Archive for the ‘a’ Category
Thursday, April 15th, 2010
Earlier this month I received a call from a Chapter 7 client that I had represented several years ago. He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars. The creditor was listed on the case, but neither he no I knew that there was any judgment.
I directed him to visit the county courthouse and pull the file for this case. He did and he reports that the return of service shows that his wife was served by a sheriff's deputy. His wife has no recollection of being served. We did list the creditor on the bankruptcy petition but because we did not know that there was a judgment, we did not file a motion to avoid the judgment lien. What can he do?
There are a number of lessons you can learn from this man's experience. First, you should always obtain copies of credit reports from all 3 credit bureaus prior to filing bankruptcy. In Georgia, you can get a free credit report from each of the 3 main credit bureaus twice a year. Online, you can go to annualcreditreport.com and download your reports. Because credit reports obviously contain sensitive information the annualcreditreport.com system will ask several questions to identify yourself. These are usually multiple choice questions – for example, the system may say "your credit report shows that you previously lived on one of the following streets: (a) Oak Street (b) Thompson Street (c) Ivers Road (d) none of the above.
If you are unable to answer these questions, the system will instruct you to mail away for your credit reports – here is a link to a page on my website with the credit report request letters.
Credit reports are helpful because they will usually show pending lawsuits as well as the names, address, account numbers and debt amounts for most of your creditors. Obviously I can't require all bankruptcy clients to bring me credit reports but it sure helps avoid "forgotten" creditors or judgments.
As far as what we can do, there are a couple of options. First I want to make sure that service of process was correct. If you are served with a lawsuit in Georgia, the sheriff's deputy (or private process server) has to complete a document called a "return of service" that states when a party was served and by whom. Section 9-11-4 of the Official Code of Georgia provides that service on an individual must be made on the defendant himself, or "by leaving copies thereof at the defendant´s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein."
In this case, if the sheriff's deputy served my client's wife, then service is most likely valid.
However, I sometimes see situations where the return of service is unclear as to who was served or even situations where the return of service is blank. In these cases, a defendant can "collaterally attack" the judgment on the grounds that service was not made and he did not know about the lawsuit.
If it turns out that service is valid, my client will have little choice but to negotiate a settlement of the real estate debt. Interestingly the Chapter 7 discharge would eliminate any personal liability he might have for this debt, but the liability remains as to his real estate.
My experience has also been that judgment creditors will become more amenable to negotiation the longer a real estate lien remains unpaid. Here, my client could forego a refinance (or threaten to to forego a refi) and use the argument that the judgment creditor might have to wait for years to get paid as leverage to negotiate a reduced payoff.
Posted in Chapter 7, Chapter 7 issues, Credit, Negotiation, Post bankruptcy credit rebuilding, a, amenable, avoid, bankruptcy and judgments, client, deputy, estate, forego, judgment, lawsuit, letters credit, lien, lien , longer, my, or, post-bankruptcy, private, process, real, refinance, remains, report, reports, request, served, server, the, threaten, unlisted judgment creditors, unpaid , wife | Comments Off
Thursday, March 11th, 2010
Recently I met with a client who was looking into filing bankruptcy because of credit card and medical debt. Among his creditors, however, was an individual, an insurance company and fines due a local county. When I asked about this, he explained that about a year ago, he was involved in an auto accident that was his fault. He further explained that the individual sued him and that damages awarded were more than his insurance coverage, and that he also had fines because the accident occurred when he was under the influence.
He was unhappy to learn that Section 523(a)(9) of the Bankruptcy Code specifically excepts from discharge debts arising from the "death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance."
I read this Code section to mean that my client cannot discharge:
- any damage award due to the accident victim
- restitution ordered by the local county court
- fines imposed by the local county court
What about property damage arising from this drunk driving accident. I read the Code section to limit non-dischargeability to personal injury so I do not think that property damages would be excepted here.
Washington D.C. bankruptcy lawyer Morgan Fisher wrote a post about DUI damages and bankruptcy dischargeability last year. He notes that an insurance company seeking subrogation damages (recovery of car repair payments from the negligent driver by an insurance company) could argue against dischargeability under other provisions of Section 523. I believe that Morgan is referring to Bankruptcy Code Section 523(a)(6) which excepts from discharge debts arising from the "willful and malicious injury by the debtor to another entity or to the property of another entity."
Morgan also notes that a local Bankruptcy Judge will look to the state law in the jurisdiction where the criminal prosecution is based to determine culpability. I suspect this means that if you are convicted of DUI in a state where the applicable blood alcohol limit is .08, but you file bankruptcy in a state where the limit is .10, you would not be able to argue that Section 523(a)(9) does not apply to you.
I would also suggest that any DUI defendant who is contemplating a plea should look carefully at the language of 523(a)(9) – how the plea is structured in state court could have a bearing on whether the debt was dischargeable. I have not seen this happen, but I would think that a Bankruptcy Judge might have to hold an evidentiary hearing if the state court DUI plea bargain did not conclusively speak to driving under the influence.
Posted in 523(a)(6), 523(a)(9), Bankruptcy, Chapter 7 issues, Creditor discharge actions, DUI and bankruptcy, DWI and bankruptcy, Insurance, Lawyer, a, accident , alcohol, an, and, applicable, bargain, blood, company, court, d c, damages, driving, drunk, dui, entity, excepted, fines, fisher, here washington, injury, limit, malicious, morgan, non-dischageability, plea, post, recovery, seeking, state, subrogation, subrogation and bankruptcy, the, willful, wrote | Comments Off
Tuesday, February 16th, 2010
It is commonly known that filing for bankruptcy can be a very trying and emotional time for those filing. But it is less common to hear about how a bankruptcy can impact the children of bankruptcy filers. If you have children or dependents and are considering bankruptcy, it is important that you understand the potential consequences bankruptcy can have on your children.
1) Unfortunately, if a debtor contributes money towards a child's college tuition or to a college fund, filing for
bankruptcy could potentially prevent these contributions from occurring. When you file for bankruptcy, the court and creditors will attempt to limit the amount of your expenses and may prioritize their collection accounts above your child’s education. While bankruptcy courts will allow necessary expenses such as housing, utilities, and food, your child’s education may not be viewed as essential. If you find yourself in this situation, I strongly recommend that you consult with a bankruptcy lawyer to understand more about how your child’s education may be affected when filing for bankruptcy.
2) When you file for bankruptcy, the line can get blurred between your assets and your child's assets. For example, say you opened a bank account for your child but failed to take the adequate steps to set it up correctly to be protected from something like a bankruptcy. When it comes time to file bankruptcy, you may run the risk of the money in that account being considered your money and not your child’s. This type of problem can occur if the account is under just your name (and not your child’s) or if you have ever used it to pay your own bills. Your children’s assets can be better protected from bankruptcy if the accounts are opened under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). If your child’s assets are at risk of being affected by bankruptcy, I again recommend consulting a bankruptcy lawyer to help find the best means of fixing this problem.
3) Children are protected from bankruptcy whether or not an in-debt parent is behind on child support payments. Child support obligations are a top priority and are ineligible for bankruptcy debt discharge. If you file for Chapter 7 bankruptcy, child support payments become a top priority when assets are being liquidated. If you file for Chapter 13 bankruptcy, child support payments will be arranged in the repayment plan. In either case, the hope is that ex-spouses find it easier to pay child support since the bankruptcy may be able to lessen many of their other debt burdens.
Posted in Assets, Debtor, Education, General consumer bankruptcy info, Gifts, Money, a, bankruptcy and children, child, children 1, child’s, contributes, obligations, opened, payments, support, the, type, understand, uniform | Comments Off
Friday, February 12th, 2010
As you probably know, there are two types of consumer bankruptcy cases available to you – a Chapter 7 which wipes out debt, and a Chapter 13 which creates a five year payment plan in which you pay back some or all of your debt with your "disposable income." When I prepare a Chapter 13 case, we work with you to create a liveable budget. The money "left over" after you pay for housing, food, transportation, insurance, utilities and other necessities must be sent to the Chapter 13 trustee, who then disburses these funds to your creditors based on a plan of reorganization that we submit to the court.
What happens if you need to file a Chapter 13, you have not yet filed your tax return for last year, but you know that a refund will be coming your way. The simple answer is that unless you are paying back your creditors at 100%, your Chapter 13 will demand that you turn over your tax refund check, and will use that money to pay your creditors. If you know that a refund is headed your way, make sure to tell your lawyer before you file – there are some steps you can take to preserve some or all of your tax refund money.
Your Chapter 13 trustee will also want future refunds paid to the trustee. This situation is easier to handle – you will want to adjust your payroll withholdings so that you do not have any refund coming. As far as the Chapter 13 trustee is concerned, your tax refund is kind of like a savings account that artificially reduces your net pay amount.
All of the Chapter 13 trustees in the Northern District of Georgia require debtors who are paying less than 100% to creditors to include in their Chapter 13 plans a provision that authorizes the IRS to intercept any refund payable during the years that your plan is in effect and send this money to the Chapter 13 trustee. And until now, the IRS has cooperated with the Chapter 13 trustees in redirecting refund money.
In January, 2010, however, a federal district court in Michigan has rules that the Chapter 13 trustee does not have the power to compel the IRS to serve as its collection agent. In the case of United States v. Carroll, a judge in the Eastern District of Michigan ruled that there is no legal basis for the IRS to withhold money and deliver it to the trustee because Congress has not waived the IRS' "sovereign immunity" that would otherwise leave the IRS vulnerable to contempt actions and other enforcement actions by the trustee (in other words, if the IRS failed to withhold a debtor's refund, the trustee would not have the right to sue the IRS for damages or for remedial action). The Michigan judge issued an order forbidding the bankruptcy courts there from confirming any Chapter 13 plan that has the income tax refund seizure language.
I would not be surprised if bankruptcy courts elsewhere in the nation begin to follow the path set by the Michigan judge. We'll know soon enough, but I suspect that the trustees in the Northern District may discontinue their demand for an income tax provision involving the IRS in Chapter 13 plans.
I do not expect, however that Chapter 13 trustees here or elsewhere in the country will permit Chapter 13 debtors from keeping large tax refunds. I suspect that trustees will still demand provisions that obligate debtors to tender their tax refunds but they will expect the debtors to send in the money, rather than having it withheld by the IRS. I will continue to advise my clients to minimize their refunds to avoid the problem entirely.
Needless to say, losing this automatic tax refund payment mechanism will make enforcement of tax refund plan provisions much more difficult. It will be interesting to what if anything Chapter 13 trustees do to address this potential administrative nightmare.
Posted in 2010, Bankruptcy, Chapter 13 issues, Chapter 13 plan calculations, Irs, Tax issues, a, an, automatic, chapter 13 plan, chapter 13 trustee, court, courts, district, enforcement, federal, forbidding, income, intercept, issued, january, judge, keeping, language i, large, losing, mechanism, michigan, money in, order, payable, payment, plan, provisions, redirecting, refund, refunds , seizure, tax, tax refunds in chapter 13, the, | Comments Off
Wednesday, February 10th, 2010
My office colleague, Susan Blum is in the process of filing a Chapter 7 bankruptcy for a young woman. Our client currently lives in a rented apartment, and her lease runs through July of this year. Our client would like to find a cheaper place to live, however, she is concerned that she may not be eligible to sign a new lease after filing for bankruptcy. Our client asked for our advice about what to do.
First, we advised out client that her bankruptcy filing would not prevent her from finding a new apartment later this year and signing a lease. However, the the months immediately following a bankruptcy are a time when a debtor's credit is most damaged – it is very possible that our client would have a difficult time finding a landlord who would lease her an apartment right after the bankruptcy.
A better option in cases like this would be for our client to to sign a new lease prior to filing bankruptcy and reject the current lease in the bankruptcy filing.
Under the bankruptcy law a lease is considered an "executory contract," meaning that our client still has on-going obligations to perform under the contract. In this case, our client has the contractual obligation to pay her lease. Other examples of executory contracts are vehicle leases, health club memberships and cell phone contracts.
The bankruptcy law allows a debtor to "reject" or "assume" an executory contract. If the contract is assumed, the debtor remains obligated under the terms of the contract. If the contract is rejected, the debtor's obligations terminated.
In our client's case if she rejects her old apartment lease, the law deems the lease contract as breached as of the day before the bankruptcy filing. The landlord is entitled to repossess the apartment in accordance with state law. Any damages that the landlord might suffer are treated as pre-petition general unsecured claims. Per the Bankruptcy Code, the rejection damages that the landlord is entitled to are limited to either 15 percent of the balance of the rent that is left in the lease or the rent due for one year from the filing date or the date the apartment was surrendered, whichever is earlier. Fortunately the debtor can include any outstanding rent in her petition and wipe out the debt along with other unsecured debt.
Susan's client took our advice and has already signed a new lease on an apartment and she will be rejecting her current lease in the Chapter 7, including all future rent and penalties incurred for not fulfilling the lease’s terms.
Posted in Apartment, Bankruptcy, Current, Executory Contracts, Law, a, an, and, apartment leases, canceling leases, cell, club, contract, contracts the, deems, filing, health, lease, lease , memberships, phone, reject, rejecting, rejects, signing, susan blum, the, year | Comments Off
Sunday, January 17th, 2010
A number of stories have recently appeared in bankruptcy and 
consumer rights blogs suggesting that the Atlanta based collection firm Mann, Bracken, LLC has gone out of business. On his Caveat Emptor blog, Minnesota bankruptcy attorney Sam Glover has written several posts about the Mann, Bracken firm including one on December 22, 2009 stating that the calls to the firm's phone number instructs callers to communicate directly with their creditors. I called several numbers listed for Mann, Bracken but the calls were answered by a message that "all circuits are busy, try your call again later."
Although based in Atlanta, Mann, Bracken has a national practice and it has apparently been growing by merging with other law firms. I found a web site called paymbw.com which purports to be a payment gateway for debtors to make electronic check or credit card payments on debts being handled by Mann, Bracken. This site notes that Mann, Bracken is the successor by merger to Wolpoff & Abramson L.L.P., and Eskanos & Adler P.C., two collection law firms well known to debtor's lawyers.
The domain mbllc.com has a "coming soon" page and the registration information for that domain is private. I looked up the contact information for the partners. Douglas Mann's shows him as an inactive lawyer affiliated with Mann, Bracken. Chris Bracken's registration shows a gmail.com email address, a business address at Mann, Bracken's location, but the space for the law firm information is blank. Two other partners – Bill Layng and Steve Knezo – are now affiliated with other law firms.
Atlanta TV station WSB sent a crew to the Mann, Bracken offices and found deserted premises along with handwritten placards stating that the firm has closed down. According to WSB, Mann, Bracken was associated with a large debt collector called Axiant, which is now in Chapter 7.
Based on all the information I can gather, the law firm of Mann, Bracken is no more. However the demise of this firm does not mean that debts owed to clients of Mann, Bracken or Axiant are no longer collectible. Apparently another large debt buyer/collector, NCO, has purchased or is about to purchase Axiant's accounts.
If you had a deal with Mann, Bracken to settle your debt, you may find that the underlying creditor or a subsequent collection agency may not honor your deal – so hold on to any paperwork you may have. As attorney Glover notes on his blog, you should contact your creditor directly if you have previously been dealing with Mann, Bracken.
Posted in Bill Collectors, General consumer bankruptcy info, Georgia Bankruptcy, a, atlanta, axiant, based, bracken, bracken , called, chris, collection, collection law firm, collector, debt, douglas, firm, including, large, mann, mann bracken, partners , the | Comments Off
Earlier this month I received a call from a Chapter 7 client that I had represented several years ago. He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars. The creditor was listed on the case, but neither he no I knew that there was any judgment.
