Complex Bankruptcy Issues
QUALIFYING FOR CHAPTER 7 – PASSING THE “MEANS TEST” FOR HIGH INCOME INDIVIDUALS
The fastest and easiest way for individuals to get a fresh start is through a Chapter 7. Rather than being subjected to a payment plan over a 3-5 year period, a Chapter 7 is over in 4-5 months. I pride myself in being able to qualify higher income individuals for Chapter 7 bankruptcy. I have worked with numerous individuals who make 6-figure plus incomes to help them qualify for a Chapter 7. If you make more than the median income for a household of your size based on county data, you will need the help of an experienced bankruptcy attorney to guide you through the means test
CREDITORS OBJECTING TO A BANKRUPTCY DISCHARGE
After your attorney files your Chapter 7 bankruptcy, a 341 meeting of creditors is held within 45 days, and each creditor has 60 days from that date to decide if they are going to file a law suit in bankruptcy court (called an adversary proceeding) to object to their debt being wiped out or your entire discharge. For instance, a creditor could argue that you obtained money, property or services through fraud or that they loaned you money based on a false financial statement you provided to them. I have litigated these cases representing both creditors and debtors over my career.
LITIGATING WITH TRUSTEE
One of the duties of the Chapter 7 trustee is to examine the debtor’s transactions within the 4-year period prior to filing bankruptcy. If the trustee determines that any of these transactions were made with the intent to defraud creditors or the trustee, he can bring an action to recover whatever property was transferred back to the bankruptcy estate to sell to pay off a debtor’s creditors. Even if no fraudulent intent is found, any transfer to a creditor within 90 days or an insider (family member or business partner) within one year of filing bankruptcy is called a preferential transfer that can be recovered by a trustee. There are certain defenses, such as payments made in the ordinary course of business or a contemporaneous exchange for new value. If you are on the receiving end of one of these law suits as an insider or, for instance, a trade creditor of a Chapter 11 or 7 debtor, contact an attorney experienced in defending against trustee actions.
I recently settled $2.2 million claim against a victim of a Ponzi scheme for less than 40% of the original demanded amount. Prior to this, I settled a law suit for a very favorable amount filed against the owner of a Chapter 7 debtor who allegedly owed his own corporation over $500,000.00.
BANKRUPTCY AND FAMILY LAW
Bankruptcy and family law often go hand in hand. Where you have one, another may follow. Certain oblgiations, such as spousal support and child support obligations, are not dischargeable in bankruptcy. Property settlements are not dischargeable in a Chapter 7 bankruptcy; however, they are dischargeable at the end of a Chapter 13 repayment plan. The difference between a property settlement and a domestic support obligation is not always clear, and if an attorney has never faced this issue, the client will be the one to suffer, potentially leaving thousands of dollars on the table.