- Officers and Administration
- Collection, Liquidation, and Distribution of the Estate
- Stockbroker Liquidation
- Commodity Broker Liquidation
- Clearing Bank Liquidation
What is a Chapter 7 Bankruptcy?
A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the bankruptcy code. Chapter 7 is the part (or chapter) of the bankruptcy case that deals with liquidation. The bankruptcy code is a federal law that deals with bankruptcy. A person who files a chapter 7 bankruptcy case is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor’s creditors. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge and obeys the orders and rules of the bankruptcy court.
A chapter 7 bankruptcy discharge is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and being eligible for a chapter 7 discharge. However, not all debts are discharged by a chapter 7 discharge. Certain types of debts are by law not dischargeable under chapter 7 bankruptcy and debts of this type will not be discharged even if the debtor received a chapter 7 discharge.
As to the dischargeability of debt, all debts of any type or amount, including out-of-state debts, are dischargeable in a chapter 7 case except for the types of debts that are by law non dischargeable in a chapter 7 case. The following is a list of the most common types of debts that are not dischargeable in a chapter 7 bankruptcy case:
- Most tax debts and debts that were incurred to pay non-dischargeable federal tax debts.
- Debts for obtaining money, property, services or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint in the bankruptcy case.
- Debts not listed on the debtor’s chapter 7 forms, unless the creditor knew of the bankruptcy case in time to file a claim.
- Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the bankruptcy case.
- Debts for domestic support obligations, which include debts for alimony, maintenance, or support and certain other divorce-related debts (including property settlement debts.)
- Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint in the bankruptcy case.
- Debts for certain fines or penalties.
- Debts for most educational benefits and student loans, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents.
- Debts for personal injury or death cause by the debtor’s operation of a motor vehicle, or aircraft while intoxicated.
- Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.
Not everyone is eligible to file for Chapter 7 bankruptcy protection. In order to determine eligibility for Chapter 7 bankruptcy protection, a person must undergo what is known as means testing. Means testing is a method of determining a person’s eligibility to maintain a chapter 7 case. Under means testing, if a person whose current monthly income from all sources (multiplied by 12) exceeds the median annual income for their state and family size, (as reported by the US Census Bureau), that person must show he or she is not able to pay a minimum of $109.58 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income in order to be eligible to maintain a chapter 7 case.
For a free legal consultation with a chapter 7 bankruptcy lawyer serving Kennesaw, call (770) 792-1000
Median Income for Georgia
Household Size | Median Income |
---|---|
1 | $40,760 |
2 | $54,054 |
3 | $61,959 |
4 | $68,502 |
Disposable monthly income is a person’s current monthly income from all sources less the person’s permitted current monthly expenses. The chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $109.58 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 bankruptcy unless special circumstances exist.
Every person who files a chapter 7 bankruptcy case must file a document called a “Statement of Current Monthly Income and Means Test Calculation.” This document, when completed and filed, shows the person’s current monthly income and the current monthly expenses that the person is allowed to claim.
The person may also be questioned about his or her income and expenses at the meeting of creditors. From these sources a person’s current monthly disposable income is calculated. This figure is then used to determine the amount of the monthly payment that the person can afford to make to his or her unsecured creditors. If the amount of this monthly payment is above a certain figure (usually $109.58), the person will almost always be disqualified from maintaining a chapter 7 bankruptcy case and the case will be dismissed, or with the person’s consent, converted to chapter 13.
The Statement of Current Monthly Income and Means Test Calculation filed by the person will initially show whether the person is able to make monthly payments to unsecured creditors in the amount required for ineligibility. If so, the clerk of the bankruptcy court will send a notice to all creditors that a presumption of abuse has arisen in the case. The United States trustee then has until 10 days after the meeting of creditors to file a statement as to whether a presumption of abuse exists in the case. Then the United States trustee or any creditor can move to dismiss the case. The bankruptcy judge will ultimately decide whether the case should be dismissed.
When the chapter 7 bankruptcy case is filed by an ineligible person, under bankruptcy terminology that person is said to have abused the chapter 7 bankruptcy laws. When a person whose current monthly disposable income is such that he or she can afford to make monthly payments to unsecured creditors in the required amount, a presumption of abuse is said to arise in the case. If a presumption of abuse arises in a case, the case will be dismissed or converted to chapter 13 unless the person filing the case can prove the existence of special circumstances, such as serious medical condition.
Even if a person is qualified to file for chapter 7 bankruptcy protection under means testing, the following people would not be eligible for a chapter 7 discharge:
- A person who has been granted a discharge in a chapter 7 case that was filed within the last 8 years.
- A person who has been granted a discharge in a chapter 13 case that was filed within the last 6 years, unless 70 percent or more of the debtor’s unsecured claims were paid off in the chapter 13 case.
- A person who files and obtains court approval of a written waiver of discharge in the chapter 7 case.
- A person who conceals, transfers or destroys his or her property with the intent to defraud his or her creditors or the trustee in the chapter 7 case.
- A person who conceals, destroys or falsifies records of his or her financial condition or business transactions.
- A person who makes false statements or claims in the chapter 7 case, or who withholds recorded information from the trustee.
- A person who fails to satisfactorily explain any loss or deficiency of his or her assets.
- A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.
- A person who, after filing the case, fails to complete an instructional course on personal financial management.
- A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.
Filing for Chapter 7 bankruptcy does not mean that you will lose all of your property. You are able protect certain limited amounts of your property from your creditors and this protection is called exempt property. Exempt property is property that is protected by law from the claims of creditors. However, if exempt property has been pledged to secure a debt or is otherwise by a valid lien or mortgage, the lien or mortgage holder may claim the exempt property may be exempt under either state or federal law. Exempt property typically includes all or a portion of a person’s unpaid wages, home equity, household furniture, and personal effects. Your attorney can inform you as to the property that is exempt in your case.
Kennesaw Chapter 7 Bankruptcy Lawyer Near Me (770) 792-1000
Property You Can Keep in Georgia
Property | Exemption Amount |
---|---|
Real Property (Homestead Residence) | $10,000.00 ($20,000.00 joint case) |
Automobiles | $3,500.00 ($7,000.00 joint two cars) |
Jewelry | $500.00 ($1,000.00 joint) |
Furniture; Household; Clothing | $5,000.00 ($10,000.00) |
Tools of Trade | $1,500.00 ($3,000.00) |
Alimony and Support | As necessary |
Life Insurance Proceeds | As necessary |
Workers Compensation | 100% |
Wrongful Death Awards | As necessary |
Retirement Accounts | $100% for most |
Disability; Government Benefits | 100% |
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Chapter 13 Bankruptcy Process
As a Chapter 7 attorney in Acworth, I sometimes have clients who are unable to meet the means testing required. In these cases, the clients will have to consider whether or not to file Chapter 13 which is a reorganization of their debt. Oftentimes, they are uncertain about the process required as it is slightly different than Chapter 7 bankruptcy.
Acworth Bankruptcy attorney explains Chapter 13
Chapter 13 is typically called “wage earners bankruptcy”. This is because in order to file you must have a steady source of income that will allow you to repay your debts. Keep in mind, unlike Chapter 7 bankruptcy, Chapter 13 allows you to keep all of your property and requires you to repay both secured and unsecured debt over a period of time which is typically three to five years.
In order to qualify for Chapter 13, you will have to create a schedule of all assets, debt and income. In order to be eligible, you must demonstrate to the court how you intend to repay your debts. Like Chapter 7, you will also have to attend a credit counseling course.
Wages can be demonstrated using a number of sources of income including wages, self-employment income, unemployment insurance, disability payments and child support or spousal support income.
The Chapter 13 process
Once you have created a schedule of debt, income and assets, the court will require you to create a payment plan. This plan must be approved by the court. Your bankruptcy lawyer in Acworth can help you prepare these documents to ensure they are accurate before submission.
Once you have filed the proper forms with the court, you have 15 days to file a proposed repayment plan. Keep in mind, you will also have to show the court that you have filed tax returns for the four years prior to filing Chapter 13.
Creditor meetings occur approximately one month after you file Chapter 13.. During this meeting, the trustee that has been assigned to your case will review your plan. Creditors may object to the plan you have filed. Few Chapter 13 cases go through without some objections. It is important to note that your first payment on your plan is due approximately 30 days after your filing and this is almost always before the creditor meeting.
The final step before you complete your plan is a confirmation hearing that is held in the court. The judge then determines whether or not your plan is sufficient and meets the rigorous requirements of the court. In some cases, the court will dismiss your case or they may recommend converting the case to a Chapter 7 filing.
In the event the court does accept your plan, you will have three to five years during which you will have to make regular payments to the bankruptcy trustee and file your taxes. In addition, if you have an obligation to make child support or spousal maintenance payments, you will have to keep these current.
Unfortunately, as a bankruptcy attorney in Acworth, I have seen numerous instances where a Chapter 13 plan has been approved and the debtor is unable to continue making payments due to job loss, medical issues or divorce. Regardless of whether or not you can keep up with your payments however, it may give you the time you need to sell your non-exempt assets in order to get back on a solid financial footing. Speak with your Acworth bankruptcy attorney and discuss your options.
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Debts that must be paid when filing Chapter 13
When you meet with your Acworth bankruptcy attorney one of the first things that must be determined is whether you qualify for Chapter 7 bankruptcy. In the event you are not able to meet the means test, Chapter 13 bankruptcy is another option. This chapter of bankruptcy is commonly called reorganization because in effect, you reorganize the payments on what you owe and when the bankruptcy is ultimately discharged, any remaining balances on your unsecured debt is eliminated.
Classification of Debts
The bankruptcy code classifies the debt you owe into three categories, specifically general unsecured debt, priority unsecured debt, and secured debt. In general, secured debt includes car loans and mortgage loans. Generally these debts will not be paid off during the term of your Chapter 13, instead you will be required to continue making regular payments during and post-bankruptcy. A word of caution: Car loans are treated slightly differently under Chapter 13; if you purchased your car within two and a half years of filing bankruptcy it may have to be paid off before the bankruptcy is discharged.
Priority unsecured debts include your bankruptcy attorney fees, the Chapter 13 trustee fees and any past due child or spousal support. Income tax debts that are past due may also be included as a priority unsecured claim. These debts take priority over general unsecured debt and will include items like medical bills, credit card bills and in some cases utility bills.
Payment of Debts by Priority
Your bankruptcy plan will be based entirely on your income. This means that in nearly all cases, secured debt and unsecured priority debt must be paid in full based on the plan that is submitted to the court. Any “excess disposable income” will be put towards unsecured debt through the plan period which lasts between three and five years. Your Acworth bankruptcy attorney can help you calculate your disposable income as well as the amount that will be considered “excess” for the purposes of your Chapter 13 plan.
When your bankruptcy plan is formalized, you must pay whatever you can afford into the plan; specifically any amount of money that is considered “disposable income”. This means that after your secured debts and priority unsecured debts receive the portion of your income that is designated to them in the plan, the balance will go to unsecured debts. Once the plan is complete and your priority debts and secured debts are paid in full (per the plan) any balances remaining on your unsecured debts is eliminated through discharge and your creditors may no longer be able to collect these debts. Speak with your Acworth bankruptcy attorney to ensure that you have an understanding of what debts may still need to be paid after you file Chapter 13.
While most debtors will prefer to file Chapter 7 so they can get a clean start, Chapter 13 for many is a good way to get a handle on your existing debts and reorganize the debt so that you can make payments over a longer period of time. At the end, most unsecured debts will be eliminated if they are not paid back in the Chapter 13 plan.
If your debt has become more than you can handle on your own and you need to consider filing bankruptcy, contact Roger Ghai, a bankruptcy attorney in Acworth at the Law Offices of Roger Ghai at (770) 792-1000 for help filing bankruptcy.
Alabama Chapter 7 Debtor Able To Keep Tax Refund From Former Wife
Charlie Paul Brockman filed for Chapter 7 bankruptcy in Alabama on January 18, 2011. In 2009 Debtor had incurred a significant net operating loss and Debtor’s certified public accountant (“CPA”) advised him that he was entitled to receive a refund against his 2006 income taxes. This arrangement was known as a carryback. The CPA explained that this carryback was only based upon Debtor’s income and that his former wife’s income was to be excluded from the refund calculation.
Debtor received two checks from the IRS. The first check was for about $7,116.00 and made payable to him. The second check was for $16,402.00 and was made payable to both him and his former wife. Debtor endorsed the check without telling his former wife. Debtor’s CPA, however, had advised Debtor that the entire refund was due to him and not any of it would be due to his former spouse. Debtor’s CPA testified that because the refund was based solely on Debtor’s income, Plaintiff, was not entitled to share in the proceeds.
Upon learning from the IRS that Debtor received a refund, Debtor’s former spouse filed an adversary proceeding in bankruptcy court pursuant to 11 U.S.C. 523(a)(6) in which she sought a monetary judgment for $8,201.00 on the basis of wilful and malicious conversion and asked the court to rule the debt to be nondischargeable under the bankruptcy law.
According to the legal standard in order to prove her case, Plaintiff had to prove by a preponderance of the evidence that “the debt is the result of willful and malicious injury byt the debtor to herself for to her property.” As the Court noted, Plaintiff had to prove that the conversion was both wilful and malicious and not because the conversion was merely intentional or technical.
In this case, the Court ruled Plaintiff had not carried her burdent of proof. Even though the Court found that Debtor acted wilfully because he endorsed the check, the Court was not persuaded that the Debtor had acted maliciously. In fact, the Court noted that Debtor testified at the bankruptcy hearing that he had not intention of taking any proceeds from the Plaintiff when he cashed the second check and that he thought he was acting legally based upon the advice of his CPA.
In this case, the Court found that to be sufficient along with the fact that Debtor’s CPA testified that the refund was not property of Plaintiff, that the refund was based solely on Debtor’s income and not Plaintiff’s. For these reasons Plaintiff’s complaint failed because she could not prove she was entitled to any portion of the refund.
If you have questions about Chapter 7 bankruptcy in Alabama or questions about bankruptcy generally you may wish to speak to an Alabama bankruptcy attorney or visit this website’s state page.
Chapter 7 Bankruptcy In Alaska Can Not Be Reopened To File Reaffirmation Agreement
Debtor Nada F. Zaochney filed for Chapter 7 bankruptcy in Alakska on August 4, 2011. Debtor’s bankruptcy attorney filed a motion to reopen the bankruptcy case for the purpose of filing a reaffirmation agreement. Debtor’s bankruptcy lawyer filed a motion to value her vehicle and the the bankruptcy court found that the vehicle was secured in the amount of $1,852.13.
Debtor’s bankruptcy case was discharged January 13, 2012. The creditor, Alaska USA, had sent the debtor a proposed reaffirmation agreement before the case was closed, but neither Debtor nor creditor requested additonal time to approve the reaffirmation agreement purusuant to Fed. R. Bankr. P. 4008(a). This Bankruptcy Rule permits the “court to enlarge the time to file a reaffirmation agreement. This ability is circumscribed by the statutory requirements found in Section 11 U.S.C. 524 of the Bankruptcy Code.
On February 10, 2012, Debtor’s counsel filed a motion to reopen the bankruptcy case for the purpose of filing the reaffirmation agreement. The motion stated that Debtor had engaged in negotitations with Alaska USA about reaffirmation of her vehicle loan, but that the discharge order was entered before the loan negotiations could be comleted. Furthermore, after the case was closed, Alaska USA repossessed the vehicle and allegedly told Debtor that it would not return the vehicle unless the bankruptcy was reopened in order to file the agreement.
The Debtor argued that she was not seeking Court approval of the agreement but was only seeking to file it in Court. In this case Debtor argued that her case was distinguishable from In re Potter, because she was not seeking approval of the agreement. In this case the Court concluded that it could not vacate a reaffirmation a discharge order so that a reaffirmation agreement could be filed with the Court.
In so ruling the Court stated that “although debtors have sought relief on a variety of grounds, courts have consistently held that the discharge and closing dates cannot be manipulated to accomodate a late reaffirmation agreement. Not even a credit union, in a case with facts similar to those present here, succeeded in setting aside a discharge so that a reaffirmation agreement could be filed. Further, Collier notes that ‘an agreement to pay a discharged or dischargeable debt that does not meet the legal requirements of 11 U.S.C. 524(c) and (d) if without legal effect.”
Finally, the Court noted “[o]ne of the statutory prerequisites to a valid reaffirmation agreement is that is be made ‘before teh granting of a discharge. Here, the debtor concedes that she cannot satisfy this prerequisite. It is pointless to file a reaffirmation agreement that was made after entry of discharge, because such agreement wouild not be enforceable under Section 524.
If you have questions about Chapter 7 or Chapter 13 bankruptcy law in Alaska, you should check with a bankruptcy attorney in Alaska about your particular situation.
Alaska Case Can Not Be Reopened To File Reaffirmation Agreement
Debtor Nada F. Zaochney filed for Chapter 7 bankruptcy in Alakska on August 4, 2011. Debtor’s bankruptcy attorney filed a motion to reopen the bankruptcy case for the purpose of filing a reaffirmation agreement. Debtor’s bankruptcy lawyer filed a motion to value her vehicle and the the bankruptcy court found that the vehicle was secured in the amount of $1,852.13.
Debtor’s bankruptcy case was discharged January 13, 2012. The creditor, Alaska USA, had sent the debtor a proposed reaffirmation agreement before the case was closed, but neither Debtor nor creditor requested additonal time to approve the reaffirmation agreement purusuant to Fed. R. Bankr. P. 4008(a). This Bankruptcy Rule permits the “court to enlarge the time to file a reaffirmation agreement. This ability is circumscribed by the statutory requirements found in Section 11 U.S.C. 524 of the Bankruptcy Code.
On February 10, 2012, Debtor’s counsel filed a motion to reopen the bankruptcy case for the purpose of filing the reaffirmation agreement. The motion stated that Debtor had engaged in negotitations with Alaska USA about reaffirmation of her vehicle loan, but that the discharge order was entered before the loan negotiations could be comleted. Furthermore, after the case was closed, Alaska USA repossessed the vehicle and allegedly told Debtor that it would not return the vehicle unless the bankruptcy was reopened in order to file the agreement.
The Debtor argued that she was not seeking Court approval of the agreement but was only seeking to file it in Court. In this case Debtor argued that her case was distinguishable from In re Potter, because she was not seeking approval of the agreement. In this case the Court concluded that it could not vacate a reaffirmation a discharge order so that a reaffirmation agreement could be filed with the Court.
In so ruling the Court stated that “although debtors have sought relief on a variety of grounds, courts have consistently held that the discharge and closing dates cannot be manipulated to accomodate a late reaffirmation agreement. Not even a credit union, in a case with facts similar to those present here, succeeded in setting aside a discharge so that a reaffirmation agreement could be filed. Further, Collier notes that ‘an agreement to pay a discharged or dischargeable debt that does not meet the legal requirements of 11 U.S.C. 524(c) and (d) if without legal effect.”
Finally, the Court noted “[o]ne of the statutory prerequisites to a valid reaffirmation agreement is that is be made ‘before teh granting of a discharge. Here, the debtor concedes that she cannot satisfy this prerequisite. It is pointless to file a reaffirmation agreement that was made after entry of discharge, because such agreement wouild not be enforceable under Section 524.
If you have questions about Chapter 7 or Chapter 13 bankruptcy law in Alaska, you should check with a bankruptcy attorney in Alaska about your particular situation.
Do You Have To Have Equity In A Residence To Avoid A Judicial Lien
Hieu Nguyen filed his Chapter 7 bankruptcy case in the Eastern District Of Virginia Alexandria Division. The case was converted from a Chapter 13 to a Chapter 7 on August 26, 2011. Navy Federal Credit Union (hereinafter “NFCU”) obtained a judgment against Debtor in the amount of $52,377.00. The judgment was filed as a lien against Mr. Nguyen’s property. The property was encumbered by two deeds of trust which totaled $430,839.00. The fair market value of the property was $360,000.00.
Pursuant to 11 U.S.C. 522(f)(I)(A) the Bankruptcy Code provides that a debtor may avoid a judicial lien (other than a judicial lien that secures a debt for a domestic support obligation) “on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled.” 11 U.S.C.(f)(1).
NFCU opposed the avoidance of the lien on the basis of the decision in Sheaffer, 15,9 B.R. 758 (Bankr. E.D. Va. 1993). This case held that a debtor had to have equity in the property in order to avoid a judicial lien in the property. However, the Court stated that Sheaffer did not apply any longer because the case was decided before Congress amended Section 522 of the Code by adding Section 522(f)(2).
Additionally, the Court pointed out that in Botkin v. DuPont Community Credit Union (In re Botkin), 650 F. 3d 396, 400 (4th Cir. 2011) the Court held that the debtor did not actually have to claim the exemption in order to avoid a lien under 522(f). Botkin also involved a Chapter 7 debtor. In Botkin the Court pointed to the language that “the amount of the exemption that the debtor could claim if there were no liens on the property.” Further in Botkin there was no equity in the property and the court allowed debtor to avoid the judicial lien.
In this case the Court applied the mathematical formula to determine that Debtor could avoid the judicial liens:
- Wells Fargo Liens $430,839.00;
- Debtor’s available exemption $5,000.00;
- NFCU judgment lien $52,377.00;
Total: $488,216.00 (Minus $360,000.00 – Fair Market Value of Property) Equals: Amount by which exemption is impaired is $128,216.00.
Because the amount by which the exemption is impaired under the mathematical formula exceeded the amount of the NFCU lien, the judgment lien was avoided in its entirety. If you have questions about Chapter 7 bankruptcy in Virginia or Chapter 13 you may wish to visit our state pages.
Chapter 7 Bankruptcy Debtor In Georgia Can’t Wipe Out Taxes
Eric M. Cannon and Robin J. Cannon filed for Chapter 7 bankruptcy in Atlanta, Georgia. Their bankruptcy attorney filed a lawsuit in bankrupcy court asking that Debtors’ personal income taxes be discharged in their case. The parties agreed that Debtors did not file income tax returns for 1999, 2001, and 2002. The IRS argued that the income taxes for those years were nondischargeable because the liability for those years was not based upon returns filed by Debtors but rather were based upon substitute returns filed by the IRS.
The Court noted that the 2005 amendments to the Bankruptcy Code added the following undesignated paragraph at the end of 11 U.S.C. 523(a):
For purposes of this subsection, the term ‘return’ means a return that satisifies the
requirements of applicable nonbankruptcy law (including applicable filing
(requirements). Such term includes a return prepared pursuant to section 6020(a)
of the Internal Revenue Code of 1986, or a similar state or local law, or a written
stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but
does not include a return made pursuant to section 6020(b) of the Internal Revenue
Code of 1986, or a similar state or local law.
Moreover, the Court noted that “[t]he cases that have addressed the impact of the undersigned paragraph added by BAPCPA to define the term ‘return’ have concluded that a late return can never qualify as a return unless it is filed under the 6020(a) safe harbor provision..The reasoning in those cases is persuasive. Accordingly, it is ordered that Defendant’s motion for summary judgment is granted; Debtor’s tax liabilities for 1999, 2001 and 2002 are nondischargeable.”
If you have questions about whether your tax debt may be discharged in your Georgia bankruptcy case it is best to seek the advice of a bankruptcy lawyer in your area.
Is Your Income Tax Refund Protected If You File Bankruptcy?
In the case of Walter Emmanuel Ellman, Jr., which was decided October 26, 2011 in the bankruptcy court for the District at Baltimore Maryland, the court found that the debtor’s income tax refund in the amount of $15,827.00 was not entirely protected.
In this chapter 7 bankruptcy case, the debtor’s bankruptcy schedules indicated that he had a negative cash flow of approximately $1,200.00 per month. During the proceeding he also indicated that as a school teacher he had extra amounts deducted from his paycheck so that he would have funds available to him to live on during the summer months while he was not teaching.
Mr. Ellman filed his bankruptcy case December 27, 2010. In February of 2011, he received and income tax return of $15, 827.00. Due to an injury at work, he became unemployed and for a short period of time received worker’s compensation benefits. In deciding against Mr. Ellman, the court pointed out that the United States Supreme Court in Kokoszka v. Belford, 417 U.S. 642 (1974) the Supreme Court construed the phrase “property of the estate” broadly because it was meant to secure for creditors everything of value which the debtor owns while balancing that against the need of the debtor to obtain a fresh start.
In the Kokoszka case, the Supreme Court distinguished it’s decision in the Lines v. Frederick , 400 U.S. 18 (1970) decision in which it held that the debtor was able to exclude vacation pay from the estate because the nature of the vacation pay was to provide the equivalent of wages in the future when the debtor was on vacation or at the end of their employment.
In the Kokoszka case the Supreme Court found that just because a property interest had its source in wages did not give it special protection because it would allow the debtor to essentially exempt everything he owned.
In ruling against Mr. Ellman, the court followed the reasoning of the Supreme Court’s decision and in addition pointed out that even if the debtor had chosen to save the wages as living expenses for the summertime when he was not working he would not have been able to exempt the wages. The court specifically said that just because Mr. Ellman used his tax refund as a way to save money for living expenses during the summertime, this was not entitled to different treatment.
If you have questions about chapter 7 bankruptcy Maryland please visit our chapter 7 bankruptcy Maryland page. For questions about chapter 13, please visit our chapter 13 bankruptcy page on this website.
Personal Bankruptcy Can Happen to Anyone
Whether you have been struggling to make ends meet for years or have been a prolific real estate mogul for over half a century, the necessity to file for bankruptcy can happen to anyone. This February, Chicago Business reported that condominium developer Nicholas S. Gouletas has filed for bankruptcy. His storied career began in the 1960s and he was dubbed the Condo King back in the 1980s and 1990s due to his monumental career in condominium development. His firm, American Invsco, has either built or developed apartments into 45,000 condos around the nation. With so much success for so long, how can someone end up needing to file for bankruptcy?
Major Setbacks Due to a Series of Poor Decisions
Gouletas has had many setbacks in recent years, which includes the unfortunate purchase of an apartment portfolio back in 2013 for just under one-billion dollars. That failed venture, and others, were not something that Gouletas could bounce back from. From there, he was sued by multiple parties for failing to pay legal fees and loans.
Failed $950 Million Condo Portfolio
Gouletas was unable to finance the $950 dollar condo portfolio that he sought in 2013, which included 3,886 units around the nation. When the deal fell through, he was not able to pay the creditor who had loaned him the earnest money required as the down payment for the condo portfolio. He lost more of his property and apartment complexes when he put them into Chapter 11. From there, he was sued by a Chicago law firm in 20145 for not paying his 2013 legal fees of $61,000. Next, he was sued by PrivateBank & Trust because he had failed to make any payments on the $200,000 personal loan he had been given in 2012.
Chapter Seven Bankruptcy
A Chapter Seven bankruptcy petition was filed last January by one of Gouletas’ creditors, and bankruptcy protection was filed in October, not by Gouletas, but by a venture group affiliated with him that owned condos in the Chicago Century Tower.
Overreaching Financial Limits
Gouletas did not change is purchasing habits when he was hit hard by bad times. In a Chicago Tribune article from 1992, Gouletas said, “If you continue to maintain the same standards in the bad as in good times, then you will have the support of the individuals and institutions that you had before.” That piece of poor wisdom ultimately saw his demise. When we make large purchases such as cars or homes, there is considerable risk involved. While the numbers may add up accordingly at the time of purchase, the loss of a job, a major medical setback, or another large loss to personal finances may create problems when paying the mortage. Similarly, we have to pay attention to smaller purchases such as how much we spend eating out, technology purchases such as new phones and computers, and other costs that can mount up. While it is incredibly unlikely that any of us will make a risky billion dollar purchase in our lifetime, paying close attention to the smaller stuff can be equally important in terms of personal financial stability.
If you have had financial trouble and see no other logical place to turn, bankruptcy may be your best option. Contact one of our personal bankruptcy attorneys with the Law Offices of Roger Ghai, P.C. today to discuss your future and to get you out of the financial hole that you have been consumed by.
Find Out Why Connecticut Court Rules Debtors Can’t Strip Second Mortgage In Chapter 20 Case
Debtors subsequently filed a Motion To Determine Secured Status of the liens on their property. The bankruptcy court entered an order setting the value of Debtor’s property at $446,000.00. The first mortgage to Collinsville Savings Society was for the amount of $458,427.70. Pursuant to Code Sections 11 U.S.C. 1322(b)(2) and 506(a) the bankruptcy court also held that the first mortgage was secured and the second mortgage to Wachovia Bank, N.A. which had a balance of $257.753.49 was unsecured.
The bankruptcy court further ruled that “[t]o the extent that a lien secures a claim against the Debtors that is not an allowed secured claim, such lien is void, as provided by 11 U.S.C. 506(d), provided, however, that in the event this case is dismissed, the liens avoided by this Order shall be reinstated without any further order of this court as of the date of such dismissal.”
Debtors sought to avoid the lien of Wachovia Bank. The Chapter 13 trustee objected to their position and argued that Debtors’ attempt to avoid Wachovia’s mortgage lien without being eligible for a discharge violates (1) the lien retention requirements of Section 1325(a)(5)(B)(i)(I) and Dewsnup v. Timm, 410 112, S. Ct. 773 (1992); and (2) the good faith filing requirements of Section 1325(a)(3).
In this case the Court pointed out that there are several differing opinions among the bankruptcy courts as to whether a debtor’s discharge in a bankruptcy case filed under Chapter 7 bars a debtor from utilizing 11 U.S.C. 1322(b)(2) to strip off an otherwise wholly unsecured mortgage on his principal residence.
As the court pointed out, some courts maintain that a debtor’s eligibility for a discharge is not a requirement for a lien avoidance. Other courts, however, hold that if a debtor is not eligible for a Chapter 13 discharge, the debtor can not permanently strip off a lien on his principal residence if he is ineligible for a discharge.
In it’s analysis, the court looked to 11 U.S.C. 1328(f) which in relevant part states:
(f) the court shall not grant a discharge of all debts provided for in the plan … if the debtor has received a discharge – (1) in a case filed under chapter 7 ….during the 4-year period preceding the date of the order for relief under this chapter… In this case Debtors agreed that 11 U.S.C. 1328 applies to them.
The Court also factored in 11 U.S.C. 1325(a)(5)(B)(i)(I) which sets forth the requirements to have a plan confirmed by the Court. That section states that “[u]nless the holder of a secured claim has ‘accepted the plan”, 1325(a)(5)(A), or the debtor surrenders the collateral, 1325(a)(5)(C), the plan must provide, inter alia, that with ‘respect to each allowed secured claim provided for by the plan: (1) the holder of such claim retain the lien securing such claim until the earlier of — (aa) the payment of the underlying debt determined under nonbankruptcy law; or (bb) discharge under section 1328; and (II) if the case under this chapter is dismissed or converted without completion of the plan, such lien shall also be retained by such holder to the extent recognized by applicable nonbankruptcy law.
In ruling against Debtors in this case, the Court referred to the fact that debtors frequently circumvented the decision in Dewsnup by obtaining a Chapter 7 discharge and then stripping the liens in the Chapter 13 case to the value of the collateral. The Court also mentioned the fact that Chapter 20 lien stripping could be prohibited on a case by case basis if the bankruptcy court found that the Chapter 13 plan was not filed in good faith.
Interestingly, the court noted that although the current value of the Debtors’ property was insufficient to cover the second mortgage of Citifinancial the claim was secured in the ordinary because it was backed up by a security interest in the property, whether or not the value of the property was sufficient to cover the claim.
If you have questions about Chapter 13 bankruptcy, bankruptcy Chapter 7, as it is sometimes referred to as, or Chapter 13 bankruptcy in Connecticut please visit our respective state pages.
Bankruptcy Attorney In Michigan Loses Exemption Argument
Edward Young and Rosemary Young filed for Chapter 7 bankruptcy in Michigan and Debtor wife sought to protect a vehicle which was not title in her name. In this particular case, the evidence showed that Debtor and her husband were living together before they got married. Prior to being married the couple went to their local Chevrolet dealership and purchased two vehicles.
The 2008 Chevrolet Equinox was chosen and Debtor wife’s vehicle and the 2005 Pontiac Grand Prix was chosen as the husband’s vehicle. The vehicles were paid in cash from Debtor husband’s workers’ compensation settlement. They testified that when the purchased their vehicle they were rushed and did not recall having any conversation with the salesperson as to how the vehicles were to be titled.
When they received the certificates of title, the Grand Prix was titled as “Rosemary Kay Duszcyk and Edward Joseph Young. Underneath their names, the certificate of title stated: “Full Rights To Survivor.” However, the certificate of title to the Equinox stated Debtor’s husband was the owner. The Debtors testified that they did not look at the certificates of title for three years until it came time for them to file bankruptcy.
The Chapter 7 bankruptcy trustee objected to Debtor’s wife claim of exemption in the Equinox on the basis that the vehicle was not titled in her name. Rosemary, however, argued that under Michigan law the definition of owner was not limited to the title holder. More particularly, Rosemary argued that under Michigan case law, an individual may be an owner of a vehicle even though the person was not the holder of legal title.
The Michigan bankruptcy court distinguished the cases Rosemary was relying on and noted that there was no evidence that Rosemary and her husband had made an agreement about transferring ownership of the vehicle to her. There was also no evidence that there was any discussion at the dealership that she would be titled the owner.
The court went on to say that none of the cases “persuade the Court that under Michigan law Rosemary is an owner of the Equinox on this facts of this case. In this case, the facts are straightforward and undisputed. Edward paid the entire purchase price for the Equinox before he and Rosemary were married. Edward is shown on the certificate of title as the sole owner of the Equinox. The Debtors testified that they do not have any idea why Edward is shown as the owner of the Equinox and they are both shown as join owners of the Grand Prix. There is no evidence that Edward and Rosemary ever discussed with each other how the certificates of title for either vehicle should read… There is no evidence that the salesperson made a mistake of any kind in filling out the paperwork.”
For the foregoing reasons the bankruptcy court ruled against Rosemary. If you have questions about bankruptcy law in Michigan it is recommended that you talk to a Michigan bankruptcy lawyer.
District Of Columbia Chapter 7 Bankruptcy Debtor Can’t Vacate Discharge To File Reaffirmation Agreements
Dorothy B. Williams filed Chapter 7 bankruptcy in the District of Columbia. Debtor obtained her Chapter 7 discharge but her bankruptcy attorney filed a Motion To Vacate the discharge order so that she could file two reaffirmation agreements.
Pursuant to 11 U.S.C. 524(c)(1) of the Bankruptcy Code a reaffirmation agreement regarding a dischargeable debt is enforceable only if “such agreeement was made before the granting of the discharge under section 727… of this title.” In this case the Bankruptcy Court ruled it had no authority to vacate the discharge order.
In Debtor’s Motion, she stated “[i]t had been debtor’s intention to reaffirm both obligations, but until now, both lenders failed, despite repeated requests, to send debtor the proposed agreements.” Moreover, the Bankruptcy Court noted that the better reasoned decisions conclude that a bankruptcy court does not have the authority to vacate a discharge order in order to permit a reaffirmation agreement made after entry of the discharge to be enforceable despite Section 524(c)(1).
However the Bankruptcy Court pointed out that “debtor, however, could have taken steps to assure that the reaffirmation agreements would be enforeceable. She could have filed a motion under Fed. R. Bankr. P. 4004(c)(2) to defer the entry of discharge. Alternatively, she could have filed a motion under Fed. R. Bankr. P. 4008 to enlarge the time to file reaffirmation agreements,and the pendancy of such a motion would have deferred the time for entering a discharge.”
Furthermore, the Court noted that “[a] discharge may be revoked in certain circumstances pusuant to 11 U.S.C. 727(d), but a desire to file a post-discharge reaffirmation agreement is not a basis for such relief and a debtor lacks standing to seek revocation of a discharge.” Furthermore it pointed out that in In re Bellamo, 45, 6 B.R. at 223, that a bankruptcy court’s equitable powers “must and can only be exercised within the confines of the Bankruptcy Code.
In ruling that is could not vacate the discharge order the Court pointed out also that vacating the discharge order imposes costs on the court system, as creditors must be notified when the discharge has been vacated, and when it is entered anew. For these reason’s the Court ruled Debtor could not vacate the discharge. If you have questions about this case or about filing Chapter 7 bankruptcy in the District of Columbia, you should consult with a local bankruptcy attorney.
Chapter 7 Bankruptcy Debtor Can Not Discharge Overpayment Of Unemployment Benefits
Linda-Joy N. Damron filed Chapter 7 bankruptcy In The Southern District Of Ohio Eastern District At Columbus. Prior to filling bankruptcy Debtor received over $44,000.00 in unemployment overpayments. She sought to have those overpayments discharged in her Chapter 7 case. However, the Ohio Board Of Workers’ Compensation (hereinafter “OBWC”sought an order requesting a finding that the overpayments were incurred as a result of fraud.
The Hearing Officer for the Industrial Commission Of Ohio found in favor of the OCBW and determined that all six elements of fraud had been demonstrated. It found that Debtor concealed the fact that she was employed for a certain amount of time when she had a duty to disclose this fact to the OBWC. In particular the Debtor did not disclose this information and continued to sign multiple [forms] in spite of the fact that the forms clearly indicated she had a duty to disclose the information. There was also a finding that the duty to disclose was material to her receiving the overpayments.
The findings also included that the Debtor concealed this information and that the concealment was made with utter disregard as to whether it was true or false and that the false information caused the OBWC to issue inappropriate payments to her. It further found that the OBWC informed Debtor that she was unable to both work and collect unemployment compensation at the same time. That in spite of this knowledge she failed to inform the OBWC of her employment and that she did this with the intent of misleading the OBWC. Finally, the finding concluded that the OBWC justifiably relied on her misrepresentations and that the State Fund suffered an injury proximately caused by its reliance on Debtor’s misrepresentations.
In rendering its decision the Court relied on 11 U.S.C. 523(a)(2)(A) of the bankruptcy law which reads in relevant part: “a) A discharge under section 727 … of this title does not discharge an individual debtor from any debt –(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial statement.”
The bankruptcy ruled that a misrepresentation did not have to be an oral representation but could be based upon the intentional failure to disclose a material fact. In fact, the Court pointed out that “openly false assertions are not a strict requirement.” Moreover, the Court stated that “[t]he elements of fraud in Ohio were substantially equivalent to those required to establish a nondischargeable debt based upon false representation under 523(a)(2)(A).
The Debtor argued that she should not be bound by the finding because it was issued by an administrative body. However, the Court said that In re Foster (Bankr. S.D. Ohio 2002) the Court held that the findings of an administrative body must be given the same preclusive effect that the findings would be given by the courts of Ohio. Therefore, this Ohio bankruptcy court ruled that Ms. Damon could not discharge the unemployment benefits overpayment.
If you have questions about bankruptcy law in Ohio you may need to speak to an Ohio bankruptcy attorney.
Chapter 7 Bankruptcy Debtor In Connecticut Loses Homestead Exemption
Salvatore Taliercio and Ann Marie Taliercio filed for Chapter 7 bankruptcy in Connecticut on August 25, 2011, In this case the Debtors owned a residence at 22 Hillandale Manor in Norwalk, Connecticut. In December of 2010 Debtors agreed to lease the property to a third party.
When Debtors filed their Chapter 7 case, they listed their address as Fullmar Lane in Norwalk, Connecticut. Mr. Talierco testified that he was residing at the Fullmar Lane Residence when he filed for bankruptcy relief and that that property was owned by his mother-in-law. In this case Debtors claimed a homestead exemption of $75,000.00 each. The Chapter 7 Trustee objected to the claimed exemptions.
In connecticut [t]hre are three requisites for real property to constitute an individual’s statutory homestead. First, the individual must ‘own the subject real property within the meaning of Section 52-352a as of the relevant time. Second, the individual must occupy the subject real property within the meaning of Section 52-352a as of the relevant time. Third, the subject real property must be ‘used as a primary residence’ within the meaning of Section 52-252a as of the relevant time.
In this case, there was no dispute tht as of the filing date Debtors owned the property. Addtionally, the Court found there was not dispute that the Debtors were not using the property as their ‘primary residence.’ In this case as has already been noted the Debtors listed their address as different from the home in which they claimed a homestead exemption.
Debtors argued that the term “occupy” had to be liberally construed. They claimed they were temporarily not occupying the property because the lease was only for one year. However, the Court stated that “the debtor’s argument is unavailing. The Court specifically stated that the argument “occupy” should be interpreted as “intention to occupy” nullified the essence of a homestead. Because the Debtors did not occupy their home at the time of filing, the court ruled that Debtors could not claim a homestead exemption.
If you have questions about bankruptcy in Connecticut you may wish to consult with a local bankrutpcy attorney.
Bankruptcy And Reaffirmation Agreements
Carolyn Denise Bowden filed Chapter 7 bankruptcy in the Eastern District Of North Carolina on August 11, 2011. When she filed her bankruptcy case, her bankruptcy attorney filed Debtor’s Statement of Intention, indicating Debtor would be reaffirming her obligation to Ally Financial regarding her 2006 Chevrolet Trailblazer.
In this case the reaffirmation agreement was filed with the Court on September 30, 2011. The agreement itself indicated that a presumption of undue hardship “arises becasue the debtor’s monthly income, minus her monthly expenses, reslts in a negative monthly income of $386.74. The reaffirmation agreement called for thirteen remaining installments of $379.94. However, Debtor indicated on the agreeement that she did not believe the reaffirmation agreement imposed an undue hardhship on Debtor because she “will have to adjust exepenses to make car payments.”
The reaffirmation agreement contained language which stated that the attorney’s certification was to be filed only if the attorney represented the debtor during negotitation of the agreement.
More specifically, the bankruptcy reafffirmation agreement stated as follows: “I herey certifify that: (1) this agreement represents a fully informed and voluntary agreement by the debtor, (2) this agreement does not imposed an undue hardship on the debtor or any dependent of debtor,; and (3) I have fully advised the debtor of the legal effect and consequences of this agreement and any default under this agreement. A presumption of undue hardship has been established with respect to this agreement. In my opinion, however, the debtor is able to make the required payment. Check box, if the presumption of undue hardship box is checked on page 1 and the creditor is not a credit union.
This Chapter 7 Debtor wanted the Bankruptcy Court to find that the agreement was unenforeceable due to “the refusal of the attorney who represented debtor during the course of negotiation of the reaffirmation agreement with Ally to file a declarationb or an affidavit of the type described in 11 U.S.C. 524(c) of the bankruptcy law. In this Chapter 7 bankruptcy case , the Bankruptcy Court agreed with debtor and stated “[t]he court agrees with the debtor that section 524(c)(3) applies in every instance where a debtor has been represented by an attorney during the course of negotiating a proposed reaffirmation agreement, and in each such case the filing of the 524(c)(3) declaration by the attorney remains a stand-alone to enforeceability.”
In sum, because this North Carolina bankruptcy attorney failed to sign this agreement, the Bankruptcy Court ruled in favor of this Chapter 7 bankruptcy client. If you have questions about reaffirmation agreements in North Carolina, you may wish to consult with a local bankruptcy attorney.
Find Out Why Florida Bankruptcy Court Finds Debtors’ Chapter 7 Abusive Under Three Code Sections
In re Michael S. Thompson and Crystal Lee Thompson’s chapter 7 bankruptcy case was filed February 2, 2011 in the Middle District Of Chapter 7 Bankruptcy Florida. At the time of filing he was earning $75,000.000 annually and Mrs. Thompson earned approximately $75,000.00 annually as a nurse.
When they filed their case, they indicated on Form 22 A, which is the Chapter 7 Statement Of Current Monthly Income and Means-Test Calculation, that the presumption of abuse did not arise. They stated their income as $8,797.65. They indicated they had two children and were above median income for a family four. They listed their expenses as $8,797.96 which meant they were running a budget deficit each month of $72.31.
On the means test they took a mortgage payment deduction on their residence which they had already moved out of and were renting a residence. At the time of filing they indicated they wished to surrender their residence to Wells Fargo.
Donald F. Walton, the United States Trustee, moved to dismiss the case on three separate code sections. First, he moved to dismiss based upon 11 U.S.C. 707(b)(2) on the basis that the case was presumptively abusive under the law. Second, he moved to dismiss the case under 11 U.S.C. (707)(B)(3) because the presumption of abuse was not rebutted by special circumstances, and the third basis was that the totality of circumstances of the Debtors’ financial situation demonstrated an ability to pay under the same code section.
The Court pointed out that pursuant to 11 U.S.C. (707)(b)(2) a case is determined to be presumptively abusive if the current monthly income, less allowed expenses, is greater than the statutory thresholds for disposable income. A bankruptcy chapter 7 case is deemed to be presumptively abusive if there is disposable income of $195.00 or more (at least $11,725.00 to fund a sixty month plan.
The allowable deductions from monthly income include (i) statutorily prescribed monthly expenses, including living expenses as set by national and local standards prescribed by the Internal Revenue Service; (ii) certain ‘reasonably necessary’ actual monthly expenses; (iii) payments ‘contractually due to secured creditors in each month of the 60 months following te date of the petition’; and (iv) payments on priority claims.
The UST argued that Debtors understated their income and claimed unallowable expenses by including payments for the Wells Fargo property they surrendered, payments on student loans, and they overstated their tax, childcare, energy, and telecommunications expenses.
Debtors argued that their student loan payment should be considered a priority debt because it was not dischargeable in bankruptcy or that it should be considered to be special circumstance. The court ruled that Debtors could not claim a mortgage expense if they were not making a mortgage payment. Therefore, the court allowed Debtors the standard IRS expense of$918.00 for housing and utilities. The court also would not allow debtors to claim as a priority expense student loan payments because student loans are considered to be a nonpriority unsecured claim.
After disallowing these deductions the court found that debtors had monthly disposable income of $2,463.94 which could be used to repay Debtors’ creditors. This meant that the debtors had disposable income of $147,836.40 over sixty months which was greater than $11,725.00 and $38,168.03 (twenty-five percent of Debtors’ total nonpriority unsecured debts of $152,672.12).
As to the special circumstances argument presented by the Thompsons pursuant to 11 U.S.C.(707)(b)(2)(B) the court rejected their argument and found that the future medical expenses were speculative and that they did not show the student loan expense to be a “reasonable and necessary expense for which there is no reasonable alternative.” For example, the Thomson’s did not prove they were even paying the student loan or that they had sought to lower the payments through consolidation or the William D. Ford Federal Direct Loan Program.
The court further noted that even if the Thompsons could show they were making student loan payments of $250.00 per month, their monthly disposable income would still be $2,213.94 or $132,846.40 over 40 months.
The UST also sought to dismiss the case on the basis of the totality of circumstances standard of the Debtors’ financial situation. As the court said, the totality of circumstances test is “whether debtors have a meaningful ability to repay their unsecured debts.” The court specified that post-petition events are relevant to the totality of circumstances analysis.
In looking at the post-petition events the court was not persuaded that the student loan payments were reasonably necessary for their maintenance or support or that of their dependents. It reiterated the fact that there was no evidence as to whether the student loans could be placed in forbearance or consolidated into a smaller monthly payment. With regard to the mortgage expense which the Thompsons had claimed, the court relied on Debtors’ testimony that they were not making mortgage payments and had surrendered the home.
Finally, the court also did not buy Debtors’ argument that there would be a possibility of substantial additional medical costs to treat Mr. Thompson’s or the childrens’ medical conditions. More specifically, the court held that “[u]nknown or speculative expenses are not relevant in a Section 707(b)(3)(B) analysis.”
In conclusion, the court held that Debtors had monthly income $11,529.54 and allowable monthly expenses of $9,065.60, resulting in monthly disposable income of $2,463.94. The court stated they have the ability to propose a Chapter 13 plan with payments totaling $88,701.84 or $147,836.40 in a sixty month plan. Based upon the foregoing the court dismissed the chapter 7 case.
If you have questions about chapter 7 bankruptcy in Florida or chapter 13 bankruptcy, please visit our state pages of this website.
Florida Chapter 7 Bankruptcy Debtor Allowed To Wipe Out Attorneys’ Fees
Osama F. Al-Suleman filed for Chapter 7 bankruptcy in Florida on June 21, 2010. Debtor is a cardiologist who previously was employed by Plaintiff, Florida Cardiology. Debtor’s written employment agreement provided that Debtor was prohibited from practicing as a cardiologist within fifty (50) miles of his former employer for a two year time period.
In March of 2008 Debtor left his employer and started his own medical practice within twenty-five (25) miles of his former employer. Furthermore, he obtained a patient list which included the names of former patients when he was employed by Plaintiff. After Debtor opened his practice, Plaintiff sued Debtor in state court allegeging Debtor was in violation of the Breach of Restrictive Covenant and sought an injunction.
In March of 2010, the parties resolved the litigation in which Plaintiff agreed to abandon all claims for damages other than for attorneys’ fees. In additon, all theories of recovery in the state court action were based upon the breach of various contractual obligations. However, in the adversary proceeding filed in the bankruptcy court, Plaintiff alleged that the debt for attorneys’ fees should be excepted from discharge based upon 11 U.S.C.523(a)(4) and (6) of the Bankruptcy Code.
More specifically, Plaintiff claimed the debt was nondischargeable pursuant to 11 U.S.C. 523(a)(4) because it arises out of defendant’s larceny of plaintiff’s patient list; and purusuant to523(a)(6) it was for “willful and malicious injury by the debtor to another entity or to the property of another entity.”
In this case, however, the bankruptcy court sided with the Debtor and ruled that the attorneys’s fees were not based upon larceny and that the Debtor’s actions did not meet the requirements of a willful and malicious injury. Importantly, the court noted that Plaintiff had abandoned all claims in the state court against Debtor except that for attorneys’ fees. For these reasons Debtor was allowed to discharge approximately $227,000.00 in attorneys’ fees and costs.
If you have questions about Chapter 7 bankruptcy in Florida or whether your debts will be wiped out if you file bankruptcy, it is strongly urged to contact a Florida bankruptcy attorney for specific legal advice about your own circumstances.
Florida Chapter 7 Bankruptcy Debtor Can Not Exempt Vehicle As Medically Prescribed Health Aid
Kathy D. Dowell filed for Chapter 7 bankruptcy in Florida on March 30, 2010. On January 11, 2010 Debtor obtained an appraisal of her vehicle as $10,200.00. After counsulting with her bankruptcy lawyer Debtor obtained a prescription from her physician for a “Steering Wheel Spinner Device.” Debtor then, about 16 months after she bought the vehicle, attached the spinner to the steering wheel.
The Bankruptcy Court noted that Debtor medically benefited from the spinner but that it was attached only one month before she filed her Chapter 7 bankruptcy. Debtor claimed in her Chapter 7 case that the entire vehicle was exempt because it was a medically prescrbed health aid. The Chapter 7 Trustee objected on the basis that the vehicle itself was not “distinctly suited or primarily used for a medical purpose and did not have a prescriptive device (a knob on the steering wheel) attached to it or prescribed until after the Debtor had the vehicle appraised in preparation for her bankruptcy fiing.”
In its bankruptcy analysis, the court looked to the decision of Driscoll in Oregon. In Driscoll a two-part analysis. The first part was whether the device was medicall prescribed and the second part was whether was whether the vehicle itself was “suited for and principally used for the diagnosis, cure, mitigation, treatment or prevention of a disease or for the purpose of affecting an structure or function of the body.”
In this bankruptcy case, the court noted that the first prong of the test was met beause the device was medically prescribed by a physician. However, the precription was only for the device itself, but the Debtor claimed that the entire vehicle was exempt. The court noted that the device itself could be attached to any steering wheel of any vehicle and that this would medically assist the debtor.
In this Chapter 7 case the court made an important distinction in that the physician never prescribed any changes to be made to the vehcile itself such as the addition of wheel chair lift. For these reasons the Florida bankruptcy court held that the vehicle itself could not be exempted from the Chapter 7 bankruptcy estate as a medically prescribed health aid.
If you have questions about Chapter 7 bankruptcy in Florida or bankruptcy law generally you may wish to contact a Florida bankruptcy attorney who can answer your questions.
Florida Chapter 7 Case Dismissed For Abuse
Craig Piazza filed for Chapter 7 bankruptcy in Florida on October 8, 2010. This was one day before he was required to produce documents in a state court proceeding relating to a judgment about to be entered against him.
In this case the evidence showed that Debtor earned about $7,740.00 per month as a physical therapist and that his wife earned approximately $7,709.00 per month. Also, Debtor continued to contribute money to his wife’s 401K and to make her credit card payments. In this bankruptcy case, Debtor failed to schedule a consumer debt owed to American Honda Finance for approximately $13,298.00. Debtor also omitted interest in the amount of $48,441.00 on the judgment which had been entered against him.
In this case the Court noted that the creditor’s arguments hinged on whether the Debtor’s debts were primarily consumer debts which would mean that Debtor would have to complete the means test anaylsis purusant to the Bankruptcy Code. In its complaint, Plaintiff argued that the case should be dismissed based upon the totality of circumstances because Debtor filed the petition to avoid a final judgment, Debtor failed to disclose the debt to American Honda Finance; Debtor had the ability to repay his debt; and that Debtor continued to maintain a high standard of living by making biweekly payments to his wife.
In this case the Court rejected the argument that Debtor’s bankruptcy case should be dismissed because Debtor had primarily consumer debts. In particular it noted that the judgment against Debtor of at least $209,824.00 was at least 55% of the total debt which meant that Debtor’s debts were not primarily consumer debts. The Court found that the Chapter 7 case could not be discharged under the bankruptcy laws if the debts were not primarily consumer debts.
Even though the Court refused to discharge the bankruptcy case on the ground sought by the creditor, the Court analyzed the case pursuant to 11 U.S.C. 707(a) and found that the case should be dismissed because it had been filed in bad faith. In this instance the Court listed several factors which it considered: the case was filed in response to a judgment where there was pending litigation, the debtor intended to avoid a large single debt; the debtor is paying off insiders, and the debtor employed a deliberate and persistent pattern of evading a single major creditor.
For all of these foregoing reasons the Court found that this Chapter 7 bankruptcy in Florida should be dismissed. If you have questions about Chapter 7 or have general bankruptcy questions about bankruptcy in Florida, you may want to speak to a bankruptcy attorney in your area.
Chapter 7 Bankruptcy And Lease Rejection In Florida
Debtors Jermaine Johnson and Christine Johnson filed their Chapter 7 bankruptcy in Florida on December 9, 2008. Prior to filing their Chapter 7 case, Debtors had entered into a lease agreement with their landlord, Manatee Bay, hereinafer “Manatee.” Debtors failed to list their lease obligation on their bankruptcy case.
Pursuant to 11 U.S.C. 365(d)(1) of the Bankruptcy Code the Chapter 7 Truestee never moved to reject the lease so it was deemed rejected on February 7, 2009 which was 60 days after the petition was filed. While their Chapter 7 was pending, Debtors remained current on their lease obligation. They obtained their bankruptcy discharge on March 17, 2009. However, about 60 days after their lease expired, they defaulted on the lease obligation.
Subsequent to their default, Manatee sued Debtors for lease arrearages and costs in the amount of $8,929.67 and obtained a judgment. Debtors filed a motion to reopen their bankruptcy case and add Mantee to the bankruptcy case. Debtors’ bankruptcy attorney argued that because they entered into the lease prior to filing their Chapter 7 case, all amounts owing under the Lease Agreement, including amounts incurred postpetition were discharged.
Manatee’s bankruptcy lawyer argued that just because the Lease Agreement was rejected in the bankruptcy case, the Agreement was not terminated under applicable Florida state law. The Court agreed with Manatee and stated “[r]ejection of a lease does not have teh conclusive effect of terminating the lease. At a minimum, a non-debtor lessor has the option of treating a lease which has been rejected as not having been terminated.”
In this case, the Court ruled that Manatee’s claim against Debtors arose post-petition. In fact, none of the damages sought by Manatee related to any pre-petition damages. Therefore, Debtors were obligated to Manatee the judgment it had already obtained.
If you are thinking of filing bankruptcy in Florida and have questions about whether you will be obligated on your lease after filing, you may want to discuss all of your options with a Florida bankruptcy attorney who can advise you of all your Chapter 7 options in Florida.
Chapter 7 Debtor In Florida Must Attend Hearing To Reaffirm Debt
Deral Pitts and Tonya Pitts filed for Chapter 13 bankruptcy in Florida; they later converted their case to a Chapter 7 bankruptcy proceeding. They represented themselves in their Chapter 7 case. During their Chapter 7 case, Debtors entered into a reaffirmation agreement to retain a rental property. The reaffirmation agreement was filed in the bankruptcy court on July 27, 2009. The Debtors received their Chapter 7 discharge on November 19, 2009.
After their case was completed, Debtor’s failure to make payments under the Reaffirmation Agreement and the creditor sought to enforce the agreement against the Debtor. In fact, the creditors sought to obtain a deficiency judgment based upon their default. Debtors, however, argued that their liability for the rental property was discharged in their bankruptcy case despite the reaffirmation agreement.
In making a determination as to whether this reaffirmation agreement was enforceable, the Court had to make a determination of whether the provision of 11 U.S.C. 524(c)(c) of the Bankruptcy Code. The Court noted that Section 524(c) imposed certain requirements must be satisfied before it could be considered a binding agreement on the debtor. As the Court noted 524(c)(1) requires that a reaffirmation agreement must be made before the discharge was granted. In this case this requirement was met.
Furthermore, the Court noted that Subsection (4) of Section 524(c) requires that the agreement not be rescinded by the debtor within the later of sixty days after filing such agreementor the date of discharge. This bankruptcy requirement was also met because the agreement was never rescinded.
Pursuant to 11 U.S.C. 524(d) of the bankruptcy law, this Section requires that if a debtor desires to enter into a reaffirmation agreement and is not represented by an attorney, then the court shall holde a hearing at which the debtor shall appear in person. Furthermore, at the hearing the court shall inform the debtor that such an agreement is not required and the legal effect and consequences of entering into the reaffirmation agreement.
In this Chapter 7 bankruptcy case, a hearing was never held concerning this reaffirmation agreement despite the fact that Debtors were never represented. Based upon this, the Court held that the reaffirmation agreement was not enforceable against Debtors because the bankruptcy laws had not been complied with.
If you have questions about this Chapter 7 case or bankruptcy in Florida, please feel free to contact one of the Florida bankruptcy attorneys in the directory of this website.
Chapter 7 Bankruptcy Court Rules In Texas Divorce Attorney Fees Are Support
Raymond D. Tepera filed for Chapter 7 bankruptcy in Galveston, Texas. Debtor’s former wife’s attorneys filed a claim for $129,388.24 in attorneys fees relating to the divorce proceeding between Debtor and his former wife.
The divorce decree stated in pertinent part:
To effect an equitable division of the estate of the parties and as a part of the
division, the court finds that Tammy Lynetter Tepera has incurred $125,154.43 as
attorney fees, expsenses, and costs. IT IS ORDERED that good cause exists
to award Kenneth C. Kaye a judgment in the amount of One Hundred Twenty-
Five Thousand and 43/100 dollars ($125154.43) for attorney’s fees, expenses, and
costs, with interest at five percent (5%) per year compounded annually from the
date this Final Decree of Divorce is signed until paid.
In this case Debtor claimed that teh claim was not a domestic support obligation because Kaye is not a spouse, former spouse or child of the debtor, or the parent, legal guardian, or responsible relative of such child. In this case Kaye testified that he represented Debtor’s former wife regarding a custody dispute and the fees related to a jury trial on the sole issue of child custody.
In this case, the Bankruptcy Court noted that “[c]ourts addressing the question of whether an award directly to an attorney in a divorce decree is a domestic support obligation have split. The majority of courts have held that an award directly to an attorney in a divorce decree is a domestic support obligation… Most of teh courts holding that awards of attorney fees directly to the attorney are domestic support obligations find that an award of attorney fees is in the nature of alimony, maintenance, or support under law in effect prior to the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and that the passage of BAPCPA did not alter the priority of such debts.
The Court went on to say that the minority view is that under the plain language of 11 U.S.C. 101(14A), attorneys are not amoung the parties to whom a domestic support obligation can be owed. However, this Texas bankruptcy court indicated that it believed the majority rule was the more well reasoned rule and thus held that the attorney fees should be paid as a domestic support obligation.
If you have questions about bankruptcy in Texas or about this particular court decision, you should inquire with a local Texas bankruptcy attorney.
Bankruptcy Trustee In Georgia Able To Strip Mortgage
Dwight Thomas Phillips, Sr. and Marcene Yvonne Phillips filed for Chapter 7 bankruptcy on March 20, 2011. In this case Debtor’s bankruptcy attorney agreed that on February 7, 2011, Debtors had obtained a loan in the amount of $187,068.00. To secure their obligation to Wells Fargo, the Debtors executed a deed to secure debt to Wells Fargo on their property located at 45 Vinnys Terrace, Covington, Georgia.
The funds which Wells Fargo advanced on February 7, 2011 were used to satisfy an existing security deed to Mortgage Electronic Registration Systems, Inc. (“MERS”) which was recorded in the Newton County court records. A cancellation of deed was record filed by MERS on March 3, 2011. On March 20, 2011 Debtors filed their Chapter 7 bankruptcy petition. The very next day, on March 21, 2011, Wells Fargo filed their Security Deed.
The Chapter 7 trustee file an adversary proceeding against Wells Fargo pursuant to 11 U.S.C. 544(a)(3) in which she sought to treated as a bona fide purchaser. As the bankruptcy court noted “[u]nder Georgia law, a bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice.” AS to notice in Georgia, the court stated that “any circumstance which would place a man of ordinary prudence fully upon his guard, and induce serious inquiry, is sufficient to constitute notice of a prior unrecorded deed.”
The Court went on to explaint that “Georgia courts have described further, ‘[o]ne claiming title to lands is chargeable with noitce of every matter which appears in his deed, and of any matters which appear on the face of any deed, decree or other instrument forming an essential link in the chain of instruments through which he deraigns title, and of whatever matters he would havae learned by any inquiry which the recitals in those instruments made it his duty to pursue. Henson v. Bridges 218 Ga. 6, 9 (1962); see also Virginia Highland Civic Association, Inc. v. Paces Properties, Inc., 250 Ga. App 72 (2001).
In this case, the court noted that the previous security deed by MERS was cancelled on March 3, 2011 and that there was nothing on the face of the cancellation which in any way suggested there was another security deed. Moreover no security deed was recorded as of the petition date. As the Court noted there was nothing which would have put the trustee on notice to make further inquiry regarding whether any encumbrance existed on the property.
Wells Fargo, however, argued that the doctrine of equitable subrogation should apply in this case. That doctine of Georgia law protects a creditor who lends money to a borrower, which is then used to satisfy an existing debt, by allowing the new creditor to assume the rights of the prior encumbrancer. The bankruptcy court rejected this argument because the security deed had already been cancelled and therefore MERS, and hence, Wells Fargo had not interest in the property. More specifically, “[a]ny rights Wells Fargo may have had to the property under an equitable subrogation theory were cancelled when MERS cancelled its security deed.”
If you have questions about Chapter 7 bankruptcy in Georgia it is highly recommened that you seek the advice from a bankruptcy attorney in your area who can provide you with specific advice about your bankruptcy case.
Four conditions that must be met to include taxes in bankruptcy
Under the law that protects consumers by allowing them to file bankruptcy, one of the sticking points always seems to be tax debts. Many times, consumers are told they are unable to write off tax debt but this is incorrect provided that certain conditions are met. There are four specific conditions that apply to writing off tax debt once the tax authority has what is considered a reasonable time to collect them. The four conditions which must be met and an explanation of these points are:
- Time since return was due – in order to write off taxes in bankruptcy, the taxes must be due at least three years prior to filing for bankruptcy.
- Two years since actual filing – if you filed your taxes late, you may still qualify to have taxes eliminated in bankruptcy if it has been at least two years since the returns were filed.
- Assessment time – generally, the IRS assesses your taxes soon after you file your return. This means the assessment period of 240 days (six months) will not apply to most taxpayers since the restriction is less than the two or three year restriction.
No fraud or evasion – taxpayers who are intentionally dishonest or avoid paying taxes have prohibited the taxing agency from collecting debt so there is no possible way to discharge the tax debt you owe, regardless of the age.
How a Marietta bankruptcy attorney can help
Most taxpayers are uncertain how to meet these requirements that are set out in the bankruptcy code. However, a Marietta bankruptcy attorney who is familiar with the code can help you determine if your tax debt meets the burden of the law to allow your debt to be discharged.
Net effect of tax discharge after bankruptcy
While a bankruptcy discharge will result in a complete elimination of any tax debt covered under the rules, there are some things that you need to be aware of including:
- Existing liens – if there is already a property lien prior to the bankruptcy as a result of taxes, the lien will remain and you will have to pay off this balance.
- Tax penalties – any penalties that were assessed as a result of tax debt are not eligible for discharge.
- Employer taxes – employers are not allowed to discharge withholding taxes which are required to be held from an employee’s paycheck.
If you are considering filing Chapter 7 bankruptcy in Georgia and you have past due state or federal taxes that are creating an additional financial burden, it is a good idea to talk to your Marietta bankruptcy attorney about what options may be available to you. When your debt seems to be more than you can manage and the bulk of your debt is credit cards, medical bills and tax debt, consider contacting Roger Ghai, a bankruptcy attorney in Marietta at the Law Offices of Roger Ghai at (770) 792-1000 for assistance. We have the skills and experience necessary to review your case thoroughly and advise you of the best way to proceed with your bankruptcy filing and can help you determine whether some or all of your tax debt may be dischargeable in bankruptcy.
Georgia Chapter 7 Debtor Can’t Get Fresh Start Bankruptcy
Mark Turnage filed for Chapter 7 bankruptcy protection in Georgia on December 19, 2008. On March 13, 2009, Plaintiff filed a Complaint to determine whether the monetary judgment oweded to her could survive Debtor’s bankruptcy filing. Prior to filing bankruptcy Debtor and Plaintff were engaged in lengthy litigation which included a jury trial on Plaintiff’s claims as well as a trip to the Georgia Court Of Appeals.
In the State Court litigation, Plaintiff sued Defendant for malicious prosecution, intentional infliction of emotional distress, and defamation. The jury found for Plaintiff on each of these counts and awarded compensatory damages on each count and attorney’s fees totaling $210,500.00. The case went to the Georgia Court Of Appeals where the Court ruled that the jury’s decision was supported by the evidence.
In the Georgia bankruptcy court, Plaintiff argued that Debtor should not be allowed to try the case all over again and that the judge should base its decision on the previous litigation because all of the issues were the same and because the issue had been litigated before. In ruling in favor of the Plaintiff the court noted that the legal doctrine of collateral estoppel applied to the bankruptcy litigation and that the case would not be re-litigated.
For the doctrine of collateral estoppel to apply, the court ruled that the case involved the same two parties in both cases, that the issues between the two cases were the same, that there was actual and final litigation of the issue in question, that the adjudication was essential to the earlier action, and that the parties had a full and fair opportunity to litigate the issues in question.
The bankruptcy legal issue was whether the debt was incurred by malicious injury under section 11 U.S.C. 523(a)(6) of the Bankruptcy Code. Pursuant to this code section, debts are excepted from discharge is an individual’s debts are incurred by “willful and malicious injury by debtor to to another entity or to the property of another entity.”
The Court stated that to meet this standard [a] showing of mere recklessness does not establish willfulness.” Moreover, the Court stated that [m]alicious acts under this Code section are wrongful and without just cause or excessiveness even in the absence of personal hatred, spite, or ill will. In finding against the Debtor, the bankruptcy court noted that the Georgia Court Of Appeals found that Defendant’s injuries were supported by the evidence in the case.
The bankruptcy court went on to say that Plaintiff was also entitled to have jer attorney’s fees deemed nondischargeable and commented that the cases interpreting the section have established that intentional torts invoke a species of bad faith that entitles a plaintiff to recover expenses of litigation, including attorney fees, because having to incur fees to collect the other damages is itself an injury flowing from the tort.
If you have questions about bankruptcy law in Georgia you may want to speak to a Chapter 7 or Chapter 13bankruptcy attorney for advice about your particular case.
Georgia Debtors Can Strip Mortgage Liens After Receiving Chapter 7 Discharge If Plan Filed In Good Faith
Originally the Jennings filed their Chapter 13 case and converted the case to a Chapter 7 bankruptcy case. They obtained their Chapter 7 discharge on April 7, 2010. They subsequently filed a Chapter 13 bankruptcy on January 3, 2011.
The Jennings indicated their home was worth $102,000.00 but they owed the first mortgage company $202,000.00; there was materialman’s lien against the property for $3,800.00 and a second mortgage for $24,800.00.
Bryce and Dena Hill also filed a Chapter 13 bankruptcy which was converted to a Chapter 7 proceeding and they obtained their discharge May 20, 2010. In this case they subsequently filed Chapter 13 bankruptcy about four months after receiving their discharge and valued their home at $105,000.00. The first mortgage was for $143,668.36 and the second mortgage was $31,366.54.
In a Chapter 13 case before a creditor can be paid, it must hold a ‘claim’ as is defined in 11 U.S.C.101(5) of the Bankruptcy Code. If the claim is allowed, it is either a secured claim or an unsecured claim pursuant to 11 U.S.C. 506)(a). Determination of whether the claim is secured or unsecured is based upon the value of the underlying collateral.
The Court pointed out that classification as a holder of a secured claim under the Bankruptcy Code is not synonymous with holding a security interest outside of bankruptcy. More particularly, the Court stated that “[h]aving a lien outside of bankruptcy is translated under bankruptcy law as having the ‘rights’ of a secured creditor, not necessarily as being the holder of a secured claim.”
The Court pointed out that this is an important difference because pursuant to 11 U.S.C. 1322(b)(2) a debtor can modify the rights of both a secured creditor and an unsecured creditor but it specifically protects the ‘rights of secured claims’ that are “secured only by a security interest in real property that is the debtor’s principal residence. 1322(b)(2) is known as the anti-modification statute which protects secured creditors after the application of 11 U.S.C. 506(a). Moreover, it does not protect creditors who are classified under 506(a) as the holder of an allowed unsecured claim.
It is by this mechanism that debtors are able to avoid unsecured mortgages. However, one of the issues which arises is whether it is the actual plan completion or the discharge which voids the lien. In this case, the court stated that chapter 13 plan completion and not discharge is the event which triggers the avoidance of the lien.
The court went on to explain that the discharge voids discharges any personal liability regarding the debtor. Additionally, the code provides that a creditors right to foreclose on the property survives the bankruptcy.
In this case the issue before the court was whether a debtor who is ineligible for a discharge in the Chapter 13 case because of a recent discharge in a Chapter 7 case, may strip a lien of a wholly unsecured mortgage holder.
In this case the Chapter 13 trustee argued that 11 U..S.C. 1325(a)(5) applied because the holder of an allowed secured claim is entitled to retain its lien following the discharge. Debtors argued that 11 U.S.C. 1325(a)(5) did not apply because liens which are not supported by any collateral value are treated as unsecured claims. And, as such, Section 1325(a)(5) does not apply to holders of wholly unsecured claims.
The Court went on to say that Section 11 U.S.C. 1325(a)(5) did not apply to wholly unsecured claims. Furthermore, the Court ruled that lien stripping in “Chapter 20” cases was allowed only if the Chapter 13 plan was filed in good faith. Here, the Court found that both cases were filed in good faith.
If you have questions about Chapter 13 or Chapter 7 bankruptcy in Georgia, please visit our state pages.
Bankruptcy Can Take a Toll on Your Assets…But Not Your Firearms
There are several provisions of the Bankruptcy Act, which are in the process of being amended. One of the provisions to the bankruptcy code which has passed the House of Representatives in July 2010, is provision that, if a person files a bankruptcy, the debtor would be allowed to retain their rifles, shotguns, and pistols so long as the items are not worth more than $3,000.00 combined.
In addition, if a person files for bankruptcy and has just one gun, then there is no limit on the value. This bankruptcy provision passed the House of Representatives by a vote of 307 to 113. In addition, the House Democrat who introduced the provision to the Bankruptcy Code stated, according to the Plain Dealer, “we must protect the rights guaranteed to us by our founding fathers, no matter what financial circumstances a citizen might face…”
In the Senate, Senator Patrick Leahy, Democrat of Vermont, introduced a similar measure.
The National Rifle Association has commented on the proposed bankruptcy changes indicating they too think it is reasonable for people who are in a bankruptcy proceeding to have an effective means of protecting themselves.
Many states currently have protections for firearms in bankruptcy proceedings. If would like to know what protection is afforded under the bankruptcy laws in your state, you can contact a local Chapter 7 bankruptcy attorney, or, if you are a Georgia resident and would like to know what firearms you would be able to protect if you file bankruptcy in Georgia, you may contact Roger Ghai, Law Offices Of Roger Ghai, P.C. at roger@chapter7attorneys.com or telephone him at (770) 792-1000.
Bankruptcy and Student Loans
Generally speaking student loans are not dischargeable in a bankruptcy case. That means that if you file for bankruptcy, the student loan debt will not be eliminated. There is an exception to this general rule and a person can eliminate student loan debt in a bankruptcy if the person can show undue hardship. This legal test is virtually impossible to meet unless a person has a severe disability.
Under current law, if the student loan is from a for profit lender such as Citibank or Sallie Mae, the debt may not be cleared in your bankruptcy case. However, that may be about to change as there is pending legislation in both the House of Representatives and the Senate which would make it easier to discharge student loans which were issued by private lenders.
The bankruptcy law would remain the same if the student loan was a Stafford student loan or a Perkins student loan, these loans, under the current pending bills would remain non-dischargeable. Some of the private lenders are advocating a waiting period of several years before the loans could be discharged. Those provisions do not appear in any of the current bills.
Opponents of the current legislation argue that with an education in hand and no other debts students will rush to file bankruptcy cases. However, most people do not like going through bankruptcy, and, even if a client is able to eliminate the student loan debt in bankruptcy, bankruptcy is still viewed by many as an option of last resort.
If the proposed legislation is passed and the bankruptcy law is amended regarding student loans, a side effect will be that most private lenders will require a co-signer before granting a student loan.
If you are considering filing for bankruptcy and have a significant amount of student loans which are in default and you have been unable to pay you may want to wait to file the bankruptcy to see if the legislation is passed which would allow you to discharge your student loan in a bankruptcy case. Depending upon the facts of your particular situation you may wish to consider filing for a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, other debts such as credit cards and other general unsecured debts are legally wiped out once the bankruptcy discharge has been granted.
Before filing for bankruptcy it is advisable that you consult with an experienced bankruptcy lawyer, and, if you reside in Georgia you may wish to consult with an experience bankruptcy law firm which can analyze the facts of your situation in light of the current bankruptcy laws.
Hawaii Chapter 7 Bankruptcy Dismissed As Abusive
Christopher Dean NG and Sheila Marie NG filed for Chapter 7 bankruptcy in Hawaii on June 30, 2010. The United States Trustee filed a motion to dismiss their Chapter 7 as being abusive. In fact, the Trustee relied upon 11 U.S.C. 707(b)(1) and 707(b)(3)(B) in making its motion.
When the bankruptcy case was filed, Debtors listed income of $5,301.09 per month and this income included a retirement income of $1,439.88 from the military. The payroll deductions all reflected a voluntary contribution to a second retirement account of $520.74. Mr. Ng disclosed that he would not be retiring and that he intended to work for about another twenty years. In addition, when the case was filed the petition showed that there was a surplus of about $76.09 each month.
The bankruptcy court denied the Trustee’s motion based upon 11 U.S.C. 707(b)(2) but continued the hearing for a ruling on 11 U.S.C. 707(b)(3)(B). As the Court noted “[t]he Court may dismiss a chapter 7 case as abusive if a debtor filed the petition in bad faith or if the totality of circumstances of a debtor’s financial situation demonstrates abuse. Section 707(b)(3) provides:
In considering under paragraph 1 whether the granting of relief would be an abuse of
of the provisions of this chapter in a case in which the presumption in subparagraph
(2)(A)(i) dos not arise or is rebutted, the court shall consider (A) whether the
filed the petition in bad faith; or (B) the totality of the circumstances of the debtor’s
financial situation demonstrates abuse.”
In determining whether a bankruptcy case is abusive under the totality of circumstances, the Court noted that several factors come into play: 1) whether a debtor had the likelihood of sufficient future income to fund a Chapter 11, 12, or 13 plan which would pay a substantial portion of unsecured claims; 2) whether a debtor’s petition was filed as a consequence of illness, disability, unemployment, or some calamity; 3) whether the schedules suggest the debtor obtained cash advances and consumer goods on credit exceeding his or her ability to repay them; 4) whether a debtor’s proposed family budget was excessive or extravagant; 5) whether a debtor’s statement of income and expenses misrepresented debtor’s true condition; an 6) whether the debtor engaged in eve-of-bankruptcy purchases.
In this case, the Court found that Debtor had the ability to repay creditors a substantial amount over time because after their scheduled expenses, Debtors had $2,201.33 in net monthly income to repay creditors. In addition, the Court noted that under the Bankruptcy Code “loan repayments to retirement accounts are considered disposable income because of their unique character; the debtor is, in essence, repaying a loan to himself. Thus it would be unfair to creditors to allow the debtors in the present case to commit part of their earnings to the payment of their own retirement fund.
Furthermore, although the Court noted that while the Court must allow all debtors to seek bankruptcy protection while contributing to a retirement plan if it appears reasonably necessary for the support of the debtor or debtor’s dependents. But in this case Debtor sought to fund a second retirement plan and Debtor testified he did not intend to retire for 20 years. Therefore, the Court reasoned that it was not unreasonable for Debtor to cease making contributions for 3-5 years as there would be many more years in which Debtor could contribute to the second retirement plan.
For the foregoing reasons, the Court dismissed Debtors Chapter 7 as abusive under the Bankruptcy Code. If you have questions about bankruptcy in Hawaii, it is strongly recommended that you seek the advice of a local bankrupty attorney in Hawaii.
Bankruptcy Court Allows Debtor To Wipe Out $2,000.00 Cash Advance
Sarah J. Paintiff filed Chapter 7 bankruptcy in Illiniois on July 5, 2011. On or about May 3, 2011 Debtor obtained a cash advance of $2,000.00 from Discover Bank. Discover Bank requested the the debt not be discharged. Discover bank contended that Debtor never made any payments on the $2,000.00 cash advance and that Debtor had represented an intention to repay the amounts borrowed. More specifically, Discover Bank claimed that pursuant to 11 U.S.C. 523(a)(2)(A).
In this case, the evidence showed that Debtor and her husband were married, resided together, in the same household, and that Mr. Paintiff earned $82,000.00 annually. Moreover, Debtor contended that at the time she had the ability to repay the cash advance and that is what she intended to do. However, the evidence showed that on May 19, 2011 Debtor’s husband involuntarily lost his job without warning. As a result Debtor asserted that she and her husband were unable to meet their monthly obligations.
Debtor’s bankruptcy attorney argued that the $2,000.00 debt to Discover was not incurred by false pretenses, a false representation, or actual fraud because, at the time she took the cash advance, she had every intention of paying her account. Debtor filed a motion in which she asserted these facts. Discover Bank never disputed Debtor’s factual version.
However Discover relied upon 11 U.S.C. 523(a)(2)(C)(i)(II) of the Bankruptcy Code. Pursuant to this Code Section, “if a creditor establishes that the debt in question arose from the taking of cash advances within 70 days before the case filing in an aggregate amount in excess of $875.00, a presumption of nondischargeability arises and the burden shifts to the debtor to go forward and rebut that presumption.
In this case the burden shifted back to the Debtor becuase the cash advance exceeded $875.00 and because the advance occurred within 70 days of the filing of the bankruptcy petition. Because Discover did not legally dispute Debtor’s factual allegations and because according to the Bankruptcy Court Discover Bank “did not allege in its amended complaint or response to the motion for summary judgment that Debtor made some separate false statement or misrepresentation upon which is justifiably relied in making the cash advance,” the Bankruptcy Court ruled that the cash advance should be discharged.
If you have questions about Chapter 7 bankruptcy in Illinios, it is highly recommended that you contact a local bankruptcy attorney who can answer all of your bankruptcy questions.
Court Rules Chapter 7 Trustee Must Prove Actual Fraud In Order To Deny Debtor A Discharge
In the adversary proceeding the trustee sought to avoid a fraudulent transfer of real property under 11 U.S.C. 548. The transfer which the trustee sought to undo involved real property worth $572,000.00 deeded to Debtor’s three children in return for a payment of only $5,203.00. On March 14, 2011 the Court issued a judgment avoiding the transfer.
Subsequently on May 9, 2011 the trustee filed an additional adversary complaint against Debtor in which the trustee sought to deny the Debtor a Chapter 7 bankruptcy discharge on the basis of 11 U.S.C. 727(a)(2)(A). As the Court note pursuant to 11 U.S.C. 548(a) the Chapter 7 bankruptcy trustee can seek to avoid transfers made by the debtor within one year before the date of filing the petition on the ground of actual fraud or constructive fraud. The Cort noted that 11 U.S.C. 548(a)(1)(A) specifies the elements of actual fraud and subsection (a)(1)(B) sets out the grounds for actual fraud.
Debtor argued that the issue of fraudulent intent had already been litigated in the first adversary proceeding and thus the second adversary proceeding seeking the denial of discharge should have been dismissed because the issue had already been decided. However, in this proceeding the Court noted that the trustee has alleged other facts such as Debtor’s failure to schedule his interest in other real property and failed to scheduled his loan obligations with Chase Bank. Furthermore, the Court pointed out that the first adversary the issue of actual fraud was not decided, but rather, the first adversary complaint dealt with constructive fraud.
For those reasons, the Court decided that the case could go forward since the second adversary complaint allegedly involved actual fraud. If you have questions about Chapter 7 bankruptcy in Illinois or Chapter 13 bankruptcy please visit our state specific pages to this website.
Illinois Debtor Can Not Keep Real Estate Commission In Bankruptcy
Jeffrey Prochnow filed Chapter 7 bankruptcy in Illinois on August 3, 2009. He obtained his bankruptcy discharge on December 3, 2009 and his Chapter 7 was closed February 23, 2009. On June 16, 2010, Debtor filed a Motion To Reopen to collect real estate commissions from ReMax which he earned before the case was filed.
ReMax opposed the reopening of the case but lost that argument and Debtor was allowed to reopen the case for the purpose of trying to collect the commissions. Debtor sought commissions in the amount of $15,323.00. On July 25, 2009, just before he filed for bankruptcy, Debtor sold a home which is the subject of the real estate commission, but he did not list his interest in the real estate commission in his bankruptcy schedules. Further, he made no complaint about not receiving his commission until afer filed the Motion To Reopen In June.
The Court pointed out that when a Debtor commences a case, a bankruptcy estate is created which generally consists of all of a debtor’s legal or equitable interests in property. Pursuant to 11 U.S.C. 541(a)(1) of the bankruptcy law, the term “property” has been broadly construed and includes ‘every conceivable interest of the debtor, future nonpossessory, contingent, speculative, and derivative.’ It also pointed out that contingent property are interests of the estate.
Therefore, the Court relied on the legal doctrine of judicial estoppel to come to the conclusion that Debtor was not eligible to receive the commission. As the Court noted, “[j]udicial estoppel is a common law doctrine which prevents a party from asserting a position in a legal proceeding which is inconsistent with a position the same party successfully asserted in an earlier proceeding.”
In the bankruptcy context the Court stated that “[j]udicial estoppel applies to ensure that a debtor ‘who denies owning an asset, including a chose in action or other legal claim, cannot realize on that concealed asset after the bankruptcy ends.” In this case, Debtor represented in his schedules that he had no accounts receivable, no unliquidated debts owed to him, and no contingent or unliquidated claims of any nature. However, it was clear Debtor knew he was entitled to the commission before he filed for bankruptcy.
In addition, the Court found that Debtor had no legal standing to even bring this claim because the claim became property of the bankruptcy estate. In this case, the trustee never abandoned his interest in the property because Debtor never scheduled the property in the schedules. Therefore, the Court ruled that the property was property of the bankruptcy estate.
In sum, Debtor could not claim an interest in his commission because he was dishonest in his petition. If you have questions about this decision or Chapter 7 bankruptcy law, you may wish to consult with a bankruptcy attorney in Illiniois for answers to your bankruptcy questions.
Illinois Subcontractor Files Chapter 7 Bankruptcy And Can Not Wipe Out Debt
Ronald F. Morgan filed Chapter 7 bankruptcy in Illiniois on November 6, 2009. He was president of RFM Enterprises, Inc. which was doing business as Newgrom Construction. Newgrom entered into a subcontract with Plaintiff, Nicholas & Associates, Inc. for a construtction project with the Kaneland Community School District.
Newgrom Construction agree to provide various construction services for the Kaneland Project. In order to receive payment for its services, it ws required to submit completed contractor’s affidavits and waivers of lien to the Plaintiff in accordance with applicable Illiniois mechanics lien laws. In this case Debtor signed all of the contractor’s affidavits under oath and as president of Newgrom Construction.
According to the affidavit if a supplier was not listed on the contactor’s affidavit, then this meant that the material provided by Newgrom Construction for the Project had been previously paid for by Newgrom Construction. From November 2008 through July 2009, Newgrom Construction began ordering materials and supplies from Westmont for use at the project. Westmont delivered approxmiately $225,000.00 in materials for use at the project.
Newgrom Construction received waivers of lien from Westmont in connection with some of the materials which it supplied for the Project. Neither Debtor nor NewGrom forwarded the lien waivers to the Creditorl. From July through September of 2009 Plaintiff made progress payments to Newgrom in the amount of $440,000.00.
After Debtor and Newgrom filed for bankruptcy protection, Westmont filed a complaint against Newgrom Construction and other defendants. Plainitff subsequently filed a complaint in bankruptcy court seeking to deny the dischargeability of debt owed to Westmont.
Plaintiff based his complaint 11 U.S.C. 523(a)(2)(A) which in relevant part states that debts based upon “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition” is not dischargeable.
In ruling against the Debtor in this case, the Court relied upon the decision in In re Malcolm, 145 B.R. 259, 263 (Bankr. N.D. Il 1992). More specifically, it noted that “[a] contractor’s affidavit certifying that subcontractors and materialmen have been paid and that there are not mechanic’s or materialmen’s lien’s against the property when in fact such subcontractors have not been paid may … result in a nondischargeable debt under Section 523(a)(2)(A). Cripe v. Malhis, 360 B.R. 662, 667 (Bankr. CD. Ill. 2006).”
In this case the Court followed the reasoning in the above two cases and held that the affidavits provided by Debtor met the legal criteria for nondischargeability under 523(a)(2)(A). Here, like in the cases referred to herein, the Debtor provided false contractor affidavits.
If you have questions about bankruptcy law in Illinois or need to speak to an Illinois bankruptcy attorney about filing Chapter 7 bankruptcy in Illinois you may wish contact an Illinios bankruptcy attorney or visit our website for additional information.
Chapter 7 Bankruptcy Debtor In Illinois Granted Discharge Despite Omissions In Petition
Steve Arstein filed Chapter 7 bankruptcy in Illinois on June 18, 2009. Prior to filing his case, Plaintiff, LaSalle/Madison Partners, LLC, filed a lawsuit against Debtor seeing $77,314.00 in damages.
Plaintiff filed its complaint in bankruptcy court on three separate grounds. It sought to deny Mr. Arstein a discharge because he failed to list a transfer of a 2003 Ford Escape to his wife which was within one year of the filing of his petition. Additionally, Plaintiff claimed Debtor’s discharge should be denied because he failed to list a lawsuit on Question 21 of Schedule B. The lawsuit involved a defamation claim involving a blog post. Finally, Plaintiff contended that Debtor failed to list a transfer of real estate on for property located at 915 Huckleberry Lane, Northbrook, Illinois from himself and his wife as joint tenants to th lee Ann W. Arstein Family Trust. The transfer occurred on August 29, 2006.
Pursuant to bankruptcy law, Question 10(b) requires debtor to “[l]ist all property transferred by debtor within ten years immediately preceding the commencement of this case to a self-settled trust or similar device of which the debtor is a beneficiary.”
Debtor did not deny any of Plaintiff’s allegations but asserted in his defense that the information was provided to his bankruptcy attorney. As to the failure to list the defamation action against the third party, Debtor testified that he thought the lawsuit was settled without a financial arrangement once the defamatory blog had been removed and that the defendant had gone out of business. He further testified that the vehicle had been transferred to his wife because it had always been her vehicle and she used it exclusively.
In ruling that Plaintiff failed to meet its burden of proof the Court found that Debtor’s testimony was credible and that the transfer by Debtor to his wife of the vehicle which was unencumbered was made close in time to when the lawsuit was pending. It further noted that although the transfer to the trust of the real estate was not listed on the Statement Of Financial Affairs, it was listed on Schedule A as an asset, on Scheduled D as a secured debt, an the mortgage company had filed a motion for relief from the Automatic Stay. Based upon these facts the court found Debtor did not attempt to conceal assets from his creditors.
The lesson to be learned from this case is that it is important to give accurate information to your bankuptcy attorney for your petition. If you have questions about bankruptcy law in Illinois you may wish to consult with an Illinois bankruptcy attorney or visit our state page.
Chapter 7 Bankruptcy In Illinois: Court Allows Debtor To Protect Disability Policy
Steve and Kim Bowen filed their Chapter 7 bankruptcy in Illinois on May 11, 2011. They listed two disablity policies having a cash value of approximately $7,777.00; and the claimed that pursuant to Illinios law these polices were exempt from their creditors in their Chapter 7 case.
The Chapter 7 trustee maintained that although cash value in a life insurance policy or an endowment policy would be protected, cash value in a disability policy would not be protected. More particularly, the trustee claimed Illinois law only protected cash value in a life insurance policy and that these were disability policies. Furthermore, the Chapter 7 trustee argued that Mr. Bowen could not exempt the cash value because he was not currently receiving a disability benefit.
The Debtors argued that the policies could be protected from credtiors because the policies had a life insurance component to the policy. According to the trustee, the statute only protected the right to receive a disability benefit but not actual cash value.
The Court disagreed with Debtor’s argument that the disability polices could be protected on the basis that actually constituted an annuity contract or annuity contract. However, the Court pointed out that although the disability policy has some life insurance component to it, this was merely incidental to the disability policy and did not determine whether the cash value could be protected under Illinios law.
Therefore, the Court ruled that the disability cash values could not be protected because they did not constitute a life insurance or endowment policy. The trustee argued that the cash value of the policy would not be exempt because it was not a right to receive a benefit because it had already been reduced to cash value and that Illinois law only recognized a right to receive a benefit rather than the benefit itself.
However, the Court disagreed with the Chapter 7 trustee and stated that the Illionois law exempted all rights to disability benefits and “does not limit itself only to those currently being received, nor does it exclude those that are contingent. As a matter of public policy, individuals should be encouraged to provide for their own subsistence needs should they become disabled and unable to work.”
Iowa Debtor Not Allowed To Exempt Accrued Income Tax Refund Under Garnishment Statutes
Debtor was due a tax refund in the total amount of $5,839.00. She exempted $1,250.00 of her tax refund under two different Iowa Code Sections 627.6(10) and 627.6(14). She sought to exempt the remaining portion of her accrued tax refund under two separate garnishment statutes.
Previously the Eighth Circuit Bankruptcy Appellate Panel held that Iowa’s garnishment statutes are available to a debtor in a debtor’s bankruptcy case. More specifically, the decision in the case of In re Irish, 311 B.R. 63, 67 (B.A.P. 8th Cir. 2004) held that a bankruptcy debtor did not have to have a garnishing creditor in the traditional sense to apply the garnishment protection statutes and ruled that the debtor could utilize both the $1,000.00 exception for wages and taxes refunds in addition to any amounts which could be protected from creditors under the garnishment protection statutes.
The chapter 7 trustee objected, however, because the garnishment statutes protected wages and not accrued income tax refunds. Debtor argued that the accrued income tax refunds were derived from wages and thus should be protected under the garnishment statutes. The garnishment statutes protected earnings.
In denying Debtor’s claim of exemption the Iowa Bankruptcy Court pointed out that Kokoszka v. Belford, 417 U.S.642 , (1974) the United States Supreme Court held that a debtor could not exempt 75% of an income tax refund using the Consumer Credit Protection Act’s limitation on wage garnishment. Furthermore, the Iowa Bankruptcy Court pointed out that “opt out” states like Iowa have held that tax refunds do not qualify as “earnings” under a state garnishment statute.
In sum, Debtor, in this case was required to turnover the remainder of the tax refund to the chapter 7 trustee. If you have questions about Chapter 7 bankruptcy in Iowa which is also sometimes commonly referred to as bankruptcy Chapter 7 please visit our state pages. If you have questions about Chapter 13 bankruptcy please visit our state page as well.
Chapter 7 Bankruptcy In Iowa And Student Loans
Susan M. Shaffer filed for Chapter 7 bankruptcy protection in Iowa on April 15, 2010. On July 23, 2010 Debtor commenced this adversary proceeding seeking to discharge her student loans pursuant to 11 U.S.C.523(a)(8) of the Bankruptcy Code.
Her total student loan debt was approximately $204,525.00. The evidence in the case showed that Debtor began her college education at the University of Northern Iowa in Cedar Falls. Subsequently she became a student at the University of Iowa and received a Bachelor of Arts degree in Psychology. She also attended Kirkwood Community College and obtained pre-pharmacy credits.
Furthermore, the record reflected that since “her mid-teens, the Debtor has been challenged by mental health conditions, including eating disorders, depression, self-harm and anxiety. Consequently, her higher eduation has been impacted as deomonstrated by a delay in obtaining her bachelor’s degree and a low grade point average which resulted in three semesters being removed from her academic record at the University of Iowa.”
In addition, Debtor enrolled in the Palmer College of Chiropractic Medicine in Davenport, Iowa but left that program prior to receiving her degree because she realized she would never be able to repay the student loans.
Debtor had interviewed for several health field related positions but the only employment she was able to find was with the University of Iowa as a Clerk III. In the years preceding the filing of her bankruptcy petition, the Court noted that Debtor had earnings which ranged from $1,480.00 to $31,977.00. In some of the years Debtor supplemented her income by withdrawing from her retirement funds. She also accepted money from family members. She testified that although a Clerk IV position pays $34,000.00 annually she did not have the requiste supervisory experience for that position.
In this case the Court asserted that based upon the evidence, it was doubtful that Debtor would experience a substantial decrease in her overall monthly expenses in the future. In addition, the Court noted that Debtor’s living expenses were reasonable. In ruling that the student loans should be discharged, the Court noted that a debtor is not required to live in abject poverty to demonstrate undue hardship.
Furthermore, the Court noted that Debtor suffers from diagnosed mental health issues, including unspecified eating disorders, depression (bi-polar) and anxiety. Debtor did not qualify for disability as she could work but the Court stated that incapacity to work is only one of the factors to be examined in determining undue hardship. But the Court noted there “is no requirement that a debtor prove qualification for disability benefits or be completely unable to work due to a disability in order to be successful in demonstrating an undue hardship.”
The Court further found that Debtor was unlikely to find employment in a position which would significantly increase her income in the forseeable future. Interstingly, the Court also noted that although Debtor did not attempt to repay her student loans through a program such as the Income Contingent Repayment Program, the total consolidated payments would amount to $614.00 per month and based upon her current income and expenses “Plaintiff is unable to meet even the combined lower monthly payment obligations to Lenders.”
Finally, the Bankruptcy Court stated: “[w]hile Debtor’s employment and education decisions my not have been objectively reasonable, the fact remains that even under the available payment options, Shaffer does not have the ability, based upon her education and employment history, to make payments on the student loans and maintain a minimal standard of living.”
Based upon the foregoing, the Court allowed Debtor to discharge her student loans. If you have questions about Chapter 7 bankruptcy or bankruptcy law generally, you should contact a local bankruptcy attorney to discuss your case.
Debtor In Kansas Cannot Keep Tax Refund
Bobbi Karen Studsstill filed for Chapter 7 bankruptcy in Kansas on April 22, 2011. Debtor was not represented by a bankruptcy attorney. The Kansas legislature passed a bill which provided that a debtor “in Kansas is entitled to exempt from the bankruptcy estate the right to receive the federal and state earned income tax credit for one year.”
However, as the bankruptcy court noted, this law did not apply to Debtor “because she received the refund and converted it to cash prior to that effective date.” In this case the Debtor and the Chapter 7 trusteee stipulated that in February 2011 Debtor received a tax refund of $1,829.74 from her 2011 federal income tax return. Debtor did not list the refund on Schedule C but she listed $400.00 in cash on Schedule B. Debtor admitted show held approximately $1,300.00 in cash from that tax refund as of the petition date.
Pursuant to Kansas law, Debtors on or after April 14, 2011 are entitled to retain their tax refund from a state or federal tax refund. As the bankruptcy court noted, the Kansas statute went into effect on April 14, 2011. When Debtor received her income tax refund in February of 2011 there was not a statute in place which would protect a debtor’s ability to keep an income tax refund. Moreover, the bankruptcy court noted that [r]egardless of the characterization of the $1,300.00 as cash or as refund, there was simply no state exemption available to her when she received the money. Therefore, the conversion of that tax refund to cash is also not exempt, becasue the tax refund was not exempt in the first place.”
The Court went on to note that “[a]t the date of filing her peitition, she held cash — converted from a non-exempt tax refund, and tehre was and is no exemption available for cash under the Kansas statutes.” Therefore the bankruptcy court held the Chapter 7 Trustee had met the burden of proof an the $1,300.00 should be turned over to the trustee.
If you have questions about Chapter 7 bankruptcy in Kansas or bankruptcy law generally, you should consult with a local bankruptcy attorney.
Debtor In Kansas Cannot Keep Tax Refund
Bobbi Karen Studsstill filed for Chapter 7 bankruptcy in Kansas on April 22, 2011. Debtor was not represented by a bankruptcy attorney. The Kansas legislature passed a bill which provided that a debtor “in Kansas is entitled to exempt from the bankruptcy estate the right to receive the federal and state earned income tax credit for one year.”
However, as the bankruptcy court noted, this law did not apply to Debtor “because she received the refund and converted it to cash prior to that effective date.” In this case the Debtor and the Chapter 7 trusteee stipulated that in February 2011 Debtor received a tax refund of $1,829.74 from her 2011 federal income tax return. Debtor did not list the refund on Schedule C but she listed $400.00 in cash on Schedule B. Debtor admitted show held approximately $1,300.00 in cash from that tax refund as of the petition date.
Pursuant to Kansas law, Debtors on or after April 14, 2011 are entitled to retain their tax refund from a state or federal tax refund. As the bankruptcy court noted, the Kansas statute went into effect on April 14, 2011. When Debtor received her income tax refund in February of 2011 there was not a statute in place which would protect a debtor’s ability to keep an income tax refund. Moreover, the bankruptcy court noted that [r]egardless of the characterization of the $1,300.00 as cash or as refund, there was simply no state exemption available to her when she received the money. Therefore, the conversion of that tax refund to cash is also not exempt, becasue the tax refund was not exempt in the first place.”
The Court went on to note that “[a]t the date of filing her peitition, she held cash — converted from a non-exempt tax refund, and tehre was and is no exemption available for cash under the Kansas statutes.” Therefore the bankruptcy court held the Chapter 7 Trustee had met the burden of proof an the $1,300.00 should be turned over to the trustee.
If you have questions about Chapter 7 bankruptcy in Kansas or bankruptcy law generally, you should consult with a local bankruptcy attorney.
Thinking of Filing Chapter 7?
Over the past months, years and decades, so many people have seen themselves on the verge of losing their jobs, homes and other assets due to debt. At such times, starting afresh is the only solution. But, how is one bound to start rebuilding themselves and their businesses when already in debt? This is where filing for Chapter 7 bankruptcy comes in.
Generally, Chapter 7 bankruptcy is designed to help individuals, couples or partnerships who are currently in a hard financial situation and are in dire need of a reliable and working solution that’s guaranteed to give debt relief. The key distinction between this and other forms of bankruptcy is that the Chapter 7 option gives one a chance to keep some of their assets. As such, once one has filed for Chapter 7 bankruptcy, they are supposed to surrender some of their property (non-exempt property) to a trustee who has been appointed to oversee the case. The property is then sold or liquidated and the money got used to repay the creditors. If there’s any other debt left unpaid, it’s erased.
Filing for bankruptcy despite it being an easy process may be quite tedious and expensive. This is because you’ll be required to start by filling out a means test, completing credit counseling, putting together the legal paperwork (list of assets, income statements, monthly expenditures, liabilities and debts among others), submitting the paperwork to a bankruptcy court, attending a meeting with your creditors and trustee where you have to answer all of their questions, waiting for 60 days to see if any of the creditors will contest your bankruptcy filing and finally, waiting for another three to six months before the liquidation gets finalized.
Although this seems to be an easy process, it’s highly advised that one hire an attorney who specializes in this or related cases. This is because a Chapter 7 attorney will help you understand what is expected of you, ensure that your property is protected, that you’re not taken advantage of, that your rights aren’t violated, that all of your dischargeable debts are erased and, ensure that the case is effectively and efficiently handled. Some of the things that the attorney can help you with include; finding if you are eligible to file for bankruptcy, helping you file an official petition in a bankruptcy court, putting a hold on any creditors and protecting you from creditor harassment especially ones who may want to file a lawsuit against you, ensuring that you get a credible trustee, relieving you from stress and, making sure that all of your exempt property is protected.
When going about choosing your Chapter 7 bankruptcy lawyer in Kennesaw, Georgia, it’s highly advised that you hire one who is well experienced in handing such cases, one that is affordable (neither too cheap nor too expensive) and one with a good track record.
Filing for bankruptcy is hence highly beneficial in a number of ways, but most especially being that it gives one a chance to start their journey towards financial recovery since it lets you keep most of your necessities like home or car. Also, one’s credit rating is bound to improve significantly.
If you have any questions about filing for bankruptcy, please contact Roger Ghai at (770) 792-1000 or email him at roger@chapter7attorneys.com
Understanding The Chapter 7 Bankruptcy Means Test
Chapter7Bankruptcy
Understanding the Chapter 7 Bankruptcy Means Test
Chapter 7 bankruptcy allows you to discharge some or all of the debts you owe while protecting your most important assets from seizure. However, this type of bankruptcy is reserved for people who cannot afford to pay what they owe. Thus, in order to qualify for chapter 7 bankruptcy, the court may require you to pass the means test.
About the Means Test
The means test is a test designed to determine whether your net monthly income is low enough to qualify for chapter 7 bankruptcy protection. The means test is only required if the amount of income you earn each month is more than the median income in your state of residence for a household of equal size. For example, if the median income in your state of residence for a family of three is $50,000 and your family of three earns only $40,000, you will not have to pass the means test in order to file chapter 7 bankruptcy.
How it Works
If you are required to pass the means test, you will begin by calculating your net monthly income, which is your total monthly income minus certain “allowed” monthly expenses, such as your mortgage, car loan payment or insurance costs. If this amount is too high, you will fail the means test, and you cannot file chapter 7 bankruptcy. According to US Courts, the amount may be considered too high if the total over five years would be either greater than $12,475 or greater than 25 percent of your unsecured debts.
What if You Fail?
If you fail the chapter 7 means test, the court will not allow you to file for chapter 7 bankruptcy protection. However, you can still qualify for chapter 13 bankruptcy, which allows you to repay your debts over time.
If you have questions about this article or are thinkng of filing bankruptcy, you may contact Roger Ghai at (770) 792-1000 or email him at roger@chapter7attorneys.com. Roger represents clients in the Kennesaw, Marietta, and metropolitan Atlanta areas.
Post Bankruptcy: Verifying your credit report
Credit reports are important to us for a number of reasons. When we apply for a job, apply for an apartment and even when we apply for insurance, our report may be reviewed. What is even more important is to make sure that your credit report is accurate. If you have been notified by your Chapter 7 bankruptcy lawyer in Acworth that your Chapter 7 has been discharged, you will need to verify your report is reflecting that status accurately.
Reviewing your report
Consumers are entitled to receive credit reports free of charge at specific intervals. Each credit reporting agency is required to provide you one free report annually and if you have been denied credit, you may also request a free report. Your free report under federal law may be obtained by filling out a short form at annualcreditreport.com.
What should you look for?
Your bankruptcy as well as the discharge should show in the “public records” portion of your credit report. However, it is important that you verify that all of your accounts that were discharged in your bankruptcy show a zero balance. Creditors do not have to remove the account simply because it was discharged; they may continue to keep a record of your prior payment history as well as showing the balance as “charged off” but the balance should be zero.
What if I find inaccuracies?
You have a right to have accurate information on your credit report. Should you find a discrepancy, such as creditors who are reporting a balance after a Chapter 7 bankruptcy discharge, you should contact the creditor and the credit bureau. When you send a query in, include a copy of your discharge notice as well as the itemized list showing which debts were discharged. If you do not have this documentation, your Kennesaw bankruptcy attorney can assist you in obtaining a copy.
How often should I check my report?
Since each credit bureau is required to give you a free credit report on an annual basis, it may make sense to request a different report every four months. This may be particularly important after bankruptcy to make sure that debts do not “reappear” on your credit report. Keep in mind, even when you file bankruptcy, the creditor may have already resold the debt you owed. While the debt buyer cannot continue to report the debt as unpaid or collect on it, they may not be aware of the bankruptcy and may report it.
Once you have completed the bankruptcy process, you will want to begin to work on rebuilding your credit as quickly as possible. The best way to do that is to start off by verifying your credit report is accurate. If you find any debts that are reported inaccurately after your bankruptcy is discharged, generally they can be removed fairly easily by contacting the creditor by phone or mail and providing your bankruptcy case number. However, if any creditor refuses to correct your record or if any item keeps reappearing on your credit report, contact your Kennesaw bankruptcy attorney for assistance. Bankruptcy is meant to give you a fresh start and you can only get a fresh start if your credit report is accurate. If you have any questions, please call Roger Ghai, Law Offices Of Roger Ghai, at (770) 792-1000.
Protect Your Home From Foreclosure
Protecting yourself from foreclosure through bankruptcy
Even though the housing crisis seems to have largely resolved itself, too often, homeowners may still face the possibility of foreclosure. One of the ways to stop foreclosure is to seek the assistance of a bankruptcy attorney who understands how to file for protection under the Chapter 7 bankruptcy laws.
How does Chapter 7 bankruptcy help?
When a consumer files for Chapter 7 protection, there is an immediate stay put on the foreclosure notice. This means any action the lender has taken must come to an immediate halt. Filing Chapter 7 does require a means test, but most consumers can qualify for this relief. Your Chapter 7 attorney in Kennesaw can help you determine if you meet the requirements.
What happens if I meet Chapter 7 requirements?
Homeowners who are facing foreclosure will gain some time to pay their mortgage. Under the terms of Chapter 7, your lender will generally be willing to work out options for you to pay additional funds along with your normal mortgage payment on a monthly basis. This means you do not have to pay all of the arrears at once, instead you can spread the payments out over a period of time.
What happens if I miss a mortgage payment after Chapter 7?
In the event you are unable to make your mortgage payments after you file Chapter 7, you may still be facing foreclosure. Keep in mind, Chapter 7 is meant to give those who are struggling to meet monthly credit card payments or medical bills a fresh financial start. Homeowners who wish to keep their home must make sure they are able to make their regular mortgage payments as well as remain current on taxes and insurance.
How do I know if I meet the requirements for Chapter 7 bankruptcy?
When you contact a Chapter 7 bankruptcy attorney in Kennesaw, you will be asked to provide a list of your current income as well as a list of your current debt. The more complete this schedule is, the easier it will be to determine your eligibility. Keep in mind, debtors must include all debts in their schedule of debts in order for them to be cleared in the Chapter 7 proceedings. Debtors will also be required to attend a credit counseling course that may be available locally or online.
What happens if I’ve filed bankruptcy in the past?
Under the current bankruptcy rules, those who have had a bankruptcy discharged are prohibited from filing for a period of eight years after the discharge. When you initially speak with a Kennesaw bankruptcy attorney, make sure you advise them of any previous bankruptcy filings and discharges.
Homeowners who are facing foreclosure are often confused about the current Chapter 7 rules and may not know what options are available to them. You should speak with an attorney who understands the Chapter 7 rules and seek immediate relief from a foreclosure notice. Keep in mind, ignoring a foreclosure notice is never a good idea, the wait could cost you your home.
Should I Sell Some of My Assets Before Filing Bankruptcy?
Sometimes when debtors find they simply cannot make their debt payments, desperation sets in and they begin the process of liquidating property they know they can live without. Oftentimes, these assets include jewelry, handguns, artwork and even tools. However, one of the problems is that if you liquidate assets and you still wind up filing for bankruptcy, these sales could potentially cause you problems.
The Look Back Period
When you meet with a Chapter 7 bankruptcy lawyer in Kennesaw, GA, you will have to fill out a number of forms including schedules of assets. As part of that schedule, you will be asked to list any property (personal and real estate) that you transferred or sold in the last 24 months. In some cases, trustees may ask for additional information including:
- Amount of sale – you may have to provide documentation showing how much you sold the property for as well as the fair market value of the property at the time of sale. If you sold the property to a family member for less than market value, the Trustee may use a process called “claw-back” where they will recover the property and sell it at fair market value to pay creditors.
- Use of proceeds – if you sell $5,000 worth of jewelry and turn around and purchase a large-screen television, the Trustee is going to be very unhappy. However, if that $5,000 is used to pay your mortgage, utility bills and purchase food, they will probably be fine with it. Make sure you have documented how you have spent money from any sales proceeds.
- Use caution with 401(k) and IRA – if you have liquidated funds from a 401(k) plan or IRA and used it to pay off family or friends for loans, you could be putting these otherwise exempt assets at risk in a bankruptcy proceeding. Make sure you let your Kennesaw bankruptcy attorney know if you have taken this step.
Protecting Yourself From Fraud Charges
It is seldom a good idea to sell property just before filing for bankruptcy as the sale could mean you are charged with bankruptcy fraud. If you are facing overwhelming debt, rather than selling off property to try to keep your head above water, consult with a Kennesaw bankruptcy attorney and see what your options are. While some property may be sold without problem, you could risk your right to file bankruptcy if you sell property, particularly if it is sold for less than market value.
Keep in mind, you should also avoid transferring real estate, automobiles and other property that can be transferred to spouses, children or family members prior to filing bankruptcy. While you may think this is protecting the asset, in the long run, it could cause you far more problems than you need. On top of no longer having access to an asset, you could be facing fraud charges and you could also forfeit your right to seek protection under Georgia bankruptcy laws.
If you are in debt, before you decide to start selling off your assets, contact Roger Ghai, a bankruptcy attorney in Kennesaw at the Law Offices of Roger Ghai at (770) 792-1000; unfortunately, sales of assets could prevent you from filing for bankruptcy and getting a fresh financial start.
Chapter 7 Bankruptcy And Student Loans
Kristin E. Gourlay filed for Chapter 7 bankruptcy in Kentucky. Her bankruptcy attorney filed an adversary complaint in the bankruptcy case requesting that the student loan debt to Sallie Mae, Inc. be discharged pursuant to 11 U.S.C. 523(a)(8). Sallie Mae, Inc. never filed an answer to the complaint and Debtor’s attorney filed for a default judgment against Debtor.
Sallie Mae filed a motion to set aside the default judgment under the legal theory that they did not file their answer as a result of excusable neglect. The motion to set aside the judgment was denied by the bankruptcy court and Sallie Mae appealed the decision to the Bankruptcy Appellate Panel Of The Sixth Circuit. Under the Federal Rules of Civil Procedure which were adopted by the bankruptcy act, a final order may be reviewedunder Federal Rule of Civil Procedure 60(b) for an abuse of discretion.
As the Court pointed out, an “abuse of discretion will be found where the reviewing court has a definite and firm conviction that the court below committed a clear error of judgment… The question is not howe the reviewing court would have ruled, but rather would a reasonable person agree with the bankruptcy court’s decision; if reasonable persons could differ as to this issue, there is no abuse of discretion.”
In this case, Debtor instituted her adversary proceeding against Sallie Mae on May 19, 2011. Debtor owed Sallie Mae aproximately $25,495.06. On May 23, 2011 the bankruptcy court issued the summons, which Debtor’s bankruptcy attorney mailed to Sallie Mae on June 6, 2011. On June 8, 2011, “S. Williams,” who Sallie Mae believes is a part-time employee named Steven Williams, signed the certified mail receipt for the summons and complaint. On June 8, 2011, Debtor filed an affidavit of service attesting that the summons and complaint, and order for trial were send by certified mail to John (Jack) F. Rmondi, President and Chief Operating Officer, Salled Mae, 1261 Bluemont Way, Reston, Virginia 20190-5684.
The judgment of default was entered against Sallie Mae on July 8, 2011. On August 4, 2011 the bankruptcy court denied Sallie Mae’s motion to set aside the default judgment on the basis that it found the complaint was properly served and that Sallie Mae’s internal processing breakdown is insufficient to overcome the requirments of Rule 60b). The bankruptcy court further noted that “[i]t’s not excusable neglect and the defendant has not shown why it’s not culpable for having not responded to the complaint properly served.”
In ruling against Sallie Mae, the appellate court indicated that the standard for setting aside a default judgment was much higher than simply setting aside a default. More particularly, as the court noted, [o]nce a default judgment has been entered, as it was here, the bankruptcy court’s discretion to set aside the judgment is ‘circumscribed by public policy favoring finality of judgments and termination of litigation.
Sallie Mae argued that it’s failure to file an answer was not due to culpable conduct but rather excusable neglect. However, the Bankruptcy Appellate Panel was unpersuaded and pointed out that Sallie Mae could not prove excusable neglect under Rule 60(b)(1) a motion to set aside a default judgment have required a showing that minimal internal safeguards designed to make sure that process reaches the appropriate personnel and action is taken.
For these reasons, the Appellate Panel ruled in favor of Debtor. If you have questions about Chapter 7 bankruptcy in Kentucky, it is strongly recommended that you seek a bankruptcy attorney in Kentucky.
Chapter 7 Bankruptcy Trustee In Kentucky Strips Lien On Vehicle
Lisa G. Godsey filed for Chapter 7 bankruptcy protection in the Eastern District Of Kentucky. The Chapter 7 trustee sought to avoid, or, do extinguish the lien General Electric Credit Union thought it held on Debtor’s 2005 Nissan Ultima.
The facts in this case deomonstrate that on December 22, 2007, Debtor financed a 2005 Nissan Ultima with General Electric Credit Union, hereinafter, “GE.” The loan agreement with Debtor was entered into in the State of Ohio.
On Janaury 18, 2008 a Title Lien Statement was recorded in the Kenton County Clerk’s office in Kentucky. The Certificate of Title which was issued incorrectly identified Nissan Motor Acceptance Corporation as the lienholder with an address of 915 L Street, Sacramento, California 95814. This was the address associated with Nissan Motor Acceptance Corporation. However, the notation number on the certificate of title correctly reflected the Title Lien number assigned to GE.
The issue before the bankruptcy court was whether GE’s lien was properly perfected. As the Court noted, Kentucky law determines whether a security interest in a vehicle is perfected. Furthermore, in Kentucky the only manner of perfecting a security interest in a vehicle is by a notation on the vehicle’s certificate of title. In fact the Court noted that [t]he plain language of K.R.S. Section 186A.190 requires the name, the mailing address and the zip code to be on the certificate of title for proper perfection.”
The bankruptcy Court noted that to GE’s detriment, the County Clerk failed to follow the Kentucky perfection statute because it transcribed the wrong lien holder on the certificate of title. The Court went on to note in this Chapter 7 bankruptcy case that “[p]erfection is not accomplished when the required paperwork and fee are submitted to the county clerk.” It further stated that perfection of a vehicle lien does not occur until physical notation is made on the title ‘pursuant to K.R.S. Section 186.190.
The bankruptcy court specifically stated that although there was a correct notaion number on the certificate of title, the “notation number cannot save General Electric where its name and address were not properly noted.” It also rejected the argument that negligence or mistake on the part of the clerk was sufficient to excuse non-compliance with the Kentucky statute.
In sum the Court concluded that pursuant to 11 U.S.C. 544(a)(1) of the bankruptcy law, the Trustee holds the status of a hypothetical judicial lien holder against the Debtor’s personal property without the trustee’s actual knowledge. In sum, as a hypothetical lienholder, GE’s unperfected lien was subordinate to the Trustee’s interest in the vehicle which could be sold by the trustee pursuant to 11 U.S.C. 544 in order to recover value for the benefit of the bankruptcy Estate pursuant to 11 U.S.C. 550. Therefore, the trustee was allowed to sell the vehicle unencumbered.
If you have questions about the perfections of security interests in Kentucky and are thinking of filing for Chapter 7 in Kentucky, it is advisable that you seek an opinion from a Kentucky bankruptcy attorney for information about your possible case.
Debtor Undervalues Real Estate So Discharge Denied
More specifically, the court found that Debtor committed a false oath in violation of 11 U.S.C. 727(a)(4)(A) and the court denied Debtor a discharge of his debts.
Debtor, Ed Edwards, had attended the University of Kentucky and Marshall University and received both a bachelor’s degrees in both mechanical engineering and mathematics. He also completed thirty hours of graduate school studying mathematics and physics.
Debtor owned several pieces of real estate. He had an appraisal for one piece of real estate for $235,000.00 but listed its value at $105,000.00. He had another appraisal on another piece of property for$90,000.00 but listed its value as $41,000.00. On a third property the appraisal was $105,000.00 but listed it as being only worth $67,000.00.
The Chapter 7 trustee contended that Debtor violated 11 U.S.C.727(a)(4)(A) because he knowingly made false statements under oath in connection with his bankruptcy case. In finding that the Debtor violated this Code Section, the Court stated that “[t]he values used by Debtor in his schedules were significantly lower than the appraised and fair market values of the properties.”
The Court went on to say that it is well-established that a debtor’s statements made in his schedules and amendments thereto are given under oath. Moreover, in proving that the Debtor knew these statements to be false, the Court said that knowledge may be shown by demonstrating the debtor knew the truth but failed to give the information or gave contradictory information. In this case, because Debtor was aware of the appraisals, the Court ruled Debtor had actual knowledge of the falsity of his statements. As a consequence, the Court denied Debtor’s request for discharge.
If you have any questions about Chapter 7 bankruptcy in Kentucky or Chapter 7 bankruptcy, please feel free to visit our state pages. If your interest is Chapter 13 bankruptcy, please feel free to visit that page as well.
Understanding a no-asset Chapter 7 bankruptcy
While a Chapter 13 bankruptcy involves restructuring debt, Chapter 7 is more commonly known as the liquidation form of bankruptcy. When you meet with your Marietta bankruptcy attorney, one of the items that will be discussed is what assets you own including household items, automobiles and other similar assets. However, in many cases, there will be no assets available for liquidation after a debtor has taken the exemptions they are allowed under the bankruptcy code. For example, Georgia bankruptcy clients have no option to elect for the federal bankruptcy exemptions but they are eligible for the following exemptions:
- Homestead exemption – debtors may claim up to $21,500 in real property including a co-op and if both spouses are claiming bankruptcy, the amount doubles.
- Motor vehicles – you can claim up to $5,000 in equity in your car and if your equity is more, you may be able to use excess portions of your homestead plus Georgia’s “wildcard” exemption of $600. The exemption is doubled if both spouses are filing bankruptcy.
- Personal property – including up to $500 in jewelry, $5,000 in household items, burial plots, health aids and up to $10,000 in personal injury compensation.
- Federal benefits – some federal exemptions do apply even though Georgia does not allow Chapter 7 bankruptcy clients to use them for their filing including certain income from the VA, disability payments and pension plans.
These are only some of the exemptions that are offered to those considering filing Chapter 7 bankruptcy, your Marietta bankruptcy attorney will help you review the entire list to ensure that you are using most of them.
What about assets not covered by exemptions?
As an experienced Marietta bankruptcy attorney, it is very seldom we have applicants for Chapter 7 bankruptcy with more assets than the bankruptcy code allows exemptions for. However, the role of the bankruptcy trustee is to review your case and determine whether you have other assets of value. In most cases, since you have declared all of your assets, it will be up to the trustee to determine whether or not selling the remaining assets, not covered under the Georgia exemptions, will net sufficient proceeds to satisfy your creditors. In most cases, the trustee determines the assets are insufficient and therefore they proceed with the case without any liquidation hence the name “no asset bankruptcy”.
The bankruptcy code is very complicated and it is imperative that you seek the right assistance when you are considering filing Chapter 7 bankruptcy to ensure that you are getting all of the exemptions you are entitled to under the law.
Most debtors will be able to keep their assets when filing Chapter 7 bankruptcy. If you are considering a Chapter 7 bankruptcy filing, it is important that you work with a skilled attorney who understands the bankruptcy code and can help you protect yourself from liquidation of assets. At the Law Offices of Roger Ghai, a Marietta bankruptcy attorney, we will be happy to review your current financial status, evaluate your assets and help determine whether you qualify to file Chapter 7 bankruptcy using the current means test. Call us today at (770) 792-1000 for assistance.
Massachusett’s Attorney Can Not Discharge Debt In Chapter 7 Bankruptcy
Patricia A. Lambert, a Massachusetts attorney, filed for Chapter 13 bankruptcy on November 27, 2009. The case was subsequently converted to a Chapter 7 bankruptcy on May 15, 2011.
On of Debtor’s former clients, Barry Unger, filed a lawsuit against Debtor in the Middlesex County Superior Court in which he asserted claims against Debtor totaling $230,000.00. Mr. Unger claimed he loaned Ms. Lambert the $230,000.00 but Ms. Lambert said only a portion of the $230,000.00 was a loan and that she the balance was transferrd to her by Plaintiff for investment purposes.
At the trial the jury returned a verdict for Mr. undger and found that Debtor had made material misrepresentations regarding the transfer of money to Mr. Unger and that he relied upon those misrepresentations to his detriment. The jury found that of the $230,000.00 transferred, $55,000.00 was an investment and the balance was a loan. Debtor appealed this ruling but the Appeals Court affirmed the jury’s finding that Ms. Lambert had misrepresented to Mr. Unger material facts upon which he reasonably relied to his detriment.
After Debtor filed for bankruptcy protection, Plaintiff filed an adversary complaint in bankruptcy court and asserted that the debt was nondischargeable under 11 U.S.C. 523(a)(2)(A) or 11 U.S.C. 523(a)(6) of the bankruptcy law. The issue before the Court in this case was whether it could rely on the judgment of the state court to make a determination that this debt was not dischargeable.
In determining that the state court judgment could be used to determine the nondischargeability in this case, the Court found that the issue had been fully litigated in the state court proceeding and that it could in fact issue a ruling declaring the debts to be nondischargeable. Therefore, Debtor was unable to wipe out these debts.
If you have questions about Chapter 7 bankruptcy law in Massachusetts or whether a particular debt may be discharged, you may wish to contact a bankruptcy lawyer in Massacusetts or whatever in which you reside.
Massachusetts Attorney Files Chapter 7 Bankruptcy And Court Denies Discharge
Brian Sullivan, a Massachusetts attorney, filed for Chapter 7 bankruptcy on November 13, 2008. The Plaintiff, Stephanie R. Lussier, with whom he shared a child sought to deny him his Chapter 7 discharge. Plaintiff filed an adversary complaint against Debtor seeking to deny the discharge based upon 11 U.S.C. 727(a)(4)(A) of the Bankruptcy Code.
- As to the facts of this case, Debtor listed on Schedule B a checking account with Citizens Bank with a balance of approximately $300.00, household furnishings of $500.00, wearing apparel of $500.00, term life insurance with no cash value, a 401K retirement account with a value of $19,100.00, and a Chevrolet Chevelle worth $9,500.00. To all of the other twenty-nine types of personal property set forth on Schedule B, including furs and jewelry Debtor checked the column “None.”
On Schedule D Debtor listed the Chevrolet Chevelle as having a lien against it for $16,721.00. He listed Plaintiff on Schedule F as an unsecured creditor with whom he was involved in litigation but he did not list that debt as being disputed or contingent.
Contrary to Debtor’s representation on Schedule B, Debtor owned a Rolex Watch which was not listed on Debtor’s bankruptcy schedules. Plaintiff informed the Chapter 7 Trustee that she had given Plaintiff a watch worth $6,200.00. Debtor testified that he no longer owned that watch but that he owned another watch which and in discovery responses he indicated he had brought the watch to the meeting of creditors hearing but that he turned it over to the trustee based upon advice from his bankruptcy attorney. The Court noted, however, that Debtor’s portrayal was misleading because Debtor did not voluntarily reveal that he owned a Rolex watch and only revealed it after the Chapter 7 Trustee had been advised by Plaintiff she had given it to Debtor.
In determining that Debtor was not entitled to a bankruptcy discharge the Bankruptcy Court noted that he had actually $1,809.09 in his checking account as of the petition date instead of $300.00 as claimed. Furthermore, the Court noted that [t]he Rolex watch was the most serious omission. The Debtor proffered no legitimate excuse for his failure to list the watch on Schedule B. Although he contended that the watch had no value, the receipt from Hingham Jewelers proves otherwise.”
Furthermore, the Court pointed out that even if the watch had no value, this was immaterial as to whether Debtor was eligible for a bankruptcy discharge. As the Court pointed out because bankruptcy is a serious process, full disclosure is required.
In sum, it is important to make full disclosure when filing for bankruptcy. If you have questions about Chapter 7 bankruptcy in Massachusetts, please feel free to visit our state page or contact a local Massachusetts bankruptcy attorney.
Massachusetts Chapter 7 Bankruptcy Debtor Allowed To Discharge Debt Despite Ownership Statement
Carl W. Tucci and Yvette G. Tucci filed for Chapter 7 bankruptcy in Massachusetts on February 16, 2010. Debtor had been a customer of Plaintiff, Sampson Lumber Co., who was a seller of lumbar and building supplies, since 2003. On August 2003, Debtor completed a credit application (“Application”) with Plaintiff in order to open up an account.
In completing the application, Debtor listed Star Realty Trust (“Trust”) as the business seeking credit. The Application requested information for all owners of the Trust, and Debtor wrote only his name and address on the “Statement Of Ownership.” Debtor failed to note that he owned only a 65% beneficial interest in the trust and that Robert Carey, Jr. owned the remaining 35% interest.
Subsquently Debtor was unable to pay for the materials and Plaintiff sued Debtor in the Plymouth District Court. Plaintiff asserted claims of breach of contract, goods and sold and delivered, and quantum meruit. However, there were no allegations of fraud. A judgment was entered against Debtor in the amount of $55,801.97.
In the bankruptcy case, Plaintiff sought to have the debt declared nondischargeable pursuant to 11 U.S.C.523(a)(2)(A) and 11 U.S.C.523(a)(2)(B) of the bankruptcy law. In this case Debtor contended that he never made a false statement because the benefiary of a nominee trust is an owner of the trust and at all times he held a 65% beneficial interest in the trust.
Furthermore, he argued that any statements made by his counsel were legal arguments and not statements made by him. Debtor also maintained there was no intent to deceive, that the statements did not affect the decision to extend credit, and that the issue of fraud was not decided in the District Court lawsuit.
In this case the bankruptcy judge pointed out that “a debt in nondischargeable if obtained by the use of statement in writing (i) that is materially false; (ii) respecting the debtor’s… financial condition on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive.”
In the instant case, the judge addressed the issue of “financial condition” within the meaning of the bankruptcy statute. It noted that there was disagreement as to what this term meant and that in some decisions it has been interpreted to mean “a balance sheet and/or profit and loss statment or other accounting of an entity’s overall financial health and not a mere statement as to a single asset. However, the Court noted that financial condition has been interpreted broadly to meant something less than a “formal financial statement” which may qualify as a statement of financial condition.
Fortunately for the Debtor in this case, the Court had previously had interepreted “financial condition” more narrowly and stated that a statement of ownership of a single asset is not an assessment of the Debtor’s overall financial health. Therefore, the Court ruled that this particular debt would be discharged in this Chapter 7 case.
If you have questions about Chapter 7 bankruptcy law in Massachusetts you should consult with a local Massachusetts bankruptcy attorney.
Massachusetts Chapter 7 Bankruptcy Transfer To Trust Undone
Debtor, Lana M. Ruel, filed for Chapter 7 bankruptcy in Massachusetts on October 31, 2008. The Chapter 7 Trustee filed and adversary in the bankruptcy court to undo a transfer of real estate by Debtor to the trust. In this bankruptcy case, Debtor transferred a mortgage on her home to the Turner Family Irrevocable Trust (‘Trust”) to secure payment of a promissory note in the amount of $67,000.00.
The defendants were all beneficiaries of the trustee. The Debtor gave teh note and the mortgage to the Trust to assure payment to the Trust of of a debt that arose when she, as Trustee of the Trust, misappropriated $44,841.56, and to compensate the Trust and its beneficiaries, her defendant siblings, for any additional loss they may have incurred because of her actions.
In this case, the Court noted that under the bankruptcy laws the trustee could avoid a transfer as a preferential under 11 U.S.C. 547(b) if the trustee could show the following: 1) that the transfer in question was an interest of the debtor in property; 2) that the transfer was made to or for the benefit of a creditor; 3) that the transfer was made for or on account of an antecedent debt owed by the debtor before such transfer was made Section 547(b)(2; 4) that the transfer was made while the debtor was insolvent Section 547(b)(3); 5) that the transfer was made “(A) on or within 90 days before the date of the filing of the petition; or (B) between 90 days and one year before filing the date of filing of the petition; if such creditor at the time of such transfer was an insider Section 547(b)(4); and 6) that the transfer engabled such creditor to receive more than such creditor would receive if (A) the case were a case under Chapter 7 of [Title 11 of the United States Code]; (B) the transfer had not been made; and (C) such creditor received payment of such debt to the extent provided by the provisions of [Title 11] Section 547(b)(5).
In this Chapter 7 Massachusetts case, the bankruptcy court held that the beneficiaries of the trust were creditors because they individually had a claim against Debtor for breach of her fiduciary duty. In addtion, the Court also ruled that it did not matter that Debtor was able to exempt the entire homestead because the majority of courts have held that simply because property is exempt does not mean that the property is exempt from the powers of a bankruptcy trustee to avoid it under Section 547(b).
In addition, the Court found that the beneficiaries of the trust were insiders of the Debtor because although there was an adversarial relationship between the Debtor and the siblings “the transaction did not wholly lose its intrafamilial character. The Debtor herself remained a beneificiary of the trust. The defendants structured the note and the mortgage to permit the Defendant to pay her obligation to her siblings only when she sold her house, the timing of which she would control.”
For the foregoing reasons, the bankruptcy court ruled that Debtor’s transfer to the trust should be undone. If you have questions about Chapter 7 bankruptcy in Massachusetts you should consult with a local bankruptcy attorney.
Trust Savings Account Protected In Chapter 7 Bankruptcy
Kesnel and Bianca Morse filed for Chapter 7 bankruptcy in Massachusetts protection in Massachuseetts and sought to protect an account, hereinafter, “Savings Account,” held for the benefit of their son. Because the Morses had made contributions to the account within four years of the filing of their bankruptcy, the Chapter 7 trustee argued that he could undo the transfers for the benefit of the bankruptcy estate.
The Savings Account was originally opened in 2004 and was titled “Savings Account in Debtor’s [sic] Possession – in trust for Children.” The trust was originally opened in 2004 but there were no independent trust documents or agreements setting forth the terms of the trust. Debtors scheduled the value of the trust to be $11, 272.13. and they exempted the full value of the account pursuant to 11 U.S.C.522(d)()5) of the Bankruptcy Code.
The Chapter 7 trustee argued that pursuant to 11 U.S.C. 522(g) of the bankruptcy law Debtors were ineligible to exempt the trust and that the trustee could avoid any transfers made into the trust. In analyzing the trust law, the Court noted that the essential feature of a savings account trust is that it is revocable. Moreover, the Court discussed another decision in which a different court had held that a savings account trust was the property of the depositor and subject to levy by the IRS for outstanding tax obligations.
Therefore, the bankruptcy court held that “when the Moises filed their bankruptcy petition the Savings Account became an asset of their bankruptcy estate. There would have been no need for the Chapter 7 trustee to bring an avoidance action to recover the funds in the Savings Account, he could have instructed the Moises to withdraw all the funds in the account and turn them over to him. Except, of course, he could not compel turnover if the Moises were entitled to claims the Savings Account as exempt.”
In this case the Court relied on the decision in In re Arsenault, 31, 8 B.R. 616 (Bankr. D.N.H. 2004) for the proposition that a trust savings account is property of the estate and therefore there was no transfer for the trustee to avoid. Furthermore, the Court went on to assert that because the Savings Account was property of the estate and that the Debtors did nothing more than moving their own money from one pocket to another. Because Debtors properly exempted the Savings Account in this case, the trustee’s objection was overruled and Debtors were allowed to retain the fund in the Savings Account.
If you have questions about Chapter 7 bankruptcy in Massachusetts or bankruptcy law involving trusts in your Massachusetts you may wish to contact a bankruptcy lawyer in Massachusetts for more particular information based upon the facts of your case.
Chapter 7 Bankruptcy Attorney Sanctioned By Court
Bankruptcy attorney Georgia Curtis in Massachusetts was order to show cause (“OSC”) why she should not be sanctioned because of her “egrgious failures to comply with procedures established by the Court for thue use of the Case Management/Electronic Case Filing system (“CM/ECF”). During the course of proceedings on the OSC, however, it became apparent that Attorney Curtis’s CM/ECF difficulties were a symptom of a much larger problem as evidenced, inter alia, her repeated misrepresentations to the Court.”
In this case bankruptcy attorney Curtis filed a Chapter 7 petition on behalf of Debtor. The next day the bankruptcy court entered an order directing Debtor and Attorney Curtis to complete the petition by filing the following documents: (1) Statement of Social Security Number by October 23, 2011; (2) the Creditor Matrix Upload by October 5, 2011; (3) the Certificate of Credit Counseling by October 14, 2011; and 4) the Attorney/Debtor Signature Page 3 by October 14, 2011. The Court dismissed the case for failure to upload timely the Creditor Matrix or file the Statement of Social Security Number.
On October 18, 2011 bankruptcy lawyer Curtis attempted to file a motion to vacate the dismissal of the First Case through the Court’s electronic mail system rather than through CM/ECF. On October 20, 1011 Debtor’s attorney attempted to electronically file a motion to dimiss the first case but it contained the wrong PDF image and she was ordered to correct the filing within two business days. Instead cf correcting the filing the attorney filded a second petition which contained only the Debtor’s name which was misspelled, the last four digits of her social security number, and the county of her residence, but there was no reference to Debtor’s previous filing or her Debtor’s mailing address.
Additionally, the court noted that the Debtor’s schedules were incomplete and blank. The United States Trustee then requested that Debtor’s bankruptcy counsel disgorge the attonrey’s fees. Debtor’s attorney indicated she did not receive any attorneys’ fees and so the Court concluded that there would be nothing to disgorge.
At the hearing on the Order To Show Cause, the Bankruptcy Court pointed out to the bankruptcy lawyer that she had now offered the Court three conflicting accounts as to whether the Debtor’s schedules had been filed, “she maintained that she had not misrepresented facts to me at any hearing and returned to her earlier position that the schedules were, in fact, filed.”
In ruling that the bankruptcy attorney should be sanctioned, the Court stated that “I have reasonable cause to believe that Attorney Curtis has violated at least one of the Massachusetts Rules of Professional Conduct, if not several, warranting referral to the District Court for further disciplinary proceedings.”
The lesson to be learned from this case is that if you are searching for a bankruptcy lawyer in your area, it is highly recommended that you research the qualifications of your bankruptcy attorney and perhaps even speak to a few bankruptcy attorneys before making your selection.
Chapter 7 Bankruptcy Debtor In Michigan Can’t Wipe Out Car Loan
Doris E. Russell filed for Chapter 7 bankruptcy protection in the Michigan. Prior to filing her Chapter 7 Debtor had purchased a vehicle for her father because he could not qualify credit-wise. In this case the creditor’s bankruptcy attorney representing the Credit Union argued that the debt should not be discharged in this bankruptcy proceeding because debtor did not have any intention of paying the loan to the Credit Union herself.
Debtor borrowed money from the Credit Union to fund the purchase of a 2006 Ford F-150 pickup truck for her father. She borrowed $19, 934.58. During the trial in bankruptcy court, Debtor testified that she purchased the truck for her father but when she signed the promissory note she had no intention of paying the Credit Union back for the truck because she expected her father would repay the loan.
She further testified that the salesperson at the dealership structured the transaction so that it appeared she was financing the vehicle herself because her father did not meet the credit requirements. Ms. Russell signed the loan application in which according to the bankruptcy court “she falsely adopted the following statement: [X] You are applying for individual credit in your own name and are relying on your income or assets and not the income or assets of another person as the basis for repayment of the credit requested.”
During trial Debtor testified that contrary to this representation, she was relying upon her father to repay this loan. In this case, the Bankruptcy Court found that this was a material misrepresentation. Moreover, the Court noted that it is “reasonable to assume that borrower will be more inclined to make payments in order to keep a vehicle that she is actually using, than to make payments to keep collateral for a third party’s benefit.”
In sum, the Court found that Debtor made a false misrepresentation to this creditor regarding the loan. Additionall, after the vehicle was purchased Debtor filed bankruptcy about a month later and Debtor’s father never made one payment on the vehicle. As the Court noted Debtor testified time and again that she had no intention of repaying the indebtedness. For these reasons, the Court ruled that Debtor could not discharge the indebtedness.
If you have any questions about transactions you have entered into before filing bankruptcy you may wish to consult with a local Michigan bankruptcy attorney.
Learn How Chapter 7 Trustee Wipes Out Mortgage In Bankruptcy
In this chapter 7 bankruptcy Michigan case, the debtor filed bank Hadi D. Lebbos filed his chapter 7 bankruptcy on June 15, 2005. Mr. Lebbos owned a home located in Wayne County, Michigan.
On March 11, 2009 WAMU discovered it’s error and filed its Claim of Interest with the Wayne County Register of Deeds. In May of 2009 they filed a lawsuit against the debtor requesting that the debtor execute a new mortgage and they filed a lis pendens. Lis pendens is notice of pending litigation.
On September 23, 2009 the chapter 7 trustee filed the lawsuit to have the recording of the Claim of Interest undone. The federal bankruptcy law allows a chapter 7 trustee two years after being appointed trustee or until the close of the case to commence a preference action. The two year statute of limitation is contained in 11 U.S.C. 546(a)(1).
In deciding whether Chase’s mortgage interest had actually been perfected the court looked to Michigan law which holds that perfection occurs upon recording. In this case the recording was not in Wayne County, but was incorrectly filed in MaComb County so it was not protected. Moreover, the court held that the filing of a Claim of Interest was insufficient to perfect a conveyance in real property in the State of Michigan.
Therefore, the court ruled that the trustee could avoid pursuant to the preference avoidance powers of 11 U.S.C. 547(b)(4)(A) which allows a trustee to avoid any conveyances within 90 days of filing of the bankruptcy case. Because the security Chase’s security interest was not perfected the trustee had the right to avoid any claimed mortgage.
If you have a question about whether your mortgage company has properly filed the necessary paperwork to perfect a security interest in your home you may wish to contact your bankruptcy chapter 7 trustee. If you have any questions about chapter 7 bankruptcy Michigan or chapter 13 bankruptcy you might want to visit the particular Michigan state pages in this website.
When Is The Value Of Your Home Determined For Purposes Of Stripping A Mortgage?
In this case, Audrey Thomas had a first mortgage in the approximate amount of $73,000.00 in favor of Citimortgage and a second mortgage in the $32,522.00. When she filed her case on February 15, 2011, she valued her home at $34,000.00 and then amended her bankruptcy petition to reduce the value of her home to $32,522.00. She also then switched the order of priority mortgage holders and to reflect that Bank of America held the first mortgage and that Citimortgage held the second mortgage.
On April 6, 2011 she filed a lawsuit in bankruptcy court, technically known as an adversary proceeding, in which she wanted to strip Citimortgage’s lien. She claimed that because the property had a value of $31,000.00 Citimortgage’s lien in the amount of $72,979.33 should be held as total unsecured and she should be able to avoid it pursuant to 11 U.S.C. 506(a).
Interestingly, on June 1, 2011 Citimortgage and Bank of America entered into a subordination agreement whereby Bank of America voluntarily agreed to subordinate it’s mortgage to that of Citimortgage. In this case the court had to decide whether the value of Ms. Thomas’s property should be valued at the time of her bankruptcy petition or whether it should be valued at the time of the hearing. It also had to decide the issue of whether the subordination agreement could be effective retroactively.
The court went on to explain that according to the legislative history of 11 U.S.C. 506(a), the court has flexibility in determining value and that value does not necessarily mean forced sale or liquidation value of the collateral and it does not always mean or imply a full going concern value. More specifically, the legistlaive history referred to the fact that value would need to be determined on a case-by-case basis taking into account the facts of each case and the competing interests in the case.
As to the subordination agreement Citimortgage argued that the agreement merely reflected the intent of all parties. The court ruled that Ms. Thomas had had no legal standing to contest the agreement.
In a chapter 7 bankruptcy the issue of stripping a second mortgage does not arise because it is not legally permissible to strip a second mortgage in a bankruptcy chapter 7 case. If you have questions about chapter 7 bankruptcy in Michigan please visit our chapter 7 bankruptcy Michigan page.
Chapter 7 Bankruptcy Debtor In Minnesota Can Not Discharge Debt Base Upon Embezzlement
Daniel Conoryea filed bankruptcy in Minnesota on November 28, 2008. His former employer, Town Centre Self Storage, Inc. filed an adversary proceeding against him for embezzlement based upon 11 U.S.C. 523(a)(4) and sought to have the debt excepted from discharge in bankruptcy.
Plaintiff claimed that Debtor failed to deposit into the business acccounts approximately $25,915.00 from self-storage renters. In this case, the rent collections were not logged as receipts of revenue in the the accounting software program. There was no dispute in this case that the cash actually passed into Debtor’s hands. However, there is a sharp dispute as to what actually happened once the money went through Debtor’s hands.
The Plaintiff claimed that the Debtor was “embezzling funds, scooping money for himself without either booking or depositing the cash receipts as he should have. The Defendant maintains that he issued separate, handwritten receipts for such payments if requeste by a renter; that he separately handed the cash from each payment with a carbon copy of the handwritten receipt; and that he placed these component parts into the same envelope that he used to accumulate and hold Sentinel-entered payments made via check until Badzin (Plaintiff) picked them up from the Eagan office.”
Because the transactions were in the nature of cash, the Court elected to do an analysis of the credibility of the parties who testified at the Chapter 7 bankruptcy hearing. In analyzing the demeanor of the two parties, the Court noted that on the witness stand Plaintiff was controlled, tight, and firm in his tesitmony. That his responses were clipped-simple yes-and-no answers to his counsel’s leading questions.
Moreover, he was insistent he would not have allowed an off the books accounting of his rents. The Court went on to note that Plaintiff’s demeanor was entirely consistent with his status in life and work, as an intelligent, seasoned, take-charge entrepreneur who would have recognized the vast power of words in human interaction and commerce.
In contract, the Court noted that [d]efendant was animated, insistent, voluble in his responses. He seemed utterly eager to have his more extended narrative heard. His spontaneity gave no betrayal of underlying guile. But his demeanor could also have been the mark of someone who had swung his perspective around to create and to believe increasingly in an alternate past–a version of a story that wold rationalize his personal involvement in something that had a bad result, and perhaps allow forgiveness for whatever he had done to bring it all about.
In ruling that Debtor could not discharge this debt in his Minnesota Chapter 7 bankruptcy, the Court found that Debtor’s story was more inconsistent. If you have questions about bankruptcy in Minnesota or need to speak to a bankruptcy attorney in Minnesota please visit our state page.
Debtors Not Allowed To Discharge Debt In Chapter 7 To Wedding Planner Because Of Their False Pretenses
In the matter of Windows of Washington, LLC v. Michael R. Callahan and Rene R. Callahan, which was decided in the Chapter 7 Bankruptcy Missouri, the court ruled that the Callahans made false pretenses to the wedding caterer and thus the debts were non-dischargeable.
In this case, Mr. and Mrs. Callahan entered into a contract with Windows of Washington, LLC for catering services at their wedding. The wedding planner and the Callahans had an continuing relationship for nine months while the wedding was being planned and the Callahans never informed the caterer they had financial problems and needed to make payment arrangements for the services rendered.
The day before the wedding the debtors gave the wedding planner a check for $9,805.34. The wedding planner decided to go forward with the services because of the ongoing relationship with the debtors. When they gave the check to the wedding planner the debtors only had $5,949.55 in their bank account.
Once the check was not honored, the wedding planner filed a lawsuit against the Callahans under Section 523(a)(2)(A) which says that a debtor cannot obtain a discharge from any debt “for money, property, services …to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or insider’s financial condition. In order to prove fraud, the wedding planner had to prove by a preponderance of the evidence:
- The debtor made a representation.
- The debtor knew the representation was false at the time it was made.
- The representation was deliberately made for the purpose of deceiving the creditor.
- The creditor justifiably relied on the representation.
- The creditor sustained the alleged loss as the proximate result of the representation having been made.
In this chapter 7 bankruptcy case the court found that the wedding caterer proved all of elements. It noted that in giving the check when insufficient funds were not available they knew the representation was false at the time and that they gave the check to the wedding planner with the sole intent of deceiving the wedding planner to perform the services. The court also ruled that the weeding planner had justifiably relied upon the representation and had sustained a loss.
The lesson to be learned is that fraud can not be discharged in this chapter 7 bankruptcy Missouri case. If you have questions about chapter 7 bankruptcy in Missouri, please visit our state page or if you have questions about chapter 13 bankruptcy please click that page.
Debtor Can’t Discharge Debt Incurred By Embezzlement
In this particular case debtor and Kimberly Sue Tyrey had been romantic partners who shared a joint checking account. When the couple went their separate ways, debtor withdrew $7,000.00 from the account knowing there was only $300.00 in the account. The counter check was paid from the credit line for which Ms. Tyrey was solely responsible.
Ms. Tyrey sued debtor in state court and obtained a judgment for the $7,000.00 plus interest. When debtor filed his chapter 7 bankruptcy she filed a lawsuit against him pursuant to 11 U.S.C. 727. This Code section excepts from discharge and debt “for fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny.” Embezzlement is defined as the fraudulent appropriation of property of another by a person to whom such property has been entrusted or into whose hands it has lawfully come. Embezzlement involves the lawful or authorized possession of the property.
In this case the court pointed out that debts could also be excepted from discharge it it was for “willful and malicious injury by the debtor to another entity or to the property of another entity.” In finding against the debtor, the court pointed out that he withdrew the $7,000.00 without Tyrey’s knowledge and it was not for her benefit, that the balance of the withdrawal was charged to a credit card and that the money was used for his personal benefit.
Not only did the court find that this debt was excepted from discharge under 11 U.S.C. 727, but it was also excepted from discharge under 11 U.S.C. (523)(a)(6). If you have any questions about chapter 7 bankruptcy Nebraska or chapter 13 bankruptcy please visit our state pages to this site.
Nebraska Chapter 7 Debtor Can Not Discharge Unemployment Overpayment
Daphne Hayes filed for Chapter 7 Bankruptcy Nebraska. The Commissioner of the Nebraska Department Of Labor, “Commissioner,” filed and adversary complaint against Debtor because she obtained an overpayment of her unemployment benefits which the Commissioner argued should not be discharged in Debtor’s bankruptcy case.
From November 4, 2006 through June 2, 2007, Debtor filed for unemployment benefits. Pursuant to Nebraska law, a person can be treated as being unemployed for a particular week if the gross wages are less than the amount of unemployment benefit the applicant could receive based upon prior work history. In this case for each week the Debtor informed the Commissioner of her wages but listed an amount which was significantly less than the amount of her gross wages.
The amount of the overpayment was $6,651.00. Debtor acknowledged that she was overpaid but claim that the overpayment was simply due to a mistake. The Court pointed out, though, that the paper claim form or the Internet form clearly stated that gross wages were to be reported. Debtor maintained that the error she made was simply that of putting down her net income instead of the gross wages.
Interestingly, the Court noted that many years prior to the issue at hand Debtor previously filed for unemployment and a determination was made that she received an overpayment of unemployment benefits because she had used her net, not gross, wages in reporting to the Commissioner. Based upon this, the Court inferred that Debtor had knowledge she should have use the gross wages instead of the net wages.
In this case, the Court noted also that the adjudicating officer made a finding that the overpayment was due to a willful misrepresentation of a material fact by the Debtor. For the foregoing reasons the Court ruled that the Commissioner had met its burden of proof pursuant to 11 U.S.C. 523(a)(2)(A) and held that the Debtor could not wipe out this overpayment of unemployment benefits.
If you have questions about bankruptcy law in Nebraska you may wish to consult with a bankruptcy lawyer in Nebraska.
Student Loans, Undue Hardship, And Chapter 7 Bankruptcy: What You Need To Know
In most instances discharging student loans is extremely difficult. But, in the matter of Kloos, 20 CBN 1097 (Bankr. D. Neb. 2010), the court held that not discharging the student loans would create an undue hardship on the debtor. In this case the debtor was a forty-five year old woman and her student loan debt totaled $84,799.00.
Here the debtor’s total household income was $2,474.00 and the debtor’s and her husband’s monthly expenses were $2,639.00. In this case the evidence showed that the debtor had already attempted to repay her student loan through the income contingent repayment plan but that the repayment plan had failed.
Furthermore, the evidence in this case showed the debtor and her husband relied on charity, including at least a gift of $100.00 per month form their church and regular aid from Eastern Nebraska Community Action, as well as a food pantry for food handouts.
In ruling in favor of the debtor, the court pointed out that there was no evidence that the debtor’s financial circumstances would change significantly in the near future. In fact, based upon these facts the court indicated there was no logical reason to deny a discharge of the student loans in this instance.
Under the current law proving undue hardship in a Chapter 7 bankruptcy is extremely difficult and this is one of the case which shows what is necessary to prove undue hardship.
If you are faced with mounting student loan debt one of your best options may be to participate in the William D. Ford Federal Direct Loan Program Income Contingent Repayment Plan. If you have and questions about this article or your own student loan situation, you may contact Roger Ghai at www.chapter7attorneys.com or call him at (770) 792-1000 if you have any questions about Chapter 7 bankruptcy laws.
Debtor Blames Bankruptcy Attorney For Filing Case
Jong Hee Kang filed for Chapter 7 bankruptcy protection in New Jersey on November 28, 2011. Ms. Kang claimed she did not know she was filing bankruptcy and did not in fact complete a credit counseling class as required. She blamed her bankruptcy lawyer for the filing.
In this case, Debtor filed a motion to dismiss her bankruptcy case on the basis that she did not comply with 11 U.S.C. 109(h) and Section 521 of the Bankruptcy Code. More specifically, she claimed that she never received the credit counseling which was reflected in a November 28, 2011 credit counseling certificate. As the court noted, “[i]n a long, very articulate certification (“Kang Cert.”) (docket entry 36) Ms. Kang, who states she cannot read or write English (Kang Cert. Paragraph 34), laid much of her current dilemma at the feet of her prior [bankruptcy] atttorney (Sangwon D. Sohn,Esquire, “Sohn”).
With regard to her claim that she never completed a credit counseling class, the bankruptcy court noted that she gave an “ambigous and vague description of what could well have been an internet credit counseling interview through her attorney (“Sohn asked me a series of questions while looking at his computer monitor… he states ..I should try to be frugal in my spending… [h]e asked me more questions, but I cannot recall exactly what the questions were…at the end Mr. Sohn asked me if I understand all the questions he asked… I stated ‘yes’…”
In ruling that the case should not be dismissed, the bankruptcy court noted that in July 2011, Debtor had prepared a mortgage in favor of her sister in the amount of $400,000.00 even though there was no documentation ever produced to show that her sister loaned her the funds. In addition, the evidence showed that the sherrif was about to have a sheriff’s sale of personalty the day before Debtor’s bankruptcy case was filed. Debtor claimed that she was unaware of the meeting.
In discussing whether Debtor was entitled to dismiss her bankruptcy case on the basis that the credit counseling class was flawed, the Court stated “[t]he debtor’s right to rely on missing or flawed credit counseling as a basis for dismissal is, at best, overstated by the movant. Conceptually, the credit counseling eligibility requirements of 11 U.S.C. Section 109(h) are neither jurisdictional nor nonwaivable.”
Furthermore, the Court went on to note that “noncompliance with Section 109(h) neither serves as an absolute mandate for case dismissal nor a bar to court inquiry into (i) the debtor’s motive for seeking dismissal, (ii) impact upon the creditors, and (iii) estoppel issues based upon the debtor’s conduct and previous representations on the record.”
In pointing this out, the Court was of the opinion that in this case, Debtor was attempting to manipulate the bankruptcy process. It noted that Debtor had taken advantage of the automatic stay, stopped execution and foreclosure, and implicated the trustee’s administration of the case (including two Section 341(a) appearances, the “teeing-up” of a sale with notices to the public and advertising, the retention of professionals, and what is now a substantial motion practice. Once a debtor so engages the bankruptcy process, she forfeits her right to cancel what she set in motion without establishing appropriate cause.
Based upon the foregoing, the bankruptcy court decided that the case should not be dismissed based upon an alleged defect in the credit counseling certificate. If you you have questions about bankruptcy law in New Jersey you should contact a local bankruptcy attorney who can assist you with all of your bankruptcy questions.
New Jersey Court Rules Distressed Property Values To Be Considered In Real Estate Appraisals
When they filed their case, they listed their property as having a value of approximately $147,000.00. The first mortgage to Wells Fargo was for about $164,000.00. The second mortgage was to Wells Fargo was approximately $23,325.00.
The appraiser for Wells Fargo submitted and appraisal for $195,000.00 and appraiser for the Loftin’s estimated the value to be $125,000.00. Wells Fargo submitted five appraisals in the price range of $183,580.00 to $243,000.00. Debtor’s appraiser submitted appraisals for between $101,000.00 to $157,000.00. The basic difference between the two appraisals was that Wells Fargo’s appraisal failed to include distressed properties in the report.
The report for the appraisal for Wells Fargo was inconsistent in that he testified that distressed properties were not good indicators of value, however, his report stated that REO properties, foreclosure properties, were a factor in the market. Also, the report indicated that about 25% of all sales within the last twelve months were REO properties. He also said during testimony that REO sales have an effect on property values.
The court found the testimony of debtor’s appraiser to be more credible because using foreclosure sales because that was the reality of the market. The court agreed that the general rule of not including foreclosure sales in determining property values did not stand up to current market conditions because that would mean excluding twenty-five percent (25%0 of the real estate market.
In a chapter 7 bankruptcy case, a debtor is not allowed to strip second mortgages generally speaking. If you would like to see more information about chapter 13 or chapter 7 bankruptcy New Jersey, please visit our state pages. Sometimes people refer to bankruptcy chapter 7 as chapter 7 bankruptcy so using either of the terms is fine.
Chapter 7 Bankruptcy Debtors In New Mexico Not Entitled To Discharge
Michael and Patricia Mulholland filed Chapter 7 bankruptcy in New Mexico on September 8, 2010. A motion to deny their discharge entirely was filed in the bankrupcy court. The Debtors operated a vending business and also operated a storage business.
In their petition, Debtors indicated they had just one checking account when in fact the had several checking accounts. Furthermore, on Schedule B of their petiton, they indicated they had no life insurance policies, but in fact they owned two life insurance policies which had no cash value. As far as the inventory they scheduled, they indicated they had a total of thirteen (13) snack machines worth a total of $4,000.00.
With regard to their inventory, the indicated they had no inventory. After their meeting of creditors hearing, they later amended this to list 13 machines with a value of $60.00 each. As to Schedule G, the Debtors had at least 50 leases for fifty drink machines which were rented on a monthly basis but the listed no leases on Schedule G.
Furthermore, the income which was listed on their Statement of Financial Affairs was significantly less than what was filed on their income tax return. In addition, Debtors failed to list a payment of $750.00 to a lien holder which was made within 90 days of the filing of their petition.
In this case the Plaintffs asserted Debtors knowingly and fraudulently presented material information about their assets, income and occupation in their Statement of Financial Affairs, which constitutes a false oath for which their discharge should be denied under 11 U.S.C. 727(a)(4). The Debtors claimed that they made mistakes but that these mistakes were innocent and not done with the fraudulent intent which is required to deny them a discharge under the bankruptcy law.
In this case, the Court found that Debtors had the requisite fraudulent intent in order for their discharge to be denied. As the Court stated “[t]he Debtors’ Statement of Financial Affairs contain several affirmative misstatements and omissions.” For example, the Debtors only disclosed one bank account when they were actually actively using three bank accounts. Likewise, Debtors failed to disclose fifty (50) leases which they had for the vending machines, failed to disclose two life insurance policies, and failed to disclose payments made within 90 days of filing of their petition. Based upon the foregoing, the Court denied Debtors’ bankruptcy discharge.
If you have questions about information which should be included in your bankruptcy petition, it is strongly recommended that you consult with a local bankruptcy attorney in your area. If you reside in New Mexico and have questions about Chapter 7 bankruptcy in New Mexico, make sure to get advice from a New Mexico bankruptcy attorney who can assist you.
Chapter 7 Debtor In New York Allowed To Reopen Case Six Years Later
On October 15, 2005 Debtors filed for Chapter 7 bankruptcy in New York. Debtors used a bankruptcy preparation service to prepare their bankruptcy petition. Debtors failed to mention that Corialia Arana and Fidel A. Arana had a medical malpractice claims against Mount Sinai Hospital in which they alleged Mr. Arana suffered vision loss, partial paralysis, and brain damage resulting from Mt. Sinai’s alleged failure to properly treat a staph infection.
In their bankruptcy case, debtor’s New York bankruptcy attorney argued that although they failed to list their medical malpractice claim in the bankruptcy schedules the case should be reopened because the bankruptcy estate would benefit as there would be a distribution made to the creditors if the lawsuit were successful. In this bankruptcy case, the evidence showed that Mr. Aranas was seeking special damages of $1 million for physicians’ services, $500,00 for hospital expenses, and $250,000.00 for lost wages.
The bankruptcy lawyer for Mt. Sinai Hospital argued the Chapter 7 case should not be reopened because Debtors were dishonest in their bankruptcy petition. In fact, Mt. Sinai argued that Debtors were judicially estopped from asserting any claim against the hospital.
In analyzing section 11 U.S.C. 350(b) of the bankruptcy law, the bankruptcy court noted that a bankruptcy case that has been fully administered and closed “may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.” The court furher noted that bankruptcy courts have broad discretion when deciding to reopen a closed case.
In its additional analysis under the bankruptcy statute, the court looked to the fact that there were about thirty unsecured creditors with claims totaling approximately $112,862.83 which would be paid if the case were reopened. It also noted that the complaint alleged serious injuries and a susbstantial recovery was being sought which would benefit debtor for his injuries. The New York bankruptcy court also weighed the fact that if the case were dismissed, the lawsuit would be dismissed and that neither the creditors nor Debtors would receive any money.
In conclusion, the court ruled that the benefit to the Debtors’ Chapter 7 bankruptcy estate and the benefit to Debtors outweighed the any prejudice to Mt. Sinai Hospital.
If you have questions about bankruptcy or need to speak with a New York bankruptcy lawyer, please refer to our directory.
Chapter 7 Debtor In New York Allowed To Strip Second Mortgage
Sonia L. Smoot filed Chapter 7 bankrupcy in New York on August 30, 2010. On November 5, 2010 she filed an adversary proceeding in order to strip a second mortgage. When she filed her bankruptcy, she owed Wachovia approximiately $370,601.02 on her first mortgage and she owed Wachovia approximately $70,749.67 on her second mortgage which was for a Home Equit Line Of Credit.
Plaintiff’s appraisal of the property was $340,000.00 and the Debtor’s appraisal of the property was $325,000.00. In this Chapter 7 bankruptcy case one of the issues was whether a Home Equity Line Of Credit should be treated differently than a traditonal mortgage.
In this case the issue before the Court was whether if in the instance that the first mortgage balance exceeded the value of the property the second mortgage could be stripped off. In addition, another issue was whether a Home Equity Line Of Credit (“HELOC”) could be treated differently than a traditional mortgage, and in this case the Court concluded that under New York law the HELOC should be treated the same as a traditional mortgage.
In determining whether a wholly unsecured mortgage could be stripped of under 11 U.S.C. 506 of the Bankruptcy Code, the Court noted that 11 U.S.C. 506(d)(1) and (d)(2) did not apply. Furthermore, the Court relied on the Second Circuit decision in Pond which held that in a Chapter 13 case, a wholly unsecured claim pursuant to 11 U.S.C. 506(a) is not protected by the anti-modification exception of 11 U.S.C. 1322 (b) and thus, a wholly unsecured subordinate mortage lien can be declared void under section 506(d).
The Court noted that some courts have held that Pond was not applicable in Chapter 7 bankruptcy case; however the Court pointed out that “[n]or is there any statutory prohibition in the application of sections 506(a) and (d) to Chapter 7 cases.” Moreover, the Court stated “if sections 506(a) and (d) were intended only for organizational chapters of the Bankruptcy Code, then Congress could have simply limited the language in sections 506(a) and (d) to exclude Chapter 7.
Because the first mortgage in this Chapter 7 was more than the value of the property, the Court held that is was wholly unsecured pursuant to 11 U.S.C. 506(a) and that this second mortage was void. If you have questions about whether your second mortgage may be declared void if you file Chapter 7 bankruptcy in New York, it is strongly recommeneded that you contact a New York bankruptcy attorney.
Motor Vehicle Collisions Involving Commercial Delivery Drivers
In 2013, 9.6 percent of vehicles in all fatal auto crashes within the state of Georgia were large trucks, according to the National Highway Traffic Safety Administration. The average for the U.S. was 8.7 percent, meaning that Georgia has a slightly higher than average level of danger presented by large commercial traffic. The reason large vehicles, such as 75-foot-long 18-wheelers, are so dangerous is that there is a lack of visibility and maneuverability. And in relation to normal passenger cars, pickup trucks, SUVs, and vans, large commercial vehicles travel slowly, weigh considerably more, take longer to slow down, and lack the same type of control around corners and steep declines. Because of all these reasons, collisions between these commercial vehicles and personal cars are all too common. If you or a loved one were injured in a Georgia collision involving a commercial vehicle of any type, you may be entitled to damages to pay for medical bills, pain and suffering, lost wages, and property damage.
The Severity of Commercial Vehicle Collisions
In almost every single scenario, the passengers of normal, privately owned passenger cars fare much worse than the occupants of large commercial vehicles. In fact, according to the Insurance Institute for Highway Safety, ten fatalities occur every day due to large truck collisions. On top of the immense size discrepancy between private and commercial vehicles, professional drivers are often sleep deprived, which can impair driving ability to the same levels seen in illegal blood alcohol contents.
Ascribing Liability Is a Complex Matter in Commercial Vehicle Collisions
Due to the sometimes catastrophic nature of large commercial vehicle accidents, such as a rollover on a busy freeway, there may be multiple parties affected. As such, hiring an experienced attorney is vital in large truck accidents. Furthermore, the matter of ascribing liability becomes more complex as well, due to the number of possible liable parties. A collision may be the fault of the driver if the accident occurred due to speeding, swerving, drowsy driving, distracted driving from the use of electronics, failing to yield, or improper merging. In fact, chances may be that liability may be placed upon the trucking company in the likely event that the driver is employed one. The law of respondeat superior holds the employer liable for the negligence of their employees. However, if the driver was an independent contractor, they would be held liable themselves. If the accident occurred due to loose cargo or improper loading, the trucking company, the company that loaded the truck, or the company that shipped it may be held liable. In the event that the accident was the result of faulty engineering or design, the manufacturer or designer may be held liable.
The Law Offices of Roger Ghai are Here to Help
If you or a loved one were injured in a Georgia commercial vehicle accident, give the Law Offices of Roger Ghai, P.C. a call today at 770-792-1000 to discuss your legal options for compensation.
Bankruptcy Attorney Wins Argument That Transfer of Funds To IRA Is Protected
Prior to filing their Chapter 7 bankruptcy case in North Carolina, Debtors had invested in real estate investment properties for their retirement. The properties began to run a negative cash flow and Debtors began to withdraw approximately $80,000.00 from their IRAs in order to fund the negative cash flow on the properties. Debtors could not reverse the negative cash flow and eventually auctioned the personalty in the property and received a check for $14,000.00.
On February 8, 2011 Debtors informed their bankruptcy lawyer that they had started two new IRA’s with the $14,000.00. They filed their Chapter 7 bankruptcy case on February 10, 2011. The Chapter 7 trustee argued that pursuant to “11 U.S.C. 548(a)(1)(A), the [t]rustee may avoid any transfer.. of an interest of the debtor in property… that was made or incurred within two years before the date of filing the petition if debtor … made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entitity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted….”
In ruling that the Debtors’ transfer of a portion of the $14,000.00 to the IRA was not a fraudulent transfer, the bankruptcy court stated: “[t]he general rule in the Fourth Circuit is, ‘[m]ere conversion of property from non-exempt to exempt property on the eve of bankruptcy – even though teh purpose is to shield the asset from creditors – is not enough to show fraud.” Ford v. Poston, 773 F.2d 52, 54 (4th Cir. 1985). As the Court noted, a fraudulent transfer is something beyond mere conversion of non-exempt property to exempt.
The Court found that in light of the fact that Debtors are in their mid-fifties and have a need fro retirement planning just like the Debtors in Duncan. Moreover, the Court stated that the Debtors originally purchased the properties as an investment in their retirement and often used funds from their existing IRAs to pay the properties’ obligations; thus the auction proceeds are a modest return on the debttors’ original retirement investment.
For these reasons, the bankruptcy court denied the Chapter 7 trustee’s motion and ruled in this Chapter 7 bankruptcy case that Debtors’ contributions to their IRAs were protected. If you have questions about bankruptcy in North Carolina, you should consult with a local bankruptcy lawyer.
Bankruptcy And Reaffirmation Agreements In North Carolina
Hubert Carter and Rita Carter filed for Chapter 7 bankruptcy on December 22, 2010. They Debtors listed an unsecured debt to Kay Jewelers in the amount of $860.61. The Defendant is an a limited liability company which is engaged in the purchasing and servicing of consumber bankruptcy accounts.
In this case, the Defendant faxed a propoose reaffirmation agreement to Debtor’s bankruptcy attorney on February 7, 2011. The agreement asserted that the Defendant was the owner of the account and claimed the obligation was a secured debt. The correspondence stated that the Defendant would like to “know you/your client'(s) intentions with respect to the collateral for the above entitled account. If the Jewelry purchased under this secured acccount have been destroyed, gifted or transferred, or sold [the Defendant] may have a non-dischargeability cause of action against you/your client(s) under 11 U.S.C.523.
Debtor’s bankruptcy lawyer forwarded the Agreement to Debtor. Debtor’s sued the creditor in bankruptcy court because the creditor was not licensed as a collection agency by the North Carolina Department Of Insurance. More specifically, Debtor asserted that creditor’s actions in sending the reaffirmation agreement to Debtor was “an attempt to collect a debt by the use of unfair practices ‘within the meaning of North Carolina General Statute Section 75-1.1.
However, in its answer the creditor maintained that Debtors could not prevail because sending a reaffirmation agreement was authorized by the Bankruptcy Code, bankruptcy case law, and the official bankruptcy forms. Furthermore, creditor stated that sending a reaffirmation agreement did not violate the automatic stay provisions of the bankruptcy code because they were not attempting to collect a debt which would be prohibited under 11 U.S.C. 362 of the Bankruptcy Code.
In this North Carolina Chapter 7 bankruptcy case, the Court found that the creditor’s actions of sending a reaffirmation agreement to Debtors was not an attempt to collect a debt in violation of North Carolina General Statute Section 58-70-1. In so ruling the Bankruptcy Court noted that “[t]he Sixth Circuit ruled that soliciting a ‘reaffirmation agreement’ does not violate the automatic stay provisions of 11 U.S.C. 362. Pertuso v. Ford Motor Credit Co., 233 F. 3d 417, 423 (6yh Cir. 2000). The Sixth Circuit explained that the automatic stay provisions of 362(a) preclude creditors from ‘seeking to obtain property of the estate or from assessing or collecting on a pre-petition claim against the debtor.'”
Moreover, the Seventh Circuit held that “[p]rovided there is no coercion or harassment of debtor, the creditor’s offer of reaffirmation is not deemed an attempt to collect the debt and therefore does not violate the automatic stay.”
In ruling against Debtors in this case, the Bankruptcy Court noted that they did not assert that the reaffirmation agreement harassed or coerced them in any way. Additionally, there was a stipulation between the parties that creditor did not attempt to collect debts by filing lawsuits in state court, operating a telephone call center or by sending out letters demanding payment to obligors on the purschased accounts.
For these reasons, the North Carolina Bankruptcy Court ruled that creditor did not violate the automatic stay provisions of the Bankruptcy Code. If you have questions about Chapter 7 bankruptcy in North Carolina, it is highly recommended that you seek the advice of a bankruptcy attorney in your area.
Chapter 7 Bankruptcy Discharge Denied To North Carolina Debtors
Thomas Michael Pepper and Linda Marie Pace filed for Chapter 7 bankrutpcy in North Carolina on June 14, 2010. The bankruptcy case was audited and the auditor found several inconsistencies in the Statement of Financial Affairs.
First, Debtors had reported income of $7,500.00 but the auditors determined that Debtrors’ actrual income was $10,073.00. Debtors also failed to disclose a checking account which had a balance of $6,974.00. They also failed to disclose the sale of investment which totaled $8,000.00. The failed to disclose a loss of a 2005 Harley Davidson and their receipt of the insurance proceeeds.
They failed to disclose their ownership of a 2004 Pilot Honda and its subsequent sale for $11,208.00. The failed to disclose their ownership and subsequent sale of a 2006 BMW Z4 Roadster. They did not disclose $3,126.00 in mutual funds. They reported an IRA with a value of $140,000.00 when in fact the value was $159,000.00,
In their answer to deny the discharge, Debtor’s claimed the omissions and inaccurancies were the result of honest mistakes, but they did not attend the dischargeability hearing to provide any explanations in court. Based upon all of the evidence in this case, the Court ruled that Debtors intended to deceive their creditors. Therefore, purusant to 11 U.S.C. 727(a)(4)(A) Debtors’ debts were not discharged.
Questions about dischargeability issues or the dischargeablity of a particular debt should be addressed by a bankruptcy attorney in your area. If you reside in North Carolina and have questions about Chapter 7 bankruptcy you should speak with a bankruptcy attorney in North Carolina.
Court Rules Debtors’ Charges Not Fraud on HELOC Loan
Debtors filed a Chapter 7 bankruptcy in North Carolina on May 6, 2010. Previously they had sold their residence to William and Rebecca Poston.
In 2002, John and Mary Toomey sold real property located at 1124 Berwyn Way, Raleigh, North Carolina (“the Property”), to William and Rebecca Poston. At the time of the sale, the Property was encumbered by a deed of trust and, in addition, by a home equity line of credit (“HELOC”) with Central Carolina Bank (“CCB”), which was secured by a second deed of trust. At the closing of the sale of the Property to the Postons, the first deed of trust was paid off and canceled of record. The Toomeys’ HELOC with CCB was paid down to zero but, unfortunately, the deed of trust securing the HELOC was not canceled and the HELOC account was not closed. In 2004, SunTrust succeeded to CCB’s rights under the HELOC and corresponding deed of trust.
On August 11, 2006, after determining that the HELOC account was still open, the Toomeys drew $35,000 from the account, using the funds primarily to pay off credit card debts and to satisfy other household expenses. On March 6, 2007, the Toomeys drew from the HELOC again, this time in the amount of $17,993.60. These funds also were used to pay off credit card debt and to satisfy household expenses.
From 2007 until 2009, the Toomeys regularly made payments, mainly of interest, on the HELOC. The Toomeys defaulted on the HELOC in 2009. Between September 2009 and January 2010, SunTrust sent a series of letters to the Toomeys informing them of their default and suspending their right to draw further from the line of credit. The Toomeys took no action in response to these letters. On January 20, 2010, SunTrust’s counsel sent a notice of default and initiation of foreclosure proceedings letter to both the Toomeys and the Postons. The January 20, 2010 letter was the first notice received by the Postons that there was a lien asserted against the Property.
On May 6, 2010, the Toomeys filed a petition under chapter 7 of the Bankruptcy Code. On December 14, 2010, the Postons filed an adversary proceeding to determine their entitlement to: (1) a judgment against the Toomeys in the amount of the current outstanding balance on the HELOC; (2) an injunction ordering the Toomeys to secure cancellation of the HELOC deed of trust; and (3) a judgment against the Toomeys providing that their claim in the amount of the balance on the HELOC is non-dischargeable under 11 U.S.C. § 523(a). At the time of trial, the outstanding balance secured by the real property was $46,974.25.
In this case, the plaintiffs asserted that their claim against the Toomeys should be nondischargeable pursuant to 11 U.S.C. 523(a)(2)(A) and (a)(6). The first code section required that the debt should be nondischargeable as follows: “(a) [a] discharge under section 727 … of this title does not discharge an indvidual debtor from any debt (2) for money, property services, or an extension, renewal, or refinancing of credit, to the extent obtained by (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.”
In this case, the court ruled that Plaintiffs could not prove that the Debtors undertook this loan with the specific intent to defraud the Plaintiffs. More specifically, the Court noted that the Plaintiffs could not “establish that the Toomeys made a false representation with the intent to deceive them. As established above, the only representation the Toomeys made to the Postons was that the Postons were receiving clear title via the General Warranty Deed. The Tooomeys testimony is that at that time, the Toomeys thought that their HELOC with CCB was closed and that their correseponding deed of trust was canceled. .. In sum, there is no evidence that the Toomeys knew that the deed of trust had not been canceled, there is no basis whatsover to conclude that they intended to deceive the Postons when they executed the General Warranty Deed.”
For the foregoing reasons Debtors’ bankruptcy attorney was able to persaude this North Carolina bankruptcy court that this debt should be discharges, or wipe out, in the Debtor’s chapter 7 bankruptcy case.
Debtor In North Carolina Entitled To Return Of Social Security Benefits
Gail Marie Goodman filed her Chapter 7 bankruptcy case in North Carolina on April 7, 2011. Debtor filed a motion for turnover of her Social Security Insurance (“SSI”) benefits in the amount of $7,410.00. There was also a motion to confirm offset which was filed by the Social Security Administration (“SSA”).
Debtor received an overpayment of $33,775.00 but the SSA waived collection of $22,190.00, so Debtor was obligated to repay $11,585.00 of the overpayment. On March 15, 2011 Debtor received notice that she was entitled to receive retroactive SSI benefits in the amount of $7,414.00. On March 24, 2011 the SSA intercepted the $7,414.00 and applied it toward the $11,585.00 which was owed. As of the date of filing her position on April 7, 2011, the resulting overpayment was $3,170.00.
Debtor’s bankruptcy attorney filed the request for setoff because the insufficiency on the date of setoff was $3,170.00 which was less than the insufficiency on the date it first arose within the 90 days preceding the filing of the bankruptcy petition.
As the bankruptcy court noted, pursuant to 11 U.S.C. 553(b) of the Bankruptcy Code “places a limitation on the ability of creditors to exercise the right of setoff by providing as follows: (1) … if a creditor offesets a mutual debt owing to the debtor against a claim against the debtor on or before the date of filing of the petition, the the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of..
(A) 90 days before the date of the filing of the petition; and (B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency. (2) In this subsection, “inufficiency” means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor byt hte holder of such claim.”
In this case, because there was no mutual debt owing on the ninetieth day prior to the filing of the petition, no insufficiency existed on that date. In this case the court determined that the insufficiency owed by debtor was $3,170.00 on March 17, 2011. As the bankruptcy court noted, “[t]hus SSA improved its position within the ninety days prior to filing by the amount of retroactive SSI benefits awarded to the debtor. Because SSA’s position was improved between the date the insufficiency arose and the date of setoff there is a basis for recovery under Section 11 U.S.C. 553(b).
Based upon the foregoing, Debtor’s bankruptcy attorney prevailed and the bankruptcy court ruled Debtor was entitled to recover $7,141.00 in retroactive SSI benefits seized by SSA under Section 553(b). If you have questions about Chapter 7 bankruptcy in North Carolina, you may wish to consult with a local bankruptcy lawyer.
North Carolina Bankruptcy Reopened To Pursue Discharge Violation Claim
Cyrus Mead IV filed for Chapter 7 bankruptcy in North Carolina on November 22, 2010. Debtor list his former fiancee as a creditor on Schedule F of his petition as a creditor with a disputed claim in an unknown amount.
The Statement of Financial Affairs listed a pending lawsuit brought by Plaintiff, Ms. Ward, against the Debtor in the United States District Court for the Northern District of Illinois, Eastern Division. The lawsuit was dismissed on July 26, 2011 without prejudice. The basis of the lawsuit was property dispute in Illinios in which Plaintiff’s ownership to a home she owned in Naperville, Illinois was contested by a third-party. In order to settle the dispute, the Debtor purchased the third-party’s interest in the home, and Plaintiff relinquished her interest in the home at that time so that Debtor could obtain clear title.
After Debtor filed Chapter 7 bankruptcy, Plaintiff filed an adversary proceeding against Debtor in bankruptcy court but the adversary complaint was dismissed and the adversary case was closed on August 26, 2011. On August 29, 2011 Debtor obtained his Chapter 7 discharge. However, on September 16, 2011 Plaintiff filed a motion in Illinois district court to reinstate the Illinois lawsuit. The case was filed against Debtor and the property.
The Agreement provided that the home would be re-titled to Plaintiff if Debtor died or if the relationship terminated. The relationship between the parties ended and initially Plaintiff filed the lawsuit in federal court to enforce her rights. She sought specific performance of the contract she had with Plaintiff and sought monetary damages against him.
Debtor subsequently filed a motion to reopen his Chapter 7 bankruptcy case to allow him to sue Plaintiff in bankruptcy court for violation of the discharge injunction. Pursuant to 11 U.S.C. 350(b) of the Bankruptcy Code, the bankruptcy court allowed Debtor to reopen his case.
In making the determination of whether the bankruptcy discharge injunction was violated when Plaintiff sued Debtor, the bankruptcy court noted that a bankruptcy discharge extinguishes “the personal liability of hte debtor with respect to any debt.”
It noted, however, that the dicharge injunction does not extinguish a creditor’s right to seek a claim against property itself, or, in other words an in rem action. As the court noted, in an in rem proceeding “no notice is required to be given; that in such a proceeding seizure of the res, or what is regarded as equivalent to seizure, is essential, ans sufficient constructive notice.”
In this case, however, the court noted that Debtor was personally sued. For that reason, the Chapter 7 bankruptcy court found that the discharge injunction had been violated and the court awarded Debtor his attorney’s fees. If you have questions about bankruptcy law in North Carolina you may wish to speak to a local bankruptcy attorney about your case.
North Carolina Chapter 7 Bankruptcy Case Not Dismissed As Abusive
Early Ray Boyette, Jr. filed for Chapter 13 bankruptcy protection in North Carolina on June 6, 2009. On May 9, 2011 Chapter 7 Debtor filed for Chapter 7 bankruptcy in North Carolina. Debtor’s former domestic partner filed an a Motion seeking to prevent Debtor from converting his case to a Chapter 7.
In her Motion, Plaintiff asserted that Debtor’s motion to convert his case to Chapter 7 was based upon bad faith pursuant to 11 U.S.C. 707(b)(1) and was also an abuse of the Bankruptcy Code provisions of 707(b)(3) based upon the totality of circumstances.
The dispute between the parties was that Debtor has signed a promissory note with Plaintiff in which he agreed to repay her for and contributions she made on a promissory note which was secured by a deed of trust on the 403 Forest Hills Road, Wilson, North Carolina property. Plaintiff had filed a proof of claim in Debtor’s Chapter 13 bankruptcy in the amount of $54,735.96. Debtor subsequently filed an objection to the claim and the hearing on the claim was scheduled for May 10,2011. The day before the hearing Debtor filed his Notice Of Conversion to Chapter 7.
Plaintiff argued that the conversion was merely an attempt to avoid paying Plaintiff her claim and noted that Debtor was only $21.50 shy of completing his Chapter 13 plan. Her bankruptcy attorney further argued that Debtor’s self-reporting of environmental hazards on the property was merely an effort to reduce the value of the property and constituted an abuse of the Bankruptcy Code provisions.
In rendering its decision that the case was not filed in bad faith when examining the totality of circumstances, the court noted that Debtor had self-reported the environmental hazards because he had been informed that he could avoid criminal prosecution if he self-reported the hazards and that he did not want to have further liabilty on the property down the road by concealing the property’s environmental hazards. Also, the court noted that Debtor’s intention was to sell the property and to pay the obligation to Plaintiff.
Therefore, in this North Carolina Chapter 7 bankruptcy case, the court allowed the case to proceed as Chapter 7 bankruptcy. If you have questions about Chapter 7 bankruptcy in North Carolina it is strongly recommended that you consult with a North Carolina bankruptcy attorney about your individual circumstances.
North Carolina Debtor Able To Discharge Obligation Despite Fraud Allegations
The Debtor in this case filed his Chapter 7 bankruptcy in North Carolina. The plaintiff was a credit union which repossessed vehicles and sold the vehicles on Debtor’s car lot. Debtor represented that he was the owner of Jamie Casper Auto Sales.
Plaintiff dealt exclusively with Debtor when doing business with Auto Sales and Debtor represented that he was an officer of Jamie Casper Auto Sales. In this case, the evidence showed Debtor signed documents and checks on behalf of Auto Sales. There was an agreement in place between Debtor and Plaintiff in which once Debtor had been paid the asking price for the vehicles on his lot, he would remit the funds to Plaintiff.
This agreement with Debtor ran smoothly between Debtor and Plaintiff for about two years before debtor filed his Chapter 7 bankruptcy. However, beginning in June of 2009, the Debtor failed to remit payment for the sold automobiles within the standard two day period. Although it failed to receive payment Plaintiff continued to deliver the vehicles to Debtor’s car sales lot. In fact, Plaintiff delievered about ten vehicles to Debtor’s lot despite not getting paid.
In analyzing whethe the debt could be discharged or not, the court stated that “[i]n order to establish the nondischargeability of a debt under Section 523(a)(2)(A), a creditor must prove: (1) that the debtor made a representation; (2) at the time the representation was made, the debtor knew the representation was false; (3) the debtor made the false representation with the intention of deceiving the creditor; (4) the creditor relied on such representation; and (5) the creditor sustained the alleged loss and damage as the proximate result of the false representation.
In this case, the Court held that Plaintiff had proven the first three elements for all ten missing vehicles. However, as the court stated, the “fourth and fifth elements, however, are much less straight forward.” Although the Court ruled that the fourth element had been proven, it went on to say that the justifiable reliance standard had not been met.
More particularly, the bankruptcy court stated that “[t]hus a plaintiff who disregards ‘red flags’ will not be able to satisfy the justifiable reliance standard. Moreover, the court noted that “[h]ere, the Plaintiff disregarded critical warning signs. The Plaintiff transferred the title to the 2001 Pontiac Bonneville to Auto Sales on June 5, 2009. Based on the Plaintiff’s policy of receiving payment for a repossessed vehicle within two days of assigning title, the Plaintiff should have received payment for the vehicle by June 7, 2009. As noted above, the Plaintiff never received payment for the 2001 Pontiac Bonneville.”
Based upon the foregoing, this Debtor’s North Carolina bankruptcy attorney was able to persuade the bankruptcy court that the debts relating to these vehicles placed on the Debtor’s car lots should be discharged.
Safe Driving Tips for Spring Break
Every spring, millions of young people hit the roads in search of fun and adventure across the warm, southern states of the U.S. And every year, those states – and more specifically, the beach communities that play host – report a significant uptick in the number of car accidents. The link between spring break drivers and both fatal and non-fatal car accidents is nothing new, and given the fact that college-age drivers tend to have significantly less experience driving than older drivers, it’s also not entirely surprising. Add to that the fact that alcohol is part of many spring break celebrations and that many drivers and passengers carry the party atmosphere right into the car, and the increase in car accidents seems almost unavoidable.
Of course, car accidents that occur during spring break don’t involve students; they also involve local residents, including families with young children, older drivers and anyone else who happens to be on the road.
If you’re heading out on spring break or you know someone who is, forward this list of safe driving tips to help ensure they get home safely:
· Have the car checked by a mechanic before leaving to make sure it’s ready for a long trip.
· Stick to heavily-traveled roads so help will be near if anything goes wrong.
· Never drive when tired; pull over and take a nap or switch with another driver who’s wide awake.
· Check your car before getting in to make sure no one is hiding inside.
· Keep your doors locked and windows up far enough to prevent anyone from reaching in.
· Never pick up hitchhikers.
· Make sure your phone is charged and have a charger with you; if you car breaks down, stay in the car with your doors locked and call the police.
· Never drive if you’ve been drinking, and don’t allow anyone to drink in the car – not even passengers.
· Obey the speed limits and be alert for hazards on the road.
· Let people know where you’re driving and the route you’re taking.
· Be sure you have the insurance card and registration with you and that they haven’t expired.
· If you’re in an accident, call the police and be prepared to exchange insurance information as well as name and address.
And remember: If you are involved in a car accident, having a car accident attorney who understands Georgia law inside and out is critically important to your success in recovering damages like medical costs and lost wages. The average emergency room visit for a minor injury can easily exceed $1,000 and often require follow-up care and therapy, not to mention lost wages. Working side by side with a car accident lawyer who’s on your side every step of the way is the best way to make sure your voice is heard – and an experienced car accident attorney can also provide you with the peace of mind that comes from knowing there’s someone in your corner.
At the Law Offices of Roger Ghai, we understand the stress of dealing with the aftermath of an auto accident. As a leading personal injury and car accident attorney in the Acworth, Marietta and Kennesaw areas, we’ve helped many clients get the compensation they deserve for their accident-related losses. If you’ve been involved in a car accident, you need a skilled car accident attorney on your side. Call our offices today at (770) 792-1000 and schedule a confidential consultation and case evaluation.
Chapter 7 Bankruptcy Debtor In North Dakota Can Claim Exemption
John J. Vranicar and Katie Vanicar filed for Chapter 7 bankruptcy in North Dakota. The Chapter 7 trustee filed an Objection to Claim of Exemptions. On Schedule C Debtors claimed an exemption of $25,285.00 in equity as exempt pursuant to North Dakota’s Code Section 28-22-02(10). Debtors also claimed $779.79 in equity in other assets as exempt under Section 28-22-03.(1).
As the Bankruptcy Court noted, Section 541(a)(1) of the Bankruptcy Code provides that, at the commencement of a case, the bankruptcy estate includes “all legal or equitable interests of the debtor in property.” 11 U.S.C. 541(a)(1). Section 522(b)(2) authorizes states to opt out of the federal scheme of property exemptions enumerated in section 522(d). In this bankruptcy case, North Dakota opted out of the federal exemptions. The Court further noted that the party objecting to the claimed objection has the burden of showing that an exemption is not properly claimed.
The Chapter 7 Trustee argued that the Debtors’ claimed exemptions under N.D.C.C. Sections 28-2-02(10) and 28-22-02 are mutually exlcusive. Pursuant to 28-8-02(10) the statute says that in lieu of a homestead exemption any housetrailer or mobile home occupied as a residence by the debtor… In this Chapter 7 case Debtors exempted $25,285.00 in equity in a mobile home.
Furthermore, Debtors exempted equity in other assets under Section 28-22-03.1(1). This Code Section specifically provides that the $7,500.00 exemption is not available if the claimant has chosen the homestead exemption provided under section 28-2-02(7). As the Court noted, claiming a homestead exemption is the only circumstance specified by Section 28-22-03.1(1) that prohibits a debtor from claiming the $7,500.00 exemption.
In this case the Court agreed with Debtor’s bankruptcy attorney and noted Debtors did not claim a homestead exemption under section 28-22-02(7); but rather, they claimed a mobile hom exemption under Section 28-22-02(10). For this reason the North Dakota bankruptcy court held Debtor could also claim the equity exemption of $7,500.00.
If you have questions about Chapter 7 in North Dakota, you should contact a local North Dakota bankruptcy attorney.
Chapter 7 Bankruptcy And The Marital Income Deduction
Mary Q. Sturm filed her Chapter 7 bankruptcy Ohio case in the Northern District Of Ohio and sought to exclude One Thousand Three Hundred Dollars of her nonfiling husband’s income from her current monthly income for purposes of determing qualification under the means test.
Pursuant to 11 U.S.C. 101(10A)(B) of the bankruptcy law, for purposes of determing current monthly income a debtor may exclude income received by a nondebtor spouse when that income is not contributed “on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in joint case the debtor’s spouse if not otherwise a dependent. This is commonly referred to as the “marital adjustment.”
Mrs. Sturm contended that her husband’s outstanding credit card debt was not income that was regularly contributed to the household expenses. In fact, she argued that her husband’s credit card debt related to expenses for automobile maintenance and repair, doctor bills, expenses related to two properties, and attorneys’ fees.
The Court found that Mr. Sturm’s testimoney was vague and unsubstantiated and did not allow it to make a determination of how much, if any, of a marital adjustment which Mrs. Sturm might have been entitled to.
In examining the credit card statements from three of the credit card companies the Court noted that Debtor failed to submit many of the credit card statments and they were “temporally incomplete.” Furthermore, no explanation was given as to why the statements were incomplete or whether any attempt was being made to gather the additional statements.
In ruling in favor of the United States Trustee, the Court pointed out that Mr. Sturm’s credit card statements lend themselves to conclusion that such debts were incurred on a regular basis for the household expeneses of the Debtor. More particularly, many of the husband’s statements were from retailers such as Walmart, Bed Bath and Beyond, Target, Big Lots, and Best Buy.
The lesson to be learned from this case is that the Court needs specific documentation from a debtor in order to make a determination as to whether one is entitled to exclude a nonfiling spouse’s income from the filer’s current monthly income. If you have questions about bankruptcy law in Ohio you may need to consult with an Ohio bankruptcy attorney.
Trustee In Ohio Unable To Avoid Mortgage
Charles and Robin White filed for Chapter 7 bankruptcy in Ohio. The Chapter 7 trustee filed a motion to strip the mortgage which was held by Midland Mortgage Company (“Midland”). The Debtor’s had a mortgage on property located at 606 Second Street in Piqua, Ohio. The mortgage securing the loan against that property was filed on April 26, 2002.
The Chapter 7 trustee argued that the mortgage should be avoided because the certification of the mortgagors’ acknowledgement of their signatures upon the mortgage was not in substantial compliance with Ohio law because the notary’s name is not typed, printed, or stamped on the acknowledgement. The only placement on the notary’s name on the acknowledgement is through an illegible signature.
In deciding whether the mortgage should be avoided, the Chapter 7 bankruptcy court had to decide whether the mortagage was executed in substantial compliance with Ohio law. According to Ohio law if the mortgage was not executed in substantial compliance with the law, it is not entitled to be recorded. Furthermore, if the mortgage was recorded, it is treated as though it had not been recorded. Therefore, the issue before the bankruptcy court was whether the acknowledgement clause was in substantial compliance with the law.
In the instant case, the Chapter 7 Trustee argued that the certification was not in substantial compliance because the name of the notary was not printed on the seal or separately printed, typed, or stamped legibly upon the certification as described in Ohio. Moreover, the Chapter 7 Trustee argued that even if the signature was sufficient, this particular signature is insufficient because it was illegible.
Pursuant to the Ohio statute, the Court had to decide what was meant by “subscribe the official’s name to the certificate.” In looking at the case law, the bankruptcy court noted that in the case of Sunnafrank “subscribe” means to print, type, or stamp the notary’s name on the mortgage. Midland, however, argued that the word subscribe as used in the Ohio statute meant to sign and that hte notary in this case did sign the acknowledgement. In ruling in favor of Midland, the bankruptcy court noted that in Sunnafrank the judge “specifically held that ‘subscription’ is “[t]he act of signing one’s name on a document.'”
In the end the bankruptcy court ruled that the aknowledgment by the notary substantially complied with Ohio law and ruled that the Chapter 7 trustee could not strip Midland’s mortgage. If you have questions about bankruptcy law in Ohio, it is strongly recommended that you seek the advice of a local bankruptcy attorney in Ohio.
Ohio Chapter 7 Bankruptcy Debtor Can Not Wipe Out Student Loan
Laura Pietras filed her Chapter 7 bankruptcy in Ohio and sought to wipe out student loans which she cosigned for her daughter. In her petition, Debtor listed an expense for two timeshares of $200.00 per month, $600.00 per month for home improvements, $225.00 per month for cellular phones, and $150.00 per month for ‘vip cable’ packages.
The Court acknowledged that Debtor had health issues which rendered her unable to work. In fact, Debtor was experiencing mental and physical health related issues. Her monthly income was $4,841.00 per month and was based upon several governmental benefits. Her montlhy expenses totaled $4,799.49 which left a very small budget surplus.
In ruling that the Debtor could not discharge her student loans, the Court relied on the decision in Brunner which is a three pronged test to determine whether a student loan may be discharged. In the first prong, the issue is whether a debtor can maintain a minimal standard of living if required to repay a student loan. Here the Court pointed out that payment of $200.00 per month in the two timeshares was not an expense necessary to maintain a minimal standard of living.
It also found that Debtor’s expense for the cellular phone was not necessary as it included $70.00 for her daughter’s phone which was to the detriment of the creditor. As to the ‘vip’ cable expense the Court noted that some Courts had ruled that cable television was not necessary to maintain a minimal standard of living. Further, the expense of $600.00 per month for home improvements was not necessarily determined by the Court to be necessary for a minimal standard of living; and the expense was not going to continue for a long period of time.
As to the Debtor’s medical condition the Court noted that there had to be a relationship between the medical condition and the inability to repay the student loan. Debtor’s income was $58,092.00 and the median income for Debtor’s family size was $51,319.00. Therefore the Court held that Debtor did not meet the second prong of the Brunner case.
Finally, under Brunner a debtor has to show that they made a good faith effort to repay the student loan. Here neither Debtor nor Debtor’s daughter made one payment toward the student loans in the four years since they became due. Based upon these facts the Court held Debtor did not meet the good faith standard in order to be able to discharge her student loan.
For questions about discharging student loans in a Chapter 7 bankruptcy in Ohio you may wish to see our state pages for more information or contact a Bankruptcy Attorney for more specific information.
Chapter 7 Bankruptcy And Student Loan Proceeds
Chapter 7 bankruptcy Ohio Debtor, Christiane Perkins, filed bankruptcy in the Northern District Of Ohio Western Division on March 16, 2010. The issue before the Court in this Chapter 7 case was whether student loan proceeds which had been commingled with her personal funds could be exempt from the bankruptcy estate.
On February 10, 2010 $3,600.00 had been garnished from the Debtor’s savings account. On December 30, 2009 Debtor’s balance in the account was $9.44 and a wage deposit into the account was made on December 31, 2009 for $1,770.03. On January 17, 2010 $1,984.06 was deposited into her savings account from the University Of Toledo as student loan proceeds. On January 15, 2010 student loan proceeds were deposited in the amount of $1,086.22.
Debtor claimed that the student loan proceeds were protected under Ohio exemption statutes but the Court found that the particular statutes which Debtor relied on dealt with the tuition payment contracts for the payment of tuition contract units and that they statute did not apply in this case.
Debtor also relied upon 20 U.S.C. 1095a as standing for the proposition that student loan proceeds could not be garnished. The Chapter 7 trustee objected to Debtor’s claim of objection based upon the first-in, first-out method of accounting to trace the source of the commingled funds. Debtor’s bankruptcy attorney argued that the better method for the accounting of commingled funds was the lowest intermediate balance method under which $2,886.22 of the $3,600.00 at issue was traceable to the student loan funds.
The Court ruled that for equitable reasons the most appropriate accounting method to be applied would be the lowest intermediate balance and therefore $2,886.22 of the Debtor’s funds were exempt from the Chapter 7 bankruptcy trustee.
In sum, if you are filing Chapter 7 bankruptcy Ohio and have funds in a bank account which are from student loans, you will want to segregate those funds. The bankruptcy laws of each state are different, but if you have additional questions about this case or bankruptcy law in Ohio, please visit our state page.
Chapter 7 Bankruptcy Court In Pennsylvania Won’t Approve Reaffirmation Agreement
Barbara Marie Caldwell filed for Chapter 7 bankruptcy protection in Pennsylvania on April 27, 2011. The issue in this Chapter 7 case was whether she should be allowed to reaffirm a mortgage which was primarily held in her daughter’s name.
The bankruptcy schedules indicated that Debtor would have a net monthly income of $454.65 if she were allowed to reaffirm the mortgage payment of $537.27 per month. As the bankruptcy court noted, pursuant to 11 U.S.C. 524(c) of the bankruptcy law, “a debtor my reaffirm a debt, thereby ensuring that the debtor’s personal liability for the debt will survive the debtor’s discharge. However, under 11 U.S.C. Section 524(m), bankruptcy courts may disapprove a reaffirmation agreement if a presumption of undue hardship arises, and is not successfully rebutted by the debtor to the satisfaction of the court.”
At the hearing, Debtor’s bankruptcy attorney argued that the court should approve the reaffirmation agreement because Debtor was seeking to protect the interest of her daughter who is a co-owner of the property and her daughter makes the payments. However, Debtor’s bankrupcy lawyer was unable to tell the court was benefit there was to the Debtor by reaffirming the agreement.
In this Chapter 7 bankruptcy in Pennsylvania case, the court ruled against Debtor and noted that if the reaffirmation were approved there was no evidence Debtor would be able to earn sufficient income during the next twenty-two years of the obligation to be able to satisfy it. The court went on to say that is could consider the best interest of the Debtor in deciding whether to approve the agreement or not. The court concluded that the agreement was not in Debtor’s best interest because she could not afford the payment. In addition, it pointed out that the mortgage payments were current and the mortgage company was not threatening to foreclose. Finally, it noted that Debtor did not reside in this property.
If you have questions about Chapter 7 bankruptcy in Pennsylvania you may want to contact a Pennsylvania bankruptcy attorney who can evaluate your specific circumstances.
Debtor Held Personally Liable For American Express Corporate Card
When he opened two American Express credit card account in his business name as the corporate officer of the business. The debtor did not dispute his receipt of the Account Agreement he received from American Express.
In addition, he argued that the subsequent revisions to the Agreement did not apply to him because he did not sign the agreement. American Express argued debtor was responsible for debt because the express terms of the Account Agreement imposed personal liability for any debts incurred by use of the credit card.
Normally a corporate officer may not be liable for debts incurred between a corporation and third party unless the officer unless the officer expressly assumes personal liability for the debt. However, most jurisdictions hold that an individual may be liable if the agreement contains a clause extending liability to all persons named on the card or to whom it is issued.
In comparing Pennsylvania law to the law in Utah the court went on to point out that in Utah that an unsigned credit card agreement may be enforced against a user of the credit card who has been provided a written copy of the agreement and the written agreement provides that use shall constitute acceptance. In this case, debtor never disputed that he received the Account Agreement and the Agreement provided that the use constituted acceptance. In addition, the Agreement in this case specifically stated that “Additional Card Members agree, both jointly and personally, to be bound to the terms of this Agreement.”
It is important to note in this case that the account statements named the debtor in his individual capacity and not as a corporate officer. Therefore, the court ruled In re James C. Fairfield, Eastern District of Pennsylvania the Dr. Fairfield was personally responsible for the American Express credit card debt.
Please visit our state pages on chapter 13 bankruptcy or bankruptcy chapter 7 to get more information on your particular state.
Pennsylvania Chapter 7 Bankruptcy Trustee Allowed To Strip Mortgage
Debtors Erik Charles Batipps and Sarah Helen Batipps filed for Chapter 7 bankruptcy in the Eastern District Of Pennsylvania. The Chapter 7 Trustee filed an adversary proceeding against the mortgage company seeking to strip the mortgage company’s lien. Based upon those facts the Trustee sought to exercise his “strong-arm” powers under 11 U.S.C. 544 to avoid the mortgage.
In this case Debtors’ bankruptcy attorney did not make any arguments because the action was filed by the trustee against the mortgage company. The Trustee filed his complaint in bankruptcy court based upon the fact that the mortgage was not executed by the Debtors before a notary in violation of the Pennsylvania Uniform Acknowledgement Act. Pursuant to Section 444 of that Act, “under 21.P.S. Section 444, this violation of the UAA renders the mortgage “unrecorded” and fraudulent as to subsequent purchasers.”
In examining the bankruptcy case law, the Court noted that there were two decisions in Pennsylvania which addressed this issue. In the first case, In re Fischer, 320 B.R. 52, 63-64 (E.D. Pa. 2005) the “court held that a mortgage signed outside the presence of a notary does not comply with the UAA, is fraudulent as to subsequent purchasers under P.S. 444 and therefore, is avoidable by a bankruptcy trustee under 11 U.S.C. Section 544.”
However, in the case of In re Messinger, 281 B.R.568, 572-75 (Bankr. M.D. Pa. 2002), the “court held that Pennsylvania law requires clear and convincing evidence of fraud or forgery with respect to the underlying mortgage documents to void the perfection of a recorded mortgage containing an acknowledgement that is complete and proper on its face, and absent proof of fraud or forgery, a mortgage cannot be avoided under 11 U.S.C. Section 544.
In ruling in favor of the Chapter 7 Trustee, the Pennsylvania bankruptcy court said “I agree with the Fisher court that the complete failure of the mortgagor to appear before a notary is a fundamental, material failure tom comply with the UAA that must trigger teh consequence provided in P.S. Section 444 – i.e. ; the mortgage is deemed unrecorded. Once this occurs, the bankruptcy trustee’s avoidance power under 11 U.S.C. Section 544 comes into play.”
In so ruling this Bankruptcy Court relied upon the plain language of the Pennsylvania statute. Additionally, the Court stated that “[t]he larger purpose of the acknowledgement process is to enhance the reliability of recorded instruments and to encourage the public to rely on the validity of publicly recorded documents.”
If you have questions about Chapter 7 bankruptcy law or bankruptcy in Pennsylvania, it is recommended that you seek the advice of a Pennysylvania bankruptcy attorney in your area.
Pennsylvania Chapter Bankruptcy 7 Debtor Gets Discharge Despite Profitablity Statements
Mark T. Hawkins filed for Chapter 7 bankruptcy in Pennsylvania. He served as president and was a one-third owner of Hawkins Precast Concrete Products, LLC. He hired Plaintiff, Sherry Justice, as a sales agent and provided health insurance coverage. As an employee she did not have access to the company’s books, but she had access to the emails of the business owners as well as information relating to the balance of the business bank account.
In May or so of 2008 Debtor borrowed $10,000.00 from Plaintiff for use in the business. He gave her a check but she was never able to cash it but promised her that if the business failed he would personally repay her the money. Debtor admitted that he continually represented that the business was profitable and would be able to pay the loan back despite the fact that there was a $900,000.00 confession of judgment against the business. Plaintiff continued to loan Debtor funds until May of 2010 when the parted ways.
Debtor eventually executed a promissory note with Plaintiff in which he agreed to repay $102,309.00. When Debtor defaulted on the Note and filed bankruptcy, Plaintiff asserted that she had relied upon the Debtor’s representations of the financial circumstances of the business as well as te assets pledged as collateral in the Note dated March 31, 2010. Plaintiff contended that based upon those representations of profitability the debt should be excepted from discharge pursuant to 11 U.S.C. 523(a)(2)(A) of the Bankruptcy Code.
In making its decision the Court stated that in order to prevail “[p]laintiff must prove by a preponderance of the evidence of the existence of the following five factors: (1) Debtor made a representation; (2) at the time of te representation, Debtor knew it to be false; (3) Debtor made the representation with the intent and purpose of deceiving Plaintiff; (4) Plaintiff relied upon the false representation; and (5) Plaintiff suffered a loss as a proximate result of the representation.
The Court pointed out, however, that [i]n order to prevail on a claim under 523(2)(A)(2), Debtor must have made a representation. However, the the code expressly excludes representations regarding the financial condition of the Debtor. There is a question in this case as to whether or not the Debtor made false representaitons that would satisfy even this first requirement.”
In this case the Court held that the representation by the Debtor that the business was profitable was based upon the financial condition of the Debtor and as such did not constitute a false representation for purposes of 11 U.S.C. 523(a)(2)(A). In addition, the Court did not believe that Plaintiff’s reliance on this representation was justified in light of the fact she had access to the bank account information and she had many years of experience in the industry. Finally, the Court noted that a mere breach of a promise to pay would not suffice to sustain Plaintiff’s theory of recovery.
For the foregoing reasons, this Pennsylvania Bankruptcy Court ruled that Debtor could discharge the indebtedness related to the Note in his Pennsylvania Chapter 7 bankruptcy case. If you have questions about what types of debts may be discharged in bankruptcy it is highly advisable to consult with a local Pennsylvania bankruptcy attorney.
Student Loan Can Not Be Discharged Due To Alcoholism
Gerald S. Lepre filed for Chapter 7 banruptcy in Pennsylvania and sought to discharge his student loans. The bankruptcy court, however, refused to discharge his student loans because it found that Debtor had not met any of the three prongs in the Brunner decision.
Pursuant to Brunner a debtor is required in a Chapter 7 case to prove that (1) based on current income and expenses, debtor cannot maintain a minimal standard of living for herself and her dependents if she has to repay the loan; (2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the loan repayment period; and (3) debtor has made a good faith effort to repay the loan.”
In this case, the Court stated, “[t]he Debtor has not established a clear enough picture of is income and expenses to establish by a preponderance of the evidence that he would be incapable of maintaining a ‘minimal standard of living’ if forced to repay the studen loans in question. In fact, the evidence adduced at trial is such that the Debtor has failed to meet the first prong of the Brunner test. Furthermore, the Court went on to note that “the Court is faced with a similar problem with regard to the Debtor’s expenses. At the center of this issue is that fact that the schedules on which Debtor relies are hopelessly out of date and have not been properlyly amended.”
As to the second prong of the Brunner test, the second prong requires a “finding of undue hardship under the second prong requires ‘unique or extraordinary circumstances’ which make it unlikely that the debtor would ever be capable of repaying his obligation.
The Debtor alleges that his disease of alcoholism may prevent him from satisfying his student loan obligations. The Court noted that “[b]ased on the record before it, this Court finds that Debtor’s alcoholism does not constitute a special circumstance which would result in Debtor satisfying the second prong of the Brunner test. Moreover, it noted that “[t]his Court’s decision is supported by case law which holds that the possiblity of Debtor’s relapse into addictive behavior is not sufficient to satisfy the second prong of the test.
With regard to the third prong of the test the Court noted that Debtor had to prove that he has made a good faith effort to repay his student loan obligations. “This Court has previously found that in analyzing the third prong of the Brunner test, courts must consider “(1) whether the debtor incurred substantial expenses beyond those required to pay for basis necessities and (2) whether the debtor made efforts to restructure his loan before filing his petition in bankruptcy.”
Here, “[d]ebtor admits that he has never made any formal attempt to seek an adjustment, deferment or forbearance, or to consolidate his student loan obligations… Furthermore, the Debor admits that he has never made a payment on his student loan obligations.”
Because Debtor’s bankrutpcy attorney could not demonstrate Debtor met any of these prongs, Debtor was unable to wipe out the student loans in his Pennsylvania Chapter 7 case.
Creditor Fails To Meet Burden Of Proof In Chapter 7 Bankruptcy Filed In Puerto Rico
On July 8, 2011 Debtor, Rosa E. Matos Zapata, filed her Chapter 7 bankruptcy in Puerto Rico. The Plaintiffs filed an adversary proceeding against Debtor claiming that their debt was nondischargeable pursuant to 11 U.S.C. 523(a)(2)(A) and (B). In their complaint, the Plaintiffs contended that they were the heirs of Jaime Marquez-Torres estate and that following his death they inherited a piece of property at Cabo Rojo, Puerto Rico.
On June 25, 2009 the Plaintiffs entered into a judgment by stipulation in the state court in which Plaintiffs agreed to give up their interest in the real property for $25,000.00. The agreement specified that in the event the Debtor failed to pay Plaintiffs within one year of the agreement, the property would be foreclosed upon and sold at a public auction. Debtor was unable to pay and in the adversary complaint Plaintiffs maintained they were still co-owners of the property.
In additon, in the adversary proceeding the Plaintiffs asserted that Debtor was intentionally trying to use the bankruptcy forum to fraudulently obtain title to the property and that Debtor intentionally underestimated the value of her property on Schedule A in order to induce the trustee to abandon his interest in the property.
In this case the Debtor asserted that the Plaintiffs failed to state a claim upon which relief could be granted because it contained just bare recitals of the elements. As the Court noted “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Moreover, the Court went on to say that to the extent that a complaint alleges fraud, the bankruptcy rules require showing circumstances constituting fraud and that those circumstances must be stated with particularity.
This particular requirement of pleading fraud is satisfied when a party specifies “who, what, where, and when of the allegedly false or fraudulent misrepresentation.” In this case the Court found that the Plaintiffs had not specifically plead their case. Moreover, the Court stated that “[i]n this case, the complaint on its face does not state a plausible claim to relief under either subsection(a)(2)(A) or (a)(2)(B) of section 523.”
Additionally, the Court asserted that in reference to 11 U.S.C. 523(a)(2)(A) of the bankruptcy code, “the only relevant, non-conclusory allegation plaintiffs assert is that debtor falsely represented on her bankruptcy petition that she is sole owner of the property in question. Such allegation -even if true- doe not state a plausible claim under this section, as plaintiffs never assert, nor could they, that they relied on debtor’s purportedly false petition to extend the $25,000.00 credit to debtor. The uncontested fact that the bankruptcy petition was filed more than two years after the signing of the stipulation makes that impossible.”
Finally, the Court did not find that there was any evidence that the stipulation had been negotiated in bad faith or that any fraud was involved in the negotitaton of the stipulation. If you have questions about Chapter 7 bankruptcy or Chapter 13 bankruptcy in Puerto Rico, it is highly recommended that you contact a local Puerto Rican bankruptcy attorney.
Rhode Island Debtor Transfers Boat To Son And Not Allowed Chapter 7 Discharge
Alfred McCory filed for Chapter 7 bankruptcy in Rhode Island on February 1, 2010. In this case Plaintiff filed an adversary proceeding seeking to deny Debtor a discharge based upon 11 U.S.C. 727(a)(4)(A). The specific basis alleged for denying Debtor a Chapter 7 discharge was that he transferred the boat to his son with “intent to hinder, delay, or defraud.”
Due to litigation in the Family Court between the parties, a Consent Judgment was entered into and Debtor was ordered to satisfy the judgment by May 5, 2009. Debtor failed to satisfy the Consent Judgment by that date and Plaintiff filed an action for contempt against Debtor. About two weeks after the contempt hearing which was adverse to Debtor, Debtor went to meet with his bankruptcy attorney.
Moreover, on his Statement of Financial Affairs Debtor failed to list the boat he transferred to his son in May of 2010. Furthermore, about four (4) months after he filed for bankruptcy relief, he sold the boat to a third party for $4,500.00. He then applied the sales proceeds to the $7,000.00 debt which he owed his son. The Debtor failed to list the boat on the Statement of Financial Affairs as property he was holding for another.
As the Court noted, in order to deny a discharge under 11 U.S.C. 727(a)(4)(A) the “[c]ourt must find that the debtor knowingly and fraudulently made a false oath, and that the oath must relate to a material fact.” In this case, Plaintiff claimed Debtor had made a false oath because he failed to disclose the boat on Question 14 of the Statement of Financial Affairs.
In looking at the Bankruptcy Code sections, the court noted that the Plaintiff had to prove by a preponderance of the evidence: 1) the debtor transferred, removed, concealed, destroyed or mutilated, 2) his or her property, 3) within one year of the bankruptcy petition’s filing, 4) with intent to hinder, delay or defraud a creditor. In this case, the court noted that it was undisputed that the first three elements had been met.
In the instant case, because debtor transfered the boat to his son and because he knew he was under a court order to satisfy the judgment by a date certain, the court found that the requisite intent had been met. In this case the court noted that the tranasfer of the boat had occurred while contempt proceedings were pending, and after the Family Court had made crystal clear, on September 2, 2009, that McCory would have to comply with the judgment. In sum, the court found that the transfer had been done with the intent to hinder or delay Plaintiff’s collecting the $60,000.00 judgment against Debtor.
If you have questions about Chapter 7 bankruptcy in Rhode Island, you may decide to consult with a Rhode Island bankruptcy attorney in your city.
Chapter 7 Debtor In Texas Files Late Tax Return And Can’t Wipe Out Taxes
Eddie Hernandez filed Chapter 7 bankruptcy in the Western District of Texas San Antonio Division on October 8, 2010. He received his Chapter 7 discharge on January 18, 2011. Debtor’s bankruptcy attorney filed an adversary complaint in the bankruptcy court on August 3, 2011 in which he asked the court to discharge certain income taxes from 1999-2006 pursuant to 11 U.S.C. 523(a)(1)(B).
The Internal Revenue Service argued that the income taxes should not be discharged in this bankruptcy case becase the taxes had not been “filed” within the meaning of 11 U.S.C. 523(a)(1)(B)(i).
In this case, Debtor failed to file an income tax return for 1999 on or before its due date of April 15, 2000. Debtor also did not file for an extension of time to file the 1999 income tax return. Therefore, pursuant to 6020(b) of the Internal Revenue Service Code, the IRS filed a substitute return on or about November 15, 2005. On or about August 7, 2006, the IRS assessed income taxes against Debtor. Debtor filed his 1999 income tax return on February 15, 2008.
For 2000, 2005 and 2006 the IRS did not make assessments for those years and Debtor filed delinquent tax returns in February 2008 for each tax year. The IRS admitted that because Debtor filed these returns more than two years before the petition date, the liabilities for 2000, 2005, and 2006 were not excepted from discharge under section 11 U.S.C. 523(a)(1)(B)(ii) of the Bankruptcy Code.
As to the other tax years, the issue before the bankruptcy Court was whether Debtor’s late-filed income tax returns were “returns” within the meaning of 11 U.S.C. 523. In this case the Court ruled that pursuant to 11 U.S.C. 523(a)(1)(B)(i) the income taxes were not discharged under section 727(a)(1).
In ruling that Debtor’s late-filed returns were not income tax returns for the purpose of bankruptcy dischargeablity, the Court relied upon the decision in McCoy v. Mississippi State Tax Commission (In re McCoy) 2010 U.S.App. LEXIS 62 (5th Cir. Jan. 4, 2012. In that case the Court pointed out that the issue was identical to the issue at hand as to whether a late-filed return constitutes a return for dischargeablity pursposes.
More particularly the Court focused on 11 U.S.C. 523(a)(1) which addressed whether a return is a return for pursposes of bankrptcy dischargeablity. That Code section reads at follows: [f]or purposes of this subsection, the term “return” means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to 6020)(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to judgment or a final order entered by a nonbankruptcy tribunal, but (underline added) does not include a return made pursuant to section 6020(b) of 1986, or a similar State or local law.”
The bottomline is that under current law, it does not appear you will be able to wipe out your personal income taxes in bankruptcy if you have filed your income tax returns late. If you have questions about bankruptcy in Texas or questions about whether your income taxes are dischargeable in bankruptcy you may need to consult with a bankrupty attorney in Texas.
Chapter 7 Bankruptcy Debtor In South Carolina Can Not Wipe Out Debt
Stephen Andrew Brush filed for Chapter 7 bankrutpcy in South Carolina on December 28, 2010. He was the sole shareholder of Brush’s Construction, Inc. He was in the business of residential and commercial construction. In late 2004 Plaintiff, Connie Godowns and Debtor entered into a contract for the construction of her home. The Plaintiff agreed to spend $750,000.00.
The house was completed in 2006 and the total amount Plaintiff paid Debtor was $2,681.234.10. The house was just over 2500 square heated feet and the total square footage was about 4,350. The cost per square foot was $1,033.00. Between August 2006 and November 2006 it was determined that the house had a value of between $1,063,000.00 to $1,609.259.
Debtor’s records reflected that approximately $1,800,000.00 had been spent on construction costs. Pursuant to the agreement that Debtor was to be paid 20% profit, the total price of the home was $2,200,000.00. Debtor admitted that there is no documentation for the almost $500,000.00 in additional costs. He had claimed that there were additional emails, invoices, and written memoranda but that he lost those things when his computer became inoperable.
Plaintiff’s expert testified that the value of the house was $1,400,000.00. The records from Brush Construction reflected that Debtor billed Plaintiff more than what he was billed by the suppliers and subcontractors. In many instances Debtor would add even sums, usually $1,000.00, to the amount of the invoice supposedly to cover field labor costs. Yet, at trial the evidence showed that Debtor had biled Plaintiff separately for field labor costs.
As the bankruptcy court noted, “the addition of a profit component to the labor bill is clear evidence of fraud in the marking up of the bills passed on to Plaintiff.” When Plaintiff began asking for more detailed bills, he complained to her that he had never before provided such documents for any other client. However, he testified at trial that he had provided Plaintiff with detailed invoices as the work progressed.
In the civil litigation which had been commenced prior to Debtor filing his Chapter 7 bankruptcy, Debtor refused to provide billing documents to Plaintiff and in fact the Court of Common Pleas entered an order in 2007 requiring Debtor to respond to Plaintiff but he never fully responded. Furthermore, the bankruptc Court noted that Debtor did not claim his computer became inoperable in 2007 but instead it became, according to him, inoperable in 2008.
Based upon these facts the Court held that Plaintiff proved, pursuant to 11 U.S.C. 523(a)(2)(A) that debtor made a representation; that at the time the representation was made, the debtor knew it was false; that the debtor made the false representation with the intention of defrauding the creditor; that the creditor justifiably relied upon the reprsentation; and that the creditor was damaged as the proximate result of the false representation. As such the Court held the debto owed to Plaintiff was nondischargeable.
Questions about Chapter 7 bankruptcy in South Carolina or bankruptcy law questions generally? Contact a South Carolina bankruptcy attorney today.
Chapter 7 Bankruptcy Debtors In Idaho Can’t Claim Homestead Exemption
Debtors filed Chapter 7 bankruptcy in Idaho and claimed a homestead exemption in a home in which they did not reside. At the time of filing their bankruptcy petition the Debtors resided in St. Anthony, Idaho, but claimed a homestead exemption in the Shoup Property.
In Idaho an exemption in a homestead is automaticlally created by virtue of residing in the property. More specifically, where an owner “desires to declare an exemption in property on which he or she does not currently reside, the owner must file both a declaration of homestead, and, if he or she presently owns and occupies other property, a declaration of abandonment of homestead for the residence property.” The Court pointed to Idaho Code Section 55-1004(1),(2) for this proposition and reference the case of In re Gardner, 41, 7 B.R. at 622.
In this case the Court found that when the Debtors recorded their Homestead Declaration in 2000, tehy owned and occupied a Montview Property. As the bankruptcy Court pointed out, although Debtors filed their Homestead Declaration, they did not record a declaration of abandonment for that property. Therefore, [t]hey did not meet the specific technical requirements of the homestead exemption statute, and did not establish an exemption by declaration in the Shoup Property.
The Court went on to discuss the fact that Debtors claim of homestead exemption also failed because the declaration “must be acknowledged in the same manner as a grant of real property is acknowledged,” pursuant to Idaho Code Section 55-1004(5). In this bankruptcy case, the Court noted that the Homestead Declaration did not contain a sufficient acknowledgement pursuant to Idaho Code Section 55-710.
In sum, the Debtor’s were not eligible to claim a homestead exemption of $100,000.00 in their Chapter 7 bankruptcy case. If you have questions about claiming a homestead exemtion in Idaho and are thinking of filing a bankruptcy case, it is strongly recommended that you speak to an Idaho bankruptcy attorney.
Chapter 7 Bankruptcy Debtor In Tennessee Discharges $250,00.00 Boat Loan
Andrew Stephen Bourke filed for Chapter 7 bankruptcy in Tennessee in on June 10, 2011. Prior to filing his Chapter 7 bankruptcy, Debtor secured a boat loan in the amount of $250,000.00 with Southeastern Financial Credit Union “Southeastern.” In May of 2007 Debtor initiated the loan process with Southeastern, Debtor completed a telepone application.
During the telephone application with the creditor, Debtor indicated that his gross income was $804,000.00. In addition, Debtor had income in the amount of Panorama of approxmimately $600.00 per month. When Debtor’s credit report was pulled by the bank, it contained a FICO Classic 98 Alert and Debtor’s credit score was 666. The credit alert noted that the balances on Debtor’s credit cards was too high in relationship to the other revolving accounts. However, the loan officer said she saw no red flags.
The loan was suppose to be approved by the loan officer’s supervisor and was approved by the lender’s CEO. Debtor’s income or employment were never verified by the bank.
Debtor later learned that $54,000.00 of his monthly income was being generated from an illegal ponzi scheme. He had a salary of about $154,000.00, so all of his income totaled approximately the $54,000.00 which he indicated on his loan application.
Debtor subsequently filed his Tennessee bankruptcy case at which time the credit union sought to have their debt survive Debtor’s bankruptcy case. More specifically, the credit union filed a comlaint under 11 U.S.C. 523(a)(2)(B) of the bankruptcy law. That Bankruptcy Code section excepts from discharge debts based upon a written statements that is (i) materially false; (ii) respecting the debtor’s or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive.
In this case the Tennessee Bankruptcy Court held that Southeastern failed to meet the first prong. As the Court noted, Debtor llisted his income at approximately $804,000 and this was the actual approximate income. The Court noted that although there may have been some misunderstanding as to whether this was solely from employment, this was not material. Furthermore, the Court found that there was no intent to deceive on the Debtor’s part.
In this case Debtor sought to have his attorneys’ fees paid by Southeastern and the bankruptcy Court granted Debtor’s motion pursuant to 11 U.S.C. 523(d) of the Bankruptcy Code because it found that based upon the totality of the circumstances the complaint against Debtor was not substantially justified.
If you are thinking of filing bankruptcy in Tennesse, you may wish to speak to a local Tennesssee bankruptcy attorney in your area.
Chapter 7 Bankruptcy Debtors Not Denied Discharge For Failing To Attend Hearing
James Albert and Linda Gail Clayton filed their Chapter 7 bankruptcy case in Tennessee on December 28, 2008. Their case had been previously a Chapter 13 bankruptcy proceeding. The meeting of creditor hearing was scheduled for May 27, 2011. They did not appear at the hearing and their attorney repesented to the Chapter 7 trustee that they did not have gas money to be able to attend their 341 meeting of creditors meeting.
The meeting of creditors hearing was rescheduled several times and Debtors did not appear. After May of 2011 Debtor’s bankruptcy attorney was unable to reach Debtors. The Chapter 7 trustee subsequently filed a motion to have the court compel Debtors appearance at their creditor hearing. The bankuptcy court granted the motion and Debtors were ordered to appear on August 26, 2011 for their meeting. The order for their appearance was sent to 1005 Mobley Road.The BNC Certificate showed that the address for the debtor was an address to which the United States Postal Service no longer was delivering.
When the Debtors failed to appear at their meeting the Trustee filed an adversary proceeding seeking to deny the Debtors a discharge for refusing to obey a court order pursuant to 11 U.S.C. 727(d)(3) and 727(a)(6)(A). In its analysis the bankruptcy court noted that the Federal Rule of Bankruptcy Procedure 7004(b)(0) provides that service may be made [u]pon the debtor, after a petition has been filed by or served upon the debtor and until the case is dismissed or closed by mailing a copy of the summons and complaint to the debtor at the address shown in the petition or to such other address as the debtor may designate in a filed writing.”
In this case the record reflected that the Debtors had surrendered their residence at 1005 Mobley Road and that the mortgage company had obtained relief from the automatic stay. Although the Court agreed with the trustee that service at the last known address upon the Debtors was legally sufficient, the Court was unpersuaded by the Trustee’s legal arguments.
The Chapter 7 trustee sought to deny the Debtors a discharge based upon 11 U.S.C. 727(d)(3) and 11 U.S.C. 727(a)(6)(A) of the bankruptcy laws. These portions of the bankruptcy laws provide that a debtor may be denied a bankruptcy discharge where a debtor has “refused.. to obey any lawful order of the court.” The Court stated that it could not find that the Debtors refused to obey the order to attend the meeting of creditors hearing beause the trustee could not proved Debtors had actual knowledge of the hearing.
In this case Debtor’s bankruptcy attorney had represented to the Court that he was unable to reach his clients and the record reflected that the Debtors surrendered their home to the mortgage company. Based upon these facts the Chapter 7 bankruptcy Trustee’s motion failed.
If you have questions about the results in this Chapter 7 Tennessee case or have questions aboutbankruptcy law in Tennesse it is strongly recommended that you contact a Tennessee bankruptcy attorney to discuss your situation.
Texas Debtor Can Protect Insurance Proceeds As Homestead
John Carlew filed for Chapter 7 bankruptcy protection in Texas. The issue which Debtor’s bankruptcy attorney argued was whether Debtor could exempt from creditors approximately $73,000.00 in insurance proceeds as a homestead exemption.
In this particular case, Debtor had filed a lawsuit against his homeowners insurance company in which he claimed the insurance company failed to pay. Debtor alleged several other theories of recovery in this chapter 7 bankruptcy case. For example, the Debtor sued his insurance company for negligence, negligent infliction of emotional distress, and negligent misrepresentation. Therefore, the issue was whether the $73,000.00 had to be apportioned among these various claims.
In ruling in favor of the Debtor, the bankruptcy court noted that “[i]n numerous cases, they (the courts) have extended specific exemptions to include the proceeds from the disposition of exempt property, including proceeds from an insurance policy or lawsuit.” Moreover, the bankruptcy Court noted that “[u]nder Fifth Circuit precedent, both proceeds from a lawsuit filed to recover damages on a homestead or from an insurance policy settlement become part of the bankruptcy estate and are potentially exemptible… Accordingly, the proceeds from the settlement of the State Court lawsuit, no matter what their characterization, are eligible to be exempted from the estate.
In addition, the court noted that “[n]or does the fact that the State Court Lawsuit pleaded several causes of action change this conclusion. Texas case law discusses apportionment of settlement proceeds, holding that debtors do not have the initial burden of breaking down these awards into exempt proceeds and nonexempt proceeds for other state law claims.” Moreover, the bankruptcy court noted that the Chapter 7 Trustee cannot escape the burden of proof assigned to an objecting party under Rule 4003(c) becauase the exemption claim relates to a settlement which fails to allocate damages into specific categories.
For the foregoing reasons, the debtor was allowed to exempt the insurance proceeds pursuant to the Texas homestead exemption in this Texas Chapter 7 bankruptcy case. If you have questions about bankruptcy law in Texas, you should consult with a bankruptcy lawyer who can talk to you about your specific situtaiton.
Chapter 7 Bankruptcy And Denial Of Discharge
Paul Sohal and Sukjinder Sohal filed Chapter 7 bankruptcy on September 29, 2009 in the Chapter 7 Bankruptcy Texas. Prior to filing bankruptcy, Plaintiff, Andy Keeton, had obtained a judgment against the Sohals for $75,000.00. Once the Debtors filed for Chapter 7 relief, Plaintiff filed an adversary proceeding seeking to deny a discharge to Debtors.
More specifically, Plaintiff sought to deny a discharge to Debtors based upon 11 U.S.C. 727(a)(4)(A) which provides that a court shall grant a discharge unless the debtor knowingly and fraudulently, or in connection with the case made a false oath or account.
The Court noted that an omission may amount to a false statement. Moreover, it stated that fraudulence could be shown by reckless indifference to the truth and that the indifference could be shown by numerous errors or admissions in the debtor’s schedules.
In this case the Court was not persuaded by Debtors that their omissions were immaterial because they were not trying to hide anything of value. In fact, it noted that materiality had to do with the trustee’s investigation of the case and stated that a false statement could be material even if the assets were worthless because the trustee could determine the debtor’s financial condition.
Importantly the Court found that the failure of Mr. Sohal to discose ongoing litigation with his disability insurance carrier was important. It further found that Mr. Sohal’s failure to list income he received from his employment as a director at his temple was of importance to the bankruptcy trustee.
Although Sohal argued that he suffered from a mental disability and memory loss, there was no evidence presented indicating he told his former bankruptcy attorney or informed the trustee of this matter. Additionally, there was no evidence that his memory loss would have caused the omissions of which he complained.
The bankruptcy laws of each state differ. Therefore, if you have further questions about bankruptcy law in Texas you may wish to visit our Texas bankruptcy page.
Chapter 7 Debtor In Texas Can Not Discharge Attorneys’ Fees
Dean Hutton filed for Chapter 7 bankruptcy in Texas on January 25, 2006. Debtor and his former spouse were involved in extensive litigation surrounding the custody of their son and daughter. During the litigation, Ferguson, Debtor’s former wife, has asserted that Debtor’s responses to the litigation questions were “essentially useless, disingenous, evasive and largely nonresponsive.”
Ferguson was awarded sole custody of the children. This decision was upheld on appeal but the Court of Appeals noted that Ferguson’s application for sanctions and attorneys’ fees remained open. When he filed his Chapter 7 case, Debtor listed Ferguson on Schedule E as a domestic support obligation but listed the sanctions which were awarded against him on Schedule F of the bankruptcy petition.
Debtor argued that the sanctions were dischargeable under the Bankruptcy Code pursuant to 11 U.S.C. 523(a)(5) because the sanctions were for the benefit of Ferguson’s bankruptcy attorney and would not affect the ability of Ferguson to support her children. He also argued that the judgments did not constitute divorce-related debts pursuant to 11 U.S.C. 523(a)(15) of the bankruptcy law because they are not payable “to a spouse, former spouse, or a child.”
In this case the bankruptcy court pointed out that the above code section “exempts from discharge certain divorce-related debts that do not meet the definition of domestic support obligations. Section 523(a)(15) provides that debts “to a spouse, former spouse, or child of the debtor … that [are] incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record are exempt from discharge in bankruptcy.”
Debtor’s bankruptcy attorney in this case was not on the winning side of the argument. The bankruptcy court stated that Ferguson benefited by relieving her of an obligation for which she would otherwise be liable. It further found that the attorney’s fees are owed to or recoverable by Debtor’s former spouse. In sum, the court found that the attorneys’ fees arose from a dispute over custody of the parties’ minor children and as such the attorneys’ fee were in the nature of support to the minor children.
If you have questions about this bankruptcy case in Texas, you may wish to speak to a Texas bankruptcy attorney about this case or any other bankruptcy related matter.
Discharging Your 2nd/3rd Mortgages: What You Need To Know
Good Morning. This is Roger Ghai of www.Chapter7attorneys.com and I wanted to discuss with you this morning a question that I frequently get from clients who are thinking about filing a Chapter 7 bankruptcy. Most often the client is faced with the situation where your house might be worth $200,000 but really you owe $300,000 on it. The question I frequently get from clients is whether the 2nd or 3rd mortgages can be wiped out or eliminated in a Chapter 7 case.
There was a recent decision that came out and reaffirmed what the law has been for some time and unfortunately, despite the fact that your house might be worth only $200,000 but you actually owe $300,000 we can not, as bankruptcy attorneys, we cannot file a motion in court to strip the 2nd mortgage holder or the 3rd mortgage holder.
In fact, in a recent case, in the Hoffman Decision last year, that’s exactly what the debtor had tried to do. They filed, then they went into the bankruptcy court, and they asked their bankruptcy attorney to file a motion to strip the 2nd mortgage lien holder on the basis that the property was only worth $100,000 instead of $150,000 that the client actually owed on it. What happened in the Hoffman decision was, the court referred to an older decision by the United States Supreme Court that was issued in 1992, the Dewsnup decision. Basically, the court said in that case, that again, if it’s a mortgage there is no way, legally, that it can be stripped even though the value of that property, the value of that real estate has decreased.
I hope that this bankruptcy tip has been useful to you this afternoon. If you have any questions, please feel free to call me. I am a practicing bankruptcy attorney. I have eleven metro meeting offices, which hopefully will be convenient to you. My telephone number is 770-792-1000 or you can visit our website at www.Chapter7attorneys.com
Thank you again.
Experts Warn of “Massive Bankruptcy Surge” in Wake of Coronavirus
Federal Reserve researchers are
predicting that the number of coronavirus-related bankruptcies will surge to over a million in the coming
months. The caveat is that Congressional efforts to stem the financial bleeding
of our nation may have some impact on those numbers.
Those who are already in a difficult
financial position before the quarantine are more likely than not to require
the services of a bankruptcy attorney in the coming months. Those who were
already in bankruptcy can expect their bankruptcy to continue to move forward
despite measures put in place to stop the spread of the coronavirus.
In this article, we’ll take a look at the
financial impact that the coronavirus quarantine is likely to have on the U.S.
economy.
What is the Government Doing to Help Americans?
The federal government, alongside state
governments, has issued a series of moratoriums on debt collection practices
that could help Americans out during this difficult ordeal. As an example,
there is a moratorium on any foreclosures during this period. But once the
quarantine is lifted, what will the banks do?
Those who are receiving money through
unemployment right now may be getting enough money to pay off their mortgage,
car loan, monthly expenses, child support, and more. Those who are only getting
the $1,200 stimulus check, though, may have a very different outcome.
One expert believes that the dollar
amount of bankruptcies that emerge from this period will set records for the
highest discharged amounts in the history of our nation. He says that there are
much larger amounts of debt now than during any prior economic downturn. This
not only includes individuals and married couples filing for bankruptcy but
corporations as well.
Will government efforts to stem the
economic bleeding be successful? No one really knows. At present, economists
don’t expect the number of bankruptcies to rise as high as during the Great
Depression, but continued deterioration of the economy could lead to similar
numbers.
Debtors May Be Blindsided Once the State of Emergency Is Lifted
Those who have lost jobs during the
coronavirus quarantine may find themselves blindsided by mounting debt once the
state of emergency has been lifted. Consider the fact that there is only a
moratorium on foreclosures and evictions while the lockdown is in effect. Once
the lockdown has been lifted, lenders and landlords are going to come searching
for their money. What happens next is anyone’s guess.
Congress could pass some form of consumer
protection legislation to force lenders and landlords into arbitration with
delinquent tenants or borrowers. This would have the advantage of forestalling
foreclosure and eviction, but borrowers would only be able to keep their homes
if they can meet the revised terms of their lending agreement and repay
arrearages. That means that families that are currently not in danger of facing
foreclosure will once the country is reopened. And their ability to remain in
their home may depend on whether or not they have any new income coming in.
With more corporations in foreclosure,
this can result in serious consequences for the job market. Positions that
existed before the closure may no longer be available once the country is
reopened.
Seventeen Million Apply for Unemployment Benefits
Already, the system in place that is
attempting to stem the economic bleeding of the coronavirus is overtaxed. Since
unemployment benefits are mostly handled at the state level, the ability to
draw funds from that trust depends entirely on the funds being available. Some
states may struggle to find the funds to pay out the myriad of claims they are
now facing.
More than 17 million Americans have applied for jobless benefits in the
three-week period. Meanwhile, some are predicting that there could be as many
as 30 million unemployed Americans by the time the quarantine is over.
Worse still, many individuals are finding
it very difficult to even apply for unemployment benefits as government servers
and the ability to process claims are compromised with so many applying for
unemployment at the same time.
Small Businesses Can Now Borrow Cheaply
As part of the $2.5 trillion stimulus
package, small businesses will be able to apply for low-interest loans that are
backed by $350 billion in government aid. But if the application process is
anything like the process of applying for unemployment, there will be more
small businesses applying that can be handled effectively. Additionally, this
money has yet to make its way to small businesses yet, meaning that there will
be continued job losses during the pandemic.
Is Bankruptcy a Viable Means of Handling Debt Problems?
Yes. The bankruptcy system exists to
protect the economy and consumers from entering a debt “black hole” from which
they can never escape. It’s necessary to the functioning of a healthy economy
and exists in the form it exists to protect both lenders and borrowers.
Those who are facing mounting debt due to
the coronavirus will be able to file under Chapter 7 or Chapter 13. There will
be a lower likelihood that a bankruptcy filer would be rejected from applying
under Chapter 7 due to the lack of income coming in.
Chapter 13 filers can begin making moves
to keep their homes or prevent the repossession of their vehicles during this
period. They would also be expected to repay any arrearages while also repaying
some of the nonpriority unsecured debt that they owe (like credit card
expenses).
Additionally, creditors may be more
willing to renegotiate loan contracts in a post-coronavirus world than they
were beforehand.
Talk to a Kennesaw Bankruptcy Attorney Today
For those who are facing financial
problems during the coronavirus crisis, there is very little news that appears
to be assuaging their anxiety. Nonetheless, the law protects every borrower
from situations that arise due to factors they may have no control over.
Bankruptcy is one option to right your ship and get back on the path to
financial freedom. Call today to learn more.
Is Support Of Your Mother In A Separate Residence A Reasonable Expense In A Chapter 7 Bankruptcy Case?
In the case of Phillip and Carol Bentincasa, hereinafter Betincasa, the court ruled that the debtor-husband’s inclusion of a payment of $1,670.00 per month to support his mother’s separate household was not a reasonable expense.
In this case the evidence showed that the debtor had been paying about a $1,000.00 a month for his mother’s living expenses and that she was living in a separate household. In the original bankruptcy filing, the debtors filed a Chapter 7 case, but the United States trustee filed a motion to dismiss the case based upon 11 U.S.C. Section 707(b). Pursuant 11 U.S.C. Section 707(b), the trustee may make a motion to dismiss a person’s Chapter 7 bankruptcy case if the person’s debts are primarily consumer debts and it “finds that the granting of relief would be a substantial abuse of the provisions of this chapter.”
Following the trustee’s motion to dismiss the Chapter 7 proceeding, the debtors filed their motion to convert the case to a Chapter 13 proceeding. However, in the Chapter 13 case, the Chapter 13 trustee objected to the confirmation, or court approval of the case, on the basis that their repayment plan had not been proposed in good faith because the debtors’ support contribution to the debtor-husband’s mother so that she could live in a separate home, was not a reasonable expense.
More specifically, the bankruptcy court pointed out that the debtors were trying to maintain two households but had accumulated $152,000.00 in credit card debt and spent approximately $100,000.00 in equity in one of their two residences. Furthermore, the debtors had indicated in their petition that they spent too much on food – approximately $600.00 per month – when the Internal Revenue Service had set the food expense at $537.00 per month.
In sum, more likely than not, if you file a Chapter 7 bankruptcy case you will not be able to include separate household expenses for a family member and file a Chapter 7 bankruptcy case. Moreover, oftentimes I am asked what expenses are considered to be reasonable in the context of the current bankruptcy laws. I think the best answer to that question is the expense guidelines set forth in the Internal Revenue Service Guidelines.
Chapter 7 Bankruptcy Debtors In Utah Able To Protect Insurance Policy
Coby R. Duffin and Jeanie Marie Duffin filed for Chapter 7 bankruptcy in Utah on August 20, 2009. In their case, Debtors owned two State Farm Insurance policies (Policies). One of the Polices was owned by Coby R. Duffin and there was a value of $4,000.00 which was claimed as exempt. The other policy was owned by Jeanie Marie Duffin and there was a value of $4,500.00 which was claimed as exempt.
In this case the value of the exemption was determined by Utah law. The Chapter 7 Trustee argued that because Debtor’s made premiums in the amount of $226.00 per month for the 12 months preceding the filing of their bankruptcy case, they could not exempt that amount in their case. Debtor’s bankruptcy attorney, however, argued that the life insurance Policies contained administrative fees and an investment component and that the administrative fees should be exempt from the bankruptcy estate.
In this case the Bankruptcy Court did not address the arguments of Debtor’s bankruptcy lawyer. Instead, the Court examined the Utah statute upon which the Trustee relied and stated that “[t]he flaw in the Trustee’s argument is that the Statute does not provide for the exclusion of payments made on a life insurance contract during the one year prior to the filing of a bankruptcy petition. The Statute excludes payments made on a life insurance contract during one year immediately preceding a creditor’s levy or executiion. By its own terms, the second clause of the Statute only comes into operation when there has been a creditor’s levy or execution. The Statute is not open ended and does not invite additional triggering events.”
Therefore, the Utah Bankruptcy Court ruled that the insurance values of these Policies were protected in this Utah Chapter 7 bankruptcy case. If you have questions about whether the cash value of your life insurance policies will be protected if you file Chapter 7 bankrupty in Utah, you should consult with a Utah bankuptcy attorney in your area.
United States Trustee Fails In Effort To Revoke Discharge Of Debtor Who Forgot To List $5,000.00 In Cash On Schedule B
During litigation over a home she discovered had been a “meth” house, Ms. Henderson disclosed that she had $5,000.00 in cash in her nightstand. She subsequently amended her bankruptcy schedules to reflect the $5,000.00 and she turned the money into the United States Trustee. The UST then filed an adversary complaint to revoke Ms. Henderson’s discharge.
At this Chapter 7 dischargeability hearing, Ms. Henderson testified that she had purchased a home in April of 2007 and when she moved in the following month she began to experience pain in her lungs and physical condition. She moved out of the home within a short time and began experiencing, anxiety, depression, increased seizures and headaches due to financial stress. She was on several medications and her physician testified at the trial that he had prescribed lamictal and sertraline, both of which affect memory and concentration. He explained that the memory was in the brain but that the memory could not be retrieved.
In finding that this Chapter 7 debtor did not perpetrate a fraud in the filing of her bankruptcy case, the Court noted that Ms. Henderson had retained the money but did not spend it, that she did not appear to be in any better financial position for holding the money for two years, that the money had remained in her nightstand, that she did not transfer the money, that there was no evidence that she attempted to hide the money, and that Court found her testimony and that of her physician to be an reasonable explanation of why she failed to list the $5,000.00 in cash on Schedule B of her Chapter 7 bankruptcy case.
If you have questions about Chapter 7 bankruptcy in Wyoming or Chapter 13 bankruptcy, please visit our state pages.
Attorneys Prohibited From Filing Chapter 7 Cases Unless Attorney’s Fees Paid Up Front
In this case the law firm accepted postdated checks from it’s Chapter 7 bankruptcy clients for legal services performed. Typically, the law firm would charge $1,250.00 for a Chapter 7 case. The client would be required to pay the court costs, credit counseling, and the cost of ordering a credit report upfront.
The balance of the attorney fees, usually $1,000.00 to $1,250.00 would be paid by the client with postdated checks which would be deposited after the case was filed and sometimes after the Chapter 7 discharge had been granted.
The UST maintained that the postdated checks constituted a prepetition claim under 11 U.S.C. 101(5), that depositing the checks after the case was discharged violated the discharge injunction pursuant to 11 U.S.C. 524, and that the fee arrangement created an inherent conflict of interest between the law firm and its clients.
In this case sometimes the law firm would send a collection letter to the client if the client’s postdated check bounced. The Court ruled that collection efforts of this sort violated the discharge injunction of 11 U.S.C. 524. In addition, the Court ruled that the postdated checks were tantamount to a promissory note and held that a postdated was like a promissory note and was really nothing more than a promise to pay a certain sum of money at a specified time. For that reason, a postdated check is a ‘claim’ under Bankruptcy Code 101(5).
Additionally, the Court found that Defendant law firm violated the Automatic Stay provisions of 11 U.S.C. 362(a) when it cashed the postdated checks after the case was filed. It elaborated by saying that each time the law firm cashed the check it violated the Automatic Stay in each instance.
Finally, the Court found that this fee contract created a conflict between attorney and client because the law firm served as bankruptcy counsel and as a creditor once the case was filed. For much of the Court’s analysis, this Court relied upon the decision In re Waldo, 41 B.R. 854 (Bankr. E.D.Tenn. 2009) which involved many of the same issues involving the same law firm.
If you have further questions about Chapter 7 bankruptcy or Chapter 7 bankruptcy in Florida or Chapter 13 bankruptcy, please visit our pertinent pages to this website.
Bankruptcy Attorney Argues Chapter 7 Bankruptcy Trial Should Be Held
John Charles Thomas filed for Chapter 7 bankruptcy in Colorado on November 8, 2010. Plaintiffs, Christopher Lykins (“Lykins”) and Lori J. Waknin (“Waknin”) filed an adversary proceeding in bankruptcy court against Debtor.
Plaintiff’s alleged several causes of action against Debtor. Debtor filed an Answer to the complaint and admitted that he was a member of the Spotlight, to whom Plaintiff had cosigned her vehicle. Overall, however, Debtor denied most allegations. Debtor’s former partner Teta and his wife filed for Chapter 7 bankruptcy protection on September 29, 2010. Plaintiffs in that case alleged nearly identical allegations against Debtor’s former partner Teta. In that case, no answer was filed and the bankruptcy Court entered a judgment in favor of Plaintiffs.
In this instant case, Plaintiffs sought to have a judgment entered against Debtor on the basis that the lawsuit against Debtor’s former partner had identical causes of action. In sum, the Plaintiff’s bankruptcy attorney wanted to obtain a judgment against Debtor on the basis that a judgment had already been obtained against Debtor’s former partner.
Debtor’s bankruptcy attorney, however, argued that a trial should be held because Debtor was disputing the material allegations of Plaintiff’s complaint. In particular, Debtor argued that any representations or statements made to Plaintiff regarding the consignment agreement or lien payoff was made by Teta, Debtor’s former partner, not by Debtor. Debtor further pointed out that at no time during the trial did Plaintiff testify that Debtor had made any representations to him regarding the 2002 Mercedes CLk 430.
Furthermore, Debtor asserted that the money received from Plaintiff Lykins for the purchase of the 2002 Mercedes CLK 430 went into the Spotlight, LLC checking account, and, importantly that contrary to Plaintiff’s assertions “this Court has never found that Thomas made any false representations to Plaintiffs or embezzled funds from Plaintiffs.”
The decision for the bankruptcy court was whether a bankruptcy trial should be held in this case. Because Debtor had material disputes with Plaintiffs theories of recovery, the Court held that the law dictated that a trial be held on Plaintiff’s case so that the Debtor could have his day in bankruptcy court. If you have any questions about bankruptcy in Colorado, you should contact a Colorado bankruptcy attorney who can advise you on Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Bankruptcy and Social Security Disability Benefits
Good news for those of you who are thinking of filing Chapter 7 bankruptcy and worried about protecting your Social Security disability benefits. Fortunately, in the case of Carpenter v. Reis, 20 CBN (8th Circuit 2010), the 8th Circuit Bankruptcy Appellate Panel ruled that in a Chapter 7 bankruptcy case, Social Security payments are excluded from the Chapter 7 bankruptcy estate pursuant to USC Section 407. This simply means that the debtor was able to keep his social security disability benefits.
Mr. Carpenter was rendered disabled by the Social Security Administration and was paid a lump sum payment of approximately $17,000 for his disability. The Chapter 7 bankruptcy trustee wanted to take the $17,000 disability payment and pay Mr. Carpenter’s creditors. Mr. Carpenter was able to show the bankruptcy court that the approximate $17,000.00 he wanted to keep was money he received from the Social Security Administration for his disability.
In ruling in Mr. Carpenter’s favor, the court ruled that his Social Security disability payment was not protected under 11 U.S.C. Section 522(d)(10) of the bankruptcy code because it was a benefit that Mr. Carpenter had already received.
However, in agreeing with Mr. Carpenter that the disability payment was protected in his Chapter 7 bankruptcy case, the Court ruled that it was protected under Section 42 U.S.C. Section 407, which states that no past or present Social Security payments are subject to bankruptcy law.
With that being said, what’s the lesson to be learned if you are thinking about filing a Chapter 7 bankruptcy? First, seek the advice of an experienced bankruptcy attorney who can evaluate the particular facts and circumstances of your situation. Each case is different and an experienced bankruptcy lawyer can tell you whether your social security disability payment can be protected.
Secondly, Mr. Carpenter or his Chapter 7 bankruptcy lawyer was smart because, in this case, Mr. Carpenter segregated his disability payment and was able to prove that the approximate $17,000 was actually from the disability payment and not some other source. This was a critical fact to Mr. Carpenter’s case.
If Mr. Carpenter had not been able to prove that the $17,000 he was trying to protect was actually from a social security disability payment, it is likely the result would have been different and he would have lost his disability payment. Don’t put yourself in that position.
For more information about this bankruptcy article visit Roger Ghai at www.chapter7attorneys.com or email roger@chapter7attorneys.com.
© Law Offices of Roger Ghai, P.C. We are a debt relief agency. We help people file for bankruptcy under the bankruptcy code.
Chapter 7 Bankrupcy Procedure – Importance of attending Your Meeting of Creditors Hearing
This is Roger Ghai of www.Chapter7attorneys.com . I wanted to do just one tip today, a
simple tip on the importance of attending your hearing, your meeting of creditors hearing.
A meeting of creditors hearing is held approximately about 30 days after your bankruptcy
case has been filed. It is very, very important that you do attend this hearing and comply
with the court process. If you don’t attend the hearing, the judge actually has the power
to order you to jail. Now, this is not a very common occurrence, but in the case of
Mr. Fulcher, that is exactly what happened. Had he just gone ahead and gone to his
hearing as he was supposed to go, the judge would not have ordered him to go to jail. So
normally, the judge is not going to order you to go to jail if you’ve got a valid excuse, the
weather, somebody became sick, or something of that nature. But in the Fulcher case he
was really not compliant with the whole bankruptcy process even though he’d been under
court order to do so, and even though he had filed the petition. So, one of the creditors in
that case actually asked for his incarceration. Just be sure that if you do file a bankruptcy
case that you follow through in good faith and that you avoid the result of Fulcher.
Again, this is Roger Ghai of www.Chapter7attorneys.com . If you have any questions,
please feel free to call my office at 770-792-1000. Thank you.
Income Taxes In A Chapter 7 Bankruptcy Case
In some instances, personal income tax liabilities may be wiped out by filing Chapter 7 bankruptcy. Bankruptcy code section 11 U.S.C. 507 (a)(8)(A) deals with eliminating income taxes. It reads as follows:
- Eighth, allowed unsecured claims of governmental units, only to the extent; that such claims are for –
- a tax on or measured by income or gross receipts –
- for a taxable year ending on or before the date of the filing of the petition for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
- assessed within 240 days, plus any time plus 30 days during which an offer in compromise with respect to such tax that was made within 240 days after such assessment was pending, before the date of the filing of the petition; or
- other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case.
- a tax on or measured by income or gross receipts –
What does this legal mumbo jumbo mean? It means that if you filed your income tax returns on time, your income taxes are at least three years old, and the IRS or state taxing authority did not make a new assessment of income tax liability in the 240 days after the date you filed your Chapter 7 bankruptcy case, you can say goodbye to your income tax debt.
In Maali v. United States, 20 CBN 1007 (Bankr. 1st Cir.2010), Maali was not allowed to discharge 2002 and 2003 income tax debt in his Chapter 7 bankruptcy case. What went wrong? The IRS assessed additional taxes, interest, and reversed an earned income tax credit within 240 days of Maali filing for Chapter 7 bankruptcy.
So what’s the lesson if you would like to discharge income tax debt in bankruptcy? Consult an experienced bankruptcy attorney who knows the rules. And make sure to bring all of the correspondence you received from the IRS or your state taxing authority to your bankruptcy attorney. If you don’t have the paperwork, call your taxing authority and get it. Otherwise, your bankruptcy lawyer will be filing your case with inaccurate information and you might not be able to get the bankruptcy debt relief you hoped for.
For more information about this bankruptcy article visit Roger Ghai at www.chapter7attorneys.com or email roger@chapter7attorneys.com.
© Law Offices of Roger Ghai, P.C. We are a debt relief agency. We help people file for bankruptcy under the bankruptcy code.
Does Your Mortgage Company Have Proper Documentation To Legally Foreclose?
Generally speaking, whoever initiates the foreclosure must demonstrate that they have legal rights in the promissory note and in the mortgage instrument itself.
Let’s take the case of Mark Richard Lippold as a case in point. In this case, Mr. Lippold filed for chapter 7 bankruptcy relief in the Southern District of New York. U.S. Bank filed a motion asking the court for permission to foreclose on Mr. Lippold’s residence pursuant to 11 U.S.C. 362(d)(2).
Interestingly neither the chapter 7 trustee nor Mr. Lippold objected to U.S. Bank’s motion. However, nonetheless the court stated even though no objection had been filed the bank still had to prove that it had the right to bring the motion.
Mr. Lippold originally signed the promissory note with Aegis Funding Corporation and Aegis was named as the lender. The mortgage listed Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS”) as the mortgagee solely in its capacity as “nominee” for Aegis and its successors in interest. The mortgage also provided that MERS “holds only legal title to the rights granted by [Debtor] in [the Mortgage] and that MERS is the ‘mortgagee of record’ as nominee for [Aegis] and [Aegis’s] successors and successors and assigns has the right:
(a) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and
(b) take any action required of [Aegis] including, but not limited to, releasing and canceling [the Mortgage].
The Note provided that Mr. Lippold was to pay Aegis the sum of $344,000.00 plus interest, but the Note did not confer any rights to MERS. In the motion filed with the court, MERS had assigned the mortgage to U.S. Bank. The assignment from MERS to US Bank claimed also to transfer all rights MERS had in the note to U.S. Bank. However, at the hearing U.S. Bank could not prove it had any ownership interest in the Note. Further, Aegis was not a party to the assignment of the mortgage or the note to U.S. Bank.
The court stated that other decisions have held that transfer of a mortgage without the promissory note is a nullity and that once a promissory note is transferred from assignor to assignee, the mortgage passes as an incident to the note.
It also made a point of stating that the foreclosing party must demonstrate that it has the right to proceed under state law against the property at issue.
In this case, MERS was not a party to the Note and it could not show that it had any authority to take any action with regard to the Note. Just as important U.S. Bank could not produce proof that it had retained physical possession of the Note in order to show a valid transfer. Therefore, the judge ruled that U.S. Bank could not foreclose on Mr. Lippold’s property.
The lesson to be learned from the Lippold case is that you may want to consult with an attorney to determine whether the mortgage company has the legal paperwork in order to be able to foreclose. If you have any questions regarding this article, you may contact Roger Ghai
Tips For Rebuilding Credit After Filing Chapter 7 Bankruptcy
Many consumers who had to file for Chapter 7 bankruptcy are uncertain about what steps to take to rebuild their credit history. Chapter 7 bankruptcy eliminates all outstanding debt and for ten years, your credit report will show the debts included in the bankruptcy. However, few consumers are prepared to wait the full ten years after the process to start rebuilding their credit. There are some simple things you can do to establish a new credit history.
Your credit report
Once you have filed bankruptcy debts on your credit report should be designated as “included in BK” on your credit report. Consumers are entitled to a free copy of their annual credit report and approximately 30 to 60 days after the bankruptcy process is complete it is a good idea to request a copy and make sure the report is accurate. If any debts are not appropriately noted, you can write a letter to the credit bureaus. If your concerns are not addressed in a timely manner, your bankruptcy attorney can advise you what steps to take to make sure your credit report is accurate.
Obtaining new credit
For most consumers who have dealt with bankruptcy the biggest challenge they will face is establishing new credit. For debtors who had debts such as a home mortgage or student loan that was not discharged in bankruptcy, one way to start ensuring a better credit future is to put the payments on an automatic debit to ensure they are paid as agreed, on time.
Not every consumer who uses the Chapter 7 process will have the benefit of having student loans or mortgages. Most bankruptcy attorneys will tell their clients that it is usually impossible to obtain a new credit card before the bankruptcy is five years old. However, there is another option called a secured credit card.
Secured credit cards allow the consumer to set up a savings account and use a portion of the account in the form of a credit card. Regular payments must be made as with any other credit card and in many cases, as a history is established, credit lines are increased. Any failure to pay on time will result in funds being removed from the attached savings account. Generally, these cards carry much higher interest rates, annual fees and should only be used until you are able to apply for a more traditional credit card. However, the monthly payments are reported to the credit reporting agencies, helping you build your credit.
What you should know about car loans and mortgages
Many consumers feel after filing a Chapter 7 they will be unable to purchase an automobile or a home. However, this is not true in many cases. There are many loan programs that can help you purchase a new car or home within a few years of a Chapter 7 discharge. The FHA allows borrowers who did not lose a home to foreclosure but had a bankruptcy to qualify for an FHA insured loan in as little as two years. If a consumer can show they are saving regularly, have gotten their finances under control they may be able to qualify in as little as one year, especially if they are a first time buyer.
Making the decision to file Chapter 7 bankruptcy is never easy and chances are your bankruptcy attorney discussed the potential ramifications to your credit. However, starting over is not as difficult as many people think. Setting a budget and establishing a pattern of saving money regularly and you may be surprised to find out how easy it is to begin reestablishing your credit after bankruptcy.
Wisconsin Bankruptcy Attorney In Chapter 7 Bankruptcy Not Sanctioned For Rudeness
Jonathan Hirsfall filed for Chapter 7 bankruptcy in Wisconsin and Plaintiff, First Weber Group, Inc. filed an adversary proceeding seeking to have a judgment excepted from the bankruptcy debtor’s Chapter 7 discharge. In this case, the bankruptcy court noted that “[t]hroughout the trial, Attorney Moermond, counsel for First Weber, asked redundant questions thate were objected to as irrelevant. Nearly all of the objections were sustained.”
Moreover, the bankruptcy court noted that Mr. Moermond was “given numerous directives to limit the scope of his questions to the issue at trial, which he consistently failed to heed. He doggedly repeated his irrelevant questions. He frequentluy rolled his eyes. Though not fully audible, nor recorded, he made constant sotto voice comments (some vulgar) during the trial, which were heard by court staff and visitors to the courtroom. Attorney Moermond’s conduct wsa rude, petulant, immature and disrespectful.”
Defendant filed a motion for sanctions based upon Rule 9011. Plaintiff argued that the Rule 9011 Motion was sanctions was itself baseless and frivolous and Plaintiff moved for sanctions against Defendant based upon 11 U.S.C. 9011(b)(4) because Defendant failed to amend repeated unwarranted denials in its Answer.
The Court summarized the legal standard for sanctions under Rule 9011 of the Bankruptcy Code as follows: (1) the document was submitted for an improper purpose (i.e., to harass one’s adversary or to delay or drive up the costs of litigation; 2) the claims contained in the document are frivoulous because they lack support under existing law; 3) the allegations contained in the document lack evidentiary support or are unlikely to have evidentiary support upon further investigation; or 4) the denials in the document are unwarranted based on the evidence.
Additionally, the Court noted that before a motion for sanctions could be pursued, the procedural requirements had to have been met in that Rule 9011(c)(1)(A) requires the moving party to serve the opposing party with the motion and provide the opposing side with an adequate opportunity (21 days) to withdraw and correct the contested portions of the challenged paper, claim, defense, contention, allegation, or denial before the motion is presented to the court.
In this case the Court found that neither Plaintiff nor Defendant complied with this 21 day rule. For that reason as well as other reasons enumerated in this Wisconsin bankruptcy case, the Court ruled that it could not award sanctions against either party under Rule 9011. The Court conducted a detailed analysis pursuant to Rule 37 whether it could impose sanctions and concluded it could not. It further concluded that under 11 U.S.C. Sections 10, 28 U.S.C. Section 1927 that it likewise could not impose sanctions on First Weber’s bankruptcy attorney.
If you are faced with sanctions in a Wisconsin bankruptcy case you may wish to consult with a Wisconsin bankruptcy attorney for an opinion based upon the facts of your case.
Wisconsin Bankruptcy Attorney’s Homemade Chapter 7 Bankruptcy Forms Inadequate
Bankruptcy Attorney Doran filed Chapter 7 bankruptcy in Wisconsin for Theresa Ann Clausen. The bankruptcy petition was filed on homemade forms developed by Debtor’s Chapter 7 bankruptcy attorney.
As the Bankruptcy Court noted, there were “some departures in substance and substantial departures in format.” For example, the Court noted that the Debtor’s Schedule B omits and significantly changes wording in the type of propery column. On the Official Forms, one column of Schedule B reads “LCheck. savings or other financial accounts, certificates of deposit or shares in banks, savings, and loan thrift, building and loan and homestead association, or credit unions, brokerage houses or cooperatives.”
“On Attorney Doran’s forms, that column reads ‘[c]heck and savings accounts, CD’s or similar accts.’ Several column descriptions in Schedule B are omitted, and only property type and dollar amount is listed. There is no space for description and location of the property, and no space to indicate whether the property is joint or community. It is not clear to the trustee (nor is it clear to me) if the dollar values in debtor’s Schedule B are meant to be the same as they would be on the Official Form column heading “Current Value of Debtor’s Interest in Property without Deducting any Secured Claim or Exemption.”
In addtion, the Bankruptcy Court noted that the schedules include language which seems to expand the exemption rights beyone what is provided for in the the Official Forms or the Bankruptcy Code. In this case the Chapter 7 trustee asked the Court to strike the documents because the forms were not in compliance with the Official Forms.
Several of the Wisconsin trustees executed affidavits indicating that the format deviations in debtor’s schedules “are cumbersome and confusing, making it difficult to determine if the debtors complied with Section 521; by omitting language rather than identifying “none” or “not applicable,” the debtor’s signatures upon the pleadings and schedules do not include an attestation to the inapplicability of those sections; debtors’s schedules include language exemption rights beyond what is provided for in the Official Forms or Bankruptcy Code.
Debtor’s bankruptcy attorney argued that the Official Forms do not have the force of law and that Federal Rule Bankruptcy Procedure 9009 states that the Official Forms presribed by the Judicial Conference of the United States shalll be observed and used with ‘alterations as may be approrpiate.’ However, the Court noted that “[f]orms may be legally insuffiient and unacceptable if they ‘confuse and confound a streamlined administrative process, or frustrate a quick and easy comprehension of the information presented.”
In ruling against Debtor’s Chapter 7 bankruptcy lawyer, the Court noted that the alterations on the debtors’ schedules are not appropriate. If you have questions about this Chapter 7 bankruptcy case in Wisconsin or bankruptcy law generally, you may wish to talk to a local bankruptcy lawyer about your case.
Wisconsin Chapter 7 Bankruptcy Debtor Can Not Claim Homestead Exemption
John M. Wilson and Christine A. Wilson filed for Chapter 7 bankruptcy in Wisconsin. The legal issue in the case was whether Debtor Christine Wilson could claim a homestead exemption in a residence. Pursurant to Wisconsin bankruptcy law, Debtor’s husband claimed a homestead exemption in the amount of $75,000.00.
Debtor’s wife claimed a homestead exemption in the amount of $75,000.00 in the same residence based upon an “Agreement to Keep Property Separate” which was entered into while the Debtors were cohabitating. Paragraph 10 of the Agreement provided: “Duration of Agreement: This Agreement shall become effective at the date of exeucution and shall remain in effect until terminated. Termination shall be effected by written notice by either party, cessation of the joint residency by eithter party or death of either party. Either party may terminate this Agreement unitlaterally at any time.”
The bankruptcy creditor Mohns filed an objection to Mrs. Wilson’s claim of homestead objection based upon the Agreement beteween the parties. In particular the creditor’s bankruptcy attorney argued that the Agreement survived the marriage and that marriage was not one of the manners in which the Agreement could be terminated. Addtionally, Debtor’s bankruptcy lawyer made the argument that the Agreement terminated when they married because there no longer existed a joint residency pursuant to the agreement.
In analyzing whether the Agreement was terminated upon the marriag of the parties, the Court looked to the definition of residency as defined by Black’s Law Dictionary and pointed out that residence is defined as a “person who lives somewhere permanently or on a long-term basis.” It pointed out that residency was not defined by the marital status of the parties. Moreover, the Bankruptcy Court relied on Debtor’s husband’s testimony that he thought the Agreement could only be terminated “by death, we moved out, didn’t cohabit anymore or either one of use could terminate it with written notice at any time.”
For the foregoing reasons, this Wisconsin Bankruptcy Court ruled that Mrs. Wilson could not claim a homestead exemption in her residence. If you have questions about Chapter 7 bankruptcy in Wisconsin, it is strongly recommended that you contact a bankruptcy lawyer in your local area.
Wisconsin Chapter 7 Bankruptcy Debtor Can’t Avoid Lien On Vehicle
Debtors, Scott T. Fryseth and Elizabeth M. Fryseth, filed their Chapter 7 bankruptcy in the United States Bankruptcy Court For The Western District Of Wisconsin in April 2011. In 2006 they had purchased a 2006 Kia Sedona which was financed by M&I Dealer Finance, Inc. M & I filed and perfected their security interest in the vehicle and they assigned their security interest in the vehicle to SunTrust Bank.
After filing their bankruptcy, Debtors filed a motion pursuant to 11 U.S.C. 522(h) of the bankruptcy law which allows a debtor to stand in the shoes of a trustee in certain instances. Debtors contended that pursuant to 11 U.S.C. 544 that a bankruptcy trustee, acting as a hypothetical lien creditor, could utilize the “strong arm” powers of the Code section and avoid the lien.
In support of their argument, Debtors relied on the case of In re Moeri 300 B.R. 326 (Bankr. E.D. Wis. 2003) in which a trustee was able to avoid a security interest in a vehicle which had been refinanced. However, the Court distinguished Moeri from the present case and pointed out that the Wisconsin statute allowed a secured party to assign its interest in a vehicle to a person other than the owner without affecting the security interest of the owner or the validity of the security interest itself. It further noted that the secured party remains liable for any obligations as a secured party until the assignee is named as secured party on the certificate.
In this case, Debtors acknowledged that SunTrust Bank did not refinance the vehicle and that M&I never released it’s security interest in the vehicle. In reaching the conclusion that an assignment did not invalidate the creditor’s security interest in the vehicle, the Court discussed the Uniform Commercial Code and said that the general rule is that an assignee is not required to file to perfect its security interest. Morover, under the Uniform Commercial Code, unless the statute provides to the contrary, the security interest will remain perfected … even if the assignee takes no action to cause the certificate of title to reflect the assignment or to cause its name to appear on the certificate of title.
Had the vehicle been refinanced by SunTrust Bank, the ruling would most likely would have lead to a different result for these Debtors. If you have questions about bankruptcy law in Wisconsin it is higly recommended that you seek the advice of a Wisconsin bankruptcy lawyer.
Rebuilding Your Credit Following Chapter 7 Bankruptcy
Good morning, this is Roger Ghai of www.Chapter7attorneys.com. I wanted to do a short informational video on rebuilding your credit after bankruptcy . There are 7 important tips for rebuilding your credit after filing a bankruptcy case.
The first one is to get a secured credit card. You can go to your bank and inquire from your local bank as far as getting a secured credit card.
You can also, after you finish a Chapter 7 or a Chapter 13 bankruptcy, go to your bank and just open up a small line of credit to re-establish your credit.
The other thing you can do is go ahead and get a mortgage after filing your bankruptcy. That is going to take a little bit more time, maybe between 1-2 years, but it can be done so long as after you’ve completed your bankruptcy case you’ve made sure that you paid your bills on time after that point.
You also want to develop good money habits after you’re out of a bankruptcy. You don’t want to over spend. You want to go ahead and pay your bills on time. You want to pay your utility bills on time. If you have a car or a home you want to pay your car payment or mortgage payment on time.
You also want to go ahead after you file a bankruptcy case and open up a checking account and a savings account. You want to make small deposits into each of those accounts on a consistent basis.
One of the things that people don’t seem to know is that as far as your credit score itself, the credit cards make up about 30% of your credit score. So you want to make sure that you are keeping your credit card payments on time.
The other thing is this, if you have credit cards, one of the factors that the credit card companies are going to look at, and how it affects your score, is actually how much of that credit limit you’ve used. So if you’re just maxed out on your credit cards you have very minimum limits left on your credit cards, then that’s going to hurt your credit score. That’s something you want to be thinking about.
Another thing that you need to pay attention to is your debt to income ratio. This is also going to help you in qualifying for a mortgage. If you have substantial income but you have a lot of debt, that’s obviously going to hurt your credit score. You want to keep your debt low. You want to have some open lines of credit. Normally, if you have 3 to 5 credit cards, that’s usually pretty good, and again with those cards, pay them on time. Don’t get them to a point where they’re maxed out as far as the actual credit limits.
You want to, of course, make sure that any installment loans are paid in full. Whether that’s a furniture payment or whether that’s a vehicle payment, things of that nature, you want to make sure that they’re consistently being paid on time.
As I was referring to earlier, you want to make sure that you don’t close all your credit cards. It is a good thing to have credit cards so long as you do not max out the credit card limits themselves.
I hope that you’ve found these 7 tips on rebuilding your credit after you’ve filed either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy to be useful. If you have any questions, my name is Roger Ghai of www.Chapter7attorneys.com. You can call my office at 770-792-1000 or visit me atwww.Chapter7attorneys.com . We are a debt relief agency and we do help people file for bankruptcy under the bankruptcy code. I hope that you’ve found this video to be useful. Thank you.
Seven Myths Concerning Chapter 7 Bankruptcy
Good morning, this is Roger Ghai of www.Chapter7attorneys.com. I wanted to do a short informational video on Bankruptcy Myths. So, I hope that as we go through these 7 bankruptcy myths you’ll find this information to be useful for you in case you’re thinking about filing for a Chapter 7 bankruptcy or even a Chapter 13 bankruptcy.
The first myth that I wanted to talk about is the myth that if you file bankruptcy you’re going to lose all of your property. That is simply not true. A lot of times clients are, in fact, worried that they’re going to lose their home, or their car, or their furniture, or their jewelry if they file bankruptcy. They’re afraid that the court is going to go ahead and grab it and use that to pay the creditors. Again, that’s just a bankruptcy myth. You are able to protect your property in most instances if you file for Chapter 7 bankruptcy or if you file for Chapter 13 bankruptcy.
Another myth, of course, is that boy, you’re going to be ruined and you’re never going to get credit again. That is simply not true either. Many times I have clients presently in their Chapter 7 bankruptcy case and believe it or not, they’re currently being solicited by the credit card companies for new credit card offers even though their Chapter 7 bankruptcy case is not completed. In addition, a lot of times clients qualify after they complete their Chapter 7 bankruptcy case, for a mortgage. A lot of times it’s within 2 years of your filing the discharge or the completion of your bankruptcy case.
Another myth is that you’ll be ruined for 10 years. I think that myth comes about because the fact that filing bankruptcy stays on your credit report for 10 years. Bad credit is on your credit report also for 10 years. The fact of the matter is that, you are not ruined for 10 years. Often times clients, within a couple of years of filing their bankruptcy case, particularly a Chapter 7 bankruptcy case, are able to go ahead and buy a new car or buy a home , qualify for a mortgage, or get the furniture or property they are trying to get. One of the reasons for that, of course, is that once you’re completely debt-free you’re a good credit risk if you don’t have all that other debt.
Another myth is that you get to pick and choose what to list in your bankruptcy. In other words, sometimes people say, well I don’t want to list my house in the bankruptcy, or I’m not going to put my house in the bankruptcy, or I’m not going to put my car in the bankruptcy. That’s a myth. You don’t get to pick and choose. All creditors have to be treated equally. But the people get worried about listing their house or putting their vehicle in the bankruptcy because they’re worried that they will lose that property. Again, the fact that you list a creditor such as your mortgage company, or your vehicle company, it does not mean that you’re going to lose that vehicle or lose your home. It just means that all creditors have to be listed. The court has to know your entire financial picture.
Another myth is that you cannot discharge or wipe out taxes, income taxes, in a bankruptcy. Again, that’s another myth. In some limited circumstances, depending on your particular situation, you might be able to wipe out completely income taxes in your bankruptcy case. In order to have that evaluated you’ll need to bring, of course, all the correspondence you’ve received either from the state taxing Authority or from the IRS to your bankruptcy attorney so that he or she can evaluate the information.
Another myth is that you’re not going to be able to buy a home or car again. I think we just covered that. It’s completely false. That’s completely untrue. A lot of times I have clients who within a very short period of time, probably 30-60-90 days out when they’ve completed their Chapter 7 bankruptcy case, they are able to go ahead and purchase a new vehicle. Most of the time it’s approximately 2 years before you can qualify for a mortgage again. But I’ve had clients that have qualified within a year or so.
The final myth that I wanted to talk about today is the thing that worries people is that if you’re married, there’s a myth out there that you have to file a bankruptcy case with your spouse. That is not true. You might have to do a lot of things together if you’re married, but filing bankruptcy together is not one of them.
I hope that you’ve found this informational video on 7 Bankruptcy Myths to be useful. If you have any questions, please feel free to call my office at 770-792-1000 or visit me at www.Chapter7attorneys.com. We are a debt relief agency and we help people file for bankruptcy under the bankruptcy code. Thank you again for your time.
Social Security Income, Means Test, and Disposable Income
The means test, however, provides that social security income is not calculated in determining whether a person’s income is above the median income for the previous six months. Although social security income is not required to be included in the means testing, the real issue is whether it is required to be included as part of the current monthly income.
At least in the case of David and Kim Rogers the court held that social security income was to be used in calculating a debtor’s current monthly income. Given that fact, that court held that the debtors’ Chapter 13 bankruptcy plan did not meet the test of good faith under 11 U.S.C. 1325(a)(3) because they were attempting to exclude their social security income from their disposable income.
Disposable income is commonly defined as monthly income after payment of your normal reasonable household expenses such as food, shelter, gas, transportation, etc. If your disposable income is above approximately $109.00 per month, then you will not be eligible for Chapter 7 bankruptcy relief, although you would still be eligible for Chapter 13 relief.
What is the lesson to be learned from this case? Well the main thing is that the social security income, more likely than not, will be calculated in determining the amount of disposable income you have at the end of each month.
Common Chapter 7 Bankruptcy Misconceptions
When debt becomes overwhelming too often, people get talked into not filing bankruptcy because they have been told some things that are simply not true. As an Acworth bankruptcy attorney, I have had discussions with debtors who believe some of these Chapter 7 bankruptcy misconceptions:
- I could lose my home – in nearly all cases, if you are a homeowner, you will not lose your home when filing bankruptcy. As long as you can keep up your mortgage payments, your home will be saved in a bankruptcy proceeding.
- I could lose my job – your employer cannot consider a bankruptcy proceeding as a means of firing you from your job nor can it be considered when applying for most jobs. You are protected under federal law for discrimination when hiring based solely on your credit status.
- I will never be able to get credit – this is simply one of the biggest myths surrounding bankruptcy. As your Acworth bankruptcy attorney will tell you, in some cases, you can qualify for a new mortgage in as little as two years and because you are eliminating much of your debt, your credit rating may even increase. In some cases, within a few months of filing bankruptcy, you may be able to secure a new credit card.
- If I am married we have to file jointly – this is also another misconception about bankruptcy. Married couples have the option of both filing or a single Chapter 7 or Chapter 13 bankruptcy filing. Your Acworth bankruptcy attorney can help you determine whether it is more beneficial to file singly or jointly.
- I will owe taxes on discharged debts – while some creditors will issue a Form 1099C to show discharged debts, in nearly all cases, debtors will not have to pay taxes on the amounts that are discharged based on the exemption of “insolvent immediately before the cancellation”. Most debtors will be able to prove they were insolvent prior to filing bankruptcy.
- Medical bills cannot be discharged – it is unclear where this misconception originated; for many who file bankruptcy, one of the primary reasons is they have overwhelming medical debt.
- You do not have to include all your debts in bankruptcy – this could get you into trouble. On your list of debts, all creditors must be listed.
For those who are considering filing Chapter 7 bankruptcy, the best course of action is to meet with an Acworth bankruptcy attorney rather than taking advice from well-meaning friends or family members. The bankruptcy law is in place to help debtors who simply can no longer meet their financial obligations. Filing bankruptcy can help you get a fresh financial start and too often, people avoid speaking with an attorney because they believe many of the myths about filing bankruptcy.
Always make sure that you speak with an attorney before making any decisions about filing Chapter 7 bankruptcy; common myths can stop you from making the right decision. If you are uncertain whether bankruptcy is the right answer, contact Roger Ghai, a bankruptcy attorney in Marietta at the Law Offices of Roger Ghai at (770) 792-1000; I will be happy to review your current situation and help you make the right decision for you based on your current financial situation.
Chapter 7 Debtors In Arkansas Able To Avoid Judicial Lien
Debtors Jeffrey Lewis White and Jennifer Gay White filed for Chapter 7 bankruptcy in Arkansas in September 0f 2010. In this case the issue was whether Debtors should be allowed to avoid a judicial lien on their homestead exemption. In 1991 Debtors acquired the subject property on which they wanted to avoid the judicial lien. The property consisted of 160 acres. At various times Debtors borrowed money against the property in the total amount of $161,000.00.
In order to collect on the judgment it had against Debtors the bank initiated an action to foreclose on its judgment lien. On or about June 29, 2009 Debtors filed for divorce and they agreed to divide the 160 acres. Debtors filed bankruptcy before the judcial lien could be foreclosed upon and each of them claimed a homestead exemption of 80 acres. They also both sought to avoid the judgment lien which was filed against the homestead exemption.
In this case, this bankruptcy case, the bank argued that the Debtor’s divorce dissolved the tenancy by entirety and that the debtors could not avoid the judicial lien because it did not exist when the title to the property changed to that of tenants in common following their divorce.
Pursuant to the law in Arkansas, a rural homestead consisted of 160 acres with a value not to exceed $2,500.00. If, however, the homestead consisted of 80 acres then a debtor could exempt the property without regard to its actual value. This Arkansas bankruptcy court rejected that arguement and said that “[b]ut the dissolution of the entireties interest did not create a break in the chain of title; instead, it merely acted as a change of the manner by which debtors held title to the property.”
The Court further explained that because the bank’s lien on the property impaired an exemption the judicial lien should be avoided. The Court relied upon 11 U.S.C. 522(f)(b)(2)(A) in making its decision as well as the case of Owen v. Owen U.S. 305 (1991)(note 6).
If you have questions about this bankruptcy case or other aspects of bankruptcy law in Arkansas, it is strongly recommended that you contact a bankruptcy lawyer in your areas for specific legal advice about your Chapter 7 or Chapter 13 bankruptcy.
Colorado Chapter 7 Bankruptcy Debtor Abuses Bankruptcy Code By Keeping Expensive Vehicle
Angela Lee Coates filed Chapter 7 bankruptcy in Colorado on December 18, 2010. She sought to retain a Dodge Ram which had monthly payments of $1,121.18. In this Chapter 7 case, the United States Trustee (“UST”) filed a motion to dismiss this case as abusive under the Bankruptcy Code.
In addressing the standards of whether Debtor’s bankruptcy filing was abusive under the Code, the Court looked to 11 U.S.C. 707(b) of the bankruptcy law and pointed out that “in determining whether there is substanital abuse under the totality of circumstances standard, the Court may consider whether the debtor’s expenses can be significantly reduced without depriving her of her adequate food, clothing, shelter, or other necessities.”
In this particular case Debtor’s mother who was in ill health was staying with Debtor and her daughter. Debtor’s daughter was unemployed but was a student who studied by taking online classes. The daughter cared for Debtor’s mother and paid for her daughter’s Jeep. In its ruling the Court ruled that for bankruptcy purposes the Debtor’s mother was not a dependent of Debtor because Debtor’s mother continued to contribute her social security income to her own household expenses and after her recovery was expected to return to her residence.
However, for bankruptcy purposes the Court ruled that Debtor’s twenty-two (22) year old daughter was a dependent. It further ruled that Debtor’s payment for the Jeep was a reasonable expense because Debtor’s daughter needed transporation to transport her mother back and forth to physician visits and needed a vehicle available in the event of an emergency.
The evidence in this case showed that Debtor had access to a company vehicle which she drove to and from work. This was a determinative factor in the Court deciding that the expense of $1,121.81 was for the Dodge Ram was an abuse of the bankruptcy code.
More specifically, the Court pointed out that Debtor and her family would not be deprived of any necessary transportation if she were to give up the Dodge Ram. As the Court noted, “Debtor would continue to have use of her company’s Ford during her working hours, and her daughter would continue to be able to use the Jeep during that time as well. Outside of work hours, the Jeep would be available to both the Debtor and her daughter, and, in the event of an emergency, the Ford would be available to either the Debtor or, if she were away in the Jeep, her daughter.”
For these reasons the Court ruled that Debtor’s retention of the Dodge Ram would be an abuse under the Bankruptcy Code. If you have questions about what may or may not constitute an abuse for Chapter 7 bankruptcy in Colorado, you may wish to consult with a local bankruptcy attorney for an opinion based upon the facts of your particular case.
Colorado Chapter 7 Bankruptcy Preparer Sanctioned
Randall Steven Hernandez filed Chapter 7 bankruptcy in Colorado on July 18, 2010. Ann Miller acted as Debtor’s bankruptcy preparer. Bankruptcy preparers are governed by 11 U.S.C. 110 of the bankruptcy law.
As a bankruptcy preparer Miller disclosed her fees of $400.00. She disclosed that $150.00 was for the actual typing of Debtor’s petition and that the remaining $250.00 was for “filling out Official Form 2, assisting with credit counseling, (computer use, phone use, technical assistance), the 100% guaranteee (any amendments regardless of fault), proofreading your petition, ensuring that Form 23 is completed in a timely manner, etc.”
The Chapter 7 bankruptcy trustee David Wadsorth was appointed as the trustee. In the course of reviewing Debtor’s petition, Debtor claimed certain exemptions to which the Chapter 7 trustee objected. Additionally, the Trustee objected to Miller’s fee of $400.00 as excessive and urged that it should be discharged purusant to 11 U.S.C. 110(h)(3)(A) of the Bankruptcy Code.
In response to the Trustee’s motion, Miller acknowledged that the case law in other jurisdictions “supports the concept that a bankruptcy preprarer can only charge $100.00 to $150.00.” However, Miller argued she could not make a living charging only $250.00 to prepare bankruptcy petitions. Furthermore, she argued that the additional $250.00 she charged for her case support services were for teaching legal research techniques. The Court stated Miller “reasonably knew or should have known were prohibited by 11 U.S.C. Section 110(e). The Court finds Miller’s fee practices are deceptive.”
In addition, the Court found that Miller was in violation of the 11 U.S.C. 110(e)(2)(A) which prohibits a bankruptcy preparer from rendering legal advice to a client. The list of legal advice prohibited by a bankruptcy preparer includes advising a debtor whether they will be able to retain their home, how to characterize the nature of a debtor’s interest in property, and other such matters.
In ruling against Miller, the Court sanctioned her for $150.00 and awarded Hernandez $2,000.00 in statutory damages under 11 U.S.C. 110(h)(3)(A). The Chapter 7 trustee was awarded fees of $1,000.00. Finally, Miller was enjoined from preparing bankruptcy petitions for six months unless she was supervised by a Colorado bankruptcy attorney.
If you have question about Chapter 7 or Chapter 13 bankruptcy law in Colorado, you may wish to visit our state page and contact a bankruptcy lawyer with your questions.
College Educated Debtor Able To Discharge Student Loans In Chapter 7 Bankruptcy
Debtor attended Delaware State University from 1980 to 1985 and graduated with two baccalaureate degrees; one in Theater and another in English Literature. The original amount of her student loans was $10,000.00. As of May 19, 2010 her student loan debts accumulated to $19,726.25.
The Court examined the Debtor’s income earning history an determined from the evidentiary record that Debtor had earned between $19,000.00 to $25,000.00 annually from 1985 to 1995. From 1996 to 1998 she earned $10.00 per hour working at Macy’s department store.
In 1998 Debtor left Macy’s and at about that time contracted hepatitis which caused her to be unemployed for about two years. In January of 2000 she worked at the Department of Public Welfare as a case administrator and continued working there until 2009. While employed there she earned approximately $37,000.00 per year and could have earned up to $55,000.00 annually.
From January 2002 until December of 2007, Debtor was on medical leave from her job for about half of the time. When she returned to work in 2008 she requested part-time work so that she could see her psychiatrist and the hematologist. In 2009 Debtor was terminated from employment and subsequently filed for unemployment.
For 2007 her earnings were $27,504.00, 2008 $16,690.00, 2009 $31,450.00, and at the time of trial she was still unemployed.
As to Debtor’s mental and physical ailments, it appeared Debtor suffered from Hepatitis C, pernicious anemia, hypertension and depression. She took medicine for depression and hypertension. Since 2007 Debtor had been in and out of the hospital numerous times for medical issues.
After graduating from college debtor did not earn enough money in the first two years to be able to repay her loans and her income taxes were garnished. In 2000 she was not making enough money to pay her rent and she was evicted. Temporarily she lost custody of her children because she had no place to stay. In addition, many times her utilities were shut off because she could not pay. She had been receiving food stamps since 2003.
Her request for a hardship discharge and or forbearance were denied. Debtor never made voluntary payments on her student loans. Rather, her student loans were paid when her income tax returns were garnished. Furthermore, she never applied for the Income Contingent Repayment Plan. Had she done so, her payment would have been $0.00.
In determining whether her student loans could be discharged on the basis of undue hardship, the Court relied on the Second Circuit decision in In re Brunner, 46 B.R. 752, 756 (S.D.N.Y. 1985) which spelled out the following three prong test:(1) present inability to pay the loan while maintaining a minimal standard of living; (2) additional circumstances suggesting that the present inability to pay will continue for a significant period of the loan’s repayment period; and (3) a past, good faith effort to repay the loan.
The Court also stated that the Debtor must prove these elements by a preponderance of the evidence. It further noted that under Brunner equitable concerns or extraneous factors may not be included in the Court’s analysis.
As to the first prong the Court concluded that debtor could not repay her loans and maintain a minimal standard of living. First the Court relied on its life experience in saying that $1,451.00 in monthly income was not sufficient to maintain a minimal standard of living. It went on to note that the income was below the monthly expenses for food clothing and household expenses allowed in the IRS National Standards for Allowable Living Expenses and IRS Local Housing and Utility Standards.
In addition, although Debtor’s payment under the ICRP would have been zero, the court rules this was not the sole determinative factor in determining dischargeability of student loans.
Concerning the second prong, the Court Debtor needed to prove ‘additional circumstances exist indicating the debtor’s present state of economic distress is likely to persist for a significant portion of the repayment period of the student loans and the inability to pay is attributable to reasons outside the debtor’s control. As the Court indicated the first aspect of this test debtor just has to show that the financial situation is not likely to improve and that this is not the fault of the debtor. Those factors can include such things as “long-term physical or mental problems precluding employment, lack of marketable job skills, or the necessity of fully supporting several dependents which precludes sufficient income.
In this case, because the debtor also submitted medical documentation from her physicians and did not rely solely on her own testimony about her medical condition, the Court accepted this testimony. Therefore, Debtor met the second prong.
The third prong Brunner also required that there be evidence that the Debtor made a good faith effort to repay her loans. In this case the Court found that Debtor did not request a discharge of her student loan until almost twenty-five (25) years into the loan term. Further, although the payments were involuntary, payments were still being made. Finally, although Debtor did not participate in the ICRP even though her payment would have been zero, the Court found it would have made no sense to make this a requirement in this case.
For the foregoing reasons, the Court granted Debtor a discharge of her student loans.
If you have questions about Chapter 7 bankruptcy or Chapter 7 bankruptcy in Pennsylvania, please visit our state pages.
Chapter 7 Pennsylvania Debtor Claiming To Be Poverty Stricken Not Entitled To Bankruptcy Relief
Erik Von Keil filed for Chapter 7 bankruptcy in Pennsylvania on May 6, 2010. At the time of his filing the Pennsylvania bankrputcy Court determined that he earned approximately $150,000.00 annually. In this case, Debtor declined to accept the W-2 income and assigned is to an allegedly religious organization which gave it back to him.
The religious organization then gives the income back to him and as the Court said he has been evading taxes and shielding his income from his creditors under the label of a ministry. In this Chapter 7 case the Court stated that the United States Trustee had established that the Debtor was not an honest but unfortunate debtor who was deserving of a fresh financial start.
In fact, the Court noted that Debtor exercised complete control over substantial amounts of money by using tax identification numbers that were not his and by opening bank accounts that he controlled using different names. Debtor had been previously cleared of Medicare fraud in 1997.
Beginning in 1997 Debtor began providing medical services to prison inmates at Lehigh County Prison where he held the title of Medical Director. He wsa employed by PrimeCare Medical, Inc. When he completed his income tax forms he put differnt tax identification numbers on the W-2 forms. While employed he received a regular salary, fully family health benefits, life insurance, annual leave, a monthly car allowance, a gas credit card, and monthly cell phone allowance.As an employee Debtor underwent annual performance reviews and was issued a W-2 by PrimeCare.
In ruling against Debtor the bankruptcy Court noted that [t]he linchpin of Debtor’s scheme is his assertion that all of his income and assets belong to the church. However, the Court went on to point out that [a]ll eight Courts of Appeal (including the Third Circuit) to have addressed the issue are in agreement: Attempts to avoid personal income tax liability based upon vows of poverty without proof that some agency relationship exists between the entity providing the wages and the church or religious order requiring the vow of poverty are simply unavailing.”
Moreover, the bankruptcy Court stated that “[t]o prove that wages or earnings were the income of the church or religious order rather than the individual, the majority of courts require the existence of a direct contractual agency agreement between the religious order and the secular employer. As the Court noted Debtor had no such evidence in this case.
Therefore based upon the foregoing, Debtor’s Chapter 7 bankruptcy discharge was denied in this Pennsylvania case. More specifically, the Court ruled Debtor was not eligible for a discharge based upon Sections 11 U.S.C. 727(a)(2), 727(a)(2)(A), and 727(a)(4).
If you have questions about whether you may be entitled to a Chapter 7 bankruptcy discharge in Pennsylvania it is strongly recommended that you speak to a Pennsylvania bankruptcy attorney about your particular circumstances.
Consumer Bankruptcies a Hot Topic, But Companies Are Filing Too
The current economic shutdown is wreaking
havoc on several industries which now have no income coming in during the
coronavirus quarantine. This has resulted in several layoffs and a reported 18
million Americans have filed for unemployment in the last three weeks. That
number appears to be growing.
With so much uncertainty about the
future, many individuals, married couples, and families are understandably
afraid of what the future holds. We are just beginning to feel the ripple
effects that the shutdown will have on our lives. In this article, we’ll
discuss how bankruptcy works for companies and individuals and how it might
help you after the coronavirus situation has stabilized.
Those Considering Bankruptcy Will Likely be Pushed Into It
Anyone who was having difficulty making
ends meet before the coronavirus situation will likely find themselves in a
worse position after the quarantine is lifted. Most (but not all) sectors of
the economy have absorbed major losses while the economic shutdown is in place.
First, this will impact companies that are forced to shut down. Their workers
will then go apply for unemployment.
The workers who have applied for
unemployment have had major difficulties getting through to their state’s
Department of Labor to file these claims. Some have been waiting for weeks to
file a claim after getting laid off from their job. These individuals likely
don’t have any form of income coming in, and those who do can expect revenue
streams to shrink the longer the quarantine remains in effect.
By May or June, at least 10 percent of the American workforce (and as much as 30 percent according to some
models) will be or are presently out of work with more being added every day.
Experts are predicting a surge in consumer bankruptcies in May or June, but the
problem will hit the commercial sector much faster and has already resulted in
several corporations announcing that they are either on the brink of
bankruptcy, considering bankruptcy, or are likely to file for bankruptcy soon.
Companies Currently in Bankruptcy
The XFL recently filed for bankruptcy after showing signs of early success. Despite
this, it is unlikely to return for another season and employees have already
been laid off.
Meanwhile, sports isn’t the only industry
that’s been devastated by the coronavirus. Several restaurants and restaurant
chains are also losing millions while the quarantine remains in place.
Retail stores have also been hit hard by
the coronavirus since they depend on in-store shopping that cannot be conducted
right now. JCPenney recently announced that they would be exploring the possibility of
bankruptcy once the dust has settled. True Religion, a jeans retailer, announced that they too would be filing for
bankruptcy.
Already, amusement parks are considering whether or not they should file for bankruptcy, anticipating that the summer may be lost
while America social distances.
And each of these companies has hundreds,
if not thousands of employees, who are now laid off due to the coronavirus
crisis.
Differences Between Consumer and Commercial Bankruptcies
There are several chapters of bankruptcy
each of which relate to a different enterprise or industry. For example, farms
can file under their own chapter of bankruptcy. Even municipalities can file
for bankruptcy.
Consumers, on the other hand, have three
chapters of bankruptcy to choose from: Chapter 7, Chapter 13, and Chapter 11.
No consumer would ever choose to file
under Chapter 11, but restrictions placed on Chapter 7 and Chapter 13 sometimes
make that necessary.
Companies can file under Chapter 7 or Chapter
11. But Chapter 7 works differently for a company than it does for an
individual. If a company files under Chapter 7, the assets of the entire
company are liquidated to repay creditors and the company is dissolved.
Chapter 11 allows companies to remain
open while they reorganize their debts and liabilities and agree to make
payments over an indefinite time period. For consumers, Chapter 11 is similar
to Chapter 13, but consumers must make payments over a three- to five-year
period as opposed to the bankruptcy remaining open until required debts are
paid. Chapter 13 is only available to consumers.
Statistics from Other Recessions
The bankruptcy code didn’t exist in the
same way that it exists today during the Great Depression. However, we now have
the exact same system as we did in 2010 during the Great Recession, brought upon by the housing market collapse.
In 2010, there were roughly 1.6 million
consumer bankruptcies, which is a little more than double the amount of
bankruptcies we had last year (770,000).
Bankruptcy filings hit a 10-year low in
2018. This, of course, is good news. The fewer bankruptcies there are, the
better the overall economic situation. However, even as the number of
bankruptcies hit record lows in 2018, the amount of debt held by each
individual household actually went up during the same period. As of 2019’s
fourth quarter, American households held over $14 trillion in debt. Now, these
same people are out of work as the coronavirus continues to cause problems for
health care workers and hospitals.
Coronavirus Stimulus Bill Makes Changes to Bankruptcy Code
The Coronavirus Aid, Relief, and Economic
Security (CARES) Act offered billions in forgivable loans to small businesses
and $1,200 checks to each American. The $1,200 checks do not count as “income”
for the purposes of taking a Chapter 7 means test. In other words, the $1,200
check can not push your income over the income restriction that potentially
bars people from filing under Chapter 7.
Similarly, for Chapter 13 bankruptcies,
the $1,200 checks do not constitute “disposable income” which would be limited
while a Chapter 13 bankruptcy is still open. Further, those who experience
economic hardship during the coronavirus crisis will have a year to change the
terms of their Chapter 13 bankruptcies. Repayment terms may be extended up to
two years. A number of these bankruptcies will eventually end up converted into
Chapter 7.
Talk to an Acworth Bankruptcy Attorney Today
If you’re facing financial hardship
during the coronavirus crisis and can’t pay off your debts, one option is to
file for consumer bankruptcy. The Roger Ghai Law Offices helps consumers manage their debts and start
fresh. Call today to learn more about how we can help.
Call or text (770) 792-1000 or complete a Free Case Evaluation form