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 Disposable Monthly Income In A Chapter 13 Bankruptcy

My previous post dealt with the first of two possible settings involving a previous bankruptcy.  The first setting was when you received a discharge in the previous bankruptcy.  Today’s post deals with the second situation, i.e., your previous bankruptcy was dismissed.

II.        Your Previous Case Was Dismissed

Other than the 180-day bar of § 109(g), or some other time bar imposed on you by the Court because of naughty behavior, there is no time bar to filing another case after a dismissal.

However, there is a serious loss of protection with serial filing.  Most particularly, you lose the protection of the automatic stay, which is perhaps the most important benefit of filing — other than the discharge.  A little history will help to set the stage.
Continue Reading Can I File For Bankruptcy More Than Once? (Part 2)

The short answer to this is, yes.  But as you may suspect from the fact that this post is considerably longer than one sentence, there is a good deal more to a thorough answer than that monosyllabic response.  There are two possibilities regarding your previous bankruptcy:  (1) you received a discharge, and (2) your case was dismissed. Today’s post deals with the first situation.  The next post will deal with the second situation.

I.          Your Received A Discharge In Your Previous Case

The big picture goal in personal bankruptcy is to receive a discharge of your debts.  This affords you the fresh financial start that is the raison d’être of a personal bankruptcy.  From a debtor’s perspective this is marvelously liberating.  However, from the creditors’ perspective it can be a hard hit.  As a result, Congress has put some time limitations in the Bankruptcy Code, meaning that you must wait a while between bankruptcy filings if you want to receive a discharge in the future bankruptcy case.  How much time?  That depends on which chapter you plan on using in your future bankruptcy case, and under which chapter you received your previous discharge.
Continue Reading Can I File For Bankruptcy More Than Once? (Part 1)

What is an ipso facto clause?  The phrase ipso facto is Latin for “by the fact itself.”  Ipso facto clauses are sometimes included in lease and purchase contracts, and they assert that if the lessee or purchaser becomes insolvent, or files for bankruptcy protection, then the contract has been breached.  In other words, under such a clause the very act of filing for bankruptcy protection constitutes a breach of contract (hence the appellation, ipso facto clause) that absolves the other party of any further contract obligations.

Are such clauses valid?  The short answer is:  No.
Continue Reading Ipso Facto Clauses In Bankruptcy

A fellow bankruptcy attorney recently posed an interesting pair of related questions:

How (if at all) does a valid prenuptial agreement affect the requirements to list a non-filing spouse’s income in CMI per 707(b)(7)(B)?  Does it make ALL of the spouse’s income includable in the “marital adjustment”?

Here is my response.

I.          The Bankruptcy Code’s Definition Of CMI

It seems to me that the starting point for the analysis must be § 101(10A), which provides (with emphasis added):
Continue Reading Prenuptial Agreements In Bankruptcy

Before getting into the meat and potatoes of today’s post, I want to acknowledge a comment by a fellow bankruptcy attorney.  At a recent continuing legal education presentation she asked why I hadn’t been regularly posting, and encouraged me to post more frequently.  I must confess that since I hadn’t heard much from my readership, I was a bit discouraged.  Her words put a fire under my seat — which is better than the fire I get from the spicy food I foolishly love — so I will try to be more regular (daily prune juice is helping).

In any event, I recently answered a couple of questions posed by a fellow bankruptcy attorney — not the same one mentioned in the previous paragraph — and thought you might find the exchange interesting.  The questions were:

Debtor was sued in Superior Court and a judgment was entered relating to the repayment of unemployment claims in 2010 to the Employment Development Department – State of California.

Q1: Is this a priority claim?

Q2: If the Debtor’s chapter 13 plan provides for this claim but the EDD does not file a proof of claim, will the claim be paid by the trustee?  If not, will the debt be discharged?
Continue Reading The Treatment Of Unemployment Taxes In Bankruptcy

How long must a Chapter 13 repayment plan last?

I.          The Statutory Authority

Section 1325(b)(4) of the Bankruptcy Code makes reference to the “applicable commitment period”:

[T]he “applicable commitment period”—

(A) subject to subparagraph (B), shall be—

(i) 3 years; or

(ii) not less than 5 years, if the current monthly income of the debtor and the debtor’s spouse combined, when multiplied by 12, is not less than—

(I) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(II) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

(III) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4; and

(B) may be less than 3 or 5 years, whichever is applicable under subparagraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.

Huh?  What does this mean in plain English?  The gist is this:  calculate the current monthly income (“CMI”) as the six-month average of gross income from all sources — other than social security — for the six full calendar months prior to the month you file your bankruptcy papers.  Annualize CMI by multiplying by twelve to get the annualized CMI (“ACMI”).  If ACMI is less than the median income for a family of your size, you’re in a three-year plan, which can be lengthened with Court approval.  Otherwise, you’re in a five-year plan.  That seems simple enough.
Continue Reading In re Flores: An Important Recent Chapter 13 Bankruptcy Case

I recently fielded a question from a fellow bankruptcy attorney.  The question raised some interesting factors to consider when preparing a set of Chapter 13 bankruptcy papers.  First here is an edited version of the question:

Debtor only has $2,500 in credit card debt.  He has $120,000 in student loan debt and wants to do a chapter 13 to get some breathing room on the monthly student loan payments.  On Form 22C his disposable monthly income (DMI) is very high:  $2,800.  This is purely theoretical and includes his wife’s income, who will not be filing.  He doesn’t actually have that kind of disposable income.  My question is:  if we propose to pay 100% of the non student loan unsecured debt ($2,500), do we have to still pay the equivalent of $2,800/month for 60 months (which would all go to the student loans)?  Are student loans considered as part of the “general unsecureds” for the purpose of this calculation?   Although student loans are not currently dischargeable, we are not allowed to give them priority payments; but can we pay them less than DMI x 60?  Are we able to designate that certain payments go to principal?  Does the nonfiling spouse’s income HAVE to be considered when the plan is really meant to pay down the separate student loan debt of the filer husband?  She’s not liable on this debt as it was incurred before marriage.

For your edification, here is my response:
Continue Reading Chapter 13 Bankruptcy; Student Loans; Community Property Income

An ongoing source of distress for debtors is truly abusive debt collectors.  Many of these alleged humans ignore the due process rights of debtors, lie, and break the law in their efforts to shake down debtors.  Can anything be done?  Finally, the federal and state governments are starting to take some action.

I.          The Problems

A.        Collectors Fail To Follow The Due Process Rules

I regularly have clients show me abstracts of judgment from state court cases in which they knew nothing about the suit until receiving the judgment.  Are my clients lying?  I don’t think so.  In fact, a California state senator had the same thing happen to him.  According to Jim Puzzanghera, in the August 20, 2012 Los Angeles Times:

Several years ago, debt collectors began pursuing state Sen. Lou Correa (D-Santa Ana) for an unpaid Sears bill they said he owed.  He told them they had the wrong man, but the debt collectors never wavered.  “These folks are very aggressive,” Correa said. “They’ll call back repeatedly and say, `Tell us some personal information so we can tell it’s not you.’  When all of a sudden is the burden of proof on me?”  Last year, Correa discovered his Senate paycheck was being garnisheed [sic] because of a $4,329 lien for the Sears debt.  Brachfeld had obtained a default judgment in court, even though, Correa said, the lawsuit was never served on him and he knew nothing of the claim or the court hearing.  He later learned that the debt belonged to a Luis Correa from Santa Ana. The man had a different Social Security number, different address, even different first name — the senator is legally Jose Luis Correa.  “I always pay my bills on time.  Then to have somebody garnish my wages, I thought was pretty astounding,” the lawmaker said.  He later resolved the problem and stopped the wage garnishment.  Now Correa is supporting a bill by state Sen. Mark Leno (D-San Francisco) to require debt collectors to document that they are pursuing the right person for the correct amount of money.  The bill passed the Senate and is pending in the Assembly.

If these entities can abuse a state senator, where does that leave the average person without any political clout?
Continue Reading A Crackdown On Abusive Debt Collectors

Occasionally, I meet with a potential client who tells me that he doesn’t want to list all of his income, assets, debts, or expenses.  If the potential client doesn’t accept my warnings about the consequences of this sort of bankruptcy fraud, I politely escort them to the door.  That potential client never becomes an actual client.

But does it really matter if you’re honest when completing your bankruptcy papers?  Aside from the obvious moral imperative in favor of honesty, there are practical reasons for avoiding falsifying anything on your bankruptcy papers.  Here for your edification, are a few recent examples of cases involving people who were less than honest in bankruptcy.
Continue Reading The FBI Really Does Investigate Bankruptcy Cases