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Suppose you’re driving home from a New Year’s Eve celebration. At the party you had one too many glasses of Krug Champagne. Suddenly a light pole leaps in front of you and you hit it. You’re badly injured. You get fine treatment at the hospital, and later receive a bill for $100,000 for the care. You can’t pay it, so you file for bankruptcy protection. Is the medical debt dischargeable? Notice that the party who was physically injured in the accident is the bankrupt debtor ? not some third party. But is the hospital a party that was also injured as… Read More →
In a recent issue of the L.A. Times, Liz Weston compared bankruptcy and debt settlement as ways to deal with overwhelming debt. Her column was good, but given the limited space she had, it was a bit brief. In this post I will expand on her discussion. I. Debt Settlement The idea behind debt settlement is pretty simple: You ask the creditor to accept less than you owe in full satisfaction of the debt. You can do the negotiation yourself, or you can hire someone to negotiate on your behalf. If the creditor agrees to lower the balance, you… Read More →
There is an alarming trend facing us, and it is not the latest teen-age fashions. It is the filing of motions pursuant to 11 U.S.C. § 706(b), to convert individual nonconsumer Chapter 7 cases to Chapter 11. Because the topic of § 706(b) motions is a bit complicated, and requires some background information to understand it, my discussion will span a multi-part series of posts. In this first post I’ll set the stage by beginning with the more commonly seen terrain of 11 U.S.C. § 707 motions to dismiss. I. Section 707 – Dismissal Of An Individual Chapter 7 Case… Read More →
In my last post I began to set the stage for a discussion of § 706(b) motions to convert a Chapter 7 bankruptcy case to one under Chapter 11 by considering § 707 motions to dismiss. I noted that § 707(b)(2) only applies to individual cases in which the debtor’s debts are primarily consumer debts. In today’s post I’ll focus on the question of what kinds of debts are nonconsumer debts because in determining whether a Chapter 7 case should be dismissed, there can be a battle over which debts are nonconsumer and which are consumer. II. Nonconsumer Debts A.… Read More →
III. Dealing With A Motion To Convert Pursuant To Section 706(b) This post assumes familiarity with my last two posts (Part 1 and Part 2) of this multi-part series. Thus, while you can certainly read this post without reading those previous ones, you’ll get more out of it if you read those posts first. A. Oppose Any Motion To Extend The Time To Enter A Discharge If the Court has already granted a nonconsumer debtor a Chapter 7 discharge, the judge will probably not entertain a motion to convert the Chapter 7 case to one under Chapter 11, pursuant to… Read More →
IV. The Constitutional Problem With A § 706(b) Motion I thank Daniel Press, an attorney practicing in Virginia, Washington, DC, and Maryland, for giving me his notes, which served as an afflatus for some of today’s post. A. Historical Background 1. The Chapter 13 Context When Chapter 13 was enacted in 1978, it provided that only an individual could be a Chapter 13 debtor (11 U.S.C. § 109(e)), imposed limitations on the amount of debt a Chapter 13 debtor could have (11 U.S.C. § 109(e)), and — most important for today’s discussion — included postpetition earnings in the bankruptcy estate… Read More →
Many people throughout the country have realized that they are too much in debt to be able to repay their loans. It can be terrifying and also overwhelming for a person since they do not want to lose their home and assets. One of the first things to consider would be to file for bankruptcy. The problem with this is that many people worry that they will lose their home in the process, yet this is not the case. Filing for bankruptcy can help you keep your home while getting your finances on track. These are some of the ways… Read More →
