Ron Sheffer, an attorney with law offices located in Paducah, Lexington, Louisville, and Henderson, Kentucky, filed for bankruptcy in June 2003. He listed assets of $1 million and liabilities of $16.6 million. Sheffer ran into financial trouble when he borrowed money against projected income.

In an effort to satisfy creditors and a federal bankruptcy trustee, a proposed settlement has been agreed on, waiting approval from the U.S. Bankruptcy Judge. "If approved, Ohio Valley Bank would receive $80,000 and Franklin Bank & Trust Co. almost $115,000 from Sheffer's settlement. His wife, Anne, and son, Tom, would pay $200,000 that would be split among the remaining creditors."

The full article will be available on the Web for a limited time:

http://www.kentucky.com/mld/kentucky/news/state/14914969.htm

Pam

Ford Motor Corp is currently in a turnaround plan which hopes to make the automotive giant profitable again by 2008. Ford says the plan is progressing ahead of schedule but there are tough conditions in the near future. Decreasing sales of SUVs and the rising cost of materials will create difficulties in the coming months.

On Wednesday, Standard and Poor's cut its rating on Ford debt deeper into junk bond territory, reducing it from single B-plus to double B-minus.

Despite the increased pressure, Chief Executive Bill Ford stated that bankruptcy is not an option for the automaker.

For more information, please visit the MSNBC article here:
http://www.msnbc.msn.com/id/13609125/

Ray

Bankruptcy Code sections 507(a)(4)(A) and (a)(5) grant unsecured creditors with a claim for unpaid "wages, salaries, or commissions" and unpaid contributions to "an employee benefit plan" a priority payment in the debtor's bankruptcy. The United States Supreme Court recently ruled that these sections do not encompass payments for workers' compensation insurance. As a result, the Court refused to grant priority to an insurance carrier's claims for unpaid premiums.

The Court declined to use the broad definition of "employee benefit plan" contained in ERISA, which includes workers' compensation, and found the definition has a more limited scope in the bankruptcy context. (The Bankruptcy Code contains no independent definition of this term.) Instead, the Court was persuaded by the Bankruptcy Code's objective of securing equal distribution among creditors in deciding to curb the priority.

It is undisputed that fringe benefits that generally complement, or substitute for, hourly pay (such as pension plans and group health, life, and disability insurance) are given priority under Section 507(a)(4). In refusing to extend this priority to workers' compensation insurance, the Court reasoned that workers' compensation is more akin to liability insurance, which provides some protection for employers, than the kind of fringe benefits that complete a pay package and benefit the employee. The Court did acknowledge that this was a narrow line and the question was close, but ultimately the Court ruled that premiums owed by an employer to a workers' compensation carrier do not fit within the priorities accorded by the Bankruptcy Code.

Link to the case: http://www.supremecourtus.gov/opinions/05pdf/05-128.pdf

Leslie

On Monday, June 26, 2006, the U.S. Supreme Court granted cert in the case of Marrama v. Citizens Bank of Massachusetts. The case involves a Chapter 7 debtor whose conversion to Chapter 13 was denied. The 1st Circuit Court of Appeals had ruled that a debtor's right to convert from Chapter 7 to Chapter 13 is not absolute and can be denied in some circumstances.

Robert Louis Marrama appeals to the Supreme Court with the argument that the actual language of the Federal Bankruptcy Code gives an absolute right to convert to Chapter 13 from Chapter 7. The Bankruptcy Court had previously denied Marrama's conversion on the grounds that the request was made in bad faith.

Marrama ran a flooring business and his assets were seized by Citizens Bank of Massachusetts. Marrama became unemployed and was therefore ineligible to file under Chapter 13 which requires a debtor to have regular income, so Marrama filed for Chapter 7 protection instead.

The Chapter 7 Trustee took possession of Marrama's home in Maine, in which Marrama had been living. Marrama moved back into a home he owned in Massachusetts, which was exempt. Once he got a job with his brother's flooring company, he became eligible for Chapter 13 relief and sought to convert to Chapter 13. His request was objected to by the Trustee and Citizens Bank, and his request was denied.

The Supreme Court will hear this case.

Ray

There is an ongoing legal issue relating to some hierarchical churches which can be summarized, albeit in a idiomatic way as: which entity owns the churchhouse? Now there are a couple of possible owners: the local parish, the regional diocese, the national church or perhaps an international headquarter. In the case of Spokane Parish, the regional dioceses is in bankruptcy as a result of the various sex abuse related judgements which were taken against that entity. Therefore the recent decision by a US District Court that the local property legally belonged to the local parish was bad news for the creditors in the diocesan bankruptcy.

Specifically, a U.S. District Court in Washington state recently ruled that Roman Catholic local parishes own their own schools and parishes. This ruling pits the church against the sex-abuse victims who have claims against the regional diocese and therefor wanted a different ruling, one which would lodge ownership of the local land and buildings in the regional diocese.

This recent opinion joins several other opinions on the same issue across the United States. "The Quackenbush decision runs counter as well to a ruling by another bankruptcy judge in Oregon. But it appears to support the position of some Massachusetts parishioners that the Boston archdiocese has no right to forcibly close down parishes."

However, according to the article linked below, in remanding the case back to lower court, the District Court (which was acting as an appellate court for the bankruptcy court) cautioned that the bankruptcy judge may have to determine, through evidentiary hearings, the ownership structure and the acquisition history of each of the diocese's 83 parishes, a process that could take years.

"The District Court also refused to make a blanket determination that each parish property was free of liability from the sex-abuse cases, setting up the possibility of protracted discovery and further litigation."

"Looming large, as well, are lawsuits set for later this year in Southern California. In San Diego and Los Angeles, the first few of more than 500 sex-abuse cases are scheduled to go to trial later this year."

The full article quoted and paraphrased above will be available on the Web for a limited time:

http://baw-media.com/lrd3_AASLWQAAFRIB

Pam