Bankruptcy Cases

LET THOMAS A. CORLETTA HANDLE YOUR
BANKRUPTCY CASE

BANKRUPTCY INFORMATION

Mr. Corletta has over 25 years' experience in Chapter 7 and 13 consumer and small business bankruptcy cases in the United States Bankruptcy Court for the Western District of New York. Bankruptcy is a highly technical area, and is based almost entirely upon interpretation of the United States Bankruptcy Code. The Bankruptcy Code and related statutes allow a Debtor, under Chapter 7, to discharge debts in full, with the exception of certain types of debts and secured creditors. Secured creditors hold collateral to secure repayment of the loan; the most common examples are a house, car, mobile home, boat, etc.
A gavel laying on a legal book
Mr. Corletta demonstrated his knowledge of the law and vigorous advocacy for his client in In re:SF (5/11/05). In that case, the United States Trustee's Office moved to dismiss a Bankruptcy Petition filed by Mr. Corletta's 80 year-old client on grounds of "substantial abuse." The government's argument was that the debtor had no assets and was on a fixed income, and therefore "did not need" protection from his creditors.

In Chapter 7, the Debtor has the option of keeping the collateral, provided they continue to make payments on the loan. This is a process commonly referred to as "reaffirmation" and is required under recent changes to the code to keep the collateral. Unsecured debts, such as unpaid credit cards, doctor bills, utility bills, rent, etc. can be discharged in total. A Debtor must disclose all of his/her assets. In most cases, those assets fall within statutory "exemptions," which is property Debtor is entitled to keep. In certain situations, some assets fall outside the exemptions, which means they must be sold to pay creditors. Sometimes, a Debtor is able to negotiate with the Trustee to keep such assets, provided Debtor pays the Trustee for the asset so the money can be used to pay his/her creditors.

Chapter 13 is another form of bankruptcy, permitting Debtors with assets to repay a percentage of their creditors. It is commonly used to cure defaults or delinquencies in mortgage, tax, or child support payments. In Chapter 13, a Debtor proposes a Plan to the Court to repay a portion of their debts, said payments being made over a 3 to 5-year period to the Chapter 13 Trustee, usually by wage deduction. The Plan is examined by the Court and Trustee, and if found to be feasible, proposed in good faith, and in the best interests of the creditors, confirmed by the Court and binding on creditors. The Chapter 13 Trustee administers the payments, and pays creditors according to the Plan.

BANKRUPTCY CASES
Mr. Corletta obtained still another published opinion in Federal Bankruptcy Court in In re G.A. (USBK Ct., WDNY, 8/18/17). 

 In that case, Mr. Corletta obtained attorney’s fees as a sanction against a landlord who attempted to collect a pre-Petition debt from his client, the tenant. In this unusual case, the landlord cosigned a Pre-Petition loan for Mr. Corletta’s client, her long-term tenant. For unrelated reasons, the client was forced to file Bankruptcy and forced to schedule the loan the landlord cosigned. The client felt bad, and although not required to, told the landlord the loan would continue to be paid and would be reaffirmed. 

 This was not good enough for the landlord who instead paid off the loan and then, post-filing and without consulting Mr. Corletta, entered into a Promissory Note with the client. The client actually started paying the landlord on this obligation. When Mr. Corletta found out about it, he directed the client to stop paying and filed a Motion for sanctions for violating the Automatic Stay.

 The landlord’s attorney first attempted to get Mr. Corletta to withdraw the motion; but did not void the Agreement or promise not to collect on it. Essentially, the landlord’s counsel felt the landlord was justified in entering into this Agreement. 

 The attorney then filed Answering papers at the last minute; 3 days before the Motion was to be argued, and the matter was argued in Bankruptcy Court where the landlord asserted that all Mr. Corletta had to do was contact her and the Agreement would have been “ripped up”.

 In a scathing 9 page Opinion, the Bankruptcy Court found the landlord violated the Automatic Stay; and further, that the landlord’s actions caused prejudice to the client/Debtor. The Court noted that despite the landlord’s protestations, they had done nothing to remedy the situation; they had not returned the money the client paid under the Agreement, and had not torn up the Agreement. The Court found Mr. Corletta’s actions in bringing the Motion were wholly and completely justified.

 The Court declared the Agreement null and void and awarded Mr. Corletta attorney’s fees as a sanction against the landlord. This was clearly a violation of the Automatic Stay because the landlord attempted to collect on a claim after she was noticed of the Bankruptcy filing. The case is a lesson in that the Bankruptcy Code provisions regarding the Automatic Stay will be strictly enforced, as the Court warned in a previous case handled by Mr. Corletta, In Re C.R. (BK Ct. WDNY 6/2016), the Automatic Stay is not to be taken lightly by creditors and is not to be cavalierly disregarded. This was the clear message sent in this case. 

BANKRUPTCY CHANGES

Like any other legal matter, each person's situation must be evaluated. However, if you are contemplating bankruptcy, you should be aware the Bankruptcy Code has undergone its most drastic changes in over 27 years. On April 14, 2005, the House of Representatives passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. On April 21, 2005, President Bush signed the bill into law.

The changes affect greatly who can file under Chapter 7 of the Bankruptcy Code, and contain a number of prerequisites making it more difficult to initiate a filing under Chapter 7. There will also be numerous modifications to longstanding Chapter 7 principles that are not favorable to Debtors. There will also be extensive changes to Chapter 13, which will result in Debtors paying more money to both secured and unsecured creditors through their Chapter 13 plans.

The changes also place greater responsibilities on attorneys who are preparing bankruptcy schedules which will result in a substantial increase in the amount of work performed and fees charges. Potential filers should also be aware that effective October 17, 2005, Chapter 7 filing fees will increase over from $209.00 to $274.00. Chapter 13 filing fees will decrease slightly, from $194.00 to $189.00. There is also proposed legislation to increase filing fees another 40.00 that is ready approval. In addition, clients must now pay for pre-petition consumer credit counseling and a post-petition debt management course.

Clients should also be aware the United States Bankruptcy Court for the Western District of New York has gone to an all electronic filing effective October 1, 2004. After October 1, 2004, no paper filings are being accepted. This has changed the procedures for the filing of bankruptcy cases.

According to a recent CNN report, a bankruptcy filing that used to cost between $500.00 and $1,500.00 now costs between $1,000.00 and $3,000.00. Moreover, for those who now try to file on their own, the law works at cross purposes. Because it has become more complicate and created traps even for veteran attorneys, consumers filing for bankruptcy are often finding their cases being dismissed for failure to file newly required documents under the Code.  

In short, the substantive law of bankruptcy has not been substantially changed. However, the procedural law of bankruptcy has been changed to make filing requirements more onerous, thereby making it too costly for them to afford an attorney, and too complicated for them to do it on their own.
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