Demystifying Bankruptcy
Tex Ritter
ERICSA
Bankruptcy 201
• A bankruptcy primer for the advanced
situations
Demystifying Bankruptcy
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Definitions
Language of bankruptcy
Types of bankruptcy
Resources
History
Child Support is First Priority Debt type
Bankruptcy is fun and easy
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Discharge/Dismissal
Trustee’s duties and obligations
Domestic Support Obligation
Automatic Stay in Bankruptcy
Proof of Claim
Types of Claims
Bankruptcy is fun and easy
• Objections to Claims
• Objections to Plans
– Failure to provide for current support
– Failure to provide for child support
arrears
Bankruptcy is fun and easy
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Situations
Employer files bankruptcy
Obligor files bankruptcy
Custodial parent files bankruptcy
Notification of Bankruptcy
Bankruptcy is fun and easy
• Discharge in bankruptcy
• Domestic Support obligations are not
discharged
• Notice to Withhold is authorized
• National Medical Support Notice is
authorized
• Tax intercept, license suspension, credit
reporting and passport denial are
authorized
Bankruptcy is fun and easy
• File a proof of claim? Or Not?
• Depends on the circumstances
• Let’s make a deal
• Include unliquidated amounts
(unreimbursed medical, child care, school
expenses, recreational expenses if
authorized by judgment or statute)
Bankruptcy is fun and easy
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Objection to Claim
Objection to Plan
Relief from stay
Motion to avoid a lien
Adversary Proceedings
Bankruptcy is fun and easy
Bankruptcy 201
• Advanced Bankruptcy
– Complex Proofs of Claim
– Various Child Support Categories
– Multiple Cases
– Adding Interest to arrears
Proof of Claim
• A claim is a right to payment. 11 U.S.C. §
101 (5).
• (5) 'claim' means - (A) right to payment,
whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured,
disputed, undisputed, legal, equitable,
secured, or unsecured; or
Proof of Claim
• A claim in bankruptcy could be the right
to collect unliquidated, but accrued,
unreimbursed medical expenses or
educational expenses or reimbursement
of child care costs not yet reduced to a
judgment.
11 U.S.C. § 101 (12A)
• 'debt for child support' means a debt of a
kind specified in section 523(a)(5) of this
title for maintenance or support of a child
of the debtor.
11 USC Section 101(14A)
• “Domestic Support Obligation” is a debt
owed to a spouse, child, parent of a child
or a governmental agency in the nature
of maintenance, support (including public
assistance) or alimony.
11 USC Section 362(b)(2)(C)
• Income Withholding, Notice to Withhold
Income, Earnings Assignments Orders,
National Medical Support Assignments do
not violate the automatic stay. 362(b)(2)(G)
• Revoking a professional or driver’s license
does not violate the automatic stay.
• Reporting to credit bureaus does not
violate the automatic stay. 362(b)(2)(E)
11 USC Section 362(b)(2)(F)
• Intercepting a tax refund is not a
violation.
Employer files Bankruptcy
• Notice to Withhold not honored
– Who gets credit?
– What not to do
– Who files the Proof of Claim
– Wages or Support
Advanced Bankruptcy
• Objections to Claims
– Prima Facia filing
– Objection to Claim Motion
– The Proceeding
– Evidence
Objection to Chapter 13 Plan
• The Plan does not provide for the
payment of support
– Object to confirmation
– Negotiate
– Child Support is non-dischargeable
– Not proposed in good faith
– Require amendment to Plan
Complex Issues
• Motions to Avoid a lien
• Recordings are judicial liens
• Child Support Exemption
Violations of the Stay
• Automatic Stay in Bankruptcy
– What to do?
– What not to do?
Adversary Proceedings
• Bankruptcy based law suit or legal
proceeding
• Core proceedings
• Non-core proceedings
Relief from Stay
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Alter Ego Actions
Preferential Transfers
Fraudulent Conveyances
Discovery
Negotiations
• Typical scenario
– You receive Notice Chapter 13 filed
– Contact Debtor’s attorney
– Next step?
• File a Proof of Claim
• Do not file a Proof of Claim
– How to negotiate
Negotiations
• Review case
• Good Pay/Bad Pay
• NTW or income withholding order or
wage assignments are allowed for current
and arrears
• Income Ratios/Child Support Obligation
• Trustee's fees (10%)
Negotiations
• Modify Plan to allow for payment of child
support and arrears outside of Plan (or
part in Plan) and list debt as nondischargeable
• Sent Notice to Withhold or Income
Withholding Order or part NTW and part
Proof of Claim for arrears (with
knowledge and consent of debtor’s
attorney)
Bankruptcy is fun and easy
• Procedure
• Telephonic hearings are authorized
• Electronic filing is required, electronic
docketing may be required
Bankruptcy is fun and easy
• In re Garrett (E.D. Tex 2005) 315 B.R. 431
• In re Charnock (9th Cir. BAP 2004) 318
B.R. 720
• In re Cervantes (9th Cir. 2000) 219 F.3d
955
• In re Lebowitz (9th Cir. 2000) 217 F.3d
799
Bankruptcy is fun and easy
• In re Coker (C.D. CA. 1998) 232 B.R. 182
• In re Pacana (9th Cir. BAP 1991) 125 B.R.
19
• In re Donald Clifford Foster (9th Cir. 2003)
319 F.3d 495
• In re: Wayne K. Crawford (7th Cir. 2003)
324 F.3d 539
• In re Gruntz , 202 F.3d 1074 (9th Cir. 2000)
Bankruptcy Exercise
Situation
Chapter
7
9
11 13
You can continue to collect child support.
Yes
Yes
You can continue to collect arrears.
Yes
No
Release a license
Yes
Discuss case options
Once the Petition in Bankruptcy is filed, you
can send a wage assignment.
Yes
Yes Yes Yes
You must release a property lien that was filed No No No No
prior to the debtor’s filing for bankruptcy.
Bankruptcy Exercise
Situation
Chapter
7
9
11 13
Repossessions are allowed.
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You can continue action to establish
paternity.
Yes Yes Yes Yes
You can use a Civil Contempt proceeding to
enforce the payment of debt.
An action to modify support is not affected
by filing of a bankruptcy.
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Yes Yes Yes Yes
Bankruptcy Exercise
Situation
Chapter
7
9
11 13
Credit reporting is allowable.
Yes Yes Yes Yes
You can file or record an Abstract of Support
Judgment.
No
You cannot negotiate an SLMS stipulation or
inquire about payment on arrears.
Yes Yes Yes Yes
You cannot contact the debtor to find out
when the next payment will be made.
Yes Yes Yes Yes
No No No
If the debtor requests a lien be lifted, refer the
Yes Yes Yes Yes
debtor to the bankruptcy court.
Bankruptcy is fun and easy
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Thank you!
Thank ERICSA!
Please fill out your evaluation forms
Email if you have any questions
– Tex.Ritter@co.nevada.ca.us