Yearly Archives: 2011

What Debts Cannot Be Discharged In Bankruptcy?

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The good news is that most debts are usually dischargeable.  A discharge eliminates the legal obligation to pay the debt that was discharged and prohibits any and all collection actions to attempt to collect the discharged debt.  The following is a partial list of the common types of debts that are not dischargeable.  This article does not provide information about the differences between a Chapter 7 discharge or Chapter 13 discharge.  Determining which debts cannot be discharged can be complicated.  Please seek counsel regarding your specific circumstances.

Income Taxes

Taxes owed to the Internal Revenue Service and in California, the Franchise Tax Board, are generally not discharged in bankruptcy unless the taxes meet the following requirements.  The income taxes could be discharged if they are three years old, filed on time, accessed 240 days prior to the case being filed , no fraud or willful evasion and returns were filed at least two years prior to the case being filed.

Student Loans

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act eliminated the discharge of all private and government backed student loans.  Any debt incurred for an educational benefit overpayment, obligation to repay funds received as an educational benefit and debts for any other education loan that is a qualified education loan under the U.S. Bankruptcy Code.  Under certain circumstances student loans could be discharged by filing an adversary proceeding.

Domestic Support Obligations

If you are behind on your child support or spousal support payments as ordered by the state court the missed payments are not dischargeable.

Debts Incurred to Pay Nondischargeable Taxes

As part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act any debt incurred to pay a nondischargeable tax debt is not discharged.

Damages Caused While Intoxicated

If you caused a car accident and you were intoxicated at the time, any damages or claims resulting from bodily injury of the victims are not dischargeable.  Debts resulting from damage to property caused while you are intoxicated could be discharged.  Any debt for death or personal injury that you caused while intoxicated while operating a motor vehicle, vessel or aircraft are not dischargeable.

Any Money, Property, Services, Credit or Renewal of Credit Obtained by Fraud

If you received money, property, services, credit, renewal of credit or refinancing of credit because you made a false pretense, false representation or actual fraud, the resulting debt of the fraud is not dischargeable.

Purchase of Luxury Items Within 90 Days of Filing Bankruptcy

If you owe $500 or more to a single creditor for the purchase of $500 or more of what is considered luxury goods or services within 90 days before the bankruptcy case was filed the debt is not dischargeable.

Certain Cash Advances

Cash advances that total more than $750 obtained within 70 days before the bankruptcy case was filed are not dischargeable.

Post-Petition HOA Dues

If you own a home in an association and are behind on the monthly dues prior to the bankruptcy case being filed, all of the missed payments before the case is filed are dischargeable.  Once the case is filed the dues that come due each month are not dischargeable.  If you plan on surrendering your home and are not making the normal mortgage payment you will still be responsible for the post-petition HOA dues as long as the house is still in your name.

For more information about which debts are dischargeable, contact our bankruptcy lawyers in the Bay Area or our bankruptcy lawyers in San Francisco.

What If I live Outside the United States – Can I File Bankruptcy?

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Unfortunate circumstances can happen at anytime and anywhere, even when you are working and living outside of the United States.  In today’s economy more and more United States citizens are working in other countries.  So if you have moved and are working in a foreign country can you file for bankruptcy?  If so, where can the bankruptcy case be filed?

Bankruptcy Code 11 U.S.C. Section 109, Venue, provides:

(a) Notwithstanding any other provision of this section, only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title.

The most common way to determine what the proper venue to file bankruptcy in is look at where you reside, live or have a domicile in that jurisdiction.  Typically venue is determined by where you have lived the most during the 180 days prior to the filing of the case.

Keep in mind that while you may be able to file bankruptcy in a state you moved to recently, over 90 days ago at least, you most likely will not be able to use that state’s exemptions.  If you have recently moved make sure you communicate this to your attorney so they can evaluate which state’s exemptions you can use to protect your assets.  If you have lived outside of the United States for more than two years, determining which exemptions can be used will be extremely complicated.

If you have not lived in the area for the greater of the 180 days prior to the case being filed, then next possible way to determine which venue you may file bankruptcy in is where your principal assets are located or where your place of business it located.  Your business could be in San Jose, California and you live in Modesto, California.  Do you file in the Eastern District of California because that is where you live, or file in the Northern District of California because that is where your business is located?  In theory you could file in both districts.

The last possible way to determine proper venue is if you own or have property in that jurisdiction.  Some courts have ruled that property can even be money on deposit with a bank in that jurisdiction.  What is considered property that rises to the level of permitting you to file bankruptcy in that venue is determined differently by different courts.

If you are in need of a bankruptcy lawyer or bay area wage garnishment lawyer you may contact us toll free at 1-877-963-9543.

City Council Files Untimely Notice of Appeal to City of Harrisburg Bankruptcy Dismissal

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As anticipated, the Chapter 9 bankruptcy filing of the City of Harrisburg came to a crashing end under the pile of motions to dismiss and Pennsylvania state law that still arguably prohibited the bankruptcy filing.  The bankruptcy court entered the order of dismissal on November 23, 2011.  The deadline to appeal the order of dismissal without an extension of time was December 7, 2011.  The council members that originally filed bankruptcy on behalf of the City of Harrisburg filed their notice of appeal on December 10, 2011, three days late.  Then on December 11, 2011, a day later, the council members filed a motion seeking an order to extend the time they had to appeal the order of dismissal given that they filed their notice of appeal three days late.  On December 13, 2011, the bankruptcy court denied the city councils request to extend the time to appeal and struck the notice of appeal from the record.  The bankruptcy court provided that counsel for the City Council of Harrisburg new the basis of the bankruptcy court’s decision to dismiss the bankruptcy case and received the written opinion two days prior to the deadline to appeal.  The failure to timely file the notice of appeal was not excusable neglect, but inexplicable and unjustifiable.

If the appeal is still allowed to move forward, which is still possible, it will challenge the bankruptcy court’s ruling in support of upholding a state’s right to legislate and control cities within its jurisdiction.  Prior to when the City of Harrisburg filed for bankruptcy the State of Pennsylvania had passed a state law forbidding a city classified like Harrisburg from being able to file bankruptcy under Chapter 9 of the bankruptcy code.

There still could be a titanic clash of state law versus federal law if there is still a successful appeal and the appellate court choses to take a different position then the bankruptcy court.  The bankruptcy court rejected arguments that the Pennsylvania state law prohibiting Harrisburg from filing bankruptcy violated the Supremacy Clause or 14th Amendment of the United States Constitution.  The bankruptcy court also rejected the arguments that Pennsylvania state law prohibiting the filing of the bankruptcy petition violated the Pennsylvania Constitution.

Issues of federalism have come up time and time again regarding the federal government’s ability to govern and make individual states follow federal law.  The Tenths Amended provides that powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively.  Under the federal bankruptcy code municipalities can file for bankruptcy protection, but only with state authorization.

Ultimately the bankruptcy court held that the city council members of Harrisburg did not have the authority under Pennsylvania state law to commence the bankruptcy case on behalf of Harrisburg and Harrisburg is not authorized to under Pennsylvania state law to be a debtor under Chapter 9 of the bankruptcy code.

For more information about bankruptcy contact our bankruptcy lawyer or you may contact our bankruptcy lawyers .

Do You Need Actual Damages to File a Lawsuit for a Violation under the Fair Debt Collections Practices Act (FDCPA)

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On November 28, 2011, the United States Supreme Court will hear arguments regarding this very issue.  The FDCPA allows for recovery of any actual damages, statutory damages sustained and reasonable attorneys’ fees and costs by an individual resulting from a debt collectors violations and in a case involving an individual, any additional damages as the court may allow, not exceeding $1,000.

The issue being heard by the Supreme Court involves whether an individual has the right or standing to file a lawsuit if actual damages are not pleaded or proved.   The FDCPA is a federal law and to sue someone for a violation of the FDCPA they must have standing.  To prove you have standing you must show that there is a connection between what an alleged wrongdoer did and yourself, and you were harmed as a result.  If there is no standing then the complaint will be dismissed.  The argument being advocated to the United States Supreme Court is that many plaintiffs do not have standing to lawsuits under the FDCPA because they do not and cannot prove there was an actual injury to them for the violation of the FDCPA.

The Fair Debt Collections Practices Act outlines many different types of violations.  For example, if the debt collector calls you 50 times a day over and over again harassing you and causing you unwarranted stress and aggravation, this is a violation of the FDCPA.  What are the actual damages though?  Did you get fired from your job because of it and therefore are seeking lost wages?  Or what if the debt collector called your mother and told her they were going to throw you in jail if you did not pay the debt back to them?  This is a violation also, but again, what are the actual damages?  Most courts allow the recovery of statutory damages without having to prove there were actual damages.

It will be interesting to see how the United States Supreme Court chooses to rule on this issue.  The whole point in passing the FDCPA is to protect consumers from the unfair and deceptive tactics used by collection agencies to obtain payment for debts.  A violation of the law is a violation and therefore that should be damage enough.  If consumers are not allowed to file lawsuits for the mere violation of the FDCPA no matter how insignificant, then why have the law at all?  The FDCPA would become a meaningless set of guidelines to be followed while debt collectors know they can do whatever they want without consequence.  For the Fair Debt Collection Practices Act to protect consumers and operate as it was intended, any technical violation of the law has to be an injury to that person giving them the right to file a lawsuit.

If you are struggling with debt or have been abused by a debt collection agency, please contact us to meet with our experienced bankruptcy lawyers and Bay Area bankruptcy attorneys to schedule a free consultation.

Bankruptcy Fees Have Increased as of November 1, 2011

By Kitty J. Lin, Attorney at Law

As we all know, prices today are rapidly increasing, from the price of food staples such as bread and eggs, to the price of gas.  I am sure it comes as no surprise that the court fees for bankruptcy have increased as well.  Effective November 1, 2011, most of the bankruptcy court fees that affect you have increased.  The increased filing fees can be found here: http://www.canb.uscourts.gov/bankruptcy-court-fee-schedule.

The filing fees that impact consumers most are the Chapter 7 bankruptcy filing fees and the Chapter 13 bankruptcy filing fees.  The Chapter 7 bankruptcy filing fee has increased from $299 to $306.  The Chapter 13 bankruptcy filing fee increased from $274 to $281.  Even though the filing fees for Chapter 7 and Chapter 13 bankruptcy petitions increased by only $7, if you are thinking of filing for bankruptcy, you know that every dollar counts.  The people that may notice these increased filing fees the most are people that have filed a previous bankruptcy recently and need to file another bankruptcy.  Be sure to include an extra $7 if you are filing pro se.  The U.S. Bankruptcy Court only accepts exact change. For people that have retained attorneys, the attorneys will make sure the filing fee is paid.  The filing fees for the other chapters, including Chapter 9, Chapter 11, Chapter 12, and Chapter 15 bankruptcy filing fees have also increased by $7.

Another fee that may affect you is the increased fees for amending your Schedules D, E, F and/or Creditor Matrix.  The fee increased from $26 to $30.  The difference with this fee is that it is entirely avoidable.  If your original schedules are correct and do not need to be amended, then you will not incur this $30 fee, so try to be diligent and make sure the schedules are correct the first time.  Another increased fee is the returned check fee.  The returned check fee increased from $45 to $53.  This fee is also avoidable.  Be sure you have the funds in your bank account before issuing a check to the bankruptcy court and you will not be charged this fee.

If you are requesting a fee waiver in a Chapter 7 bankruptcy case, the qualifications have not changed, so the filing fee increase does not affect the fee waiver.  Fee waivers may be granted to families that have income less than 150% of the poverty guidelines and that cannot pay the filing fee in installments.

If you have any questions or you need to consult with an experienced bankruptcy attorney or bankruptcy lawyer, please call us toll free at 877-9NEW-LIFE or 877-963-9543 for a free consultation.

Who Can Garnish Wages?

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Who can garnish wages is virtually unlimited.  Anyone that has obtained a judgment against you can enforce or collect on the judgment by garnishing your wages unless it is the Internal Revenue Service or Franchise Tax Board.  From a taxing authority you will receive a notice of levy and if you do not respond they will garnish your wages without obtaining a judgment.  Your wages can also be garnished under rare circumstances if you have agreed to a wage assignment, which is different than wage garnishment.

All other parties must sue you by filing a complaint and serving you with the summons and complaint.  Once served has been made the party can then obtain a judgment against you.  If you ignore the complaint the party will be able to request entry of the judgment by default.  If you choose to answer the complaint the party suing you will next be able to obtain a judgment by filing a motion for summary judgment by the court.  If your debt and lawsuit are the result of a breach of contract like not paying a credit card company you will have very few defenses and they will most likely obtain a judgment against you.

Once the judgment is entered the next step is to enforce the judgment.  Just because a party has obtained a judgment against does not necessarily mean they will spend more money to go through the process of enforcing the judgment.  To enforce the judgment they can garnish your wages, levy on your bank accounts and record the judgment with the county in which you live hoping it will attach to any real property you may own.

If your wages are garnished you can file an exemption to reduce the amount that can be garnished each paycheck and even stop the garnishment altogether depending upon your circumstances.  Filing bankruptcy will stop the garnishment of your wages and depending upon the circumstances get rid of the judgment forever too.  Bankruptcy is not the only answer, but for many it is the permanent solution to making sure the enforcement of the judgment does not continue.

Many collection agencies improperly tell people that they are going to garnish their wages without having obtained a judgment in an attempt receive a payment.  This could be a violation of the Fair Debt Collection Practices Act and any contact with the collection agency should be documented for future prosecution if it continues.

Contact us for more information from our experienced bankruptcy lawyers or one of our wage garnishment bankruptcy attorneys to find out if bankruptcy is right for you.

What Happens During Bankruptcy?

By Ryan C. Wood, Attorney at Law

What happens during bankruptcy depends primarily on the chapter of the bankruptcy code you file under.  The most common bankruptcy is the filing of a consumer no asset chapter 7 bankruptcy.  The next most common cases are consumer chapter 13 reorganizations and asset chapter 7 bankruptcy cases.

1.       The Automatic Stay Takes Effect as Soon as the Case is Filed

The first thing that happens during every bankruptcy is as soon as the case is filed the automatic stay is in effect stopping any and all collection actions against you.  This includes wage garnishment, foreclosure, lawsuits and harassing phone calls.  Everything is stopped and must be addressed in the bankruptcy case.  The whole point of filing bankruptcy is to get rid of burdensome debts and treat creditors fairly under the Bankruptcy Code.

2.       Documents are Forwarded to the Trustee Assigned to the Case

After the case is filed certain documents must be forwarded to the trustee assigned to your case.  Some trustees require bank account statements in addition to pay advices and your most recently filed tax return.  If the case is a Chapter 7 case there is a panel of trustees that are assigned cases.  Each jurisdiction has different Chapter 7 trustees to administer the bankruptcy estate.  If your case us under Chapter 13 there is a standing trustee that administers all of the cases filed within in their jurisdiction.

3.       Second Course is Completed and Certificate Filed

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act created two courses that must be completed.  The first course, Credit Counseling, must be completed before the case can be filed.  The second course, Financial Management, must be completed before you may obtain a discharge of your debts.  You must complete the second course within 60 days of the date the 341 meeting of the creditors is scheduled.  If you do not complete the second course your case will be closed and you will not receive a discharge.

4.       341 Meeting of the Creditors Attended and Concluded

The 341 meeting of the creditors should be the only appearance you need to make in the bankruptcy case.  The meeting is usually scheduled 30-45 days after the case is filed.  If the case is Chapter 7 or Chapter 13 the meeting is administered by the trustee assigned to your case.  The meeting is not in a courtroom but there are formalities observed.  You will provide testimony under oath and it is recorded.  This meeting also provides your creditors an opportunity to ask you questions about the bankruptcy petition filed.  Creditors rarely appear at the meeting unless you have committed some sort of fraud.  If everything is in order then the meeting of the creditors will be concluded.

5.       Debt is Discharged and Closed

In a no asset Chapter 7 case after the conclusion of the meeting of the creditors the only remaining deadline that needs to pass is creditors right to file an adversary proceeding objecting to the discharge of the debt owed to them.  Creditors have 60 days from the date the meeting of the creditors is schedule to file an adversary proceeding objecting to the discharge of your debts.  Once the 60 days passes the Bankruptcy Court may now enter the order discharging your debts and closing the case.

In a Chapter 13 bankruptcy case the Chapter 13 plan will still need to be confirmed or approved by the Bankruptcy Court.  Depending upon the debts you are reorganizing in your Chapter 13 plan this can take a number of months.  Once the Chapter 13 plan is confirmed the plan will need to be completed.  Once the Chapter 13 plan is completed the order discharging the debt you do not pay back in the plan can be discharged and the bankruptcy case closed.

If you are need of bankruptcy you may contact us at San Jose bankruptcy or contact us at Oakland bankruptcy for more information.

The Top 10 Things To Do Before Filing Bankruptcy

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After meeting with hundreds and hundreds of potential clients during our free consultations the same issues arise over and over again.  The following are the top ten most common issues that should be addressed or followed prior to filing either a chapter 7 bankruptcy or chapter 13 bankruptcy case.

10.       Do Not Wait To Speak To An Experienced Bankruptcy Attorney

Even if you are not ready to file bankruptcy speaking with an experienced bankruptcy attorney will give you the information you need to make educated decisions.  To determine if you are speaking with an experienced bankruptcy attorney, ask the attorney how many other areas of law they practice, how long they have practiced bankruptcy law, how many bankruptcy cases have they filed and to name the trustees in the jurisdiction and what document requirements each trustee requires.  If the attorney does not know who the trustees are and what each of them requires they do not regularly file bankruptcy cases.  One the most common problems we face is meeting with potential clients when it is already too late.  If you have been served with a summons and complaint you need to speak with an bankruptcy attorney.  If you owe taxes and the IRS or FTB has indicated they are going to garnish your wages you need to speak with a bankruptcy lawyer.

9.         Review Your Monthly Expenses

All consumer bankruptcy petitions include Schedule J.  Schedule J is the estimate of the average or projected monthly expenses for your household at the time the bankruptcy case is filed.  Prior to scheduling a free consultation with an experienced bankruptcy attorney take a few minutes and review your bank account statements and get a better idea of where your money is going each month.  This will help to determine if you have any disposable income available to creditors.

8.         Make Sure All of Your Tax Returns Are Filed

In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) provided new guidelines for the filing of tax returns and bankruptcy.  If you file for bankruptcy you will need to provide your tax return for the previous year, or the current year if requested.  If you fail to file your return that becomes due after you file for bankruptcy the IRS can request dismissal of your bankruptcy case.  Section 1308 of the Bankruptcy Code requires filers of chapter 13 bankruptcy cases to have filed all of their tax returns for the previous four years before the filing of the bankruptcy petition.  This is one of the standard questions asked by the standing chapter 13 trustee at the meeting of the creditors.

7.       Review and Document Self-Employment or 1099 Income

If you are self-employed or receive 1099 income it is essential that you know what your income is and what your expenses are for each of the six-months prior to filing for bankruptcy.  Just like in Number 6 below, the Means Test uses a six-month average of your income to determine if you have disposable income available to creditors each month.  Determining what your take home pay is when self-employed or receiving 1099 income is always more time consuming, but absolutely necessary prior to filing bankruptcy.

6.         Save Your Pay Stub or Proof of Income Each Month

In 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) changing the bankruptcy code and creating what is commonly called the Means Test.  The Means Test is based upon local and national standards for expenses.  The Means Test also uses the six-month average of your gross income extrapolated to a twelve months.  You will need all six months of your pay statements or other proof of income.

5.         Do Not Take a Cash Advance on a Credit Card

Taking a cash advance close in time to filing bankruptcy can be a huge problem.  This can be a problem for the same reasons detailed in Number 4 listed below.  It really depends upon the circumstances, but if you take a $5,000 cash advance on a credit card three weeks before filing bankruptcy you will probably hear from the credit card company when you file bankruptcy.  An adversary alleging fraud could be the likely result.

4.         Do Not Continue to Use Your Credit Cards

One of the most common complications in a consumer bankruptcy is the use of credit close in time to filing for bankruptcy.  The problem is the recent use of credit is circumstantial evidence that the user never had the intent to pay the debt back.  If you are unable to pay your bills as they come due how can you incur more debt?  If you are not making payments to your creditors do not continue to use your credit cards.  If you are having trouble paying your credit cards and are missing payments regularly you need to stop incurring more debt.

3.         Do Not Transfer Money or Assets to Friends or Family Members

The simple transfer of a car to a friend or family member before filing bankruptcy to reduce your assets is not allowed.  It must be disclosed and will only complicate your bankruptcy case.  When filing bankruptcy the sole goal is to successfully discharge all of your eligible debts.  Transferring assets in an attempt to hide assets will only complicate your bankruptcy case and possibly have your right to a discharge take away.

2.         Do Not Borrow Funds or Take an Early Withdrawal From an Individual Retirement Account or 401(k) Plan

Bankruptcy provides exemptions to protect assets such as retirement funds.  We meet with client after client that has unfortunately borrowed or withdrawn from their retirement accounts all of their retirement money trying to pay off debts or stay afloat.  You must weigh all the positives and negative before choosing to withdraw or borrow against your retirement accounts.  Bankruptcy provides exemptions that can protect for the average person all of their retirement funds.  You can file bankruptcy and still keep your retirement.

And The Most Important:

1.         Disclose All of Your Income, Expenses and Assets

Anyone that files for bankruptcy protection must disclose all income, expenses and assets in their petition.  The backbone of bankruptcy is the automatic stay, but the body is treating creditors according to the type of debt owed and the priority of payment of debts required under the bankruptcy code.  Without full disclosure treating all parties fairly cannot take place.  It is not the bankruptcy court’s duty or the duty of the trustee assigned to your case to find assets.  It is the bankruptcy filer’s duty to be open and honest about their income, expenses and assets in exchange for the discharge of their debts.  If you have not fully disclosed everything you may not only lose your right to a discharge of your debts, but criminal charges could be filed and fines imposed.

For more information about filing bankruptcy or the steps necessary to file a successful bankruptcy you may contact us at San Francisco bankruptcy or our Redwood City bankruptcy lawyers toll free at 1-877-963-9543.

Covanta Harrisburg, Inc. Seeks Dismissal of Harrisburg Bankruptcy

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The incinerator operator, Covanta Harrisburg, Inc., drew first blood today by filing their objection and brief in support, seeking the dismissal of the bankruptcy petition of the City of Harrisburg.  Covanta is at the center of the cities bankruptcy filing given that the bonds used to fund the incinerator are what the city is having trouble paying back.

Covanta cites section 921(c) and section 109(c) for authority to dismiss the bankruptcy petition.  Under section 921(c) the court may dismiss a petition if the debtor did not file the petition in good faith or the petition does not meet the requirements of Title 11.  Covanta is arguing that the petition was not filed in good faith because of Pennsylvania Act 26 of 2011 and that the petition makes no mention of this state law.  They are also arguing the requirements of section 109(c) are not met.

Covanta argues that Harrisburg is not eligible to be a debtor pursuant to section 109(c) of the bankruptcy code.  You may remember in a previous article in the Bay Area Bankruptcy Blog details about who can be a debtor and who may not.  A municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor.  The Commonwealth of Pennsylvania passed a law providing a city such as Harrisburg cannot file for bankruptcy protection.  Rather the state can step in and appoint a receiver to help the city form a plan to become solvent.  The State of Pennsylvania did just that on October 20, 2011, when Governor Tom Corbett signed Senate Bill 1151.  This bill declares a fiscal emergency and provides a receiver may be appointed to create a plan of recovery.  See Act 26 of 2011, 72 P.S. Section 1601-D.1 (2011).

Covanta also is arguing that the petition is invalid because the person who signed the petition did not have authority.  Just like the Mayor of Harrisburg, Covanta argues that all laws and legal matters must be presented to the City Solicitor for approval.  The four council members that voted for and authorized the filing of bankruptcy by the city have been called “unauthorized council members.”  The Mayor argues that only she as the executive can sign the petition and bind the city to filing bankruptcy, not a council member.

This is probably one of many more objections and briefs to be filed in support of dismissal of this bankruptcy case.  The Commonwealth of Pennsylvania has already passed a law appointing a receiver, the Mayor of Harrisburg representing the City of Harrisburg has opposed the filing, and now the incinerator operator has lined up against this bankruptcy case.  The question still is whether the Tenth Amendment of the U.S. Constitution will force the Bankruptcy Code to defer to the state law of the Commonwealth of Pennsylvania which arguably forbids this bankruptcy filing by Harrisburg.

For more information from an experienced bankruptcy lawyer or from a Redwood City bankruptcy attorney visit us at www.westcoastbk.com or call us toll free at 1-877-963-9543.

Governor of Pennsylvania Signs Senate Bill 1151 Declaring Fiscal Emergency and Appoint a Receiver for the City of Harrisburg

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On October 20, 2011, the Governor of Pennsylvania, Tom Corbett, signed Senate Bill 1151 authorizing the declaration of a fiscal emergency and install a receiver to attempt to develop a recovery plan for the City of Harrisburg.  The news release from the Governor’s office provides the Governor signed the bill to help enforce the state’s law that when a municipal city fails to adopt a fiscal recovery plan the state will intervene.  Wait a second; the City of Harrisburg filed a Chapter 9 bankruptcy case to do just that, implement a plan of reorganization to lead to solvency.  It is the Governor’s and State of Pennsylvania’s position that the filing of the Chapter 9 bankruptcy case was in violation of state law and Harrisburg could not file the bankruptcy petition in the first place.  It seems they are backing up that position by installing a receiver pursuant to Pennsylvania State Law, Act 47 and Act 26.  Act 47 allows a municipality such as Harrisburg to develop a fiscal recovery plan that is acceptable to the secretary of Department of Community and Economic Development.  The plan can be accepted and then the takeover and installation of a receiver is stopped.  The question is whether a plan of reorganization under Chapter 9 of the Bankruptcy Code is a possible way to satisfy this provision of Act 47?  We will find out on November 23, 2011.

The Harrisburg Chapter 9 bankruptcy case is also facing a request for dismissal from the Mayor of Harrisburg, the Honorable Linda D. Thompson.  The Mayor is arguing that the person who signed the bankruptcy petition is an unauthorized council member who lacks the authority to file bankruptcy for the city.  The Mayor is arguing that the only person who is authorized is her as the executive branch of the government of Harrisburg.

The Bankruptcy Court has entered an order setting the date of the hearing on whether this bankruptcy case should be dismissed for November 23, 2011, at 9:30 a.m.  All parties seeking to dismissal of this case must file and serve their briefs by October 28, 2011.  Responses to the briefs requesting dismissal are due by November 7, 2011.  The actual hearing will be held on November 23, 2011, at 9:30 AM in Bankruptcy Courtroom One, Third Floor, Ronald Reagan Federal Building, 228 Walnut Street, Harrisburg, Pennsylvania.  It will be interesting how the court rules and if the court agrees with both the Mayor of Harrisburg and the State of Pennsylvania regarding their state law and the authority granted to the Mayor.

For more information about bankruptcy you may find contact our Foster City bankruptcy lawyer for answers to your questions.  You may also contact our bankruptcy lawyer in Redwood city for more information.