include alimony and child support, but the federal list limits the amount to "the extent reasonably necessary for the support of the debtor."

What happens to credit card debt in bankruptcy?

One of the prime motivations for filing a bankruptcy petition is accumulated credit card debt. Many residents of Rockland County who have let their use of credit cards get out of control often look to bankruptcy for relief, but very few understand what happens to credit card debt in a bankruptcy proceeding. The answer to this question depends upon the type of bankruptcy proceeding that is chosen and upon the debtor's ability to continue to pay off those credit card balances.

Chapter 7 often looks more attractive because it can result in the discharge of all unsecured claims. Because credit card debt is usually unsecured, Chapter 7 appears to be a wonderful cure-all. Unfortunately, not everyone is eligible to file a petition under Chapter 7. To be eligible for Chapter 7, a debtor's annual income must be lower than the median annual income for New York state over the last six months. Currently, the means test cut off for an individual is $47,414. The limit rises depending upon the number of persons living in the household. If a person qualifies for Chapter 7, the final order discharging the debtor's obligations will wipe out all unpaid credit card debt.

Buying a business out of bankruptcy can be profitable - and risky

Many business and commercial bankruptcies in Rockland County and elsewhere end up with the assets of the enterprise being sold to an investor who intends to reinvigorate the company and turn it into a profitable enterprise. The lure of purchasing a bankrupt company is the reduced price of the assets. On the other hand, rehabbing a bankrupt company can be very expensive and risky.

According to a recent report, a couple in Williamstown, New Jersey. bought a restaurant out of bankruptcy for $3.9 million. They felt that the restaurant's reputation and location on a busy intersection justified the price. The restaurant is on the Black Horse Pike between Philadelphia and the Jersey Shore. The new owners are busy rebuilding relationships with suppliers and renovating the physical structure.

How often is bankruptcy related to medical problems?

Many New Yorkers probably have had to deal with medical expenses even after a relatively minor illness or common course of treatment. Particularly for those who do not have the best health insurance, these bills can pile up quickly, as some residents of Rockland or Garnerville may have plans leave them responsible for a large deductible, to the tune of thousands of dollars.

It is not uncommon for medical debt to drive a family in to consumer bankruptcy, but exactly how common it is depends on who you ask. According to one group, one of whom was a noted bankruptcy scholar and is now a well-known politician, up 62 percent of all personal bankruptcies have a significant connection to medical problems.

What is a 'no asset' case in a Chapter 7 bankruptcy?

When a resident of Rockland County considers filing a bankruptcy petition, one of the crucial decisions is whether to file a petition for discharge under Chapter 7 or a petition for reorganization under Chapter 13. A decision to seek discharge under Chapter 7 can often produce what is called a "no asset" case. This is a case where the debtor has no assets that can be liquidated to pay the claims of unsecured creditors.

When the Chapter 7 petition is filed, if the debtor passes the means test that determines eligibility for a Chapter 7 discharge of debt, then the court appoints a neutral party to take possession of the debtor's assets. The neutral party is the trustee, and the assets are the bankruptcy estate. The trustee is charged with responsibility for taking possession of the debtor's non-exempt assets, which can include the debtor's legal or equitable interest in any type of property. The trustee is required to sell the estate's assets in a manner that yields the highest return to the debtor's unsecured creditors.

What is a 'voidable preference' in bankruptcy?

Let's imagine that you own and operate a business in Rockland County. You have a customer who owes you money for goods that were bought at various times during the last year. You learn that the customer is experiencing financial difficulties and may have trouble paying his debts. You take the obvious action and ask the customer for payment. The customer pays one-third of what he owes and promises more later. Instead of "more," however, the customer files a bankruptcy petition two weeks later. Bad news, but at least you were paid some of what the customer owes. You shrug and think things could be worse. You file your notice of claim for the balance owed to you and wait. But instead of receiving money from the bankruptcy trustee, you receive a federal court complaint seeking to recover the money paid to you before the bankruptcy. How can this be?

The answer is provided by 11 U.S.C. ยง547 -- the section of the Bankruptcy Code that deals with voidable preferences. The payment that you received before the bankruptcy petition was filed is called a "preference," or, to be more accurate, a "voidable preference." A preference is a payment by the debtor that gives one or more creditors preferential treatment over other creditors.

Should student loans be dischargeable in Chapter 7 bankruptcy?

As young adults in Rockland County graduate from college and prepare to enter the working world, one of the biggest obstacles many face is paying off the loans they incurred to pay for college. For many people, their student loan balance reach into the high five figures, and some exceed $100,000. A debt of such magnitude on a borrower's credit record can preclude access to loans that are necessary to enable the purchase of a home or an automobile. According to a recent study completed by the United States Department of Education, even bankruptcy offers little hope.

The study evaluated more than 400 responses from borrowers and lenders. A student loan can be discharged in a Chapter 7 bankruptcy only if the debtor can prove that paying on the loan would create "an undue hardship," an evidentiary threshold that is virtually impossible is clear. The test is vague and is subject to differing interpretations by various bankruptcy courts. Experts familiar with the problem of student loans have made several recommendations for changing the Chapter 7 standards for discharge.

What is a '341 meeting' in a Chapter 7 bankruptcy?

Anyone in New York who files a petition under Chapter 7 of the United States Bankruptcy Code must attend a meeting with creditors and the trustee early in the proceeding. The meeting is required by Section 341 of the Bankruptcy Code, and it is commonly referred to as the "341 meeting."

The 341 meeting must be held within a reasonable time after Chapter 7 bankruptcy petition is filed. The court will set the time and place of the meeting, but the judge is prohibited from attending the meeting. The debtor is required to attend the meeting, as is the trustee. Creditors are also notified of the time and place of the meeting, but their attendance is optional. Creditors are not required to be represented by lawyers.

The advantages of reaffirming a debt in bankruptcy

When a resident of Rockland County considers filing a bankruptcy petition, one of the many questions he or she may have is whether he or she will be able to keep his or her car. The answer depends in part on the kind of bankruptcy petition that is filed and also on whether the debtor elects to reaffirm the installment payment agreement that was used to finance the original purchase of the car.

If the debtor files a consumer bankruptcy under Chapter 13 petition, the status of the car loan will be included in the reorganization plan. Most debtors keep their car and propose a schedule to make up late payments. In a Chapter 7 proceeding, the installment purchase agreement is canceled and the creditor usually reclaims the car. If, however, the debtor wants to keep the car, he or she can "reaffirm" the debt and enter a reaffirmation agreement with the creditor.

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