Blogs

3 weeks 5 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.


3 weeks 6 days ago

By STACY COWLEY and JESSICA SILVER-GREENBERG

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
loans.

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
technicalities.’”

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
themselves.

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.


1 month 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.


1 month 5 days ago

CONGRATULATIONS! YOU EARNED OUR GOLD CLIENT CHAMPION AWARD!
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.*

The post Diane Receives Gold Client Award appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.


1 month 1 week 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 ›
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1 month 2 weeks ago

Sometimes it’s helpful to have kind of a global or overhead view of a process before drilling down in into the particulars. What follows is a view of Chapter 7 bankruptcy in Oregon and Washington from 30,000 feet up. I mean that both figuratively and literally as I am writing this 30,000 feet above eastern Oregon on a flight into Portland. Anyway, here goes nothing.
First, before a bankruptcy can be filed with the court, you must complete a credit counseling course. Fortunately, this course can be completed on the phone and online, figure maybe forty-five minutes to get this done. Depending on your financial status, you may have to pay a fee, normally somewhere between fifteen and twenty-five dollars. When you have satisfactorily the course, you will receive a certificate of completion, which is valid for 180 days. If you use our provider, the provider will automatically send on a copy of the certificate to our offices. 
After you complete the course, we work with you to prepare paperwork including the identities and addresses of your creditors and the amounts owed, descriptions of your property, your current expenses and income, a statement concerning your financial affairs and a statement of what you intend to do with the property you used as collateral to secure consumer debts. You must include all of the creditors that you know about, everyone goes in. You can opt to repay a debt to a family member or friend later, but they need to be completed. 
We try to make the process of getting this paperwork put together as easy as possible. We can provide you with an online questionnaire, rather than the 70 page monstrosities that many firms are handing out these days for you to fill out by hand and then drop them off at their offices rather than just hitting the submit button. We have detailed lists of the documents that we are going to need to file your case and we provide you with those lists as soon as we  are hired. We can often do prep appointments over the phone with you before you come in to file your case so that your time in our office(away from work and/or family) is minimized. 
All of your information must be submitted on forms that have been approved by the court. They are filed with the United States Bankruptcy Court, along with the certificate of completion of the credit counseling course. You must also pay a filing fee to the court which is $335, but you need not pay this at the time of filing. Our office is happy to submit paperwork to the court so that your can get a few months to pay it off.  
Your bankruptcy is effective the moment it is electronically filed with the court. Once your bankruptcy is filed, the court will notify every creditor that you listed in your petition that you have filed for bankruptcy. The court will also set a date, time and place for a hearing that is called either the section 341(a) hearing or the “meeting of creditors.” 
The hearing is usually held somewhere between 28 and 36 days after your bankruptcy is filed. You must attend this hearing with us and answer questions under oath by the trustee and any creditors who appear. Creditors rarely appear. The questions are about your financial affairs, including your property, past earnings, past transactions, and the forms you have filed. Your case may be dismissed if you fail to attend as scheduled. These hearings generally are about five minutes long. 
After your case is filed, our case managers will likely need documents from you to submit to the Chapter 7 Trustee. Failing to provide these documents in a timely manner can have major repercussions, including dismissal  or having to come back for a second hearing. It is also critical that you bring photo identification and official proof of your social security number or your hearing will not be held.  
The trustee who administers your hearing is appointed by the court. The trustee is obligated to determine whether you have properly completed all of the forms and listed all of your assets and your creditors.
It is also the trustee’s duty to take possession and sell any of your non-exempt property, to examine claims creditors may file and determine whether they are proper, and to distribute any proceeds of that property among your creditors. This rarely comes up for two reasons. First, the exemptions that are used to protected assets in both Oregon and Washington are actually extremely generous. Second, we screen for potential issues prior to the filing of your case. 
You might be required to make further court appearances at the trustee’s request. Also, if anyone objects for any reason to you getting a discharge of all or part of your debts, we may have to appear in court on your behalf to defend your position. Again, in the vast majority of cases, these issues do not come up.
No more than forty-five days after your meeting of creditors, you must complete a second counseling course to be eligible for a discharge. This course is on personal financial management. It can be completed on the Internet or by telephone. This course generally costs between ten and twenty-five dollars, depending on who you use. If you do not timely complete this course and file the certificate of completion with the court, the court can close your case without discharging your debts.
During the entire bankruptcy process you must be honest and as accurate as possible in the information you put in your petition and with your answers to questions.
Please let me know if you have any questions at all about the bankruptcy filing process. The above overview is just that, an overview from 10,000 feet. If you want to drill down on a specific issue that worries you during the filing process, set an appointment with one of our attorneys in Portland, Salem or Vancouver. You can also book a video or phone appointment with me. We are here to help. 
The post Overview of Chapter 7 Bankruptcy in Oregon and Washington appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.


1 week 1 day ago

U S Senate Votes to Override Bill of Rights Last night, the United States Senate blocked an effort to restore a neglected part of America’s Bill of Rights: The Seventh Amendment to the Constitution. The Seventh Amendment grantees a jury in civil cases; cases where people are suing other people, or corporations. (The better known […]
The post U S Senate Ignores The Seventh Amendment by Robert Weed appeared first on Robert Weed.


1 week 2 days ago

U S Senate Votes to Override Bill of Rights Last night, the United States Senate blocked an effort to restore a neglected part of America’s Bill of Rights: The Seventh Amendment to the Constitution. The Seventh Amendment grantees a jury in civil cases; cases where people are suing other people, or corporations. (The better known […]


1 month 2 weeks ago

U S Senate Votes to Override Bill of Rights Last night, the United States Senate blocked an effort to restore a neglected part of America’s Bill of Rights: The Seventh Amendment to the Constitution. The Seventh Amendment grantees a jury in civil cases; cases where people are suing other people, or corporations. (The better known […]The post U S Senate Ignores The Seventh Amendment by Robert Weed appeared first on Robert Weed.


1 month 2 weeks ago

So you were in the marijuana business or worked in it and things didn’t work out. Now you are thinking about filing bankruptcy and wonder what effect, if any, your former business or employer is going to have on you.  As bizarre as it might sound to anyone living in Portland or Salem where dispensaries have become about as ubiquitous as gas stations, this can be a real problem. 
It is the policy of the United States Trustee Program that United States Trustees shall
move to dismiss or object in all cases involving marijuana assets on grounds that such assets may not be administered under the Bankruptcy Code even if trustees or other parties object on the same or different grounds. There is no distinction made between states where marijuana is legal and less evolved states where it is not. 
With respect to Chapter 13 bankruptcy, it seems pretty clear that no debtor is going to be able to fund a Chapter 13 Plan with any income that is even tangentially related to marijuana. After all, in one Oregon bankruptcy case, a debtor who owned a medical marijuana business filed for chapter 13 protection, but the plan was denied when the U.S. trustee objected to his case due to the fact that income received from the debtor to support the plan payments was partially derived from Federally illegal activity. 
In a recent Colorado case, the U.S. Trustee successfully objected where a debtor derived 25% of his income from renting out space to a grower. The debtors bankruptcy was dismissed as the debtor was found to have “unclean hands.” 
With respect to Chapter 7 bankruptcy, it seems pretty clear that the U.S. Trustee is going to take a hard line with respect to debtors with any assets that stem(pun intended) from the marijuana business. For our part, we would encourage any debtor currently employed in any marijuana related business to find work elsewhere prior to filing. Moreover, debtors in possession(pun intended) of grow equipment or any other property used in the marijuana business would do well to eliminate that property prior to filing.
If you are or were in the marijuana business or somehow profited from it even tangentially, it’s  critical that you consult with a Portland or Salem bankruptcy attorney about how to put yourself in a position to seek relief under the bankruptcy code. 
The post Oregon, Bankruptcy and Marijuana appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.


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