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Disclosure of All Property

When you file for chapter 7 or chapter 13 bankruptcy, you are required to disclosure and list all of your property in bankruptcy schedules A and B that you own on the filing of your bankruptcy - the petition date. This includes all types of property, whether tangible or intangible.  This also includes property (a) wherever located - even if it is in another state or country, (b) another person may be holding for you,  (c) that you may have been given as a gift, (d) really owned by you, but in the name of another person, or (e) of no value.

You are also required to submit supplemental schedules if you acquire or become entitled to the following items within 180 days after you file for bankruptcy: (a) inheritance, (b), property from a marital settlement agreement or divorce decree, and (c) life insurance policy proceeds.In chapter 13, you are required to submit supplemental schedules when you acquire certain types of property that you acquire during the three to five year duration of your chapter 13 plan. Any failure to list property may subject you to a denial of your bankruptcy discharge or other civil and criminal penalties.  
Rights to Sue/Causes of Action

All actual or potential causes of action you hold at the time of the filing of the bankruptcy case  (i.e. your right to sue someone for damages, etc. including personal injury claims and employment cases.) must be disclosed as an asset in the bankruptcy schedules. This includes cases presently pending and cases you have not yet filed, but may decide to bring in the future.  If you fail to schedule such causes of action, in addition to the above‑mentioned penalties, you may entirely lose the right to bring and lose your recovery for ("judicial estoppel") the cause of action against the other party.
(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases and Mortgage Modifications

Debtors filing Bankruptcy in Fresno metropolitan area can save about $1000 by filing a bankruptcy without an attorney.  Another cheap alternative is to hire company that helps debtors complete bankruptcy petitions. By law, they can only charge $125 per petition.  In some simple cases, this strategy can make sense.  The problem, however, is that you do not have the expertise of an attorney to avoid the many pitfalls in bankruptcy.  One nuance is to file bankruptcy with checks from your bank that have not cleared.  Please read on for the details:

A big surprise happened in Shapiro v. Henson.  It cost the Barbara Henson $3000 that she did not expect. The sad part was that she was represented by an attorney who had done what lots of other attorneys were doing.  Here is what went wrong:

Ms. Henson hired an attorney to help her file Chapter 7 Bankruptcy.  Prior to filing bankruptcy, Ms. Henson wrote several checks from her Bank of America checking account.  On the day she filed bankruptcy, many of the checks had not cleared the bank.  Thus, at the time she filed bankruptcy, her checking account showed that she had $7000.  In the subsequent days after she filed, the checks cleared and her checking account showed less than $800.

After filing bankruptcy, a trustee was appointed.  One of the job's of a trustee is to find assets, sell them, and give them to the trustee.  In most Chapter 7 cases, there are no assets.  However, the trustee assigned in Ms. Henson's case tried a unique approach that surely surprised her attorney and all of the other bankruptcy attorneys.  He brought a motion against Ms. Henson demanding they she turn over the money from the Bank of America checks that had not cleared on the day Ms. Henson filed bankruptcy.  Ms. Henson's attorney fought the trustee and won at the lower court levels.  The trustee was persistent and filed an appeal.

At this point, NACBA joined the fight on behalf of the debtor.  The outcome would have a devastating effect on debtors in California.  NACBA stands for the National Association of Consumer Bankruptcy Attorneys.  Thousands of bankruptcy attorneys throughout the country, including yours truly, contribute money to help fight cases that would have a bad outcome for our clients.  

Ms. Henson lost.  NACBA argued that Ms. Henson did not have possession, custody or control of the money that was in the checking account at the time the trustee filed his motion. The appellate court ruled that it did not matter.  Rather, the trustee can file a motion for turnover of property that was in possession of the debtor at any point during the bankruptcy case.

The lesson prudent bankruptcy attorneys take from this case is to make sure that their client's checks the bank accounts before filing bankruptcy.  Then, debtor should beat the test she did not have possession or control, during, the case.  I just can't see how a debtor without an attorney can stand a chance at knowing all of the small ins and outs of the bankruptcy code.  

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at [email protected] or by telephone at 1-559-324-1882.

Photo Credit: https://www.flickr.com/photos/tristanf/  "Danger Goldfinch"

By Tara Siegel Bernard
Six months after his wife learned that she had a rare vascular disease of the brain,
Frank, now 66, lost his job as director of sales of a telecommunications company.
His wife, to whom he had been married for 36 years, died just two months later.
He was still grieving when he learned that he had kidney cancer. The tumor
was operable, but the exam brought to light a long list of other serious problems,
including a pulmonary embolism and a heart-rhythm disorder.

That was in 2009, in the depths of the recession, and finding a new job was
difficult. Two years later, after struggling to pay medical bills not covered by
insurance and other debts, Frank filed for bankruptcy. But that did not erase the
giant pile of federal Parent Plus loans that he had taken out to help put his three
children through college. Since he could no longer work, Sallie Mae, the loan
servicer, ultimately suggested applying for a disability discharge, which would
cancel the debts.

He qualified, and last July, his loans, which had ballooned to $150,000 in
forbearance, were wiped away. “I felt like a Buick had been lifted off my
shoulders,” said Frank, who lives in upstate New York.

But much to his surprise, he received another bill. In January, the Internal
Revenue Service sent him a tax form, known as a 1099-C, which said that the loan
amount had to be treated as income. According to his calculations on TurboTax,
his tax bill for this year is about $59,000.

“If I am not capable to work due to a medical disability to pay the student
loan, how am I supposed to work to pay the taxes?” said Frank, who agreed to discuss his situation only if his full name was not published. “Now I am somewhat
panicked.”

After much criticism, the Department of Education has made it easier in
recent years for disabled borrowers to have their federal student loans discharged.
But now, as more people are qualifying for loan forgiveness, many of them are
running into an unexpected consequence: They are often shocked to learn that
they basically exchanged one debt for another, according to consumer advocates
and tax and credit specialists.

While millions of debts — including credit cards and mortgages — are
canceled each year, the group of borrowers whose loans have been discharged
because of a “total and permanent disability” has grown sharply to more than
115,700 in 2013, from nearly 61,600 in 2011 and fewer than 15,000 in 2008,
according to the Department of Education. But under current tax law, the amount
of debt forgiven is generally taxable, so some disabled borrowers end up with tax
bills they cannot afford.

Borrowers who can prove they were insolvent may be able to ease the tax
burden, but may not be able to eliminate it. And many people do not even know
this exception exists. The insolvency calculation is notoriously complex,
particularly for people who are dealing with medical problems or the death of a
child, consumer advocates said, which is another instance in which student loan
debts may be discharged.

“The government gives with one hand, while taking back with the other,” said
Mark Kantrowitz, a senior vice president and publisher of Edvisors, an
informational website about paying for college. “Morally, if debt is canceled
because of the borrower’s inability to pay due to disability, the corresponding tax
debt should also be forgiven.”

The tax debt is generally a small fraction of the overall debt, but it can present
a great burden because it is due in one lump sum instead of being spread over
time, he added.

“Many borrowers don’t even realize it’s going to be a taxable event,” said
Persis Yu, a lawyer at the National Consumer Law Center who works on the
Student Loan Borrower Assistance Project. “The collateral damage definitely has
potential broad impact. There is the issue of finding affordable housing if they do
have to sell assets to pay for this liability. One of our other concerns is because some people will have this included in their adjusted gross income, they could lose
public benefits.”

In some instances canceled debts are not taxable, including debts canceled in
bankruptcy. And student loans may not be taxable for borrowers who work for a
specific period in certain professions, for example.

Insolvency is another exception. Borrowers who can illustrate that they were
insolvent — that is, their total liabilities exceeded the value of their assets — could
potentially lessen or even eliminate the tax burden. The amount of taxable income
can be reduced, but only to the extent of the insolvency.

In other words, if a borrower’s debts exceed assets by $25,000, but a $50,000
loan is forgiven, tax would still be owed on $25,000. “Insolvency is insufficient to
protect many vulnerable borrowers,” Ms. Yu said.

In Frank’s case, when he factors his insolvency in that calculation, he said he
would still owe nearly $25,000 in federal and state taxes. He needed the help of a
tax lawyer to arrive at that reduced figure, which he said the I.R.S. may or may not
accept.

Canceled debts are treated as income “to prevent people from using this as a
loophole: lend someone money, they buy something of value, then cancel the debt
and they don’t have to report that money as income,” explained Gerri Detweiler, a
credit specialist with Credit.com. “But unfortunately very vulnerable borrowers are
being swept up in this. They find themselves suffering from a variety of illnesses,
unable to work, and having to deal with the I.R.S.”

The consequences of not paying are serious. The I.R.S. has the authority to
garnish wages, bank accounts and other property, such as automobiles or
retirement savings accounts. The agency can also garnish Social Security and
pension payments, and can file a federal tax lien, which is attached to all property
an individual may own, specialists said. The I.R.S. will also add penalties and
interest to the bill.

If a taxpayer does not pay the amount owed, the I.R.S. will send a bill, which
is the start of the automated collections process. If the borrower cannot work
something out through that process and does not pay, the borrower will receive a
final notice, which says the agency intends to collect what is owed and gives 30
days to comply, said Daniel J. Pilla, a tax litigation consultant and the author of
“How to Eliminate Taxes on Debt Forgiveness,” (Winning Publications, 2013). The letter also notifies individuals of their right to appeal, he added, a process that
stops the collections process.

A few other options are available for people who cannot afford to pay the bill.
If the amount owed is less than $50,000, they can apply for a monthly payment
plan online, according to the I.R.S., or request a plan by filing Form 9465 (people
who owe more than $50,000 must file that form ). Some taxpayers may also
qualify for an “offer in compromise,” where the I.R.S. agrees to settle the tax bill
for less than the full amount.

Mr. Pilla said taxpayers could also try to prove that their monthly income was
consumed by necessary living expenses, which may cause the I.R.S. to deem the
debt “currently not collectible.” “That means they will press the hold button on the
collection machine,” he added.

Some organizations, including the National Council of Higher Education
Resources, a trade group representing student loan servicers and other
organizations, have brought the tax issue to the attention of members of Congress,
but it has not yet gained traction, said Tim Fitzgibbon, vice president for debt
management services at the group.

For now, people who find themselves with large tax obligations have to figure
out how to best navigate the process on their own or with professional help, which
can be hard to find. The I.R.S.’s free tax preparation service for low- and
moderate-income people is not equipped to handle the complexities.

Frank said the tax lawyer he hired to help him negotiate with the I.R.S. was
going to cost him $3,000 to $5,000, and he is making plans to sell his home. “I
have to go through this process,” he said, “which is going to be laborious and expensive."

Copyright 2014 The New York Times Company.  All rights reserved.

Check it out!  More electronic thought from my (prolific) better half.  Put it on now and tell me what thoughts come to your mind.
Endless Tunnels is my latest recording of deep drone pieces, and it’s available now from the good folks at Montreal’s GBS Records. This past weekend was pretty busy, with us laying down 3 new No so…