3 days 4 hours ago

Medical debt – number one cause for seniors filing bankruptcy
According to an article in Forbes, the 65+ demographic now makes up a higher percentage of bankruptcy filers than it did a decade ago.

seniorFiling for bankruptcy is seen by many seniors as a social stigma.  Some live in a nightmare where they are forced to choose between paying a credit card or buying food; paying a medical bill or paying rent. The truth is that bankruptcy can bring a light into their lives by eliminating medical and credit card debts. Many seniors are under the false impression they will lose items necessary to their daily lives: social security, furniture, retirement accounts, vehicles or even pets (see exempt property).
Bankruptcy is a good way to protect heirs.
In many states when a family member passes their creditors have first ‘bite’ at the estate (the deceased’s property).  If the deceased filed bankruptcy most, if not all, of their unsecured debts, such as medical debts, credit cards and personal guarantees, would have been discharged (wiped out).  Resulting in their heirs receiving their entire estate and not battling with creditors.
Peace of mind – bankruptcy stops the calls and harassment
When creditors are owed money they are not shy to call repeatedly throughout the day demanding payment.  Many will lie about their ‘rights’ (saying they have the right to take everything the senior owns).  There are laws governing creditors and collection companies but few know about those laws and fewer know their rights.
Most Arizona consumer bankruptcy attorneys offer a FREE consultation
Many, especially seniors, assume that hiring an attorney to help is too expensive – that depends on the situation and the attorney.  For most their initial consultation is FREE so take advantage of that option.  Always talk to several attorneys before choosing one.  Don’t assume the attorney is being honest about their experience and capabilities.  Check them out with the various ranking sources: such as Google, LinkedIn, AVVO, and Better Business Bureau, to name a few.
AVOID Used Car Sales Tactics
seniorBeware of firms advertising on TV or the Internet (“pay per click” – if there is an “Ad” icon on the left side of the name this is a paid ad).  Those ads are paid by the client in the form of higher fees.  NEVER pay an attorney if you feel pressured – this is what I call a “used car sales firm”.   They are in the business to get your money, not offer you advice customized to your unique situation.
​​Talk to the attorney you will be working with, not a staff person.  When interviewing the attorney ask how long they have practiced bankruptcy law.  Ask what percentage of their practice is focused on consumer work.  Ask whether they are experienced in both chapter 7 and chapter 13 cases.  Ask the attorney for references.  Ask about their policy of returning phone calls.  They should be committed to answering specific questions about your situation and help you understand your options.
If, after talking with the attorney you are still confused about the issues you raised, find another attorney.  An attorney is should be your guide in understanding your options, including bankruptcy.  They should educate you, be there to assist you in avoiding pitfalls and help you plan for your future after bankruptcy.  senior
Do your homework before hiring anyone.
There are hundreds of “bankruptcy” attorneys in Arizona.  Of those just a few will fit the criteria set forth above.  Bankruptcy is a very complicated process and you want to use an attorney who will be there when you need them.

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About the Author:
Diane L. DrainDiane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article.  Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*

The post Bankruptcy of Seniors Increasing – A Good Option for Many appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

3 days 7 hours ago

According to court records, in 2016 more than 6,300 Chapter 7 bankruptcy cases were filed in the U.S. Bankruptcy Court for the Eastern District of California, Sacramento Division. The same year, just under 2,150 Chapter 13 cases were filed, bringing the total above 8,000 cases. Some of these bankruptcy petitions were filed by individuals, while others were filed jointly by married couples, similar to the way spouses may choose to file a joint income tax return. But what about couples who are not married? Is it possible to file joint bankruptcy with your boyfriend or girlfriend if you are unmarried? And how are same-sex marriages and domestic partnerships impacted? Sacramento bankruptcy lawyers explain the answers to these important questions for Californians seeking debt relief.

Can I File Bankruptcy Jointly with My Boyfriend or Girlfriend?
Unfortunately for unmarried couples, the answer to this question is no. Even if you have lived with your boyfriend or girlfriend for many years, and you share numerous jointly-held debts together, you will still be prohibited from filing with your partner. Under federal bankruptcy laws, only married couples have the legal option to file bankruptcy jointly.
Though your household income will be assessed when you take the “means test,” which determines whether you should file Chapter 7 or Chapter 13, you cannot treat your boyfriend or girlfriend as a spouse on your bankruptcy forms. Keep in mind that lying on your bankruptcy paperwork could cause your case to be dismissed, which means you will not get the debt relief you are seeking through the bankruptcy.
best bankruptcy attorneys
Can Married Same-Sex Couples or Domestic Partners File Joint Bankruptcy?
In 2015, the United States Supreme Court legalized same-sex marriage with the landmark ruling Obergefell v. Hodges, in which the Court held that state-level bans on same-sex marriage were unconstitutional. According to the results of a Gallup poll published earlier this year, more than 10% of the country’s LGBT adults are now married: a figure that equates to well over 100,000 Americans.
Before Obergefell legalized same-sex marriage in other parts of the country, California extended this right to its residents in 2008. Though the passage of Proposition 8 halted same-sex marriage in California from November 2008 through June 2013, the right was later restored through Hollingsworth v. Perry, which overturned Proposition 8.
As a result of the Hollingsworth and Obergefell rulings, same-sex couples are entitled to the same legal rights as other married couples – including the right to file jointly for bankruptcy. If you and your husband or wife are thinking about filing bankruptcy together, we invite you to contact our Sacramento Chapter 7 lawyers or Sacramento Chapter 13 attorneys for legal guidance. Before you file for bankruptcy in California, it is crucial to determine whether a joint filing would benefit you and your spouse. In many cases, it is more logical and cost-effective for only one person to file. For more information on this subject, see our article on whether married couples are required to file jointly, or simply call us at (800) 920-5351 for a free legal consultation about bankruptcy in California.
Bankruptcy laws no longer draw distinctions between lesbian couples, gay couples, and straight couples. They do, however, continue to draw distinctions between married couples and unmarried couples. If you and your partner are in a domestic partnership, you may be disallowed from filing together. In 2015 in In re Villaverde, the Bankruptcy Court for the Central District of California ruled against allowing two registered domestic partners to file a joint Chapter 13 petition, citing 11 U.S.C. § 302(a), which provides the following:

“A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual’s spouse.”

The emphasis here is on the word “spouse.” Though domestic partnerships are similar to marriages in many respects, only marital relationships qualify couples for joint bankruptcy petitions.
The bottom line is that you must file individually if you are unmarried. If you are married, you will have the option of filing jointly, but are certainly not required to do so. Filing individually may make better financial sense, depending on the nature of your debts, assets, and income.
In either case, you will file using the Voluntary Petition for Individuals Filing for Bankruptcy (Form B 101). If you are filing jointly, you will be required to supply information for both spouses. Per the instructions given to debtors, “[I]n joint cases, [bankruptcy] forms… ask for information from both debtors. For example, if a form asks, ‘Do you own a car,’ the answer would be yes if either debtor owns a car. When information is needed about the spouses separately, the form uses Debtor 1 and Debtor 2 to distinguish between them.”
CA Bankruptcy Lawyers Serving Sacramento and Roseville
If you and your husband or wife are thinking about filing for bankruptcy together, make sure that filing a joint petition is the best course of action before you begin the process. Depending on your circumstances, you may be better off filing individually and excluding your spouse from the bankruptcy proceedings.
Regardless of whether you file jointly or individually, it is critical that you have step-by-step guidance throughout the process. Bankruptcy laws are extremely technical, and it is easy to overlook valuable opportunities or make costly errors unless you have assistance from an experienced Folsom bankruptcy attorney. For a free consultation, contact The Bankruptcy Group at (800) 920-5351 today.
The post Can Unmarried Couples File Joint Bankruptcy in California? appeared first on The Bankruptcy Group, P.C..

3 days 7 hours ago


Fall behind on your student loan payments, lose your job.

Few people realize that the loans they take out to pay for their education could
eventually derail their careers. But in 19 states, government agencies can seize stateissued
professional licenses from residents who default on their educational debts.

Another state, South Dakota, suspends driver’s licenses, making it nearly impossible
for people to get to work.

As debt levels rise, creditors are taking increasingly tough actions to chase
people who fall behind on student loans. Going after professional licenses stands out
as especially punitive.

Firefighters, nurses, teachers, lawyers, massage therapists, barbers,
psychologists and real estate brokers have all had their credentials suspended or

Determining the number of people who have lost their licenses is impossible
because many state agencies and licensing boards don’t track the information. Public
records requests by The New York Times identified at least 8,700 cases in which
licenses were taken away or put at risk of suspension in recent years, although that
tally almost certainly understates the true number.

Shannon Otto, who lives in Nashville, can pinpoint the moment that she realized she
wanted to be a nurse. She was 16, shadowing her aunt who worked in an emergency
room. She gaped as a doctor used a hand crank to drill a hole into a patient’s skull.
She wanted to be part of the action.

It took years of school and thousands of dollars of loans, but she eventually
landed her dream job, in Tennessee, a state facing a shortage of nurses.
Then, after working for more than a decade, she started having epileptic
seizures. They arrived without warning, in terrifying gusts. She couldn’t care for
herself, let alone anyone else. Unable to work, she defaulted on her student loans.

Ms. Otto eventually got her seizures under control, and prepared to go back to
work and resume payments on her debt. But Tennessee’s Board of Nursing
suspended her license after she defaulted. To get the license back, she said, she
would have to pay more than $1,500. She couldn’t.

“I absolutely loved my job, and it seems unbelievable that I can’t do it anymore,”
Ms. Otto said.

With student debt levels soaring — the loans are now the largest source of
household debt outside of mortgages — so are defaults. Lenders have always pursued
delinquent borrowers: by filing lawsuits, garnishing their wages, putting liens on
their property and seizing tax refunds. Blocking licenses is a more aggressive
weapon, and states are using it on behalf of themselves and the federal government.

Proponents of the little-known state licensing laws say they are in taxpayers’
interest. Many student loans are backed by guarantees by the state or federal
government, which foot the bills if borrowers default. Faced with losing their
licenses, the reasoning goes, debtors will find the money.

But critics from both parties say the laws shove some borrowers off a financial

Tennessee is one of the most aggressive states at revoking licenses, the records
show. From 2012 to 2017, officials reported more than 5,400 people to professional
licensing agencies. Many — nobody knows how many — lost their licenses. Some,
like Ms. Otto, lost their careers.

“It’s an attention-getter,” said Peter Abernathy, chief aid and compliance officer
for the Tennessee Student Assistance Corporation, a state-run commission that is
responsible for enforcing the law. “They made a promise to the federal government
that they would repay these funds. This is the last resort to get them back into

In Louisiana, the nursing board notified 87 nurses last year that their student
loans were in default and that their licenses would not be renewed until they became
current on their payments.

Eighty-four paid their debts. The three who did not are now unable to work in
the field, according to a report published by the nursing board.

“It’s like shooting yourself in the foot, to take away the only way for these people
to get back on track,” said Daniel Zolnikov, a Republican state representative in

People who don’t pay their loans back are punished “with credit scores
dropping, being traced by collection agencies, just having liens,” he said. “The free
market has a solution to this already. What is the state doing with this hammer?”

In 2015, Mr. Zolnikov co-sponsored a bill with Representative Moffie Funk, a
Democrat, that stopped Montana from revoking licenses for people with unpaid
student debt — a rare instance of bipartisanship.

The government’s interest in compelling student borrowers to pay back their
debts has its roots in a policy adopted more than 50 years ago.

In 1965, President Lyndon B. Johnson signed the Higher Education Act, which
created financial aid programs for college-bound students. To entice banks to make
student loans, the government offered them insurance: If a borrower defaulted, it
would step in and pick up the tab. The federal government relied on a network of
state agencies to administer the program and pursue delinquent borrowers. (Since
2010, the federal government has directly funded all student loans, instead of relying
on banks.)

By the late 1980s, the government’s losses climbed past $1 billion a year, and
state agencies started experimenting with aggressive collection tactics. Some states
garnished wages. Others put liens on borrowers’ cars and houses. Texas and Illinois
stopped renewing professional licenses of those with unresolved debts.

The federal Department of Education urged other states to act similarly. “Deny
professional licenses to defaulters until they take steps to repayment,” the
department urged in 1990.

Two years ago, South Dakota ordered officials to withhold various licenses from
people who owe the state money. Nearly 1,000 residents are barred from holding
driver’s licenses because of debts owed to state universities, and 1,500 people are
prohibited from getting hunting, fishing and camping permits.

“It’s been quite successful,” said Nathan Sanderson, the director of policy and
operations for Gov. Dennis Daugaard. The state’s debt collection center — which
pursues various debts, including overdue taxes and fines — has brought in $3.3
million since it opened last year. Much of that has flowed back to strapped towns and

But Jeff Barth, a commissioner in South Dakota’s Minnehaha County, said that
the laws were shortsighted and that it was “better to have people gainfully

In a state with little public transit, people who lose their driver’s licenses often
can’t get to work.

“I don’t like people skipping out on their debts,” Mr. Barth said, “but the state is
taking a pound of flesh.”

Mr. Sanderson countered that people did not have to pay off their debt to regain
their licenses — entering into a payment plan was enough.

But those payment plans can be beyond some borrowers’ means.

Tabitha McArdle earned $48,000 when she started out as a teacher in Houston.  A single mother, she couldn’t keep up with her monthly $800 student loan
payments. In March, the Texas Education Agency put her on a list of 390 teachers
whose certifications cannot be renewed until they make steady payments. She now
has no license.

Randi Weingarten, president of the American Federation of Teachers, who has
worked to overturn these laws, called them “tantamount to modern-day debtors’

States differ in their rules and enforcement mechanisms. Some, like Tennessee,
carefully track how many borrowers are affected, but others do not keep even
informal tallies.

In Kentucky, the Higher Education Assistance Authority is responsible for
notifying licensing boards when borrowers default. The agency has no master list of
how many people it has reported, according to Melissa F. Justice, a lawyer for the

But when the agency sends out default notifications, licensing boards take
action. A public records request to the state’s nursing board revealed that the
licenses of at least 308 nurses in Kentucky had been revoked or flagged for review.

In some states, the laws are unused. Hawaii has a broad statute, enacted in
2002, that allows it to suspend vocational licenses if the borrower defaults on a
student loan. But the state’s licensing board has never done so, said William Nhieu, a
spokesman for Hawaii’s Department of Commerce and Consumer Affairs, because
no state or federal student loan agencies have given it the names of delinquent

Officials from Alaska, Iowa, Massachusetts and Washington also said their laws
were not being used. Oklahoma and New Jersey eliminated or defanged their laws
last year, with bipartisan support.

But in places where the laws remain active, they haunt people struggling to pay
back loans.

Debra Curry, a nurse in Georgia, fell behind on her student loan payments when
she took a decade off from work to raise her six children. In 2015, after two years
back on the job, she received a letter saying that her nursing license would be
suspended unless she contacted the state to set up a payment plan.

Ms. Curry, 58, responded to the notice immediately, but state officials
terminated her license anyway — a mistake, she was told. It took a week to get it

“It was traumatic,” Ms. Curry said. She now pays about $1,500 each month to
her creditors, nearly half her paycheck. She said she worried that her debt would
again threaten her ability to work.

“I really do want to pay the loans back,” she said. “How do you think I’m going
to be able to pay it back if I don’t have a job?”

Copyright 2017 The New York Times Company.  All rights reserved.

4 days 4 hours ago

Reuters reports that Richard Cordray, directors of the Consumer Financial Protection Bureau, will step down at the end of the consumers lose to big businessmonth.  Those companies (banks, auto finances, pay day loans and student loans, to name a very few) are ecstatic because this opens the door for Trump to nominate a CFPB head who will go easier on these industries.  Several of these companies, as student loan servicer Navient (NAVI.O) and lender TCF National Bank (TCF.N), already have gone to court to fend off large fines while Cordray – renowned for imposing steep penalties- is still in place.
By Corday stepping down this gives companies being pursued by the CFPB for alleged predatory lending practices added incentive to stall settlement talks until Republican President Donald Trump puts his own appointee in place, lawyers and analysts say. reverse mortgage

Commentary: How Trump is making it easier to exploit consumers
Richard Cordray, who has been the head of the U.S. Consumer Financial Protection Bureau (CFPB) since 2012, announced Wednesday that he will be resigning before the end of his five-year term. His interim replacement will be self-described “right-wing nutjob” Mick Mulvaney.
Currently the Trump administration’s Office of Management and Budget Director, Mulvaney is a longtime politician who has tirelessly worked to dismantle regulations and, as CBS News notes, “a longtime critic of the agency.” Nominating Mulvaney, in other words, is functionally equivalent to eliminating the agency entirely.  reverse mortgage

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About the Author:
Diane L. DrainDiane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article.  Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*

The post Beware Consumers No Longer Protected, Big Business Wins Again appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

1 week 2 days ago

By Michael Corkery and Jessica Silver Greenberg

The Toys “R” Us world headquarters are on a sprawling wooded campus next to a
reservoir in Wayne, N.J., on a street that bears the name of the company’s iconic
mascot, Geoffrey the giraffe.

But in September, when Toys “R” Us filed for one of the largest bankruptcies of
the year, it did not go to nearby Newark.

Instead, the toy company followed an increasing number of corporations —
from Gymboree to a major coal company to a Pennsylvania fracking company — that
are choosing to file for bankruptcy in Richmond, Va.

In recent years, Richmond has become the destination wedding spot for failed companies. The United States Bankruptcy Court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in the proceedings.

First, Richmond’s bankruptcy court offers a so-called rocket docket that moves cases along swiftly. Chapter 11 bankruptcy filings can be laborious proceedings that drag on for years. Gymboree’s bankruptcy was completed in less than four months.

Second, the legal record in that court district includes precedents favorable to
companies, like making it easier to walk away from union contracts.

But perhaps one of the biggest draws, according to bankruptcy lawyers and
academics, is the hefty rates lawyers are able to charge there. The New York law firm
representing Toys “R” Us, Kirkland & Ellis, told the judge that its lawyers were
charging as much as $1,745 an hour. That is 25 percent more than the average
highest rate in 10 of the largest bankruptcies this year, according an analysis by The
New York Times.

“The numbers are stratospheric,” said Kevin Barrett, a lawyer at the firm Bailey
Glasser, who represented the State of West Virginia in two coal bankruptcy cases
filed in Richmond.

Companies can file for bankruptcy in a court district where they have an affiliate
— a loophole that allows them to shop for the court they think will provide the best

For an affiliate to be incorporated in Virginia, it can use a “registered agent”
with a local address, according to the state. For its bankruptcy filing, state records
show, Toys “R” Us used a Richmond affiliate whose registered agent has an office in
downtown Richmond.

Representatives for Kirkland & Ellis and Toys “R” Us declined to comment for
this article. So did a spokesman for the federal bankruptcy court in Richmond.

It’s not just the lawyers who stand to gain from the Toys “R” Us bankruptcy. The
bankers and other professionals who helped arrange $3.1 billion in new debt to keep
the company operating in bankruptcy will collect $96 million in fees, according to a
court document filed by Toys “R” Us.

Executives at bankrupt companies typically agree to the high fees, bankruptcy
experts say, because they think the cost will have been worth it if the lawyers and
bankers can save their business. Kirkland & Ellis has a long track record of getting
companies back on their feet in bankruptcy.

The two judges in Richmond are also known for their expertise. “The judges understand the complexities of large corporate bankruptcies and can handle cases expeditiously,” said Dion Hayes, a local bankruptcy lawyer.

Still, the huge fees can eat into the money that is left over for small creditors —
typically vendors, suppliers and pensioners.

In the Toys “R” Us case, dozens of suppliers of scooters, rubber duckies and
teething rings could lose millions in the bankruptcy.

Linda Parry Murphy, chief executive of Product Launchers, a distributor for
several small toy suppliers, said her clients were owed about $1.2 million from Toys
“R” Us. She worries that they may recover as little as $120,000.

“For some of these clients it was very devastating,” she said.

Nationally, professional fees for bankruptcies have been increasing about 9.5
percent a year, about four times the rate of inflation, according to Lynn LoPucki, a
bankruptcy professor at the University of California, Los Angeles.

Mr. LoPucki said the higher fees were fueled, in part, by court shopping. Lawyers advising troubled companies tend to gravitate to courts that approve their fees, he said. Judges who balk at high fees see far fewer cases.

“They become pariah courts,” Mr. LoPucki said.

Down the road, creditors in the Toys “R” Us bankruptcy can challenge how
many hours the lawyers bill at the high rates. Another check on the costs is the
United States Trustee Program, which helps oversee the process and can object if the
legal bill seems unreasonable.

The vast majority of companies — more than 76 percent — now file for
bankruptcy in a different state from where they are based, Mr. LoPucki said.
Delaware and New York — which have long been popular bankruptcy
destinations — still see the lion’s share of the filings.

But Richmond is gaining ground. In July, an article in The Virginia Lawyers Weekly declared the city a “bankruptcy haven” and quoted a local lawyer who said the high legal fees charged there would give judges in other courts a “heart attack.”the high legal fees charged there would give judges in other courts a “heart attack.”

Then in September, the court landed the Toys “R” Us bankruptcy.

Toys “R” Us started out in 1948 as a company that sold cribs and strollers out of
the ground floor of a house in Washington, D.C.

It expanded into the world’s leading toy retailer with about 2,000 stores and an
advertising jingle — “I Don’t Want to Grow Up, I’m a Toys ‘R’ Us Kid” — that could
stick in its customers’ heads like glue.

Seeing opportunity in a consolidated toy industry, the private equity investors
Bain Capital and Kohlberg Kravis Roberts and the real estate firm Vornado Realty
Trust bought the company in 2005 and loaded it up with debt that today stands at
$5.3 billion. It was a burden that proved too much to overcome.

Toys “R” Us has dozens of affiliates around the globe employing 64,000 people.

But when it came time to file for bankruptcy, the company opted for Richmond,
where its law firm, Kirkland & Ellis, had success in the past.

The law firm had represented Patriot Coal, a coal miner based in West Virginia
that filed for bankruptcy twice in four years, most recently in Richmond in 2015.

In that case, the most profitable mines went to another coal company backed by
Patriot’s lenders, while the others were closed.

Mr. Barrett, the lawyer who represented the State of West Virginia in that case,
was stunned by the fees.

“I remember five lawyers in one meeting, and I joked that meeting cost
$10,000,” he said.

This year, Kirkland worked on another bankruptcy case in Richmond —
Gymboree, the children’s clothing retailer, based in San Francisco.

Like Toys “R” Us, Gymboree was owned by private equity and was weighed siwn bt debt.

After emerging from bankruptcy in September, the company closed 350 of its
stores across the country, but the retailer is still in business.

The Toys “R” Us bankruptcy case kicked off in September at a packed hearing.
Kirkland & Ellis set the stage by playing the Toys “R” Us theme song for the judge.
The toy company, the lawyer explained, had tried to turn around its business.

But it couldn’t afford to sufficiently spruce up its stores and compete with retailers
like Walmart and Amazon because it had billions of dollars in debt. He emphasized
how Toys “R” Us had brought joy to many children and how the bankruptcy process
would help the company survive.

“We are all Toys ‘R’ Us kids,” he said.

Copyright 2017 The New York Times Company.  All rights reserved.

1 week 3 days ago

Here at Shenwick & Associates, we’re often asked about the dischargeability of tax debts, which we’ve covered on our blog hereand mostly recently here.  In brief, it’s a very complex topic that depends on the type of tax, the date of tax and other factors.  But the latest wrinkle in the analysis of tax dischargeability comes in the form of a riddle: when is a tax return not a tax return?
As many of you know, in 2005, Congress enacted the first major reform of bankruptcy law in 27 years, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)In §523, which governs exceptions to discharge, the following “hanging paragraph” was added to subsection (a): “[f]or purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements).”  So, the question is, does a late filed tax return count as a tax return for the dischargeablity of a tax debt?
Different courts have come to different conclusions regarding this question.  The first case that held that late filed returns were not returns for the purposes of tax dischargeability was McCoy v. Miss. State Tax Comm’n (In re McCoy), a 2012 case from the Fifth Circuit Court of Appeals.  Other appellate courts, including the Tenth Circuitand the First Circuit issued opinions following McCoy’s reasoning. 
In a recent petition for certiorari to the Supreme Court in Smith v. IRS (In re Smith) (which was denied), the appellant taxpayer explained the deep division of the courts on this issue:
The circuits are actually divided three ways as to whether late-filed returns are “returns” under§ 523(a)(1)(B). The Eighth Circuit holds that a duly filed return, even if late, is still a “return” and thus permits discharge two years after filing. Other circuits, including the Ninth Circuit below, hold that returns filed after the IRS assesses a tax liability are not “returns” at all, and thus trigger the permanent bar to discharge. Still other circuits have ruled that any belatedness in return filing bars discharge—even if filing occurs before assessment.
Earlier this year, in Giacchi v. U.S. (In re Giacchi), the Third Circuit Court of Appeals held that returns filed after the IRS assesses a tax liability are not “returns” for the purpose of tax dischargeability.  Please note that the Second Circuit Court of Appeals (which includes New York) has not yet ruled on this issue.
For more information about the dischargeability of taxes in bankruptcy, please contact Jim Shenwick.

1 week 4 days ago


A woman in a suburb of Columbus, Ohio, was sued twice, by two different creditors,
over the same overdue student loan. Another person, in Illinois, was taken to court
over a loan that had already been paid off. And hundreds of borrowers faced lawsuits
over debts so old that they were no longer legally collectible.

The cases all involved the same debt collector: Transworld Systems.
Student loans have soared over the last decade, becoming the largest source of
household debt outside of mortgages. The tide of rising defaults has also turned into
a lucrative business, with companies collecting tens of millions of dollars through
settlements, wage garnishments and other compelled payments.

Transworld Systems has been one of most prolific debt collectors, filing more
than 38,000 lawsuits in the last three years on behalf of a single client, the National
Collegiate Student Loan Trusts. But many of the cases were flawed, as the debt
collector churned out mass-produced documentation based on scant verification,
according to legal filings by a federal regulator and a New York Times analysis of court records from hundreds of cases.

In September, the regulator, the Consumer Financial Protection Bureau,
accused National Collegiate and Transworld, in separate complaints, of using sloppy
and illegal collections methods. Both parties agreed to settle and pay more than $21
million in penalties and refunds.

National Collegiate and Transworld “sued consumers for student loans they
couldn’t prove were owed and filed false and misleading affidavits in courts across
the country,” said Richard Cordray, the consumer bureau’s director.

Most of the nearly $1.5 trillion that Americans owe in student debt is backed by the
federal government. When borrowers fall behind on those loans, the government can
garnish their wages or seize their tax refunds.

Private loans, like those owned by National Collegiate, amount to more than
$100 billion. Those players have to go to court to get what they are owed.

Transworld’s high-volume tactics in such cases are common across the industry,
according to borrowers’ lawyers and lawsuits. Court dockets are choked with faulty
cases. Students have been sued for debts they no longer owed, by companies they
never borrowed from, and by creditors that lacked the legal standing to sue in the
first place, records show.

Alarmed by such problems, judges in Arizona, California, Florida, Louisiana,
New Jersey, New York and other states have quashed hundreds of lawsuits.

“This is robosigning all over again,” said Robyn Smith, a lawyer with the
National Consumer Law Center, a nonprofit advocacy group, referring to the way
that banks, at the height of the mortgage crisis, brought thousands of foreclosure
lawsuits without reviewing the underlying paperwork.

Assembly-Line Reviews

From the outside, the squat, industrial office park in Norcross, Ga., is
unremarkable, just another in a stretch of low-hung buildings along a road dotted with pines.

Inside, Transworld’s litigation machine cranks out the paperwork for thousands
of lawsuits each year against borrowers who have fallen behind on their student

The process for producing legal filings runs like an assembly line for making
widgets. Transworld employees review 30 or 40 borrower files in a typical day,
according to testimony from Bradley Luke, the company’s senior litigation paralegal,
during a deposition in June.

When an affidavit, a legally binding statement laying out evidence in a case, is
needed, Transworld’s software automatically fills in details like the amount owed,
according to Mr. Luke’s testimony. From there, a document production team
finishes preparing the file, then hands it over to an “affiant” — typically a low-level
employee with no legal training — for a review and signature.

The affiants are a critical link in the litigation chain, swearing in many cases that
they had “personal knowledge of the business records,” according to court records.

But Transworld’s employees did not have personal knowledge, the consumer bureau
said in its complaint against the debt collector.

Other companies had created the records reviewed by Transworld employees.
Those workers, the consumer bureau said, did not know how the data was
maintained and whether it was correct. Even so, employees signed the forms “for
fear of losing their jobs,” according to the bureau’s complaint.

The hasty review process obscured defects. More than 800 cases involved
apparent time travel: In those instances, Transworld employees swore that
borrowers’ loans had been purchased by investors on dates that were months or even
years before the loans were actually made.

Transworld, based in Fort Washington, Pa., said it disagreed with many of the
consumer bureau’s accusations. The company agreed to settle the case, it said in a
statement, to avoid the cost and distraction of litigation.

The company’s review process “accords with all industry best practices and
relevant law,” David Zwick, Transworld’s chief financial officer, said in a statement

Transworld “processes thousands of affidavits, and while our error rate is
exceptionally low, we believe that any mistake is unacceptable,” Mr. Zwick said. “We
will continue to regularly review everything we do in order to ensure the highest
standards of quality control.”

Lisa Kyser, in Pataskala, Ohio, said she got tangled up in one of Transworld’s
mistakes. She took out half a dozen student loans as she juggled her college studies
with full-time jobs, but she thought she had all of them under control.

In June 2016, Ms. Kyser got a summons notifying her that she was being sued
for falling behind on a $12,000 loan made in 2006. Two weeks later, she got a
second summons also seeking payment — to a different creditor, for a different
amount — on the same loan.

“I called the opposing counsel from both firms and said, ‘You can’t both be
right,’” said Emily White, a lawyer in Columbus, Ohio, who represented Ms. Kyser.

The cases lingered for five months, while Ms. Kyser racked up legal fees. In the
end, after her lawyer continually pestered them, the law firms that sued Ms. Kyser —
both working for Transworld — withdrew the cases.

Courts Digging Deeper

The stacks of legal documents Transworld prepared in that Georgia office park
made their way to courts across the country.

Many of the cases sailed through, unchallenged. Borrowers often do not fight
collection lawsuits, which allows the creditor to win by default.

Even when defendants did respond, some judges brushed off their objections. In
Miami, a law firm working for Transworld brought a lawsuit last year against
Antonio Fuentes, seeking payment on a $13,356 student loan. With interest and fees,
Mr. Fuentes now owed $25,322.31, according to the complaint.

Mr. Fuentes, representing himself, admitted that he had taken the loan but disputed the amount he was said to owe. A Transworld employee swore in an affidavit that the tally was correct. The judge sided with Transworld and ordered Mr. Fuentes to pay the full amount.

“The courts are often not sympathetic to these cases,” said N. James Turner, a
lawyer in Orlando, Fla., who represents borrowers. “Many judges take the attitude: ‘I
paid my student loans. You ought to pay yours. Don’t give me this nonsense about

But some judges are starting to raise questions about collection cases.

Last year, a California appeals court cast doubt on the company’s affidavits.
Employees of Transword, then known as NCO Financial Systems, were not
“personally familiar” with the records they swore were accurate, the judges wrote,
and therefore could not vouch for them in court. The case was tossed out.

It’s not just debt collectors facing judicial skepticism, but also the creditors

A New York judge questioned whether Navient, the nation’s largest owner of
private student loan debt, had a right to collect on some loans at all in the state.

At the center of that decision was Stefanie Gray, who fell behind on $36,000 in
private student loans from Navient, with interest rates as high as 14 percent.
Ms. Gray, 29, said she pleaded with the company for relief, but it would not
budge. “I could barely pay rent, and was on food stamps at the time,” she said.
Unable to keep up with the ballooning debt, she defaulted.

Navient filed four lawsuits against Ms. Gray in 2013. With help from Kevin
Thomas, a lawyer with the New York Legal Assistance Group, a nonprofit
organization that helps low-income residents, she fought back by challenging the
creditor’s standing to sue in New York courts. Navient’s student loan trusts — the
investment vehicles that owned her debt — had not registered to do business in the
state, she claimed in her legal filings.

Judge James d’Auguste of the New York State Supreme Court’s civil division in in Manhattan agreed. He dismissed all four lawsuits, on the grounds that Navient’s trusts did not have standing to pursue the cases.

A justice on the New York State Supreme Court ruled differently last year on a
separate case that raised the same defense. He denied a dismissal motion and said
that the standing of Navient’s trusts to sue should be addressed at trial. The case is
still pending.

Patricia Nash Christel, a spokeswoman for Navient, declined to comment on
specific cases.

“We pursue litigation as a last resort for a tiny fraction of individuals — less than
1 percent of defaulted private education loan borrowers — and each case is
individually reviewed and prepared,” Ms. Christel said.
A Brawl Brews

The consumer bureau’s action against National Collegiate and Transworld was
intended to sideline the aggressive litigators.

Under the settlement terms, National Collegiate would be forbidden from
collecting on the judgments its trusts have already won, or bringing any new cases,
until it had completed an audit of the paperwork underpinning every single one of its
800,000 loans — an expensive and time-consuming slog.

But the deal, struck in September, may be falling apart.

The settlement requires court approval, usually a rubber stamp when both sides
have agreed to the terms. The case was submitted to the United States District Court
in Delaware.

The trusts’ beneficial owner, Donald Uderitz, the founder of Vantage Capital
Group, a private equity firm in Delray Beach, Fla., approved the agreement with the
consumer bureau. Within days of its announcement, though, seven other parties
involved in or working for the trusts, including Transworld, filed motions asking the
court to reject it.

(The separate settlement that Transworld reached with the consumer bureau
Transworld from hiring law firms to file debt collection cases.)

Until the court sorts out the dispute on National Collegiate settlement — which
could take months, if not years — most of the deal is blocked from taking effect. That
means that Transworld can continue bringing new lawsuits for National Collegiate
against borrowers behind on their student loans.

In Ohio, Ms. Kyser’s home state, law firms acting on Transworld’s behalf have
already filed at least 30 new collection cases in the past month.

Copyright 2017 The New York Times Company.

2 weeks 4 days ago

Here at Shenwick & Associates, many clients, lawyers and accountants have contacted us regarding the discharge of taxes in bankruptcy filings. Many kinds of “old” state and federal income taxes are dischargeable in bankruptcy. In the case of income taxes, they are dischargeable in Chapter 7 if all the following criteria are met:
1. The tax is for a year for which a tax return is due more than 3 years prior to the filing of the bankruptcy petition;2. A tax return was filed more than two years prior to the filing of the bankruptcy petition;3. The tax was assessed more than 240 days prior to filing of the bankruptcy petition;4. The tax was not due to a fraudulent tax return, nor did the taxpayer attempt to evade or defeat the tax;5. The tax was not assessable at the time of the filing of the bankruptcy petition; and6. The tax was unsecured.
However, more recent taxes won’t meet these rules.  In that case, the taxpayer can’t file for bankruptcy to discharge these tax debts, and the taxing authorities will start the collections process.
If a taxpayer fails to pay his or her debt to a taxing authority, a lien is created on all the taxpayer’s current and future property.  The taxing authority may also file a notice of the tax lien to give public notice to other creditors and establish the priority of its claim over other creditors.  If the taxpayer still doesn’t pay his or her tax debt, the taxing authority will send a notice of its intent to levy (seize and sell) the taxpayer’s property to satisfy the tax debt.
However, there’s a way to stop liens and levies–by entering into an installment agreement, which is an agreement with the taxing authority to pay the tax debt within an extended timeframe.  In the case of the IRS, entering into an installment agreement will get the IRS to withdraw a Notice of Federal Tax Lien (unless the agreement provides otherwise).  This notices other creditors that the IRS is abandoning its lien priority.  It doesn’t mean that the tax lien is released or that the taxpayer is no longer liable for the tax debt.  In the case of a levy, entering into an installment agreement will release the levy (if the terms of the agreement don’t allow the levy to continue) and the IRS will return previously levied property (unless the agreement provides otherwise). 
However, note that entering into an installment agreement doesn’t affect or impact the statute of limitations on the taxing authority’s time to collect on the debt!
By entering into AND complying with the terms of an installment agreement, the taxpayer can not only have a notice of lien withdrawn, a levy released  and levied property returned, but can also “age the tax debt so that it meets the criteria for dischargeability”.  Then subsequently the taxpayer can file for bankruptcy to discharge the balance of the tax debt.
For more information about the dischargeability of taxes and the collection process, please contact Jim Shenwick.

2 weeks 5 days ago

Announcement from Martindale-Hubbell: your clients think you are wonderful and so do we! Because your clients have highly recommended you, we are thrilled to award you our new Gold Client Champion award!

Fewer than 1% of attorneys have achieved Martindale-Hubbell’s newest award, making you part of an elite group. This complimentary benefit showcases your approach and commitment to the best in client service.

About the Author:
Diane L. DrainDiane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. Diane is a retired professor of law teaching bankruptcy for more than 20 years. As a teacher she believes in offering everyone, not just her clients, advice about the Arizona bankruptcy laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Nothing on this website should be construed as establishing a lawyer-client relationship between you, me, the author of any page or the website owner (me) who happens to be a lawyer.  Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article.  You may pick up some information about bankruptcy, foreclosure or the practice of law written by myself or others.  Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*

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3 weeks 22 hours ago

Two proposed bills are working their way through the Michigan Legislature that would significantly impact state law pertaining to commercial real estate receiverships. Read More ›