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Afraid that You Could Lose Your Job if You File Bankrutpcy? The Law Says “No,” but….

By Jonathan on May 6, 2010

Last month, my friend and colleague, Charleston bankruptcy attorney Russ Demott published an interesting article on his web site entitled “Fired for Filing Bankrutcy? No way!” This article was written by Elyria, Ohio bankruptcy lawyer Bill Balena, who notes that the Bankruptcy Code specifically forbids “employee discrimination” based on a bankruptcy filing if:

You are, or have gone through a bankruptcy proceeding
You are insolvent either before filing a bankruptcy or while your petition is pending;
You have not paid a dischargeable debt

Let’s take a closer look at what the Code actually says. Pay particular attention to the different language that applies to government employers vs. private employers.

Section 525 of the Bankruptcy Code contains the following language:

As to governmental units:

[with limited exceptions] a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

As to private employers:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— [Read more…] about Afraid that You Could Lose Your Job if You File Bankrutpcy? The Law Says “No,” but….

Forgotten Lawsuit Creates Big Problems for Prior Chapter 7 Client

By Jonathan on April 15, 2010

Earlier this month I received a call from a Chapter 7 client that I had represented several years ago. He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars. The creditor was listed on the case, but neither he no I knew that there was any judgment.

I directed him to visit the county courthouse and pull the file for this case. He did and he reports that the return of service shows that his wife was served by a sheriff’s deputy. His wife has no recollection of being served. We did list the creditor on the bankruptcy petition but because we did not know that there was a judgment, we did not file a motion to avoid the judgment lien. What can he do?

There are a number of lessons you can learn from this man’s experience. First, you should always obtain copies of credit reports from all 3 credit bureaus prior to filing bankruptcy. In Georgia, you can get a free credit report from each of the 3 main credit bureaus twice a year. Online, you can go to annualcreditreport.com and download your reports. Because credit reports obviously contain sensitive information the annualcreditreport.com system will ask several questions to identify yourself. These are usually multiple choice questions – for example, the system may say “your credit report shows that you previously lived on one of the following streets: (a) Oak Street (b) Thompson Street (c) Ivers Road (d) none of the above.

If you are unable to answer these questions, the system will instruct you to mail away for your credit reports – here is a link to a page on my website with the credit report request letters.

Credit reports are helpful because they will usually show pending lawsuits as well as the names, address, account numbers and debt amounts for most of your creditors. Obviously I can’t require all bankruptcy clients to bring me credit reports but it sure helps avoid “forgotten” creditors or judgments. [Read more…] about Forgotten Lawsuit Creates Big Problems for Prior Chapter 7 Client

Debts Arising from Impaired Driving are Not Dischargeable

By Jonathan on March 11, 2010

Recently I met with a client who was looking into filing bankruptcy because of credit card and medical debt. Among his creditors, however, was an individual, an insurance company and fines due a local county. When I asked about this, he explained that about a year ago, he was involved in an auto accident that was his fault. He further explained that the individual sued him and that damages awarded were more than his insurance coverage, and that he also had fines because the accident occurred when he was under the influence.

He was unhappy to learn that Section 523(a)(9) of the Bankruptcy Code specifically excepts from discharge debts arising from the “death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.”

I read this Code section to mean that my client cannot discharge:

any damage award due to the accident victim
restitution ordered by the local county court
fines imposed by the local county court

What about property damage arising from this drunk driving accident. I read the Code section to limit non-dischargeability to personal injury so I do not think that property damages would be excepted here.

Washington D.C. bankruptcy lawyer Morgan Fisher wrote a post about DUI damages and bankruptcy dischargeability last year. He notes that an insurance company seeking subrogation damages (recovery of car repair payments from the negligent driver by an insurance company) could argue against dischargeability under other provisions of Section 523. I believe that Morgan is referring to Bankruptcy Code Section 523(a)(6) which excepts from discharge debts arising from the “willful and malicious injury by the debtor to another entity or to the property of another entity.” [Read more…] about Debts Arising from Impaired Driving are Not Dischargeable

How Can Filing Bankruptcy Impact My Children?

By Jonathan on February 16, 2010

It is commonly known that filing for bankruptcy can be a very trying and emotional time for those filing. But it is less common to hear about how a bankruptcy can impact the children of bankruptcy filers. If you have children or dependents and are considering bankruptcy, it is important that you understand the potential consequences bankruptcy can have on your children.

1) Unfortunately, if a debtor contributes money towards a child’s college tuition or to a college fund, filing for bankruptcy could potentially prevent these contributions from occurring. When you file for bankruptcy, the court and creditors will attempt to limit the amount of your expenses and may prioritize their collection accounts above your child’s education. While bankruptcy courts will allow necessary expenses such as housing, utilities, and food, your child’s education may not be viewed as essential. If you find yourself in this situation, I strongly recommend that you consult with a bankruptcy lawyer to understand more about how your child’s education may be affected when filing for bankruptcy.

2) When you file for bankruptcy, the line can get blurred between your assets and your child’s assets. For example, say you opened a bank account for your child but failed to take the adequate steps to set it up correctly to be protected from something like a bankruptcy. When it comes time to file bankruptcy, you may run the risk of the money in that account being considered your money and not your child’s. This type of problem can occur if the account is under just your name (and not your child’s) or if you have ever used it to pay your own bills. Your children’s assets can be better protected from bankruptcy if the accounts are opened under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). If your child’s assets are at risk of being affected by bankruptcy, I again recommend consulting a bankruptcy lawyer to help find the best means of fixing this problem.

3) Children are protected from bankruptcy whether or not an in-debt parent is behind on child support payments. Child support obligations are a top priority and are ineligible for bankruptcy debt discharge. If you file for Chapter 7 bankruptcy, child support payments become a top priority when assets are being liquidated. If you file for Chapter 13 bankruptcy, child support payments will be arranged in the repayment plan. In either case, the hope is that ex-spouses find it easier to pay child support since the bankruptcy may be able to lessen many of their other debt burdens.

IRS May Soon be Out of the Business of Seizing Income Tax Refunds for Benefit of Chapter 13 Trustee

By sblum on February 12, 2010

As you probably know, there are two types of consumer bankruptcy cases available to you – a Chapter 7 which wipes out debt, and a Chapter 13 which creates a five year payment plan in which you pay back some or all of your debt with your “disposable income.” When I prepare a Chapter 13 case, we work with you to create a liveable budget. The money “left over” after you pay for housing, food, transportation, insurance, utilities and other necessities must be sent to the Chapter 13 trustee, who then disburses these funds to your creditors based on a plan of reorganization that we submit to the court.

What happens if you need to file a Chapter 13, you have not yet filed your tax return for last year, but you know that a refund will be coming your way. The simple answer is that unless you are paying back your creditors at 100%, your Chapter 13 will demand that you turn over your tax refund check, and will use that money to pay your creditors. If you know that a refund is headed your way, make sure to tell your lawyer before you file – there are some steps you can take to preserve some or all of your tax refund money.

Your Chapter 13 trustee will also want future refunds paid to the trustee. This situation is easier to handle – you will want to adjust your payroll withholdings so that you do not have any refund coming. As far as the Chapter 13 trustee is concerned, your tax refund is kind of like a savings account that artificially reduces your net pay amount.

All of the Chapter 13 trustees in the Northern District of Georgia require debtors who are paying less than 100% to creditors to include in their Chapter 13 plans a provision that authorizes the IRS to intercept any refund payable during the years that your plan is in effect and send this money to the Chapter 13 trustee. And until now, the IRS has cooperated with the Chapter 13 trustees in redirecting refund money. [Read more…] about IRS May Soon be Out of the Business of Seizing Income Tax Refunds for Benefit of Chapter 13 Trustee

How Can I Get Out of an Apartment Lease When I File Bankruptcy?

By Jonathan on February 10, 2010

My office colleague, Susan Blum is in the process of filing a Chapter 7 bankruptcy for a young woman. Our client currently lives in a rented apartment, and her lease runs through July of this year. Our client would like to find a cheaper place to live, however, she is concerned that she may not be eligible to sign a new lease after filing for bankruptcy. Our client asked for our advice about what to do.

First, we advised out client that her bankruptcy filing would not prevent her from finding a new apartment later this year and signing a lease. However, the the months immediately following a bankruptcy are a time when a debtor’s credit is most damaged – it is very possible that our client would have a difficult time finding a landlord who would lease her an apartment right after the bankruptcy.

A better option in cases like this would be for our client to to sign a new lease prior to filing bankruptcy and reject the current lease in the bankruptcy filing.

Under the bankruptcy law a lease is considered an “executory contract,” meaning that our client still has on-going obligations to perform under the contract. In this case, our client has the contractual obligation to pay her lease. Other examples of executory contracts are vehicle leases, health club memberships and cell phone contracts.

The bankruptcy law allows a debtor to “reject” or “assume” an executory contract. If the contract is assumed, the debtor remains obligated under the terms of the contract. If the contract is rejected, the debtor’s obligations terminated.

In our client’s case if she rejects her old apartment lease, the law deems the lease contract as breached as of the day before the bankruptcy filing. The landlord is entitled to repossess the apartment in accordance with state law. Any damages that the landlord might suffer are treated as pre-petition general unsecured claims. Per the Bankruptcy Code, the rejection damages that the landlord is entitled to are limited to either 15 percent of the balance of the rent that is left in the lease or the rent due for one year from the filing date or the date the apartment was surrendered, whichever is earlier. Fortunately the debtor can include any outstanding rent in her petition and wipe out the debt along with other unsecured debt.

Susan’s client took our advice and has already signed a new lease on an apartment and she will be rejecting her current lease in the Chapter 7, including all future rent and penalties incurred for not fulfilling the lease’s terms.