Published on:

by

So they taught you in school that there was no debtor’s prison in the great nation of the United States of America, did they? Well, of course, most school children know there’s no debtor’s prison here, but are they correct?

Debtors prisons are as old as humanity. The Bible deals with the idea in Matthew 18:23-35. In this biblical story, servant A is called before his king. Servant A owed a great deal of money to the king. The king ordered that Servant A be sold into slavery, with his wife and children also to be sold, all to pay the debt. Servant A begged and the king showed mercy, cancelling his debt. Later Servant A came across Servant B, who owed a small amount of money to Servant A. A grabbed B by the throat and yelled at him to pay what he owed. B begged A to have mercy and give additional time to pay. A had no compassion and had B thrown into debtor’s prison. As these stories go, A’s fellow servants ratted him out to the king and the king was very, very unhappy with A, calling him wicked and essentially telling him that his soul would burn in the eternal fires.

Debtor’s prison is not a fun place. Essentially, it’s a jail where you are placed until your debt is paid. Since you are in jail, you can’t pay your debt and someone must come to your aid, a benefactor or loved one. None of these in the U.S.A.?

by
Posted in:
Published on:
Updated:
Published on:

by

Here is a good example of why you need a reputable bankruptcy attorney to help when you have financial troubles with your house. A fraud artist who claimed to help distressed homeowners stave off foreclosures has been sentenced to 11 years in Federal prison after he was finally caught in Waterloo, Canada. Here was his scam.

Mr. W would solicit homeowners who were facing foreclosure on their home. He told them that for a fee (usually $700) he could legally delay the foreclosure. After he was paid, he would get a list of people who had filed for bankruptcy in the homeowner’s state. He would then prepare a phony deed that would transfer a fractional share of the homeowner’s home to someone who had filed bankruptcy. After recording the deeds, he would mail them to the bank or lender foreclosing on the house informing them that they were stayed from doing the foreclosure because the owner (the person in bankruptcy who never knew about the phony deed) was in a bankruptcy. The bank would then postpone the foreclosure for several months until it finally figured out in the bankruptcy that the bankrupt really had no interest in the home. When the unwitting debtor in bankruptcy would finally disavow that he owned part of the house, Mr. W would then just pluck another name from the bankruptcy database and start this process all over again. In this manner, he filed fraudulent foreclosure documents on 824 homes, using at least 414 bankruptcies filed in 26 judicial districts. He collected about $1,200,000 from clients during the life of the scheme. Needless to say, the homeowner ended up losing his house in the end. Mr. W. pleaded guilty to bankruptcy fraud and identity theft. He received a sentence of 11 years in prison, was ordered to pay nearly $60,000 in restitution and was ordered to forfeit about $100,000 of property previously seized by law enforcement.

What do we learn from this? If it sounds too good to be true, it probably is. If your home is in financial trouble and in danger of foreclosure, a chapter 13 bankruptcy reorganization can often save your home. You do this by going to see an experienced bankruptcy attorney. You do not go see Mr. W.

by
Posted in:
Published on:
Updated:
Published on:

by

One item that is often overlooked by persons considering filing bankruptcy is that handy trust that someone said you had to have years ago. Remember, the “My Family” living trust that you created a few years ago? You might have placed a car, a house, or even a bank account in the trust. Then when you look to file bankruptcy, you have forgotten all about it. Often, this is not caught by the bankruptcy attorney until you begin providing things like bank statements and car titles. It is, however, an important matter for discussion before you chose to file bankruptcy, and then before you chose which chapter to file.

Question 10b. of the Statement of Financial Affairs (among the initial bankruptcy documents filed in any bankruptcy case), requires the debtor to respond to the following: “b. List all property transferred by the debtor within 10 years immediately preceding the commencement of this case to a self-settled trust or similar device of which the debtor is a beneficiary.”

Question 14. of the Statement of Financial Affairs requires the debtor to respond to the following: “Property Held for Another Person. List all property owned by another person that the debtor holds or controls.”

by
Published on:
Updated:
Published on:

by

Consumer Bankruptcy News in its November 2012 edition reports that Chapter 13 debtors may keep their social security income. The Bankruptcy Code says Social Security income is not included in a debtor’s “disposable income.” The 10th Circuit Court of Appeals ruled in Anderson, Trustee, v. Cranmer (In re Cramner), that neither recent Supreme Court decisions or the Bankruptcy Code require that Social Security income be committed to Chapter 13 plan payments.

SS%20income.jpg

In In re Cranmer, the Chapter 13 trustee asserted that the debtor would receive more than $87,000.00 in Social Security income over the life of his plan and objected to the debtor’s plan on that basis. The 10th Circuit rejected the trustee’s argument stating that Bankruptcy Code Section 105(10A)(B)’s definition of “Current Monthly Income” specifically excludes benefits received under the Social Security Act. Therefore, Social Security income is not included when calculating disposable income.

The 10th Circuit found additional support for its conclusion in the Social Security Act, which shields payments made pursuant to the Act from “execution, levy, attachment, garnishment, or other legal process,” or from “the operation of any bankruptcy or insolvency law”.

by
Posted in:
Published on:
Updated:
Published on:

by

We see many people in our office who owe back taxes to the IRS. If you ignore the IRS, they will levy your wages or bank accounts, leaving you with no money. There are several options you have to deal with this situation.

1. Installment agreement- You can enter into an installment agreement with IRS to pay off the tax. Interest will still accrue so this may take a very long time, but at least you will know that there will be no levies as long as you are current on your payments. This is the least attractive option. Our office can help you in obtaining an installment agreement.

2. Offer in Compromise- This is what all the ads you see on television or hear on the radio are referring to when they talk about the “New IRS Programs” or “The Fresh Start Initiative”. The Offer and Compromise (“OIC”) is not a new program and has been around since the 1990s. An OIC allows you to pay a smaller lump sum in full satisfaction of the tax debt. It is all formula driven: you must pay to the IRS as much as they would get if they sold basically all of your property and you pay them your monthly disposable income multiplied by 12. Disposable income means your monthly gross income less certain stingy expenses the IRS allows you. The key here is to manipulate the formula so IRS has no choice except to accept the OIC, something IRS seems to try and avoid. When doing an OIC it is important that you choose a reputable local attorney or accountant who has OIC experience. Most of the companies advertising on the radio or internet are out of state and I have never had a client give me a positive comment about them. They tend to take a large retainer from you after making big promises without ever reviewing your case, and then are unable to deliver. When you meet face to face with a local attorney, he can tell you what your chances for success are right then. Sometimes the numbers just do not work for an OIC.

by
Published on:
Updated:
Published on:

by

When the real estate market crashed, starting in 2007, we had many homeowners stuck in a situation where their homes plummeted in value so much that there was no equity at all. Thousands of homeowners walked from their homes, allowing the properties to be foreclosed upon.

A lien strip is where the lien of a lienholder, other than the first mortgage, is stripped and ultimately changes the status of the obligation owed to the lienholder from “secured” to “unsecured”.

The legal authority for lien stripping in Chapter 13 is 11 U.S.C. § 1322(b)(2). and 11 U.S.C. § 1328(a). § 1322(b)(2) allows a wholly unsecured lien on a debtor’s principal residence to be modified. § 1328(a) allows any unpaid portion of the claim to be discharged as an unsecured debt.

Published on:

by

A bipartisan bill, expected to be signed by President Barack Obama, would lower the rate on federally subsidized Stafford loans from 6.8 percent to 3.9 percent. It comes a month after lawmakers failed to reach a deal to keep the interest rates from rising from 3.4 percent to 6.8 percent. This is good news for everyone with student loans. Total student loan debt in this country is now higher than total credit card debt. It is fast becoming the number one debt problem in America.

I am the State Chairperson for the National Association Consumer Bankruptcy Attorneys (NACBA). Our lobbying arm worked very hard to get this interest rate reduction. We are continuing to lobby for changes to the bankruptcy law regarding the discharge of student loans. Current bankruptcy law only allow the discharge of student loans if the debtor can prove a hardship. The rules for hardship are so strict that it is virtually impossible to obtain a hardship discharge unless you are totally disabled and have been making payments on the loans.

student%20loan%20debt.jpg

Before 2005, we could discharge private (as opposed to government guaranteed) student loans. That is no longer the case. NACBA is lobbying very hard to remove this private student loan restriction because these loans have the highest interest rates and private student loans are not eligible for most of the programs that government student loans have that allow for lower payments or forbearance. Once we have accomplished this, we will be lobbying for a return to the student loan discharge law as it existed before 1995, which did allow for a bankruptcy discharge for student loans that were over 7 years old.

by
Posted in:
Published on:
Updated:
Published on:

by

When it comes to guns, motorcycles and prescribed health aides, folks get downright indignant if someone tries to take them away.

It seems people think the second amendment to the U.S. Constitution has something to do with guns. This amendment has been around for a long time. It was enacted by congress on December 15, 1791. It reads as follows: “A well regulated Militia, being necessary to the security of a free state, the

right of the people to keep and bear arms, shall not be infringed.”

Published on:

by

If tax debt is a substantial portion of your liability and you can qualify, you may want to consider filing a Chapter 13 bankruptcy. Even if the taxes are secured, the majority of courts have held that tax penalties are not secured and are never a priority. The reasoning is that the courts are not willing to penalize the unsecured creditors by giving priority to the penalties. This also applies to interest that has accrued on the penalties. Therefore, the superdischarge remains in effect for tax penalties and the interest that accrues thereon no matter when assessed or when the triggering event happened. (Section 523 (a)(7)(A) and (B); and Section 1328(a). Contrast this with chapter 7 where penalties are dischargeable only if the triggering event causing the penalty is over 3 years old.

Published on:

by

In In re Nathan B. Makowski, the 9th Circuit ruled that a creditor willfully violated the automatic stay by failing to return a debtor’s vehicle immediately following his filing for Chapter 13 relief.

tn_cg4945df33c5ea50.jpg A credit union in Nevada, that financed the purchase of debtor’s truck, repossessed the vehicle one week before the debtor filed for relief under Chapter 13 of the bankruptcy code. After the debtor’s attorney informed the credit union of the bankruptcy filing he demanded the truck’s return. The credit union refused and instead said it was going to request stay relief from the Court. Debtor’s attorney was forced to file a motion to compel the credit union to return the vehicle and requested sanctions be imposed against the credit union.

Debtor’s attorney contacted the credit union on a Friday and demanded its return no later than noon the following Monday. The credit union refused although after being advised by debtor’s attorney of the Motion to Compel, the credit union returned the vehicle later Monday afternoon. The 9th Circuit ruled that the time frame given by debtor’s attorney was reasonable and the credit union’s delay willfully violated the stay by retaining the vehicle past the deadline. The Court further stated that the credit union’s initial refusal to return the vehicle required the debtor to take legal action that should not have been necessary. As a result, the credit union was ordered to pay the debtor’s attorney fees and costs.