Tag Archives: bankruptcy

An Equitable Argument by an Unperfected Secured Creditor

An Equitable Argument by an Unperfected Secured CreditorAn Equitable Argument by an Unperfected Secured Creditor.  Has the court ever heard an equitable argument made by an unperfected secured creditor? The answer is yes. Here’s the story.

In a case of very unfortunate timing, a creditor loaned a business $500,000.00 to keep its doors open, took a security interest in the Debtor’s assets to secure the loan, and filed a UCC financing statement five days later to perfect the lien. However, on the day after the loan, and four days prior to perfection of the lien, an involuntary petition was filed against the Debtor. In re Millivision, 474 F.3d 4 (lst Cir. 2007). In this case the creditor argued that the “strong-arm” pro visions of §544 “offended the underlying equitable principles of the Bankruptcy Code by conferring a “windfall” cash infusion…” Further, it was argued that the “relation-back” provision of §5 47(e) (which allows transferees a grace period to perfect a transfer) constitutes “any generally applicable law” under §546(b), which limits the rights of a Trustee to recover under §544. Affirming the lower Courts, the First Circuit rejected the § 547(e) argument, finding that a subsection applicable to prefer entail transfers is not “generally applicable law” for purposes of the strong-arm powers under § 544 (b). The Court then noted that the creditor could have perfected its lien prior to making the loan, and “under long-established principles. Therefore the court found that petitioner’s lack of diligence precludes equity’s operation”. So yes a court has heard an equitable argument by an unperfected secured creditor and lost the argument. If you have a question about your perfected interest, please see a bankruptcy attorney.

For more information about Bankruptcy and Disability Income  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Error in the Debtor’s Name Seriously Misleading

Error in the Debtor's Name Seriously MisleadingIs an error in the debtor name seriously misleading? In what appears to be a national trend, two more recent cases have affirmed that a slight error in the Debtor’s name seriously misleading in the age of computer search logic. Here are the cases.

In re John’s Bean Farm of Homestead, Inc., 378 B.R. 385 (Bkrtcy. S.D. Fla. 2007). the creditor filed a UCC- l financing statement with the Florida Secured Transaction Registry identifying the Debtor as “John Bean Farms, Inc.”, instead of the proper incorporation name, “John’s Bean Farm of Homestead , Inc.” When the Trustee searched the database using the Debtor’s correct name, the search yielded no match. The Trustee found the creditor’s financing statement only after striking “previous command” 60 times. The Trustee objected to the secured claim filed by the creditor, and was awarded summary judgment. The Court held that the initial search page displayed the result of applying Florida’s standard search logic. Further, even if what constituted a search result were more than the initial page display, there would be a reasonable limit to the search. The Court deemed this limit to be no more than one page “previous” and one page “next” from the initial result screen.

In a second case, In re Jim Ross Tires. Inc.. 379 B.R. 670 (Bkrtcy. S.D. Tex. 2007), the Court construed Texas law. The financing statement was filed by the creditor in the Debtor’s correct corporate name. However, it added the Debtor’s trade “or d/b/ a” name, which had expired and not been renewed. Judge Isgur found that the financing statement did not contain a proper statement of the Debtor ‘s name, and left the creditor unperfected. The Court reasoned that only exact matches would be returned from a computer search of the Secretary of State’s database , and including the d/b/ a in a financing statement would
inevitably have resulted in the failure of the financing statement to appear.

If you have questions about the validity of a financing statement an attorney can help you decide if an error in the debtor’s name seriously misleading to the bankruptcy court.

For more information about Bankruptcy and an error in the debtor’s name seriously misleading  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Alimony Dischargeable in Bankruptcy

Alimony Dischargeable in BankruptcyIs Alimony dischargeable in Bankruptcy? It might be, it depends on many factors.

Generally speaking, one of the most significant changes in the bankruptcy code in 2005 (BAPCPA) is that all domestic relations obligations created by a divorce decree or separation agreement are non-dischargeable. The spousal support defined as Domestic Support Obligations are non-dischargeable in every chapter, but non-support obligations under 523 (a)(15) MAY BE dischargable in a Chapter 13 plan.

How do we know if alimony is dischargeable in a chapter 13 bankruptcy? The court will consider the substance of the underlying obligations, as well as the relative financial circumstances of the parties at the time of their divorce. To ascertain the intent of the parties and the substance and function of the obligation, a bankruptcy judge may consider any or all of the following factors:

(1) The amount of alimony, if any, awarded by the state court and the adequacy of any such award;
(2) the need for support and the relative income of the parties at the time the divorce decree was entered;
(3) the number and age of children;
(4) the length of the marriage;
(5) whether the obligation terminates on death or remarriage of the former spouse;
(6) whether the obligation is payable over a long period of time;
(7) The age, health, education, and work experience of both parties;
(8) whether the payments were intended as economic security or retirement benefits;
(9) the standard of living established during the marriage.

If your spouse is trying to discharge your alimony you need to see an attorney right away to make sure your rights are protected. Alternatively, if you need to discharge alimony, an experienced attorney can help you determine how the court is likely to view your case.

For more information about Bankruptcy and if alimony dischargeable in bankruptcy   – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy Eligibility for Chapter 7

Bankruptcy Eligibility for Chapter 7Bankruptcy Eligibility – As a bankruptcy attorney, I get this question all the time, who can file a chapter 7 bankruptcy? The answer is everybody with some exceptions, I have made a list of the common reasons that make you not bankruptcy eligible for a chapter 7.

(1) If you have been granted a discharge in a chapter 7 case that was filed within the last eight years.

(2) If you have been granted a discharge in a chapter 13 case that was filed within the last 6 years, unless 70% or more of your unsecured claims were paid off in the chapter 13 case.

(3) If you have obtained court approval of a written waiver of discharge in the previous chapter 7 case.

(4) If you conceal, transfer, or destroy property with the intent to defraud creditors or the trustee in the chapter 7 case.

(5) If you conceal, destroy or falsify records of your financial condition or business transactions.

(6) If you make false statements or claims in the chapter 7 case, or you withhold recorded information from the trustee.

(7) If you fail to satisfactorily explain any loss or deficiency of your assets.

(8) If you refuse to answer questions or obey orders of the bankruptcy court, either in your bankruptcy case or in the bankruptcy case of another person such as a relative, a business associate, or a corporation in which you have a relationship.

(9) A person who, after filing a bankruptcy, fails to complete an instructional course on personal financial management.

(10) A person who has been convicted of bankruptcy fraud.

(11) A person who owes a debt arising from a securities law violation.

If you have question about bankruptcy eligibility for chapter 7 bankruptcy, it is best to contact a bankruptcy attorney who can discuss your situation specifically. There are many exceptions to the bankruptcy eligibility rules, and only an experience bankruptcy attorney can assist you in determining if those exceptions apply to your specific case.

For more information about Bankruptcy – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081.

Student Loans Bankruptcy

Student Loans BankruptcyStudent loans bankruptcy – I am receiving more and more calls about student loans bankruptcy, student loans are becoming more and more troublesome for college graduates as the struggling economy as left fewer jobs for those just graduating from college and graduate school. Additionally, most students graduating college have student loans because of the rising college tuition rates and other costs associated with college such as fees, books, computers, and room and board. However, unlike other unmanageable debt, both government and private student loans are not dischargeable in bankruptcy unless you can prove substantial hardship under the very difficult Brunner test.

The Brunner test requires you to prove a substantial hardship and you need to file a law suit against the lender who made your student loan. In that suit, you must prove:
• If required to repay the loans, you could not maintain a minimal standard of living for yourself and your dependents.
• Circumstances show that this state of affairs is likely to continue for a very long time.
• You have made good faith efforts to repay the loan.

This is a very difficult standard. You may have a better chance to manage your student loans in a chapter 13 bankruptcy. A chapter 13 bankruptcy gives you the opportunity to include your student loans within a Chapter 13 payment plan. Another advantage to a chapter 13 bankruptcy is that you may be allowed to concentrate on paying the student loans by paying relatively little on your other debt.

Student Loans Bankruptcy – if you have government student loans, another repayment option available to you is called the Income Based Repayment plan. This is a relatively new program offered by the Department of Education and is only available for government student loans. Information about this repayment plan is available at http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp. In general your payment for your student loan under an income based repayment plan is based on your actual income and has some other advantages if you work for a non-profit or a government agency.

If you have private student loans there is little that can be done outside a chapter 13 bankruptcy. However, there is a bright glimmer of hope. The House Judiciary Subcommittee on Commercial and Administrative Law took the first steps in reversing language in the 2005 bankruptcy law related to private student loan debt by approving the Private Student Loan Bankruptcy Fairness Act. This legislation will restore fairness in student lending by treating privately issued student loans in bankruptcy the same as other types of private debt. Under the bill, privately issued student loans will once again be dischargeable in bankruptcy.

For more information about Bankruptcy and your Student Loans  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Post-Petition Inheritance

Post-Petition InheritancePost-petition inheritance disclaimer was avoided. Here’s what happened.

Post-petition inheritance disclaimer was avoided.  The Debtor’s mother died on June 27. 2006, and the debtor filed her bankruptcy petition on September 29, 2006. On November 3, 2006. the Debtor. who was executrix of the probate estate, filed a disclaimer of the inheritance she was to receive. The Trustee then sought to avoid the purported disclaimer as an unauthorized post-petition transfer under §549. The Debtor countered that under Fifth Circuit and Texas law the disclaimer related back to the date of death, and therefore did not occur post-petition. ln re Schmidt. 362 B.R. 318 (Bkrtcy.W.O. Tex. 2007).

Finding for the Trustee, Judge Clark followed In re Farrior, 344 B.R. 483 (Bkrtcy. W.O. Va. 2006), which held that federal pre-emption trumps a Debtor’s ability to employ if state law disclaimer as to property designated by federal statute (§54I) as property of the estate. The Court distinguished Simpson v. Penner 36 F.3d 450 (5th Cir. 1994) which involved a pre-petition disclaimer. However Judge Clark questioned whether Simpson was still good law, as it pre-dated Drye v. United States 528 U.S. 49 (1999), where the Supreme Court ruled that a state-authorized disclaimer of inheritance could not defeat attachment of a federal tax lien to the taxpayer’s beneficial interest in the inheritance prior to execution of the disclaimer. The Court also cited Matter of Burgess, 438 F.3d 493 (5th Cir. 2006) (en banc) as further authority that Simpson no longer applies. In Burgess. the Fifth Circuit held that a subsequent event (passage by Congress of a crop disaster relief bill) could not be used to revise a state of affairs that existed on the date of the bankruptcy filing. In this case the inheritance was property of the es tate on the petition date, giving the Trustee dominion and control over it, not the Debtor. Even if the Fifth Circuit did not find Drye persuasive, Judge Clark was certain that the Circuit Court would not permit a post-petition disclaimer to be effective. Post-petition inheritance disclaimer avoided.

For more information about post petition inheritance disclaimer avoided- contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy tax refund.

Bankruptcy tax refundBankruptcy Tax Refund.  This is an article about what happens when there is a tax refund and the IRS files an offset.

Here’s an example of what happens.  A debtor filed a chapter 13 bankruptcy.  After the filing the IRS retain a portion of the debtors income tax return.  The Debtor sought to recover his bankruptcy tax refund, retained by the IRS in his chapter 13.  The IRS had retained a portion because it had been set off by the IRS against a priority tax liability. In re Jones, 359 B.R. 837 (Bkrtcy. M.D. Ga. 2006).

Judge Walker analyzed the three different approaches to this issue:

(1) the majority view that an IRS setoff under $553 is not permitted by the bankruptcy court for exempt property. See In re Jones, 230 B.R. 875 (M.D. Ala. 199); In re Alexander, 225 B.R. 145 (Bkrtcy. W.D. Ky. 1998);

(2) The minority view, that the setoff by the IRS is allowed, See In re Wiegand, 199 B.R. 639 (Bkrtcy. W.D. Mich. 1996); or

(3) An emerging view that the “overpayment” by the Debtor does not become a “refund” until and unless all setoffs have been applied, See Beaucage v. U.S., 341 B.R. 408 (D. Mass. 206); In re Baucom, 339 B.R. 504 (Bkrtcy, W.D. Mo. 2006); In re Pigott, 330 B.R. 797 (Bkrtcy, S.D. Ala. 2005).

The Court in this case chose the third options, premised on 26 U.S.C. S6402, which specifically allows setoffs from “overpayments”. From the characterization of the claim as an “overpayment”, it follows that the setoff is allowed and, after it is applied, only then does any excess become a ‘refund” which is an asset of the debtor, or the bankruptcy estate.

For more information about Bankruptcy and Taxes  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Are Taxes Dischargeable In Bankruptcy?

Are Taxes Dischargeable In Bankruptcy?Are taxes dischargeable in bankruptcy? The short answer is “sometimes”.  If the debts are relatively old and they meet several other conditions, the taxes are dischargable in a bankruptcy; however, you may have to file a complaint in the bankruptcy court to have a Judge determine the dischargeablity of the taxes debts in order to have the IRS honor the discharge.

Generally speaking, for taxes dischargeable in bankruptcy, you must meet all of these conditions:

1         You filed a legitimate tax return.

2         The tax returned was filed at least two years before filing bankruptcy.

3         The tax liability you want to discharge was due at least three years before filing bankruptcy.

4         The IRS has not assessed your liability within 240 days.

5         You did not willfully evade payment of a tax.

A couple of additional notes.  Penalties for the taxes dischargeable in bankruptcy are also dischargeable, if the taxes are dischargeable in bankruptcy.  But courts are split as to whether you can discharge tax penalties of nondischargeable taxes.

However, if the taxing authority has put a lien on your property, the lien will remain after your bankruptcy.  You will have to pay off the lien before you can sell the real estate will a clear title even if the tax was discharged.

As you can see it’s COMPLICATED!  If you are considering bankruptcy because of your tax debts, consider a consultation with a bankruptcy attorney experienced in discharging taxes in a bankruptcy.

A word of caution, if you get a loan to pay taxes what would otherwise not be discharged in bankruptcy, you can not eliminate that debt in a chapter 7 bankruptcy. You can’t turn nondischargeable taxes in a bankruptcy into a discharageable debt in a chapter 7 bankruptcy. A chapter 13 might be a better alternative for you in this case.

For more information about Bankruptcy and Taxes  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy and Disability Income

Bankruptcy and Disability IncomeBankruptcy and Disability Income. Is Disability Income considered income or property of the estate? Here’s a case where the court addressed bankruptcy and disability income.

In 1995, the debtor was diagnosed as suffering from depression. When he filed his Chapter 7 petition in 2000, he was receiving approximately $11,400.00 per month from a former employer as disability insurance, while he continued to work for a subsequent employer. Four days post-petition, the debtor ceased employment. Over a year later he submitted a disability claim to his second employer, seeking benefits retroactive to 1995 (the date the depression disability began). The claim was denied as to the time prior to termination of employment, but granted going forward, from the date employment ceased. This left the Debtor with monthly payments from disability insurance of approximately $21,700.00. The Trustee sought turnover of the disability payments as assets of the bankruptcy estate. In re Stinnett, 465 F.3d 309 (7th Cir. 2006).

Affirming the Bankruptcy and District Courts, the Circuit Court initially found that an insurance contract in which the debtor has an interest pre-petition, generally consituties property of the estate. Further, payments from such insurance contract in which the debtor has an interest pre-petition, generally constitutes property of the estate. Further, payments from such insurance policies, to the extent the debtor has a right to receive and keep such payments, are proceeds of estate property, which are also property of the estate. The court then addressed the debtor’s argument that this disability payment represented post-petition personal services income, which is exempt from becoming estate property under 541(a)(6). The debtor asserted that his entitledment to the payments was predicted on his inability to obtain personal services income, making them a “substitute” for such earnings, and their equivalent. Rejecting this argument, the Court cited In re Prince, 85F.3d 314 (7th Cir. 1996), holding that the “post-commencement earnings exception should be interpreted ‘extremely narrowly’ and ‘excepts only earings from services actually performed by an individual debtor.”

Therefore, “earnings obtained solely by virtue of the inability to perform services cannot be considered the legal equivalent of ‘earnings from services performed.”

For more information about Bankruptcy and Disability Income  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.