1 month 2 weeks ago

five-star“We highly recommend Diane Drain IF you are looking for the educated, knowledgeable, honest and transparent (and very fairly priced) attorney! ” P.R.
We had recently relocated to Arizona from the Chicago area when we realized we had to face up to our financial problems, rather than run away from them. Our Chicago attorney was helpful in assisting us in choosing the right bankruptcy attorney – boy did he pick the perfect person!! Diane talked us through every step of the process! Our emotional ups and downs were frequent, and her patience was unwavering!  We highly recommend Diane Drain IF you are looking for the educated, knowledgeable, honest and transparent (and very fairly priced) attorney!  If you want a flash in the pan, “Bankruptcy for $199″ and get it done in 72 hours” good luck to you!  Diane has earned high praises from our other attorney, our accountant and our Chicago attorney, who has her on his referral list for clients moving to Arizona. 
Bankruptcy is a big deal and not something to put in the hands of anyone less than the best!” P.R.
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1 month 2 days ago

People thinking about filing for bankruptcy will usually do some research before contacting our experienced Roseville bankruptcy lawyers. One of the first things they will discover is that there are different types of types, or chapters, of bankruptcy filings. This begs the question, “which type is the most beneficial for me?” If you are an […]
The post How Do I Know Which Type of Bankruptcy is Best For Me? appeared first on The Bankruptcy Group, P.C..

1 month 3 weeks ago

The Hill reports that representatives from both political parties are in favor of discharging student loans in bankruptcy.
Senators Dick Durban (D) and John Cornyn (R) introduced a bill aimed at repairing how student loans work in bankruptcy. Rather than free college, this idea of student loans being dischargeable during bankruptcy earns support from both political sides.
From The Article:

“Over the past 30 years, a series of policy changes have made it more difficult for borrowers to have their student loans discharged in bankruptcy. These policy changes were driven by the idea that investments in education could not be transferred because the borrower would always retain the benefits acquired from their education. This would make sense if degrees paid off uniformly with large dividends, but the reality is that some investments in education fall short of that mark — unpredictably offering little or no value to the borrower.”

After it was made more difficult to discharge student loans in bankruptcy, Congress created income-driven-repayment programs or IDR’s. IDR’s were created to help loan borrowers pay back their student loans. IDR’s take your income into account. Then, they have you commit to paying back these loans at a reasonable pace based on your income. In theory, IDR’s were supposed to counterbalance the financial burdens of student loans. Buty in reality, IDR’s are falling short and needs serious reform. Discharging student loans in bankruptcy can help jumpstart this reform.
Many fear that people will take advantage of this bill and begin to abuse the bankruptcy system. The fear is that borrowers will take out extra student loans to live a lavish lifestyle while going to school and then immediately file bankruptcy so they don’t have to pay off their student loans at all, ensuring them free tuition and living expenses for the past 4+ years. This issue can be resolved through strict restrictions like making sure borrowers are required to be paying back consistently for several years before discharging student loans.
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1 month 3 weeks ago

Dirty Little Secret – medical bills are the highest they have ever been and debtor buyers are paying pennies on the dollar to purchase the debts, but then sue the borrower for the full amount of the debt.

Article Yahoo!Finance, Adriana Belmone, June 21, 2021
“Medical debt is the no. 1 cause of bankruptcy in the United States, which is something that’s obviously a uniquely American problem,” Allison Sesso, executive director of RIP Medical Debt, said on Yahoo Finance Live. “So we’re out there trying to give people relief from this economic burden. We’ve got donors that are excited across the country to do more of this debt relief. That number — 278 million — we’re very proud of that, but we have a lot more debt relief ahead of us.”
Roughly 21 million Americans holding $46 billion of medical debt as of April 2021 face collections — meaning that a third-party debt collector is trying to obtain the money owed — according to Credit Karma data previously provided to Yahoo Finance.

How the Debt Collection Agency Business Works,
Investopedia, article by Amy Fontinelle, updated August 21, 2021.

debt buyersDebt collectors often work for debt-collection agencies, though some operate independently. Some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts—debts that are at least 60 days past due—and remitting them to the original creditor. The creditor pays the collector a percentage, typically between 25% to 50% of the amount collected. Debt collection agencies collect delinquent debts of all types: credit cards, medical, automobile loans, personal loans, business, student loans, and even unpaid utility and cell phone bills.
Collection agencies tend to specialize in the types of debt they collect. For example, an agency might collect only delinquent debts of at least $200 less than two years old. A reputable agency will also limit its work to collecting debts within the statute of limitations, which varies by state. Being within the statute of limitations means that the debt is not too old, and the creditor can still pursue it legally.

Agencies That Buy Debt
When the original creditor determines that it is unlikely to collect, it will cut its losses by selling that debt to a debt buyer. Creditors package numerous accounts together with similar features and sell them as a group. Debt buyers can choose from packages that:

  • Are relatively new, with no other third-party collection activity
  • Very old accounts that other collectors have failed to collect on
  • Accounts that fall somewhere in between

Debt buyers often purchase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value.1 In other words, a debt buyer might pay $40 to purchase a delinquent account that has a balance owed of $1,000. The older the debt, the less it costs since it is less likely to be collectible.
The type of debt also influences the price. For instance, mortgage debt is worth more, while utility debt is worth significantly less.2 Debt buyers keep everything they collect. Because they took the risk of purchasing the debt from the original creditor (and paying in advance to the original creditor), this debt becomes their own, and any amounts collected are theirs.
Debt collectors get paid when they recover delinquent debt. The more they recover, the more they earn. Old debt that is past the statute of limitations or is otherwise deemed uncollectable is bought for pennies on the dollar, potentially making collectors big profits.
What Debt Collectors Do
Debt collectors use letters and phone calls to contact delinquent borrowers and convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they look further, using computer software and private investigators. They can also conduct searches for a debtor’s assets, such as bank and brokerage accounts, to determine their ability to repay. Collectors may report delinquent debts to credit bureaus to encourage consumers to pay since delinquent debts can seriously damage a consumer’s credit score. 

To read the entire article

.fusion-body .fusion-builder-column-1{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-1 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:980px) {.fusion-title.fusion-title-1{margin-top:15px!important; margin-right:0px!important;margin-bottom:0px!important;margin-left:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-1{margin-top:10px!important; margin-right:0px!important;margin-bottom:10px!important; margin-left:0px!important;}}MUSINGS BY DIANE:No one wants medical debts, yet that may be the only way you can save your family member who is suffering with a disease or injury.  From my own personal experiences I know the scams that the medical system is suffering on us all.  If you need health care and have really good insurance (if that is an option) then you will not be faced with choosing between paying your mortgage or the hospital so they will operate to save your life.
Why do I know the truth?  Because I have had several knee surgeries (same knee) over a 4 year period.  The bill for the first surgery was about $125,000, my co-pay was about $1,000, and the insurance company was billed about $29,000.  That means the hospital/doctors over-charged by $95,000.  When I asked a hospital administrator about the extra $95,000, I was told that is the amount they would have billed anyone who did not have good insurance (they were talking about my clients who can barely afford to feed their families).  My husband went to the emergency room for fractured ribs.  We were there for 8 hours, he had a cat scan. The final bill was $12,689, our co-pay was $231, and our insurance was billed $300. 
This is wrong.  No one should have to delay necessary medical treatment because they cannot afford it.  No, I am not a socialist, but I am a pragmatist.  Greed should not be part of our medical system.

@media only screen and (max-width:980px) {.fusion-title.fusion-title-2{margin-top:0px!important; margin-right:0px!important;margin-bottom:6px!important;margin-left:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-2{margin-top:10px!important; margin-right:0px!important;margin-bottom:10px!important; margin-left:0px!important;}}– Diane L. Drain.fusion-body .fusion-builder-column-2{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-2 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 30px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 45px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-2{width:100% !important;order : 0;}.fusion-builder-column-2 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}.fusion-body .fusion-flex-container.fusion-builder-row-2{ padding-top : 0px;margin-top : 0px;padding-right : 0px;padding-bottom : 0px;margin-bottom : 0px;padding-left : 0px;}.fusion-button.button-1 {border-radius:10px;}.fusion-button.button-1.button-3d{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}.button-1.button-3d:active{-webkit-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);-moz-box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);box-shadow: inset 0px 1px 0px #fff,0px 5px 0px #003d00,1px 7px 7px 3px rgba(0,0,0,0.3);}Click here for steps to your free bankruptcy consultation
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1 month 2 weeks ago

five-starHer assurance that there was nothing to be ashamed, of gave us the incentive to proceed.” D.

“Diane was fabulous during our bankruptcy, guiding us every step of the way. After medical bills got us behind, we didn’t know where to turn and felt uncomfortable filing. Her assurance that there was nothing to be ashamed, of gave us the incentive to proceed. Two years later we had questions in another matter, in which she again went to bat for us without further fees. I would recommend her firm to anyone in financial difficulties.” D.

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2 months 1 day ago

Fast Company shares the stories of multiple people who have filed for bankruptcy. They share why it has been the best decision they’ve ever made.
“Clean Slate”
Whitney Reynolds filed for bankruptcy in 2014 because of overwhelming credit card debt. She had racked up $23,000 of credit card debt since graduating college. Her father suggested bankruptcy to her. He said, “‘There’s a lack of knowledge of what it means to somebody who’s making an average income and has run into some trouble and made some mistakes. For most people, it’s just a clean slate”‘. Since Whitney’s bankruptcy, she now has started budgeting properly and has an emergency credit card that she keeps frozen in her freezer – which literally can only be used for emergencies. Whitney’s credit score is now in the 700s.
“Last Resort”
Mopelola Gloria Fagbemi filed for bankruptcy because of her divorce. Once her marriage ended, she had to keep her finances afloat and take care of her three children. She knew bankruptcy was her last hope when she received a garnishment from her payroll. She was nervous about filing because she did not want to feel like a failure. Fagbemi says, “‘I’m part Nigerian, part American, and you’re not supposed to give up…People will tell you that you can push through and make the payment. They’ll say don’t file for bankruptcy, but they’re giving that advice based on what they believe. You need to think about what’s good for you and how you can sustain it—and then make your decision only based on that'”.
“Trying To Live Life Without Debt”
Robert Gale & his ex-wife had a large amount of consumer debt. They decided to file bankruptcy together before divorcing so that they could both split their debt. Gale had many worries about bankruptcy. He worried about losing his assets, his good credit score, etc. Gale says, “‘I thought we were going to lose the house, the cars—that they would take anything that’s got any value to it… That’s not exactly true for Chapter 7. If you can show that you’re able to pay specific debts, you can reaffirm debts that are larger and continue to pay those”‘. Though he didn’t originally want to file, Gale says it benefitted him in the end. Now remarried, Robert Gale’s only debt is his mortgage.
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The post “Filing For Bankruptcy Is The Best Decision I’ve Ever Made” appeared first on Allmand Law Firm, PLLC.

2 months 1 day ago

Chapter 13 cases are three to five year payment plans.  Creditors receive a monthly payment based on a debtor’s ability to pay, the type of debts they owe, and the amount of unprotected property they own.
But how does one make the payment? Who do you pay?
Chapter 13 payments are paid to the Chapter 13 Trustee, typically an attorney appointed to oversee the bankruptcy case. In Nebraska that person is Kathleen A. Laughlin.
There are only two ways to pay the Trustee:

  1. Money Order or Cashier’s Check.
  2. Garnishment of paycheck.

No other payment methods are allowed.  (Read this.)
What about payment in cash? Are personal checks allowed? What about paying via a debit card? Can you pay online? Can you set up an automatic payment?   What about BillPay services?
None of those payment methods are allowed.  And, to be honest, I just don’t understand.
I wish I understood the answer to that question.  I really see no reason why an automatic payment cannot be set up.  In fact, the TFS company has established a program to facilitate automatic payments in chapter 13 cases.  Many chapter 13 trustees around the country use TFS, including Iowa.
What I do know is that automatic payments work. Clients who have the payment deducted from their paycheck complete their payment plans at a much higher percentage than those who do not.
But not everyone can have a payroll deduction, and that is a real problem. Many clients are self-employed. Many are underemployed and they do not earn enough from one job to make the payment.  Others have jobs where their employers look dimly on payroll garnishments thus causing employment issues.
Working in our nation’s bankruptcy system for nearly 30 years, I can say that Nebraska has just about the best court system in the country. Really, there is something special about Nebraska’s system. Maybe it is because we are small population state and we just know each other better and cut through the red tape. Attorneys just don’t appreciate how great Nebraska’s bankruptcy judges and trustees are until they practice elsewhere.
But the lack of automatic payments in Chapter 13 drives me nuts. Come on Nebraska, we can do better than this!  Let’s automate!

2 months 2 days ago

May a person contribute to 401(k) retirement plan during a Nebraska Chapter 13 case?
Prior to the Bankruptcy Reform Act of 2005 the answer was fairly simple: No.  Contributions to a 401(k) retirement plan are voluntary, and prior to 2005 it was commonly known that contributions were not “necessary” to the support of a debtor.
The maximum required length of a plan was only three years, so to deny this deduction was not a terrible burden on debtors.  No matter how high their income was, debtors only had to be in Chapter 13 for three years.
But that all changed in 2005 and now higher-income debtors are required to spend up to five years in Chapter 13. Monthly payments are now, in theory, determined by a Means Test based on income received during the prior six months.
The entire intent of the new law was to make filing bankruptcy more difficult and to force debtors to pay back a greater portion of their debts
But the new 6-month income test also contained a new deduction: qualified retirement plan contributions.  Debtors might have to repay more of their debts, but at least they could contribute to a voluntary retirement plan, or so it appeared.
The problem with applying the Bankruptcy Reform Act of 2005 is that nobody really understands what it says. The language is confusing and it contains incomplete “hanging sentences.”
As a result, bankruptcy courts have crafted different interpretations of whether a debtor may contribute to a voluntary 401k plan during a Chapter 13 case.  (See In re Penfound, 6th Cir 2021)

  1. Majority View–the Johnson View.  The majority of bankruptcy courts hold that a debtor may fund a 401k plan during Chapter 13 if the contributions are made in “good faith.”  Under this view bankruptcy courts look at all the relevant factors to see if the contributions are justified. Contributions must be reasonable in light of the debtor’s income, age, health, existing retirement balances, previous contribution percentages, the type of debt owed, and the amount of debt owed.  See Baxter v. Johnson (In re Johnson), 346 B.R. 256, 263 (Bankr. S.D. Ga. 2006).
  2. Priggee Interpretation: Debtors are never permitted to contribute to voluntary retirement plans during chapter 13. In re Prigge, 441 B.R. 667, 677 & n.5 (Bankr. D. Mont. 2010)
  3. Seafort-BAP Interpretation.  A debtor may continue to contribute to a 401k plan an amount they were contributing “at the time” the case was filed. In other words, you may not start contributing to a program after the case is filed.
  4. CMI Interpretation.  A debtor may only claim a monthly deduction for an amount equal to the average amount contributed in the six months prior to filing.

There is no Nebraska or 8th Circuit case exactly on point, but it appears that Nebraska follows the Good Faith rule of Johnson.  A reasonable retirement contribution is allowed.
Counsel for the Chapter 13 Trustees often speak about a higher-income debtor’s level of retirement contributions.  Objections are raised on “good faith” grounds instead of technical arguments. However, when presented with a case involving a high-income debtor who offers to pay very little to unsecured creditors while making significant contributions to their own retirement plan, is is common for the trustee to object to the debtor’s budget.
It is extremely common for debtors to liquidate or to stop contributions to a retirement plan before bankruptcy.  The vast majority of people I meet do not realize that retirement funds are shielded from creditor claims and they feel a strong moral duty to liquidate their savings to pay debts.
The other observation is that liquidating a retirement plan to pay debts rarely provides enough funds to pay back all the debt. At best only a portion of debt is paid and income taxes and penalties frequently consume nearly half of the funds withdrawn. Rarely does it make sense to use retirement savings to pay debts.
Those who do use retirement savings to pay debts suffer a tremendous blow. They forfeit decades of savings they can never restore.
When it becomes clear that filing bankruptcy is necessary, a debtor should cease to pay unsecured debts (credit cards & medical bills) and they should consider contributing to a retirement program prior to filing bankruptcy.  Bankruptcy courts may balk at contributions to 401k plans if those contributions were not being made prior to filing a case.
Most debtors wait too long to visit a bankruptcy attorney. By the time they do visit one they have wiped out savings that would have been fully protected in the bankruptcy case.
The lack of retirement savings is often a strong factor in deciding to file bankruptcy. Although a young person may learn a hard but valuable lesson in paying back debts incurred foolishly, those in their middle years are running out of time to save up for retirement.  Filing bankruptcy enables a person to protect the retirements they have saved so far and frees up future income to devote to that purpose. Bankruptcy has as much to do with planning for the future as it does in cleaning up the past.
Image courtesy Leigh Blackall & Flickr

2 months 1 week ago

A new Nebraska bankruptcy court opinion (In re Torres) answers the question of whether a debtor may hold a vehicle title in trust for another person who provided the funds to purchase the vehicle.
In Torres, the debtor’s sister lived in Mexico and she transferred $42,970 to the debtor’s bank account to purchase a 2020 Hyundai Palisade.  The vehicle was titled only in the debtor’s name.
The chapter 7 trustee demanded a turnover of the vehicle, but the debtor objected claiming that he merely held the vehicle in trust for his sister.
There was no written agreement between the debtor and his sister.  The parties stipulated that the sister did not intend to make a gift to her brother but that the funds were transferred to purchase a vehicle for the sister’s use.  Apparently the sister intended to come to Nebraska for medical treatment but was unable to due to Covid-19 travel restrictions.  It’s not clear why the sister’s name was left off the title.
Nebraska statute 60-140 governs the ownership and acquisition of motor vehicles:
No person acquiring a vehicle from the owner thereof . . .  shall acquire any right, title, claim, or interest in or to such vehicle until the acquiring person has had delivered to him or her physical possession of such vehicle and (a) a certificate of title or a duly executed manufacturer’s or importer’s certificate with such assignments as are necessary to show title in the purchaser, (b) a written instrument as required by section 60-1417, (c) an affidavit and notarized bill of sale as provided in section 60-142.01, or (d) a bill of sale for a parts vehicle as required by section 60-142.
That seems very conclusive. No person shall acquire any “right, title claim or interest” without possession of the vehicle and a title, a written instrument, or a bill of sale.  Something must be in writing.
Judge Kruse ruled that “any equitable interest Ms. Torres asserts in the vehicle cannot defeat the trustee’s powers under 11 U.S.C. § 544. This court previously refused to recognize the equitable ownership interest of a non-debtor whose name is not noted on a motor vehicle’s certificate of title. See In re Farrell, Case No. BK19-80282, 2019 Bankr. LEXIS 1949 (Bankr. D. Neb., June 28, 2019).”
The court focused on Nebraska Statute 60-140.  “No person shall acquire any right title claim or interest of any person in or to a vehicle . . . unless there is compliance with this section.”
In Torres there was no writing between the debtor and his sister. Case closed. The sister had no interest recognized under Nebraska motor vehicle title law.
In re Farrell
In the Farrell opinion Judge Saladino relied on the Strong Arm power of Section 544 to allow the chapter 7 trustee to void the interest of a non-debtor spouse in a motor vehicle.  In Farrell the debtor’s mother purchased a vehicle for the debtor and his wife, but the title was only recorded in the debtor’s name. On the bankruptcy schedules the debtor claimed a one-half interest in the vehicle and stated that his wife held an equitable interest in the other half.
Bankruptcy Code Section 544 is called the Strong Arm Power because it allows a chapter 7 trustee to avoid any interest in a judicial or unrecorded lien in property of the debtor.
Importantly, in the Farrell opinion Judge Saladino ruled that Nebraska case law does recognize an ownership interest in a motor vehicle not listed on the vehicle title.
“Nebraska case law makes clear that “while the certificate of title act provides the exclusive method for the transfer of title to a vehicle, it is not conclusive on the issue of ownership[.]” Hanson v. Gen. Motors Corp., 486 N.W.2d 223, 225 (Neb. 1992) (citing Alford v. Neal, 425 N.W.2d 325 (Neb. 1988)). The bankruptcy court has observed that the certificate of title statute’s applicability may not be as broad as initially appears: “The Nebraska Supreme Court recognized that the purpose of § 60–105 is to prevent fraud or misrepresentation, and recognized that there are circumstances where, although § 60–105 would apply by its terms, the circumstances may not be within the intended purview of the statute.” In re Mueller, 123 B.R. 613, 615 (Bankr. D. Neb. 1990) (interpreting the predecessor statute to § 60-140).”
How can we reconcile Judge Saladino’s opinion in Farrell the does recognize a debtor’s ownership interest in a motor vehicle that does not appear on the vehicle’s title with Judge Kruse’s opinion in Torres that “no right, title, claim or interest” may exist without compliance with 60-140?
Judge Saladino, quoting Hanson v Gen Motors Corp says an ownership interest may exist apart from the vehicle title. Judge Kruse says it does not. We have a conflict of opinions here.
Resulting Trusts:
In Farrell the debtor did not argue that he held his wife’s interest in trust. (“Mr. Farrell has not suggested that he holds the vehicle in trust for his wife, so § 541(d) need not be addressed further here.”)
Why is that significant?  It is significant because if the vehicle was held in trust then it would not be part of the bankruptcy estate and the Strong Arm power of Section 544 would not apply.
It is clear under the Hanson v Gen Motor Corp opinion that Nebraska recognizes that an ownership interest may exist even if it is not recorded on a vehicle title.  Nebraska statute 60-140 is not conclusive.  Judge Saladino says exactly that in Farrell.
In Torres Judge Kruse specifically finds that Nebraska law recognizes resulting trusts, but he finds that Nebraska that statute 60-140, however, does not allow a resulting trust in a motor vehicle. What Judge Kruse does not explain is why the Hanson v Gen Motors Corp case does not apply. We are left to wonder.
Burden of Proving Existence of Resulting Trust:
Judge Kruse explains that the existence of a resulting trust must be established by clear and convincing evidence.  That is a high standard.
In Torres there was no written trust agreement between the debtor and his sister. There was no writing of any type at all to prove the existence of a trust.
Based on the evidence presented, I think the Court got it right in Torres, but we now have a conflict in case law about whether Nebraska law allows a resulting trust in a motor vehicle that will have to be resolved in a future case.
Image courtesy of Flickr and Greg Gjerdingen

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