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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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Dec. 22, 2003
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FEATURED BOOK: King's Discharging Taxes
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ATTORNEY'S PREPETITION FEES DISCHARGED
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U.S. SOLDIERS SINKING IN DEBT?
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NEW BANKRUPTCY COURT BUILDING GROUNDBREAKING
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BUSH SIGNS FREE CREDIT REPORT LAW
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The One-Stop site for Consumer Bankruptcy Lawyers
Books / Software / Periodicals
FEATURED -
King's DISCHARGING TAXES IN BANKRUPTCY ed. 2000
5th ed. • 915 pages • 75 exhibits and checklists • over 1,000 cases cited • indexed $95 - 2002 Supplement available
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 Ike Shulman, former President of the National Association of Consumer Bankruptcy Attorneys, "Every serious bankruptcy practitioner should have this book!"
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OTHER POPULAR TITLES -
King, Discharging Taxes in Bankruptcy with 2002 supplement $135
King, Marketing A Consumer Bankruptcy Practice $89
King, Chapter 7 Law & Practice $129.50
King, Chaper 13 Law & Practice $129.50
King, Fees & Ethics in Consumer Bankruptcy Cases $79.95
NCLC, Consumer Bankruptcy Law & Practice $140
James Pub, Bankruptcy Courts & Procedures $110
Aspen, Basic Bankruptcy Law For Paralegals $79.95
Aspen, Automatic Stay Litigation $195
Juris, Fundamentals of Bankruptcy & Corporate Reorganization $80.75
CD TimeValue, TValue5 Interest Calculator $149.00
CD Gold, Tax Discharge Chronometer $139.00
CD Collier TopForm Bankruptcy System $700
OVER 100 SELECTIONS TO CHOOSE FROM
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PAYDAY LENDERS PREY ON MILITARY
Military bases across the nation have become magnets for payday lenders, which charge fees as high as $30 every two weeks per $100 borrowed — equal to a 720 percent annual interest rate.
Lt. Col. Russ Putnam, a Fort Stewart lawyer, told legislators that stress over paying off payday loans hurts troop morale and the combat readiness of the post's 3rd Infantry Division, which led the assault on Baghdad. In extreme cases, soldiers saddled with debt must be discharged.
SOURCE: CBSNews.com
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STROM THURMOND FUNNELED FUNDS TO MIXED-RACE DAUGHTER THROUGH BANKRUPTCY JUDGE
The chief federal bankruptcy court judge for the state of South Carolina, a nephew of former Sen. Strom Thurmond, R-S.C., acknowledged Tuesday that he served as a "pass through" for payments sent by cashiers' check to Thurmond's 78-year-old mixed-race daughter in California.
Walter Thurmond Bishop, a longtime South Carolina judge and lawyer who is the son of Thurmond's late sister Martha, said he sent money at the senator's request whenever Essie Mae Washington-Williams indicated that she needed financial assistance. He said he began communicating with Williams on the senator's behalf in the late 1960s and continued to send money, packaged along with warm personal letters, until recent years.
SOURCE: Washington Post
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7TH CIR. HOLDS THAT DEBTOR'S ATTORNEY'S FEES FOR PREPETITION SERVICES ARE DISCHARGED
Pre-petition debts for legal fees are subject to discharge under §727 even if services are performed or owed postpetition.
Three debtors in bankruptcy hired lawyers before filing their petitions. Each agreed to a retainer that would cover the legal services entailed in preparing and prosecuting the proceedings. Unlike most retainers, however, these were to be paid over time -- some installments before the petition was filed, others thereafter. The lawyers performed as promised: all three debtors received their discharges, and the cases were closed. When the lawyers continued to collect the unpaid installments, the three debtors (with the assistance of new counsel) commenced adversary proceedings in which they asked the bankruptcy court to hold their former lawyers in contempt for violating the injunctions implementing the discharges.
The Bankruptcy Court and District Court held that the fees were not dischargeable. Reversed by the Seventh Circuit.
“We . . . agree with In re Biggar, 110 F.3d 685 (9th Cir. 1997), that pre-petition debts for legal fees are subject to discharge under §727. See also In re Sanchez, 241 F.3d 1148, 1150 (9th Cir. 2001). Although Biggar is the only appellate decision squarely in point, almost every bankruptcy judge and district judge who has considered the question has come to the same conclusion . . ”
COMMENT: In this case Circuit Judge CUDAHY, concurring in part and dissenting in part, added to the opinion with an interesting discussion of the conundrum of compensation for debtors' attorneys in view of an “awkward” code. Must reading for every consumer bankruptcy attorney.
Bethea v. Robert J. Adams & Associates, __ F.3d __ (7th Cir. 2003)
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OTHER CASES -
BK DISMISSED DUE TO DEBTOR'S REFUSAL TO COOPERATE
The Bankruptcy Court did not err in dismissing a dischargeability action brought by George Harrison against his manager when Harrison refused to submit himself for deposition.
“Fed. R. Bankr. P. 7037(b), the bankruptcy counterpart of Fed. R. Civ. P. 37(b), authorizes a court to sanction a party who disobeys a discovery order with dismissal if the disobedience is willful and prejudices another party. (cite). In the context of Rule 37 motions, a court may find willful disobedience sufficient to support dismissal when a party employs stall tactics and disregards court orders.”
In re O'Brien, __ F3d. __ (8th Cir. 2003)
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EXEMPTION DETERMINED AT TIME OF FILING
Time for determining a debtor's exemption is the time of filing. When the Debtor filed her original Chapter 13 petition the Missouri homestead exemption was only $8,000.00 (raised postpetition by the Missouri legislature to $15,000), and the exemption in effect at the time of the filing of the original petition is the only exemption to which the Debtor is entitled.
In re Burley, __ B.R. __ (Bkrtcy.Mo. 2003)
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HELD, LAVISH LIFESTYLE IS NOT SUFFICIENT TO DENY DISCHARGE OF SUBSTANTIAL TAX DEBT
A debtor with a significant debt to the Internal Revenue Service ("IRS"), seeks to discharge this debt even though, by any fair standard, his annual income is munificent, and he spends much of it on private education for his children and the rental of his large and expensive family home. This case, one of first impression in this circuit, presents the following novel questions: (1) whether "cause" for dismissal under 11 U.S.C. § 707(a) includes a debtor's lack of good faith; and if so, (2) whether the facts presented here reflect a lack of good faith on the part of this debtor.
The debtor's total debt to all creditors was $5,461,986.85, the lion's share of which was the $5,135,464.66 owed to the IRS. The IRS debt was largely unsecured.
Held, in the absence of other evidence of fraud or wrongdoing, mere lavish lifestyle is not sufficient to deny discharge under § 707(a).
McDOW v. SMITH, __ B.R. __ (E.D.Va. 2003)
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“STRIP OFF” DENIED IN CHAPTER 7 CASE
The United States Court of Appeals for the Sixth Circuit, affirming the decision of the District Court for the Western District of Michigan in Talbert v. City Mortgage Services (In re Talbert), held that a chapter 7 debtor could not avoid (or "strip off") an allowed junior lien on real property pursuant to Bankruptcy Code section 506(d) even though a senior lien on the property exceeded the fair market value of the real property in question. In support of its ruling, the Sixth Circuit reasoned that such a result is demanded by the statutory construction of section 506(d) as interpreted by the Supreme Court of the United States in Dewsnup v. Timm.
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IRS ORDERED TO CONSIDER OFFER-IN-COMPROMISE
In Holmes v. United States (In re Holmes), the United States Bankruptcy Court for the Middle District of Georgia held that the Internal Revenue Service ("IRS") did not violate the antidiscrimination provision of the Bankruptcy Code by refusing to consider an offer-in-compromise from a chapter 11 debtor. However, the court exercised its equitable powers and directed the IRS to consider the offer-in-compromise because it was necessary and appropriate to carry out the congressional intent found in chapter 11 of the Bankruptcy Code.
Holmes v. United States (Bkrtcy.M.D.Fla. 2003)
SOURCE: The Bankruptcy Bulletin
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HELD, CREDIT GUARANTEED BY CONSTITUTION - JUDGE ISSUES ORDER OF MAGNITUDE
Hon. Rooker Feldman, bankruptcy judge pro tem, has held that Article IV, Section 1 of the U.S. Constitution which states: "Full faith and credit shall be given in each State," means exactly what it says.
The ruling came in a class action suit brought by students at Totally Busted University against 1.2 million businesses in the United States. The lawsuit was triggered when I.B. Poor, a freshman at TBU, tried to buy a pair of cowboy boots “on account.” The application was denied because, according to store spokesman Yugadda B. Kidden, "Mr. poor is so doesn't have an account with us.”
Judge Feldman, in his 1/2 paragraph analysis of the constitutional basis for credit, observed "As a matter of public policy, all credit applications should be approved because this would promote a surge of consumer purchasing, which could boost the economy by an order of magnitude. Thus, it serves an important public policy to encourage instant gratification, which is The American Dream. Am I right?”
Poor v. Boots, __ F.4th __ (Bkrtcy.Berkeley 2003)
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