Vancouver Washington Legal Blog

People in Vancouver who are contemplating bankruptcy are often torn between their desire to cancel their debts and to keep certain assets that may have created one of the debts -- the family car, for example. In a Chapter 7 proceeding, the debtor must turn over all assets to the trustee so that the assets can be sold and the cash from the sale used to pay creditors. Thus, the family car may be forfeited in return for canceling the loan that facilitated its purchase. The bankruptcy code contains one mechanism that may help resolve this dilemma -- a reaffirmation agreement.

A reaffirmation agreement is a contract between the debtor and a creditor in which the debtor agrees to continue to make payments on the loan in return for the creditor's agreement to forego repossession of the asset that was purchased with the loan proceeds. The debtor benefits from such an agreement by retaining possession of the asset. The creditor benefits because the debt will not be discharged. Repayment of the debt will be monitored by the court until it has been repaid according to the terms of the reaffirmation agreement. The agreement must be signed by both parties and filed with the court. Both parties must make disclosures concerning the amount that will be repaid, interest that must be paid, the debtor's income and other financial information.

As two parents in Washington work to end their marriage, they will be asked to create a parenting plan. That plan will be the guide by which the individuals will co-parent their shared children and the agreement that binds them to provide specific support and care. Traditional notions of child custody are encompassed into the parenting plan.

For example, parents must establish where their children will live and when they will transition between the homes of the parents. This is often referred to as "physical custody" and it can be shared between two parents. If a parent does not retain the right to have their kids live with them, then they may be able to have scheduled time with their children under the parenting plan, which can be referred to as "visitation."

Most divorcing couples in the state of Washington do not have significant assets apart from their house, joint savings and retirement accounts and pension plans. When a couple gets divorced, the court will divide these assets between the two spouses. Dividing retirement and pension plans can be complicated, and a legal device known as a "Qualified Domestic Relations Order" (QDRO) has been created to ease the division process.

Because retirement and pension plans are separate legal entities and are not usually made parties to the divorce proceedings, they are not under the jurisdiction of the court. In addition, each plan has a contract with the beneficiary that specifies how the plan's balance will be distributed. Many divorce settlements change the distribution formula and therefore, change the terms of the plan. The United States Department of Labor has jurisdiction over retirement plans under the Employee Retirement Income Security Act (ERISA), and it created QDROs to solve this problem.

As many businessmen in Vancouver have learned, dealing with a company on the verge of bankruptcy can be difficult. Payments for goods and services are often late or entirely non-existent, and the threat of a bankruptcy filing and the imposition of the automatic stay are constant threats. These risks are well known, but a lesser known risk can cause even more financial chaos -- the rejection by the trustee of an "executory contract."

The bankruptcy code gives both a trustee and a debtor-in-possession the power to accept or reject any executory contract or unexpired lease. Unfortunately, the bankruptcy code does not define the term "executory contract." Many courts have struggled with a definition, but no single definition has been adopted.