Grab as many staplers are you can carry.  No, I am kidding.  Staplers are not worth what they used to be, what with document scanning these days.   Staple pullers?  Maybe.  Seriously, the headlines are full of stories about massive corporate layoffs and bankruptcies.  A local steel mill shut down for an undetermined length of time, laying off over 2000 workers.   A smaller mill laid off 600 employees.  My favorite ice cold beverage company pink slipped approximately 10,000 workers from its North American headquarters.  Our friends at www.BankRate.com tell us corporate bankruptcies in the first half of 2008 are up over 41% over the same period last year.   So what can an employee do when the company ship runs aground?

Lora Shinn over at BankRate offers practical advice for the worker who suspects the ship is sinking and for the employees of full blown bankrupt and shut the door businesses.  Her article, Surviving a workplace bankruptcy, puts the focus on taking care of one’s own finances with a time honored tip of saving a 6 month cushion of money to get through troubled times.  Lora also points out practical advice to salvage health care benefits through federal COBRA legislation and to protect retirement accounts .  You may qualify if your company reorganizes through Chapter 11 but your bennies will evaporate if the company shuts down completely.  Your 401k is yours, but if it is invested in company stock, you should consider adjusting your portfolio while you still have time.  A qualified pension will be guaranteed, but perhaps not at the same rate as you hoped.  Lora provides these tips, and more in her article.

If your employer owes you money for wages, you should file a claim with the bankruptcy court.  Your claim enjoys priority status to an extent, but you will not receive any payment unless the corportation has assets to liquidate.  A bankruptcy lawyer can help you decide whether you need to file a claim.

In this four-part series, I will discuss the four areas of the economy that are likely to contribute to an ever worsening economy over the next year. I’m starting with the area of the economy that has received the most attention recently, the auto industry. Everyone knows that GM, Ford and Chrysler are in serious trouble. The recently approved request for a short-term bailout has been headlined and discussed in newspapers, TV, magazines and blogs.

What has received somewhat less coverage, however, is what will happen now that the Big Three have received at least some of the money they’ve been asking for. And the result isn’t pretty. There are some significant structural problems with the US auto industry that suggest anything short of bankruptcy reorganization won’t work. And even a traditional bankruptcy might not help. Read the rest

Most U.S. Courts of Appeals and some Bankruptcy Appellate Panels where bankruptcy appeals are litigated have begun accepting the filing of documents electronically.

Most bankruptcy attorneys are familiar with electronic case filing and will welcome the ability to file their documents online over the Internet instead of mailing documents to far away court clerks.  Most bankruptcy appeals courts, but not all, have gone live with electronic case filing.

The following circuits are accepting Electronic Case Filing (ECF) registrations for purposes of electronic filing and/or to permit access by case participants to certain restricted case types.

* U.S. Court of Appeals, First Circuit, (electronic service only)
* U.S. Court of Appeals, Third Circuit
* U.S. Court of Appeals, Fourth Circuit
* U.S. Court of Appeals, Sixth Circuit
* U.S. Court of Appeals, Seventh Circuit
* U.S. Court of Appeals, Eighth Circuit
* U.S. Court of Appeals, Ninth Circuit
* U.S. Court of Appeals, Ninth Circuit BAP
* U.S. Court of Appeals, Tenth Circuit
* U.S. Court of Appeals, Tenth Circuit BAP, (electronic service only)
* U.S. Court of Appeals, D.C. Circuit

Users will be required to register with PACER (Public Access to Court Electronic Records) to gain access to the Appellate ECF.  If you already have a PACER account, you must register for a separate Appellate PACER account and indicate which circuit(s) you want.

For more information, you may contact the PACER Service Center at pacer@psc.uscourts.gov or call (800) 676-6856.

As we enter 2009, many pundits are predicting that we’ve seen the worse that the recession has to offer, and things will improve in the coming year. Sadly, I don’t see it. Rather, I see things getting significantly worse before they get better. Why? Because of problems or continuing problems in four areas: the auto industry, insurance, mortgages/real estate, and credit cards/consumer credit. This series will examine each of these areas, discuss why they will contribute to the worsening recession, and talk about some steps that can be taken to lessen the severity of their impact on the economy.

Part One: The Auto Industry
Part Two: Insurance
Part Three: Mortgage/Real Estate
Part Four: Consumer Credit

It used to be that there were two main exceptions to having to pass the “means test” when filing for bankruptcy under the new laws enacted in October, 2005.  Recently, a third large exception was added.

Prior to October, 2005, filing for bankruptcy did not require form “b22″ or taking a means test.  Instead of this artificial test, discretion was left to the bankruptcy judges to decide whether there was an abuse of the bankruptcy code.  Typically, such an abuse would be found if  debtor filed bankruptcy and clearly had the ability to pay back a substantial portion of his claims within a three to five year period.

When Congress passed the means test, it intended to take much of this discretion away from the bankruptcy judges with a bright line formula called the means test.  This test compared artificial income (from the previous 6 months) with artificial expenses (from an IRS tax table). Read the rest

A shout out to the Utah State Law Library blog who cited to the Bankruptcy Law Network”

“The Bankruptcy Law Network is a great online resource if you have questions about bankruptcy and want information from a reputable source. The web site content is created and vetted by bankruptcy attorneys and consumer advocates from across the United States and the authors write about topics like filing for Chapter 7, 11, and 13 bankruptcy, when to consult a bankruptcy attorney, and specific types of debt bankruptcy does or does not erase.”

In a Chapter 11 bankruptcy case, the debtor, the person or company that files the case, is a debtor in possession.

The debtor in possession, or D.I.P, has the power to keep running the business.  It also imposes duties and powers on the debtor.

The United States Trustee’s office has guidelines for the duties of a debtor in possession.

Once a Chapter 11 case is filed, the debtor becomes the debtor in possession, and has the obligations and powers of a trustee.

As the trustee, the debtor has the duty to operate the business in the best interest of the creditors, preserving the assets, making sure there is insurance.

Read the rest

Just “walk away.”  That’s the title of a recent Newsweek article by Jane Bryant Quinn, normally a conservative financial writer.  The article recommends filing for bankruptcy in some circumstances, and doing it sooner rather than later.

Ms. Quinn discusses the humiliation often associated with filing for bankruptcy and points out, correctly, that that the purpose of getting a “fresh start” is to stop self-blame and helplessness and give yourself a second chance.

Most people contemplating filing bankruptcy are at the end of their rope and there’s little else they can do to right their economic ship.  But filing for bankruptcy isn’t the end of the world – it’s a new beginning, and in this era of financial crisis, rising unemployment and decreasing house values, it may be the best thing to do.

In her article, Ms. Bain quotes University of Iowa law professor, Katie Porter, noting that most people struggle longer than they should before filing.  Also quoted is Harvard Law School professor, Elizabeth Warren, advising to time the filing of a bankruptcy carefully.

The bottom line of the article: filing for bankruptcy will get you a fresh start and help you reestablish a healthy credit score sooner rather than later.  If conservative financial columnists are encouraging filing  bankruptcy it’s obviously time to recognize that it has become the most acceptable and reasonable way to deal with a personal financial crisis.  If you’re heading in that direction, don’t wait too long: find a competent bankruptcy attorney now to speak with about your situation.

My colleague David Leibowitz of Chicago posted about a fresh 7th Circuit Court of Appeals case, In re Belcher, which denied a homestead exemption under Illinois law to a spouse as to real estate that was titled in his spouse’s name only but not in his name.  This case will expose real estate equity to the bankruptcy estate for the benefit of creditors in joint cases where property in titled in the name of only one spouse.  In Belcher, the court denied a $7,500 exemption to one spouse who was not listed on the deed to the property.

When one decision leads to another involving similar, but slightly different issues, we in the legal community confer parental rights over the offspring.   The first decision is said to beget the second.  We like to refer to a string of decisions that follow as the progeny.  The Belcher case is destined to spawn offspring as to other exemptions in personal property, such as vehicles, savings and assets that convey ownership via named title.

Belcher involved real estate and the Illinois Homestead exemption.  Illinois has similar exemptions for various types of personal property.  In Belcher, the statutory Homestead exemption broadly applied to real estate “owned or rightly possesses by lease or otherwise.”   Nevertheless the 7th Circuit determined that broad language did not create a property interest in real estate not expressly owned in name.  The Illinois personal property exemption is one word specific - “owned” by the debtor.  Similar, but slightly different.  Expect a similar result as courts extend the holding in Belcher to personal property cases.

After Belcher, trustees will examine deeds to see if joint filing spouses are able to claim a double exemption in real estate.  As they seek to expand the reach of Belcher from real estate to other items of personal property, these trustees will look at car titles and signature documents to determine whether joint debtors are entitled to claim an exemption in personal property that is not titled in their name.

The US Court of Appeals for the Seventh Circuit has just decided that Illinois residents cannot claim a homestead exemption on a house in which they live unless they have some record title interest in the property.  In re Belcher, (7th Cir. 07- 2174, December 31, 2008).   Often, one spouse may hold title to a house while the other spouse has lived there for some time, secure in the knowledge that he or she has a marital interest in the house in the event of divorce or the expectation of inheriting the house in the event of death.  Unfortunately, in the event that the couple is forced to seek bankruptcy relief, these potential interests in the house don’t rise to the level of homestead exemption protection.

In Illinois, a homestead exemption is available in the amount of $15,000 up to a limit of $30,000 per household.  However, the homestead exemption has been construed to require more than simply being in possession of the house.  One actually must have some ownership interest in the house to qualify.

Much more effective than the homestead exemption for Illinois residents is the concept of tenancy by the entireties. Read the rest