Legal Question in Business Law in Ohio

Dear Architect: My heart and sentiments are with you as a colleague. You may elect to file bankruptcy under Chapter 7, 11,or 13 as applicable to your specific state of finacial disabvility. Or, you may request representation from Legal Aid.

Here's a Basic Primer: Chapter 7, otherwise known as "liquidation," is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. A trustee (appointed by the court) gathers and sells your non-exempt property and uses the proceeds from the sale to pay your creditors.

"Exempt property" is property that a debtor is allowed to keep. What property is exempt is determined by state law. In certain states you are required to use the exemptions under your state's laws. In fifteen states and the District of Columbia, you can chose the exemptions that work the best for you - either the federal exemptions or your state's exemption. It is always best to check with an attorney in your state to see what exemptions apply to your individual case.

The new law also increased the amount of time you have to live in the state before you are eligible to use that state's exemptions. This was to prevent a debtor from moving to a state with more generous exemptions just prior to filing for bankruptcy.

Most chapter 7 cases are "no-asset" cases, which simply means that you do not have any non-exempt property for the trustee to sell. At the time that you file your petition for bankruptcy, you declare whether your case is "asset" or "no-asset" and the burden is on the trustee to change the designation.

Eligibility for Chapter 7

Beginning October 17, 2005, under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you must undergo a "means test" to qualify for Chapter 7 bankruptcy. The "means test" is how the Internal Revenue Service will determine who can or cannot file for Chapter 7. Your income and expenses are examined in detail to see how they compare to the standard for your area as set by the IRS. If you earn less than the median income for a family of your size in your state, you can automatically file for Chapter 7 bankruptcy.. But if your income from the last six months is greater than the median income and you can pay at least $6,000 over five years or $100 a month toward your debt, you are not allowed to file for Chapter 7 but must file for Chapter 13 instead. Chapter 13 will require you to repay a portion of your debts over three to five years.

A part of the means test requires that you file any overdue tax returns within weeks of filing a Chapter 7 bankruptcy.

Under the new law, when you file for bankruptcy you must receive approved credit counseling and a budget analysis, at your own expense. Credit counseling should address the means test calculation for you. You can also find mean test calculators on the internet.

Filing Chapter 7

A bankruptcy starts with the filing of the official petition, schedules and Statement of Financial Affairs with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses.

As soon as you file for bankruptcy, your creditors are prevented from trying to collect on your debts through what's called an "automatic stay." The stay is designed to preserve your property and to give you a break from litigation.

A creditor must show the bankruptcy judge, after a hearing, that there is "cause" for the creditor to be allowed to continue with collection action (for instance, by showing that the property might deteriorate in value during the bankruptcy period).

If there is property that isn't exempt, the trustee takes control of it. From the sale of your property, the trustee pays the expenses of the administration of the case, and then gives any remaining money to creditors with allowed claims, according to the priority of the claims. Any wages you earn after you file the case are yours, beyond the reach of creditors who had claims on the date you filed for bankruptcy.

Retain experienced Counsel, or seek assistance from Legal Aid. Good luck!

Sincerely, J. Norman Stark, Attorney & Reg. Architect.

This has the potential to become a messy situation. An architect can be sued for negligence. The plaintiff likely will need expert opinions to support the claims against you. There could be many potential causes, or even multiple causes, of the incident. So, if a claim were asserted against you, you might be able to file a cross-claim against other people who might be responsible. And of course, a defense could be the plaintiff business ower did something wrong.

I would have expected your liability insurer would open a claim and start defending. So, I'm not sure what they mean that they don't feel like dealing with this. When something like this happens, the owner can make a claim for business interruption damages/loss of business, etc in addition to costs for repair.

My office handles such claims and I would be glad to tlak to you further. Please call me if you would like to discuss.

Vaseem S. Hadi

513-381-9216

www.rendigs.com