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Car Titles and Chapter 13

By Jonathan on August 19, 2012

An issue that that seems to arise in more and more Chapter 13 cases has to do with the release of car titles. Even when the vehicle lender has been paid in full in the Chapter 13, there seems to always be a delay or problem getting the vehicle title released back to my client.

It seems that vehicle lenders are taking the position that they do not have to release a vehicle title back to the bankruptcy filer until the case is over, instead of when the lender is paid in full. In my view, lenders are acting improperly when they do not return my client’s title, and in most cases they will back down, although it may take a letter or a phone call from me.

As you probably know, Chapter 13 modifies the installment contract between a debtor and his vehicle lender. In effect, Chapter 13 allows a bankruptcy filer to refinance his vehicle loan. In a recent case I filed, for example, my client owed $12,000 to her lender and was paying over $450 per month, with just under 2 years left on the loan. I proposed a Chapter 13 plan that paid $275 per month to the lender. The lender was going to be paid in full but under my plan, it was going to take just over 4 years to get the lender paid. The Chapter 13 plan also set out an interest rate for the payout.

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Social Security Disability Lump Sum Excluded from Bankruptcy Estate?

By Jonathan on August 6, 2012

My Bankruptcy Law Network colleague Craig Andresen has written about a very interesting federal appeals court case which holds that a lump sum payment from Social Security representing past due disability benefits are excluded from one’s bankruptcy estate by virtue of Section 407 of the Social Security Act.

Until this point I have operated under the assumption that a past due benefit lump sum had to be squeezed into an exemption to protect it for a bankruptcy debtor. Official Code of Georgia section 44-13-100(a)(2) excludes from the bankruptcy estate “the debtor’s right to receive a Social Security benefit” or a “disability benefit.” When representing a debtor who gets approved for Social Security disability, I have been filing a motion to declare the lump sum exempt under the Georgia exemption and I have been including in my motion assertions that the debtor needs these funds for support and maintenance.

If Craig’s analysis is correct, however, the Georgia exemption argument would be superfluous. He cites an 8th Circuit Bankruptcy Appellate Panel decision called Carpenter v. Ries in which the 8th Circuit held that Section 407 of the Social Security Act excludes all Social Security funds, lump sum or otherwise, from the bankruptcy estate.

Under the logic of Carpenter, there is no need for a bankruptcy debtor to account for his Social Security lump sum at all. I can imagine a scenario where a debtor has proposed a Chapter 13 plan that pays 2 cents on the dollar to unsecured creditors, and the Chapter 13 trustee has no claim on a $50,000 lump sum Social Security payment sitting in a segregated savings account, representing past due benefits.

The Carpenter case would have a much greater impact in states like Alabama, where there does not appear to be any state law protection for Social Security benefits. Debtors there could really benefit from federal law protection of lump sum Social Security disbursements.

Georgia is part of the 11th Circuit, and 8th Circuit law is not binding on cases filed here but federal circuit court decisions do carry some influence. It will be interesting to see if a case with bad facts like the scenario described above might cause the 11th Circuit to rule differently than the 8th, possibly setting up a Supreme Court showdown.

Bankruptcy: No Safe Haven for Child Support Cheats

By Jonathan on August 1, 2012

The short and simple answer to this question is yes – if a non custodial parent files bankruptcy, he will not be excused from paying any of his child support obligations, past, present or future. In fact, the Bankruptcy Code goes to great lengths to ensure financial security for custodial parents who are owed child support.

First, the Code classifies child support payments as “non-dischargeable debt.” Specifically, Bankruptcy Code sections 523(a)(5) and (a)(15) provide that any form of domestic support obligation is non-dischargeable. This means that the discharge order that cancels other types of debt like credit card bills or medical expenses will have no effect on child support obligations.

Second, the Code requires bankruptcy filers to give specific notice of his bankruptcy filing to his ex-spouse. This means that custodial parents who may have had difficulty finding out where the non-custodial parent is working or how much he is earning will now have access to this information. [Read more…] about Bankruptcy: No Safe Haven for Child Support Cheats

The Two Credit Counseling Requirements of the Bankruptcy Code

By Jonathan on July 25, 2012

If you are considering filing for bankruptcy in the near future, you must comply with the bankruptcy law’s credit counseling requirements and complete two separate education requirements.

The Bankruptcy Code’s education requirements went into effect in 2005 and provides that every Chapter 7 or Chapter 13 debtor must complete two separate and distinct credit counseling sessions: one before filing for bankruptcy and one after filing for bankruptcy.

Bankruptcy filers sometimes become confused about the need to finish two separate courses. However, both courses are mandatory and must be completed if you wish to obtain relief under the federal Bankruptcy Code. These credit counseling requirements apply not only to cases filed in Georgia, but in every state.

Pre-Bankruptcy Counseling

The pre-bankruptcy credit counseling session must be completed prior to filing. When you take the pre-filing course, your certification is valid for 6 months. If you do not file within this 6 month window, you will have to take the pre-filing course again. [Read more…] about The Two Credit Counseling Requirements of the Bankruptcy Code

Chapter 7 Before Divorce? Slow Down and Seek Good Advice

By Jonathan on July 16, 2012

I recently received an email from a CPA friend of mine who was advising a husband and wife couple who were contemplating both divorce and bankruptcy. He was surprised to learn from me that the bankruptcy court usually gives wide deference to settlement agreements that are made part of divorce agreements.

For example property transfer that would be considered fraudulent outside of a divorce would most likely not be challenged if it was part of a divorce settlement. I asked my friend if he would write a guest post for my blog discussing Chapter 7 from the perspective of a CPA, as opposed to a bankruptcy lawyer. Here it is:

Especially in today’s economy, it is not uncommon for couples to have money challenges at some point in their relationship. Whether a catastrophic loss of income, a major health challenge, or just plain old fashioned poor money management skills are to blame, sometimes filing for bankruptcy is necessary. In order to feel more in charge of the situation and to have the process go as smoothly as possible here are some tips to keep in mind as you plan your strategy for an imminent Chapter 7 filing, especially if a looming divorce is compounding the urgency of the situation.

1. Seek Expert Advice

In the past few years over 1 million Americans have filed for bankruptcy annually as a way out of overwhelming debt. In order to have the best possible outcome, it is important to seek expert advice in order to minimize the impact of the bankruptcy experience. Although a bankruptcy attorney will help you with the legal matters, seeing a CPA together first may also be helpful. Doing a little research beforehand can help you find out how to hire the best CPA for your situation. Local job and family services branches, as well as your local Better Business Bureau can help you find an experienced CPA who has passed the uniform CPA Exam and is fully qualified to meet your specific needs. [Read more…] about Chapter 7 Before Divorce? Slow Down and Seek Good Advice

Beware Fake Debt Collectors Using the Phone to Demand Payment for Phony Debts

By Jonathan on June 30, 2012

ABC News has recently run several stories about fake debt collectors from India posing as police officers to collect phony debts from vulnerable Americans. The ABC video, which you can view by clicking on the link, contains audio recordings of illegal activity – debt collectors threatening their victims with imprisonment and public embarrassment.

Several victims who paid hundreds or even thousands of dollars to the scammers explained that they sent money because the callers had personal information including addresses, dates of birth and even Social Security numbers.

When you view the ABC video, you may find it hard to believe that anyone would actually believe that a heavily accented caller calling himself Officer Johnson threatening to put you “behind the bars” would fool anyone but the FBI estimates that this scam has produced over $5 million for an organized crime group in India.

Many of the victims had previously borrowed money from online finance companies and law enforcement officials theorize that personal information associated with these borrowers was either stolen or sold to the scammers from India.

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