Posted by Kevin on January 29, 2012 under Bankruptcy Blog | 
One on the advantages of Chapter 13 is that you can extend payments on long term debt. Section 1322 (b)(2) allows a debtor to modify the rights of holders of secured claims (collateralized claims) other than claims secured only by a security interest in the debtor’s principal residence. Section 1322 (b) (5) allows the debtor to cure defaults and make periodic payments during plan on debts where the last payment on the debt is due after the last payment under a plan.
In a recent case, a Chapter 13 debtor proposed a plan where the IRS would be paid on its secured claims in equal monthly installments over a period of 15 years. Ingenious concept, however, the IRS objected because the proposed payment period was greater than 5 years (which is a requirement of Section 1322) and the monthly payments were too small.
Both the bankruptcy court and the 5th Circuit sided with the IRS. The 5th Cir stated that Section 1322 (b)(5) applies only to long term debts such as home mortgages whose original payment terms establish a final payment date after the conclusion of the Chapter 13 plan’s statutorily mandated term. The 5th Circuit added that tax obligations were due, in whole, on the date of assessment or at least on the date that the tax lien was filed. Therefore, it is not akin to a long term debt. Accordingly, the debtor had to make payment in full on the tax lien (with interest) during the 5 year term of the plan.
How do I feel about this ruling? I believe the Courts were correct. I also believe that debtor’s counsel was aggressively taking a shot at a longer term payment. However, that does not mean that Chapter 13 does not give a debtor a benefit with a secured tax obligation. Remember, the courts pointed out that absent bankruptcy, the obligation is due in full upon assessment. And you know that when the IRS wants its money, it can be very aggressive with levies and other collection methods. Chapter 13 lets you take that debt out over 60 months. In reality, that is not such a bad deal.
Posted by Kevin on January 16, 2012 under Bankruptcy Blog |
Now, that my seem like a harsh title. You may have spent an extended period on unemployment because of the prolonged economic downturn. While you were on unemployment, you used up all your savings and went into debt. You sent out hundreds of resumes and spent hours on the net looking for a job- even if it was for less than your prior jobs. Things are now looking up. You are back to work. But, now is the time to be wary.
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Posted by Kevin on January 15, 2012 under Bankruptcy Blog |
If you file a bankruptcy under Chapter 7 and the case has assets to distribute (not a no asset case) or you file a Chapter 13 case, creditors are required to file a proof of claim to participate in the bankruptcy.
The burden is on the creditor to file before the bar date and provide sufficient backup to justify the claim. In today’s marketplace, however, many claims are sold to hedge funds or other companies for pennies on the dollar. In many cases, these claim purchasers do not have any backup to support their allegation that they have a claim. If challenged, the claim can be expunged and the creditor is SOL.
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Posted by Kevin on January 9, 2012 under Bankruptcy Blog |
It appears that the economy is getting better. On a national level, bankruptcy filings went from 132,173 in October, 2010 to 106,255 in October 2011. This is a reduction of 19.6%. In New Jersey, bankruptcy filings went from 3,511 to 2,995 over the same period of time. That is a reduction of 14.7%. Not as good as the national numbers, but still pretty good.
Now, does that mean the economy is getting better, or does it mean that people are so bad off that they don’t have enough money to file bankruptcy?
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Posted by Kevin on January 2, 2012 under Bankruptcy Blog |
Credit card debt is almost always discharged in bankruptcy. That means that you do not have to pay the debt. If a creditor tries to collect a credit card debt while the bankruptcy is pending, that is called a violation of the automatic stay. If it happens after the bankruptcy discharge and close of the case, it is a violation of the bankruptcy injunction against collecting discharged debts.
But there is another way to get a debt “discharged”. That occurs when a credit card company does not sue you before the statute of limitations runs. This is sometimes referred to as “expired debt”. In NJ the statute of limitations is usually 6 years. In the past, if a credit card company did not sue before the statute of limitations ran, they were SOL.
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Posted by Kevin on December 11, 2011 under Bankruptcy Blog |
Every year about this time, my bankruptcy practice slows down. Why? People are focused on the holidays and buying presents. Then, in January and February, I get lots of calls for consultation. Sort of like a last hurrah.
Well my advice is that if you really want to file bankruptcy in January or February, then do not use your credit cards during the holiday season.
When you file bankruptcy, you want to get a discharge from your debts. There are exceptions to discharge, however. One exception is exceptions is for consumer debts totaling over $500 to a single creditor for luxury goods or services incurred with 90 days of filing. Another is for cash advances totaling over $750 obtained within 70 days of filing. For these situation, the presumption is that if you bought the HD tv or took the cash advance, you do not get the discharge.
In addition, there is the catch all that if you obtain credit by false pretenses, then it usually is not dischargeable. This could mean that you ran up a credit card and then filed. The court takes the position that the debtor had no intention of re-paying the debt.
A word to the wise.
Posted by Kevin on October 5, 2011 under Bankruptcy Blog |
When the Code was changed back in the late 1970′s, a debtor could discharge a student loan if there was a hardship situation or if loan payments were due more than 5 years before the filing. Now, a debtor can only get a hardship discharge. I tell all my clients that you have to be in pretty bad shape with little or no prospects for a decent living to get a hardship discharge . Even then, it was iffy.
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Posted by Kevin on September 4, 2011 under Bankruptcy Blog |
Now, this is a little advanced. You open your mail in Hackensack and have been hit with a Notice of Federal Tax Lien. Not good because it applies to all your property and, more importantly, the collection agent is the IRS. The one thing that you do not want is for the IRS to start levying on your property to satisfy the lien. That will ruin your day or year, for that matter.
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Posted by Kevin on August 22, 2011 under Bankruptcy Blog |
Bankruptcy has its own language- sometimes quite colorful. We have cram downs and strip offs. Long before we talked about mortgages being underwater, underwater was a term used frequently in bankruptcy to determine whether a claim was secured or not.
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Posted by Kevin on August 13, 2011 under Bankruptcy Blog |
The object of a consumer bankruptcy is to get a discharge of your debts. That means that you do not have to pay them back. The Code, however, has certain exceptions to discharge. Among them is a debt for willful and malicious injury by the debtor to another person or the property of another person or entity.
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