• Chapter 11, Subchapter V Bankruptcy

    Chapter 11, Subchapter V Bankruptcy

    Filing Chapter 11 bankruptcy allows businesses to remain open and in operation while repaying creditors over a set period. However, pursuing this route is generally too expensive and complicated for most small business owners. Therefore, the Small Business Reorganization Act created Subchapter V to eliminate numerous Chapter 11 requirements. Thus, the addition makes reorganization bankruptcies more attainable for small businesses. 

    Filing for Bankruptcy as a Business Owner

    There are several different bankruptcy options to seek debt relief if you’re a business owner. You can consider filing for Chapter 7 or Chapter 11 bankruptcy.

    Note – If you run your company as a sole proprietorship, you can file Chapter 13 in your name and include your business debts in your plan. 

    Chapter 7 bankruptcy is known as “straight bankruptcy.” It aims to eliminate most, if not all, of your debt in exchange for your property. You’ll be obligated to sell your business assets in their entirety, pay creditors, and close your business. However, you’ll be debt-free. 

    Chapter 11 bankruptcy is known as “reorganization bankruptcy,” typically involving organizations, small businesses, corporations, or partnerships with a great deal of debt. You can remain open while you negotiate payment plans with your creditors. 

    What Is Subchapter V?

    Subchapter V was added to Chapter 11 of the US Bankruptcy Code and went into effect in 2020. The subchapter was intended to make bankruptcies involving reorganizations more accessible for small businesses. 

    Who Can Qualify for Subchapter V?

    To qualify for Chapter V bankruptcy, businesses must:

    • Engage in business or commercial activities
    • Ensure their unsecured and secured debts don’t exceed $2,725,625
    • Have a minimum of 50% of business debt result from business activities
    • Not include debt owed to company insiders

    Note – You don’t qualify for Chapter V if your primary business activity is owning and operating a single property. 

    Advantages of Subchapter V

    Subchapter V has many advantages, including removing many Chapter 11 requirements. The following is a list of benefits associated with filing for this subchapter. 

    1. Eliminating the absolute priority rule
      Absolute priority is a rule in corporate bankruptcies that determine what order of payment will go to creditors and shareholders. For example, senior creditors are paid before junior creditors. However, there isn’t an absolute priority rule when filing Subchapter V. 
    2. Remaining open operationally
      Similar to the traditional Chapter 11, you’ll be able to keep your business open while repaying creditors
      Note – While on the plan, you’ll have to pay your unsecured creditors the total amount of your disposable income.
    3. No disclosure is required
    4. Installments of expenses paid
      Instead of paying the administrative expenses in their entirety, you can settle your costs in installments.
    5. Plan exclusivity
      The debtor alone may file Subchapter V, and there isn’t an exclusivity period expiring after a certain period.
    6. Reduced administrative expenses
    7. Increased protection of the automatic stay
      An individual may file a second case within two years of the prior case, staying the actions of creditors pursuing the debtor.
    8. Easier counsel retention
    9. There is no vote required to confirm the plan
      The debtor can establish a cramdown plan with no approval from creditors.
    10. Modification of specific mortgages
    11. Post-confirmation plan alterations
      After confirmation, only the filer may modify the plan.
    12. The discharge
      The debtor can obtain a discharge on the effective plan date, given consensual confirmation provisions. 
    13. No limits in the modification of motor vehicle loans

    Disadvantages of Subchapter V

    While there are numerous advantages to filing Subchapter V, there are several disadvantages, including:

    • Limited eligibility, as stated earlier
    • Plan deadlines where the individual has 90 days to file a plan
    • Remedies upon plan default, which says the program must provide appropriate corrections if payments aren’t made
    • Limits on cash collateral use
    • Mandatory trustee appointment
    • Required status conference
    • Dedicated projected disposable income to pay creditors

    Subchapter V simplifies Chapter 11 for small businesses. But the process can still be complex. A knowledgeable lawyer can help you thoroughly understand the proceeding and ensure you achieve the greatest possible outcome. At Mummert Law, we’re available for a consultation, at which time we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to bankruptcy. Make your appointment with Mummert Law today!

  • What You Need to Know About Mortgage Forbearance

    What You Need to Know About Mortgage Forbearance featured imageThe coronavirus disease 2019 (COVID-19) has affected our world on unprecedented levels. And homeowners are no exception. So, in 2020, Congress passed the Coronavirus, Aid, Relief, and Economic Security Act, or CARES Act. As part of the CARES Act, if you cannot make payments on your home, you can find relief with mortgage forbearance.

    What Is Mortgage Forbearance?

    Mortgage forbearance is an agreement between a mortgage servicer (the company that manages your loan) and a delinquent borrower. The borrower is typically struggling to make payments. The lender agrees to allow you to pause or reduce mortgage payments for a limited time, providing temporary respite.

    Who Is Eligible for Forbearance?

    You qualify to request forbearance if:

    • You have experienced financial hardship on account of the coronavirus pandemic, and
    • You have a mortgage that is federally backed, which includes HUD, FHA, VA, USDA, Fannie Mae, and Freddie Mac loans

    Note- If your mortgage isn’t federally backed, servicers may have comparable options. You should discuss payment relief options with the company that manages your loan.

    What Documentation Is Required?

    There is no documentation required proving hardship beyond a statement that you’re suffering from such a hardship. If you can, however, continue to make mortgage payments, you should do so.

    How Long Does Forbearance Last?

    If you’re a homeowner who has a federally backed loan, you have the right to request and receive a forbearance period for up to 180 days. In addition, you can request an extension of forbearance for up to another 180 days, totaling 360 days. However, be advised that other limitations can apply. Also:

    • If you have a Fannie Mae or Freddie Mac mortgage, you may ask for up to two more three-month extensions, up to a total of 18 months of forbearance
      Note – Your initial forbearance documentation must be received by February 28, 2021, to qualify.
    • If you have a HUD, FHA, USDA, or VA-backed mortgage, you may ask for up to two more three-month extensions, up to a total of 18 months of forbearance
      Note – Your initial forbearance documentation must be received by June 30, 2020, to qualify.

    When Is the Deadline for Applying?

    • If you have a federally-backed loan, or if you’re the owner of a multi-family rental with a loan backed by the government, you can apply through September 30, 2021
    • There is no current deadline to request initial forbearance for a home subsidized by Fannie Mae or Freddie Mac

    Requesting Forbearance

    Simply contact your mortgage servicer, requesting a forbearance.

    Future Payments, Loan Interest, Foreclosure, and Terms

    • It doesn’t reduce or erase the amount that you owe on your home
    • After the established period, the borrower must resume total payments, plus additional amounts to be current (e.g., principal and interest, insurance, and taxes)
    • Under this legislation, you won’t be reported to credit bureaus or charged late fees
    • If you’re in forbearance, you may be able to avoid foreclosure
    • Agreement terms vary depending on lender and situationNote – both the Consolidated Appropriations Act (CAA) of 2021 and the American Rescue Plan of 2021 include additional funding for housing relief.

    While in Mortgage Forbearance, Can I File for Bankruptcy?

    The CARES Act supplemented new language to the bankruptcy code and has given individuals struggling with their mortgages more options. Bankruptcy courts are now permitted to discharge the debt if the filer has entered into forbearance or has an adjusted mortgage loan. If your debt burden is still too high, you can consider filing for Chapter 13 bankruptcy.

    Note – if Congress doesn’t renew these provisions, these changes may no longer be in place.

    The CARES Act has helped provide relief for individuals struggling to make their mortgage payments. So from job loss and illness to other COVID-19-related circumstances, if you’re unable to make payments on your home, make your appointment with Mummert Law today! We are available for a consultation, at which time we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to finding relief during this unprecedented time.

  • Signs of Potential Conflict in Estate Settlements

    It’s often assumed that a last will and testament will be followed to the letter, regardless of the personal preferences of the surviving family members. But in fact, will disputes are not as uncommon as you might think. If you suspect you are about to become involved in a will dispute, you should consult an estate planning lawyer in Baltimore without delay. Certain situations may be more likely to lead to a challenge of the will than others. last - will

    Multiple Marriages

    Divorce and remarriage can be contentious situations after death as well as during life, particularly if the first marriage produced children. Sometimes, it is discovered that the decedent left the entire estate to the last spouse that he or she married. In turn, the inheriting spouse may leave the assets to his or her surviving children. The children from the previous marriage may become disgruntled that they were not named as beneficiaries in the will. These children may decide to contest the will, perhaps by claiming that the spouse from the second marriage coerced the decedent into signing a new will.

    Disinherited Children

    Deciding whether or not to leave children an inheritance can be a highly sensitive choice. It is the right of the testator to decide exactly how his or her assets will be distributed. In some cases, individuals prefer to give their entire estate to charities, rather than to family. While this is certainly a legally allowed decision, the children or other family members who are disinherited may raise objections to it. Testators may try to avert future will disputes by writing a letter that explains his or her choices.

    Disparate Inheritances

    A similar situation is when one of the beneficiaries receives a significantly larger inheritance than the others. Sometimes, a testator will decide to leave a larger portion of the estate to an adult child who served as a primary caretaker of the testator. In other cases, the testator may leave a larger inheritance to the family member who is most likely to be financially responsible. Again, this is a legal right of the testator, but it may lead to future conflicts.

  • What Is Probate?

    Legal matters are often complex and confusing in the wake of a loved one’s death. It’s highly recommended that you consult an estate lawyer in Baltimore to guide you through the probate process. Probate is the process by which a will is legally recognized, an executor or personal representative is appointed, and the assets are distributed. In some cases, probate can be completed relatively easily and quickly. In other cases, such as when a will is contested, the matter can drag on for months.

    After a person dies, a probate lawyer will ask that the court legally recognize the will and appoint the executor that the decedent named. If the person died without a will, then the judge can appoint someone. The executor is responsible for taking an inventory of the decedent’s assets and debts, and for identifying the beneficiaries. The executor will need to settle the decedent’s outstanding debts before distributing the remaining assets to the beneficiaries in the manner specified in the will.

    probate - info

  • Finding Your Birth Parents

    Individuals who were adopted often have many questions about their birth parents . It isn’t always possible to uncover the identities of the birth parents, especially if it was a closed adoption. However, the first step is to consult a lawyer in Baltimore. A lawyer can guide you through the process of filing consent for contact and a waiver of confidentiality with the Department of Social Services. If your birth parents have also filed this paperwork, then the identities can be disclosed. In many cases, however, mutual consent is not given.

    Watch this video to find out what you can do if the adoption was closed and mutual consent is not given. This professional explains that you can have a lawyer petition the court to open the records. In the petition, you must provide compelling reasons why the court should open the records. For example, you may need information about your birth parents for medical reasons.

  • Designating a Guardian and Custodian in Your Will

    In the state of Maryland, a child is a minor until he reaches the age of 18, after which he is considered an adult. If you have a minor child under the age of 18, naming a guardian or custodian in your will is an important step toward ensuring he is cared for by an individual you trust in the event that you pass away before your child reaches adulthood. Regardless of whether you have already written a will in Baltimore or are preparing to complete this important task, reviewing or determining your choices for guardian and custodian is important for your child’s future. last - will

    Designating a Guardian

    A guardian is an individual to whom your child’s care is transferred if both parents pass away. Naming a guardian in your will means you want this person to care for your child as if they were a parent until your child is no longer a minor. Guardians perform all parental duties, including making decisions regarding a child’s upbringing, education, religious teachings, and medical care, so it’s important to choose a person that you trust with your child’s wellbeing. It’s also important to note that if the individual named in your will is not your child’s surviving parent, your wishes could be overridden in court and custody provided to the remaining parent if a judge feels it is the best situation for your child.

    Designating a Custodian

    Because minor children cannot inherit property or financial assets, you should also name a custodian in your will to handle your child’s inheritance until he reaches a certain age or meets a specific milestone, such as graduating from college. The individual named in your will as your child’s guardian can also serve as his custodian, or you may choose a different person to handle your child’s finances and assets as the custodian. Thus, if you feel the person you want as your child’s guardian is not the best individual to manage his inheritance, you can opt to name a different custodian to protect your child’s financial future.

  • How Can Assets Be Passed Outside of Probate?

    One of the benefits of estate planning with an experience estate attorney in Baltimore is finding ways to help your beneficiaries avoid probate. Probate is long and expensive, and if you don’t set up your estate properly, your assets could be tied up for an extended period of time. Fortunately, an estate lawyer can help you use legal tools that let you pass property to your beneficiaries outside of probate, saving considerable time and money. Here are some of the strategies that can be useful in protecting your assets from probate. avoid - probate

    Joint Property Ownership

    You can use the right of survivorship to prevent a property from entering probate by owning it jointly. Jointly owned properties automatically pass to the co-owner upon the death of the other owner, with no need for probate. Typically, your estate lawyer will create a legal document that sets out the joint ownership and the right of survivorship. Although married couples usually have joint property ownership, the agreement doesn’t have to be between two spouses. Anyone can create a joint property ownership agreement with any person they wish to inherit the property without having to deal with probate.

    Death Beneficiaries

    There are certain types of financial accounts that allow you to name a beneficiary to inherit the account when you are gone, thus passing outside of the will and the associated probate process. These accounts include payable on death (POD), transfer on death (TOD), and retirement accounts, including traditional and Roth IRAs and 401(k) accounts. However, keep in mind that an surviving spouse often has a right under the law to some portion of your retirement accounts, so even if you don’t name him or her as the beneficiary, they may automatically receive a least a portion of them. Your estate planning lawyer can help you plan accordingly.

    Revocable Living Trusts

    Revocable living trusts let you transfer assets to a trustee while you are still alive, with the right to cancel the trust at any time. The trustee becomes the owner, so the property can no longer be included in your estate and will not enter probate upon your death. The trustee will then distribute the assets as instructed by you in documents prepared by your attorney.

  • Tips for Talking to Your Spouse About Estate Planning

    Estate planning is one of the most important things you and your spouse will do for your family, but starting the conversation isn’t always easy. Scheduling an appointment with an estate lawyer in Baltimore is a good step, but it can be helpful to have a conversation before your meeting so you can align your priorities and come up with a list of questions. Use these tips for talking to your spouse about estate planning. estate - planning

    Start With Why

    Before you begin the estate planning process, discuss why it is important to you and why you want to begin it now. In some cases, you may only have a vague idea that estate planning is something you’re supposed to do and feel like you are at the age to do it. In other instances, you may have very specific goals you want to accomplish. By identifying why you want to make a plan for your estate, you can focus in on your goals and create a framework for your decision making process.

    Identify Your Non-Negotiable Points

    You and your spouse may have some very specific things you hope to accomplish with your estate, and it’s important for your attorney to understand these needs up-front. You may have a family business that you want to pass on to your heirs in a specific way, or you may have a child with special needs that you want to make preparations for. Make a list of the things your estate must do so you can make sure your plans meet these needs appropriately.

    Take a Break When You Disagree

    Estate planning should be something you and your spouse feel good about together, not the source of conflict. If your conversation becomes heated over things like making a living will or setting up a trust, take a break. Allowing each other time to think and returning to the conversation when you’re calm again will make the process easier.

  • What to Expect During a Business Dispute Mediation Session

    Business disputes can arise over many situations, including miscommunications, disagreements over verbal contracts, and conflicts within your employee pool. Handling business disputes through litigation can be a costly and drawn-out process; by contrast, mediation can help conflicting parties reach an agreement much more quickly, often at lower cost. Knowing what to expect from business dispute mediation in Baltimore can help you better determine whether the mediation process is right for you. business - mediation

    The Role of the Mediator

    When you seek business dispute mediation, you and the party with whom you have a conflict will meet with a mediation attorney. This mediator will serve as an impartial third party to help you reach a resolution that is satisfactory to both parties. Prior to your mediation session, you may have the opportunity to speak with the mediation attorney in person or over the phone without the other party present, allowing you to present your side of the story. During mediation, the mediator may take either an active or a passive role, depending on your preferences.

    The Process of Conflict Resolution

    Mediation is a beneficial conflict resolution process , allowing both parties to discuss and reach a solution in private without the oversight of the public or a judge and courtroom staff. Depending on the type of mediation you prefer, your mediator may simply listen to both parties and point out the pros and cons of the potential solutions offered with complete neutrality. Alternatively, your mediation attorney may take a more active role that involves structuring the discussion and proactively guiding both parties toward a conclusion. Mediation can involve both joint sessions, during which all parties and their attorneys are present, as well as private caucus meetings, which allow each party to meet with the mediator privately as the process continues. Caucus meetings allow the mediator to evaluate both sides of the issue and make better-informed suggestions during joint sessions, and all information discussed during a private caucus remains confidential. Once a solution has been reached, your attorneys will use this information to draw up a legally-binding agreement.

  • Find Out How Mummert Law Can Help You Plan for the Future

    When most people begin the estate planning process, they have two goals: to protect their resources as much as possible and to make dealing with the estate less stressful on their loved ones. When you need help with estate planning in Baltimore, Timothy Mummert of Mummert Law can help. Watch this video to learn more.

    Mummert Law is experienced in all aspects of estate planning, from last will and testament preparation, revocable and irrevocable trust planing, and more. The firm is also here to help your loved ones deal with the process of probate as quickly and efficiently as possible. Delaying estate planning can put your assets at risk, so make an appointment with our attorney today.