Demystifying Bankruptcy

Tex RitterERICSA

Bankruptcy 201

• A bankruptcy primer for the advanced situations

Demystifying Bankruptcy

• Definitions• Language of bankruptcy• Types of bankruptcy• Resources• History• Child Support is First Priority Debt type

Bankruptcy is fun and easy

• Discharge/Dismissal• Trustee’s duties and obligations• Domestic Support Obligation• Automatic Stay in Bankruptcy• Proof of Claim• Types of Claims

Bankruptcy is fun and easy

• Objections to Claims• Objections to Plans

– Failure to provide for current support– Failure to provide for child support

arrears

Bankruptcy is fun and easy

• Situations• Employer files bankruptcy• Obligor files bankruptcy• Custodial parent files bankruptcy• Notification of Bankruptcy

Bankruptcy is fun and easy

• Discharge in bankruptcy• Domestic Support obligations are not

discharged• Notice to Withhold is authorized• National Medical Support Notice is

authorized• Tax intercept, license suspension, credit

reporting and passport denial are authorized

Bankruptcy is fun and easy

• File a proof of claim? Or Not?• Depends on the circumstances• Let’s make a deal • Include unliquidated amounts

(unreimbursed medical, child care, school expenses, recreational expenses if authorized by judgment or statute)

Bankruptcy is fun and easy

• Objection to Claim• Objection to Plan • Relief from stay• Motion to avoid a lien• Adversary Proceedings

Bankruptcy 201

• Advanced Bankruptcy– Complex Proofs of Claim– Various Child Support Categories– Multiple Cases– Adding Interest to arrears

Bankruptcy is fun and easy

Proof of Claim

• A claim is a right to payment. 11 U.S.C. § 101 (5).

• (5) 'claim' means - (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or

Proof of Claim

• A claim in bankruptcy could be the right to collect unliquidated, but accrued, unreimbursed medical expenses or educational expenses or reimbursement of child care costs not yet reduced to a judgment.

11 U.S.C. § 101 (12A)

• 'debt for child support' means a debt of a kind specified in section 523(a)(5) of this title for maintenance or support of a child of the debtor.

11 USC Section 101(14A)

• “Domestic Support Obligation” is a debt owed to a spouse, child, parent of a child or a governmental agency in the nature of maintenance, support (including public assistance) or alimony.

11 USC Section 362(b)(2)(C)

• Income Withholding, Notice to Withhold Income, Earnings Assignments Orders, National Medical Support Assignments do not violate the automatic stay. 362(b)(2)(G)

• Revoking a professional or driver’s license does not violate the automatic stay.

• Reporting to credit bureaus does not violate the automatic stay. 362(b)(2)(E)

11 USC Section 362(b)(2)(F)

• Intercepting a tax refund is not a violation.

Employer files Bankruptcy

• Notice to Withhold not honored– Who gets credit?– What not to do– Who files the Proof of Claim– Wages or Support

Advanced Bankruptcy

• Objections to Claims– Prima Facia filing– Objection to Claim Motion– The Proceeding– Evidence

Objection to Chapter 13 Plan

• The Plan does not provide for the payment of support– Object to confirmation– Negotiate– Child Support is non-dischargeable– Not proposed in good faith– Require amendment to Plan

Complex Issues

• Motions to Avoid a lien• Recordings are judicial liens• Child Support Exemption

Violations of the Stay

• Automatic Stay in Bankruptcy– What to do?– What not to do?

Adversary Proceedings

• Bankruptcy based law suit or legal proceeding

• Core proceedings• Non-core proceedings

Relief from Stay

• Alter Ego Actions• Preferential Transfers• Fraudulent Conveyances• Discovery

Negotiations

• Typical scenario– You receive Notice Chapter 13 filed– Contact Debtor’s attorney– Next step?

• File a Proof of Claim• Do not file a Proof of Claim

– How to negotiate

Negotiations

• Review case• Good Pay/Bad Pay• NTW or income withholding order or

wage assignments are allowed for current and arrears

• Income Ratios/Child Support Obligation• Trustee's fees (10%)

Negotiations

• Modify Plan to allow for payment of child support and arrears outside of Plan (or part in Plan) and list debt as non-dischargeable

• Sent Notice to Withhold or Income Withholding Order or part NTW and part Proof of Claim for arrears (with knowledge and consent of debtor’s attorney)

Bankruptcy is fun and easy

• Procedure• Telephonic hearings are authorized• Electronic filing is required, electronic

docketing may be required

Bankruptcy is fun and easy

• In re Garrett (E.D. Tex 2005) 315 B.R. 431 • In re Charnock (9th Cir. BAP 2004) 318

B.R. 720• In re Cervantes (9th Cir. 2000) 219 F.3d

955• In re Lebowitz (9th Cir. 2000) 217 F.3d

799

Bankruptcy is fun and easy

• In re Coker (C.D. CA. 1998) 232 B.R. 182• In re Pacana (9th Cir. BAP 1991) 125 B.R.

19 • In re Donald Clifford Foster (9th Cir. 2003)

319 F.3d 495• In re: Wayne K. Crawford (7th Cir. 2003)

324 F.3d 539• In re Gruntz , 202 F.3d 1074 (9th Cir. 2000)

Bankruptcy Exercise

SituationChapter

7 9 11 13

You can continue to collect child support. Yes

You can continue to collect arrears. No

Release a license

Once the Petition in Bankruptcy is filed, you can send a wage assignment.

Yes

You must release a property lien that was filed prior to the debtor’s filing for bankruptcy.

No No No No

Discuss case options

Yes Yes

Yes

Yes Yes Yes

Bankruptcy Exercise

.

SituationChapter

7 9 11 13

Repossessions are allowed.

You can continue action to establish paternity.

You can use a Civil Contempt proceeding to enforce the payment of debt.

An action to modify support is not affected by filing of a bankruptcy.

A A A A

Yes Yes Yes Yes

Yes Yes Yes Yes

Bankruptcy Exercise

SituationChapter

7 9 11 13

Credit reporting is allowable.

You can file or record an Abstract of Support Judgment.

You cannot negotiate an SLMS stipulation or inquire about payment on arrears.

You cannot contact the debtor to find out when the next payment will be made.

If the debtor requests a lien be lifted, refer the debtor to the bankruptcy court.

Yes Yes Yes Yes

No No No No

Yes Yes Yes Yes

Yes Yes Yes Yes

Yes Yes Yes Yes

Bankruptcy is fun and easy

• Thank you!• Thank ERICSA!• Please fill out your evaluation forms• Email if you have any questions

– Tex.Ritter@co.nevada.ca.us