Monthly Archives: October 2011

Covanta Harrisburg, Inc. Seeks Dismissal of Harrisburg Bankruptcy

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The incinerator operator, Covanta Harrisburg, Inc., drew first blood today by filing their objection and brief in support, seeking the dismissal of the bankruptcy petition of the City of Harrisburg.  Covanta is at the center of the cities bankruptcy filing given that the bonds used to fund the incinerator are what the city is having trouble paying back.

Covanta cites section 921(c) and section 109(c) for authority to dismiss the bankruptcy petition.  Under section 921(c) the court may dismiss a petition if the debtor did not file the petition in good faith or the petition does not meet the requirements of Title 11.  Covanta is arguing that the petition was not filed in good faith because of Pennsylvania Act 26 of 2011 and that the petition makes no mention of this state law.  They are also arguing the requirements of section 109(c) are not met.

Covanta argues that Harrisburg is not eligible to be a debtor pursuant to section 109(c) of the bankruptcy code.  You may remember in a previous article in the Bay Area Bankruptcy Blog details about who can be a debtor and who may not.  A municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor.  The Commonwealth of Pennsylvania passed a law providing a city such as Harrisburg cannot file for bankruptcy protection.  Rather the state can step in and appoint a receiver to help the city form a plan to become solvent.  The State of Pennsylvania did just that on October 20, 2011, when Governor Tom Corbett signed Senate Bill 1151.  This bill declares a fiscal emergency and provides a receiver may be appointed to create a plan of recovery.  See Act 26 of 2011, 72 P.S. Section 1601-D.1 (2011).

Covanta also is arguing that the petition is invalid because the person who signed the petition did not have authority.  Just like the Mayor of Harrisburg, Covanta argues that all laws and legal matters must be presented to the City Solicitor for approval.  The four council members that voted for and authorized the filing of bankruptcy by the city have been called “unauthorized council members.”  The Mayor argues that only she as the executive can sign the petition and bind the city to filing bankruptcy, not a council member.

This is probably one of many more objections and briefs to be filed in support of dismissal of this bankruptcy case.  The Commonwealth of Pennsylvania has already passed a law appointing a receiver, the Mayor of Harrisburg representing the City of Harrisburg has opposed the filing, and now the incinerator operator has lined up against this bankruptcy case.  The question still is whether the Tenth Amendment of the U.S. Constitution will force the Bankruptcy Code to defer to the state law of the Commonwealth of Pennsylvania which arguably forbids this bankruptcy filing by Harrisburg.

For more information from an experienced bankruptcy lawyer or from a Redwood City bankruptcy attorney visit us at www.westcoastbk.com or call us toll free at 1-877-963-9543.

Governor of Pennsylvania Signs Senate Bill 1151 Declaring Fiscal Emergency and Appoint a Receiver for the City of Harrisburg

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On October 20, 2011, the Governor of Pennsylvania, Tom Corbett, signed Senate Bill 1151 authorizing the declaration of a fiscal emergency and install a receiver to attempt to develop a recovery plan for the City of Harrisburg.  The news release from the Governor’s office provides the Governor signed the bill to help enforce the state’s law that when a municipal city fails to adopt a fiscal recovery plan the state will intervene.  Wait a second; the City of Harrisburg filed a Chapter 9 bankruptcy case to do just that, implement a plan of reorganization to lead to solvency.  It is the Governor’s and State of Pennsylvania’s position that the filing of the Chapter 9 bankruptcy case was in violation of state law and Harrisburg could not file the bankruptcy petition in the first place.  It seems they are backing up that position by installing a receiver pursuant to Pennsylvania State Law, Act 47 and Act 26.  Act 47 allows a municipality such as Harrisburg to develop a fiscal recovery plan that is acceptable to the secretary of Department of Community and Economic Development.  The plan can be accepted and then the takeover and installation of a receiver is stopped.  The question is whether a plan of reorganization under Chapter 9 of the Bankruptcy Code is a possible way to satisfy this provision of Act 47?  We will find out on November 23, 2011.

The Harrisburg Chapter 9 bankruptcy case is also facing a request for dismissal from the Mayor of Harrisburg, the Honorable Linda D. Thompson.  The Mayor is arguing that the person who signed the bankruptcy petition is an unauthorized council member who lacks the authority to file bankruptcy for the city.  The Mayor is arguing that the only person who is authorized is her as the executive branch of the government of Harrisburg.

The Bankruptcy Court has entered an order setting the date of the hearing on whether this bankruptcy case should be dismissed for November 23, 2011, at 9:30 a.m.  All parties seeking to dismissal of this case must file and serve their briefs by October 28, 2011.  Responses to the briefs requesting dismissal are due by November 7, 2011.  The actual hearing will be held on November 23, 2011, at 9:30 AM in Bankruptcy Courtroom One, Third Floor, Ronald Reagan Federal Building, 228 Walnut Street, Harrisburg, Pennsylvania.  It will be interesting how the court rules and if the court agrees with both the Mayor of Harrisburg and the State of Pennsylvania regarding their state law and the authority granted to the Mayor.

For more information about bankruptcy you may find contact our Foster City bankruptcy lawyer for answers to your questions.  You may also contact our bankruptcy lawyer in Redwood city for more information.

Pennsylvania and Mayor of the City Harrisburg Seek Dismissal of the City of Harrisburgs Chapter 9 Bankruptcy

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In another strange twist, the Mayor of the City of Harrisburg, the Honorable Linda D. Thompson, has hired counsel for the City of Harrisburg to seek dismissal of the Chapter 9 bankruptcy case filed by the City of Harrisburg.  Huh?  You read that right.  On October 16, 2011, a Sunday, Mayor for the City of Harrisburg filed a motion to modify or vacate an order by the Bankruptcy Court to send out notice to creditors of the Chapter 9 bankruptcy filing.  The Mayor seeks to prevent notice of the bankruptcy case from being mailed arguing the bankruptcy case should be dismissed entirely.

The Mayor of the City of Harrisburg claims that the Chapter 9 petition filed on behalf of Harrisburg was signed by an unauthorized council member.  It appears that four city council member voted in favor of filing bankruptcy for the city on October 11, 2011.  The Mayor did not agree with these four council members.  The Mayor is arguing that she has executive power over the city and only she is the governing municipal officer capable of signing a petition for bankruptcy.  The Mayor further argues that providing notice before the issue of whether the case can go forward would force the city to incur significant cost given that the number of parties to provide notice to would be in the thousands.  This is definitely a valid concern if the bankruptcy case will not go forward and is dismissed.  The cost and expense of notifying Harrisburg’s creditors would not only be expensive but cause further complications in the event the bankruptcy court rules in favor of the Mayor or the State of Pennsylvania regarding their requests for dismissal.

As the case moves along many creditors and parties in interest seek special notice of all documents filed in the case.  So far a group called Debt Watch Harrisburg and the International Association of Fire Fighters, Local Union No. 428, have filed requests for special notice with the court.

So, the Common Wealth of Pennsylvania is seeking dismissal of the bankruptcy case arguing the City of Harrisburg violated state law in filing the bankruptcy petition and now the Mayor of the City of Harrisburg on behalf of the city is arguing the petition for bankruptcy is invalid because the party that signed it lacks to the proper authority.  This case is facing an uphill battle from every direction.  A hearing will be held on November 23, 2011, regarding these various issues.  It will be interesting to see if this bankruptcy case will survive.

For more information from an experienced bankruptcy lawyer or bankruptcy attorney visit us at www.westcoastbk.com.

The Latest Chapter 9 Municipal Bankruptcy is the City of Harrisburg

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The latest municipality to file a municipal bankruptcy case under Chapter 9 of the Bankruptcy Code is the City of Harrisburg, Pennsylvania.  The City of Harrisburg filed their petition for relief on October 11, 2011, bankruptcy case number 11-06938 in the Middle District of Pennsylvania.  According to court records the scope of the City of Harrisburg’s bankruptcy case is much larger than another recent municipal bankruptcy, the City of Central Falls.

The City of Harrisburg cites past due payments of a staggering $83 million.  This is primarily due to their failure to pay the guaranteed incinerator bond debt that is due.  Like any cities throughout United States the City of Harrisburg has issued bonds to fund infrastructure improvements.  Many cities must meet certain guidelines for the services they provide the public.  Many cities issue bonds to fund waste treatment plants, waste disposal and other services necessary to meet the public’s needs.  The City of Harrisburg had a $5.35 million deficit in 2010 and has projected a $3.0 million deficit for 2011 without adding in the cost of any of their guaranteed bond obligations.  It is no surprise that small municipalities are feeling having trouble meeting their obligations when many states also have budget deficits not to mention the enormous federal budget deficit.  Like many Americans struggling with mortgage debt and credit card debt municipalities are turning to the powerful tools available under the Bankruptcy Code to obtain relief.

On October 14, 2011, the Commonwealth of Pennsylvania, the State of Pennsylvania, filed a motion seeking the dismissal of the City of Harrisburg’s bankruptcy case arguing that the City of Harrisburg does not qualify to be a debtor under the Bankruptcy Code.  Pennsylvania passed a state law, Act 26 of 2011, 72 P.S. §1601-D.1 (2011), arguably prohibiting a city such as the City of Harrisburg from filing a petition under Chapter 9 of the Bankruptcy Code.  The Pennsylvania state law includes a section providing that if a municipality such as the City of Harrisburg were to file a petition under Chapter 9, all state funding to the filing municipality will be suspended.  Whether the City of Harrisburg will be allowed to continue to seek reorganization of their debts under Chapter 9 of the Bankruptcy Code now remains to be determined.  The Bankruptcy Code is part of Title 11 of the United States Code, federal law.  The question of whether a state may enact laws to circumvent and prevent a municipality from receiving the benefits of bankruptcy is in question.

At issue is the Tenth Amendment of the United States Constitution.  The Tenth Amendment provides that powers not granted to the federal government nor prohibited to the states by the Constitution are reserved, respectively, to the states or the people.  The age old power struggle between the rights of states to govern themselves versus the power of the federal government is not new.  This issue may find its way the United State Supreme Court.

For more information about Chapter 9 bankruptcy you may contact our bankruptcy attorneys or bankruptcy lawyers.

Garnishment Laws

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Garnishment is the result of a lawsuit and the enforcement of the judgment obtained in the lawsuit.  The good news is that filing for bankruptcy protection will stop the wage garnishment and get rid of the lawsuit forever.

Many collection agencies threaten to garnish wages to attempt to scare people into making payments on delinquent accounts.  The fact is that they must first file a lawsuit against you, served you with the lawsuit, obtain a judgment, then writ of garnishment or writ of execution, then serve the earnings withholding order on your employer.  Whew, that is a lot of steps.  The hardest part of this process is usually personally serving you with the lawsuit.  Once they have served you it will only be a matter of time before they can obtain a judgment against you.  Of course you may have a valid defense.  If so, seek the counsel of an experienced attorney to represent you.  In most cases that involve credit cards there are no valid defenses.  It is a straightforward breach of contract for failure to pay.  So if you are behind on a credit card or owe money to someone the question always is, “Are they going to take the time, effort and money to follow the garnishment laws and actually be able to legally garnish your wages?”  Who knows?

What is certain is once all the necessary steps have been completed to garnish your wages it hurts your income severely.  The amount that can be garnished varies from state to state, but what is garnished is deducted from your net income.  Yes, after federal and state taxes are deducted, healthcare costs or other deductions, then thee garnishment is deducted.  Ouch.  Each state has exemptions you can claim to reduce the amount that can be garnished each paycheck.  Depending upon your circumstances, like have ten kids you have to feed, you could reduce the amount garnished quite a bit.  Even though you can be legally garnished that does not mean you will not be allowed to live and eat.

Every check will be garnished until the judgment is satisfied in full up to ten years.  The judgment is only good for ten years and must be renewed if it is not satisfied in full.  The amount of the judgment will be more than what you originally owed too.  Do not forget that there will be attorney fees and costs added into the judgment and you will have to pay that back too.

For more information about garnishment and how bankruptcy can help, contact our Oakland bankruptcy lawyers today.  If you are located on the Peninsula, contact our Redwood City bankruptcy attorneys for more information about garnishment and bankruptcy.