I’m back.  I have been busy writing a book on Chapter 13 bankruptcy — I was asked to do so by a publisher.  I should have it completed in a few months, so watch for it.  In any event, I am ready to start posting again.

Some time ago I posted on preferential transfers (a.k.a. preferences).  Since I will be speaking on preferential transfers (and on fraudulent transfers) in May these topics have been on my mind.  Today’s post will look at the statutory definition of a preference.  It’s complicated, which is why the post a bit long.  However, it’s worth the read.  Subsequent posts will look at preference avoidance and defenses to preference avoidance.

I.          Introduction

There are two main goals of bankruptcy.

The first goal is to give the debtor a fresh financial start .  This goal has a laudable pedigree that has its origins in the Bible, ancient Roman law, and the U.S. Constitution .

The second goal is to ensure that all creditors who are similarly situated are treated equally and fairly.  There are two ways in which debtors sometimes violate this second big goal:  (1) They don’t list all of their creditors in their bankruptcy papers, and (2) They make preferential payments to certain creditors in anticipation of bankruptcy.

If a debtor omits a creditor from the list, then the debt to that creditor will not be discharged at the conclusion of the case.  (See 11 U.S.C. §§ 523(a)(3) and 1328(a)(2). But see In re Beezley, 994 F. 2d 1433 (9th Cir. 1993) (Unscheduled debt is discharged in a no-asset Chapter 7 case if the debt would have been discharged if it had been listed).)  If the debtor purposely omitted the creditor, and thus “made a false oath,” i.e., committed perjury, the debtor may either be denied a discharge, or have a discharge revoked.  (See 11 U.S.C. §§ 727(a)(4)(A), 1144, 1230, and 1328(e)(1).)  However, there can be a bright side to this scenario:  the debtor may end up receiving free room and board at government expense, which could greatly reduce any stress over finances .

The focus of these posts is on the other way debtors violate the second big goal:  preferential transfers.  We begin with the definition.
Continue Reading Preferential Transfers II

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 The § 1111(b) Election In Chapter 11 Bankruptcy

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 What Happens To Social Security In Bankruptcy?

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 Bankruptcy: What’s In your Wallet? It’s A Loan Shark!

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 Can I Continue To Contribute To My Retirement While In Bankruptcy? (Part 1)

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)