I will be discussing “Adversary Proceedings in Chapter 13″ on Morgan King’s Friday Teleconference on Friday, September 27, 2013 at noon PST. Mr. King’s Friday teleconferences are for bankruptcy and tax professionals, addressing topics of importance to consumer bankruptcy professionals. More information can be found at www.FridayConference.com
I have a friend, a fellow bankruptcy attorney, who decries the excessive use of hyphens, so he might get a little upset by the title of today’s post. However, the hyphenation is perfectly correct here. Now to the post.
I recently received an email from a fellow bankruptcy attorney — not the one who is concerned about hyphens — that asked whether tax-deferred retirement accounts that are not ERISA-qualified are in jeopardy in a Chapter 7 bankruptcy.
I. The California Exemption Tables
As a preface to answering the question posed, let me remind you of the concept of exemption, about which I have written many times. For example, I wrote:
In a Chapter 7 bankruptcy, the Chapter 7 Trustee assigned to the case is empowered to seize bankruptcy estate assets and liquidate them for the benefit of creditors. However, any of the debtor’s assets that are excluded from the estate under 11 U.S.C. § 541(b) are protected from the Chapter 7 Trustee’s depredations. . . . [A]ny estate assets that the debtor can exempt are also protected from the clutches of the Chapter 7 Trustee. The Bankruptcy Code has an exemption table which is found in 11 U.S.C. § 522. However, the Bankruptcy Code — which is federal law — permits the states to use their own exemption tables. California is unique among the states in that it has chosen to have two exemption tables for bankruptcy: one for homeowners with equity, found in Cal. Civ. Proc. Code § 704, and the other for everyone else, found in Cal. Civ. Proc. Code § 703.140.
Without knowing what kind of tax-deferred accounts a particular debtor has, it is difficult to make a blanket statement. With that caveat I offer the following thoughts and strategies as general information. Call me if you have more specific details on a particular account. Continue Reading
I recently had an email exchange with a fellow bankruptcy attorney who was a little confused about something called the § 1111(b) election in a Chapter 11 bankruptcy. Her confusion was easy to understand because there are some interesting wrinkles in the statutory language that are worth exploring.
Before we get into the somewhat arcane aspects of today’s topic, it might be worth defining a few important terms that we’ll be using, and then summarizing the salient features of Chapter 11 bankruptcy. Continue Reading
If you’ve been following the news from Wall Street, you might assume that the economy is finally improving. For example, in the July 11, 2013 issue of The Wall Street Journal’s Market Watch, Kate Gibson reported:
U.S. stocks leapt Thursday, with the S&P 500 up for a sixth day and setting a record finish, after Federal Reserve Chairman Ben Bernanke said the Fed would remain accommodative.
Whoopee Wall Street!
I. Unemployment And Underemployment Are Growing
However, there are threatening clouds overshadowing the current economy. One of them is the combination of growing unemployment and underemployment. Indeed, in the very same Market Watch article Ms. Gibson reported:
Labor Department figures released Thursday showed first-time jobless claims rising last week by 16,000 to a two-month high of 360,000.
Moreover, in the May 3, 2013 issue of Market Watch Rex Nutting reported that although there were more jobs created, there were fewer hours worked:
The April employment report exceeded expectations, with 165,000 jobs created and a welcome drop in the unemployment rate to 7.5%. But there was a dark side to the report: Total hours worked fell sharply, and the total amount of money earned by U.S. workers actually declined from the month before. “Aggregate weekly hours” is an obscure series of data in the jobs report, but it’s vital to understanding how strong the economy is performing. As the name implies, it measures the total number of hours worked, which is what matters for sizing up overall growth in the economy.
Debt collectors serve the useful role in society of forcing many debtors who otherwise wish to pay their debts into bankruptcy. They also provide a source of additional income for bankruptcy attorneys when they violate the automatic stay of 11 U.S.C. § 362(a), the discharge injunction of 11 U.S.C. § 524(a), and the Fair Debt Collections Act of 15 U.S.C. § 1692 et seq..
In spite of these important roles, the California Attorney General, Kamala D. Harris, has filed a lawsuit against JPMorgan Chase, based on the fact that JPMorgan Chase violated various collection laws. As Andrew Tangel and Alejandro Lazo reported in the May 27, 2013 edition of the Los Angeles Times:
In a lawsuit that echoes the worst abuses of the foreclosure crisis, the state’s top law enforcement official is suing the nation’s largest bank, accusing it of using aggressive and illegal tactics to collect credit card debt from thousands of California consumers. Atty. Gen. Kamala D. Harris on Thursday accused JPMorgan Chase & Co. of operating a “debt collection mill” that flooded courts with more than 100,000 lawsuits to obtain speedy judgments before consumers could fight back. Much as banks did during the housing crisis, JPMorgan used so-called robo-signing to churn out documents without reviewing them, Harris said. The state alleges that JPMorgan relied on incomplete records and erroneous information to make its cases; in some instances, key documents allegedly were signed by low-level employees posing as assistant treasurers and bank officers. Harris also alleges that the bank revealed customers’ credit card numbers, potentially exposing them to identity theft. JPMorgan also failed to notify some customers that lawsuits had been filed against them, a practice known as “sewer service” litigation, according to Harris. The bank ”abused the judicial process and engaged in serious misconduct against California credit card borrowers,” Harris said. “This enforcement action seeks to hold [JPMorgan] accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers.”
Picky, picky, picky.
Let’s look at just one of the charges against JPMorgan Chase: Failing to notify customers that a lawsuit had been filed against them. What’s the big deal? Does the bank have to tell you everything it does? After all, the government doesn’t have to tell you everything.
For example, I knew a guy — let’s call him Joseph K — who faced criminal charges, and had a trial without ever finding out what the charges were. He was eventually executed without ever learning what the charges were against him. No problem, right? Oops. I just remembered: I didn’t know Joseph K personally. Joseph K’s story, called The Trial, was told by a writer named Franz Kafka. It illustrated what could go wrong in a society without the rule of law.
Maybe JPMorgan Chase’s behavior wasn’t acceptable after all.
But surely the other debt collectors are all above board. Not according to Mr. Tangel and Mr. Lazo — and stop calling me Shirley. Later in the article they state:
[D]ebt buyers appear to have business models in which they are able to go into California superior courts and get default judgments against consumers. A majority of these debt collection cases go to default judgments, indicating that many of these firms do not make adequate efforts to notify people that they are being sued . . .
In fact, I have seen remarkably illegal and wicked behavior by debt collectors, and have written about it in great detail. I even discussed the way debt collection practices have corrupted Sheriff’s departments. And still the problem persists.
If you’ve been troubled by debt collectors —especially those attempting to collect money while you’re in bankruptcy, or attempting to collect debts that were discharged in bankruptcy — the good news is you can get relief. Call a high quality bankruptcy attorney to discuss your options.
This is a simple question to pose, but the answer is a bit more complicated to give. Part of the complication lies in the fact that in bankruptcy social security has two identities: it is income, and it is an asset. The rest of the complication arises because there is more than one chapter of the Bankruptcy Code under which individuals and married couples file.
I. Social Security Income As An Asset
In any personal bankruptcy, one of the reporting requirements is found in 11 U.S.C. § 521(a)(1)(B)(i): “The debtor shall—file— . . . a schedule of assets . . .” Social security payments are an asset, and become part of the bankruptcy estate that is created when the debtor files for bankruptcy protection. (See 11 U.S.C. § 541(a)). Continue Reading
On January 30, 2013 Shan Li of the L.A. Times reported:
Nearly 44% of American households are one emergency away from financial ruin. That means they don’t have enough savings to cover basic living expenses for three months if something unforeseen happens such as losing a job or falling sick, according to a recent study by the Corporation for Enterprise Development. Almost a third of Americans have no savings account at all. . . . Many people living precariously have jobs. About 75% are working full time, and more than 15% are earning middle-class incomes of more than $55,000 a year, according to the report. But despite steady jobs, many of those surveyed are surviving paycheck to paycheck, trying to cope with the recession’s aftermath; one emergency could tip them over “the edge of financial disaster.” Possible reasons for their lack of savings? Experts say many factors could be at play, including stagnating wages, rising prices and high credit card debt.
It’s worth noting that a fairly large number of employed people are underemployed, which gives a partial explanation for the precarious position of many people.
How do folks deal with an income shortfall? Some tap into their credit cards, and increase their debts. Then they use other credit cards to pay the new credit card debt, and eventually things spiral out of control.
However, a growing number of people are turning to loan sharks for extra cash. The breathtakingly high interest rates on Payday loans, Cashcall loans, and loans from Don Corleone guarantee a bleak financial future. In the April 24, 2013 Los Angeles Times, Alejandro Lazo reported:
Payday loans often trap consumers in a cycle of debt, a new report by the federal government finds. The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees — not including loan principal. A quarter of borrowers paid $781 or more in fees. Continue Reading
In my last post, I discussed retirement contributions within the Chapter 7 context. Our attention now turns to retirement contributions in a Chapter 13 bankruptcy.
II. Retirement Contributions In A Chapter 13 Bankruptcy
In discussing Chapter 7, I referred to Form 22A. The Chapter 13 analogue is Form 22C, which is very similar to Form 22A; but there are some differences.
One difference is Form 22C’s line 55, which permits a debtor to list “Qualified retirement deductions.” There is no analogue to Form 22C’s line 55 in Form 22A. This indicates that the Commission that created Form 22 (Form 22A for Chapter 7, Form 22B for Chapter 11, and Form 22C for Chapter 13) believed that Congress wanted Chapter 13 debtors, but not Chapter 7 debtors, to able to contribute to their retirement —presumably to “encourage” debtors to go into Chapter 13, so that their creditors would receive something through the Chapter 13 plan.
Why did the Commission include line 55 in Form 22C? The best explanation is found in 11 U.S.C. § 541(b)(7). A little background will help to understand that statutory subsection and its application to the creation of Form 22C. Continue Reading
This easy question to state has a surprisingly complicated answer. This is bad news if you were hoping for a simple yes or no, but good news if you’re a fan of more complex legal analysis. In this post, I’ll discuss retirement contributions within the Chapter 7 context. In my next post, I’ll discuss retirement contributions in a Chapter 13 bankruptcy.
I. Retirement Contributions In A Chapter 7 Bankruptcy
There are at least two reasons why Chapter 7 debtors would want to continue contributing to their retirement plans (for linguistic simplicity, let’s assume we’re dealing with a 401(k) plan, since it’s easier to type “401(k)” than “retirement plan”): First, to provide for those golden years of not having to spend two plus hours a day commuting (those of you who don’t live in a traffic nightmare area like the Los Angeles environs may not understand this problem except on a theoretical level, but it’s very real here), and second, to chew up income to qualify for Chapter 7 relief. Continue Reading
In Part 1 of my two-part series discussing the issue of filing for bankruptcy after a previous bankruptcy had been filed, I mentioned “disposable monthly income” in the context of Chapter 13 bankruptcy and told you that this post would discuss it in detail. This isn’t the first time I have promised to discuss this topic. I have put it off because of the somewhat esoteric, indeed recondite, dare I even say arcane, nature of the subject. However, there have been some very recent developments in the case law on “disposable monthly income” that make it ripe for discussion. Therefore, this post makes good on my promises. Continue Reading