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Filing for bankruptcy for many is the most difficult decision they will ever have to make. It is something completely foreign and new to them. Due to the fact that bankruptcy has such a stigma many people don't discuss it and don’t really understand what bankruptcy is all about. If you take the step in the direction of bankruptcy remember
that if you are in a Chapter 13 you will need Court approval for certain things. This does not mean that you are not allowed to make purchases nor are you being controlled by the Chapter 13 Trustee. It is necessary, however, for the Court and your creditors to know when you are making a major purchase such a vehicle or a home. This also applies if you are opting to sell your home or vehicle. Although it is not the
most ideal situation and it can be a bit of a hassle saving your home and/or getting your financial situation under control; it is completely worth the extra work that being in a Chapter 13 may require of you. When looking into bankruptcy, knowing you are going to be committed to a Chapter 13 plan for 3 to 5 years may be a bit overwhelming, however, you will be able to continue living your life. Depending on your circumstances it may just take a little extra work and communication with your attorney.
It is clear that a tax debt is not dischargeable in bankruptcy if a return for the year in question is not filed. See 11 USC § 523 (a)(1)(B)(i). However, The 2 Year Rule provides that taxes due based upon a late filed return (filed after its due date and any extensions) are dischargeable if... Read More »
Court case not the way Whataburger likes it – Houston Chronicle.
As H. Anthony Hervol, a San Antonio lawyer who defends individuals in debt-collection disputes says, Whataburger’s action is “very unusual.”
It is not usual for an employer to sue a collection agency on behalf of an employee who is receiving harassing debt communications at work. Usually, the employee is left to deal with the harassment on their own and hope that they don’t lose their job as a result of the repeated phone calls. However, Whataburger has sued NCO for what it calls harrassing phone calls which interfered with their employees’ execution of duties.
Seeking unspecified damages, the lawsuit claims NCO placed over 50 calls to the restaurant’s toll free number in an attempt to collect a debt from an unnamed employee. Twenty seven of those calls were made after NCO was sent a cease and desist letter.
Consumers who are behind on their debts are consistently pelted with phone calls to their home, employers, neighbors and family members. The Fair Debt Collections Act (FDCPA) was designed to protect consumers from creditor harassment, however, many creditors blatantly ignore or gleefully push the boundaries of the FDCPA. If you can prove that a creditor violated the provisions of the Act you may sue the creditor for damages. Keep in mind, however, that the FDCPA only applies to debt collectors who work for collection agencies and not debt collectors that are employed by the original creditor. Once you have made the determination that the calls are coming from a collector and not the original creditor, here are 3 steps to take.
1. Determine Whether the Communication is Abusive. Calling a third-party and asking them to pass along a message (neighbor’s, family members, etc.), calling you at work after being told you cannot take creditor’s calls there and failing to cease and desist after a written request are all impermissible communications under FDCPA. Threatening you with arrest, war dialing (repeated and continuous calls), abusive messages and profanity are impermissible as well.
2. Send a Cease and Desist Letter. Notify the creditor in writing to stop the abusive contact. Send certified mail with return receipt requested so that the creditor has to sign for it and you have documentation their received it. Always keep a copy of any letters you send to them in case you need to use them in court. The letter should state that you want the creditor to cease all communications with you. Under the law, the creditor must stop calling you to collect the debt, however, they can contact you to let you know what steps the creditor will take if the debt is not paid. This is where the next step comes in handy.
3. Keep A Communications Log. Make notes of dates and times of the calls and who the calls were made to. If legal in your state, record the calls. Save all voice mails and cell phone bills which prove the communication. This can be used as evidence if the creditor does not comply with your cease and desist letter. If you seek to sue the collector, an attorney will want to see this as well as a copy of the cease and desist letter.
The Sixth Circuit Court of Appeals recently held that Michigan's bankruptcy-specific exemption statute is constitutional under the Bankruptcy Clause and Supremacy Clause of the United States Constitution.
Historically, Michigan has allowed bankruptcy debtors to use the federal exemptions under 11 U.S.C. § 522(d), the general state exemptions under M.C.L. § 600.6023, or the state exemptions pursuant to M.C.L. § 600.5451 that are specific to debtors in bankruptcy (prior to it being declared unconstitutional).
Michigan is one of a few states that has a bankruptcy-specific exemption statute available to bankruptcy debtors only. In the Western District of Michigan, the constitutionality of the bankruptcy-specific scheme was called into doubt by the Hon. James D. Gregg in In re Pontius, 421 B.R. 814 (Bankr. W.D. Mich. 2009) and the Hon. Jeffrey R. Hughes in In re Wallace, 347 B.R. 626 (Bankr. W.D. Mich. 2006). Contrarily, the Hon. Scott W. Dales, held that the bankruptcy-scheme was constitutional in In re Schafer, 428 B.R. 720 (Bankr. W.D. Mich. 2010), pursuant to Sixth Circuit precedent and Congress' delegation of power to the states pursuant to 11 U.S.C. § 522(b) to create bankruptcy exemptions. Read More ›
Tags: 6th Circuit Court of Appeals
The Sixth Circuit Court of Appeals recently affirmed a decision of the United States District Court for the Southern District of Ohio based upon the District Court's holding that the automatic stay does not prevent the issuance of injunctive relief. Read More ›
Tags: 6th Circuit Court of Appeals
I had coffee with a great friend of mine who began his own bankruptcy practice a few years ago. He explained that he recently acquired a very difficult case involving a debtor with a high paying job and he expected a brutal Chapter 13 confirmation process—i.e, he expected the Trustee to demand a significant monthly payment. Apparently the debtor had bad luck in a business venture and was now deep in SBA loan debt requiring a bankruptcy despite his job that paid a six-figure salary. As I continued to question my friend about the nature of his client’s debt, it became clear that the majority of his debt came from the business failure. The good news for my friend and his client is that there would be no brutal Chapter 13 confirmation hearing. In fact, there would not even be a Chapter 13 case at all.
One of the greatest loopholes in bankruptcy law allows debtors with high income to qualify for the speedy Chapter 7 discharge even though it is obvious that they have the financial ability to repay some or all of their debt. Generally speaking, if a debtor has the ability to repay some or all of his debt, then Chapter 7 is not allowed and a debtor must commit to repaying a portion of the debt in a 3 to 5 year Chapter 13 payment plan. However, if a majority of the debt is not consumer debt a person is allowed to file Chapter 7 regardless of their income or ability to repay debt.
Bankruptcy Code section 707(b) provides the general rule:
"After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor’s consent, convert such a case to a case under chapter 11 or 13 of this title, if it finds that the granting of relief would be an abuse of the provisions of this chapter."
Omaha millionaire Ted Baer was allowed to complete a Chapter 7 case despite objections filed by a creditor and a monthly budget that allowed $4,580 for retirement savings, $2,000 of food expenses and $1,500 per month for vehicle payments on monthly income of $20,065. Why? Because most of his debts were business related.
In the case of Dr. Steven Lapke, (Case number 07-81140) the Nebraska Bankruptcy court stated the following:
"For purposes of § 707(b), a debtor’s debts are primarily consumer debts if more than half of the dollar amount owed is on consumer debts. In re Coleman, 231 B.R. 760, 761 (Bankr. D. Neb.1999); In re Shelley, 231 B.R. 317, 319 (Bankr. D. Neb. 1999); accord Price v. U.S. Trustee (In rePrice), 353 F.3d 1135, 1139 (9th Cir. 2004); In re Booth, 858 F.2d 1051, 1055 (5th Cir. 1988); In re Beacher, 358 B.R. 917, 920 (Bankr. S.D. Tex. 2007); In re Snyder, 332 B.R. 641, 643 (Bankr.M.D. Fla. 2005); In re Praleikas, 248 B.R. 140, 144 (Bankr. W.D. Mo. 2000). This calculation is to be made as of the date of bankruptcy filing. In re Penny, 297 B.R. 737, 739 (Bankr. C.D. Ill. 2003)."
Debts normally classified as “consumer” debts include credit card debt, medical bills, student loans, home mortgages and auto loans.
Bankruptcy attorneys frequently assume the nonconsumer debt exception only applies to business debts, however it also includes tax debts, personal injury claims and other tort debts. If credit cards were used primarily to fund business operations, that too may be deemed a nonconsumer business debt. Some debtors have argued that student loan debts are not consumer debts but have received little success.
If the majority of debts are not consumer debts, it is important that the bankruptcy schedules reflect this fact. The list of debts in such a case should specifically state whether each debt is a consumer or nonconsumer debt, and it is helpful to provide the U.S. Trustee with a worksheet that totals each type of debt.
Sad news out of London today. The 10 year old Belgian stallion named London, ridden by Gerco Schroeder in the 2012 Olympics, and which took the silver in both team and individual show jumping has been seized due to bankruptcy proceedings by the owners. The horse, along with other horses owned by the same company was seized shortly after the conclusion of the jumping competition.
http://www.examiner.com/article/silver-medal-winning-olympics-horse-seized
Of course the bankruptcy trustee was hoping that “London” won gold instead of silver. More for the estate creditors I am sure.
Sad news out of London today. The 10 year old Belgian stallion named London, ridden by Gerco Schroeder in the 2012 Olympics, and which took the silver in both team and individual show jumping has been seized due to bankruptcy proceedings by the owners. The horse, along with other horses owned by the same company was seized shortly after the conclusion of the jumping competition.
http://www.examiner.com/article/silver-medal-winning-olympics-horse-seized
Of course the bankruptcy trustee was hoping that “London” won gold instead of silver. More for the estate creditors I am sure.
The local rules for the Bankruptcy Court for the Western District of Michigan have been amended, effective August 1, 2012. The new rules can be found here in their entirety.
A redline version of the rules, showing the amendments, can be found here.
Among other changes, practitioners should review the following amendments: Read More ›
Tags: Western District of Michigan
You can absolutely keep your 401k if you file bankruptcy in Atlanta, Georgia. This is one of the most common questions I receive when clients schedule an appointment with me. Many people thing that the bankruptcy court (or more appropriately, the trustee assigned to your case) will liquidate all your assets under a Chapter 7 bankruptcy. This is simply not the case. Georgia has specific laws that protect certain assets of the debtor from being taken by the Chapter 7 trustee or creditors.
For instance, under Georgia bankruptcy law (specifically, the Georgia law specific to exempt property in bankruptcy), the Debtor may shield from creditors up to $23,500 of equity in his or her personal residence, $3,500 in a car, and $5,000 in household goods, among other things.
When it comes to 401k retirement plans, you may exempt the entire amount of the holdings in your 401k. This is one of the most debtor friendly laws in the state of Georgia. It just makes sense. How can you expect someone to get back on their feet if their retirement is up for grabs by creditors?
Section 44-13-100 of the Georgia Code states,
“Exemptions for purposes of bankruptcy and intestate insolvent estates
(a) In lieu of the exemption provided in Code Section 44-13-1, any debtor who is a natural person may exempt, pursuant to this article, for purposes of bankruptcy, the following property: ”
(2.1) The debtor’s aggregate interest in any funds or property held on behalf of the debtor, and not yet distributed to the debtor, under any retirement or pension plan or system:
(A) Which is: (i) maintained for public officers or employees or both by the State of Georgia or a political subdivision of the State of Georgia or both; and (ii) financially supported in whole or in part by public funds of the State of Georgia or a political subdivision of the State of Georgia or both;
(B) Which is: (i) maintained by a nonprofit corporation which is qualified as an exempt organization under Code Section 48-7-25 for its officers or employees or both; and (ii) financially supported in whole or in part by funds of the nonprofit corporation;
(C) To the extent permitted by the bankruptcy laws of the United States similar benefits from the private sector of such debtor shall be entitled to the same treatment as those specified in subparagraphs (A) and (B) of this paragraph,
provided that the exempt or nonexempt status of periodic payments from such a retirement or pension plan or system shall be as provided under subparagraph (E) of paragraph (2) of this subsection; or
(D) An individual retirement account within the meaning of Title 26 U.S.C. Section 408.
The above statute appears confusing, but it stand for the proposition that all undistributed funds held in a 401k retirement plan are exempt from creditor collection action.
But here’s another wrinkle that bodes well for debtors. Your 401k funds may not even be property of the bankruptcy estate. To explain, when you file bankruptcy, all your property becomes property of the newly created bankruptcy estate to be administered and liquidated by the Chapter 7 trustee appointed to your case. However, the Supreme Court has held that retirement plans with an enforceable anti-alienation clause, which is a provision that prevents creditors from garnishing retirement funds of the debtor, are not property of the estate. This means that the trustee has no power over those funds. Virtually all 401k savings plans that are qualified under ERISA (Employee Retirement Income Security Act) have an anti-alienation clause.
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