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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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August 25, 2003
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ANNOUNCEMENTS - EVENTS - NEWS
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King's DISCHARGING TAXES Edition 2000
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LEGISLATION & REFORM NEWS . . .
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PERSONAL BANKRUPTCY FILINGS CONTINUE TO RISE . . .
THE AMERICAN BANKRUPTCY INSTITUTE said Monday that personal bankruptcy filings totaled 1,613,097 — an all-time high for any 12-month period. The figure was up 10 percent from the 1,466,105 cases filed in the 12-month period that ended June 30, 2002.
“The latest bankruptcy record reflects the continuing hangover from the binge consumer spending and consumption of the late 1990s,” Gerdano said in a statement accompanying the figures. “Consumers, aided by historic low interest rates, helped make the last recession a shallow one, but at the cost of adding to already high household debt burdens.
“This can lead borrowers to consider bankruptcy as a solution to their debt problems.”
The institute said that business bankruptcy filings fell in the 12 months ended June 30. Business filings totaled 37,182, down more than 5 percent from 39,201 in 2002, it said. Business bankruptcies also had declined in the 12 months ended March 30.
A total of 440,257 bankruptcy petitions were filed in the April-June period, surpassing the previous record of 412,968 cases in the first quarter of 2003.
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WHAT DO YOU DO WHEN YOU HAVE CHILDREN?
YOU FILE BANKRUPTCY
Parents are in worse economic shape than they've ever been in, when compared with people who don't have children . That view is expressed by Harvard law professor Elizabeth Warren and her daughter Amelia Warren Tyagi in their forthcoming book, "The Two-Income Trap," according to an article in The New Yorker. The authors demonstrate that having a child is now the best indicator of whether someone will end up in "financial collapse." According to their study, married couples with children are twice as likely as childless couples to file for bankruptcy. They are 75 percent more likely to be late paying their bills. And they're also far more likely to face foreclosure on their homes. The study also indicates that most of these people are not, by the usual standards, poor. Rather they are middle-class couples who are in deep financial trouble in large part because they have kids.
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CREDIT CARD PROFITS SOAR
The nation's three largest issuers reaped nearly $1.5 billion in profits for the three months of April, May, and June of this year. Add in profits from the largest issuer of charge cards and business cards, and the figure handily tops $2 billion for the second quarter. The nation's largest issuer of bank credit cards, Citibank, reported profits of $659.0 million, which includes some credit cards outside the USA. Citibank's second quarter card profits were 9% over the same period one year ago. MBNA, the second largest U.S. issuer of bank credit cards, reported $543.3 million in second quarter profits, a 20% increase over last year. The third largest U.S. issuer of bank credit cards, Bank One, posted $279.0 million in profits, a 2% decline over the second quarter of last year. American Express, the king of charge cards, corporate cards, and with $36 billion in U.S. credit card loans, reported second quarter profits of $634.0 million from its card operations. Based on the second quarter information, the U.S. credit card business is poised to produce more than $12 billion in profits this year.
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KING'S DISCHARGING TAXES IN BANKRUPTCY - Ed. 2000
This book has been called "the bible" for discharging taxes in consumer bankruptcy cases. Used by thousands of lawyers, trustees, judges and other tax professionals across the country, it explains in simple yet comprehensive terms what kinds of taxes can be erased, when they can be erased, and how they can be erased in chapter 7, 13, or 11. It covers all the issues and traps for the unwary. This book is even used by revenue officers!
Says Matthew Tozer, bankruptcy attorney - Fullerton, CA
"Any practitioner who does any degree of bankruptcy tax work or analysis would be crazy not to have this tax discharge treatise!"
Says Ike Shulman, former President of the National Association of Consumer Bankruptcy Attorneys, "Every serious bankruptcy practitioner should have this book!"
TO ORDER BOOK CLICK ON IMAGE AT RIGHT . . .
2002 SUPPLEMENT ALSO AVAILABLE -
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DEBTOR WHO TOOK 5TH WAS NOT DENIED DISCHARGE
The bankruptcy court did not err in denying a creditor's discharge challenge after the debtor refused to testify during pretrial discovery, citing Fifth Amendment protections.
While the law does not forbid adverse inferences against civil litigants who refuse to testify on Fifth Amendment grounds, see Baxter v. Palmigiano, 425 U.S. 308, 318 (1976), it does not mandate such inferences. When all is said and done, the trial court has discretion over whether a negative inference is an appropriate response to the invocation of the Fifth Amendment in a particular civil case.
In re Carp __ F.3d __ (1st. Cir. 2003)
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ATTORNEY'S RIGHT TO LIMIT HIS/HER SERVICES TO DEBTOR EXPLORED IN THOUGHTFUL OPINION
Judge Paul W. Bonapfel (N.D. Georgia) has written an excellent essay in his opinion in a recent bankruptcy case, exploring the issues of, 1) May a lawyer limit the scope of representation of a chapter 7 debtor? 2) The extent of the lawyer's duties absent court leave to withdraw from the case; 3) The grounds for attorney withdrawal based on debtor's inability or refusal to pay fees for services.
"Counsel for debtors should have a reasonable expectation of the work that will be required in connection with a chapter 7 bankruptcy case at the time it is filed. They may set their fees accordingly and decline cases where the anticipated services will result in more fees than the client is willing or able to pay."
COMMENT: One aspect of the fee v. representation issue that we would have wished the opinion had explored was the problem that debtors' attorneys often feel they are not, in fact, free to "set their fees accordingly." They are asked to charge only minimal fees, yet are expected to provide maximum services. Perhaps the opinion could somehow be expanded to more fully explore this conundrum.
We recommend Judge Bonapfel's opinion as an unusually well drafted essay exploring the needs and expectations of debtors, nature of the rights and benefits they seek in bankruptcy, and the role of professional counsel in the process.
In re Egwim, 291 B.R. 559 (N.D.Ga. 2003).
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