FAQ - Baltimore Bankruptcy Lawyer

Can I Use My Gift Card When A Company Files For Chapter 11?

LPM Dev — Wed, 11 May 2016 23:41:29 +0000

Many people wonder what happens with their gift cards when a company files bankruptcy. When a company files chapter 7, they intend to close and liquidate their assests to pay off their debtors. In these cases, it is unlikely that the gift cards will be redeemable. However, when a company enters into a Chapter 11, they are attempting to reorganize and continue operating. Therefore, it is likely that they will continue to accept gift cards, and will receive a first day court order to allow this practice to continue. But don’t wait too long to use them. Sometimes a Chapter 11 can turn into a Chapter 7 if the company’s financial position continues to fail. If you have any questions about what happens with your gift cards after a company files bankruptcy, give our office a call at (410) 484-9000. We would love to answer your questions.

The post Can I Use My Gift Card When A Company Files For Chapter 11? appeared first on Baltimore Bankruptcy Lawyer.

My borrower has abandoned his home and stopped paying the mortgage. Can I change the locks and secure the property while I am in the process of foreclosing?

LPM Dev — Wed, 11 May 2016 23:37:37 +0000

The answer to this question is almost certainly yes, you can and should take these steps to protect your mortgage investment. Almost every standard loan document provides that the secured creditor can protect their collateral by securing it against the elements and against theft or vandalism or to deal with other common problems like frozen pipes in the winter by turning off the water or maintaining utility service. This kind of self help is permitted when there is no likelihood that it is going to lead to a breach of the peace or resistance by the home owner. However, if the homeowner is living there or even if the property is occupied by squatters the secured creditor may not be permitted to enter into the property, change the locks or secure the premises. Under those circumstances the creditor will need to foreclose or otherwise obtain an order from the court allowing the sheriff to vacate the property before the secured creditor can take the action necessary to protect their collateral.

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My company shipped goods to another company that filed bankruptcy right after and that doesn’t seem fair. Can we do anything?

LPM Dev — Wed, 11 May 2016 23:37:20 +0000

The answer to this question is yes, provided that the creditor actually shipped the goods within 20 days before the bankruptcy was filed. When a debtor receives goods while insolvent, the creditor has what’s called the right of R\reclamation to recover the property or its value from the debtor. In the bankruptcy code, that right has become incorporated into the creditor’s ability to obtain a highest priority administrative claim against the debtor for the amount of the goods that were shipped on the eve of the bankruptcy. This administrative claim is powerful because it enables that creditor to receive payment before any other creditor is paid, except perhaps for secured creditors who may have the right to the cash generated from the debtor’s operations. Creditors need to be careful however because many times bankruptcy courts establish bar dates for filing administrative expense claims and these claims aren’t filed by simply submitting the proof of claim form that every creditor receives upon the filing of the bankruptcy case. Instead the administrative creditor needs to file a specific request with the bankruptcy court and obtain an actual order of the court allowing the administrative claim to be paid in the first priority against the bankrupt estate.

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What Is A Charging Order?

LPM Dev — Wed, 11 May 2016 23:21:26 +0000

In modern commercial practice, many entities are limited liability companies. These are entities that have some of the qualifications of a corporation and some characteristics of a partnership, but in Maryland at least if a person gets a judgment against someone that’s a member of a limited liability company, that person can’t just seize that membership interest and sell it or become a member and operate that business. All that person can get is a charging order; a charging order charges the membership interest or a partnership interest with any income that that limited liability company might distribute to the member who is an owner of the limited liability company.

Relative to other remedies, a charging order is sometimes the best you can get. On the one hand, it’s not terribly powerful because it can’t force the member to give up their rights in the limited liability company so that the judgment creditor can now control that company. All it can do is seize the distributions that are being made to that member under the limited liability company.

On the other hand, sometimes this can be powerful because a member can get money out of an LLC in only a limited number of ways: by salary, by distributions or by taking loans. But, if the member is clever, they might be able to put off the creditor and somehow operate that company to defeat the rights of the charging order. Nevertheless, it’s an important arrow in the quiver of a judgment creditor in trying to collect a debt.

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How Do I Get Information About A Debtor?

LPM Dev — Wed, 11 May 2016 23:07:19 +0000

Information about a debtor is available from many different sources. Many states now have all lawsuits, business history and propery ownership records available online. The debtor itself is required to file Schedules and Statement of Financial Affairs at the beginning of a bankruptcy case. These are documents signed under oath that contain important information about the debtor’s assets, liabilities, income, and expenses.
The debtor must also testify under oath at a meeting where all creditors are welcome to appear and ask questions. These tend to be shorter examinations and are recorded digitally.
To obtain detailed information a creditor may take a bankruptcy deposition known as a Rule 2004 exam and compel the debtor to produce much more extensive information than is available in the Schedules and Statement of Financial Affairs.
For a more in depth discussion of bankruptcy information see the article Gone Fishing: The Broad Reach of Bankruptcy Depositions.

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What is an involuntary bankruptcy?

LPM Dev — Wed, 11 May 2016 23:05:59 +0000

An involuntary bankruptcy occurs when three or more creditors join together to force a debtor into bankruptcy court jurisdiction. These involuntary petitions usually occur when the debtor has acted in a way that causes creditors concern that the debtor’s assets and value are rapidly depreciation, or has recently dropped. This may happen when, for example, a debtor transfers assets to insiders or preferred creditors leaving insufficient assets to pay creditors in full.

The following are the main threshold requirements to initiate an involuntary bankruptcy case:

If the debtor has more than eleven creditors, three creditors can join together to file an involuntary bankruptcy petition.
The debtor is generally not paying its debts as they become due.
The three creditors must have noncontingent debts.
The debts of the petitioning creditors must not be subject to a bona fide dispute.
The aggregate amount of the unsecured claims of the petitioning creditors must be more than $14,425.

For more information on the topic of involuntary bankruptcy please see this article.

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What is a credit bid?

LPM Dev — Wed, 11 May 2016 22:59:44 +0000

When banks make loans that are secured by property sometimes the loans default and the bank needs to sell that property to pay down the loan. When the property is real estate those sales are typically by public auction, whether by a private auctioneer or the sheriff. Buyers who are interested in obtaining properties at a bargain frequently visit these foreclosure auctions and need to show the auctioneer or the sheriff that they have substantial cash for making a down payment. After the sale, if they bid and win, these buyers will need to pay cash to complete the sale. However, frequently a buyer will not be willing to pay enough money at the foreclosure auction to satisfy the outstanding loan to the bank. When that happens the bank will prevail at the auction by bidding in the amount that is owed and that is secured by the property. Bidding the amount owed by the bank is the same as bidding in cash by an outside buyer. This is known as a credit bid. The bank will be able to own the property outright by bidding in the amount that it is owed and paying cash only to the extent of foreclosure costs.

Foreclosure doesn’t have to be the end result of default. Read about how some people use forbearance agreements to stop a foreclosure sale. Forbearance helps both debtors and creditors find a better solution to the problem.

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Is bankruptcy my only option if I default on a loan?

LPM Dev — Wed, 11 May 2016 22:53:07 +0000

Generally, the more creditors you owe the more likely you will need to use bankruptcy for relief. The reason for this is that despite your best efforts to resolve delinquencies with all of your creditors any one creditor can be a “spoiler” that could ruin your settlement efforts. Frequently, however, especially in commercial settings, debtors have only one or two major creditors. In those situations it makes sense for debtors to try to negotiate forbearance or other loan modification agreements with their primary creditors. These agreements can provide substantial relief but at a price, as described in this article.

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