Bankruptcy & Foreclosure

Transcription

1 Bankruptcy & Foreclosure Presented by: Tex Ritter & Don Garrison 26 th Annual Training Conference Little Rock, Arkansas September 13-17, 2009

2 WiCSec Bankruptcy Workshop Tex Ritter, Director, Sierra Nevada Regional Department of Child Support Services Don Garrison, Managing Attorney, North OKC Child Support Office 2

3 Demystifying Bankruptcy Definitions Language of bankruptcy Types of bankruptcy Resources History Child Support is First Priority Debt type 3

4 Bankruptcy is fun and easy Discharge/Dismissal Trustee s duties and obligations Domestic Support Obligation Automatic Stay in Bankruptcy Proof of Claim Types of Claims 4

5 Bankruptcy is fun and easy Discharge/Dismissal Trustee s duties and obligations Domestic Support Obligation Automatic Stay in Bankruptcy Proof of Claim Types of Claims 5

6 Bankruptcy is fun and easy Objections to Claims Objections to Plans Failure to provide for current support Failure to provide for child support arrears 6

7 Bankruptcy is fun and easy Situations Employer files bankruptcy Obligor files bankruptcy Custodial parent files bankruptcy Notification of Bankruptcy 7

8 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 8

9 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) 9

10 Bankruptcy is fun and easy Objection to Claim Objection to Plan Relief from stay Motion to avoid a lien Adversary Proceedings 10

11 Bankruptcy is fun and easy Objection to Claim Objection to Plan Relief from stay Motion to avoid a lien Adversary Proceedings 11

12 Bankruptcy 201 Advanced Bankruptcy Complex Proofs of Claim Various Child Support Categories Multiple Cases Adding Interest to arrears 12

13 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 13

14 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 14

15 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. 15

16 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. 16

17 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. 17

18 11 U.S.C. 523 (a)(5) Domestic Support Obligations and interest on support obligations are non-dischargeable in bankruptcy. This change in the law makes is clear that previous court decisions allowing discharge of assigned support or arrears are no longer valid. 18

19 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) 19

20 11 USC Section 362(b)(2)(F) Intercepting a tax refund is not a violation. 20

21 Employer files Bankruptcy Notice to Withhold not honored Who gets credit? What not to do Who files the Proof of Claim Wages or Support 21

22 Advanced Bankruptcy Objections to Claims Prima Facia filing Objection to Claim Motion The Proceeding Evidence 22

23 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 23

24 Complex Issues Motions to Avoid a lien Recordings are judicial liens Child Support Exemption 24

25 Violations of the Stay Automatic Stay in Bankruptcy What to do? What not to do? 25

26 Adversary Proceedings Bankruptcy based law suit or legal proceeding Core proceedings Non-core proceedings 26

27 Relief from Stay Alter Ego Actions Preferential Transfers Fraudulent Conveyances Discovery 27

28 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 28

29 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%) 29

30 Negotiations Modify Plan to allow for payment of child support and arrears outside of Plan (or part in Plan) and list debt as non-dischargeable 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) 30

31 Bankruptcy is fun and easy Procedure Telephonic hearings are authorized Electronic filing is required, electronic docketing may be required 31

32 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

33 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) 33

34 Bankruptcy Exercise Chapter Situation You can continue to collect child support. You can continue to collect arrears. Release a license Discuss case options Once the Petition in Bankruptcy is filed, you can send a wage assignment. You must release a property lien that was filed prior to the debtor s filing for bankruptcy. Yes Yes No Yes Yes Yes Yes Yes Yes No No No No. 34

35 Bankruptcy Exercise Situation Repossessions are allowed. You can continue action to establish paternity. 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. Chapter Yes Yes Yes Yes A A A A Yes Yes Yes Yes 35

36 Bankruptcy Exercise Chapter Situation Credit reporting is allowable. You can file or record an Abstract of Support Judgment. You cannot negotiate an SLMS stipulation or inquire about payment on arrears. You cannot contact the debtor to find out when the next payment will be made. If the debtor requests a lien be lifted, refer the debtor to the bankruptcy court. Yes Yes Yes Yes No No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 36

37 Upon Notice of Chapter 7 Most are no asset cases and say that creditors should NOT file Proofs of Claims If Notice says to file a Proof of Claim, by all means do so. The trustee has found assets and we want our share Wage withholding/income assignment can stay in place for current support AND arrears

38 Upon Notice of Chapter 13 Look at the Plan. Arrears should be listed as a priority claim. Current support may or may not be included in plan. Often it is not. Call the debtor s attorney and reach agreement on payments inside/outside the Plan File Proof of Claim for arrears

39 Chapter 13 (cont.) Wage withholding/income assignment can often remain for current support only, with arrears paid through the Plan If arrears are paid through Plan you cannot also include them in a wage withholding/income assignment

40 Chapter 13 Issues DANGER, WILL ROBINSON!! In some Circuits, there is precedent for a confirmed Plan controlling even if it violates a statute If Plan omits child support completely, or mis-states the balance or interest- TAKE NOTE! If contacting debtor s attorney doesn t result in an Amended Plan, OBJECT!

41 Foreclosures Foreclosures vary widely from state to state, workers must be guided by their attorneys With declining property values, many properties in foreclosure are worth less than the balance owed on the mortgage. In these cases, there is no point in being aggressive about the child support lien, as there is no money to be paid.

42 Bankruptcy is fun and easy Thank you. Thank WiCSec. Please fill out your comment forms. if you have any questions. 42