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Here at Shenwick & Associates, many of our more challenging personal bankruptcy cases involves past due tax debts. We've previously written about the complex rules involving the dischargeability of taxes hereand here.

This month we want to discuss the concept of "tolling." There are several types of events that serve to stop the clock on various time periods that determine when an income tax becomes dischargeable:

• A prior bankruptcy case. The filing of a bankruptcy case will toll both the rule that a tax must be more than three years past its due date to be dischargeable in bankruptcy (the "3 year rule") and the rule that a tax must have been assessed for more than 240 days to be dischargeable in bankruptcy (the "240 day rule")

• An request for a due process hearing or an appeal of a collection action taken against a debtor. The same rules apply.

• An offer in compromise. We recently wrote about offers in compromise, which are offers to compromise (or settle) a tax debt for less than the full amount due. The submission of an offer in compromise will toll the 240 day rule. If the taxpayer makes an offer in compromise within 240 days of filing for bankruptcy, the 240 day time rule will be suspended for the time during which the offer in compromise is pending, plus an additional 30 days.

• Tax litigation. Litigation with taxing authorities in U.S. Tax Court or other venues will toll both the 3 year rule and the 240 day rule.

• A request for an extension of time to file a tax return. Filing for an extension will: (a) delay the start of the 3 year rule to the extended due date; (b) delay the start of the rule that a tax is not dischargeable in bankruptcy until more than two years from the filing date (the "2 year rule") until the actual filing date; and (c) delay the start of the 240 day rule until the tax is actually assessed.

To get an idea of how your past due tax debts might be handled in bankruptcy, please contact Jim Shenwick.

The following is from the Consumer Financial Protection Bureau: Banks to Pay $35.7 Million After Loan Officers Illegally Traded Referrals for Cash and Marketing Services
The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General took action against Wells Fargo and JPMorgan Chase for an illegal marketing-services-kickback scheme they participated in with Genuine Title, a now-defunct title company. The Bureau and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement.  Genuine Title gave the banks’ loan officers cash, marketing materials, and consumer information in exchange for business referrals. The proposed consent orders, filed in federal court, would require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase, and $11.1 million in redress to consumers whose loans were involved in this scheme. Cohen and Oliphant Cohen also will pay a $30,000 penalty.
“Today we took action against two of the nation’s largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks,” said CFPB Director Richard Cordray. “These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market.”
“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”
Copies of the proposed consent orders filed in federal court and of the Bureau’s administrative consent orders will be available later today.
The post CFPB Takes Action Against Wells Fargo and Chase for Illegal Mortgage Kickbacks appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

When you hear “meeting of creditors,” you might imagine yourself having to face a room of people representing the banks and credit card companies. The reality is that the meeting of creditors is used by the trustee to ask you questions about your financial situation. These questions and your answers will help him or her carry out the responsibilities of the trustee. Creditors will rarely show up at this meeting. Bankruptcy judges are not allowed to attend the meeting of creditors.
The post Chapter 7 Bankruptcy Basics: Part Two appeared first on Tucson Bankruptcy Attorney.

The law governing Arizona anti-deficiency protection for residential property has finally been clarified by the Arizona Supreme Court.
Arizona Revised Statute: 33-814 G. If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.
History:  Property not yet fully constructed does not qualify as “limited to and utilized for one or two family dwelling” Borrowers never intended on residing in the real property.  DEFICIENCY allowed.: Mid Kansas, id at 129, 804 P2d at 117.  But the Court of Appeals put a bizarre twist on that concept in M&I vs Mueller, (Az Ct Appeals, Div 1, 12/27/11) 1 CA-CV 10-0804, CV 2009-031468 (explanation – in Mid Kansas, where the borrower was a corporation that never intended to occupy the property, the Muellers intended to live in the single-family home upon its completion.
FACTS: In 2005, the Muellers purchased a plot of vacant land (the “Property”) in Arizona. In June 2006, the Muellers borrowed $444,000 from M&I to construct a single-family home on the Property for their own use.  Several months into construction, the Muellers discovered that the contractor was behind schedule, and much of the construction was defective. The Muellers notified M&I that they would need advances on loan disbursements to remedy the defects. M&I did not disburse additional funds, and the Muellers abandoned the Property and defaulted on the note.
In September 2009, M&I foreclosed and sued to recover a deficiency judgment for $68,196.91, the difference between the appraised value of the home prior to the foreclosure sale. The trial court dismissed M&I’s deficiency claim, finding as a matter of law that the Muellers were entitled to anti-deficiency protection under Arizona Revised Statutes (“A.R.S.”) section 33-814(G) (2010). Court of Appeals upheld lower court.
FINAL WORD: BMO Harris Bank N.A. v. Wildwood Creek Ranch, No. CV-14-0101-PR (AZ Sup. Ct. 1/23/2015 – vacated Court of Appeals decision in Wildwood and, in essence overturning Mueller) Finding: 1) there must be a completed structure on the property suitable for dwelling purposes and, 2) even the homeowner who has not yet moved into the completed residence would be entitled to anti-deficiency protection. “Mueller’s emphasis on intent arguably would extend anti-deficiency protection to owners of a vacant lot so long as they intend to build and eventually live in a residence.” ‘Our holding in Mid Kansas clarified, for purposes of the anti-deficiency statute, both what constitutes a dwelling” and when property is “utilized for” a dwelling.   A structure is a “dwelling” if it is suitable for residential purposes and a person resides in the structure, or the structure is intended for such use. Id. at 128, 804 P.2d at 1316. Thus, a property contains a “dwelling” for purposes of the anti-deficiency statute when a borrower has purchased but not yet occupied a home, given that the structure is suitable and intended for human abode.”
The post Arizona Supreme Court Clarifies Anti-Deficiency Protection for Residential Property appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.