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THE CONSUMER BANKRUPTCY LETTER |
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In This Issue:
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August 16, 2004
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LAS VEGAS ACADEMY SEPT. 8-10 FISHERMAN'S WHARF OCT. 27-29
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NO LEGISLATIVE ACTIVITY THIS WEEK
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SIX ERRORS WARRANTS DENIAL OF DISCHARGE
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IRS TO PULL PLUG ON DEBT COUNSELING SERVICES
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KING BANKRUPTCY ACADEMY - DISCHARGING TAXES MADE SIMPLE!
THREE SEMINARS ON DISCHARGING TAXES - LAS VEGAS, SAN FRANCISCO & SAN ANTONIO
The first dates scheduled for the 5th annual 3-day Bankruptcy Academy on discharging taxes in bankruptcy cases have been scheduled for -
LAS VEGAS, Nevada, on Sept. 8, 9 and 10, 2004;
FISHERMAN'S WHARF, S. F., on October 27, 28 & 29, 2004,
SAN ANTONIO, Texas, January 27, 28 & 29, 2005.
Additional 2005 dates are pending for Atlanta, Georgia, and Boston, Mass.
Principal presenters will be; Morgan King, attorney and author of Discharging Taxes in Bankruptcy; Charles F. Rosen, former chief of the Los Angeles IRS office of Special Procedures (bankruptcy, insolvency); Eric M. Casper, formerly Senior Trial Attorney, Tax Division, U.S. Department of Justice - Washington, D.C.; and Robert N. Kolb, formerly with the IRS and recently the prevailing attorney for the debtor/taxpayer in two important appellate cases. Also appearing - enrolled agents Jerry Satterberg and Bobby Covic.
The 3-day seminar and workshop will be a thorough exploration of bankruptcy remedies for delinquent taxes and tax liens in consumer bankruptcy cases (chapter 7 and chapter 13), emphasizing practical handlng of tax discharge cases from A-to-Z.
CLE ACCREDITATION
Previous programs have qualified for CLE in all states for which CLE accreditation was requested. The Academy is applying for attorneys' CLE accreditation in all states for which CLE is mandatory.
CPE accreditation from the IRS for enrolled agents has been approved.
TUITION
Single attorney registration for Las Vegas - $695
Single attorney for Fisherman's Wharf or San Antonio $645
Double attorney registration any location $995 (saves $400!)
Paralegal or other office staff any location $350
Enrolled agent or CPA any location $495
For more information about the Tax Discharge program, or to enroll, click on red below or call (925) 829-6460 west coast time.
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Debt counselors might lose IRS tax exemptions
Regulators say nonprofit groups charge high fees, pay big salaries
WASHINGTON - The Internal Revenue Service's chief counsel has concluded that many credit-counseling agencies do not meet the requirements to be tax-exempt organizations, setting the stage for revocation of their special tax status.
In an internal advice memo issued recently, the chief counsel's office said "it can and should be argued that the new generation of credit-counseling organizations does not meet the criteria for exemption."
Laying out its legal analysis of credit-counseling agencies, the memo said: "They are not providing any meaningful education or relief of the poor," as would be required for the tax exemptions many are currently receiving.
The memo, available on the IRS Web site, said that many of the nonprofit organizations may also be violating tax-exempt laws because they are being operated for the private benefit of their executives.
The memo comes as the IRS is auditing 50 credit-counseling agencies accounting for about half of the revenue of the $1 billion nonprofit industry.
The audits were prompted by consumer complaints about deceptive and fraudulent marketing practices.
Congress has also held hearings into allegations that many of the newer credit-counseling firms have turned what was once a social service-oriented industry into a profit-driven business that charges consumers high fees to the benefit of founders who siphon off the cash through for-profit affiliates that they also control.
By CAROLINE E. MAYER
Washington Post
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DEBTOR, LAWYER CHARGED WITH BANKRUPTCY FRAUD
A Danville, California man and his bankruptcy attorney have been indicted by a federal grand jury on one count of mail fraud, one count of conspiracy, one count of bankruptcy fraud and one count of concealment of assets.
The U.S. Attorney's Office for the Northern District of California announced the indictments Monday.
According to the indictment, Arnold Stewart, 54, of Danville and his bankruptcy attorney, Gregory S. Lyons, 49, of Orinda, allegedly took part in a scheme to prevent certain creditors from obtaining and recording a judgment lien on Stewart's property in Mendota.
While Stewart was in bankruptcy, the men allegedly "entered into coal-mining investment encumbering the Mendota property," but never disclosed that fact to the creditors, the bankruptcy court or the trustee, according to a statement released by the U.S. Department of Justice.
Instead, they led creditors to believe they were following the order of the bankruptcy court to sell the land and pay to proceeds to the creditors, according to the investigators.
When it appeared that some creditors had learned of the scheme, the defendants attempted to conceal the fraud by dismissing the bankruptcy case, according to the Department of Justice.
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CEO'S COMPENSATION SKYROCKETS AS EMPLOYEES SUFFER IN DEBT
The median compensation for chief executives at the largest U.S. companies rose to $4.6 million last year, up from a median $3.6 million in 2002, according to the latest pay survey by the Corporate Library.
The 27% climb in overall pay -- base salary, bonus, options proceeds, restricted stock awards and long-term incentive plans -- exceeds the 11.5% rise in 2002 over 2001.
“I am surprised at the strength of the growth in the annual compensation,” said Paul Hodgson, author of the 2003 CEO pay report. Driving the gains were restricted stock awards. The 2003 median value for these awards was nearly $2 million, up from $1.46 million in 2002. Last year, 116 CEOs received restricted stock awards, up from 99 in 2002.
By Reuters
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DEBTOR'S OBLIGATION TO IRS NOT EXCEPTED FROM DISCHARGE DESPITE CLAIM HE CONVEYED HIS INTEREST IN HOME TO WIFE
Debtor transferred his interest in the couple's residence to his wife, yet he continued to occupy and enjoy the benefits of ownership in the property. His right to occupy the property was not listed as an asset. Nevertheless, the BK court found no intent to deceive or conceal, and no fraudulent intent in transferrring the interest. Accordingly, taxes were not excepted from discharge.
IN RE PETERSEN, (N.D.Iowa 2004
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EXPENSE FOR CIGARETTES NOT GROUNDS TO DENY CHAPTER 13 PLAN
Evergreen Credit Union, an undersecured creditor, appeals from the decision of the district court upholding the bankruptcy court's confirmation of debtor Clare A. Woodman's First Amended Chapter 13 Plan ("the plan"). Evergreen objected to the confirmation of the plan on the ground that it did not meet the requirement set forth in § 1325(b) that debtors devote all of their "disposable income" to their plans for at least three years. In particular, Evergreen claimed that Woodman's monthly purchases of cigarettes, amounting to $136.00, were not "reasonably necessary" expenses within the meaning of § 1325(b)(2)(A). Thus, it argued that § 1325(b) required the exclusion of Woodman's cigarette expenditures from the calculation of her reasonably necessary expenses, thereby increasing her projected disposable income and consequently the amount that she would be required to pay each month into the plan. The bankruptcy court, in a thoughtful rescript, overruled Evergreen's objection to the confirmation of the plan. In re Woodman, 287 B.R. 589, 596 (Bankr. D. Me. 2003). Evergreen appealed, and the district court affirmed the bankruptcy court's judgment. Adhering to our long-standing rule that arguments not squarely presented below may not be advanced for the first time on appeal, we affirm the judgment of the district court.
(ed. note: in this opinion, the 1st Cir. did not address the issue of cigarette expense on the merits, but held that the issue was forfeited because not properly raised at the trial level. However, the court did appear to acknowledge that a debtor in chapter 13 could include in the budget "basic needs including a reasonable cushion for recreation and exigencies.")
In re Woodman (1st Cir. 2004)
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DEBTOR "FORGETS" TO DISCLOSE INTERESTS IN CORPORATIONS
Six or more careless mistakes in a consumer debtor's schedules will generally warrant denial of discharge under section 727. Since the court believes that many schedules contain such errors, the court expects trustees and the UST hereafter to be much more active in policing the issuance of discharges.
The UST complains of the omission from the Debtor’s schedules certain real estate, a GMC Yukon and a Ford truck (the lien on which Debtor reaffirmed) and equity interests in at least eight corporations. Among misstatements in the statement of affairs were his income and his corporate equity interests and positions as officer and director in at least eight corporations. There can be no question about the materiality of these omissions. The judicial standard of materiality is an easy one to meet. As the Court of Appeals for the Fifth Circuit stated in Beaubouef (966 F.2d at 178), quoting COLLIER ON BANKRUPTCY: The subject matter of a false oath is ‘material’ . . . if it bears a relationship to the bankrupt’s business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of his property. Value is immaterial. Though a failure to give proper value to an item may itself constitute a false statement, and the Debtor’s views of value are to be scrutinized critically (Mitchell, slip. op. at 3), that the omission was of an asset without value does not make the omission immaterial.
In re Moschella (Bankr. N.D. Tex. 2004)
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FAILURE TO MAINTAIN ADEQUATE RECORDS RESULTS IN DENIAL OF DISCHARGE
Because the debtor is often the gatekeeper to any incriminating evidence, the Bankruptcy Code will avoid a discharge if a debtor fails to maintain adequate records to reasonably ascertain his financial condition. 11 U.S.C. § 727(a)(3). Complete disclosure is in every case a condition precedent to the granting of discharge, and if such a disclosure is not possible without the keeping of books or records, then the absence of such amounts to grounds for denial of discharge. A debtor's decision to not maintain a bank acocunt to avoid creditor action, can constitute grounds for denial of discharge for failure to maintian records.
In re Schifano (1st Cir. 2004)
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PUBLISHED BY KING BANKRUPTCY MEDIA FOR BANKRUPTCY PROFESSIONALS 7080 Donlon Way Suite 222 Dublin California 94568 (925) 829-6460
© King Bankruptcy Media 2004 CONTACT US AT editor@bankruptcymedia.com
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