Of course you love your sweetie.  Honeybunches is your best baby.  And I’m sure that snookums is true blue to you in every way. Have you checked your credit?

Financial infidelity is a leading cause for divorce, not to mention bankruptcy.  For better or worse, your marriage is a financial partnership as well as a legally recognized relationship.  While you are not necessarily liable for your spouse’s debts incurred during marriage, except in a community property state like California or Wisconsin, it’s really important to know where you and your spouse stand so far as money is concerned.  A third of American couples with combined finances say they have committed financial infidelity, with both sexes lying to their partners in equal numbers, according to a Harris Interactive poll released in January

During my first marriage, I frequently found myself unpleasantly surprised at the end of the year.  I’d get nice year-end bonuses and think that my family finances were in good shape. Then I would find out that my then-wife had been holding out on me the fact that she had run up substantial credit card bills.  Men are equally as bad as women in lying to their spouses about their finances.

Open and honest relationships are critical to the success of any marriage.  And openness and honesty about financial matters is just as important.

Here are some of my suggestions for a happy financial marriage:

• Both you and your spouse should have full on-line access to all financial accounts
• Both you and your spouse should review each other’s credit reports at least once a year
• Both you and your spouse should sit at the kitchen table periodically to agree upon the family’s financial objectives for the year.
• Both you and your spouse should design a mutually agreed upon family budget – maybe not down to the penny but at least as to the big items.
• Both you and your spouse should agree on major financial goals for the family and agree on actions you’ll take in order to reach them.

The family that saves together, plans together, and budgets together stays together – and avoids bankruptcy too.

by David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney · Posted in Marriage and Debt

This year, it seems that more creditors than ever are sending IRS Form 1099-C to their debtors who have filed bankruptcy or settled debts with them.   While in many cases it is unnecessary for the creditor to do this, it is nothing to fear.  If a debt is discharged in bankruptcy, it is not treated as cancellation of indebtedness income, and it is not taxable.  The IRS has provided a simple fix for the seemingly unnecessary 1099-C: Form 982.

If you have received a 1099-C, you need to file IRS Form 982 to demonstrate to the IRS that it is not taxable.  While it seems complicated, it is very simple with regard to consumer debt discharged in bankruptcy, and even do-it-yourself tax filers should be able to do it.  You just need to check box 1a on the form ("Discharge of indebtedness in a title 11 case" - "Title 11″ being the Bankruptcy  Code, not to be confused with Chapter 11, which is just one type of case under Title 11).   You then list the amount discharged on line 2, and then list it again on Line 10a to reduce the basis in your property.  However, only list it on 10a to the extent the basis (generally, the purchase price) of the non-depreciable property that you retain after discharge exceeds the debt remaining after your discharge (which includes both existing mortgages and loans secured by property you still own and any non-dischargeable debt).  This reduction in basis can result in capital gains tax liability in later years, but because of the residential capital gains exclusion, for most people it has no effect.

This "reduction in attributes" can be more complicated for business debt: for that, you should to consult your tax advisor.

Why is it that these forms are issued?  The idea that cancellation of indebtedness is income is pretty simple, and is designed to avoid what could otherwise be a great way to defraud the IRS: instead of getting paid money that would be income, you could "borrow" the money (because a loan is not income), and then have the "lender" just write off the "loan".  To avoid this scam, the tax law generally treats cancellation of debt as income.

To avoid creating phantom income when there is no scam, but legitimate debt cancellation for non-fraudulent reasons, there are certain exceptions to the treatment of cancellation of indebtedness as income.  The most important for consumers are (a) discharge in bankruptcy; (b) insolvency; and (c) qualified principal residence indebtedness.

• Debt discharged in bankruptcy is simply not income for cancellation of indebtedness purposes. 

• Debt cancelled to the extent of a taxpayer's insolvency is not treated as taxable income.   Generally speaking, this means that if all of your liabilities exceed the fair value of all of your assets (including exempt assets and retirement plans), cancellation of indebtedness up to the amount by which you are insolvent is not taxable (once rendered solvent, the balance would be taxable). 

• Finally, through the end of 2012, cancellation of secured loans used to buy, build or substantially improve your principal residence, or to refinance loans incurred for those purposes, is not taxable.

Even though cancellation of indebtedness may not be taxable, the law in many cases requires, or permits, creditors to issue Form 1099-C to report that cancellation to the IRS.  The IRS regulation (26 C.F.R. 1.6050p-1(a)(3)) states "Except as otherwise provided in this section, discharged indebtedness must be reported regardless of whether the debtor is subject to tax on the discharged debt under sections 61 and 108 or otherwise by applicable law."  In other words, the fact that you get a 1099-C from a creditor does not mean that you owe tax on the money shown on the form.   That is the reason for the Form 982.

There are exceptions to reporting.  In particular, where a debt is discharged in bankruptcy, the IRS does not require issuance of a 1099-C unless it was incurred for business or investment purposes.   Cancellation or discharge of consumer debt in bankruptcy need not be reported on a 1099-C.   But it can be.

A few words of caution: if the debt, or part of it, was cancelled before you filed bankruptcy (through debt settlement or negotiation, for example), the creditor must issue the 1099-C unless another exception applies.   And that debt is not included on Line 1a of Form 982, because it was not discharged in bankruptcy.   As a result, even if you later file bankruptcy, you may owe tax on that debt cancellation income unless you were insolvent at the time you settled it.  For that reason, it may make sense not to settle your debtsbut to just file bankruptcy and discharge them.  Before entering into a debt consolidation or settlement program, or settling claims asserted against you, it is important that you discuss the tax aspects of your situation with an experienced bankruptcy attorney.\

by Dan Press, Virginia and D.C. Bankruptcy Attorney · Posted in *Bankruptcy Basics, Tax Issues In Bankruptcy

Business owners who find themselves liable for unpaid payroll taxes are in deep trouble.  The trust fund portion of the tax, the amount withheld from employees' checks, becomes a personal debt of anyone in the business who could have paid that money over to the IRS.  Usually, trust funds make up about 2/3rds of the payroll tax.  The balance is the business's share of Social Security.

Trust fund liability is not dischargeable in bankruptcy.  The statute of limitations is10 years and the IRS is a fearsome creditor.

If you find yourself in this pickle, you, and the business itself, can avail yourself of your right toearmark any payment you make on Form 941 liability. A taxpayer  who makes voluntary payments to the IRS has the right to designate to which liability the payment will be applied . In re Ribs-R-Us, Inc., 828 F.2d 199, 201 (3rd Cir. 1987).

An earmark is simply a direction as to how the payment is to be credited.  Pay voluntarily and you have the right to tell the IRS what to do with the money.

Without instructions, the IRS is free to apply payment it receives on the tax debt as it chooses.  And it chooses the manner of application that benefits it best.  Send a check for payroll taxes and if the check is not enough to pay the entire liability, the IRS applies it first to the dischargeable portion of the tax first, preserving the personal liability of the business owners for the remaining tax.

Likewise, if the IRS levies an account, they may apply the levied funds as they wish.

Write directions on the check, and you can insure that each dollar paid on payroll taxes is applied to the portion of the debt that will follow the individuals around, long after the business has failed.

Of course, the better course of action is to remain current on payroll taxes.  Use a payroll service that won't cut the checks unless the taxes are paid, or make a tax  deposit  with each payroll. Dip into the money withheld from employees and you've taken a "loan" that lives forever.

by Cathy Moran, California Bankruptcy Lawyer · Posted in *Bankruptcy Basics

What happens to my tax refund if I file bankruptcy is:

it depends.

Tax refunds received, after you file your case, have to be paid to the Chapter 13 bankruptcy trustee, at least in

the 6th Circuit, which covers Michigan, Ohio, Indiana and Kentucky, because the U. S. Court of Appeals said so.

OK, there are ways to get out of that, but it is basically true.

It is possible to get bankruptcy court approval to allow you to spend the tax refund on something, but you have to file a motion and get that approval in a court order.

For Chapter 7 bankruptcy cases,

Tax refunds are calculated to accrue 1/12th every month.

So, if you file Chapter 7 bankruptcy six months into the year, July 1, half your tax refund for that year already exists.

As opposed to saying the first 9 or 10 months of your tax payments go to pay your liability, and the last 2 or 3 months are the refund.

Accrued tax refunds must be listed as an asset and claimed exempt if you want to keep it.

Otherwise, the Chapter 7 trustee can take it.

Which exemptions you can claim depend on what state you live in.

Many courts have held that if you leave off an asset, such as a tax refund, you cannot amend later to keep it from the trustee, even though the Bankruptcy Code says the debtor has a right to amend the bankruptcy schedules at any time.

If you file any time other than January 1, and have not received your tax refund for the previous year, or years, that yet to be paid refund is an asset that must be listed, and claimed exempt, or you may lose it to the trustee.

by Kurt O'Keefe, Attorney at Law · Posted in *Bankruptcy Basics

Keep your emotions in check when dealing with your financial problems.  No one wants to file bankruptcy, but sometimes it's your only meaningful option.

"I don't want to file bankruptcy," a client said to me the other day.  "No one does," I replied.  I explained that any good bankruptcy lawyer will explain non-bankruptcy options-like debt settlement or even doing nothing-prior to recommending bankruptcy.  However, sometimes there really aren't any other real options.

Another client told me, "I know you'll recommend bankruptcy-your favorite option-but I'm not doing that."  I then told him that my "favorite option" was doing what was best for my clients.  That might be bankruptcy, but it might just as well not be bankruptcy.  In my Charleston, South Carolina practice, I regularly tell clients not to file bankruptcy.

Both of these clients are filing bankruptcy now after extended meetings with me to evaluate all their options.  Both are relieved and feel much better now that they have a solid financial plan for dealing with their debts.  To their credit, both kept open minds and will be better off for doing so.

I know going through financial problems is extremely stressful.  It's the number one cause of marital discord, and it leads all sorts of stress-related problems.  It causes problems in relationships of all sorts-with spouses, children, employers, and friends.  It's just plain no fun.

But a knee-jerk approach to your financial problems is a bad idea.  "I won't file bankruptcy" might be an appropriate answer to give after you have evaluated all your options, including exploring you rights under the Bankruptcy Code.  So keep your options open and be open minded.  Your bankruptcy lawyer's "favorite option" is what's best for you.  Get all the facts so you can make an informed decision.

by Russell A. DeMott, Charleston Bankruptcy Lawyer · Posted in *Bankruptcy Basics

The Fair Credit Reporting Act requires credit reports to be accurate. What is accurate reporting during a bankruptcy case?

In general, creditors have no duty to report anything at all to credit reporting agencies. Consequently, many will simply stop reporting any debt information once informed of a bankruptcy case.
However, sometimes a credit report will reflect a balance for a debt that was included in a bankruptcy. When should this balance be set to zero? During a bankruptcy, which in the case of a Chapter 13 can last several years, or only after the bankruptcy is concluded and a bankruptcy discharge appears?
The answer is that a debt does not need to be listed as having a zero balance until a discharge makes it so. While a bankruptcy is pending, the debt balance still exists while the debt cannot be legally collected. Having a pre-bankruptcy debt balance stay on a report during a bankruptcy is sometimes harmful to credit during that period.

However, the duration of a Chapter 7 case is brief-three to four months-and one cannot usually obtain new credit during a Chapter 13 bankruptcy. So, even though it lasts longer, credit during a Chapter 13 bankruptcy is usually not necessary. When it is necessary, like in the case of a proposed mortgage refinancing, sometimes it is possible to work with a mortgage broker or lender to do quick disputes and get disputed trade lines off a report to complete the transaction. Often a lender will not re-report the debt under those circumstances for fear of violating the automatic stay.

by Nicholas Ortiz, Boston Bankruptcy Attorney · Posted in *Life After Bankruptcy

Few concepts are as difficult to grasp for a potential bankruptcy debtor than the "means test," which Congress added to the bankruptcy law in 2005.  To be sure, the means test can be confusing, and it has been roundly criticized both by lawyers and by judges in bankruptcy court decisions.  While this brief article will not attempt to explain everything about the means test, it will explain the purpose of the means test, and help you to understand how to assist your lawyer in preparing it.

The key to understanding the means test is to know that it is financial formula, not unlike a tax return.  The means test aims to predict (1) whether you can afford to pay off some or all of your debts, and thus should be required to file chapter 13 bankruptcy rather than chapter 7, and (2), how much you can afford to pay each month into a chapter 13 payment plan.  The means test is a formula developed by Congress to answer the question of which type of bankruptcy, chapter 7 or chapter 13, is appropriate for you. 

What Congress attempted to do through the means test was to establish a uniform method to enforce its desire that bankruptcy debtors who could pay back part of their debts in chapter 13 be made to do so.  The means test is fundamentally an income and expenses test.  Those who can afford chapter 13, based on the means test formula, in nearly all cases cannot file chapter 7.

The means test is only half the inquiry into your income and expenses, because when Congress enacted the means test formula in 2005, it left untouched the "actual income and expenses" test it created in 1986.  Yes, that's right, there are two income and expenses tests in the bankruptcy law: the actual income and expenses test enacted in 1986, and the means test enacted in 2005.  Each of these separate tests is designed to tell if you should be forbidden from filing chapter 7 because of your ability to afford a monthly payment in a chapter 13 case.  It's little wonder, then, that people are confused about the income and expenses issue.

The important point to remember is that your lawyer will need to prepare two separate income and expenses statements for your chapter 7 or 13 bankruptcy: the means test and the actual income and expenses test.

The actual income and expenses test is based upon your current income and household expenses, projected into the near future.  Unlike the means test formula, it is based on common sense and you can often prepare most of this statement yourself, without much input from a bankruptcy lawyer.  The actual income and expenses test looks at your actual household budget, excluding the debts that would be discharged in a chapter 7 (or paid in a chapter 13).  The question is, after taking away these debts, do your actual income and expenses allow you to make a monthly payment in a chapter 13 case?  Just as with the means test, if the answer is yes, then you have file chapter 13 instead of chapter 7.

Because the means test is a formula using past income, along with a mixture of your actual expenses combined with arbitrary IRS-provided allowances for some of your expenses, it is next to impossible for you to prepare your means test without your bankruptcy lawyer's help.  However, you can help your lawyer in doing this for you by being diligent in providing both past income information, and current household expenses information, and by understanding why your lawyer needs this information.

by Craig Andresen, Minnesota Bankruptcy Attorney · Posted in Means Testing

Recently, Senator Jeff Merkley from Oregon has been speaking very loudly about the need for the current Congress to amend the Bankruptcy Code to allow cramdowns of first mortgages on primary homesteads.  If you recall, the same proposal was attempted by Senator Dick Durbin from Illinois back in 2009.

This time, Senator Merkley may have some additional ammunition in his arsenal.  The recent jobs report is horrible.  The housing market is in the toilet, and we are facing over a million additional foreclosures in 2011.  Likewise, we now learn that the Federal Government is considering scraping the HAMP Program.   Let's face it right now, this Country is in a mess and there is no plan to bring us out of it.  Most Americans are living paycheck to paycheck without the security of knowing if they can save their completely underwater homes.  Most Americans are still being told that they have to be behind 90 days before anyone will help them.

There are still over 300K mortgage foreclosure suits being filed in the United States, and that is unacceptable to me.  The HAMP program is a failure, I agree, but that doesn't mean we should stop looking at the situation to come up with better ideas.

Senator Merkley is proposing this legislation because it is comprehensive.  It will not only allow a homeowner to save their homes by reducing the principal to what the house is actually worth, it will also allow the homeowner to craft a financial plan to deal with all of their debts under the Bankruptcy Judge's supervision.  Accordingly, there will be no unfair and deceptive dealings.  Everything will be in the open, and the homeowner will not have to live in fear of losing everything that they have ever worked for.  As if they haven't lost enough already.

Merkley's plan contains another component.  He wants to implement a refinancing option to provide homeowners facing foreclosure the option to refinance at current rates and home values.

I think that one of the most important provisions in the Merkley plan would suspend foreclosures while the mortgage modifications were being considered.  I have never, and I mean never, spoke to one person who sent in their mortgage modification documents one time and a decision was rendered.  They may be out there, but I haven't heard about them.  I have heard from and about individuals who sent in their paperwork multiple times.

I agree with Senator Merkley's plan.  I believe it is well thought out and will not only create jobs, but will provide stability to the American public.  Sure, the number of personal bankruptcies will increase, but the number of foreclosures will drop.  The number of Americans paying their mortgages will increase.  The number of people working will increase.  Trust me, if you tell someone that they can save their homes by taking a less paying job.  The homeowners would be inspired to take any type of work knowing that they are providing for their families.

by Carmen Dellutri, Southwest Florida Bankruptcy Attorney · Posted in *Bankruptcy Basics

Your mother entrusted her funeral expense money to you last year.  You spent it on living expenses.  You don't want your mother to get notice of the bankruptcy as a creditor because you are very much ashamed.  You said that you were hoping to repay your mother with your expected tax refund, and asked if we could forget that you brought it up. 

Let's go through this slowly.

Every bankruptcy filer has a personal meeting with a trustee, who is appointed by the U.S. Department of Justice.  The meeting is in a fairly public room with five rows of chairs filled with other filers waiting their turn, while the trustee sits before a table in front of the room with one filer and the attorney.

The filer raises her right hand and takes an oath to tell the truth.  The meeting is recorded.  There's a big sign right behind the trustee that warns of five years in jail and a $500,000 fine for perjury. 

Then the trustee directly asks you if you've listed all your debts.  He directly asks If you owe any money to a family member.  And he directly asks if you've paid any money to any family member during the past year.

Next, the trustee directly asks you how you spent the tax refund.

So, Jane, I ask this question to you quietly and without judgment:  How good a liar are you?  If you're like each one of my other clients, you won't even be able to sleep before the meeting  - never mind maintaining the lie, the perjury, at the recorded meeting with the trustee

Now (I say jokingly, but to make the point), jail may not be a bad thing.  You get a dry room.  You get three meals a day.  You get an hour of exercise a week, which may be more than you're getting now.  You get a roommate named Bubba.

Get my point? 

No, Jane, we can't forget about this debt to your mother.  I'd be doing you wrong to counsel you otherwise.  You might be denied your bankruptcy protections from your debt, and you'd have every right to sue me after you got caught.

Not to make a big deal of this, but my initial intake form asked about "Loans From Family Members or Friends:  Name, Relationship, Amount, Purpose (MUST DISCLOSE)!!!"  You told me that your mother gave you $500 over the past year.  You're certainly not the first client in this situation, which is why I put that in my form.

I hasten to add that you just brought it up because you know in your heart that it was wrong to hold back the information from me.

Repayment to your mother is what we call a preference, where you preferred one creditor over the others.  (You know, those poor innocent credit cards.)  A trustee has one year to sue (yes, sue) your mother to recover the repayment and redistribute the money to all your creditors pro rata.  So, you can repay her and we'll wait a year.  We'll see if your new situation in the future requires an adjustment of fees.

Or you can tell me that you swear to G-d and hope to die that (1) you've told your mother that you spent her money, and (2) and that she said you don't need to repay her, that it was a gift.  (You'll still have to disclose it as income when we get closer to the bankruptcy filing but she won't get notice.)

I'm very serious about the possibility of perjury.  I hope you trust me on this.

by L. Jed Berliner, Springfield & Marlborough, MA Bankruptcy Attorney · Posted in Family Debt Problems

A Michigan bankruptcy court recently took the unusual step of denying a discharge under bankruptcy code section 707(a) to a debtor whose debts were primarly business debts, based upon the court's determination that the debtor could repay a portion of his debts in a chapter 11 reorganization case.  In re Rahim, 2010 WL 5128944 (Bky.E.D.Mich. Dec. 16, 2010),

Section 707(b) is the usual provision relied upon by bankruptcy courts to deny a chapter 7 discharge for ability to repay all or part of one's debts in a chapter 13 case.  Because section 707(b) expressly does not apply to debtors whose debts are primarly business debts, most lawyers have assumed that business chapter 7 debtors are immune from motions to dismiss based upon ability to repay a portion of the debts.  What makes this case unusual is that the court relied upon section 707(a) to bring about the dismissal of the business debtor's chapter 7 case.

In re Rahim involved married chapter 7 debtors who earned in excess of $509,000 annually from a medical practice.  Their unsecured debts consisted mainly of $6 million in guarantees arising from failed Florida real estate investments.  The debtors' budget showed monthly expenses of $15,714 for their home mortgage, nearly $5,000 for a second home in Florida, over $2,000 for luxury motor vehicle payments, $4,575 for private school tuition, and $540 for care for the debtors' elderly mother.  The court characterized these expenses as "extraordinary."

The chapter 7 trustee's lawyer testified that over $200,000 in assets would be administered for creditors if the case were allowed to proceed under chapter 7 rather than being dismissed.  However, the court noted that much more would be paid to creditors if the debtors converted the case to a chapter 11 reorganization.

The court held that given the debtors' income level and extravagant lifestyle, they simply were not in need of a chapter 7 discharge.  Therefore, section 707(a) applied, and the fact that the debts were primarly business debts was of no consequence.  The case was therefore dismissed for "cause" under section 707(a).

by Craig Andresen, Minnesota Bankruptcy Attorney · Posted in * Business Bankrtupcy, *Chapter 7

Five years after bankruptcy reform, and millions of cases later,  the Supreme Court is still deciding issues affecting the most basic administration of bankruptcy cases.  The latest case, In re Ransom, held a debtor may not deduct an ownership expense on the Statement of Current Monthly Income [B22C] for a vehicle that was not encumbered by a lien.

The court did not specify whether the Ransom decision, a chapter 13 case, applies to chapter 7 cases, yet the Court compared Ransom with two contrary chapter 7 Court of Appeal decisions, In re Ross-Tousey, and In re Tate, both of  which permitted that ownership deduction for a free and clear vehicle on the chapter 7 Means Test.  Did Ransom overrule Ross Tousey, Tate, and various District Court decisions?   Still today bankruptcy attorneys do not know how to answer that question.  At least one esteemed bankruptcy professor fashioned an argument that Ross-Tousey remains good law because means testing in Ransom looked to see how much money a chapter 13 debtor reasonably needed for support during the duration of the chapter 13 case.  Time and another case decision will only tell.

Well over a million bankruptcy cases are filed annually.  Prior to the Ransom decision, most debtors with one or two cars claimed an ownership deduction for each fully owned non-liened vehicle.  Ransom changed the landscape five years after the "new" bankruptcy law took effect.  But other questions remain unanswered.

In Ransom, the Supreme Court adopted a definition of 'ownership expense' as being limited to loan or lease payments.  On the issue whether a debtor may deduct the full ownership expense amount listed in the IRS Local Standards [used in bankruptcy calculations] if debtor does not actually spend that much, the Supreme Court directly, pointedly and matter of factually said "We decline to resolve this issue".

Equally disturbing is language in the Ransom decision that says a debtor may not claim actual expenses that exceed the amount of the allowance listed in the IRS tables.  In practice, a debtor with a car loan or lease payment higher than the allowance currently takes the higher expense as a secured payment deduction.  Does Ransom threaten payment of secured debt to car lenders?

2010 has been a busy bankruptcy year for the Supreme Court.  Just a few months back, in June 2010, that court issued a watershed decision, Hamilton vs Lanning, that changed the way debtors calculate projected disposable income available to pay unsecured creditors.  Bankruptcy reform legislation took effect on October 17, 2005.  Since then, courts have struggled to calculate "current monthly income",  which oddly enough averaged income over a six month period before bankruptcy, but resulted in a number that was not actually current, not fully monthly and not accurately income.  Bankruptcy Law Network contributor Dan Press analyzed the Lanning decision this way:  "rather than mechanically applying the calculation of current monthly income which looks at debtor's income for the 6 calendar months before the filing of the petition, the court can take into consideration changes in income that have occurred or are known or are virtually certain to occur at the time of confirmation."

Prior to Lanning, some courts decided to mechanically count income only during the 6 months, some courts only looked to actual income earned most recent to the time of filing bankruptcy, some courts looked to a combination of both the mechanical average 6 month look-back period with adjustment for recent increases or recent decreases, and some courts experienced contrary opinions by different judges within the same district.  Nearly 4 years 8 months after the first reform case was filed, the Supreme Court told us how to calculate debtor's income.  A chapter 13 bankruptcy plan may not last longer than 60 months.  Ironically, a case filed on or after October 17, 2005 and slated for the maximum 5 years could have been active at the time Lanning decided five years later how to calculate monthly plan payments for that case.

The highest court in the land is increasingly called upon to determine issues and answer questions of bankruptcy law.  In March 2010, the Supreme Court clarified that a lawyer could legally advise a client regarding appropriate situations where borrowing money prior to filing bankruptcy was in the client's best interest and where the client intended to repay the money after filing bankruptcy.  See In re Milavetz.

Are other issues pending?  Are major issues unresolved?  Certainly.  A few months before Christmas 2010, bankruptcy courts rendered opposite decisions in the Southern Illinois case of In re King, and in the Northern Illinois case of In re Davis, regarding whether modification of a confirmed chapter 13 plan required compliance via 1329 with the 1325b requirement that debtor pay unsecured creditors all projected disposable income during the applicable commitment period.

Litigation is expensive, time-consuming and delays justice for debtors and creditors alike.  Equally if not more importantly, unresolved issues frustrate judges and lawyers who are forced to speak about bankruptcy law in gray terms and with disclaimers of uncertainty.  Bankruptcy reform legislation has not been applied equally, certainly or consistently during its initial five years.  Though the Supreme Court is not in the business of issuing advisory opinions, more questions need answers, sooner than later

by Andy Miofsky, Illinois Bankruptcy Attorney · Posted in *Bankruptcy Basics, Means Testing

Lately, a number of clients coming to see me have just transferred real property (or their interest in real property) to a family member or friend, or they are inquiring about transferring their property to a family member or friend - and, of course, for no money in return.  AND, they want to file bankruptcy ASAP.  Bad decisions and bad ideas! Bankruptcy law has several provisions that penalize a transfer made with the intent to hinder, delay, or defraud creditors.   Any transfers made within two years of filing bankruptcy (and in some instances - further back than that) the bankruptcy trustee can undo those tranfers pursuant to his avoidance powers under Section 548 of the Bankruptcy Code. 

I recently turned down filing a case for a potential client who, after several months of being laid off from work and no foreseeable job offer coming, decided to transfer a second parcel of land (approximately 20 acres) - not his homestead to his son.  He wanted to protect his land from his creditors.  Unfortunately, this is considered a fraudulent transfer and the trustee could undo the transfer.  He, of course, was sick to learn that his actions had only made matters worse for him since he is unable to file a Chapter 7 bankruptcy now and keep his land.   

If you are thinking about filing for bankruptcy and are thinking about transferring or giving property of any value to someone else, PLEASE talk to a bankruptcy attorney before you take that action.

by Pamela Stewart, Attorney at Law · Posted in *Bankruptcy Basics, *Filing for Bankruptcy

Foreclosures have been getting a lot of media attention lately, but credit card debt probably accounts for more bankruptcies than foreclosures.  And a lot of people who fall behind on mortgage payments and end up in foreclosure do so trying to juggle credit card debt as well, so it’s probably responsible for a fair number of those as well.  Credit cards are like crack–addictive, hard to handle, and a hard habit to break.  It’s not an original thought.  My colleague and friend, Russ DeMott, has said for years that credit card issuers are the drug pushers of the financial world.

For years, credit card issuers have used extremely sophisticated marketing tactics to woo customers and promote the use of credit cards, often in completely irresponsible ways, at the same time that their collection departments maximize fees, unilaterally raise rates, and, in short, do all those things that cause customers to default.  Often at the same time.  Although it has some age on it, the PBS show Frontline did a report that outlines some of the history of the industry, as well as some of the things you should know about credit cards, but probably don’t.  In fact, some of those tactics were so abusive that Congress passed the Credit Card Accountability, Responsibility and Disclosure Act (sometimes referred to as the CARD Act).  What the act does not do, as some scammers try to maintain, is give anyone the “right” to avoid or settle all or part of their credit card debt.  That is called “bankruptcy.”

I often hear from my clients very real and heartfelt concern that they are somehow treating the credit card companies unfairly by filing bankruptcy.  I point out to them how, in many cases, the card issuers knew that they were overextended when they offered new credit, and how much they have paid over the years in interest and fees.  And I point out how aggressively the credit card companies market their cards.  In many cases my clients talk about trying to persuade credit card lenders to offer any lower interest rate or payment terms, while the account is being paid, but offer generous settlement terms after the account is in default and headed toward bankruptcy.  In other words, as long as you’re paying the minimum payments, they have no interest in working with you, but once they’ve trashed your credit, they’ll settle for pennies on the dollar.

I recently added another story to my repertoire, to demonstrate the essential irrationality of credit card marketing, which also explains a lot about credit card collection.  In the last several weeks I received in the mail an offer for a pre-approved credit card, from a very large bank.  The offer included a period of more than a year with no interest.  Only problem was that the offer was directed to a person who doesn’t exist.  The address on the offer was my business address, but my name appeared nowhere on the offer.  Instead, the last name on the offer was that of one of my clients, and the first name was that of the client’s bankruptcy trustee.  How the bank happened to put that together is a mystery to me, but is a perfect demonstration of the essential irrationality of their marketing efforts.  And no, I did not send it back.  I will admit to curiosity about what would happen, but common sense, and a sense of decency, prevailed.  I wish I could credit the credit card issuers with the same.

by Dana Wilkinson, Attorney at Law · Posted in *Filing for Bankruptcy,Consumer Credit Issues,Discharge of Debt,Personal Finance

Student loan debt is not dischargeable in bankruptcy. That's not news-it's pretty much common knowledge.  But student loan debt for newly-minted lawyers is a growing problem, since the job market for lawyers is, well, abysmal would be an optimistic assessment.

[A] generation of J.D.'s face the grimmest job market in decades. Since 2008, some 15,000 attorney and legal-staff jobs at large firms have vanished, according to a Northwestern Law study. Associates have been laid off, partners nudged out the door and recruitment programs have been scaled back or eliminated.And with corporations scrutinizing their legal expenses as never before, more entry-level legal work is now outsourced to contract temporary employees, both in the United States and in countries like India. It's common to hear lawyers fret about the sort of tectonic shift that crushed the domestic steel industry decades ago.

You would think that lawyers would do a better job of taking care of their own.  After all, law schools make a big deal about their job placement services, and the number of graduates who have jobs.  But, since law schools are often profit centers for universities (or for-profit institutions), law schools are in the business of selling themselves, even if they have to fudge the numbers to do so.

The surveys themselves have a built-in bias. As many deans acknowledge, the results are skewed because graduates with high-paying jobs are more likely to respond than people earning $9 an hour at Radio Shack. (Those who don't respond are basically invisible, aside from reducing the overall response rate of the survey.)

Certain definitions in the surveys seem open to abuse. A person is employed after nine months, for instance, if he or she is working on Feb. 15. This is the most competitive category - it counts for about one-seventh of the U.S. News ranking - and in the upper echelons, it's not unusual to see claims of 99 percent and, in a handful of cases, 100 percent employment rates at nine months.

A number of law schools hire their own graduates, some in hourly temp jobs that, as it turns out, coincide with the magical date. Last year, for instance, Georgetown Law sent an e-mail to alums who were "still seeking employment." It announced three newly created jobs in admissions, paying $20 an hour. The jobs just happened to start on Feb. 1 and lasted six weeks.

Does this business model ring a bell with anyone?  Young borrowers seduced by promises of a life of ease and prestige borrow more than they can possibly repay.  And where do you go to find a 22-year-old skeptic, who can grasp the reality of a six-figure debt load?  Here's the view from one such, Elie Mystal, eight years later:

I graduated from law school eight years ago, and I still don't answer my phone unless I know who is calling. Every six to eight months, I call up the debt collection agencies that have been hounding me, and do a gut wrenching dance where I try to give them a little more money towards debts that I'll need to hit the lottery to ever pay off, while they ask for dollar amounts I simply don't have. At the end of the day, I'm judgment proof. There's only so much blood you can get out of a rock.And "credit," I mean, I don't even know what that is anymore. I've been running a straight cash lifestyle since 2003. No really, I haven't had a credit card since '03, even my debit card isn't a credit card. If I had hit the Mega Millions last week, it'd still be seven year before I saw a 700 on my credit report. People say "Elie, you know you'll never be able to own a home or finance a car if your credit is that bad." And I laugh. "Own"? Are you kidding me? Getting a landlord to accept my application to rent is an effort of futility. I once got passed over on a rental for a guy who had just been released from prison.

Mystal asks a couple of  very good questions:  First, where is the consumer protection for these kids? "But, bottom-line, if you sell a toaster that explodes 50% of the time, the government won't let you sell that toaster. Maybe the ABA doesn't have the teeth to do it, but somebody needs to regulate law schools. How many lawyers need to be in the room before they start making up some laws?" And then there is this:

The biggest argument in favor of preventing student debt from being discharged through bankruptcy is that it makes banks willing to loan the money. Well, maybe they shouldn't? Maybe you should have to get an educational loan the same way you get a loan for a small business. Maybe you should have to sit down with a banker and explain to them how you are going to pay them back before they give you money. 150 LSAT score and acceptance to a third tier law school with questionable employment statistics? Sorry kid, nobody is going to give you money for that, for your own good.

The basic public policy justification for bankruptcy is that it is not healthy for all of us for some of us to be enslaved by debt. There is an entire generation of law school grads for whom that is a reality, and it should be chilling for the rest of us.  And I am sure law school grads are not the only one affected-I just happen to be more familiar with the legal profession.  The time has come to reassess the reasons for non-dischargeability of student loan debt, before we completely waste an entire generation of smart young lawyers.  And other professionals as well.

by Dana Wilkinson, Attorney at Law · Posted in *Bankruptcy Basics,Discharge of Debt,Personal Finance,Student Loans

Unless you are a mortician most people do not like to think about death, especially when considering filing bankruptcy.  However there are times when death comes into play whether it be the death of the debtor or the death of a loved one.  Inspiration for these blogs come from the everyday experiences in my practice and life.  The same holds true for this blog.

This week a friend of mine passed away.  Because her passing was unexpected and sudden and it has given me pause to think of ways of improving my practice and assist my clients in planning for the unexpected.  She like many thought she had time to get her personal affairs in order with respect to her final wishes.  Unfortunately the universe had a different time line than she did.  So it is in her honor that I write this blog.

When one is in bankruptcy and dies they still may be eligible for a discharge whether it is a Chapter 7 or a Chapter 13.  If the debtor dies after the filing of the bankruptcy they still may be eligible for a discharge of their debt.   This discharge of debt will assist loved ones in preventing debt collectors from attempting to collect from one's estate.

The difference between the Chapter 7 and Chapter 13 Bankruptcy is that in a Chapter 13 you must request a Hardship Discharge.   Kent Anderson has written a great article explaining the three prong test for aChapter 13 hardship discharge.  As Kent has eloquently outlined the hardship discharge there is no need to reiterate this point.

The point of this blog is to illustrate that bankruptcy is a great opportunity to get all of one's personal affairs in order.  To prepare for bankruptcy you have to gather so much information and paperwork that it makes sense to go ahead have your estate planning documents drafted.  This way your entire financial house can be placed in order.  If you are not in bankruptcy and do not plan to file for bankruptcy you still should get your personal affairs in order now before it is too late.

Our lives our so busy and stressed filled that often we do not stop to think what will happen if I die today.  Who do I want to take care of my children?  Where do I want to buried?  Who do I want to make my medical and financial decisions if I have to be hospitalized?  How will my family be able to shut down my virtual online life?  The are many questions that we put off until tomorrow hoping to not have to face this decision with respect to our loved ones or ourselves.

At a minimum everyone who is over the age eighteen should have certain documentation:

1. A Last Will and Testament or Trust. These documents will advise your loved ones what you want done with your worldly possessions as well as your final requests.  The Will itself can be complex or simple as Chief Justice of the Supreme Court Warren Burger's will.
2. An Advanced Directive or Living Will that explains what your requests are when your medical condition is critical.
3. A Durable Power of Attorney so that someone may make financial and medical decisions for you if you are incapacitated.
4. A list of all your insurance policies and all the policies should be placed together.
5. All bank accounts should have someone listed as the person to receive the account upon transfer upon death.  This is also known as TOD.  All bank accounts should be listed as well as the user name and password for any online accounts.
6. All safety deposit boxes should be listed.
7. Transfer upon death should be listed on all your vehicles and copies of all titles or loan paperwork should be gathered.
8. If you own a home you should see if your state allows for a beneficiary deed.
9. List all online websites, social networking sites and accounts with the user names and passwords.
10. List the user name and passwords to all your computers.
11. A lit of friends that you would like contacted upon your passing.
12. I also recommend that that you write a letter to each loved one especially if you have children to give your thoughts along to them directly after you pass.  To this day I have a Christmas card that arrived 3 days after my father passed.  It was the last time I had heard from my father and the first time he truly expressed how he felt.  I have that card framed and in my office where I view it everyday.  I consider it the greatest gift that my father had given me.
13. Place all the above documentation in one spot such as a safety deposit box.  Then let someone know where that safety deposit box is located.

Estate Planning is a specialty just like bankruptcy.  Therefore you need to seek the advise of an attorney who istrained in estate planning.  Although it will cost to have this service provided, the peace of mind that your family members receive is priceless.  Again many of the documents you need to gather to file for bankruptcy are the same documents that you need to gather for Estate Planning.

The American Bar Association provides information so you can begin to educate yourself about estate planning.  You may also want to check the bar association in your particular state to see if they provide state specific information and/or forms.

It is critical that you speak to your family members or friends now about your wishes.  Do you want to be cremated or buried?  Where do you want to be buried?  Do you want a funeral, wake or a celebration of life?  Luckily for my friend she had just discussed with her children what she wanted to take place in the event of her passing.  This discussion alone has provided comfort to her children as they can abide by her wishes.  Does your family know what you want when you pass?

Death is never a comfortable subject but I am urging you to prepare for your passing now and not procrastinate until it is too late.  I too need to take these steps so do not feel like you are the only one.  Although I have insisted on Estate Planning for each member of my family I always seem to be too busy to plan for my own passing.

Remember that knowledge is power and the more knowledge you have about handling your affairs when you die the more power you will have in controlling how your final affairs are to be handled.  This in turn will provided comfort to your loved ones in their time of loss.

by Rachel Lynn Foley, Kansas City, MO, Bankruptcy Attorney · Posted in *Life After Bankruptcy

Holidays are wonderful… and sometimes, some parts, not so wonderful. Some of us know this because we are barely now relaxing from the rush to prepare, having battled traffic and crowds and lines in stores, groceries or airports. Many of us know this from having just lived through the old family tensions we thought we’d outgrown. And still others of us know that we overspent on the holidays — and in some cases really badly.

I think I see cycles in my practice as a bankruptcy lawyer in Santa Fe and northern New Mexico. There are fewer calls for first-time consultations throughout December and in early January. Then, in mid-January, the calls come in, generally with a fresh sense of urgency.

As the holiday spending bills come in, people are looking more closely at what they spent, and sometimes the consequences take them by surprise.

It’s the holidays! People want a “time out” from their usual worries and fears, and a “time in” with their families and other loved ones. Cares are pushed aside to make room for holiday cheer. That’s understandable – time with loved ones is good and too much stress will kill you. But if you are living with more debt than you can manage, relaxing that concern often becomes the temptation to spend more money than you have. You have promised the children an expensive gift, or simply want to give them more than you perhaps received as a child. You brought plenty of beer or wine to the family gathering or to the party with friends, so that all could enjoy the time spent together, when worries and concerns seemed small. You were generous, in the spirit of the season. Though now sadly you realize, you could not afford it.

Sometimes the hardest part is recognizing that what you are doing is not working; and perhaps harder still is quitting the behavior altogether (e.g., stop spending money you do not have). Sometimes it is time to ask someone else for help, especially when you don’t know what else to do. In the case of debt you can’t manage, talking with a bankruptcy lawyer may be the best gift you can give yourself and your family.

People frequently ask  whether they can file a bankruptcy case without their spouse.

The simple answer is yes.  The complicated answer is that your spouse matters for several reasons.

Let's assume that you and your spouse are married and living together.  Then you have one household. There are at least two of you and maybe more in your household.  If that's the case, your spouse's earnings count and must be considered to determine if you are eligible to file a chapter 7 case - straight liquidation - or whether you must file a chapter 13 debt adjustment case - along with payments to creditors for up to 5 years.

A married person must take into account his or her spouse's income.  Of course, the spouse's separate expenses, like personal credit card bills, are deducted.  But anything left over is considered disposable income which is placed to  household uses and therefor available, at least in theory, to pay the filing spouse's debts.  If the non filing spouse makes enough money, then the filing spouse may be required to file a chapter 13 case or run the risk of having his or her chapter 7 case be subject to a motion to dismiss as abusive.

If you are married and living separately, you probably won't have to include your non-filing spouse's income.  Each of you now has your own household.  If you are married but estranged, you may be deemed to have separate households even if you live in the same dwelling.

The issue becomes more complex in community property states like Wisconsin or California, for example.  In such states, debts arising during marriage are typically considered community debts and property acquired during marriage is considered community property.  Community property can be subject to bankruptcy administration even if one of the spouses does not file jointly with the other.  On the other hand, the non-filing spouse benefits from the discharge of the filing spouse. That's because if one spouse is discharged from a community debt, the other spouse is automatically discharged from that debt - this is called a "phantom discharge."

So if you are married but are thinking of filing bankruptcy separately, ask a bankruptcy lawyer who understands marital law what this means to you and your non-filing spouse.

by David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney · Posted in *Filing for Bankruptcy,Family Debt Problems

Yesterday’s Wall Street Journal published an opinion piece by George Mason University law professor Todd Zywicki entitled Dodd-Frank and the Return of the Loan Shark.  If you do not subscribe to the Wall Street Journal, you can read more about this topic from Professor Zywicki by clicking on the link.

The gist of Professor Zywicki’s argument is this:  as Congress imposes new regulations on credit card issuers such as those created by the Credit CARD Act, banks have come up with new ways to recoup lost revenue, including:

• inactivity fees
• increased foreign rate exchange fees
• debit card annual fees
• cutting reward programs
• limiting the number of transactions for your debit cards
• reduced credit limits
• cancellation of card access for people with poorer credit

Zywicki argues that lower income Americans, and presumably people emerging from bankruptcy with damaged credit will be hit disproportionately hard by these new bank policies.  Those whose interaction with traditional banking products was limited before may now find themselves completely shut out from mainstream banking – thus the reference to “loan sharks.”

It is estimated that the CARD Act restrictions will cost credit card issuers some $390 million annually.  I am afraid that Congress and the credit card industry are engaged in a giant game of “whack-a-mole” where each new limitation is quickly met by a new fee not prohibited by legislation.  Since the credit card industry can move a lot faster than Congress to dream up creative new fees and credit card lobbyist money tends to blunt and delay Congressional action, it seems unlikely that legislation will result in any significant benefit for the population that needs the most help.

The editors of the Credit Slips blog take an opposing position, suggesting that payday lenders, car title lenders and other high interest money sources (presumably not real “loan sharks”) actually charge less than credit card issuers.

What do you think?  Have the CARD Act of 2009 changes saved you money?  caused a reduction in your access to credit?  made your financial situation worse or better?

by Jonathan Ginsberg, Atlanta Bankruptcy Attorney · Posted in *Life After Bankruptcy,Consumer Credit Issues

For the first time, a federal appeals court has ruled that the bankruptcy code does not forbid a private employer from refusing to hire a person based solely on the fact that he or she filed for bankruptcy.  The court distinguished refusing to hire a person based upon having filed for bankruptcy from other forms of discrimination, such as termination of employment or other negative actions affecting a person’s employment, which presumably would still be forbidden.

Rea v. Federated Investors, No. 10-1440 (3rd Cir. Dec. 15, 2010), involved Dean Rea, a Pennsylvania man who filed bankruptcy in 2002.  In 2009, Rea applied for employment at Federated Investors.  However,  Federated refused to hire him, citing Rea’s past bankruptcy filing as the reason.  Rea sued in federal court, claiming that bankruptcy code section 525 forbade dicrimination in hiring based upon bankruptcy.  The court dismissed Rea’s complaint and he appealed.

The U.S. Court of Appeals, Third Circuit, upheld the lower court’s dismissal, concluding that section 525 allowed bankruptcy discrimination in hiring by private employers.  The court observed that section 525(a), which forbids discrimination by governmental units based upon bankruptcy, contains language not found in section 525(b), which addresses discrimination by private entities.  Section 525(a) provides:

(a) … [A] governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

Section 525(b) provides:

(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

The phrase “deny employment to” is found in section 525(a) but not in section 525(b).  Because section 525(a) applies only to governmental units, and because section 525(b) applies only to private employers, the appeals court held that Congress must have intentionally omitted the prohibition against bankruptcy hiring discrimination from the section dealing with private employers.

Although section 525(b) does prohibit bankruptcy discrimination by private employers “with respect to employment,” the appeals court held that this prohibition was applicable only to employees who have already been hired.

As we start a new year, it is a good time to set some new financial goals.  In particular, the goal of reducing debt or eliminating your dependence on debt should be everyone’s goal. 

So, how do we get started?  First, you need to know what your debts are.  As one financial talking head stated, if you want to lose weight, the first thing you do is to get on the scale.  You have to know your starting point.  So, get your credit card statements, mortgage statements, any signature loans that you are paying and tally up your balances and your minimum payments.  This will help you to establish your starting point.

Then, look realistically at your income.  If you are paid a salary and your income does not fluctuate much, this is a fairly easy step.  However, if your income does fluctuate because you are paid on a commission or your hours change, then this is more of a challenge.  For example, for people who work in the construction industry, if the weather prohibits working, then those folks may have their hours reduced.  Similarly, overtime hours are never guaranteed so do not count that into your budget.  Determine your base line for income on which you can realistically rely.

Then start going through the payments that you must make in order to meet your living expenes.  For example, you know that if you want to continue to live indoors, then you must make your mortgage  or rent payments.  If you don’t want your car repossessed, you must continue to make your car payment.  You also will need to budget for groceries, car insurance, gasoline, oil changes, electricity, heating and air conditioning. 

You must also budget for non-recurring expenses such as property taxes and homeowners’ insurance (unless escrowed); school clothes, Christmas and birthday presents.  You will need to set aside money for these items.  You need to be aware that some expenses fluctuate–sometimes dramatically.  In the winter, heating expenses will be much higher than in the fall or spring.  Don’t budget $200.00 a month for electricity which may be your average bill for the fall and early spring when in December, January and February or during the dog days of summer your bill is likely to be much higher!

After you compile your list of reasonable and necessary expenses, start listing your debt payments (hopefully, you’ve already counted for most of your secured debts) along with the minimum payments required.  You should also list the interest rate for each debt just so you know.

Then, start subtracting expenses from your net or take-home  income.  Once you start subtracting, you will see where your money is going.  Once you get through your regular living expenses including secured debts that are very important (think house and vehicles) and setting aside money for non-recurring expenses, you will then start allocating money to debt payments such as credit cards and other debts.  Once you have all this information laid out, you can then set your priorities.  For example, perhaps you can try to reduce your energy consumption to reduce the electricity bill.  Perhaps you can reduce your food bill  by taking your lunch to work instead of eating at out for lunch.  Perhaps you can reduce your fuel consumption through a carpool or combining trips.  Allocate as much money as you can realistically do so towards reducing your debts. 

By being aware of your income and expenses and with a plan to reduce your debt, hopefully you will soon be debt free.  Not a bad New Year’s start.

by Adrian Lapas, Eastern North Carolina Bankruptcy Attorney · Posted in *Bankruptcy Basics

Even a rich and ancient institution like the Roman Catholic Church needs bankruptcy.  On January 4, 2011  the Archdiocese of Milwaukee  filed for protection in bankruptcy under chapter 11.  Other Archdioceses around the United States have previously been forced to file for chapter 11 relief, including those in Portland, Oregon; Wilmington, Delaware; Tucson, Arizona;  Spokane, Wash.; Fairbanks, Alaska;  San Diego, Calif; and Davenport, Iowa.  It may not be the last.

Since this is a forum about bankruptcy law, we won't discuss the religious or social implications of this epidemic of church related bankruptcy cases.  Instead, we are going to focus on those among our readers who might have claims in this sort of matter.

Bankruptcy is designed mostly to deal with claims which can be quantified in dollars and cents. Those who have been injured by church related abuse have claims which may, in monetary terms, be astronomical, but which, in reality, are beyond price.  Not only that, but the bankruptcy court's process for liquidating, or figuring out the exact monetary value of claims, can be challenging even to business people.  For an individual who claims to have been injured by the action of a church representative or leader, bankruptcy is daunting to say the least.

You will want an attorney to represent you in the bankruptcy court who not only understands you and your situation, but who will also deal with you in a caring and professional fashion.  Be sure that your lawyer understands the sensitivity of your claim.  Be sure that your lawyer demands the sealing of all records related to your matter so as to protect both your privacy and dignity.

You may wish to demand the United States Trustee to appoint a creditors committee to represent people in similar situation to yours.  A creditors committee can appoint attorneys and professionals who will have to be paid by the Roman Catholic Church.  Be sure that you are represented effectively in a Roman Catholic Church related chapter 11 case.  You can be sure that the Church will be represented by the best attorneys that money can buy.

by David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney · Posted in *Bankruptcy Basics

No one wants to file bankruptcy.  No one does it for fun.  It's like going to the dentist (or proctologist, or urologist-take your pick).  You do it only because you need to, and it will improve your life in the long run.  So how do you know when the time has come?  Here are some benchmarks for individuals (as opposed to businesses) who are wondering whether they need to file bankruptcy this year, to ensure their financial health for the future:

Have you been thinking about filing bankruptcy since this time last year?  Have you discussed it with your spouse, or other family members?  Have friends or family members, or your lawyer or accountant suggested that you need to consider bankruptcy?  If you have financial issues that remain unresolved over a long period of time, that's a pretty good indication that you should be considering bankruptcy.  Let's face it-if you are still struggling with debt after trying to deal with it on your own for more than a year, you may not be able to solve it by yourself.   That applies whether you have been paying minimum payments only (without reducing your overall debt), or borrowing from Peter to pay Paul, or whether you have been in default for some time.

One of the benchmarks I use in advising clients is to consider whether, with discipline and a little luck, they could pay off most or all of their debt over a period of five to seven years.  If not, I consider them good candidates for bankruptcy, for several reasons.  First, it is difficult for anyone to go through any given five-to-seven-year period without significant changes in financial situation-an illness, job change, the birth of a child, or a child starting college, retirement-the list goes on.  Some changes are positive, like a raise or a promotion, but many of those positive changes also come with increased responsibilities as well.  Second, a debt payment plan in Chapter 13 generally lasts five years, so while a Chapter 13 is a bankruptcy, it gives many people the opportunity to be debt free in five years or less.  Third, most people find that the effects of bankruptcy on credit scores fade within that time frame (although they can last longer).  In short, if you can't get your debt paid in five to seven years, it is unlikely you can do it at all, and it serves no useful purpose to prolong the inevitable.

Another benchmark to consider is whether you are headed toward one of those life-changing events, and you are barely making ends meet as you are.  Let's say you are making more than the minimum payments on your credit card accounts, but you're still using the credit cards for emergencies, and you are a couple years away from retirement, or sending your kid to college, or any of a dozen things that will upset your financial applecart.  If you are staring down the tunnel of your financial future, and the light you see is the train coming at you, it is probably time to consider bankruptcy.

The most important indicator, however, is the simplest:  Do you have any savings?  If you have so much of your income going toward debt service that you can't save for unexpected expenses, that should be a red flag.  Actually, a red flag with bells on.  And flashing lights.    I'm talking here about ordinary savings, too-not just retirement savings, like a 401k.  You need some savings for ordinary, everyday emergencies, like a hospital bill, or tires for your car, or your deductible if you're in a fender-bender.  If you don't have savings for ordinary emergencies (much less big emergencies like a serious illness, or a layoff), you are in an inevitable downward spiral, because those expenses are inevitable.  I can't tell you what the next thing will be-that's why they're called unexpected-but I can guarantee there will be something (like the "known unknowns a former vice-president spoke of).   We all have them-a car breaks down, a child is ill, your furnace needs repair, or the roof springs a leak.  Sometimes several of them happen at once.  If you are accustomed to using credit to deal with such unexpected expenses, you are in a downward spiral.  Eventually, you will use that credit card one too many times, and you won't be able to make the payment on time, which will cause you to incur more debt (for fees and interest).  Then, the next emergency comes up, and you still haven't been able to save anything, but this time you can't use the credit card because you're over your limit (or they've reduced your available credit because your payment was late).  So, you'll have to pay the unexpected expense out of cash, which means you can't make another payment, and the downward spiral continues.   If you have so much of your income going to debt service that you can't save for emergencies, you aren't just a good candidate for bankruptcy, you need help dealing with your existing situation, as well as planning for a better financial future, and changing your financial habits.

The New Year is a great time to start making those changes.

by Dana Wilkinson, Attorney at Law · Posted in *Filing for Bankruptcy,Discharge of Debt,Family Debt Problems

The bankruptcy code give you limited protection against employment discrimination after bankruptcy. You can’t get fired from your existing job in the private sector.  You can’t be discriminated against for a job in the public sector.  But you could be excluded from consideration for a new job in the private sector.

States have been responding to this problem.

Illinois has a new law on the books, effective January 1, 2011, the Employee Credit Privacy Act which puts your credit report and credit report off limits except for a few categories of financially sensitive jobs such as:

• Any bank or financial holding company, bank, savings bank, savings and loan association, credit union, trust company, or any subsidiary or affiliate of same;
• Any authorized insurance or surety business, and those who act on behalf of a company engaged in the insurance or surety business;
• Any state law enforcement or investigative units, such as the executive inspector general, state police, and departments of corrections, juvenile justice, and natural resources;
• Any state or local government agency that requires use of an employee or applicant credit history or credit report; and
• Any entity defined as a “debt collector” by federal or state statute.

That give you a lot of room and flexibility in new employment opportunities after bankruptcy.

Remember, bankruptcy is supposed to give you a fresh start – and now, at least in Illinois, that includes a fresh start to a new and better job

by David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney · Posted in *Bankruptcy Basics

On more than one occasion, I have represented individuals in Chapter 7 and Chapter 13 bankruptcy cases when the debt that prompted the filing was wholly or in large part co-signed debt.   It seems that underwriting standards for most large loans have become tighter and nowhere is this more true than in the case of student loans.

From the lender's perspective, student loans can pose a significant risk.  Unlike mortgages, there is no collateral to secure the loan.  The borrower, of course, is a student who may or may not find suitable employment.   Given that college and trade school loans can easily top $100,000, the likelihood of slow pays or defaults is high.

I am also seeing more and more cases involving student loans from so-called "for profit" colleges - usually vocational schools.  According to the United States Department of Education, 34 million borrowers owe $713 billion, with $50 billion of these funds in default as of September 30, 2010.

Student loan debts are not dischargeable in a bankruptcy unless the debtor/borrower can show extreme hardship, which is a very hard result to accomplish.  In the Northern District of Georgia, where I practice, a debtor generally must show compelling evidence - usually in the form of a chronic medical problem - that would prevent repayment of the student loan, and the judges here have been very reluctant to grant this type of relief.

I am also seeing more cases where the student loan lender is demanding a co-signer, usually a parent, but possibly grandparents or siblings.  What happens when tragedy strikes and the primary borrower (the student) dies before he is able to pay back his loans?

If the loan is federally backed, (Stafford loans or PLUS loans), the student loan is discharged if the primary borrower (the student) passes away.  If the loan is private, the death of the primary borrower does not relieve the co-signer from his or her obligation to pay.   Since the rigorous "hardship discharge" standard applies to both federally backed and private student loans, a surviving parent or grandparent may be left with a lot of non-dischargeable debt.

by Jonathan Ginsberg, Atlanta Bankruptcy Attorney · Posted in *Filing for Bankruptcy,Student Loans

Every person that files a bankruptcy is required to attend a Meeting of Creditors.

The meeting, also called a Section 341(a) meeting is held by a Trustee.

The Trustee is an individual, usually an attorney or a certfied public account, who is responsible for reviewing the debtor’s bankruptcy to see if there are any assets available to pay the debt owed to unsecured creditors.

The meeting is usually scheduled to occur about one month after the bankruptcy is filed.  Attendance is mandatory, and failure to attend can result  in dismissal of the bankruptcy.

At the end of the meeting, the Trustee will announce what he plans to do with the debtor’s property.

This is usually referred to as a “Statement of Intentions”.

 Unfortunately, the Statement of Intentions tends to be in Legalese, and debtors frequently leave the meeting uncertain of what the Trustee intends to do with their property.

by Kevin Gipson, New Orleans Bankruptcy Attorney · Posted in *Bankruptcy Basics

The following are three phrases you may hear and what they mean.

1) THE PROPERTY IS EXEMPT.

Property that is exempt cannot be sold (liquidated) by the trustee and is retained by the debtor.

2) THE PROPERTY IS UNWORTHY OF ADMINISTRATION.

Property that is unworthy of administration is property that, while not exempt, has little or no equity value. Simply put, it is not worth the time, effort and cost for the trustee to seize the item of property and sell it. This property is usually abandoned by the trustee and is also retained by the debtor.

3) THE PROPERTY IS ENCUMBERED.  (OR THE PROPERTY IS ENCUMBERED BEYOND ITS WORTH)

An encumbrance is a secured debt such as a mortgage or a car loan. For most debtors the encumbrance also makes the property unworthy of administration.

Finally, don’t be afraid to ask questions if you hear something said at the trustee’s meeting that you don’t understand. Bankruptcy lawyers and trustees use these terms on a regular basis: you don’t.

However, understanding the terms used in bankruptcy as well as the process are important parts of having a successful case.

 An experienced bankruptcy attorney can guide you through the entire process and will be able to bring the legalese down to earth.