Archive for the ‘Creditor discharge actions’ Category
Wednesday, May 25th, 2011
Because I handle both personal bankruptcy cases and Social Security disability cases, I frequently get questions about the interrelationship between these two areas of law. A question I get at least once a month has to do with whether a Social Security disability overpayment is dischargeable in bankruptcy.
The short answer to this is "yes," a Social Security overpayment is treated like any other unsecured debt. There are exceptions to the dischargeability of a particular debt under Section 523 of the Bankruptcy Code and exceptions to the discharge as a whole under Section 727 of the Code.
Specifically, this means, however, that fraudulent behavior can result in a finding that this Social Security debt is not dischargeable.
Overpayment issues typically arise in disability cases when a claimant continues to accept and receive disability payments even after returning to work. The question then becomes – "did the debtor/claimant knowingly and with intent to deceive the Social Security Administration continue to accept disability payments even when not entitled to do so?"
A 2009 case decided by Judge Joyce Bihary, chief judge of the Bankruptcy Court for the Northern District of Georgia offers helpful insight into how a bankruptcy judge will analyze this issue.
In the Rodriquez vs. United States of America case, debtor Diego Rodriquez collected over $70,000 of disability benefits after returning to work. Mr. Rodriquez filed Chapter 7, then asked the Bankruptcy Court to rule on his request for waiver of overpayment. Judge Bihary found that the Bankruptcy Court did not have jurisdiction over this issue and denied Mr. Rodriquez' motion about the waiver issue, but she took the unusual step of addressing some of the substantive issues arising from the overpayment problem.
In what is known as "dicta," the judge explained that under her understanding of the law, "an overpayment debt of Social Security benefits is dischargeable" and will be treated like any other unsecured debt. The judge cited a 1982 7th Circuit case called Neavear v. Schweiker as support for her conclusion. Since Social Security did not file a timely objection to discharge, the overpayment debt owed by Mr. Rodriquez is dischargeable.
What is interesting to me about this decision are the judge's discussion of the facts. Apparently, on several occasions, Mr. Rodriquez attempted to advise Social Security about his return to work, but all of these disclosures were ignored by SSA. Further, the judge noted that Social Security had put Mr. Rodriquez in limbo by failing to respond to his request for administrative review.
The judge devotes almost a page of her decision to suggestions about how SSA might appropriately satisfy its statutory obligations to Mr. Rodriquez. Reading between the lines, it seems apparent to me that the judge found Mr. Rodriquez' testimony credible about his efforts to report his employment income to Social Security, but she did not believe Social Security's assertions (apparently gleaned from documentation and perhaps testimony) that it had not received notice of employment from Mr. Rodriquez.
The judge references Social Security's ineptitude regarding file management. Mr. Rodriquez' deliquentcy grew so large because "SSA lost debtor's file for a period of five years."
In my mind, the obvious question in an overpayment case is this – how can a debtor not be guilty of fraudulent behavior if he accepts Social Security payments while at the same time he is working and earning money. Wearing my Social Security disability lawyer hat I can tell you that Social Security's rules about trial work periods, its Ticket to Work program and its extended period of disability and work that does not reach the level of "substantial activity" is by no means intuitive and even a sophisticated claimant would not necessarily know when he might be allowed to keep his disability check as well as his paycheck.
The judge in the Rodriquez case did not reach this issue (because Social Security did not raise it) but I get the sense that the judge felt that in this case at least, the debtor tried to play by the rules but received little cooperation from Social Security and that Social Security's "unclean hands" might very well be held against the agency in a dischargeability inquiry.
So, what can we learn from the Rodriquez case? I think that if you are attempting to discharge an overpayment you will need to show that you tried to engage Social Security to resolve the issue prior to filing bankruptcy. If you were confused by Social Security's rules it would not be a bad idea to explain your areas of confusion in your correspondence with Social Security. Finally I would make sure that you and your lawyer identify specific addresses where notice of your bankruptcy filing ought to go. Social Security is such a bloated bureaucracy that they will most likely not file an objection in time – there is no need to give them added life by not offering notice at the correct address.
Posted in 1982, 7th, Bankruptcy, Creditor discharge actions, Lawyer, a, administration, and, bihary, called, case, cases, circuit, cited, continue, debt , deceive, disability, discharge of social security disability overpayments, earning, employment, handle, hat, intent, judge, money , mr, my, neavear, overpayment, overpayment , personal, references, rodriquez the, schweiker, security, social, social security overpayment and bankruptcy, the, treated, unsecured, v, waiver, wearing, working | 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
Saturday, November 21st, 2009
As we approach the Christmas holiday season, I want to remind my readers of two things. First and foremost, I want to wish all of my clients and blog readers a happy and healthy holiday season. Financial struggles will come and go but if you have your family and your health, not a whole lot of other things matter.
Secondly, I would respectfully suggest that it is never too late to begin the process of tackling your financial issues. Over the years I have met with many potential clients in January and February who bring me credit card bills containing charges incurred for presents in November and December. They are ready to make a fresh start and want to file.
On more than one occasion I heard the explanation "well, I knew that I was going to have to file bankruptcy at some point – but I wanted my family to enjoy a nice Christmas first."
From my perspective as a bankruptcy lawyer, this attitude will get you in trouble. Common sense should tell you that you cannot run up your credit cards buying gifts, then wipe out that debt a month or two later by filing bankruptcy.
Not surprisingly the Bankruptcy Code addresses the issue of "credit card binge" debt as well.
Section 523(a)(2) excepts from discharge debt that was obtained if an individual made material and false representations about his financial condition (i.e. , lies on the credit application).
Section 523(a)(2)(C) provides that:
- consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services (luxury goods defined as goods or services reasonably not necessary for the support or maintenance of the debtor or a dependent of the debtor) incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
- cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable;
Section 523(a)(2)(a) excepts from discharge money, property or services incurred by false pretenses, a false representation, or actual fraud (i.e. incurring debt that you knew or should have known that you would not be able to repay)
As a practical matter this means that if you incur several hundred or several thousands of dollars of charges in December then try to discharge that debt in January or February, credit card lenders have three potential arguments to object to the discharge of that debt. Further, the last thing you want to face in your bankruptcy case is discharge litigation, as litigation is expensive and risky.
When I meet with clients in January and February who show me Christmas credit card statements, I will advise them to wait four to six months at a minimum and to make regular payments during that period.
So, if you are already in debt, or unemployed, I urge you to fight the impulse to use your credit cards to purchase gifts that you cannot afford. The satisfaction you will feel giving those gifts will shortly give way to frustration when your bankruptcy lawyer tells you that you have to wait.
Posted in Credit Card Debt, Creditor discharge actions, General consumer bankruptcy info, christmas presents, discharge litigation | Comments Off
