Involuntary Bankruptcies
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WhatsNew:
Dealing With This Economy
December 3, 2011
We have been busy at the firm helping our clients deal with this difficult economy. We have had some success recently filing Chapter 11's for a few individuals with multiple properties. A recent court ruling from the Middle District of Florida eliminated a major challenge to this type of bankruptcy. We have seen a drop in the number of Chapter 7 cases compared to last year but have been advised by the foreclosure attorneys that the next waive of foreclosures in coming soon. We expect to see a corresponding increase in Chapter 7 filings. Let us know if we can help you with your financial issues.
CurrentNews:
American Airlines Files Chapter 11
December 2, 2011
The parent company of American Airlines filed for bankruptcy protection in late November, seeking relief from crushing debt caused by high fuel prices and expensive labor contracts that its competitors shed years ago. For most travelers, though, flights will operate normally and the airline will honor tickets and take reservations. American said its frequent-flier program would be unaffected.
Recent Events:
The Local Bankruptcy Scene
November 28, 2011
In the Southern District of Florida, our firm has seen an increase in the unwillingness of Chapter 7 trustees to forgo the collection of potential funds. In Florida, an individual's exemptions in bankruptcy are guided by reference to state-not federal-law. An individual is entitled to certain exemptions of personal and real property. Generally, if an individual was over their exemption limit, i.e. having certain property not entitled to exemption, trustees would generally forfeit their right as administrator of the bankruptcy estate to sell the non-exempt asset if the asset was of little value or considered "unsellable." However, our firm has observed a recent uptick in the willingness of the trustee to sell non-exempt assets worth little, seemingly because trustees do not want to lose out on the potential collection of funds. Often, the sale generates funds in an amount that does little more than pay for trustee and professional fees. If you are considering filing for bankruptcy protection, it is imperative to consult with a bankruptcy attorney who can explain your options and offer pre-bankruptcy planning to avoid these common pitfalls.
Involuntary Bankruptcy
Most people have some familiarity with voluntary bankruptcy filings. Far fewer understand the possibility that an involuntary bankruptcy can be filed against them or their business. Involuntary bankruptcies are still relatively rare.
An involuntary bankruptcy case is initiated when one or more creditors files a petition and a summons with the clerk of the U.S. Bankruptcy Court. The debtor has 20 days to file objections. If that happens, the case can go to trial to determine if the filing was appropriate. If the debtor does not object, the bankruptcy proceeds in the same fashion as a voluntary case. An involuntary case can be initiated only under Chapter 7 or Chapter 11 of the Bankruptcy Code, not under Chapter 13.
Most creditors prefer to pursue their claims outside of bankruptcy to avoid having to share the debtors assets with other creditors and to avoid the expenses that are involved in a bankruptcy. However, when friendly creditors are being paid out of the debtors available assets but not other creditors, or when assets are being wasted or hidden, an involuntary bankruptcy can provide relief in a number of ways. First, it will stop any further payments or transfers. Second, it may allow a trustee to recover preferential payments.
Involuntary Bankruptcies Under the Bankruptcy Reform Act of 2005
One aspect of the 2005 reform legislation limits the homestead exemption that can be claimed in bankruptcy during the first 1215 days of ownership. Five states (including Florida) now offer their residents an unlimited homestead exemption. This has lead to numerous abuses. The new law limits the homestead protection available in bankruptcy if the Debtor has not owned his or her home for the specified period. A second provision prevents a debtor in bankruptcy from claiming as exempt any equity fraudulently transferred into the home within the past ten years. A creative creditor may file an involuntary bankruptcy for the sole purpose of destroying the debtors homestead protection. This can be a major concern for someone with either of these issues. Call us if you would like more information on this subject or bankruptcy in general.
David W. Langley
8551 West Sunrise Blvd.
Suite 303
Plantation, FL 33322
954-356-0450
dave@flalawyer.com