Bankruptcy Still Works - A guide to the new bankruptcy laws

Part VII

Authors:
LEON D. BAYER
Partner: Bayer, Wishman & Leotta
JEFFREY WISHMAN
Partner: Bayer, Wishman & Leotta

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Objecting to confirmation of the plan. Creditors that have unsecured claims are typically the losers in the Chapter 13 process because so may Chapter 13 plans are going be approved that provide for payment of little or nothing to unsecured creditors. There are some tactics though that can be employed by an unsecured creditor in order to object to the confirmation of the plan. The best line of attack for an unsecured creditor is to fall back on the eligibility and good faith requirement for Chapter 13 debtors. If an unsecured creditor can establish for example, that the debtor is not eligible or the plan is not feasible, debtors are not regular wage earners or more importantly show that the debtor’s plan has been proposed in bad faith.

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Bad faith. Bad faith may be shown by a variety of factors: where there have been repetitive Chapter 13 filings in order to frustrate the collection of legitimate state court judgment; the commencement of a Chapter 13 case which is strategically timed to interrupt an ongoing state court trial or prevent the entry of a judgment or to prevent the deliberation of a jury.

Complaint to determine nondischargability. Generally, debts that are nondischargeable in Chapter 7 are now also nondischargeable under Chapter 13 due to the new bankruptcy law amendments effective October 17, 2005. However, the creditor must be extremely vigilant to file and successfully prosecute a timely complaint. Debts incurred by a debtor that result from acts of intentional wrong doing, such as intentional torts, fraud, conversion, embezzlement can be nondischargeable in Chapter 13. However, if the debtor is able to confirm a plan, collection of the nondischargeable debt will remain stayed until after the debtor’s case is closed. Such a claim can not be collected from property and earnings of the debtor acquired during the administration of the case, because post-petition income and property acquired by the debtor during the case is property of the estate and protected by the automatic stay.

Pursue simultaneous remedies. Prosecuting an objection to confirmation, with a simultaneous motion to dismiss and a complaint to determine nondischargability, will if justified put the creditor on a much faster tract towards collection than simply determining nondischargability. Even if the debt is found to be nondischargeable, a confirmed plan places the creditor in the position of having the collection of a nondischargeable debt stayed for as long as the duration of the plan, which may be up to 60 months.

Creditors should have legal representation. Creditors in a bankruptcy case are every bit as much in need of legal representation as the debtor is. The failure to timely pursue remedies can make all the difference between collecting on a debt or losing it. In fact, creditors that are corporations and non individuals are not allowed to appear in court, except through an attorney.

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BAYER, WISHMAN & LEOTTA
Attorneys at Law
888 S. Figueroa Street, Suite 1970
Los Angeles, CA 90017

email at: info@debt-relief-bankruptcy.com

Reprinted with permission.

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