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Miami bankruptcy lawyer Jordan E. Bublick has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. He has filed over 8,000 cases. Office: 1221 Brickell Ave., 9th Fl., Miami, Florida Tel.: (305) 891-4055 www.bublicklaw.com
Divorce Obligations and Chapter 7 and Chapter 13 Bankruptcy
Many issues are presented with respect to the treatment of divorce obligations in chapter 7 and chapter 13 bankruptcy. Certain changes were made to the bankruptcy code in 2005 by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) with regard to issues related to the dischargeability of marital debt and support obligations, as well as to the effect of the automatic stay on collection and enforcement proceedings out of divorce and family law litigation.
Domestic Support Obligations
Under section 104(14A) of the bankruptcy code, a domestic support obligation ("DSO") is defined as any debt that accrues before, on, or after the bankruptcy filing, including interest on the debt, that is
A. owed to or recoverable by a spouse, former spouse, or child of the debtor or such child's parent legal guardian or responsible relative or a governmental unit
B. that is in the "nature of alimony, maintenance, or support" of such spouse, former spouse or child of the debtor or the child's parent
C. established by a separation agreement, divorce decree or property settlement agreement
Under case law, the labels put on obligations in the state court are not binding and the determination of whether debts are in the nature of alimony, maintenance or support" is a determination made under federal bankruptcy law. The 11th Circuit Court of Appeals has held that a debt is in the nature of support or alimony if at the time of its creation, the parties intended the obligation to function as support or alimony. Cummings v. Cummings, 244 F. 3d 1263, 1265 (11th Cir. 2001). This is a case-specific factual determination based on an examination of all relevant facts and circumstances. The court examines the underlying purpose of the obligation to determine the function which the parties intended the award to serve.
Chapter 7 Bankruptcy
Under chapter 7 bankruptcy, a debtor receives a discharge of all his debt with certain exceptions. In Chapter 7 bankruptcy, all marital and domestic relations obligations are not dischargeable, regardless of whether they are in the nature of support, property divisions or “hold harmless” agreements, provided they were incurred by the debtor in the course of a matrimonial proceeding or a divorce action which resulted in a separation agreement, divorce decree, court order or administrative determination.
Property divisions are excepted from discharge in chapter 7. A debtor’s obligation to pay marital debts directly to a third party ("hold harmless" obligation) such as to pay the mortgage on a former marital residence and to hold the former spouse harmless on this debt is also deemed to be non-dischargeable if the obligation has the effect of providing support to the former spouse. Furthermore the following expenses are usually deemed to be in the "nature" of support and therefore not dischargeable:
- educational expenses of a minor child
- medical insurance coverage for a minor child
- life insurance, with the minor children as beneficiaries
Attorney’s fees owed by debtor to his own lawyer are generally dischargeable in bankruptcy, but as a general rule, attorney’s fees owed by debtor to a former spouse’s attorney are not dischargeable, if the underlying legal proceeding resulted in the entry of an order or judgment directing payment of maintenance or spousal support to the former spouse.
The division of a debtor’s pension benefits during the divorce action is usually accomplished by entering a Qualified Domestic Relations Order (“QDRO”). Since division of a pension is considered to be a transfer by debtor of a present interest in his pension, and as such, it is not a debt that can be discharged in bankruptcy.
Chapter 13 Bankruptcy
The rules under chapter 13 are partly different from those under chapter 7.
Under chapter 13 bankruptcy (like chapter 7 bankruptcy) domestic support obligations are not dischargeable and are usually paid in full over the term of the chapter 13 plan. Arrearages in support obligations may usually be paid over the term of the chapter 13 plan.
In contrast to chapter 7, in chapter 13 obligations to a former spouse that is not a domestic support obligation incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court" are dischargeable. created by a separation agreement or judgment of divorce are dischargeable.
In order for a chapter 13 plan to be approved by the bankruptcy court the plan must
- pay in full to the former spouse all domestic support obligations owed by debtor at the time of the bankruptcy filing
- be current on all domestic support obligations incurred after the bankruptcy filing.
A chapter 13 case is subject to dismissal if the debtor fails to pay any post-petition domestic support obligations and a chapter 13 discharge will not be entered by the bankruptcy court unless the debtor certifies that all domestic support obligations have been paid and that the debtor is current on these obligations.
Automatic Stay
The automatic stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding to establish paternity; to establish or modify a child support order, determine child custody or visitation issues, or dissolve a marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest. In those situations, the divorce can be granted without first obtaining relief from the automatic stay, but the marital property cannot be divided without obtaining relief from the automatic stay.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Miami Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. 1221 Brickell Avenue, 9th Fl., Miami. Tel.: (305) 891-4055. www.bublicklaw.com
The Bankruptcy Code provides in section 522(b)(3)(B) in general for the exemption of property held as a tenant by the entirety or joint tenant to the extent that it is exempt from process under state law.
Property held in a tenancy by the entireties is generally exempt from the claim of individual creditors under Florida common law but is not exempt to the extent of joint debts of both spouses or to the extent of a fraudulent conveyance into the property. Havoco of America, Ltd. v. Hill, 197 F.3d 1135 (11th Cir. 1999).
Under Florida law, property held by a husband and wife as tenants by the entireties belongs to neither individual spouse, but to a separate entity referred to as the "unity" or "the marriage." Florida law recognizes that entireties estates can exist in both real and personal property. Property held as tenancy by the entireties generally possesses six characteristics: 1. unity of joint ownership and control (unity of possession), 2. unity of interest, 3. the interests must have originated in the same instrument (unity of title), 4. the interests must have commenced simultaneously (unity of time) 5. survivorship, and 6. the parties must be married at the time they took joint title (unity of marriage).
Florida law provides that real property held by a husband and wife in joint names is held in a tenancy by the entireties absent some express indication to the contrary. Beal Bank, SSB v. Almand and Associates, 780 So. 2d 45 (Fla. 2001). Florida law also provides a presumption that a bank account titled in the names of both spouses is held as a tenancy by the entireties as long as the unities of possession, interest, title, and time are met. Various court decisions extend the presumption in favor of a tenancy by the entireties to personal property in various manners. Some courts extend the presumption to all personal property.
The Court in In re Kossow, Case No. 03-27115-BKC-PGH (S.D. Fla. 2007)(Hyman, J.) allowed the tenancy by the entireties exemption of certain household furnishings acquired during the marriage as there was no evidence to rebut the presumption. The Court also allowed the tenancy by the entireties exemption of other household furnished acquired prior to the marriage as it found that it was subsequently assigned to the marriage. The Court further found the joint federal income tax refund as exempt tenancy by the entireties property.
The case of In re Schwarz, III, Case No. 06-13348-BKC-JKO (S.D. Fla. 2006)(Olson, J.) illustrates that a debtor may be able to exempt property held as tenants by the the entireties even though he is required to claim another state's exemptions and not able to utilize the Florida homestead exemption.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Bankruptcy Lawyer - Chapter 13 Bankruptcy Lawyer Jordan E. Bublick has an office in Miami and has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. His office is located in Miami at 1221 Brickell Ave., 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
Bankruptcy section 522(p) which was added in 2005 provides a cap of $155,675.00 (originally $125,000.00 but is subject to increases) in value (equity) on homestead property acquired within 1,215 days of the petition date.
Courts though have held that this limitation only applies to the Florida homestead exemption that the debtor could claim under the Florida Constitution and not the separate exemption available for property held as tenants by the entireties.
One Court noted that while its ruling would appear to provide a way for a debtor to "end run" the $125,000 cap contained in section 522(p), that its ruling is consistent with the legislative history of new section 522(p) which was directed to close the "mansion loophole" and not against a state's common law exemption for tenancy by the entireties property.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Bankruptcy Lawyer - Chapter 13 and 7 Bankruptcy Lawyer Jordan E. Bublick has an office in Miami and has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. His office is located in Miami at 1221 Brickell Ave., 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
Florida law provides certain defined exemptions for property in the following categories:
Homestead - unlimited in value, l/2 acre in municipality, 160 acres outside municipality, Art. X, Section 4, Florida Constitution
Personal Property - to extent of $1,000, Art. X, Section 4, Florida Constitution and a further $4,000 in certain circumstances
Earnings of Head of Family - section 222.11(2)(a), Fla. Stat.
Motor Vehicles - to extent of $1,000, section 222.25, Fla. Stat.
Health Aides Professionally Prescribed - section 222.25, Fla. Stat.
Proceeds of Life Insurance on Florida Resident - section 222.13(1), Fla. Stat.
Cash Surrender Value of Life Insurance on Life of Florida Resident - section 222.14
Annuity Contracts - section 222.14, Fla. Stat.
Disability Income Benefits - section 222.18, Fla. Stat.
Workers' Compensation Benefits - section 444.22, Fla. Stat.
Qualified Tuition Programs, Prepaid College Trust Funds - section 222.22(1), Fla. Stat.
Health or Medical Savings Accounts - section 222.22(2), Fla. Stat.
Educational IRA - section 222.22(3), Fla. Stat.
Property Held as Tenants by Entireties for debts of only one spouseJordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for October 31, 2013 New York City Opera Files for Bankruptcy California pension fund appeals San Bernardino bankruptcy Foreclosure on Property After Bankruptcy?
So, you have decided to file bankruptcy. While this option may be a difficult decision to make, it is significant as you have gotten even closer to establishing the fresh start and financial control you deserve. But, filing does include several processes including filling out forms, completing credit counseling, and appearing before a judge. It [...]
The folks at Fox Business are at it again, dishing out inaccurate personal finance information about debt settlement and bankruptcy.
In a column published on October 10, 2013, Fox Business columnist Jan McNamara addressed the question of whether bankruptcy was preferable to debt settlement.
She begins with the stunningly misinformed blanket statement that, “bankruptcy will damage your credit more than settling your credit card debt. ”
Unfortunately, McNamara forgets a few things along the very short road to her conclusion.
Bankruptcy’s Impact On Your Credit Is Variable
If you’re current on your debt repayment then your credit score is likely pretty good. In this situation, filing for bankruptcy will involve a hit to your credit rating.
But if you’re already past due on your debts then your credit rating is probably in the proverbial toilet. The credit impact of a bankruptcy filing likely won’t be good big because you’re already looking at a poor score.
In other words, look at where you are to see the impact on where you’ll be.
Debt Settlement Stretches Out The Pain
You don’t wake up in the morning, settle your debts by lunch, and enjoy the rest of the day.
The process of debt settlement takes months at best, years at worse. No creditor is going to be willing to give you a good deal on a settlement unless you’re past due on your account, which means the negative credit implications of being past due will drag you down for quite some time.
On the flip side, filing for bankruptcy stops your creditors from reporting the debt as past due. The minute your case is filed, the reporting stops. Depending on the type of bankruptcy case, you could be done in as little as a few months.
Multiple Creditors Makes Debt Settlement Problematic
If you owe money to a single creditor, you can try debt settlement without much trouble. Offer x% as a settlement and either the creditor accepts or declines.
When you have multiple creditors, however, it gets trickier.
Maybe a few creditors settle. Maybe a few don’t. And maybe the ones that don’t settle decide to sue you, getting a judgment and making you reconsider filing for bankruptcy.
In the end, you’ve paid out a bunch of money to settle some debts and you still file for bankruptcy. It’s like getting the worst of both worlds.
Bankruptcy? Debt Settlement? It Depends.
It’s nice to be able to tie things up with a bow, but this situation is neither neat nor pretty.
You can’t know whether bankruptcy is better or worse than debt settlement unless you analyze the entire situation.
Sit down with someone who understands the pros and cons of each solution before deciding.
There has been a definite change in the attitude of bankruptcy courts are taking towards the discharge of student loans in bankruptcy. I am reading cases throughout the nation that indicate a greater willingness of the Courts to discharge these debts. A case affecting debtors in Nebraska with student loan debt underscore this recent change in judicial attitude.
In the matter of Conway vs. National Collegiate Trust, 495 B.R. 416 (8th Cir BAP 2013), the Bankruptcy Appellate Panel for the 8th Circuit ruled that a single person with no dependants who graduated college in 2005 with a Bachelor of Arts degree in media communications was eligible to discharge her student loan debts even though she suffered from no physical or mental issues. The debtor was never able to find work in her field of media communications and she had wage income that varied between $22,000 to $25,000 per year in the eight years since she graduated college. She was employed in two part-time jobs as a server at local restaurants at the time her bankruptcy was filed. The case involved $118,579.66 owed on 15 private student loans. The debtor also owed another $18,000 of federally-guaranteed student loans that were not a part of this proceeding.
In the Eighth Circuit (which includes Nebraska), the courts utilize a Totality of the Circumstances Test to determine if a student loan may be discharged.
Reviewing courts must consider the debtor’s past, present, and reasonably reliable future financial resources, the debtor’s reasonable and necessary living expense, and “any other relevant facts and circumstances.” The debtor has the burden of proving undue hardship by a preponderance of the evidence. The burden is rigorous. “Simply put, if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt—while still allowing for a minimal standard of living—then the debt should not be discharged. Long. v. Educ. Credit Mgmt. Corp, 322 F.3d 549,554-55 (8th Cir. 2003)
The remarkable facts of Conway case is that the debtor was single, relatively young with no dependants, healthy, college educated and had only been out of school for 8 years. The court refused to consider the argument that the debtor had the “possibility” of earning higher income in the future. The court focused on her real income history and concluded that it was unlikely to change in the future. With the better part of 30 working years left in her career, the court focused on the actual income history of the past 8 years rather than a speculative future income. This represents a real change in how courts are to review student loan discharges in Nebraska.
The second remarkable feature of the Conway case is the court’s requirement that the lower court review each of the 15 student loans separately and complete a loan-by-loan analysis to see which loans should be discharged. Although the 8th Circuit does not permit a “partial discharge” of a single student loan (See Andresen v. Nebraska Student Loan Program Inc., 232 B.R.127 (B.A.P. 8th Cir 1999), the Andresen decision actually requires that each separate loan be reviewed for discharge independently.
It appears that the courts are taking a more realistic approach to the student loan problem these days. Debtors with multiple student loans, especially private student loans that do not provide for Income-Based Repayment plans (IBRs), should consider their rights to discharge these debts in bankruptcy.
Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. Office: 1221 Brickell Ave., 9th Fl., Miami, Florida. Tel.: (305) 891-4055
In 2009, the 11th Circuit Court of Appeals issued its opinion in the case of In re Baker, ___ F.3rd ___, 2009 WL 4912122 (11th Cir. 2009) in which it held that the involved Keogh plan did not have to comply with ERISA in order to be exempt under § 222.21 (2)(a)(1), Florida Statutes. The Court held that the Florida exemption statute only required that the Keogh plan qualify under section 401 (a) of the Internal Revenue Code (the "IRC") and did not require the further compliance with the provisions of ERISA.
Section 222.21 (2)(a)(1), Florida Statutes generally provides for the exemption of assets payable to or an interest of an owner, participant, or beneficiary in a "fund or account" that is maintained in accordance with a plan that has been preapproved by the IRS as exempt from taxation under section 401 (a), et seq. of the IRC. Section 401 (a) of the IRC provides for the exemption from taxation of certain retirement plans maintained for the benefits of "employees", which includes "a self-employed individual."
The lower courts had held that the Keogh plan was not exempt on a contention that it was not maintained in accordance with the ERISA provisions (29 U.S.C. sections 1001-1461) in addition to having been "preapproved by the Internal Revenue Service" as required by § 222.21(2)(a)(1), Florida Statutes. The lower courts rejected the debtor's argument that § 222.21 (2)(a)(1), Florida Statutes only required the Keogh plan to qualify under section 401 (a) of the Internal Revenue Code and did not require the additional complaince with ERISA. The lower courts based their decision on the case of Raymond B. Yates, M.D., P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1, 124 S.Ct. 1330, 158 L.Ed.2d 40 (2004), which held that the sole shareholder and president of a professional corporation could qualify as a "participant" in an ERISA pension plan as long as the plan cover other employees other than himself or spouse.
The 11th Circuit Court of Appeals reversed the lower courts and held that § 222.21(2)(a)(1) only required the preapproval by the IRS under section 401(a) of the IRC and did not require the additional compliance with ERISA. The court stated that Fla. Stat. § 222.21(2)(b) specifically provides that for the fund to be exempt it need not necessarily be maintained in accordance with a "governing instrument that is covered by any part of [ERISA]...".Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Fast as lightning.
It used to be that filing for bankruptcy took a lot of time.
Your lawyer needed to make a bunch of copies of your bankruptcy documents, hop on the train or jump in the car, and be sure the court was open.
If the bankruptcy court was closed, maybe there was an emergency mail drop. Some places had them, others didn’t.
Thankfully, things move a lot faster now.
Bankruptcy Filings Are Done Online
All bankruptcy papers must be filed electronically over the Internet. The system is called CM/ECF (short for case management-electronic case filing) and is administered through the federal court system.
Using CM/ECF is pretty simple; in fact, most of the bankruptcy lawyers use software that handles the filing with the press of a single button on the computer.
Getting To Filing Is Another Story Entirely
In order to file your bankruptcy case, six things need to happen. They are:
- you’ve got to provide all documents your lawyers asks for;
- you’ve got to pay your legal fees;
- you must complete your pre-filing credit counseling certification;
- your bankruptcy lawyer has to draft the court documents using the information and documentation you provide;
- you need to sign the bankruptcy court papers; and
- the case must be filed electronically.
Of the list, the final step is clearly the easiest one – press a button and you’re in the system.
See Also:
It’s the first five that will probably take you some time to complete.
Preparation And Organization Are Critical
Most of my clients have a tough time getting their documents together. Bills have been ignored or filed away in some dark corner, paystubs are routinely thrown out, and tax returns mysteriously disappear.
Set aside the time to get your ducks in a row, ideally before we sit down to talk. If you just can’t face the prospect of unearthing all that information right now, be prepared to spend a full weekend or more once you’ve made the decision to move ahead with a bankruptcy filing.
Because the faster you do your part, the quicker we can do ours.
Photo courtesy of Just Us 3.
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