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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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Jan. 5, 2004
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FEATURED BOOK: King's Discharging Taxes
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TRANSFER OF HOUSE WAS FRAUDULENT & OTHER CASES
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CONSUMERS BURIED IN HOLIDAY DEBT?
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PRESS RELEASES / EVENTS
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REFORM NOT A PRIORITY IN '04?
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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, plus Gold's Tax Discharge Chronometer
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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POST-HOLIDAY DEBT MAY BURY CONSUMERS
As credit-card bills come due in January, consumers unable to afford their spending will become part of the annual cycle of buyer's remorse. In the worst cases, they will discover why bankruptcy filings are highest in the period from March to May.
Americans owe nearly $2 trillion in consumer debt, $728 billion of which is on credit cards and other revolving loans, according to the Federal Reserve Board. That's up from $1.5 trillion three years ago, before the stock market tumble and recession. It doesn't include mortgage loans.
"Consumer debt is a huge problem and a trend that continues to grow," said Shelley Curran, a policy analyst at Consumers Union in San Francisco.
By Katherine Reynolds Lewis
Newhouse News Service
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LIQUIDATORS THRIVE AMID ADVERSITY
NEW YORK (Reuters) - Liquidators, the scavengers of the U.S. retail business, experienced boom times as some high-profile retailers were forced into bankruptcy amid struggling sales.
Now, with sales picking up as the economy recovers and companies working hard to keep inventories tight, slim pickings might be expected for those who buy up unwanted stock at below bargain-basement prices before reselling to close-out retailers.
But the liquidators say they're doing just fine.
The success of the multi-billion-dollar industry even in lean years shows that liquidators aren't merely sweepers, hired to scoop up goods from defunct retailers. They deal with healthy companies, too.
"The word liquidator has become somewhat of a misnomer," said Stephen Miller, a partner at The Ozer Group, a Needham, Mass.-based liquidator. "People think all we do is work with companies in crisis. But more and more we're getting involved with the restructuring world and with asset relocation."
SOURCE: CNNMoney.com
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FRAUD WIDESPREAD IN COMPANIES
According to a recent survey by accounting firm KPMG, more than 75 percent of executives have uncovered some form of fraud within their company in the last year. The figure is up from 62 percent in 1998 and reflects measures taken by companies to improve internal controls in the last two years.
Internal controls, many introduced in response to the 2002 Sarbanes-Oxley Act, are now the chief means of detecting fraud in 77 percent of cases, up from 51 percent in 1998.
Employee fraud accounted for most of the fraud reported by 459 companies surveyed, with 60 percent of companies reporting incidents.
Financial reporting fraud affected 7 percent of the companies, more than double the number in 1998, and were the most expensive frauds with an average cost of $250 million per episode.
SOURCE: Anthony Lin, New York Law Journal
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SHORT SESSION PLUS OTHER ISSUES LEAVE LITTLE TIME FOR BK REFORM
Few Legislative Days Expected for Senate In Election-Year, Bankruptcy does not appear to be a "priority".
On January 20th, after about 7 weeks away, the Senate returns to begin the 2nd session of the 108th Congress.
The anticipated election-year calendar (including significant "out of DC time") and the agenda could result in a difficult year for legislation which may run past the November elections, especially in light of Congresses inability to complete the annual appropriations bills on time. For anyone keeping score, "lame-duck" sessions (a legislative session conducted after election of new members but before they are installed) have occurred at the end of the 105th, 106th and 107th Congresses.
The first order of business for the Senate when it returns will be the 04 Omnibus Spending Bill (HR 2673), which covers 7 agencies and is valued at $820 billion.
The Senate is targeting an "initial" adjournment date of October 1, while the House is hoping to leave October 4, giving each chamber about one month off to campaign before the November 2 election.
Currently, bankruptcy reform does not appear to be particularly high on any agendas in the Senate.
SOURCE: CLLA Legislative Counsel
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DEBTOR'S TRANSFER OF HOUSE TO MOTHER FOR LESS THAN FAIR VALUE, AND CONTINUED OCCUPANCY, WAS FRAUDULENT
A debtor's prepetition transfer of his $115,000 house to his mother for $78,000 was a fraudulent transfer where the debtor continued to live in the property after the transaction, the debtor used the funds to pay off the mortgage on the house, and filed bk within a year. Court recited badges of fraud to include inadequacy of consideration, financial condition of debtor, pendency of suits, and whether debtor retained possession of the property following the transfer.
In re Harris (Bkrtcy.De. 2003)
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FEES REDUCED IN PART BECAUSE HOURLY RATES EXCEEDED COMPARABLE NON-BANKRUPTCY RATES
Held, hourly rates for bankruptcy work should be commensurate with, but not higher than, hourly rates for comparable non-bankruptcy work and with similar legal experience. The court required the fee applicant to provide a “complete survey” of law firm hourly rates for the surrounding community.
The court also reduced fees for unnecessary exercises, citing authority that “futile efforts aimed at achieving unattainable objectives are unreasonable; fees generated at tilting at windmills will be disallowed.”
In re Fleming Companies, Inc. (Bkrtcy.De. 2003)
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STATE SALES TAX PENALTIES HELD DISCHARGEABLE
Held, penalty, notwithstanding its status under § 507(a)(8)(G), may be dischargeable as long as it is not punitive in nature and it is shown that, pursuant to paragraph (A), the penalty is related to an underlying debt that is dischargeable or, under paragraph (B), the penalty relates to a transaction or event that occurred more than three years before the date of the filing of the bankruptcy petition. Ohio state sales tax penalties were held dischargeabe.
IN RE BAIR, (N.D.Ohio 2003)
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BK COURT HAS JURISDICTION TO ADJUDICATE UN-ASSESSED TAX DEBT
In this Chapter 7 case, although IRS showed no liabilities had been assessed against the debtor for the years in question, the debtor nonetheless filed a complaint to determine their dischargeability.
Held, the Government holds a contingent claim against the Plaintiff's bankruptcy estate. As such, a "case or controversy" exists in this case, thereby entitling the Plaintiff to maintain an action to determine the
dischargeability of any potential federal tax obligations.
COMMENT: It is unclear what theory the debtor would use to assert the un-assessed taxes were discharged, in view of the rule that to be dischargeable in Chapter 7 the taxes must have been assessed prepetition by at least 240 days, pursuant to 11 U.S.C. § 507(a)(8)(A)(ii).
IN RE LANDRIE, (N.D.Ohio 2003)
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ASSETS ACQUIRED DURING CHAPTER 13 AND BEFORE CONVERSION WERE NOT PROPERTY OF THE CHAPTER 7 ESTATE
The issue raised in this case concerned whether two assets which were obtained subsequent to the filling of the Debtors' Chapter 13 Bankruptcy, but prior to the conversion of the case to a Chapter 7 bankruptcy, were included within the Debtors' Chapter 7 estate. Bankruptcy Code section 548(f) excludes such property, absent evidence of bad faith conversion.
No inference of "bad faith" arises solely because a debtor acquires postpetition, but preconversion assets, and thereafter elects to convert their case on account of the protection afforded by § 348(f)(1). To hold otherwise would clearly go against the principle that a person should not be penalized solely for exercising a statutory right.
IN RE BEJARANO, (N.D.Ohio 2003)
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EDUCATIONAL LOAN NOT ENTITLED TO HARDSHIP DISCHARGE WHERE DEBTOR SHOWED NO EFFORT TO PAY BACK
The evidence presented by debtor in terms of the good faith requirement falls far below the legal standard required for hardship discharge.
Debtor chose to abruptly quit making payments on his loan rather than contacting his loan provider[s] in an effort to negotiate a lower monthly payment for the loan and/or extend its term. Further, debtor failed to pay the student loan at issue in the present matter, while continuing to faithfully pay his son Jeremy's student loan for which debtor is not legally obligated. Such conduct in no way reflects a good faith effort to pay the student loan for which debtor is legally obligated.
IN RE FISH, (W.D.Pa. 2003)
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February 5-7, 2004
AMERICAN BANKRUPTCY INSTITUTE
Rocky Mountain Bankruptcy Conference
Westin Tabor Center, Denver, CO
Contact: 1-703-739-0800 or http://www.abiworld.org
March 5, 2004
AMERICAN BANKRUPTCY INSTITUTE
Bankruptcy Battleground West
The Century Plaza, Los Angeles, CA
Contact: 1-703-739-0800 or http://www.abiworld.org
March 18-19, 2004
BEARD GROUP & RENAISSANCE AMERICAN MANAGEMENT
Healthcare Transactions
The Millennium Knickerbocker Hotel, Chicago
Contact: 1-800-726-2524; 903-592-5168.
April 23-25
NACBA Annual Convention -
Sheraton Boston Hotel (Copley Place) Boston, MA. For info go to NACBA.org or e-mail maureent@nacba.org.
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THIS E-LETTER goes to nearly 3,000 bankruptcy professionals; help get the word out for your news or event by submitting a press release here. Your item will appear in the next issue of this letter.
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