Bankruptcy & Child Support: An Introduction

Transcription

1 WICSEC Conference September 7th - September 11th, 2008 Bankruptcy & Child Support: An Introduction John Cardoza VCDCSS john.cardoza cardoza@ventura.org

2 What we ll discuss. Bankruptcy Basics Filings Chapter 7 Chapter 13 Automatic Stay Bankruptcy & Child Support: Tools, Restrictions, & Day-to to-day Issues

3 A Fresh Start What is Bankruptcy? Bankruptcy is a federal court procedure designed to help both individuals and businesses address debts they cannot fully repay as well as help creditors receive some payment in an equitable manner. * A Fresh Start Discharge *GAO R Child Support Under Bankruptcy

4 Domestic Support in Bankruptcy Code 11 USC 101 (14A) a debt including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is-- owed to or recoverable by-- a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or a governmental unit; in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) from a court order.

5 Domestic Support in Bankruptcy Code Wisc. v. Ratliff --- F.Supp.2d ---, (2008) WL (E.D.Wis.) Non dischargeable -11 USC 523(a)(5) Chapter 13 Plan must provide for Full payment -11 USC 1322(a)(2) Entitled to Priority over other debts- 11 USC 507 (a)(1)(a) In re: Williams (2008) 387 B.R. 211

6 On the Rise million Bankruptcies filed each year* 2005 Bankruptcy reform ,000 Bankruptcies up 28% first two months; projected by some economists to rise to million** *GAO R Child Support Under Bankruptcy ** NYT March 8, 2008

7 Chapter 7 Refers to a Chapter of Title 11, U.S. Code (Bankruptcy Code) 701 et seq. Liquidation Trustee

8 Chapter 7 Filing of a bankruptcy petition creates an estate consisting of the debtor's property as of the date the petition is filed [11 U.S.C. 541(a)] Reforms of 2005 Means Test Generally -- No Asset -- No Disbursement Rarely Proofs of Claim

9 Chapter 13 Wage Earner s Plan Installment plan to pay creditor s over 3-5 years (depending on Income and means test) Forestall foreclosure Reschedule debts to lower monthly payments Limits on eligibility

10 Process: Chapter 13 Debtor files a Voluntary Petition Also files Schedules Files a Plan within 15-days of filing the Petition Creditor files a Proof of Claim and/or an Objection to the Plan Plan is Confirmed Funds are disbursed

11 Chapter 13 The Estate: Consists of all of debtor s property from the filing of the petition to the confirmation of the plan After confirmation, assets not used in funding the plan revert to the debtor [11 U.S.C. 1327]

12 Chapter 13 What the LCSA does when it receives a Notice of Bankruptcy: Be aware of the applicable aspects of the Automatic Stay Obtain Copy of the Schedules Write Bankruptcy Attorney PACER File Proof of Claim

13 Automatic Stay An injunction that automatically stops enforcement actions against a debtor the moment a bankruptcy petition is filed. As a result of Bankruptcy Reform in 2005, many enforcement activities previously forbidden to the LCSA are now allowed.

14 Automatic Stay Notice Court/Trustee The LCSA may not: File an OSC re: Contempt for enforcement purposes File/Record a lien or judgment on Estate Property File an OSC for a Judgment Debtor Examination

15 Automatic Stay The LCSA may not: Do Bank Levies on accounts that are part of the estate Negotiate payments for support outside of the plan (e.g. release a license) Collect WCAB benefits from a Prepetition injury Temporary Disability Benefits (CA) different

16 Automatic Stay The LCSA may: Establish Paternity, Support or Medical Support Judgment Modify a Support Order Issue Wage Assignments for Ongoing Support and Arrears But After the Plan is confirmed proceedings inconsistent or incompatible with the confirmed plan are improper. Gellington (2007) 363 B.R. 497

17 Automatic Stay The LCSA may: Certify Cases for Submission for IRS/Tax intercepts Report Delinquencies to Credit Reports Submit Cases for Criminal Prosecution Submit Licenses for Suspension Submit to DOS to withhold Passports Retain any lien/abstract of Judgment recorded prior to the filing of bankruptcy Demands without Bankruptcy Court Orders

18 Schedules Official, detailed lists filed by the debtor with his petition for bankruptcy that describe his assets, liabilities, income and other financial information.

19 Schedules A Great Source of Information (A) Real Property Secured or Priority (B) Personal Property (C) Exempt Property (D) Secured Creditors (E) Unsecured Priority Creditors (F) Unsecured Non-Priority

20 Schedules (G) Executory Contracts and Unexpired Leases (H) Co-Debtors (I) Income (J) Expenses Statement of Financial Affairs

21 The Plan A Detailed description of how the debtor proposes to pay creditor s claims for the duration of the bankruptcy* *Bankruptcy Basics A.O.U.S.C, 2007

22 The Plan 11 USC 1325 To be confirmed, Must comply with Title 11 [11 USC 1325 (a)(1)] Be Proposed in Good Faith [11 USC 1325 (a)(3)] Debtor will make payments and comply with Plan [11 USC 1325 (a)(6)]

23 The Plan The Plan must provide for the payment of all priority claims (e.g. child support arrearages) [11 USC 1322(a)(2)] All Support Payments must be made as they are due since the filing of the petition [11 USC 1325 (a)(8)]

24 If the Plan Doesn t File an objection [11USC 1324(a)] Failure to Pay Ongoing Child Support during Bankruptcy Move to convert or dismiss [11 USC 1307(c) (11)]

25 Proof of Claim A written statement verifying documentation filed by a creditor that describes the basis of the debtor s obligation.

26 Proof of Claim Must file one to receive disbursement Presumed to be accurate if properly prepared Include Judgment/Order and Pay History

27 Proof of Claim Will be either Priority or Secured Check Schedule (A) All support is first priority as of 10/17/05 First Priority Doesn t always mean it will be the first to be paid* (Compare Chap 13 with Chap 7) Post Petition Interest may not be entitled to priority** *Sanders (2006) 347 B.R. 776 **Hernandez (2007) WL **(Contra?) Reid 2006 WL

28 E-Filing Pleadings F.R.B.P. Required Exceptions Infrequent Filer Motion Check Local Website Local Rules

29 An E Consortia john.cardoza@ventura.org

30 Thank You