New York Bankruptcy Lawyer Blog

We often get calls and e-mails from people who have been sued by a trustee or debtor-in-possession in a chapter 11 case pending in the United States Bankruptcy Court for the Southern District of New York and United States Bankruptcy Court for the District of Delaware.

1. What is a preference claim?

In bankruptcy cases a trustee has the ability to file a lawsuit in the Bankruptcy Court – called an adversary proceeding – seeking to recover certain payments made by the debtor prior to bankruptcy as preferential.

The elements of a preference claim are:

a) a payment by a debtor to a creditor made within 90 days of bankruptcy filing (1 year in the case of payment to “insiders”);
b) for a debt that was owed to the creditor prior to the time the payment was made;
c) made while the debtor was insolvent; and
d) that allowed the creditor to receive a greater recovery than if the payment had not been made and the debtor had instead been liquidated in a chapter 7 bankruptcy case and the creditor received payment as allowed by law in a chapter 7 case.

The first thing to understand about a preference claim is that the trustee (or debtor in possession in a chapter 11 case) is not challenging that you, the creditor, actually provided the goods or services for which you were paid. Instead, the preference recovery provisions of the Bankruptcy Code are intended to promote the Bankruptcy Code’s goal of “equality of distribution” among similarly situated creditors. The bankruptcy law, as drafted by Congress, views it as unfair that you had your invoices paid in the 90 days prior to the debtor’s bankruptcy filing while other creditors did not. The preference avoidance provisions of the bankruptcy law allow the payment to you to be potentially recaptured by the trustee (or debtor in possession in a chapter 11 case).

Continue reading " Help I’ve Been Sued by a Bankruptcy Trustee in New York, What Do I Do Now? " »

We are often contacted by former and prospective clients in Manhattan and other boroughs of New York City, and elsewhere, who are faced with a potential eviction involving a commercial or residential lease and wonder what their bankruptcy options are.

1. Bankruptcy Filing Creates Automatic Stay

A bankruptcy filing by the tenant (whether residential or commercial) creates an “automatic stay.” This is a mandatory injunction that arises by operation of law without the need for a hearing or order of the Bankruptcy Court. The automatic stay operates like a legal “Stop Sign” to freeze a creditor’s efforts to pursue collections, litigation or judgment enforcement. The automatic stay operates to protect the debtor and the property of the debtor’s bankruptcy estate.

In the case of a lease, whether commercial or residential, the critical issue is whether a writ of eviction has already been issued from the landlord-tenant court. There is a significant body of case law from the U.S. Bankruptcy Court for the Southern District of New York and U.S. Bankruptcy Court (covering Manhattan, Bronx and White Plains) and U.S. Bankruptcy Court for the Eastern District of New York (covering Brooklyn, Queens, Staten Island and Long Island) that once a writ of eviction has issued from the landlord-tenant court the interest of the tenant in the lease has terminated.

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A creditor can start an involuntary bankruptcy case in New York City against a debtor (either a person or business) who owes the creditor money. An involuntary bankruptcy case is a bankruptcy case started by creditors. If a debtor has more than 12 creditors who are owed at least $13,475 as a group, those creditors can file an involuntary bankruptcy case against the debtor if they can establish that the debtor is not paying his, her or its debts as they become due. Also the debts must be fixed and liquidated in amount and not contingent (meaning that nothing else has to happen to fix liability – such as a judgment in a personal injury case resulting from an accident). In addition, the claims cannot be subject to bona fide dispute as to liability or amount -- if there is a valid and legitimate dispute about the debt it can't be the basis for an involuntary bankruptcy case.

If a debtor has less than 12 creditors in all, one petitioning creditor owed at least $13,475 can commence an involuntary bankruptcy petition against the debtor.

Continue reading " If a Person or Business Owes Me Money Can I Put Them Into Bankruptcy in New York? " »

New York is a destination for many people relocating here for work, school or personal reasons. Many people are surprised to find out how expensive the cost of living is here compared to many other parts of the country. Many people underestimate their costs of housing and other living expenses which causes a lot of problems for their budget.

A common question we get asked is “How long do I have to live in New York before I can file for bankruptcy here?”

The rule is that you have to have lived here more in the past 180 days than anywhere else. So, for example, if someone moved here from Ohio, she would need to live in New York at least 91 days before she could file for bankruptcy here.

Continue reading " Can I File for Bankruptcy in NY City if I Recently Moved Here? " »