Georgia may soon have a new law governing wage garnishments and bank account levies. But the news is not all good.You may recall that back in September, 2015, I reported that federal judge Marvin Shoob had issued a ruling that invalidated on Constitutional grounds bank account levies in Gwinnett County, Georgia. A man named Tony Strickland sued the Gwinnett County clerk of court after his bank account containing workers compensation and Social Security funds was seized by a credit card company that had sued him. Mr. Strickland argued, and Judge Shoob agreed, that the credit card company had an affirmative obligation to notify debtors like Mr. Strickland that certain funds (like workers’ compensation benefits, Social Security benefits, welfare payment and similar benefits) were exempt from garnishment.Although the federal judge’s ruling was limited to bank account levies in Gwinnett County, most legal experts concluded that the principle set out in the judge’s order was applicable generally to all bank account levies and wage garnishments within the state of Georgia.Following this ruling, most judgment creditors stopped or carefully audited all post-judgment collection activities.New Georgia Notice RequirementsIn response to the federal judge’s ruling, several Georgia state legislators have introduced bills to modify Georgia’s post-judgment collection laws to meet the standards set out by Judge Shoob.Senate Bill 255, passed on Tuesday, February 2, 2016 requires creditors to notify debtors that money originating from Social Security, workers’ compensation and welfare is protected from seizure. The bill now moves to the state House, where it is expected to pass, and then to Governor Deal, who is expected to sign the bill into law.What does this mean to you?First, you need to understand that the proposed legislation doesn’t change the protected status of benefits received from workers comp., welfare or Social Security. Those benefits have long been protected whether in check form or after they have been deposited into your bank account. The new law is mostly about providing notice.What this new law may do is reduce the pressure on struggling debtors who are trying to survive on benefits. If your only source of income is workers’ comp or Social Security, for example, and a debt collector calls to demand payment, that bill collector will also have to notify you that your benefit payments are protected from seizure. We may see fewer instances of bill collectors intimidating confused and frightened debtors into issuing post dated checks, or worse, allowing electronic access to bank accounts.Presumably judgment creditors would have some burden to investigate whether the accounts of judgment debtors contains protected money and they would be liable for damages if they fail to honor the protected status of seized funds.It’s Still “Buyer Beware” for Georgia ConsumersIf you are on the receiving end of a judgment, I think that you still need to take steps to protect yourself. First, you need to be careful about co-mingling your benefit funds with other monies. Only funds directly attributable to Social Security, workers comp., and welfare are protected (and these funds remain protected even after deposit). A problem arises, however, when these protected funds are co-mingled with unprotected funds such as income from part time work, rental property income, or wages earned by a spouse if that spouse is also a judgment defendant.You don’t want to be in a situation where your possibly protected funds are seized and you have to hire a lawyer to go to court to argue that some or all of the funds seized are exempt from garnishment or levy.You would be wise to segregate your funds by asking your bank to create a sub-account of your main checking or savings account that contains only protected funds. And if you have any cash in unprotected accounts, use those funds first to pay necessities.I would also continue to advise my Social Security disability and workers’ compensation clients to protect themselves by notifying their banks and the suing creditors that they have a protected subaccount and to stay away from this account. If the creditor ignores your written notice, you would have an even stronger claim for damages against that creditor or collection agency.Don’t Ignore LawsuitsFinally, I want to again remind you about the importance of taking action if you are sued. Back in September, 2015 I wrote a post entitled Don’t Fall Prey to Illegal and Immoral Behavior by Debt Buyers. The gist of that post was to warn you that there are companies – debt buyers – that purchase stale debt for pennies on the dollar and attempt to collect on it. Stale debt refers to accounts for which the statute of limitations for collection has expired. In other words, you have no obligation to pay a statute of limitations barred debt.However, if you don’t know that the statute of limitations has run and an aggressive bill collector calls you, you might agree to pay the debt and even reboot the statute of limitations. In more egregious cases, debt buyers actually sue unsophisticated debtors to collect stale debt and if the debtor does not respond and deny the claim, the debt buyer may obtain a judgment that can be turned into a wage garnishment or bank account levy.The big picture here is that consumers still have relatively little protection against well funded credit card companies, collection agencies and debt buyers. My colleague John Skiba, a nationally known bankruptcy and debt defense lawyer in Arizona, notes that in his jurisdiction over 95% of “junk debt buyer collection lawsuits” end up in a default judgment. In other words, 95% of collection defendants ignore lawsuits. I suspect default rates in Georgia are similar.While a bankruptcy lawyer can sometimes undo the damage, you may find yourself paying a lawyer to deal with a problem that could have been easily dealt with early on.This is why it is so important to always take action if you receive a lawsuit or even if you hear a rumor that you are being sued. Most of the metro Atlanta courts offer electronic access and I can usually find out in a few minutes if there is a pending or defaulted lawsuit.Again, despite the efforts of the Consumer Financial Collection Bureau, and despite the new notice requirement that will likely become part of Georgia law, you have to be diligent and advocate for yourself. If you are facing collection it truly is a jungle out there.I’ll leave you with a quote from Georgia State Senator Jesse Stone, who filed Senate Bill 255: “the sooner we get it in the law, the sooner everybody will be back in the business of collections.” If you are struggling with overdue consumer debt, that certainly does not sound like good news.The post Georgia’s Likely New Pre-Garnishment Notice Not All Good News appeared first on theBKBlog.
Depriving local governments of tax revenue is like cutting off oxygen to the body–they can’t live without it. Local governments and schools in Nebraska depend on a steady flow of real estate tax revenue to keep their doors open.
To prevent cash flow problems caused by homeowners who fail to pay real estate taxes on time, Nebraska county treasurers sell Tax Lien Certificates to investors for the unpaid taxes. The investors earn 14% interest on their investment and if the certificates are not redeemed by the homeowner within 3 years, the investor make take ownership of the property by requesting a Treasurer’s Deed.
Although the investments are subject to risk, the potential to earn staggering profits is significant. I’ve seen homes worth $100,000 lost for unpaid taxes of less than $5,000. Most taxpayers over the age of 65 are not required to pay real estate taxes if they apply for the Homestead exemption annually, but with advanced age comes a loss of memory and it is not uncommon for the elderly to lose their homes when they fail to apply for the exemption.
WILL FILING BANKRUPTCY RECOVER A HOME LOST TO UNPAID TAXES?
A recent case from the 7th Circuit Court of Appeals provides an example of how filing bankruptcy may allow a homeowner to recovery a home lost for unpaid real estate taxes. In that case (In re Smith, 526 B.R. 737), Keith and Dawn Smith owed $4,046.26 of real estate taxes. The Illinois county treasurer sold a tax lien certificate to an investor for the unpaid taxes and when the Smiths failed to redeem the certificate by not paying the tax and accrued interest within the required time, the investor became the owner of the home. The investor subsequently sold the property to another investor for $50,000. Wow, that is almost 10 times the original investment price!
The Smiths filed a Chapter 13 bankruptcy and commenced an adversary complaint seeking to avoid the tax sale of their property.
BANKRUPTCY CODE SECTION 548(a)(2)
Under Section 548 of the bankruptcy code a transfer of a debtor’s property made within 2 years of the bankruptcy petition for less than “reasonably equivalent value” may be avoided. May a person in bankruptcy utilize section 548 to recover a home lost in the prior 2 years to a tax certificate sale?
CASE LAW BACKGROUND: BFP v RESOLUTION TRUST CORP
As a general rule, homes lost to foreclosure sales cannot be recovered even if the foreclosure sale price is significantly less that what a home would fetch if it were sold through a normal real estate listing. In 1994 the Supreme Court issued a ruling in BFP v. Resolution Trust Corp (511 U.S. 531) stating that the sales price obtained in a foreclosure sale is considered “reasonably equivalent value” as a matter of law, even if the sales price is far below what a property would sell for under normal market conditions. In other words, there is no opportunity to complain about the low price because that is just the nature of foreclosure sales where buyers must pay the full purchase price at the time of sale or shortly thereafter. As long as the state foreclosure procedures were followed the sales price is final.
The 7th Circuit, however, pointed out that the Illinois tax sale procedure is unlike the competitive bidding process present in the BFP case. In fact, the Supreme Court specifically stated that the BFP opinion “covers only mortgage foreclosure of real estate. The considerations bearing upon other foreclosure and forced sales (to satisfy tax liens, for example) may be different.” (page 537, footnote 3).
There is no competitive bidding process in the sale of tax certificates in Illinois. Rather, Illinois utilizes an Interest Rate Method when selling tax certificates that does not involve competitive bidding between prospective investors. (Under the Interest Rate Method there is competitive bidding as to the interest rate paid, but not as to the price of the certificate.) Because Illinois does not employ competitive bidding when selling tax certificates the sale is subject to being avoided in a bankruptcy proceeding if the sales price is substantially less than the true market value of the property.
TENTH CIRCUIT OPINION: SHERMAN V. ROSE
The 10th Circuit Court of Appeals has also allowed debtors to attack property transfers involving unpaid tax certificates. In the case of In re Sherman, 223 B.R. 555, a Wyoming property was transferred to an investor for unpaid taxes of only $500. Under Wyoming law, the tax certificate was sold to an investor “selected in a random lottery for the amount of the outstanding taxes. The Wyoming tax sale statutes do not permit a public sale with competitive bidding.” Since there was no competitive bidding in the sale of the tax certificate the 10th Circuit ruled that the sale was subject to the bankruptcy court’s avoidance powers.
NEBRASKA TAX CERTIFICATE SALE PROCESS
Nebraska utilizes a “Round Robin” format very similar to Wyoming system in selling tax certificates. The procedure is provided in Nebraska Statute 77-1807. (A good description of the process is provided here.) In a Round Robin auction investors must register to buy certificates that are sold on the 1st Monday of March each year. The order of the auction is determined by randomly selecting an investor from the list of registered participants. There is no competitive bidding on the price of the certificate. Each certificate is sold for exactly the amount of the unpaid taxes.
There is no case law in Nebraska on this topic yet, but it would appear that the Nebraska procedure for selling tax certificates is substantially the same as the Illinois and Wyoming procedure and debtors (as well as Chapter 7 Trustees) should be able to recover their homes lost to a tax certificate sale if the sales prices is substantially less than the home’s fair market value.
Keep in mind that this option is only available when a tax certificate buyer obtains title to the property by acquiring ownership through a Treasurer’s Deed. Property purchased by investors at a real tax foreclosure auction sale that involves competitive bidding would probably be protected under the Supreme Court’s BFP decision.
Have you lost a home in the past 2 years due to unpaid real estate taxes? Contact our office for a free consultation regarding your options.
Image courtesy of Flickr and davitydave.
Chapter 13 in Virginia–A New Nightmare The Bankruptcy Judge in Norfolk just made chapter 13 in Virginia even more dangerous. And last night one bankruptcy judge in Alexandria hinted that he agrees. The issue came up the the case of In re Marlene Evans. Ms Evans made her bankruptcy payments to the Chapter 13 Trustee […]The post Chapter 13 in Virginia–A New Nightmare by Robert Weed appeared first on Robert Weed.
The co-debtor stay applies in chapter 13 of the United States Bankruptcy Code and goes into effect immediately upon the filing of the case. The co-debtor stay will prohibit any action or continued action to collect on a consumer debt from an individual who secured such debt or who is liable on such debt with+ Read More
The post Co-Debtor Stay In Bankruptcy appeared first on David M. Siegel.
Gas Prices Drop As gas prices continue to drop, the yearly benefit to the average consumer can approach $750.00 or more per year. This precipitous drop in prices may help many that are on the fence about filing for bankruptcy. For a married couple, the savings can approach $1,500.00 or more. Here are the details:+ Read More
The post Lower Gas Prices May Forestall Some Bankruptcy Filings appeared first on David M. Siegel.
Thanks, Woodbridge! This week brought our one hundredth five star review. I’m Woodbridge bankruptcy lawyer Robert Weed. And I’m happy to announce we now have one hundred five star reviews from Woodbridge bankruptcy clients. I’ve been a bankruptcy lawyer in Northern Virginia since 1993, helping fourteen thousand people get a fresh start in bankruptcy. (More than any […]The post Woodbridge Bankruptcy Lawyer 100 Five Star Reviews by Robert Weed appeared first on Robert Weed.
Have you fallen behind on your mortgage payments? Are you also behind on your Walworth County property taxes? Walworth County property taxes are due again at the end of January, right after Christmas. (Who thought that was a good idea?) If this is the third year in a row that you have been unable to pay your property taxes, you may be facing the loss of your home to public auction. One option you may want to consider is a Walworth County short sale.
What is a Walworth County Short Sale?
A short sale means exactly what it sounds like, your home is being sold for less than the amount owed. If you are unable to pay your mortgage payments, your mortgage lender can approve a short sale. Your home will be listed for sale at an amount less than what is owed to your mortgage lender. Since your mortgage lender will be receiving less than the amount owed on the mortgage, the lender must approve a short sale before it can take place. Your lender will decide if a short sale is a better option than foreclosing on your property.
Is a Walworth County Short Sale a Good Option?
If you are facing the loss of your home to public auction this year due to three years of nonpayment of real estate taxes, a short sale is most likely a better option for all parties involved. A short sale benefits a homeowner by avoiding foreclosure, and public auction. A homebuyer will benefit from a short sale because they will purchase a home at a lower cost and avoid the risks associated with foreclosed properties. A Walworth County short sale is a good option for your mortgage lender since they will save time, hassle, and money involved with foreclosure, the legal process, and the resale of your property. Other parties associated with the short sale of your home will earn a profit from the sale, such as real estate agents, mortgage brokers, homeowners insurance companies, title companies, inspectors, and appraisers.
Please remember, if your home is sold by way of a short sale before the home is seized by the county for nonpayment of real estate taxes, you still owe the county real estate tax money. You may not have a seized home on your record because the home is no longer in your name for the county to seize, but you are still liable for the tax monies due. If the tax monies due are in an amount you are unable to pay, other options may be better for you based upon these circumstances, such as bankruptcy. You should consult with an experienced Walworth County real estate attorney to discuss your best options and all possible scenarios. For example – What if your home doesn’t sell in time?
Contact Our Walworth County Real Estate Law Office
If you are in danger of losing your home this year, please contact our Walworth County real estate law office. A Walworth County short sale may be a good option; however, it is only one option. Contact our Walworth County real estate attorney to discuss all options available to you based upon your particular situation. We can provide answers to all of your questions and ease your concerns. Contact our Walworth County real estate office by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law, LLC has real estate law offices located in Delavan, Lake Geneva, Muskego, and Salem, Wisconsin.
*The content and material on this web page is for informational purposes only and does not constitute legal advice.
Contrary to news reports, there are times when you can wipe out student loans in a bankruptcy case.
To do so, you’re required to not only file for bankruptcy but also to file a separate lawsuit and prove that the debt amounts to an undue hardship. If you can meet the standard required under the bankruptcy laws then you will be able to wipe out your student loan obligations – but if you fail then you’re going to walk out of bankruptcy saddled with the same bills as when you walked in.
It’s a gray area at best, with courts split on the way to address the standards set by the law.
This uncertainty is the student loan industry’s most powerful tool, making people believe they shouldn’t bother trying to discharge their student loans in bankruptcy.
In some situation, you can be reasonably sure bankruptcy won’t help with your student loan problems. But that’s not always the case.
Instead of being bullied by student loan companies into dismissing bankruptcy as a solution, weigh the risks and reward to make an informed choice.
The Law on Discharging Student Loans in Bankruptcy
The law says that bankruptcy won’t discharge you from a student loan unless the court finds that the student loan would impose an undue hardship on you and your dependents. In the context of bankruptcy, a student loan means any of the following:
- an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
- an obligation to repay funds received as an educational benefit, scholarship, or stipend; or any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.
In my experience, qualifying for an undue hardship discharge of student loans in bankruptcy isn’t easy. The law doesn’t define what undue hardship means, so it’s up to the judge. Many courts use what’s called the Brunner Test, and others look at the totality of your circumstances. Either way, you’ve to prove that you meet the legal standard and battle the student loan lender.
Your student loan lender can (and usually will) argue against discharging your student loans. The bankruptcy judge may not be fond of letting people walk away from student loans in bankruptcy. Or he may not buy your argument.
With that in mind, here are the five times when you shouldn’t try to go file for bankruptcy to wipe out your Federal student loans.
When Bankruptcy Is A Bad Move for Student Loan Relief
You shouldn’t try to discharge your student loans in bankruptcy if:
The only loans you have are your student loans. If the student loans are all you have, then losing the student loan discharge case means you wouldn’t get any benefit from the bankruptcy at all.
You have other non-bankruptcy ways of discharging the loan. Federal student loans can be discharged or forgiven in a variety of situations that have nothing to do with bankruptcy. Those procedures are easier than pursuing a bankruptcy discharge and are handled without the uncertainty that comes with bankruptcy.
You may qualify for Public Service Loan Forgiveness. Under PSLF, the unpaid balance on your Federal student loans is forgiven after 120 timely monthly payments. The forgiveness under PSLF is tax-free and is an administrative manner handled without getting a judge involved.
You’d be able to pay the student loans if you wiped out the other debts in bankruptcy. Under any interpretation of undue hardship, you’ve got to be unable to repay the student loan and continue to support yourself and your dependents. If discharging your other debts in bankruptcy will enable you to pay the student loans, then your argument for undue hardship falls apart.
You’re retired, receive income only from Social Security retirement, and have no assets to protect. The Federal government can take your tax refunds, garnish your paycheck, and sue you to collect a defaulted student loan. A private student loan lender can file a lawsuit but can put a lien on your property and start a wage garnishment only if it gets a judgment. If you’ve got no income and no property then there’s nothing to seize. If your Social Security income is retirement-based rather than disability-based, then the government can’t take your money. Getting a discharge of your student loans in bankruptcy won’t give you any benefit, so it doesn’t make financial sense to pursue that remedy.
Analyze Your Situation Before Seeking Student Loan Discharge
I talk with clients every week about using bankruptcy for their student loans. Often, they come to me after they’ve spoken with a bankruptcy attorney who doesn’t have an understanding of student loan law.
Those clients are frustrated and looking for someone to represent them. They didn’t get a straight answer from the other bankruptcy attorneys, some of whom would have filed the case but only with a hefty legal fee and a pessimistic attitude.
Many of these lawyers have bought into the lie that bankruptcy is never going to wipe out student loans, bullied by student loan companies into submission.
Sometimes it makes sense to pay the legal fee and try to wipe out the student loan, but there’s no way of knowing for sure without a complete understanding of the issues.
You need to look at your entire financial situation, determine your other options for solving your student loan problem, and move on from there.
That’s why I look at every issue and consider each alternative before making a recommendation to a client. Every bankruptcy lawyer with student loan knowledge would do the same for you, just as every attorney who practices in bankruptcy court would engage in a complete analysis of your alternatives if you were struggling with excessive tax debts or a foreclosure.
It’s part of the process of deciding which option is best for you, and how to best structure a solution to your student loan problems.
The post Here’s When You Shouldn’t File for Bankruptcy to Discharge Your Student Loans appeared first on Shaev & Fleischman LLP.
Below is a partial transcript of David M. Siegel as he talks bankruptcy law for the Legal Action television show which airs on Comcast Cable throughout Chicago and its suburbs: Interviewer: Let me ask you this. I work at a bank so is my employer going to find out if I do a bankruptcy? David Siegel: Your+ Read More
The post What Happens When I File Bankruptcy? appeared first on David M. Siegel.
Students have taken on more than $1 trillion in debt to pay for the relentlessly rising costs of higher education. With that much debt outstanding, it’s no surprise that there are increasing numbers of borrowers defaulting on student loan debt, and seeking to discharge that debt by filing for bankruptcy protection. But, as a Wisconsin man recently learned, discharging student loan debt in bankruptcy is no easy feat. Read More ›
Tags: Chapter 7, U.S. Supreme Court