Blogs

7 years 3 months ago

Frequently I meet with people seeking Chapter 13 or Chapter 7 bankruptcy protection who are surprised that the actions they take prior to filing for bankruptcy can have a lasting impact on their bankruptcy. For instance, let’s say the debtor’s mother “helped her out” by loaning her money for several months. Later on the debtor comes into some money and repays the family member in full but then subsequently has to file for bankruptcy protection.
Two bankruptcy provisions come into play in this situation. First, Sec. 547 allows the Trustee to avoid any transfer of an interest of the debtor in property made within 90 days before the filing of the petition or up to one year prior to the filing if the transfer was made to an insider. So that means if Debtor wants to file Chapter 7 , the price of admission is that she understands the Trustee can and will recover that money from the mother for the benefit of the creditors she is trying to discharge. The law will not allow the debtor to pay off her mom in full when other unsecured creditors would receive nothing in Chapter 7, which brings me to the second provision which comes into play if the debtor files a Chapter 13. According to Sec. 1322, a Chapter 13 repayment plan cannot discriminate unfairly against any class of creditor, i.e., paying the mother in full while the other unsecureds get zip. Furthermore, Sec. 1325 states that a Chapter 13 plan cannot even be confirmed unless the unsecured creditors received at least what they would have received under a Ch. 7, in this case, that would have included the amount of the preferential transfer.
So, that seemingly harmless repayment can become a can of worms in a bankruptcy setting. Invariably the debtor asserts that they didn’t know they were going to file at the time of the payment, they don’t want their family member involved and that it’s “not fair”. Those may be valid points, however, they won’t get you out of the preferential transfer quagmire.  That doesn’t mean you won’t be able to file Chapter 13 or Chapter 7 if you have repaid loans to friends or family members, however, if you have and need to file bankruptcy, discuss the matter with your attorney.  An experienced bankruptcy attorney will know how to properly address the payments in your bankruptcy.


7 years 2 months ago

Frequently I meet with people seeking Chapter 13 or Chapter 7 bankruptcy protection who are surprised that the actions they take prior to filing for bankruptcy can have a lasting impact on their bankruptcy. For instance, let’s say the debtor’s mother “helped her out” by loaning her money for several months. Later on the debtor comes into some money and repays the family member in full but then subsequently has to file for bankruptcy protection.
Two bankruptcy provisions come into play in this situation. First, Sec. 547 allows the Trustee to avoid any transfer of an interest of the debtor in property made within 90 days before the filing of the petition or up to one year prior to the filing if the transfer was made to an insider. So that means if Debtor wants to file Chapter 7 , the price of admission is that she understands the Trustee can and will recover that money from the mother for the benefit of the creditors she is trying to discharge. The law will not allow the debtor to pay off her mom in full when other unsecured creditors would receive nothing in Chapter 7, which brings me to the second provision which comes into play if the debtor files a Chapter 13. According to Sec. 1322, a Chapter 13 repayment plan cannot discriminate unfairly against any class of creditor, i.e., paying the mother in full while the other unsecureds get zip. Furthermore, Sec. 1325 states that a Chapter 13 plan cannot even be confirmed unless the unsecured creditors received at least what they would have received under a Ch. 7, in this case, that would have included the amount of the preferential transfer.
So, that seemingly harmless repayment can become a can of worms in a bankruptcy setting. Invariably the debtor asserts that they didn’t know they were going to file at the time of the payment, they don’t want their family member involved and that it’s “not fair”. Those may be valid points, however, they won’t get you out of the preferential transfer quagmire.  That doesn’t mean you won’t be able to file Chapter 13 or Chapter 7 if you have repaid loans to friends or family members, however, if you have and need to file bankruptcy, discuss the matter with your attorney.  An experienced bankruptcy attorney will know how to properly address the payments in your bankruptcy.


7 years 3 months ago

Chapter 7 and Chapter 13 of the bankruptcy code have given millions of people the financial freedom they needed to get on with their lives without a crushing debt load. There seems to be a lot of confusion regarding which chapter is right for who, so I’ve written this post as a quick reference for anyone who cares to know.
Chapter 7
Chapter 7 is often referred to as a “complete liquidation”, but this is not entirely accurate. The bankruptcy code provides that debtors are able to save certain property according to certain state law exemptions. What this means is that Georgia state law allows you to prevent certain property from being liquidated to pay off yours creditors.  The Chapter 7 Trustee is the individual tasked with administering your case and liquidating whatever non-exempt assets you have to pay off your creditors.
The Chapter 7 Trustee makes money by receiving a percentage of whatever value of the property he or she distributes to your creditors, so there is definitely an incentive for him to sell your assets; however, the three things that trustees really looks for are cash or cash equivalents (stocks, gold, etc.), real estate, and luxury cars.  Jewelry is often worth much less than you think, and the liquidation value of your household goods, including that sofa you paid five grand for, is virtually nothing.  I have had clients making in excess of $200,000 per year able to exempt everything they owned from the reach of the trustee.
Chapter 7 will wipe out any unsecured debt, with the exception of a few non-dischargeable debts such as child support, criminal fines, and debt incurred through fraud,  just to name a few.  What Chapter 7 cannot do for you is save your home from a foreclosure or your car from repossession.  Your car lender and mortgage holder have what is called a “security interest” or “lien” on your property.  This means that if you fail to pay them, they can sell your property to recover some of the money you owe.  After you file bankruptcy, creditors can no longer collect against you personally for any amount you owe, though the lien that attaches to your house or car will survive bankruptcy.  If you file Chapter 7 to stop a foreclosure, the lender will simply ask the court to lift the automatic stay and foreclose on your home a few months down the road.
 If you make more than the median income for a family of your size in Georgia, you may not qualify to file a Chapter 7.  In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) that does “not a damn thing” to protect the consumer.  It is very creditor friendly, and one part of this act is the requirement that all consumer debtors pass the “Means Test” in order to file Chapter 7.  If you make more than the median income (around $50,000 for a family of two), you presumptively fail the Means Test, though this presumption can be overcome with the help of a bankruptcy attorney who can find the right deductions to help higher income individuals pass the means test.
Chapter 13
Chapter 13 is the chapter to file if you want to keep all of your assets without worrying about a trustee attemping to sell them.  In a Chapter 13 bankruptcy, you will be given the option to pay back a portion of your debts (based on several factors that go beyond the scope of this article) over a 3-5 year period. One of the biggest advantages to filing a Chapter 13 bankruptcy is the ability to “strip-off” a second mortgage on your property if the first mortgage is worth more than the value of your home.  For instance, if your residence is worth $100,000 and you owe $120,000 on your first mortgage, there is no equity, or value, for the second mortgage to attach.  As a result, the second mortgage is wiped out and treated the same as any other unsecured debt, such as your credit cards and medical bills.
Just like Chapter 7, most debts are wiped out, though you will receive your discharge at the end of your payment period rather than a few months down the road as in Chapter 7.

 


7 years 3 months ago

Dude, so like, wouldn’t it be totally sweet to get money for free? All you need is pre-approval for a credit card and swipe away! What are the eligibility requirements for pre-approval? Nothing! Too good to be true? Of course!
Check out Demitri Martin on the Daily Show and his tongue-in-cheeck mockery of the credit card “wealth” mentality.
Joking aside, credit card debt is increasingly common under the current economic environment and the temptation sometimes too much to bare. The most common type of consumer debt is unsecured credit card debt which is the most common factor leading to Chapter 7 consumer bankruptcy.
Mr. Martin humorously mocked credit card companies and their appeal towards recent graduates through marketing ploys. While more regulations and laws are currently being passed by Congress regarding deceptive credit card and banking practices, it is best to keep your wits about you and common sense with you at all times.


5 years 6 months ago

Dude, so like, wouldn’t it be totally sweet to get money for free? All you need is pre-approval for a credit card and swipe away! What are the eligibility requirements for pre-approval? Nothing! Too good to be true? Of course!
Check out Demitri Martin on the Daily Show and his tongue-in-cheeck mockery of the credit card “wealth” mentality.
Joking aside, credit card debt is increasingly common under the current economic environment and the temptation sometimes too much to bare. The most common type of consumer debt is unsecured credit card debt which is the most common factor leading to Chapter 7 consumer bankruptcy.
Mr. Martin humorously mocked credit card companies and their appeal towards recent graduates through marketing ploys. While more regulations and laws are currently being passed by Congress regarding deceptive credit card and banking practices, it is best to keep your wits about you and common sense with you at all times.


7 years 3 months ago

            Sorry about not posting in a while – the start of the fall semester and the submission of job applications has taken considerable time.
            I would like to discuss a topic that is, admittedly, not as common an issue for most debtors as those I have previously discussed, but still interesting in my view.  Broadly speaking, this is the ability to discharge a debt under section 523(a)(6), which is for “willful and malicious injury by the debtor to another entity or to the property of another entity.”  Narrowly speaking, I will be discussing this in the context of medical malpractice debts. 
            Speaking very generally, a debtor can discharge the equivalent of a negligent tort, but not something that would amount to an intentional tort.  A tort is, broadly speaking, a wrongdoing for which the law provides a remedy in a civil case.  To illustrate in a simple example, if I am driving my car, drop my cell phone on the floor, and I accidentally run over a person who later sues me, I can probably discharge this debt in bankruptcy.  I use this example rather than drunk driving, as that presents somewhat different rules under 523(a)(9) – I’ll write more on that in a later post.  If I am driving my car, see a person whom I dislike, put the pedal to the metal and purposely hit that person who later sues me, bankruptcy will not relieve me of this duty (as it shouldn’t).
            A special situation, then, arises for physicians and other medical professionals.  The leading case on this subject was issued by the Supreme Court in Kawaauhau v. Geiger, 523 U.S. 57 (1998).  In a unanimous opinion issued by Justice Ginsburg, the Court held that a debt arising from a medical malpractice judgment for negligent or reckless conduct was dischargeable in bankruptcy.  Despite its unanimity among the Court members, I recall feeling great skepticism the first time I read the case, and still find its reasoning somewhat questionable.  I have chosen to write about this case, in part, because when I was a staffer on an academic journal last year, I realized that I wanted to write about this subject at a point when it was too late to make such a decision.  But I digress. 
            In Geiger, the patient had a foot injury.  She sought treatment from Dr. Geiger, who prescribed her oral penicillin in order to reduce the risk of infection, despite his knowledge that intravenous penicillin would have been more effective.  Dr. Geiger then left for a trip, and upon his return, overruled the decision of other physicians to transfer the patient to an infectious disease specialist, as he believed the infection was less severe.  Dr. Geiger was wrong, and the patient eventually had to have her right leg amputated below the knee. 
            The patient then sued Dr. Geiger, and obtained a judgment for about $355,000.  Dr. Geiger, having had his wages garnished as a result of his lack of malpractice insurance, then filed for bankruptcy.  The Bankruptcy Court for the Eastern District of Missouri did not allow this debt to be discharged, holding that it Dr. Geiger’s actions were below prevailing medical standards, and so amounted to “willful and malicious” injury in 523(a)(6).  The District Court agreed. The U.S. Court of Appeals for the Eighth Circuit reversed, holding that the exemption from discharge is confined to actions amounting to an intentional tort, and allowed the discharge.
            The Supreme Court agreed to hear the case, and affirmed the Eighth Circuit’s decision to allow the discharge.  The Court interpreted 523(a)(6) to mean that the exception from discharge is limited to acts done with the intent to cause injury.  Applying the statute to mean that all acts done intentionally which cause injury was too broad of a standard for the Court.  It went on to say that intentional torts “generally require that the actor intend ‘the consequences of an act,’ not simply ‘the act itself.’”
            I don’t take issue with the reasoning in general.  The result in the case of medical malpractice debts in particular seems inequitable to me, though.  Why not hold professionals, such as physicians, to a higher standard?  Dr. Geiger, without malpractice insurance (which he probably should have had), decided to practice medicine in a manner that he knew was less effective.  The patient alleged that this was simply a cost-cutting measure.  The result for the patient was that she had a good portion of her leg amputated, and yet did not receive any compensation from her physician who was, by all accounts, negligent.  To me, a physician such as Dr. Geiger should have known better than to practice medicine in this manner, whether it was for cost-cutting or not.  Generally in tort law, physicians and other professionals are held to a higher standard of care than the average person.  To me, it only makes sense for this special standard of care to translate to a special exception for discharge in bankruptcy as well.  Otherwise, the higher standard of care may be reduced to a lack of meaning should the physician file for bankruptcy.
            The Court’s decision was well-reasoned.  The Bankruptcy Code, then as today, does not provide an exception of discharge for medical malpractice debts.  Near the end of the Court’s opinion, Justice Ginsburg writes that although the Court declines to make a policy exception for discharge for medical malpractice debts, “Congress, of course, may so decide.  But unless and until Congress makes such a decision, we must follow the current direction § 523(a)(6).”  It’s in Congress’s hands to fix what I perceive as an inequitable loophole.  I’m not getting my hopes up.
            I expect to write again next week on a topic which applies to (nearly) all individual debtors: state exemptions from the bankruptcy estate.  I’ll focus on my state of Virginia, as it has some interesting provisions.  Thanks for reading.
-JP


7 years 3 months ago

If you are considering filing for bankruptcy you have, no doubt, considered a number of the positive effects of filing for bankruptcy. To name a few: filing for bankruptcy can reduce or eliminate unsecured debt obligations, can provide peace of mind, and can get a debtor back on track financially. However, bankruptcy is not a [...]


7 years 3 months ago

This has been a long time coming. The first post on a blog meant to educate the public on bankruptcy matters and keep bankruptcy professionals up to date on hot issues within the wonderful (and not so wonderful) world of bankruptcy.
For starters, I simply want to say welcome. And nothing says “welcome” like a listing of public sources that may help you find your path towards financial recovery.
Before I post some really helpful links, I must disclaim a few things.  I am in no way a lawyer (yet!) nor am I providing legal advice in violation of any professional code of ethics (California or American Bar Association). Think of me as a legal secretary guiding you to other sources that MAY be able to give you direct legal advice about your specific situation. Comments I make regarding any articles posted, are only that–General comments and opinions.  And with that, hopefully the links below may be helpful. Please check back to this first post for updated links as I will add more links over time.
Links For Consumers, Lawyers and Judges
American Bankruptcy Institute:  This is the Mecca of all things bankruptcy. Consumers, lawyers and bankruptcy judges use ABI as the go-to place for publications, events, news, statistics, Pro-bono Locators, and live webinars.
ABI Charts and Graphs:  ABI also provide charts ranging from frequency of bankruptcy filings, mortgage delinquency trends, housing and real estate trends.
Links For Consumers Re: Pro-Bono and Affordable Solutions For Financial Recovery (Emphasis on Southern California)
Orange County(Ca) Legal Aid Society Hotline:  Low income Orange County residents facing the prospect of filing bankruptcy may call this hotline to determine eligibility to be provided with pro-bono legal representation or guidance for your Chapter 7 bankruptcy. This hotline may schedule an in person appointment with an attorney for free if you are eligible. The personnel here are incredibly friendly and very experienced.
OC Legal Aid Society: Legal Genie Bankruptcy Forms and Legal Advice:  If OC residents do not qualify for free legal representation yet are still low income individuals who cannot afford an attorney, Legal Aid provides a do it yourself website with forms and access to attorneys for advice during a do-it-yourself process for a nominal fee.
Orange County Public Law Center Bankruptcy Clinic:  Another resource for low income OC residents to seek pro-bono legal representation through the potential Chapter 7 bankruptcy. The Public Law Center also represents (although rarely) low income consumer creditors.
Links For Attorneys and Judges
ABI Volo Project:  This is a service for practicing attorneys and judges lead by a community of fellow attorneys providing 24 hour updates on game changing bankruptcy Circuit Courts of Appeal decisions directly to your email or phone.
Other Areas of Law Such as Immigration and Taxes as it Relates to Bankruptcy: 
FicaroLaw News and Resource Center:  This is the hub website for news and resources involving Immigration, Real Estate and Foreclosure, Tax and Bankruptcy.


5 years 6 months ago

This has been a long time coming. The first post on a blog meant to educate the public on bankruptcy matters and keep bankruptcy professionals up to date on hot issues within the wonderful (and not so wonderful) world of bankruptcy.
For starters, I simply want to say welcome. And nothing says “welcome” like a listing of public sources that may help you find your path towards financial recovery.
Before I post some really helpful links, I must disclaim a few things.  I am in no way a lawyer (yet!) nor am I providing legal advice in violation of any professional code of ethics (California or American Bar Association). Think of me as a legal secretary guiding you to other sources that MAY be able to give you direct legal advice about your specific situation. Comments I make regarding any articles posted, are only that–General comments and opinions.  And with that, hopefully the links below may be helpful. Please check back to this first post for updated links as I will add more links over time.
Links For Consumers, Lawyers and Judges
American Bankruptcy Institute:  This is the Mecca of all things bankruptcy. Consumers, lawyers and bankruptcy judges use ABI as the go-to place for publications, events, news, statistics, Pro-bono Locators, and live webinars.
ABI Charts and Graphs:  ABI also provide charts ranging from frequency of bankruptcy filings, mortgage delinquency trends, housing and real estate trends.
Links For Consumers Re: Pro-Bono and Affordable Solutions For Financial Recovery (Emphasis on Southern California)
Orange County(Ca) Legal Aid Society Hotline:  Low income Orange County residents facing the prospect of filing bankruptcy may call this hotline to determine eligibility to be provided with pro-bono legal representation or guidance for your Chapter 7 bankruptcy. This hotline may schedule an in person appointment with an attorney for free if you are eligible. The personnel here are incredibly friendly and very experienced.
OC Legal Aid Society: Legal Genie Bankruptcy Forms and Legal Advice:  If OC residents do not qualify for free legal representation yet are still low income individuals who cannot afford an attorney, Legal Aid provides a do it yourself website with forms and access to attorneys for advice during a do-it-yourself process for a nominal fee.
Orange County Public Law Center Bankruptcy Clinic:  Another resource for low income OC residents to seek pro-bono legal representation through the potential Chapter 7 bankruptcy. The Public Law Center also represents (although rarely) low income consumer creditors.
Links For Attorneys and Judges
ABI Volo Project:  This is a service for practicing attorneys and judges lead by a community of fellow attorneys providing 24 hour updates on game changing bankruptcy Circuit Courts of Appeal decisions directly to your email or phone.
Other Areas of Law Such as Immigration and Taxes as it Relates to Bankruptcy: 
FicaroLaw News and Resource Center:  This is the hub website for news and resources involving Immigration, Real Estate and Foreclosure, Tax and Bankruptcy.


7 years 3 months ago

Pretty Girl in CarThe Nebraska Bankruptcy Court has issued a new opinion extending greater protection to vehicles owned by unemployed debtors.  In the case of Angelita Quintero decided on August 22, 2012, the Court expanded the “Tool of the Trade” exemption provided under Neb. Rev. Stat 25-1556(4) which allows up to $2,400 of protection for a vehicle used in a business or used by a debtor to commute to and from work. The Court extended the protection to debtors who are temporarily unemployed and who intend on returning to the workforce.

"In liberally construing the exemption statutes, this court has been receptive to the statutory interpretation that a debtor need not be currently employed in order to claim a tool of the trade exemption in a vehicle, as long as there is evidence the debtor is only temporarily unemployed as of the petition date and intends to resume working."

In addition to the Tool of the Trade exemption, Nebraska debtors are also able to protect the equity of their vehicle under the “Wildcard” exemption Neb.  Rev. Stat. 25-1552 which protects up to $2,500 of any personal property.  Thus, debtors are able to combine the Wildcard and Tool of the Trade Exemption and protect up to $4,900 of equity in their vehicle. 
The Quintero decision will help many unemployed debtors who were facing the grim prospect of losing their vehicle while searching for a new job.


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