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Mathew Laskowski is a Senior Paralegal at Porzio, Bromberg & Newman, P.C.’s Morristown, New Jersey office. He is a member of the firm’s Bankruptcy and Financial Restructuring team. Prior to joining the Bankruptcy team, he was a Case Manager on the firm’s Mass Tort team, defending Toxic Tort cases Nationally.
Mathew came to Porzio with an extensive litigation background. This stemmed from his previous firm’s defense of Medical Malpractice cases, Construction litigation generally and in defending Municipalities. His Municipal Defense experience exposed him to other areas of the law including Employment Law, Civil Rights cases and it led to Class Action defense experience early in his career.
Mathew graduated from Marist College with a B.A. in Political Science and a minor in Business. While at Marist, he also completed the school’s ABA approved Paralegal Certificate program.
Mathew is a member of National Association of Legal Assistants and he is the Treasurer and Website Developer of the Legal Assistant’s Association of New Jersey, a NALA affiliate. Mathew sits on the New Jersey State Bar Association’s Special Committee on Paralegals; he is also a member of the NJSBA’s Bankruptcy section. Mathew sits on the Advisory Board to the Union County College (NJ) Paralegal Program.
Mathew co-authored and won a 2005 Burton Award for the article “Secured Creditors May Not Be As Secure As They Think,” that appeared in the New Jersey Law Journal and involves PACA Trusts. He has also lectured on the use of Courtroom Technology, Large Scale Document Reviews/Productions, Case Management and on the use of the World Wide Web as a research tool.
MATHEW E.LASKOWSKI - FACTS & FINDINGS
NALA AUGUST 2005
New Code Impact
Professionals who practice in the areas of bankruptcy and creditors rights have been bracing for “sweeping reforms” of the Bankruptcy Code for years.
Federal legislators made such reforms a priority early in their sessions until amendment after amendment would weigh down the bill until it fell by the wayside. This time, the Republican-backed initiative was kept free of amendments,which helped it move swiftly through Congress. Now, the bill, formally known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S. 256, H. 685) has been approved by Congress and was signed by President Bush on April 20, 2005 (herein the “New Code”). The majority of the provisions will become effective in mid-October 2005. Although this complex bill will affect many provisions of the Bankruptcy Code, the consumer bankruptcy sections were modified to the greatest extent, and were the subject of the most debate. Many large institutional creditors (i.e., banks and credit card companies) have complained of alleged abuses of the bankruptcy system while debtors and their advocates have cried “foul” against lenders for overextending credit and contributing to their insolvency.
Following are some key areas that will affect consumers under the New Code.
Consumer Bankruptcy
In 2004, Chapter 7 bankruptcy petitions accounted for slightly more than 70 percent of all consumer filings (“Non- Business Bankruptcy Filings by Chapter, 1990-2004, per Quarter” http://www.abiworld. org, 28 April 2005). Chapter 7 of the Bankruptcy Code is generally relied upon as the most effective way to wipe out unsecured debt and, in many instances, provides unsecured creditors with little or no return on their claims. Those who file their petitions under Chapter 13 primarily do so in an effort to preserve assets (usually a home) that would otherwise be liquidated for the benefit of creditors. Chapter 13 debtors, who make up nearly 30 percent of the remaining consumer filings, enter into a repayment plan lasting from 36 to 60 months where unsecured creditors are paid an equal percentage of their respective claims based on the debtor’s disposable income. Thus, generally speaking, creditors receive a greater return on their claims, and debtors pay more to their creditors in Chapter 13 cases than in Chapter 7 cases.
BANKRUPTCY REFORM ACT OF 2005
The Sweeping Changes are Here by Mathew D. Laskowski
In an effort to curb the number of Chapter 7 filings, the New Code purports to adopt two “means tests” to determine if a debtor may file a petition under Chapter 7. Furthermore, pursuant to section 707(b) of the New Code, the court on its own motion or by motion of the trustee may move to dismiss or convert the Chapter 7 proceeding should the debtor’s income exceed the state median income (the “Median Family Income”). The assumption behind section 707(b) is that if a debtor has income in excess of the state median, the debtor’s Chapter 7 filing is an abuse of the bankruptcy system. Such a debtor may convert the case to one under either Chapter 11 or Chapter 13, with a repayment plan that provides a greater distribution to unsecured creditors.
First Means Test The first means test is calculated using a complex formula. First, the debtor’s income must be determined. Pursuant to section 101(10A) of the New Code, the debtor’s income is determined by calculating the total of the debtor’s latest six months of income (prior to the filing date) from all sources (not including Social Security payments). The total is then divided by six to determine the average monthly income. Health expenses, disability insurance and healthcare savings accounts are deducted from the debtor’s average income. Additional expenses that may be deducted include actual expense for the care and support of elderly or disabled household members, and certain expenses associated with elementary and secondary school up to $1,500 per dependant child under 18 years of age. This final number is known as the debtor’s “Adjusted Income.”
Once the adjusted income is calculated, it may be compared to the median family income, which is defined in sections 101(39A) and 707(b)(2)(A)(ii)-(iv), and calculated by reviewing the “Median Family Income by State and Persons in the Household” generated by the U.S. Census Bureau (1999). That number must be adjusted up to the time of filing based on the Consumer Price Index. The resulting number should be reduced based upon the “IRS Standards for Allowable Living Expenses by Number of Persons in Household,” then further reduced pursuant to the “IRS House and Utilities Allowable Living Expenses by State and County,” and the “Allowable Living Expenses for Transportation by Region.” The allowable expenses can be adjusted over the federal level if the debtor can prove their actual costs exceed the IRS allowances. The resulting “Median Family Income” is then compared to the debtor’s adjusted income. If the adjusted income is less than the median family income, the debtor will be allowed to file a petition under Chapter 7—provided certain additional requirements, some of which are set forth below, are met. Conversely, if the adjusted income exceeds the median family income, the debtor may not file a petition under Chapter 7, but may file a petition under Chapter 11 or 13.
Second Means Test
Those whose adjusted income is more than the median family income may still be eligible to file a Chapter 7 petition if they meet the requirements set forth in an additional means test determined pursuant to section 707(b)(2). Under this calculation, the debtor’s monthly expenses are subtracted from the debtor’s current monthly income to determine an “Adjusted Monthly Income” (AMI). The AMI is then multiplied by 60. If the result is less than 25 percent of the debtor’s general unsecured claims, or $6,000 (whichever is greater), a debtor may file a Chapter 7 petition. If it is greater than 25 percent or $6,000, the debtor may file Chapter 11 or 13 petitions.
Credit Counseling
The New Code also requires mandatory credit counseling (see section 111) for all individual debtors seeking bankruptcy protection. Pursuant to section 109(h)(1), counseling must occur within 180 days prior to the filing of a petition under any section of the New Code. The counselor must be associated with an approved nonprofit budget and credit counseling agency as defined by section 111(c) (2), and must develop a management plan to accompany the bankruptcy petition. There are certain exceptions for emergencies, or, if in the trustee’s opinion, the agency could not provide proper counseling for the debtor’s situation. These emergency exceptions do not exempt the debtor from counseling. Under section 109(h)(3)(a), the emergent debtor must complete the counseling within 30 days of the bankruptcy filing, subject to a potential court-approved additional 15 day extension to complete the counseling. Failure to complete counseling can result in dismissal of the petition.
Debtors who are incapacitated, disabled or on active military duty in a war zone are exempt from the counseling requirement. In addition to credit counseling, debtors, under section 1328(g), will now be required to complete a course in personal financial management from a
Reprinted with permission of the National Association of Legal Assistants and Mathew D. Laskowski. The article originally appeared in the August 2005 issue of Facts & Findings, the quarterly magazine for legal assistants. The article is reprinted here in its entirety. For further information, contact NALA at www.nala.org or phone (918) 587-6828.
CAREER GOALS
• To continue to push the advancement of the paralegal profession by encouraging my co-workers and other paralegals I am in contact with to take part in their profession, including involvement in paralegal organizations, being published or to speak at events and seminars.
• To continue to write and be published in professional journals.
• To speak at events and/or seminars about paralegals generally and the use of paralegals.
• To continue to teach other paralegals about how they can improve aspects of the skill sets.
• I hope to expand my own horizons and continue to learn more about the areas of the law I currently work in and down to the road to learn new areas of the law entirely, including Corporate.
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