2 years 8 months ago

Most people thinking about filing for bankruptcy are understandably concerned about paying for the service. They wonder how in the world they going to pay the attorney’s fees and the court costs in an effort to get out of debt. After all, they have very little available per month after they are paying all of+ Read More
The post The Bankruptcy Payment Plan appeared first on David M. Siegel.

2 years 8 months ago

When you file a chapter 7 bankruptcy, you are basically telling creditors that you have no significant assets from which to pay them. To prove this, on your bankruptcy petition you must list all of your property of every nature. You are then allowed to protect or exempt a specific amount of property depending upon+ Read More
The post Income Tax Refund At Risk When Filing Chapter 7 Bankruptcy appeared first on David M. Siegel.

2 years 8 months ago

I recently had a client who was reorganizing student loan debt over a five-year period. He was willing to pay back 10% of the student loans knowing full well that the other 90% would be due and owing plus interest after his bankruptcy case was over. He did have some minor credit card debt and+ Read More
The post Do You Really Need A Bankruptcy Discharge Under Chapter 13? appeared first on David M. Siegel.

2 years 8 months ago

Total bankruptcy filings in the United States dropped 14 percent in January from the same period last year.  Local results saw even larger decreases.

California saw a 23% drop in cumulative filings.  California ranked 1st compared to all other states with the largest decrease in bankruptcy filings when compared to 2013.  For the first time in a long time, fewer than 100,000 bankruptcies were filed in the Golden State.  During the height of the Great Recession in 2010, more than 255,000 bankruptcy cases were filed.

Other states seeing a drop in cumulative bankruptcy filings when compared to 2013 include Alaska (-22%), New Hampshire (-21%), Vermont (-22%) and Wyoming (-23%).

The San Joaquin Valley saw bankruptcy case filings drop 23.5% from 2013.  This area includes Sacramento, Fresno and Bakersfield,  Total cases filed were 20,355.  In 2013, the San Joaquin Valley Valley filed 26,606.  In 2010, the valley had more than 54,000 bankruptcy cases filed.

 Why the decrease in bankruptcy filings? American Bankruptcy Institute Executive Director Samuel J. Gerdano said, "High costs to file and sustained low interest rates continue to reduce the number of consumers and businesses seeking the fresh financial start of bankruptcy."  January Bankruptcy Filings Decrease  

Click here to read the full statistical release.

Will the last bankruptcy debtor remember to turn off the lights on the way out?

Photo courtesy of Francesca Gallo on Flickr

2 years 8 months ago

Most people do not wish to file for bankruptcy. They know there’s a psychological aspect. They know there’s a monetary fee. They know that there is a process. In fact, most clients wind up filing for bankruptcy after some catastrophic event triggers the necessity to file. Wouldn’t it be wise if on certain occasions people+ Read More
The post When Is It Smart To File Bankruptcy Preemptively? appeared first on David M. Siegel.

2 years 7 months ago

This area of law turns on specific facts, but here are some basics:

  • The fact that the widow may have used the card during the marriage does not necessarily make her liable for the debt.
  • The debt may be charged against the community property of the spouses, but the creditor has a deadline to sue or file a claim in the decedent’s probate case.
  •  If the debt was incurred by the deceased in an earlier marriage was in a community property state, such as Arizona, the ex-wife may be obligated to pay the debt.  

Law booksAgain, all of this is very fact specific, but here is some law:

The post Am I Responsible for My Deceased Husband’s Pre-marriage Debts? appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

2 years 8 months ago

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New York attorney Austin C. Smith writes an important article in the American Bankruptcy Institute under the heading The Misinterpretation of 11 U.S.C. 523(a)(8) suggesting that federal courts have been misapplying the student loan exception to discharge since 1990.
Section 523(8) of the Bankruptcy Code provides that bankruptcy does not discharge an individual debtor from any debt for:
(A)(i) 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
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986.
Prior to the Bankruptcy Reform Act of 2005, private student loans were dischargeable in bankruptcy. The change in the bankruptcy law in 2005 was to add subsection (B) above to provide that a Qualified Education Loan as defined by Section 221(d)(1) of the Internal Revenue Code was excepted from discharge. In all other respects, the law remained the same.
The error federal courts are making, according to Smith, is when they deny discharge to private student loans because they are “educational benefits” under section A(ii) when in fact section A(ii) does not address private student loans. Section A(ii) existed prior to the reform act of 2005, so to claim that any loan that confers an educational benefit is excepted from discharge is to argue that private student loans were not dischargeable prior to 2005, and that simply is not the case.

The term “educational benefit” is being interpreted so broadly that it makes the addition of Section (B) unnecessary. Indeed, how could any private student loan not also be an educational benefit? Is not any loan to a student also a benefit to their education?

According to Smith, the courts have lost track of the history of 523(a)(8). In 1990 Congress amended the law to deny discharge to any obligation to repay an educational benefit, scholarship or stipend. The amendment was spurred by an 8th Circuit case of U.S. Dept. of Health and Human Services v. Smith in which the bankruptcy court discharged the debt of a medical student who accepted a scholarship on the condition that he work in a “physician shortage” location for a certain number of years. The law was amended in 1990 to prevent discharge of these conditional scholarships. The 1990 amendment prevented discharge for any debt:
 (a)(8) for 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 for an obligation to repay funds received as an educational benefit, scholarship or stipend.
Smith argues persuasively that the 1990 amendment was never designed to protect loans. Conditional scholarships were the target of the 1990 amendment.

[A] growing number of courts have realized the difficulty of the resultant logic: Interpreting “educational benefit” to except from discharge any loan that in any way facilitates education renders the remaining provisions of the statute meaningless. If any money lent to any person for any educational purpose is protected, then the remaining provisions of § 523(a)(8) — provisions carefully crafted to protect federally insured loans, nonprofit loans and other loans qualified by the IRC — become superfluous.”

What is a Qualified Educational Loan under Internal Revenue Code 221(d)(1)?
A QEL is “any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses. The term “qualified education expenses” is defined as “the cost of attendance at an eligible educational institution.” Cost of attendance is “tuition, books, and a reasonable allowance of room and board as defined by the institution.” Private loans in excess of this limit are not “qualified” (i.e., they may not be taken as deductions on a tax return) and they are not protected from the bankruptcy discharge.
The problem is, federal bankruptcy courts are, according to Smith, bypassing the required tax analysis demanded by IRC 221(d)(1) and just declaring private loans nondischargeable educational benefit.
The most extreme example of this misapplication of the student loan discharge law in found in the case of Carrow v. Chase Loan Serv., 2011 Bankr. Lexis 823 (Bankr. N.D. 2011). Despite the fact that the debtor received the maximum federal loan amount for which she was eligible and thus all the private loans issued by Chase Bank could not be certified because they were beyond the debtor’s eligibility, the court nevertheless declared the debts to be nondischargeable because they were clearly an “educational benefit.”
Contrast the Carrow opinion with the opinion of the 7th Circuit in case of In re Oliver, 499 B.R. 617 (7th Cir. 2013). In that case the 7th Circuit held that a debtor’s failure to repay tuition did not constitute a qualified educational loan and therefore ruled the tuition debt discharged. The bankruptcy court for the Northern District of California made a similar decision recently. Inst. of Imaginal Studies v. Christoff, 310 B.R. 876, (N.D. Cal. 2014).
The Take Away:
Bankruptcy attorneys need to spend more time determining whether the private loans their clients are facing are Qualified Educational Loans under IRS 221(d)(1) and, if not, bringing Adversary Proceedings to determine whether those debts are excepted from the bankruptcy discharge. Special attention must be paid as to whether the private loans exceed the school’s certified cost of attendance.
Image courtesy Flickr and iwearyourshirt.

2 years 8 months ago

Acclaim Legal Services Open’s Sixth Michigan Office Location in Downtown Detroit! Since our firm was founded in 2003, we have continued to grow our debt relief practice.  We are excited to expand further to downtown Detroit, with a new office space conveniently located in the United State Bankruptcy Court building at:   211 West Fort Street Suite […]
The post Detroit Bankruptcy Attorneys Make it Official with a New Downtown Office Location appeared first on Acclaim Legal Services, PLLC.

2 years 8 months ago

This is the bankruptcy case study for E.A. from Montgomery, Kendall County, Illinois. He is here to see whether chapter 13 bankruptcy will provide debt relief for him. Let’s look at the facts of his case: he is currently a homeowner with a market value of $149,000. ( has two outstanding loans on the property.+ Read More
The post Bankruptcy Case Study-Chapter 13: Get Current On Mortgage appeared first on David M. Siegel.

2 years 8 months ago

I have had bankruptcy clients who have been overly concerned with their credit score before, during, and after they have filed for bankruptcy. The credit industry, including the credit bureaus and the credit protectors, have done a great job of marketing to Americans the importance of having a good credit score. What they fail to+ Read More
The post There Is Way Too Much Emphasis On A Credit Score appeared first on David M. Siegel.