Tricky Tax Issues / You have an extra day to file federal tax returns

If a client of mine wants to file for bankruptcy, for the purpose of discharging income tax debt, I will wait as long as I can to be sure the three year rule is satisfied. I will make sure there are no prior bankruptcies, and I will make sure no extension was requested.

Most of the time, our clients cannot wait, and will want the bankruptcy filed asap. So when are those taxes dischargeable for this year?

I thought to myself, simple:

April 15 is a Sunday.
April 16 is Emancipation Day.

So, taxes are due on April 17!

WRONG

The IRS had technical issues and automatically granted a one day extension! So taxes are due on April 18! So those of us planning on filing bankruptcy for our clients, we have to be sure to add an extra day.

You can find out more by visiting the official announcement here: https://www.irs.gov/newsroom/irs-provides-additional-day-to-file-and-pay-for-taxpayers-through-wednesday-april-18-irs-processing-systems-back-online

Class-action lawsuit against student loan giant brings hope to borrowers in bankruptcy

A recent article from Jillian Berman about a pending student loan class action in Texas.  This will have consequences for consumer debtors.  To read the MarketWatch article, follow the link here.

 

 

Judge Zurzolo Brown Bag on May 14, 2018

Judge Vincent Zurzolo will host a Brown Bag discussion on Monday May 14th at 12:15 p.m. in his courtroom at the Los Angeles Division.

The specific topic is his new procedure to advance the hearing date on confirmation of a chapter 13 plan for chapter 13 cases over which he presides.

In addition, attendees can ask questions about chapter 13 procedures or other general court matters. Please see the flyer and 4 exhibits that will be discussed by clicking the link below.

To view this announcement and the exhibits please click here.

Incredible! 1874 Supreme Court Tongue Lashing

Another memorable class with Prof. MJH when my jaw dropped upon reading Justice Miller’s opinion in a famous 1874 Supreme Court case about the balance between the purpose of the bankruptcy process versus what really goes on…….

Justice Miller writes….

“It is obviously one of the purposes of the Bankrupt law, that there should be a speedy disposition of the bankrupt’s assets.  This is only second in importance to securing equality of distribution……it is a wise policy, and if those who administer the law could be induced to act upon [the Codes] spirit, would do much to make the statute more acceptable than it is……….But instead of this, the inferior courts are filled with suits by or against [trustees], each of whom as soon as appointed retains an attorney, if property enough comes to his hands to pay one, and then instead of speedy sales, reasonable compromises, and efforts to adjust differences, the estate is wasted in profitless litigation, and the fee of the officers who execute the law.”  

I wish I could sarcastically ask Justice Miller — but how do you really feel?   This was in 1874…I gaze into the sky and wonder what he would think if he were to see the “suits” filed today (i.e. 547/548).  Smirk

SFVBA Program – Litigation Strategies

Email from Steve Fox:

Dear All:

We have a really practical program, put on by Judge Russell and Scott Bovitz, on litigation strategies when your clients are short of money.  We have all had this problem, a client in litigation who needs to do things on the cheap (relatively speaking) and cannot afford to pay us to handle the litigation in a first class manner.  Scott and the Judge have spoken to the bankruptcy section a few times.  They put on a good show, they teach and we learn.

Come and learn, pick up a few nuggets which could help you.  Enjoy the company and the food.  Unlike other bar associations, parking is free and the program charge is ½ what all of them charge.

Here are the program particulars: Read more…

RIP Hon. Stephen Reinhardt, Ninth Circuit Court of Appeals

Image result for stephen reinhardtThe “liberal lion” has passed.  He will be missed.  The LA Times article is here.

L.A. County Bar Assoc. Program on Bankruptcy Crimes (April 16)

Bankruptcy Crimes – the distinguished panelists will discuss the provisions of the United States Criminal Code that deal with bankruptcy cases, as well as recent litigated case outcomes and statistics. This is an important course for bankruptcy and criminal law practitioners alike because it analyzes the intersection between the U.S. Criminal Code and the Bankruptcy Code.

Speakers:
Honorable Sandra R. Klein, United States Bankruptcy Court, Central District of California
Monica Tait, Assistant U.S. Attorney, Office of the United States Attorney
Jill Sturtevant, Assistant U.S. Trustee, Office of the United States Trustee
Thomas P. Jeremiassen, Development Specialist, Inc.

When:
4/16/2018
Registration/Lunch: 11:30 a.m.
Program: 12:00 – 1:00 p.m.

Read more…

Bovitz – O’Halloran Writing Contest at California Bankruptcy Forum

Email from Scott Bovitz,

Mike O’Halloran and I are the sponsors of a lighthearted contest at each California Bankruptcy Forum.  Bankruptcy judges tell us that we should write shorter briefs and motions.  In 2018, we are challenging CBF attendees to write a bankruptcy brief or story — in exactly nine words.  See, https://en.wikipedia.org/wiki/For_sale:_baby_shoes,_never_worn (“…While lunching with friends at a restaurant … Hemingway bets the table ten dollars each that he can craft an entire story in six words. After the pot is assembled, Hemingway writes “For sale: baby shoes, never worn” on a napkin, passes this around the table, and collects his winnings.”)  We think that bankruptcy professionals will need three more words than Ernest Hemingway.

Nice Summary of new Consumer Tax Issues from Cathy Moran

Yikes!  Cathy’s article is here. 

“Under the new tax law,  any damage award a consumer recovers stands to go in large part to the IRS.

So even if you are successful in court in vindicating your legal rights, the expenses of getting the award aren’t deductible from the gross award. The taxing authorities end up getting a large hunk of the total recovery.

Welcome to tax ‘reform.’”

Automatic Stay: a Deep Dive

I wanted to see how much I knew about the automatic stay besides it’s general parameters so I opened section 362 and realized that at 6,518 words, section 362 is the longest section in the Code broken up into 15 parts (a-o).   There are 8 things that are “stayed” followed by 28 things not stayed.  Below are parts a-k for now and the rest to follow.  Pop quiz — I discovered a way to invoke the powers of the “stay” without ever filing bankruptcy (that’s my next blog post).

Let’s take a deep dive into the labyrinth:

Part (a) – 8 things that are Stayed 

  1. Commencement or continuation of any action against the debtor that could have been commenced prepetition;
  2. Enforcement of prepetition judgment
  3. Obtain possession or exercise control over property of the estate
  4. Recover re: lien against property;
  5. Recover re: prepetition secured claim
  6. Recover prepetition claim
  7. Set off
  8. US Tax Court re: corporate debtor re: tax liability

Read more…