All posts in Chapter 7

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.

 

 

What to do with Timeshares! Is the Debt Discharged? Yes! But What About Postpetition or Post Discharge Use of the Property?

Below is from the California Bankruptcy Specialists List serve.  Debtor’s obligations under a timeshare agreement are discharged.  But what about postpetition and/or post discharge obligations?  If the obligation arises under the contract, I say it’s gone.  But what about when the debtor uses the timeshare postpetition?  He or she certainly cannot use it for free?  The value of the postpetition use would be, I assume, presumed to be the contract price, and that would be a postpetition debt.  But what does it mean that the debtor “used” the timeshare – postpetition?

From the listserve:

Renay Rodriguez posted:

During recent research I found:

cdcbaa Program on Student Loan Dischargeability on Saturday, March 17 at Southwestern Law School

This should be good.   The program is at Southwestern Law School, Westmoreland Building – 3rd Floor, 3050 Wilshire Boulevard, Los Angeles, CA 90010.  

Speakers are

SPEAKERS:

  • Leigh E. Ferrin, Esq. – Public Law Center
  • Christine E. Kingston, Esq.
  • Austin C. Smith, Esq.

Information on this exceptional panel follows: Read more…

Can a Trucker Use “Homestead” To Exempt His 18-Wheeler with a Sleeping Compartment?

Yes — in Wisconsin anyhow.  In a Wisconsin case, debtor had a semi truck with a cab and he wanted to exempt it under that state’s homestead exemption.   He sleeps in the cabin, has a bunk bend, refrigerator, radio, heater and a/c but no bathroom or kitchen.   Read more…

Debtor’s Inherited IRA Not protected

Your client tells you “yes, I also have an IRA retirement account.”   Don’t stop there — ask them “is this your IRA that you created or you inherited from another person (i.e. spouse or parent)?”   If the latter — then be careful!  Inherited IRA’s can be taken by the trustee.  Why?  Because Justice Sotomayor, on behalf of the entire bench, said so in Clark v. Rameker (2014). Read more…

Raise Fraud in State Court Or Else “Waived” Later for 523?

Are you barred from re-litigating fraud in bk court just because you did not do so in your state court matter even though the facts were there and you could have done so?  In Brown v. Felsen, 442 U.S. 127 (1979), the plaintiff sued defendant for breach of contract in state court (which was based on fraud).  Plaintiff obtained a quick default judgment but did not seek a finding of fraud even though he could have “easily” done so based on the facts and time permitted.  Defendant filed bankruptcy and when plaintiff filed his 523 complaint the debtor screamed “motion to dismiss for res judicata — you should have done that in state court!”  Will the court grant the motion to dismiss?  No.

Res judicata holds that a party is barred from re-litigating grounds for a cause of action that was available to that party in a prior lawsuit.  The motion will be denied because in Brown the Supreme Court said that it would be wrong to force plaintiffs to litigate all of the issues that might later bear on nondischargeability in the future just in case defendant files bankruptcy.  See 422 U.S. 138 (1969).

But does collateral estoppel apply?  Yes, see Grogan v. Garner.

Notifying the State Court of the Automatic Stay

More stuff I didn’t know.  A person on the California Bankruptcy Specialists listserve complained that the Superior Court in Orange wanted him to pay a first appearance fee in order to file a Notice of Automatic Stay.  A tip of the hat to Frank X. Ruggier for his response, ”If you haven’t appeared, it is the other parties responsibility to file Notice of Stay.”

ATTORNEY’S RESPONSIBILITIES FOR GIVING OF REQUIRED NOTICE TO COURT
Rule 3.650(a) of the California Rules of Court requires the party who requested or caused a stay of the proceedings to notify the court of its existence, unless that party has not appeared or is not subject to the jurisdiction of the court, in which case the plaintiff in the pending action must immediately notify the court of the stay.  Therefore, if you or your assignee commenced a civil action to recover attorney’s fees and/or costs from the client, and the clients has not appeared in the action, it is the responsibility of you or your assignee to notify the court of the automatic stay.  Judicial Council Form CM-180 has been adopted for mandatory use in giving notice of a stay of proceedings, and a copy is attached for your use.

UST After Attorney in Riverside in Chapter 7 Cases for Disgorgement

A thank you and tip of the hat to Keith Higginbotham, always looking out for us.

Dear Colleagues!

I came across an interesting UST adversary complaint filed yesterday that alleges improper Ch7 business practices as it relates to “bifurcating Ch7 atty fees between prepetition and post petition” and then “assigning the debt to a collection agency called BK Billing, Inc., to service the debt”.

   The complaint alleges violations of 9th Circuit law as it relates to a novel Ch7 fee arrangement.  My intent is to alert you to a company called BK Billing, LLC.
   Check out:  6:17-ap-01271-MJ  Docket #1

Keith A. Higginbotham
Note from MJH:  The docket states  ”Complaint For Disgorgement Of Fees, Civil Penalties, Sanctions, And Declaratory, Injunctive, And Other Relief Nature Read more…

More on Sundquist: Are Fees Based on Contingency Fee Agreement here Reasonable?

No according to Judge Klein (in 40 pages).

Sundquist v. Bank of America (In re Sundquist) — B.R. — (Bkrtcy, E. D. Cal. Nov, 2017) Klein, J.

Issue:   Is it appropriate to “expunge” an attorney’s lien on the facts here?

Holding:   Yes.  The court here “canceled” the fee agreement between counsel and the debtor on the basis, in part, that fees exceeding $70,000 here were unreasonable.

Judge Christopher Klein

This is a 40 page diatribe excoriating the efforts of debtor’s counsel on behalf of the debtor.  It lays out very nicely however the rules of determining what fees are “reasonable” and how that determination intersects with state law.    Read more…