In July 2014, the Pennsylvania Legislature enacted amendments to the Pennsylvania Mechanic’s Lien Law, which significantly, and adversely, affect the mechanic’s lien rights of subcontractors on residential construction projects. The amendments were signed into law by Gov. Corbett on July 9, 2014, and will take effect in 60 days (on September 7, 2014). Previously, subcontractors could file a mechanic’s lien claim for the unpaid balance due to them, even if the property owner had paid the contractor in full. The newly enacted amendments deny subcontractors that right, or limit the lien based on the amount still owed by the property owner to the general contractor. As a result, the legal actions available to subcontractors seeking compensation for their unpaid work have been significantly reduced.
Very little can be as frustrating to a creditor than the situation where a debtor from which you have been trying to collect, supposedly “closes down” but then re-appears as a new company. Think about it. You have probably encountered this situation. You have a claim or a judgment against a commercial debtor, which is purportedly out of business. However, at the same address of your debtor is a (supposedly) new corporation, with the same ownership, the same management, the same employees, engaged in the same line of business. You call the debtor business and the phone answers with the new company’s name. You ask what happened to your debtor company and you are told by the phone receptionist that “we bought them out,” or perhaps “it’s under new management” or “we changed our name” or “that used to be us.” Whatever the purported excuse, you are being stonewalled, and led to believe that your debtor is out of business. Do you have any remedies? Continue reading “Successor Liability Actions as a Collection Tool”
Kirk Burkley Featured in Pittsburgh Post-Gazette Article on Commonwealth Renewable Energy Inc.’s Ch. 11 Bankruptcy
July 8, 2014
In a recent Pittsburgh Post-Gazette article, “An Ethanol Dream Dashed Six Years Ago Turns to Bankruptcy,” Bernstein-Burkley, P.C. Partner, Kirk B. Burkley, spoke on behalf of creditors impacted by Commonwealth Renewable Energy Inc’s chapter 11 bankruptcy filing. Currently more than $35 million in debt, the company is looking to reorganize under Ch. 11. For the full article, click here, or view the PDF version.
Executory Contracts
June 27, 2014
What are executory contracts, when are they used and how are they viewed by the Bankruptcy Code? Bernstein-Burkley, P.C. Managing Partner, Robert S. Bernstein, answers these questions and more in this 5MLM episode.
Kit Pettit Named Partner At Bernstein-Burkley, P.C.
June 24, 2014
Bernstein-Burkley, P.C. announced today that Kit F. Pettit has been named a Partner with the law firm, responsible for the management of the firm’s growing Real Estate and Oil, Gas and Energy practices. Kit has been a valued asset since he joined the firm in 2010.
Defining the Line Between a Fresh Start and a Free Pass – June 12, 2014 Supreme Court Decision: Clark v. Rameker
June 12, 2014
Bernstein-Burkley, P.C.
Today the Supreme Court of the United States issued a decision that helped further define what constitutes a fresh start as opposed to a free pass for debtors seeking to exempt assets in bankruptcy. In Clark v. Rameker, Justice Sotomayor delivered the opinion holding that inherited IRAs are not “retirement funds” within the meaning of § 522(b)(3)(C).
A Trust is a legal instrument in which a Grantor transfers legal ownership to a Trustee (or Trustees) for the benefit of the Beneficiary (or Beneficiaries). The Grantor writes his or her own rules for the management of the trust assets. When a Grantor creates a trust for the benefit of himself or herself, the resulting trust is commonly referred to as a Revocable Living Trust (RLT).
Common Misconceptions of RLTs:
They save federal estate tax and/or Pennsylvania Inheritance tax. An RLT does not reduce federal or state taxes related to death – only your overall estate plan affects your tax liability. An RLT can potentially reduce probate fees.
An RLT will keep my estate out of probate. Only true if ALL of the Grantor’s asset are legally titled in the name of the RLT. Some assets are not appropriate to be held in an RLT; it is very cumbersome to ensure that all assets have been transferred.
An RLT will provide creditor protection for the assets. Only an irrevocable trust can have creditor protection. Further, the Grantor generally cannot create an irrevocable trust to hold assets for his/her own benefit; the trust must be for the benefit of someone other than the Grantor. This means that the assets in such a trust no longer belong to the Grantor.
While no one wants to think about a new client becoming a debtor, it’s important that a credit agreement is in place from day 1 to protect your company. In this 5 Minute Legal Master Series episode, Bernstein-Burkley, P.C. Partner, Nicholas D. Krawec, discusses what should be included in credit agreements, and why.
Welcome to the 5 Minute Legal Master series where expert attorneys help you master important legal topics. Today, board certified creditors’ rights attorney, Nicholas D. Krawec discusses credit agreements.
Welcome! Today I want to talk to you a little bit about credit agreements. In the euphoria of getting a new customer not many creditors, especially their sales departments, want to think about their customer becoming a debtor down the line. However, when a creditor extends credit to that new customer he is essentially lending his company’s money and there is a risk that the creditor may not get paid by this customer. Therefore, the outset of the business relationship with a new customer is precisely the time to be proactive, to anticipate what rights and remedies you as the credit granter will want and need to have at your disposal if and when the new customer becomes a non compliant debtor. You have to prepare for collection from day one and no one likes to think about that with a new customer, but the creditor needs to create a new environment where the customer is made clearly aware that the creditor expects timely payment, this starts with the credit agreement. The credit agreement must clearly set forth the payment terms and conditions.
If the new customer’s credit worthy warrants it then the creditor should require other creditor enhancements which we will talk about in a few moments. The credit agreement should identify the legal form of the customer, it is a corporation or proprietorship? This will obviously identify who is responsible for payment. Creditors should periodically review the account and watch for possible changes in the legal form of the customer during the course of dealings. For example, has the business form changed from a proprietorship or partnership to a corporation or limited liability company?
The credit agreement should also identify who at the customer is authorized to make purchases or incur charges on the account. I recommend adding a provision that puts responsibility on the customer to notify the creditor of any such changes in that responsibility. Next, set for the credit and payment terms. What is the credit limit, how much credit are you willing to extend to this customer? Closely monitor the account balance to ensure it does not exceed the level of credit risk that you as the creditor determined to undertake. Not every customer has the same credit history so not every customer should get the same credit terms. Be clear about when payment is due, encourage timely payment by offering discounts for early payments, identify what the consequences are of default. You can reserve the right to unilaterally change credit terms or even cut off credit if the account falls into arrears. You can change the credit account to COD or Cash in advance until the arrears are cured and they can go back to continued payment according to the original terms, it may clear the legal consequences of default, a lawsuit.
The next question to ask yourself is what are the interest of finance charge terms? After all the debtor who does not pay you is using your money. In the absence of an agreement with regard to interest, the creditor is generally limited to an interest rate set by statute which in Pennsylvania is 6% per annum. For interest rates or service charges in excess of the stature rate, contractual interest terms are required. You can only recover your collection cost and attorney’s fees when you see a debtor if it is part of the contraction or statutory authorization for attorney’s fees. You want to put the attorney’s fee provision in your credit agreement and make the debtor responsible for your attorney’s fee if you have to proceed with suit.
If the credit applicant is border line credit worthy, consider this credit enhancements I mentioned earlier, a personal guarantee from the principle(s) of the corporate debtor, maybe include the confession of judgment clause which will allow you to confess an immediate judgment in the event the debtor defaults on the account. You may seek a security agreement where the debtor grants the creditor a security interest in his assets and the lien of that security interest will cover the debtor’s assets once the lien is perfected by the filing of a UCC1.
There is a lot to go into a credit agreement. For excellent information about a disciplined and responsible credit policy of which a well drafted credit agreement is an integral part, I would encourage you to visit the website www.getpaidsystem.com to learn more about my colleague, Bob Bernstein’s get paid system and his book, “Get Paid, A Guide To Getting Paid Faster and What To Do If You Don’t.”
Thank you for listening!
This has been another installment of the 5 minute Legal Master series where expert attorneys help you master important legal topics. For more information on this and other topics please visit 5minutelegalmaster.com
Kirk Burkley in the Valley News Dispatch
May 29, 2014
Bernstein-Burkley, P.C. Partner, Kirk Burkley, was featured in the news again in reference to the bankruptcy reorganization plan for the Rock Airport and Business Park, located in West Deer, PA. As the attorney for the bankruptcy trustee, Kirk commented on the federal judge’s decision to move forward with the plan and the sale of the facility:
“If the plan ends up being the best result for all creditors, then it will be upheld by the court,” said Kirk Burkley, attorney for the bankruptcy trustee. “We shouldn’t hold up the sale based on things that are outside of the trustee’s control,” such as the reorganization plan.
Section 365 of the Bankruptcy Code & Oil and Gas Leases
May 27, 2014
The expansion of the oil and gas industry throughout the region has increased the incentives for landowners to lease their oil and gas rights. Landowners sitting atop active oil and gas plays can receive bonuses ranging from $500.00 to $8,000.00 per acre, plus royalty interests on the sale of oil and gas ranging from 12% to 20%. The increase in rates has led many landowners who leased their mineral rights prior to the Marcellus Shale boom to experience a form of “buyer’s remorse,” seeing now that their oil and gas rights could have earned several thousand dollars per acre, plus royalties. Depending on the terms and conditions of the lease, many landowners find it difficult, if not impossible, to cancel or otherwise modify the lease. If the lessor landowner encounters financial difficulties and turns to bankruptcy, Section 365 may enable the landowner to reject his or her oil and gas lease.
Robert Bernstein Discusses Unsecured Creditors’ Committees on Business Credit Radio
May 20, 2014
Bernstein-Burkley, P.C. Managing Partner, Robert S. Bernstein, discusses unsecured creditors’ committees on his most recent appearance on Business Credit Radio. What are unsecured creditors’ committees? How and when are they formed? Do they make a difference? Robert answers these questions and more during his interview. For the full interview, click here.
5 Minute Legal Master Series: Mediation
May 16, 2014
In this 5 Minute Legal Master Series video, Bernstein-Burkley, P.C. Managing Partner, Robert S. Bernstein, discusses mediation, a popular alternative dispute resolution tactic. For more details, be sure to read Robert’s ebook: 5 Ways That Mediation Can Save You Time and Money.
Welcome to the 5 Minute Legal Master series where expert attorneys help you master important legal topics. Today, board certified creditors’ rights and business bankruptcy attorney, Robert S. Bernstein discusses mediation.
Mediation comes under the heading of alternative dispute resolution which is a broad category that includes mediation, arbitration, early neutral evaluation and maybe some other things but those are the 3 main things people talk about. Those are ways to resolves disputes outside court or in conjunction with a court proceeding. Mediation, which to me is the most important of those things is a facilitated settlement discussion, it is entirely voluntary among the parties, although a court may order the parties to go to mediation, the result is voluntary. There is a mediator who is a neutral party either hired by the parties or directed by the court to be the mediator who helps the parties come to an agreement if possible. That mediator has gone through special training and presumable has had previous experience mediating cases so that he/she can help you, the parties to have a meaningful discussion.
Sometimes the discussion is facilitated best by the parties’ not being in the same room, sometimes the parties should be in the same room. typically when I mediate a dispute, I have the parties together all in one room at the start, I make some introductory comments about the mediation process, including the fact that everything said there is confidential and cannot be disclosed to the court or anywhere so that the parties can be free to have an open discussion. I make these initial comments, I often ask each side whether by their attorney or by one of the parties to make an opening statement to say whatever they want to say about the dispute, possible resolution, their feelings about the dispute so that they can, in some sense get it off the their chest.
It may be hard for the other party to hear because there maybe things said which may be hurtful, hopefully they are not, but they might be, but it is important for the resolution process for people to be able to say what they need to say ad get their feeling heard. Often times in court proceedings, parties do not feel that they have had an opportunity to be heard, mediation allows that.
After the parties have given their opening statements, depending upon the field, I might ask for discussion to happen right then and there. I would have consulted with counsel on both sides, or the parties to get some idea of the settlement position that is confidentially provided to me before the mediation. I may feel that things are close enough or maybe far enough apart that there ought to be some discussion right then. Either after that or instead of that, I will separate the parties in separate rooms and we will then shuttle back and forth talking to the parties privately and confidentially about their positions, how the case may be settled and this allows me to perhaps fashion a settlement that I can suggest to each side based on what each side has said in order to help them come to an agreement.
At the end of the session if there is an agreement the parties will help me write it down so that there is an agreement that can be signed so that the case can be resolved, either back to the court for a final order or judgment or if there is no court involved for a final agreement. But at least at the end of that day we will know that the mediation accomplished a settlement.
You have just heard the 5 minute Legal Master series where expert attorneys help you master important legal topics. For more information on this and other topics please visit 5minutelegalmaster.com
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