Mr. Corletta has over twenty-five 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.
Mr. Corletta has represented clients in over 3,000 consumer bankruptcy cases. Bankruptcy is legal debt repudiation. 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.
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 changesto the code to keep the collateral.
In Chapter 7, unsecured debts, such as unpaid credit cards, doctor bills, utility bills, rent, etc. can be discharged in total.
In Chapter 7, 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.
The Trustee is a legal representative of the government, empowered to investigate a Debtor's case and administer assets, if any.
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 three to five 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 is commonly utilized where an individual has suffered a life-changing event; such as loss of employment, business failure, illness, divorce, or in recent years, overextension on credit cards. It is used to relieve creditor pressure on the individual, so the individual can reorganize and/or obtain a "fresh start".
Creditors must obey the Bankruptcy Code, including the statute which protects all Debtors upon filing from creditor action. This is called the "automatic stay". The object is to receive a Discharge, which is a permanent injunction barring creditors from collecting debts that are discharged. The main advantage of bankruptcy over consumer counseling or debt consolidation or management programs is that such programs are voluntary. Creditors need not participate. However, since bankruptcy is the law, creditors are bound by it, whether they wish to participate or not.
If creditors violate either the automatic stay or Discharge Injunction, they can be disciplined by the Court. Debtors can be awarded monetary sanctions and legal fees for creditor violations of the automatic stay or Discharge Injunction.
In Chapter 13, some secured claims on cars, boats, mobile homes, etc. can be reduced to the value of the collateral, and incorporated into the Plan at great savings, due to a lower interest rate and extended payments. However, recent changes to the code have placed limitations on this, and this now doesn't apply to loans incurred within two and a half years of filing.
Bankruptcy cases are time consuming, in that a Debtor is expected by the Court to be completely truthful in disclosure of their debts, income, and assets. This requires careful information gathering and document preparation, and cooperation from Debtor in assisting their attorney in gathering this personal information. My office staff and I can assist you in this process.
There is also a need for strong advocacy in bankruptcy cases. 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 addition, the case received national attention in an established consumer bankruptcy publication. See Consumer Bankruptcy News, Vol. 15, Issue 13, June 9, 2005.
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 one hundred 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.
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 twenty-seven 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 most significant changes to the Bankruptcy Code since 1978 will take effect on October 17, 200.
The changes will affect greatly who can file under Chapter 7 of the Bankruptcy Code, and will 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 posdt-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.
Almost one (1) year after the changes to the Code, the National Association of Consumer Bankruptcy Attorneys has determined, pursuant to a survey, that 81% of those attorneys surveyed said there has been a mahor increase in the time it takes to prepare a bankruptcy filing. 93% of the attorneys surveyed said the increased paperwork mostly increased the cost of the services rather than having improved the result.
This essentially supports the objections of bankruptcy attorneys that all the changes in the law did was make it more difficult and costly to file for bankruptcy, thereby closing the door to the courthouse on these grounds alone, not because less people are qualified to file.
This is demonstrated by the large increases in filing fees and costs for attending Consumer Credit Counseling and Debt Management classes after filing. The Debtor's costs, exclusive of attorneys fees, are now over $400.00 in most casses.
According to a recent CNN report, a bankruptcy filing that used to cost between $500.00 and $1500.00 now costsbetween $1000.00 and $3000.00. 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 requried 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 affford an attorney, and too complicated for them to do it on their own.
