Blogs

4 years 5 months ago

Are Taxes Dischargeable Through Bankruptcy? Some taxes are dischargeable through bankruptcy, but some are not eligible for discharge due to the year the taxes are due and the timeliness of filing the taxes.  If income taxes are more than three years old, they usually can be discharged.  The three year time period is based on the due date of the taxes, which generally is April 15th unless the debtor has been granted an extension.  If the taxes would be due within three years of the filing of the bankruptcy, the taxes would not be eligible for discharge.  It is not based on the end of the tax year but the due date for filing the tax return.  Therefore, if it is November, 2012, tax years 2008 and earlier would be discharged, but 2009, 2010, and 2011 would not because their due dates would be April 15th, 2010, 2011, and 2012, which is within the three year time period before the filing of the bankruptcy. Even if the taxes are more than three years old, taxes are not dischargeable if they have been filed within the last 2 years.  If the taxes are not filed timely and less than two years before the filing of the bankruptcy, the taxes cannot be discharged through the bankruptcy.  If taxes are unable to be discharged through the bankruptcy, debtors can call the IRS or their state Department of Revenue and attempt to work out a payment plan to repay their non-dischargeable tax debt.  Sometimes debtors are able to pay the taxes over a longer period of time.  It is still important for debtors to list their tax debt in the petition regardless of the ability to discharge the debt, however, so the IRS and Department of Revenue will get notice of the bankruptcy filing. For more information, please contact a St. Louis or St. Charles bankruptcy attorney today.


4 years 5 months ago

Can Debtors be Arrested for Not Paying Their Debts? Many debtors/clients inquire whether they can be arrested if they are unable to make payments on their debts.  Creditors sometimes threaten to come to their home and arrest them if they are unable to make their payments, even if they inform the creditor of their intent to file a bankruptcy.  Often, this threat is used to encourage payment and to frighten the debtor.  This information, however, is often incorrect and misstated.  Before a debtor can be arrested for a civil matter, such as a lawsuit for not paying a debt, there is a procedure that must be followed.  The arrest does not occur immediately.  The creditor must file a lawsuit against the debtor in the appropriate court and serve the debtor so the debtor is aware of the court proceeding and has an opportunity to appear.  The debtor can either choose to appear in court or not.  If the debtor doesn't appear, the court will issue a default judgment in favor of the creditor.  The debtor can also enter into a consent judgment and agree to a payment plan or take the case to trial and let the judgment enter a judgment.  If a judgment is entered against the debtor and the debtor refuses to pay or is unable to pay, the creditor has the ability to freeze or levy the debtor's bank account or garnish their employment up to 25 percent or 10 percent for head of household.  If the creditor is unable to garnish, the creditor can pursue a warrant for the debtor's arrest.  This is a last resort and cannot be done without first having a judgment. Therefore, the creditor cannot arrest a debtor at their home if they have not pursued a warrant through the proper court procedure. If a bankruptcy is filed, the creditor would be required to cease all contact with the debtor and would be unable to continue with pursuit of a lawsuit, judgment, or warrant against the debtor. For more information, please contact a St. Louis or St. Charles bankruptcy attorney.


4 years 5 months ago

114304479(1).jpg
Two new court opinions were recently handed down by the 5th and 10th Circuit Court of Appeals on the issue of whether Social Security income is considered “projected disposable income” under the Bankruptcy Code.  Projected disposable income is income that must be paid over to creditors during a 3 to 5 year Chapter 13 payment plan.
In the Matter of Benjamin Ragos, the 5th Circuit Court of Appeals upheld the ruling of a Louisiana bankruptcy court which ruled that, pursuant to Section 407 of the Social Security Act, income from Social Security is not projected disposable income in calculating the chapter 13 payment.  The court rejected the Chapter 13 Trustee’s argument that such income should be included and further rejected the Trustee’s argument that the failure to include such income constituted bad faith thus preventing confirmation of the debtor’s payment plan. 

We cannot square Trustee's argument with the apparent intent of Congress. If Congress excluded social security income from current monthly income and disposable income, it makes little sense to circumvent that prohibition by allowing social security income to be included in projected disposable income.”

Section 407(a) of the Social Security Act provides that “none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”
In the case of Fred Fayette Cramer, the 10th Circuit Court of Appeals also ruled that Social Security payments should not be considered as projected disposable income in Chapter 13 cases as well, and the court also ruled that the failure to pay such income to creditors does equal bad faith in confirming the plan.  

When a Chapter 13 debtor calculates his repayment plan payments exactly as the Bankruptcy Code  and the Social Security Act allow him to, and thereby excludes SSI, that exclusion cannot constitute a lack of good faith.”

How is Social Security income treated in Nebraska bankruptcy cases?  The answer was given in the case of Fink v Thompson by the 8thCircuit Bankruptcy Appellate Panel (In re Thompson), 439 B.R. 140, 144 (B.A.P. 8th Cir. 2010).  The 8thCircuit stated that “[t]he plain language of the Bankruptcy Code specifically excludes Social Security income from a debtor's  required payments in a Chapter 13 plan.”   (see also Carpenter v. Ries (In re Carpenter), 614 F.3d 930, 936-37 (8th Cir. 2010) ("§ 407 operates as a complete bar to the forced inclusion of past and future social security proceeds in the bankruptcy estate.")
It is now very clear that neither the monthly income received by a retired or disabled debtor nor the lump sum payments typically associated with disability claims are at risk in either Chapter 7 or Chapter 13 cases.


4 years 5 months ago

Shortly after you file for bankruptcy, the Court sends you a notice to appear at a meeting of creditors, also called a “341 meeting”.  This meeting will take place roughly about a month after your case is filed.  The notice will contain the date, address, time and the name of the trustee that will be [...]


4 years 5 months ago

I want to challenge the conventional wisdom that filing bankruptcy should be considered a last resort. Does that sound self serving coming from a bankruptcy lawyer? Maybe. But consider this table: Balance monthly payment time to payoff interest rate total interest total payoff $10,000 $300 44 months 15% $3,043 $13,043 $50,000 $1,500 44 months 15% $15,217 $65,217   As you can see, under the best of circumstances, it will take you 4 ½ years and $13,043 to pay off that $10,000 credit card debt, assuming that: you are no longer using your credit card for future purchases you have not been late, thereby keeping your interest rate from jumping to a penalty rate you make only the minimum payment of $300 per month Under this best case scenario, $50,000 of credit card debt will require $1,500 per month and you will end up paying interest charges totaling $15,217 for payoff of $65,217. What happens if you miss a payment? In addition to the late fees, your interest rate rises from 15% to a penalty rate, which is typically 29%. With a 29% interest rate, and a $300 per month minimum payment, your interest charge on that $10,000 balance will total $10,959 (totaling $20,959) and almost 6 years to pay off the debt.  A $50,000 balance, payable at $1,500 per month, will produce interest charges of $54,793 for a total of $104,793 over that 70 month period. Balance monthly payment time to payoff interest rate total interest total payoff $10,000 $300 70 months 29% $10,959 $20,959 $50,000 $1,500 70 months 29% $54,793 $104,793   You can run your own numbers at: http://www.cardhub.com/credit-card-calculator/ Remember, these calculations assume no on-going use of your credit cards and minimum payments only. The point here is this: if you have $50,000 or more of credit card debt, you are in a very deep hole that will require a great deal of austerity and discipline to escape.  More importantly, your capacity to pay off this debt will require stability in both your income and expenses.  Late or missed payments at any point during the payoff term can have catastrophic implications in terms of the interest rates you pay. Why Bankruptcy?why not bankruptcy
The bankruptcy option can offer a huge benefit economically. There are certainly non-economic factors to consider, such as:

  • impact on your credit reports
  • moral or religious aversion to filing bankruptcy

but speaking solely in terms of economics, the bankruptcy option is worth considering. If you can qualify for Chapter 7, you would be looking at a cost in the neighborhood of $1,500 to $2,000 to totally wipe out the $50,000 credit card debt. Basically for one monthly payment on your balance, your debt can simply go away. If you do not qualify for Chapter 7 and have to go to Chapter 13, you may end up paying back some percentage of your unsecured debt. However, there is no accrual of interest in Chapter 13 – you pay only the balance due at the time of filing. So if your plan called for a 100% payout to unsecured creditors, you would pay $50,000 (not $65,000 and certainly not $104,000) to your credit card lender over 5 (not 6) years. If your plan calls for a 50% dividend to unsecureds, then the $50,000 would turn into $25,000. Obviously other factors will go into your decision to file for bankruptcy, but I wanted to use the credit card example to demonstrate in very clear dollars and cents terms just how powerful bankruptcy relief can be.The post When Bankruptcy Makes More Sense than Struggling to Pay Off Debt appeared first on theBKBlog.


4 years 5 months ago

The short answer is no…you do not have to surrender your home if you file for bankruptcy.  If you are having financial trouble and problems making your ongoing mortgage payment, I would first recommend contacting your lender and trying to modify your mortgage.  Some lenders will work with you, but if they are not willing [...]


4 years 5 months ago

Vowing to make the billionaires pay their “fair share”, the country has a true consumer advocate in Massachusetts now.  Elizabeth Warren, a law professor who moonlights as a true champion of the middle class consumer, beat incumbent pretty-boy Scott Brown for the Massachusetts Senate seat vacated by Ted Kennedy.  Warren created the Consumer Protection Bureau although Wall Street interests had her ousted from her position as director when they saw her headlights in their rear view mirrors.  If there is anyone who can give the middle class hope, it is her.  Congrats Senator Warren!


4 years 5 months ago

Vowing to make the billionaires pay their “fair share”, the country has a true consumer advocate in Massachusetts now.  Elizabeth Warren, a law professor who moonlights as a true champion of the middle class consumer, beat incumbent pretty-boy Scott Brown for the Massachusetts Senate seat vacated by Ted Kennedy.  Warren created the Consumer Protection Bureau although Wall Street interests had her ousted from her position as director when they saw her headlights in their rear view mirrors.  If there is anyone who can give the middle class hope, it is her.  Congrats Senator Warren!


4 years 5 months ago

New mortgage modification rules make it easier to combine a HAMP or "Obama Plan" mortgage modification with a Chapter 13 Bankruptcy. Combining a HAMP mortgage modification may be beneficial to many homeowners.

The filing of a chapter 13 bankruptcy generally stays all foreclosure and collection actions by mortgage companies and other creditors. This allows a person to formulate a chapter 13 plan to reorganize their financial situation.

A typical homeowner who owes more on their home than it is valued at will propose a chapter 13 plan to avoid their second mortgage lien and categorize it with other unsecured claims, such as credit cards. The homeowner will also file a HAMP mortgage modification request if they haven't already file it. The chapter 13 plan will provide for payment of the estimated and anticipated HAMP modified mortgage payment. The chapter 13 plan provides also provides for a percentage dividend to unsecured creditors.

Filing for a HAMP modification together with a chapter 13 bankruptcy may increase the likelihood of obtaining a HAMP modification for various reasons, including the increased feasibility of making the new payment for the first mortgage, as the second mortgage is avoided and categorized as an unsecured creditor. Also, as the HAMP is being filed in the context of the chapter 13 case, it may receive more prompt review by the mortgage company.

A typical HAMP modified mortgage payment is calculated as 31% of the homeowner's gross income. The 31% amount would cover principal, interest, taxes, insurance and associations.Jordan E. Bublick, Miami and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983


4 years 5 months ago

Overcoming an Objection to Confirmation of Chapter 13 Plan in San JoseTens of thousands of people in California file Chapter 13 Bankruptcy every year. Filing a Chapter 13 case and getting that case confirmed by your bankruptcy judge, however, are two very different things. The process of getting a Chapter 13 Plan confirmed can be a bit daunting, but like everything else in filing a personal bankruptcy, having an experienced bankruptcy lawyer along with a bit of good humor will make the process smoother. There are many moving parts in getting a Chapter 13 bankruptcy case confirmed, from filing a proper Chapter 13 Plan, to disclosing all of your financial information, to making sure you make your plan payments on time, and all of this can make the confirmation process somewhat dizzying. Because knowledge is power, this post is aimed at arming you with some knowledge about overcoming a Chapter 13 trustee’s objections to confirmation of your Chapter 13 bankruptcy plan.
If you file a Chapter 13 bankruptcy case in the San Jose Division of the Northern District of California, where we primarily practice, then you should know that the trustee assigned to your case, along with her staff of case analysts and staff attorneys, are efficient, fair-minded professionals who work with us to help get your Chapter 13 Plan confirmed. Yes, you may very well receive something called a “Trustee’s Objection To Confirmation” in the early weeks after your Chapter 13 bankruptcy case is filed, and you might be tempted to think that the Chapter 13 Trustee has it out for you and does not want your case to be confirmed. But this is not the case. Yes, the Chapter 13 Trustee does represent the interests of your creditors. But it is also true, that the trustee and her staff generally want your plan to work, as long as it is filed in good faith.
It is helpful to bear in mind that proposing a Chapter 13 payment plan involves a bit more art than science. The debtor’s bankruptcy attorney is advocating for the debtor’s plan payments to be as manageable as possible while meeting various requirements. At the same time, the trustee is duty bound to make sure that the debtor’s creditors are receiving as much as the debtor can reasonably afford to pay. Hence, there is necessarily some back-and-forth between the debtor’s attorney and the Chapter 13 bankruptcy trustee. It is not at all uncommon for a debtor to receive an Objection to Confirmation from the trustee. This simply means that you and your bankruptcy attorney still have some work to do. But the reality is that Objections can often be remedied in fairly short order.
In the San Jose Division, every bankruptcy case is reviewed by the Chapter 13 Trustee’s office prior to the 341 Meeting of the Creditors. If the Trustee’s office needs more clarification on certain portions of your bankruptcy petition, or needs to review additional documents like paystubs, profit and loss statements for a small business, tax returns, or trust documents, they will file an Objection on your bankruptcy case so that they can review these documents prior to moving your case forward for confirmation. This doesn’t mean your case will not ultimately be confirmed. It simply means that the trustee’s office is doing their own due diligence.
How long do you have to take care of the points of the Objection? Do you need to get the Objection points taken care of by your Confirmation Hearing date? While it would be ideal to get the Objection taken of by your Confirmation Hearing date, it is not absolutely necessary. The Trustee’s office won’t dismiss your case just because you haven’t addressed all issues in the Objection by that time. What will happen if the Objection is not withdrawn by the time the Confirmation Hearing occurs? In the San Jose Division, all that happens is that your case gets taken off of the Confirmation Hearing calendar and is put on something known as the “Trustee’s Pending List,” where your case will stay until all objections have been taken care of. Once all Objections are resolved the Trustee will automatically take your case off of the Trustee’s Pending List and put it back onto the next Confirmation Hearing calendar date.
While it is true that if the objections aren’t resolved after some time has passed your case can be dismissed, this is not the primary aim of the Trustee’s office. The Trustee’s office wants to work with bankruptcy debtors to make sure that their cases and plans conform to the applicable bankruptcy laws in a timely manner, and are willing to work with debtors and their attorneys to make that happen. In fact, the staff of the San Jose Division Chapter 13 Trustee’s office are exemplary in their willingness to candidly discuss with bankruptcy attorneys how to resolve Objections.
If the Trustee’s office reviews your case further after the original Objection has been filed and has found certain objections to have been satisfied, but others have not, they can then file an “amended” Objection to address the issues that are still pending at that time.
Having an experienced bankruptcy attorney help you navigate through the complexities of getting a Chapter 13 case confirmed can mean the difference between a successful Chapter 13 Bankruptcy and a dismissed one. Call us to schedule a free consultation today.


Pages