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.
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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 produced documentation that his client was frail and sick, confined to a nursing home, had just had open heart surgery, and was being hounded by creditors. Mr. Corletta reviewed over 100 cases on the topic and filed an extensive Memorandum of Law with the Court. Mr. Corletta defeated the government's motion in a ruling from the bench. In addition, the case received national attention in a well-known national consumer bankruptcy publication.

The case was an example of a trend of overzealous behavior by the government seeking to limit deserving people from filing under Chapter 7. The case demonstrates the need for vigorous advocacy in bankruptcy cases, which will be even more evident once the amended Bankruptcy Code goes into effect in October, 2005. Once the new law goes into effect, there will be no presumption a debtor is entitled to a Chapter 7 Discharge. Further, the new law places restrictions on attorneys representing consumer debtors. That will make it more difficult to represent them.New Paragraph

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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