GENERAL QUESTIONS
- What types of matters does your firm handle?
- Do you only represent companies?
- What geographic areas do you cover?
- What are your fees for legal services?
- Do you accept credit cards?
- Do I have to come to your office in person to hire your firm?
BANKRUPTCY GENERAL QUESTIONS
- What are the different types of bankruptcy and their eligibility requirements?
- What are the principal goals and aims of bankruptcy?
- What is the bankruptcy estate?
- What is the automatic stay and what is its scope?
- Who are the usual players in a bankruptcy case?
- What is a preference claim?
- What is a fraudulent transfer claim?
PERSONAL BANKRUPTCY QUESTIONS
- What type of bankruptcy are individuals eligible for and what are the requirements of each?
- What are consumer debts and why are they important in personal bankruptcy cases?
- What is the "means test" for chapter 7 and why is it important?
- Will I lose all of my property if I file bankruptcy?
- Will all my debt get discharged (wiped out) in bankruptcy?
- What are the stages in an individual consumer chapter 7 case?
- How does chapter 13 work?
- What are the benefits of chapter 13 & why file chapter 13 instead of chapter 7?
- Why do I need an attorney to file bankruptcy? Can't I represent myself?
- Why do I need an attorney to file bankruptcy? Can't I just hire a paralegal for a lot less money?
- How much should it cost to hire an attorney to file bankruptcy?
- When should a business voluntarily file Chapter 7?
- What happens when a business files Chapter 7?
- When should a business voluntarily file Chapter 11?
- How can a debtor reject burdensome leases and contracts in a chapter 11 bankruptcy?
- What happens when a business files Chapter 11?
- What is the U.S. Trustee and what is its role?
- What is a creditors committee and what is its role?
- What is the goal of Chapter 11?
- What is an assignment for the benefit of creditors?
- What is a receivership?
- What is an involuntary bankruptcy filing?
COMMERCIAL COLLECTIONS QUESTIONS
- What is commercial collections?
- Is the only type of collections work your firm handles commercial collections?
- What is the difference between commercial collections done by a collection agency and by an attorney?
- What are the stages of commercial collections?
- What tools are available to a collections attorney to seek to enforce a judgment?
- What is the likelihood of recovery on my claim turned over for commercial collections?
CIVIL LITIGATION QUESTIONS
- What is civil and commercial litigation?
- What is the statute of limitations?
- What are the stages of litigation?
- What is discovery?
- What is motion practice?
- What is alternative dispute resolution or ADR?
- How long does a civil litigation case take from start to finish?
1. What type of matters does your firm handle?
Our practice is focused primarily on personal bankruptcy, business bankruptcy, commercial collections, civil litigation and bankruptcy litigation.
2. Do you only represent companies?
No, we also represent individuals as debtors in personal bankruptcy cases under chapter 7 and chapter 13 and as plaintiffs and defendants in civil litigation and bankruptcy litigation.
3. What geographic areas do you cover?
We cover New York City, Manhattan, Bronx, Brooklyn, Queens, Staten Island, New York County, Bronx County, Kings County, Queens County, Richmond County, Westchester County, Nassau County, Suffolk County, and New Jersey, among other locations. We represent clients in bankruptcy and reorganization cases before all of the Bankruptcy Courts of the Southern District of New York (Manhattan, White Plains and Poughkeepsie), all Bankruptcy Courts of the Eastern District of New York (Brooklyn and Central Islip), and in the District of New Jersey. We handle matters in other counties and districts of New York not listed above, as well as other states, on a case-by-case basis. We also have extensive practice experience before the U.S. Bankruptcy Court for the District of Delaware. We represent clients in commercial collections and commercial and civil litigation matters in the state and federal courts of New York and New Jersey, and in other jurisdictions on a case-by-case basis. We handle arbitration and mediation matters in New York and New Jersey. We can be hired as mediators anywhere. Our attorneys are admitted to practice in New York, New Jersey, California and Washington, D.C., and get admitted on a per matter basis in other jurisdictions as needed.
4. What are your fees for legal services?
Please contact us for a no obligation fee quote regarding your matter. To represent debtors in personal bankruptcy cases (Bankruptcy Code chapter 7 and chapter 13 cases) we charge on a flat fee basis. Our fees are very competitive to those of other comparable attorneys in our region. To represent debtors in business bankruptcy cases, we charge on a flat fee basis for chapter 7 liquidation cases, and on an hourly rate basis for chapter 11 reorganization cases. To represent creditors in bankruptcy cases, or defendants in bankruptcy litigation, our fees are usually based on our hourly rates. We usually perform commercial collections work on a contingency fee basis (unless the client prefers an hourly fee basis). Finally, we represent parties in civil and commercial litigation matters on an hourly rate basis, but will consider alternative fee arrangements, such as fixed fees for different phases of the case, fee caps, success fees, or blended hourly fee and contingency fee arrangements. Our hourly rates and fixed fee rates are very competitive with other law firms. For hourly rate matters we can provide our clients with a written estimate of fees and costs.
5. Do you accept credit cards?
With the exception of debtors seeking to file bankruptcy, we accept credit cards (Visa, MasterCard, American Express and Discover). For all matters we accept cash, personal checks, traveler's check, PayPal, eCheck, or bank and wire transfers. Payment plans are available in appropriate non-bankruptcy cases. In chapter 7 bankruptcy cases, in appropriate cases fees may be paid over time provided that all fees and costs (court filing fee, mandatory pre-bankruptcy credit counseling fee, etc.) are paid in full before the case is filed as required by law. In chapter 13 bankruptcy cases involving a home owner we may, in appropriate cases, accept part of our fee through the plan with Bankruptcy Court approval.
6. Do I have to come to your office in person to hire your firm?
No, if you are located outside the New York metropolitan area we can work with you by a combination of phone, e-mail, fax, and/or mail. If you are located in the New York / New Jersey metropolitan area we always like to meet clients in person, at least initially. For business clients in the New York metropolitan area, we will be glad to come to your place of business if travel to our office is inconvenient. Also, for consumer clients who are unable to come to us due to health or other reasons, we will come to you depending on the matter.
BANKRUPTCY GENERAL QUESTIONS
1. What are the different types of bankruptcy and their eligibility requirements?
The U.S. Bankruptcy Code provides for the following types of bankruptcy filing:
Chapter 7 -- Liquidation -- provides for the liquidation of a debtor's assets by a trustee to raise cash to pay off creditors' claims. The stages in a chapter 7 case are discussed below. Companies, as well as individuals, can file for chapter 7 (individual consumer debtors are subject to eligibility requirements, discussed below). Spouses can file a joint-case. The 2005 Amendments to the Bankruptcy Case have increased the complexity of individual consumer chapter 7 cases (discussed further below).
Chapter 9 - Municipal Bankruptcy - provides a financially-distressed municipality protection from its creditors while it develops and negotiates a plan to adjust its debts.
Chapter 11 - Reorganization - provides for reorganization of a debtor under a reorganization plan that is voted on by the debtor's creditors. However, it is possible for a business debtor to liquidate its assets in chapter 11 under a "liquidating plan". Companies as well as individuals can file for chapter 11. However, chapter 11 is typically not suitable for individual or consumer debtors unless they have a high net worth or high income. The stages in a chapter 11 case are discussed below.
Chapter 12 - Family Farmer or Fisherman Debt Adjustment - provides for adjustment of debts of a family farmer or fisherman with regular income and subject to certain debt caps.
Chapter 13 - Wage Earner Debt Adjustment - provides for adjustment of debts of an individual with regular income (spouses can file a joint-case). Total unsecured debt cannot exceed $336,900 and secured debt cannot exceed $1,070,650.
Chapter 15 - Ancillary and Other Cross-Border Case - provides a mechanism for dealing with foreign bankruptcy cases where the debtor has assets or creditors in the U.S.
2. What are the principal goals and aims of bankruptcy?
The purpose of bankruptcy is to provide a forum for a financially troubled debtor to deal with all his, her or its creditors in a single unified proceeding, and a mechanism to satisfy creditors' claims. For a business, the goal of bankruptcy is either to provide an orderly liquidation of the debtor and its assets or to reorganize. For an individual, the goal of bankruptcy is to get his or her debts wiped out. The Bankruptcy Code provides for a "discharge" of debts -- which is the elimination of the individual debtor's personal liability for his or her pre-bankruptcy debts (subject to certain exceptions discussed below). The discharge of debt is intended to give the debtor a fresh start.
3. What is the bankruptcy estate?
Upon the filing of a bankruptcy case by or against a debtor, an "estate" is created consisting of all of the debtor's property wherever located in the world. This holds true whether the debtor is an individual or business entity (such as a partnership, corporation or limited liability company). The bankruptcy estate is protected from creditors by the automatic stay discussed below.
4. What is the automatic stay and what is its scope?
The automatic stay is triggered by the filing of a bankruptcy petition. Any action taken by a creditor in violation of the stay (such as commencement of a lawsuit against the debtor after bankruptcy filing without leave of the Bankruptcy Court, or judgment enforcement of pre-petition judgments against estate property) has no legal effect and is void. The stay bars action by all creditors to enforce their pre-bankruptcy claims against the debtor and the debtor's property, regardless of whether the creditor had notice of the commencement of the debtor's bankruptcy case. There are limited exceptions to the stay, including for governmental agencies to enforce health, safety and public welfare laws and for domestic support obligations, among others. Creditors also can move to have the stay lifted for "cause" including lack of adequate protection of an interest in property. In addition, if a creditor is stayed as to property of the estate (for instance, property subject to the creditor's lien, such as a mortgage), the creditor can also obtain relief from stay if it can establish that the debtor has no equity in the property and it is not necessary to an effective reorganization.
5. Who are the usual players in a bankruptcy case?
There are a variety of players in a bankruptcy case as follows:
Debtor - is the person or business that files for bankruptcy relief.
Trustee - is the person appointed by the U.S. Trustee in a chapter 7 case (or elected by creditors to replace the person appointed by the U.S. Trustee in a chapter 7 case) to collect and liquidate the assets of the debtor. In a chapter 11 case, if the Court orders the appointment of a trustee for cause one is appointed by the U.S. Trustee and takes over the management of the debtor and ousts its existing management. Most trustees are attorneys or accountants.
U.S. Trustee - A branch of the Department of Justice tasked with overseeing the administration of bankruptcy cases. The U.S. Trustee plays an oversight role, particularly in chapter 11 cases.
Creditors Committee - A committee of creditors appointed in chapter 11 cases by the U.S. Trustee usually consisting of creditors who hold the seven largest unsecured claims against the debtor. The creditors committee acts as a representative body to advance the interests of unsecured creditors as a whole. In many bankruptcy cases there is insufficient creditor interest for a creditors committee to be formed. Committee members are unpaid but receive reimbursement of expenses. A creditors committee may, subject to Bankruptcy Court approval, hire professionals, such as attorneys, accountants and financial advisors to represent the committee and advance the interests of unsecured creditors in the bankruptcy case. The fees of such professional are paid out of the debtor's bankruptcy estate and not by individual committee members.
Bankruptcy Court - The bankruptcy court is a federal court of the United States and constitutes a unit of the district court. In some locations the bankruptcy court is housed in the same building as the district court, while in others it is in a separate building.
Bankruptcy Judge - A bankruptcy judge is a judge appointed for a 14 year term by the Court of Appeals in the federal district in which the bankruptcy court is located. Most bankruptcy judges previously worked as attorneys in private practice or for the government.
Secured Creditor - A creditor that is secured by a lien against property of the debtor as the result of a voluntary agreement that the debtor entered into (such as, for example, a bank loan secured by a lien on assets, a mortgage on real estate, or a car loan secured by a vehicle), or as the result of a court judgment or order (such as, for example, a judgment lien recorded against real estate, or a writ of attachment against a debtor's equipment), or as the result of a particular law (such as tax liens, that create a lien against the debtor's property when certain notice and filing requirements are met).
Unsecured Creditor - A creditor who has a claim that is not secured by a lien against property of the debtor.
Priority Creditor - Certain types of claims are priority claims under the Bankruptcy Code. These are claims that get paid in full before any distribution is made to general unsecured claims. Priority claims include most tax claims and domestic support obligations (alimony, child support, etc.).
6. What is a preference claim?
A preference under the Bankruptcy Code is a payment on a pre-existing debt made to a creditor within 90 days prior to the date of the debtor's bankruptcy filing (or one year in the case of a transfer to an "insider" of the debtor) that allows the creditor to recover more than it would recover if the assets of the debtor were liquidated in a case under chapter 7 and the creditor received a proportionate distribution on its claim along with other creditors in same class and entitled to the same priority of treatment under the Bankruptcy Code. The intent of the Bankruptcy Code is that similarly situated creditors should receive equal treatment. The preference law is intended to advance this and also prevent pre-bankruptcy collection efforts that disrupt the debtor's business or financial affairs. Trustees (or debtors in possession in chapter 11 cases) have the ability to pursue preference claims. Trustees and DIPs often bring preference claims against all recipients of payments by a debtor during the 90 day pre-bankruptcy preference period. There are a number of defenses under the Bankruptcy Code to a preference claim that a defendant in a preference case may be able to utilize, most notably the "new value defense" and "ordinary course of business defense".
7. What is a fraudulent transfer claim?
Claims of fraudulent transfer under the Bankruptcy Code are based on a transfer of money or other property of the debtor made within one year (two years for cases filed after October 17, 2006) prior to the date of the debtor's bankruptcy filing, regardless of whether the transfer was made voluntarily or involuntarily by the debtor, if
(1) the debtor made the transfer with actual intent to defraud creditors, or
(2) received less than reasonably equivalent value in exchange for the transfer and was either (a) insolvent (i.e., debts greater than assets or unable to pay debts as they became due in the ordinary course of business) or became insolvent because of the transfer, or (b) engaged in business for which the remaining capital of the debtor left after the transfer was unreasonably small. There are a number of defenses under the Bankruptcy Code to a fraudulent transfer claim that a defendant in a fraudulent transfer case may be able to utilize.
PERSONAL BANKRUPTCY QUESTIONS
1. What type of bankruptcy are individuals eligible for and what are the requirements of each?
Individuals are eligible to file bankruptcy under chapter 7, 11, 12 or 13.
Chapter 7 -- Liquidation -- provides for the liquidation of a debtor's assets by a trustee to raise cash to pay off creditors' claims. The stages in a chapter 7 case are discussed below. Individual consumer debtors are subject to eligibility requirements, discussed below. Spouses can file a joint-case. The 2005 Amendments to the Bankruptcy Case have increased the complexity of individual consumer chapter 7 cases (discussed further below).
Chapter 11 - Reorganization - provides for reorganization of a debtor under a reorganization plan that is voted on by the debtor's creditors. Chapter 11 is typically not suitable for individual or consumer debtors unless they have a high net worth or high income. The stages in a chapter 11 case are discussed below.
Chapter 12 - Family Farmer or Fisherman Debt Adjustment - provides for adjustment of debts of a family farmer or fisherman with regular income and subject to certain debt caps.
Chapter 13 - Wage Earner Debt Adjustment - provides for adjustment of debts of an individual with regular income (spouses can file a joint-case). Total unsecured debt cannot exceed $336,900 and secured debt cannot exceed $1,010,650. Chapter 13 is discussed further below.
2. What are consumer debts and why are they important in personal bankruptcy cases?
The Bankruptcy Code defines consumer debts as debt incurred by an individual primarily for a personal, family or household purpose. There are special provisions of the Bankruptcy Code that are only applicable to individuals having consumer debts. The "means test" (discussed below) only applies to an individual debtor in a chapter 7 case whose debts are primarily consumer debts. Debt that an individual incurred for a business, trade or profession that he or she was engaged in would not be consumer debt.
3. What is the "means test" for chapter 7 and why is it important?
As a result of the 2005 amendments to the Bankruptcy Code a "means test" was introduced for eligibility for chapter 7. An individual who is unable to pass the means test will have his or her chapter 7 case dismissed (subject to certain exceptions), or must convert his or her case to a case under chapter 11 or chapter 13.
An individual chapter 7 debtor with primarily consumer debts will be subject to the means test if his or her "current monthly income" (based on average monthly income for 6 months prior to bankruptcy) is above the median income for a family of the same size. In New York this means the debtor's income on an annual basis cannot be greater than $42,896 for an individual ($51,994 for a family of 2, $62,815 for a family of 3 and $74,501 for a family of 4). In New Jersey the debtor's income on an annual basis cannot be greater than $53,557 for an individual ($63,357 for a family of 2, $80,239 for a family of 3 and $93,176 for a family of 4). Current monthly income includes regular contributions to household expenses from a nondebtor and includes income for the debtor's spouse if the petition is a joint petition (husband and wife both filing bankruptcy), but does not include social security income.
If the debtor's income is below the median listed above for the states listed above (each state has its own requirement), the debtor is eligible for chapter 7 bankruptcy. If the debtor's income is greater than the median income listed above, the debtor must past the "means test". The means test starts with the debtor's monthly current income (based on income for last 6 months) and subtracts
(1) expenses for food, clothing, utilities, transportation and housing based on permitted monthly expenses specified by IRS standards (not the debtor's actual expenses),
(2) average monthly secured debt payments,
(3) average monthly priority debt payments, and
(4) a few other expenses in certain limited categories, such as educational expenses of dependents of the debtor, and expenses to care and support elderly, chronically ill, or disabled household members. The remaining net amount after deducting these expenses is the debtor's "disposable income" and leads to the following results:
Disposable income of less than $100. If the debtor has disposable monthly income of less than $100, the debtor is eligible to file chapter 7.
Disposable income of between $100 - $166.67. If the debtor has disposable monthly income of between $100 - 166.67, we look at the total disposable income the debtor would have for five years (i.e., $6,000 - 10,000). If the $6,000 - 10,000 total disposable income for 5 years is at least 25% of the debtor's total unsecured debtor, the debtor fails to satisfy the "means test" for chapter 7 (but can file chapter 13).
Disposable income of greater than $166.67. If the debtor has disposable monthly income of more than $166.66, the debtor fails to satisfy the "means test" for chapter 7 (but can file chapter 13).
3. If my income is above the median income for my state for a family of my size does that mean I fail the "means test" and cannot file chapter 7 bankruptcy?
If your income is below the median income for your state for a family of your size, it means you do not have to complete the "means test." If your income is above the median income for your state for a family of your size it does not mean you fail the means test. It means you have to complete the means test. The results of the means test will determine your eligibility for chapter 7 bankruptcy. This is a complicated area and required the assistance of an experienced bankruptcy attorney. At Starr & Starr, PLLC, we have invested in what we believe is the best computer software available on the market today for the purposes of calculating the means test.
4. Will I lose all of my property if I file bankruptcy
When a consumer debtor files bankruptcy, he or she gets to keep certain property from the bankruptcy estate that is created by the bankruptcy filing. This property the debtor gets to keep is called "exempt" property and is based on specific laws exempting certain types of property to encourage the debtor's fresh start. The exemption laws vary from state to state and New York and New Jersey are not nearly as generous regarding exemptions as some other states. In New York there are exemptions for equity in a debtor's home ($50,000 for single debtor, $100,000 for joint debtors), life insurance, annuities, and pension plans, among others. Debtors who file bankruptcy without the assistance of a competent bankruptcy attorney risk losing property of significant value by failing to claim the exemptions to which they are entitled. Maximizing the exemptions to which you are entitled is part of what we do at Starr & Starr, PLLC when we represent you in a personal bankruptcy filing.
5. Will all my debts get discharged (wiped out) in bankruptcy?
Certain types of debt automatically do not get discharged in bankruptcy, such as many types of taxes, student loans (unless the debtor can show undue hardship would result from failure to discharge the loans), most government fines and penalties, court restitution orders, domestic support obligations (such as alimony, child support, etc.), and debts in connection with divorce decrees, among others.
There are other types of debts that the creditor has the right to bring a lawsuit in the Bankruptcy Court (called an adversary proceeding) against the debtor to determine the dischargeability of the debt. The creditor can sue the debtor for a judgment determining that the debt will not be wiped out in bankruptcy.
Some examples of debts that can be excepted from discharge upon court order are:
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Money, property, services or extension, renewal or refinancing of credit obtained by false pretenses, false representation or actual fraud
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Consumer debt owed to a single creditor above the dollar limits specified in the Bankruptcy Code for luxury goods or services incurred within the time period specified in the Bankruptcy Code prior to the debtor's bankruptcy filing (the term "luxury goods" does not include goods or services reasonably necessary for the support or maintenance of the debtor or dependents of the debtor).
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Cash advances above the dollar limit specified in the Bankruptcy Code incurred within the time period specified in the Bankruptcy Code.
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Debts for willful and malicious injury of the debtor to another person or entity or property of another person entity.
An experienced bankruptcy attorney, such as the bankruptcy attorneys at Starr & Starr, PLLC, can analyze a consumer debtor's debts to determine if there is a risk of certain debts being automatically nondischargeable, or of potentially being found nondischargeable by the Bankruptcy Court. Pre-bankruptcy planning may facilitate the dischargeability of certain types of debt.
6. What are the stages in an individual consumer chapter 7 case?
- Pre-Filing Stage -
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Initial Meeting with You. You meet with us for a free in-person initial consultation to discuss your bankruptcy and non-bankruptcy options and determine if a chapter 7 bankruptcy filing is the right solution for you. We discuss services to be provided by Starr & Starr, PLLC and agree on the fee for such services. You sign our standard Engagement Letter and pay our fee (or make installment payment arrangements with us). We discuss our chapter 7 intake Checklist and the documentation and information that you will need to supply us, as well as your obligations as a client.
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Follow-Up Meeting. We schedule an in-person follow-up meeting to complete our Bankruptcy Questionnaire and review the supporting documentation that you supply. At the follow-up meeting we will determine the exemptions that you are entitled to claim in property. We then prepare the first draft of your bankruptcy petition, schedules, statement of financial affairs, creditors' matrix and other papers required in connection with your chapter 7 case.
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Credit Counseling. You must complete a mandatory pre-bankruptcy creditor counseling program with one of the credit counseling agencies approved by the U.S. Trustee's Office before we can file your bankruptcy petition. There are currently three approved providers with which we have made arrangements. The program takes approximately 2 hours and can be completed by you at your convenience prior to bankruptcy filing. Telephone, internet and live in-person programs are available. After you complete the credit counseling program, the provider electronically sends us a certificate of completion that we need for your bankruptcy filing.
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Bankruptcy Petition & Schedules Signing Session. You meet again with us in person to review your petition, schedules, statement of financial affairs and creditors' matrix for accuracy. We make any final changes that may be needed. You sign your petition and other papers. If you are paying us under an installment arrangement you provide us with the unpaid balance of the total fee at this time.
- Filing & Post-Filing Stage -
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Filing of Petition. We electronically file your petition, schedules, statement of financial affairs, creditor matrix and other papers required in connection with your chapter 7 case. The automatic stay goes into effect once the petition is filed and bars your creditors from further litigation or enforcement efforts (other than in the bankruptcy court), unless they obtain relief from the stay. After filing, we send to you for your records one complete set of your petition, schedules, statement of financial affairs, creditor matrix and other papers we filed in your case.
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Communication with chapter 7 trustee. We provide the chapter 7 trustee appointed in your case with a copy of all documents that the debtor is required to provide to the trustee as the result of the 2005 amendments to the Bankruptcy Code. We send you a copy of any correspondence we send to the chapter 7 trustee.
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Meeting of Creditors & Preparation for Meeting. After your case is filed the Meeting of Creditors will be scheduled at which the chapter 7 trustee will ask you questions concerning your financial affairs, the circumstances leading to your bankruptcy filing, and raise any questions he/she may have concerning your schedules and/or statement of financial affairs. This meeting is required to be scheduled within 20-40 days after you file your bankruptcy petition. The meeting is typically scheduled about 30 days from the date the petition is filed. Typically creditors do not attend this meeting, although they are entitled to attend and ask questions by law. If you hire Starr & Starr, PLLC, one of our attorneys will represent you at the meeting.
Shortly after your case is filed we will learn the date and time your meeting of creditors has been scheduled. We will send you a letter advising you of the date and time, along with a map and directions and some information about the type of questions most commonly asked by the chapter 7 trustee. A day or so before the meeting we will have a telephone conference with you to prepare you for the meeting of creditors and discuss any questions you may have about it.
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Financial Management Course. Within 45 days of the date first scheduled for the Meeting of Creditors you are required to complete the Pre-Discharge Financial Management Course. We suggest you complete it as soon as possible after the Meeting of Creditors. The same credit counseling agency that provided you with pre-bankruptcy credit counseling can provide you with the Financial Management Course. After you complete the Financial Management Course, the provider electronically sends us a certificate of completion that we will file in your bankruptcy case.
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Discharge. The goal of a personal chapter 7 bankruptcy filing is to obtain a discharge (legal elimination) of your debts. As discussed above, certain types of debts may be automatically excepted from discharge, or subject to the exception from discharge by order of the Bankruptcy Court. A discharge is supposed to be granted within 60 days after the date first set for the meeting of creditors. The one exception is if a creditor or other party in interest (such as the chapter 7 trustee) files an objection to discharge, which is uncommon.
7. How does chapter 13 work?
Only an individual with regular income can file chapter 13. You can be self employed if you can show you have a regular income and only operate as a sole proprietor under your own name or under a trade name (i.e., "doing business as" or "d.b.a."), and do not have a separate business entity, such as a corporation or a limited liability company. Total unsecured debt cannot exceed $336,900 and secured debt cannot exceed $1,010,650. In chapter 13 the debtor repays creditors over time based on the money left over each month after expenses. The debtor pays the chapter 13 trustee each month who then mails checks to each of the debtor's creditors. In chapter 13 the debtor gets to keep all of his or her property. Chapter 13 is commonly used to stop a foreclosure and cure defaults over time. The typical chapter 13 plan is 3 years. However, as a result of "means testing", chapter 13 debtors with income above the state median must submit 5 year plans. Creditors do not get to vote on a debtor's chapter 13 plan, but get to object. The plan is subject to Bankruptcy Court approval at a confirmation hearing. In a chapter 13 case the chapter 13 trustee plays an important role in reviewing chapter 13 plans and raising objections to such plans.
8. What are the benefits of chapter 13 (why file chapter 13 instead of chapter 7)?
The main benefit of chapter 13 compared to chapter 7 is that in a chapter 13 bankruptcy case the debtor gets to keeps all of his or her property and satisfies creditors claims through the chapter 13 plan. So, by way of example, if a debtor owned a house and wanted to keep living in it but is behind on mortgage payments, the debtor could cure the arrears (the payments that have fallen behind) through the plan and keep living in the house. Alternatively, in a chapter 13 case the debtor could seek to refinance or sell his or her house (subject to Bankruptcy Court approval). That is not usually possible in a chapter 7 case.
If the debtor is a renter and has fallen behind on rent payments (but an eviction order has not yet been entered), for instance, due to a period of illness or unemployment, the debtor could use a chapter 13 plan to cure the defaulted portion of rent through the plan.
Chapter 13 can also be used to keep a car where the debtor has fallen behind on payments.
In addition, in a chapter 13 case there is a co-debtor stay. So if one spouse files bankruptcy and the other does not, joint creditors cannot pursue the non-filing spouse. This can be beneficial to help preserve the credit standing of the non-filing spouse.
Chapter 13 is a complex area of bankruptcy law and requires the assistance of an experienced bankruptcy attorney.
9. Why do I need an attorney to file bankruptcy? Can't I represent myself?
You do not have to have an attorney to file bankruptcy. The law allows you to represent yourself. However, if you represent yourself you are still held to the same standard as if you had an attorney. You will need to be able to analyze and decide how to answer all of following questions, among others, yourself, and correctly complete and file the required documents:
- Chapter of bankruptcy to file under (chapter 7, 13, or 11, and why)?
- Which creditors to list as secured, priority, and unsecured?
- Which addresses to use for your creditors (- - & if you use the wrong address the debt will not be wiped out - -)?
- Which exemptions in property to claim and why?
- Whether you want to reaffirm any debts and if so how do you do that?
- Whether any of your debts are or may be nondischargeable and how to deal with them?
- Whether you have co-debtors and how to list them?
- Which debts to list as contingent, unliquidated or disputed on your schedules?
- How to value your personal and real property on the schedules?
The list above is not a complete list of the things that must be considered in personal bankruptcy case.
In addition, as the result of the amendments to the Bankruptcy Code in 2005 there are particular pre-filing and post-filing obligations that a debtor in bankruptcy must comply with that an attorney would usually take care of.
Finally, if you don't hire an attorney you will also have to represent yourself at the Meeting of Creditors held pursuant to Section 341(a) of the Bankruptcy Code.
10. Why do I need an attorney to file bankruptcy? Can't I Just Hire a Paralegal for a Lot Less Money?
There are paralegal services that claim to assist people with bankruptcy filing. They are not lawyers and not knowledgeable about bankruptcy law. By law they are not allowed to provide any legal advice. All they are allowed to do is fill out the numerous forms and schedules required to be filed with the Bankruptcy Court based on information you provide. Basically, they are just expensive "typing services" that can't advise you whether or not to file bankruptcy, what chapter of bankruptcy to file if you decide to file bankruptcy, or how to fill out the forms and schedules needed in your bankruptcy case. The United States Trustee, in the Southern District of New York and elsewhere, has filed lawsuits against paralegal services prohibiting them from engaging in the unauthorized practice of law. See, Martini, as the United States Trustee v. We the People Forms and Service Centers USA, Inc., et al. (U.S. Bankruptcy Court S.D.N.Y., Adv. Pro. # 05-01434, and Stipulated Final Judgment entered). Many debtors have had bad results from using paralegal services for bankruptcy filings, such as having their cases dismissed or losing homes that could have been saved had the debtor hired a competent bankruptcy attorney.
11. How much should it cost to hire an attorney to file bankruptcy?
The filing fee charged by the Bankruptcy Court is currently $299 for a chapter 7 case and $274 for a chapter 13 case (as of 1/1/07). The fee for the mandatory pre-bankruptcy Credit Counseling program from a provider approved by the U.S. Trustee is approximately $50. The fee for the mandatory post-bankruptcy Financial Management program from a provider approved by the U.S. Trustee is also approximately $50.
The fee to hire Starr & Starr, PLLC to represent you varies depending on which chapter of bankruptcy you are filing (chapter 7 or chapter 13), how many creditors you have, your property situation and how much complexity will be involved in claiming your exemptions and completing your property schedules. Once we have this information we can quote you a binding flat fee. If you hire us we will enter into an Attorney-Client Engagement Letter with you in writing that will specify our total fee and any costs that we will collect from you and pass through (i.e., Court filing fee, two mandatory programs mentioned above) in your case.
Our fee may be paid in installments, but in a chapter 7 case it must (by law) be paid in full before we file your bankruptcy petition with the Bankruptcy Court. In a chapter 13 case we may agree to receive some part of our fee through your chapter 13 plan, depending on the circumstances of the case.
By law attorneys are required to disclose the fee they charge to represent debtors in chapter 7 and chapter 13 bankruptcy cases on disclosure forms filed in each debtor's bankruptcy case. We regularly review these filings in the Southern District of New York Bankruptcy Court (which includes New York County and Bronx County) and the Eastern District of New York Bankruptcy Court (which includes Kings County, Queens County, and Richmond County). We set our fees to be competitive with those of other experienced bankruptcy attorneys in New York City.
BUSINESS BANKRUPTCY QUESTIONS
1. When should a business voluntarily file Chapter 7?
Chapter 7 bankruptcy of a business involves its liquidation and should be viewed as a last resort when all other reasonable and realistic alternatives to chapter 7 have been explored and exhausted. Alternatives to chapter 7 for a business may include obtaining new sources of debt financing or capital investment, sale of assets or sale of the business in whole or in part, an out-of-court workout with creditors, or a restructuring under chapter 11. If none of these alternatives are viable, management or owners of a business may want to file a chapter 7 liquidation for a financially troubled business that is unable to pay its debts or has debts greater than assets (i.e., insolvent). If a business is insolvent or in the zone of insolvency, there is a developing body of case law that holds that management no longer has a duty to the owners (i.e., shareholders or other equity holders) of the business, but rather to its creditors. By filing a chapter 7 bankruptcy, management can ensure that creditors' claims are dealt with in a single unified proceeding and that the debtor's assets are not stripped apart by different creditors pursuing their individual legal remedies, such as by judgment enforcement. The decision whether a chapter 7 is appropriate for a particular business must be made based on the facts applicable to that business.
2. What happens when a business files Chapter 7?
The filing of bankruptcy creates an automatic stay (discussed further above) which is comprehensive and bars virtually all creditor collection activity, including commencement and continuation of lawsuits and enforcement of judgments against the debtor's assets. When a business files chapter 7 bankruptcy an interim trustee is appointed by the U.S. Trustee's office to marshal and liquidate the debtor's assets and distribute them to creditors. The interim trustee becomes the permanent trustee unless a different trustee is elected by creditors. The trustee has the ability to collect and pursue the receivables and claims (including legal claims and causes of action) of the debtor. In order to promote equality of treatment of similarly situated creditors, the Bankruptcy Code gives the trustee the ability to recover certain pre-bankruptcy transfers of the debtor as preferential or fraudulent transfers (discussed further above).
3. When should a business voluntarily file Chapter 11?
Chapter 11 can permit management or owners of a business to restructure the debt of the business and reorganize the business. The filing of bankruptcy creates an automatic stay (discussed further below) which is comprehensive and bars virtually all creditor collection activity, including commencement and continuation of lawsuits and enforcement of judgments against the debtor's assets. In chapter 11 the business can seek to reorganize as a going concern, or to sell its assets in whole or in part. Chapter 11 is an attractive method for asset purchasers to acquire assets because through a sale in the bankruptcy court pursuant to section 363 of the Bankruptcy Code they can ensure that they are acquiring assets free and clear off all liens and claims (including tax claims). A chapter 11 bankruptcy also provides a mechanism for a business to reject burdensome leases and contracts (discussed further below). Chapter 11 should not be viewed as a panacea or first resort. However, it can be a very useful way for a financially troubled business to restructure its debts in appropriate situations, or attempt to preserve the "going concern" value of its assets in a sale. The decision whether chapter 11 is appropriate for a particular business must be made based on the facts applicable to that business and it will not work for all companies.
4. How can a debtor reject burdensome leases and contracts in a chapter 11 bankruptcy?
One of the benefits of chapter 11 to a business debtor is that it has the choice to assume or reject its ongoing contracts and unexpired leases, and can reject financially burdensome ongoing contracts and unexpired leases. The claims of the other side to the contract or unexpired leases for rejection damages are treated as pre-petition unsecured claims in the bankruptcy. The Bankruptcy Code also caps a landlord's lease rejection damages claim (to one year's rent or 15%, not exceeding 3 years, of the remaining term of the lease).
5. What happens when a business files Chapter 11?
Unlike chapter 7, when a business files for chapter 11, a trustee will usually not be appointed and the debtor will remain a "debtor in possession" (DIP) with the same management in place unless the bankruptcy court orders a trustee appointed for "cause" (including fraud, dishonesty, incompetence or gross mismanagement of the affairs of the debtor by its current management), or if the court determines that appointment of a trustee is in the best interest of creditors.
6. What is the U.S. Trustee and what is its role?
A branch of the Department of Justice tasked with overseeing the administration of bankruptcy cases. The U.S. Trustee plays an oversight role, particularly in chapter 11 cases. It does this primarily through reviewing operating reports the debtor is required to file and tracking the progress of the case against benchmarks set in the early stage of the case.
7. What is a creditors committee and what is its role?
A creditors committee is routinely appointed in chapter 11 cases by the U.S. Trustee and ordinarily consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. The creditors committee consults with the debtor on administration of the case, investigates the debtor's conduct and operation of the business and participates in developing a reorganization plan. The creditors committee in a chapter 11 case may, with the approval of the Bankruptcy Court, hire attorneys, accountants, and other professionals (such as financial advisors).
8. What is the goal of Chapter 11?
The main goal of a chapter 11 case is for a plan of reorganization regarding the debtor to be approved by its creditors. The Bankruptcy Code gives the debtor the exclusive right to file a plan for the first 120 days of the case (which can be extended not more than 20 months from the date the case was filed). A creditors committee, or even individual creditors, can file a plan of reorganization once the debtor's exclusive filing period has lapsed (or been lifted by the Court). Debtors in chapter 11 must be represented by attorneys. Creditors committees typically also hire attorneys.
9. What is an assignment for the benefit of creditors?
An assignment for the benefit of creditors is a state law alternative to bankruptcy. Article 2 of the New York Debtor & Creditor Law specifies the procedures and requirements for an assignment for the benefit of creditors. It involves the assignment by a debtor to an assignee of all of the debtor's property pursuant to a written assignment agreement. The assignee then collects and liquidates the property and satisfies creditor's claims in accordance with the procedures specified in the Debtor & Creditor Law. The New York Supreme Court has jurisdiction over the proceeding. Unlike some states where they are regularly used, assignment for the benefit of creditors is a rarely used device in New York. One draw back with it, compared to bankruptcy, is that there is no nationwide automatic stay created by the commencement of the case. However, in certain circumstances the overall costs of administration may be cheaper than in a bankruptcy case thereby resulting in a greater return to creditors. In addition, the administration of the case may also be faster than in a bankruptcy case.
10. What is a receivership?
A receivership is a proceeding in which a receiver is appointed for an insolvent corporation, partnership, limited liability company or other business entity, or individual, to preserve and/or recover its assets for the benefit of the affected parties. New York law provides for appointment of a temporary receiver to preserve property that is the subject of a lawsuit prior to judgment where there is danger that the property will be removed from the state, lost, materially injured or destroyed. A receiver can also be appointed in connection with enforcement of a judgment in certain instances. For NY corporations, Article 12 of the NY Business Corporation law provides for appointment of a receiver to preserve assets or in connection with the dissolution of a corporation. Similar provisions exist under the laws of other jurisdictions. A receivership is a non-bankruptcy alternative that can be particularly useful to preserve the rights of creditor pending judgment.
11. What is an involuntary bankruptcy filing?
An involuntary bankruptcy filing is a bankruptcy filing that it commenced against a debtor by petitioning creditors. An involuntary bankruptcy case may be commenced under chapter 7 or chapter 11 against a person or business entity by three or more petitioning creditors (or 1 or more creditors if the debtor has less than 12 creditors) holding noncontingent, undisputed claims aggregating at least $13,400 based on the debtor's failure to pay his, her or its debts as they become due, or the appointment of a custodian over substantially all of the debtor's assets (such as an assignee for the benefit of creditors)
COMMERCIAL COLLECTIONS QUESTIONS
1. What is commercial collections?
Commercial collections involves the collection of past-due receivables owed to a business by another business, or an individual for a business related debt. It can be distinguished from consumer collections which involves collection of debts owed by individuals that were incurred primarily for a personal, family or household purpose.
2. Is the only type of collections work your firm handles commercial collections?
Our collections practice is generally focused on representation of business creditors that are owed money by other businesses or individuals. We routinely handle claims where the debtor is an individual where the basis of the claim is business related, such as a personal guaranty, or some other basis for personal liability of an individual in connection with a business debt. We do not currently accept volume retail collections (such as defaulted credit card debt) involving consumer debtors. We will accept non-commercial claims where the debtor is an individual depending on the nature of the claim, the documentation or other evidence supporting the claim, the age of the claim, its value, and our evaluation of its collectibility. Please contact us for a free initial consultation to evaluate your claim.
3. What is the difference between commercial collections done by a collection agency and by an attorney?
A collection agency sends a series of dunning letters to a debtor and usually combines its mail campaign with a series of phone calls. Many collection agencies operate on a high volume basis and handle all claims that are referred to them using a "cookie cutter" or "assembly line" approach where each claim is handled the same way (regardless of the circumstances of the debt or debtor involved). An attorney uses the law courts and legal process to collect the debt. Depending upon the specifics of the case the legal strategy can be tailored accordingly.
4. What are the stages of commercial collections?
For each claim that is accepted for collections, the first stage in the collection process is to investigate the debtor and its financial situation (assets and liabilities). This is done by accessing a variety of public records and private data sources available to us, including private subscription only data bases to which we subscribe. Based on the results of the initial investigation, a final demand letter may be sent to the debtor. We may combine this with a phone call to the debtor or personal visit to the debtor's business premises. In some circumstances this step may be skipped entirely and a law suit will be commenced immediately.
The second stage of the collections process is to file a lawsuit. This is a litigation to collect the past due receivable. The goal of commercial collections litigation is to obtain a judgment or settlement. A collections case is not undertaken in the anticipation of contested litigation. A collections case is one the debtor is not anticipated to raise any substantial defenses, and typically is the type of case where creditor could obtain summary judgment (judgment by motion prior to trial) based on the underlying documents and a supporting affidavit. See the FAQs regarding commercial and civil litigation below for more information about litigation generally. In appropriate instances the collections attorney will seek to obtain a pre-judgment remedy against the debtor, such as an attachment against assets of the debtor, or an injunction to preserve the status quo or prevent fraudulent transfers of assets.
Once a judgment has been obtained the third stage of the collections process is judgment enforcement. The collections attorney seeks to enforce the judgment against assets of the judgment debtor and turn it into cash using a variety of judgment enforcement tools permitted by law.
5. What tools are available to a collections attorney to seek to enforce a judgment?
There are a variety of legal tools that a collections attorney can use to seek to enforce a judgment on behalf of a judgment creditor. In New York a collections attorney can serve restraining notices and information subpoenas upon banks holding or believed to hold accounts of the judgment debtor, and upon third parties that owe the debtor money (such as the debtor's customers or clients). In New York a judgment debtor can be compelled to answer written questions under oath or to participate in an oral examination under oath regarding the identity and location of the debtor's assets. The sheriff or marshal can be instructed to seize the debtor's bank accounts and execute and sell other assets, such as business equipment, vehicles, and real estate, among others. There are other devices that can be employed depending on the nature of the debtor's assets.
6. What is the likelihood of recovery on my claim turned over for commercial collections?
The answer to this questions depends upon a number of factors including the age and size of the receivable and what it is for, whether the debtor is still engaged in business, whether the debtor has unencumbered assets, whether or not the debtor is a defendant in other litigation, and whether there are prior unsatisfied judgments against the debtor. In addition, the more information you are able to provide regarding the debtor, such as where the debtor banks, or the debtor's primary customers or clients, the better the chances of recovery.
CIVIL LITIGATION QUESTIONS
1. What is civil and commercial litigation?
Civil litigation means litigation in the civil law courts, as opposed to other types of law courts, such as criminal, administrative, family law, etc. Commercial litigation means any type of litigation involving a business dispute. At Starr & Starr, PLLC our civil and commercial litigation practice typically involves money disputes, primarily related to debtor - creditor claims, creditors' rights and judgment enforcement.
2. What is the statute of limitations?
The statute of limitations is the time period within which a lawsuit must be commenced or will be time barred. Certain acts can toll or extend the statute of limitations. The statute of limitations varies depending on the cause of action (underlying claim). If you or your company have legal claims to enforce, it is important to not sit on your rights and to promptly consult with an attorney regarding the merits of your claims and whether it is advisable to file a lawsuit.
3. What are the stages of litigation?
A lawsuit is commenced by the filing of a complaint by the plaintiff with a court. A summons and copy of the complaint are then served on the defendant or defendants who have a specified period of time to file an answer (or other response, such as a motion) to the complaint. The exact time period for the defendant to answer varies depending upon the court involved and the method of service. If a defendant is served with a summons and complaint and fails to answer, the plaintiff may apply for a default judgment.
If the defendant answers, the next stage of litigation is discovery (discussed below) and motion practice (discussed below). If the litigation does not voluntarily settle or get disposed of through motion practice, it will then go to trial or, in certain cases, to alternative dispute resolution (discussed below). The trial stage results in a judgment (or sometimes in a mistrial). If the judgment is in favor of the plaintiff, the next stage in the litigation is judgment enforcement. Even if a defendant appeals a judgment, a plaintiff can usually seek to enforce its money judgment unless the defendant obtains a stay pending appeal, which usually requires the defendant to post a bond.
4. What is discovery?
Discovery is the process by which parties to litigation seek to obtain evidence from the opposing side or third parties relevant to the claims and defenses raised in the lawsuit. In the United States broad pre-trial discovery is permitted. This includes written discovery and depositions (both discussed below). Different discovery rules apply in federal court and state court, although there are many similarities between the two.
Written discovery includes interrogatories (written questions that a party is required to answer), requests for admissions (written requests to admit or deny certain facts relevant to the claims and defenses raised in the lawsuit), and requests for production of documents (written request to produce documents relevant to the claims and defenses raised in the lawsuit). Documents can also be obtained from third parties who are not involved in the litigation through a document subpoena.
A deposition (referred to as an examination before trial or EBT in New York state court practice) is the questioning of a witness under oath in the presence of a stenographer who records the questions and answers and then prepares a written transcript. Parties to a lawsuit can be compelled to participate in a deposition and third party witnesses can be subpoenaed to testify in a deposition. The results of discovery can be utilized in motion practice and at trial.
5. What is motion practice?
A motion is a written request to the court for entry of an order granting certain relief based on applicable statutory and/or case law. Motion practice refers to the procedural or substantive motions that a party to litigation files with the court. A procedural motion is one that effects the procedural conduct of the case, for instance, to compel a party to respond to written discovery, such as interrogatories. A dispositive motion is a motion that, if granted, disposes of the case, such as a motion for summary judgment or a motion for dismissal. A motion for summary judgment can be generally described as a motion seeking judgment prior to trial on the grounds that based on the facts of the case and applicable law there are no triable disputed factual issues. A dismissal motion is a motion seeking dismissal of a lawsuit. Effective motion practice can play an important role in the outcome of litigation.
6. What is alternative dispute resolution or ADR?
Alternative dispute resolution or ADR refer to methods for resolving legal disputes other than through in-court litigation. Arbitration and mediation are two common ADR methods.
Arbitration involves submitting a dispute to a single arbitrator, or a panel of 2-3 arbitrators, who will issue a binding decision in the matter. Parties may be subject to arbitration based on an arbitration provision in a contract, or may voluntarily agree to submit their dispute to arbitration. Binding arbitration decisions are usually final and non-appealable except based on certain limited grounds.
Mediation involves an attempt by parties to a dispute to resolve their dispute by agreement reached with the assistance of a mediator. The mediator does not decide the dispute like a judge or arbitrator, but rather aids the parties in trying to reach a settlement acceptable to both sides. Mediation is an informal process compared with litigation or arbitration.
7. How long does a civil litigation case take from start to finish?
If the defendant does not answer the summons and complaint, the plaintiff can seek to obtain a default judgment. If the defendant answers the complaint, the length from start to finish of a civil or commercial litigation case depends on a number of factors, including, the complexity of the case, number of parties involved in the litigation, amount at stake, the court in which the lawsuit is filed and caseload of that court, and whether the case is resolved through settlement or motion practice or goes to trial.
While litigation involving simple small dollar claims may get resolved in a matter of months, litigation involving complex high value claims may take many months or years from start to finish.
