What New Bankruptcy Lawyers Need To Know: Beyond The Code

What Goes Into The Liquidation Analysis

By Cathy Moran, Esq. Leave a Comment Filed Under: Bankruptcy Practice, Start Here

The liquidation analysis is central to every form of consumer bankruptcy. Yet too many attorneys think the formula is Assets minus Secured Debts minus Exemptions = Distributable estate Not by a long shot. So let's walk through the elements of a comprehensive liquidation analysis. You need it if you're assessing the vulnerability of assets to the trustee in a Chapter 7. It's one of the confirmation tests ("best interests of creditors") in Chapter 13. And it's critical if you're cramming down a Chapter 11 plan. Assets, tangible and intangible Tangible assets like homes and cars are easy to identify. A step less obvious, to your client at least, is money in the bank. And then there are legal rights that may be worth money, like interests in a probate estate, membership in a class action suit, or an employment-based claim. All of those things are assets. And unless you find an exception in 541, they become assets of the estate. But don't forget assets that may … [Continue reading...]

Getting Started In Bankruptcy Law

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Everyone new to bankruptcy needs a guide to this specialized legal realm. Just as you can't tell the players without a scorecard, it's hard to make heads or tails of bankruptcy law when it's new to you. Jon Hayes has what you need to tell priorities from the absolute priority rule. Exemptions from exclusions. Denial of discharge from non dischargeability. His book is A Summary of … [Continue reading...]

When The Marital Community Doesn’t Get A Bankruptcy Discharge

By Cathy Moran, Esq. Filed Under: Community property, Discharge Dischargeability

Community property works differently in bankruptcy, especially when it comes to debts of a non-filing spouse. I probably don't have to tell you that. On the issue of assets and debts, community property is pretty straightforward. All of the community property comes into the estate upon the commencement of a bankruptcy case, even when only one spouse files. §541(a)(2). Every creditor with … [Continue reading...]

The Weak Link In The Means Test

By Cathy Moran, Esq. Filed Under: Means test

The bankruptcy means test, designed to keep people out of bankruptcy, has a fatal weakness. Like so much recently, it's health care. Health care, in the future, to be paid before creditors get any money. It works because, in a logic that only Congress could employ, the means test deducts future expenses from past income. And, since we don't know what the future brings, … [Continue reading...]

The Long Reach of R. 3002.1

By Cathy Moran, Esq. Filed Under: Rule 3002.1

What are the consequences of a secured lender's failure to comply with R. 3002.1 in a prior case when the debtor files again? Significant, it seems. The issue came before the SD Texas bankruptcy court in Alvarez, No. 22-33889 (Bankr. S.D. Tex. Aug. 9, 2023) when the debtor objected to the mortgage claim of the non-institutional lenders which included some $12,000 in attorneys fees from the … [Continue reading...]

Recover The House AFTER The Foreclosure Under New California Law

By Cathy Moran, Esq. Filed Under: Real property

The signal changes in California foreclosure law in 2021 are bearing unexpected fruit: a bankruptcy filing AFTER the foreclosure auction can save the house for the homeowner. Under CC 2924m, instead of the foreclosure sale being final at the drop of the auction hammer, now the sale is not final, and the trustee's deed not recordable, for weeks following the sale under fairly common … [Continue reading...]

Rule 41 Threatens Strike Out

By Cathy Moran, Esq. Filed Under: Rule 3002.1

I was the third attorney on this lien avoidance matter. Instead of it being "third time's the charm", it came close to being "three strikes and you're out." All because of FRBP 7041. One This was the set up: original counsel filed a number of lien avoidance actions, including the one against a landlord with a large default judgment. Motion was served, and, for reasons unknown, it was … [Continue reading...]

Today’s AI Stands To Create Work For Consumer Lawyers

By Cathy Moran, Esq. Filed Under: lawyer skills

Most lawyers were torn between wincing and laughing when a lawyer filed a brief packed with case authority created out of whole cloth by an AI bot. Meanwhile, a segment of the bar is fretting that we will be replaced by powerful artificial intelligence. My concern, based on a couple of casual forays into AI, is not that I will become redundant, but rather that I will spend my professional life … [Continue reading...]

The Neglected Non-dischargeability Provision

By Cathy Moran, Esq. Filed Under: Counseling clients

Hands up, everyone who has encountered a claim that a debt is non-dischargeable by reason of §523(a)(14). That's what I thought: nada, or next thing to it. Despite watching for it, I hadn't seen one til this year when AmEx filed an adversary in a case in which I was peripherally involved. My copy of Colliers code doesn't even comment on any (a)(14) cases. So, what's this about credit … [Continue reading...]

Is This Corporation Really Separate From Its Owners: A Checklist

By Cathy Moran, Esq. Filed Under: Business bankruptcy

In a perfectly-executed world, clients who do business via an entity like a corporation or LLC would arrive with their business life neatly separated from their personal lives. However, that's not the world I practice in. It's probably not yours, either. Instead, I have to sleuth out the facts, and compare them to the individual's version. I see prospective debtors where the business … [Continue reading...]

Are 401(k) Contributions Disposable Income Or Not?

By Cathy Moran, Esq. Filed Under: Means test

For a system that is supposed to rehabilitate personal finances and set debtors back on their feet, Chapter 13 nationwide is schizophrenic about on- going retirement savings. We're divided about whether post petition contributions to retirement accounts preclude confirmation of a Chapter 13 plan. Are 401(k) Contributions Disposable Income Or Not? Too many courts, in my opinion, come down … [Continue reading...]

Bankruptcy Law Trumps State Protection For Judgment Lien

By Cathy Moran, Esq. Filed Under: Exemptions

State law insulated a recorded judgment lien from future increases in the homestead exemption. However, bankruptcy law trumps that limitation, says the 9th Circuit in Barclay v. Boskoski. [T]he Bankruptcy Code requires courts to determine the amount of the exemption to whichthe debtor would have been entitled in the absence of the lien at issue The issue was literally a half-million … [Continue reading...]

Finding the Flaws in IRS Tax Liens

By Cathy Moran, Esq. Filed Under: Tax

Tax liens in bankruptcy sometimes don't stand up to close scrutiny, to the delight and profit of bankruptcy debtors. I was reminded of two such instances by the excellent presenters at the NACBA 2021 Workshop. Lien perfection follows state law The secret tax lien attaches to all of a taxpayer's property of any kind, wherever located. However, a tax lien is perfected against other creditors … [Continue reading...]