Man’s Bail Bond Can Be Discharged in
Bankruptcy Court
A man who posted a $1 million bond for his son who was charged with
murder and then failed to appear in court can discharge the debt in
bankruptcy court since the debt was not incurred as a result of the
man’s own wrongdoing, a federal judge has ruled, according to an
article in
The Legal Intelligencer.
In In Re: Gi Nam, U.S. District Judge Stewart Dalzell upheld
an opinion by U.S. Bankruptcy Judge Diane Weiss Sigmund, who held
that such surety bonds do not fall under an exception to
dischargeability since they are civil, and not penal, in nature.
Dalzell regected an argument by the City of Philadelphia that such a
ruling would violate public policy and irreparably harm the bail system.
Steven M. Schain, a lawyer for the city, argued that if the criminal
defendant and the surety know that the liability for the bond will be
erased if the surety enters bankruptcy, there is much less reason for
the defendant to appear, since his family member surety will be able to
deflect the financial harm of forfeiture. As a result, Schain argued, an
interpretation of §523(a)(7) of the Bankruptcy Code that frees
family member bail bond sureties from their bond obligations after a
petition for bankruptcy would impede the states’ ability
successfully to prosecute criminal offenders.
Dalzell said the city’s policy argument is difficult to
quantify. “While these costs do not eradicate the concerns created
by discharging bail bond surety debts, their existence shows that the
balancing of competing interests and policies here presents a difficult
calculus for any court to perform with any hope of precision,” he
wrote.
Dalzell said he agreed with Judge Sigmund that “to the extent
that these policy concerns should come to a different balance, it is for
Congress, and not this court, to address them by amending the
statute.” Judge Sigmund concluded that Congress only intended the
exception in §523(a)(7) to go to obligations that were penal in
nature—those imposed on the debtor as punishment for the
debtor’s wrongdoing. After examining Pennsylvania law,
Sigmund concluded that the obligation of a bail bond surety is civil,
and not penal, in nature, and that therefore Gi Nam’s debt
resulting from his suretyship on the bail bond was dischargeable.
Prime Succession Reorganization Plan Confirmed
Prime Succession Inc. announced that its chapter 11 reorganization
plan was confirmed yesterday by the U.S. Bankruptcy Court for the
District of Delaware, according to a press release. The reorganization
plan is expected to be consummated before the end of November, at which
time Prime Succession would emerge from chapter 11.
Gary Wright, Prime Succession's president and chief executive
officer, said, 'The Court's confirmation of the Plan of Reorganization
is the final step in bringing closure to Prime [Succession’s]
restructuring.”
Approval of the plan is conditioned upon, among other things, Prime
Succession’s exit financing strategy. As previously announced, the
company received a commitment from its existing bank group to provide
$18 million of exit financing in the form of a new revolving credit
facility. Prime Succession is the fifth largest provider of funeral and
cemetery products and services in the death care industry in the United
States. Through its subsidiaries, the company owns and operates about
136 funeral homes and 19 cemeteries in 19 states.
FDA Medical Device Reviewers Accused of Bias
Three U.S. Food and Drug Administration (FDA) medical device reviewers
have been accused of bias in keeping the country's best-selling jaw
joint devices off the market since last April and bringing their
manufacturer to the brink of bankruptcy, according to a report released
by Dickinson's FDA Webview, an FDA news site. It is the second time in
three years that the same FDA division has been accused of biased
reviews and improperly moving market share between competing companies.
FDA declined to comment on the report.
The report names the reviewers and the company, and describes a long
sequence of allegedly biased actions that the company says caused it to
lose $6 million dollars in sales of devices that have been implanted in
over 16,000 patients over 39 years of marketing.
CareMatrix Corporation Files to Reorganize Under Chapter 11
CareMatrix Corporation, which runs assisted-living facilities for
the elderly, yesterday announced that it and nine of its 79 subsidiaries
yesterday filed a voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code, according to a newswire report. The
petition was made in the U.S. Bankruptcy Court for the District of
Delaware.
CareMatrix Chairman and Chief Executive Abraham D. Gosman resigned.
The company said it has initiated a search for Gosman's replacement. It
also said that Andrew D. Gosman and Michael M. Gosman resigned as vice
chairman and director, respectively.
In the court documents presented on Thursday, CareMatrix said the
company's assets as of Nov. 6 were $228.6 million while liabilities
stood at $119.0 million. Court papers also said that at least 20 percent
of the company's voting securities are owned by Abraham D. Gosman. Among
the company's 20 largest unsecured creditors, the State Street Bank
& Trust Co., of Boston, Mass., was listed as the trustee for an
unspecified claim of $115 million.
Under the protection of chapter 11, CareMatrix intends to continue
its normal business operations while formulating its restructuring plan.
CareMatrix Corporation is a leading provider of senior housing services
including assisted living, supportive independent living and specialized
programs for people with Alzheimer's disease.
Reliance Group's Debt Deadline Stayed for Restructuring
As negotiations continue on the fate of Saul Steinberg-controlled
Reliance Group Holdings Inc., the company's debt holders have agreed to
push back a debt deadline, The Wall Street Journal reported
today.
Bank debt of $237.5 million for the property-casualty insurer was to
come due today, after extensions granted in March and August. But the
banks and regulators have agreed to 'forbear on the filing of any
bankruptcy,' and no further deadline was imposed for the repayment,
according to Stephen Johnson, a deputy insurance commissioner of
Pennsylvania.
Johnson said that intense negotiations are continuing in an effort to
come up with a restructuring plan for the company. Pennsylvania
regulators, who oversee Reliance's insurance subsidiaries because the
largest of them are based in Philadelphia, have had control over the
insurance units' financial transactions since August. Another $291.5
million is due to bondholders next week.
Reliance, hobbled by too much debt, poor underwriting and bloated
management compensation, is now technically in 'runoff' mode, with
claims being paid as they come in and no new policies being sold. The
banks and bondholders have been working together to try to reach a pact
that will keep Reliance from seeking bankruptcy-court protection,
because they would stand in a queue behind the company's many
policyholders and it could be years before they are repaid.
MicroAge Inc. Withdraws Auction Sale Motion for MicroAge
Teleservices; Compromise Settlement Proposed with UPS
MicroAge Inc. yesterday announced that it has withdrawn its motion for
the sale of the assets of its MicroAge Teleservices business through a
court auction. In addition, the company filed a separate motion to
approve a compromise agreement and settlement with United Parcel Service
(UPS).
UPS and MicroAge Inc. have reached a tentative settlement, subject to
Court approval, to sell the assets of MicroAge Teleservices to UPS.
Under the compromise and settlement, UPS would pay MicroAge Inc. $11.5
million for the assets of Teleservices without the deduction of any
topping fee. The action increases the net return to MicroAge Inc., and
resolves concerns about potential litigation. The compromise settlement
agreement is subject to review and approval by the U.S. Bankruptcy
Court. The hearing on the compromise and settlement agreement is
currently scheduled for Nov. 21, 2000 at the U.S. Bankruptcy Court for
the District of Arizona in Phoenix.
