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THE CONSUMER BANKRUPTCY LETTER |
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In This Issue:
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June 7, 2004
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BankruptcyAcademy.com - Seminars Scheduled
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CAN'T ATTEND ACADEMY? BUY THE BOOK!
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NO ACTION ON REFORM EXPECTED
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COURT HOLDS DEBTOR NEED NOT REAFFIRM
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CREDIT COUNSELING FIRM FILES FOR BANKRUPTCY PROTECTION
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DISCHARGING TAXES IN BANKRUPTCY
KING BANKRUPTCY ACADEMY SCHEDULES 3-DAY SEMINARS ON DISCHARGING TAXES - LAS VEGAS, SAN FRANCISCO & SAN ANTONIO
The first dates scheduled for the 5th annual Bankruptcy Academy program 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.
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.
Early registration before July 1 saves $50 off the regular enrollment fee of $695. And, with a double enrollment, the second tuition fee is 1/2 price!
Previous programs have qualified for CLE in all states for which CLE accreditation was requested. On request the Academy will assist in obtaining CLE accreditation for an enrollee's state.
For more information about the Tax Discharge program, or to enroll, click on red below.
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AMERIDEBT CREDIT COUNSELING FILES FOR BANKRUPTCY PROTECTION
Credit-counseling company AmeriDebt, charged by federal regulators with using deceptive marketing to bilk hundreds of thousands of customers, filed for bankruptcy yesterday, the company announced.
Christine Kraly, a spokeswoman for the Germantown-based company, said the filing for Chapter 11 protection in the U.S. Bankruptcy Court in Greenbelt won't affect AmeriDebt's current operations.
The company said payments made by its customers are processed through a separate trust account that won't be affected by the bankruptcy filing.
Kraly declined to comment further, but in a statement released yesterday, the company said: "AmeriDebt's first priority is and always has been serving its consumer clients. As such, we recognize that the protections afforded by Chapter 11 are vital for the uninterrupted continuation of these services."
In November, AmeriDebt became the first credit counseling company to have a federal lawsuit filed against it. Minnesota, Illinois and Missouri are among five states that have filed separate lawsuits against the company.
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LAWYER DISBARRED FOR BANKRUPTCY EMBEZZLEMENT
Associated Press
JACKSON, Miss. - The Mississippi Supreme Court on Thursday disbarred a Gulf Coast attorney sentenced in January to 26 months in prison for bankruptcy embezzlement.
William S. Boyd III of Gulfport pleaded guilty last fall in federal court in Gulfport, admitting he embezzled $163,500 from clients he represented in U.S. Bankruptcy Court, according to federal prosecutors.
U.S. District Judge Walter J. Gex III also sentenced Boyd to three years supervised release and ordered him to pay restitution of $395,500.
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BANKRUPTCY LAWYER SUED FOR DEBTOR'S LOSS OF HOME
Judge John R. Hawkinson of District Court in Grand Rapids has ruled in favor of Thomas and Sandra May in a civil suit they brought against a Park Rapids attorney.
The judge has ordered Bill Jones to pay the couple $49,721.50 in damages plus interest and attorney’s fees on finding Jones “was the direct cause of the loss of Mays’ homestead.”
According to the findings of fact in the case, the Mays’ homestead consisted of a home and 80 acres of land sold at a mortgage foreclosure sale April 3, 2001. The couple had a 12-month period within which to redeem the property and retained Jones to represent them in filing a bankruptcy for the purpose of extending the redemption period.
At the time the bankruptcy was filed, Jones advised May he had 60 days from the April 2 filing date, or until June 1, 2002 to redeem the property.
On other visits to Jones’ office, however, testimony indicates Jones led May to believe he had until July 12, 2002 to redeem the property.
An attorney, who specializes in handling bankruptcy proceedings, testified that a Chapter 7 filing does not extend the period of redemption. Any extension is up to the lender and if the lender agrees to an extension, the agreement should be put in writing.
Hawkinson further cited the testimony of two local attorneys (Jim Wallace and Greg Larson), “who are aware of Mr. Jones’ reputation in the community.” Their testimony “indicated that his reputation was not good for truthfulness.”
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WHO FILES FOR BANKRUPTCY?
To find out, the Akron Beacon Journal surveyed the cases filed in the Akron and Canton courts last year.
What emerged mainly were faces of city dwellers in Akron, Canton, Massillon and Alliance -- a cross section of those communities, earning moderate pay and living in modest homes.
There was little evidence of lavish lifestyles. Instead, a common trait among the cases was a sudden drop in income, usually due to job loss, divorce or death of a spouse. Nearly 60 percent reported losing income in the previous year or two, with the loss averaging $9,315.
For many, it doesn't take much of an income loss to topple a household into bankruptcy. All it took was a one-hour-a-day pay cut to push school-bus driver Joan Madden of Kent over the edge. That's how much her daily bus route was shortened in September 2002. The change cut her pay by $230 a month.
"That's all it took," said the 48-year-old divorced mother of a grown daughter. "I had to file bankruptcy because of it or I was going to lose everything."
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KING'S DISCHARGING TAXES IN BANKRUPTCY
5th ed. • 915 pages • 75 exhibits and checklists • over 1,000 cases cited • indexed
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!"
At BankruptcyBooks.com
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3RD CIRCUIT RULES DEBTOR MAY CONTINUE MAKING PAYMENTS WITHOUT REAFFIRMING INSTALLMENT CONTRACT
Held, section 521(2)(a) of the Bankruptcy Code does not prevent non-defaulting chapter 7 debtors from retaining secured property such as an automobile by keeping current on their loans.
The Prices are chapter 7 debtors who wanted to use their automobiles while remaining current on their monthly auto loan payments. The lienholder, Delaware State Police Federal Credit Union ("Credit Union"), convinced the Bankruptcy Court and the District Court that section 521(2)(A) of the Bankruptcy Code does not permit the Prices to continue possessing the cars simply by paying their bills, but instead allows the Prices only four options: surrender the cars, purchase them in a lump-sum payment, negotiate another loan that would attach post-petition liability, or claim a recognized exemption under the Bankruptcy Code. This issue has been the subject of no fewer than eight discordant decisions of the courts of appeals. Four courts of appeals have held that a debtor is not limited by the options enumerated in 521(2), while four others have held to the contrary. It seems that the only thing our courts can agree on is that we disagree. After a close examination of the text and context of section 521(2)(A), we conclude that the provision does not prevent non-defaulting debtors, such as the Prices, from retaining secured property by keeping current on their loans.
In re Price __ F.3d __ (3rd Cir. 2004)
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10TH CIRCUIT HOLDS TAXES EXCEPTED FROM DISCHARGE
The Bankruptcy Code's exemption of income tax debt from discharge allows the federal government to collect funds lawfully due, even from a debtor who has received a discharge in bankruptcy.
Debtor transferred assets of his failing corporation to himself. IRS assessed against him individually, as transferee, for corporate income tax liablities. Debtor argued that his "liability" for corporate taxes was a mere debt, not a tax, and therefore was discharged in his personal chapter 7.
Held, the Bankruptcy Code's specific exemption of income tax debt from discharge reflects Congress' intent to allow the federal government to collect funds lawfully due, even from a debtor who has received a discharge in bankruptcy. Nor is this obligation lessened by the fact that the debt has been transformed from a direct tax liability of a transferor taxpayer into a transferee liability.
McKowen v. IRS __ F.3d __ (10th Cir. 2004)
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SUPREME TO COURT TO CONSIDER IRA EXEMPTION
The Associated Press
WASHINGTON -- The Supreme Court said today it would consider whether people facing bankruptcy can prevent certain retirement savings from being used to pay their debts.
Bankruptcy law protects payments from a person's pensions and annuities, but does not mention Individual Retirement Accounts, which are at issue in a case involving an Arkansas couple. The case will be argued at the Supreme Court in the term that begins next fall.
Richard and Betty Jo Rousey have already lost in a federal appeals court, which said that Congress could easily change the law if it wanted to protect IRAs.
The Rouseys have about $55,000 in two accounts, money that was rolled over from pensions and 401K plans at their previous employer, Northrop Grumman. The 8th U.S. Circuit Court of Appeals had held that because the Rouseys could withdraw money, the IRAs were like "readily accessible savings accounts."
Their attorney, Thomas Goldstein, told justices in a filing that the case is important because of the popularity of IRAs and the large numbers of people who file for bankruptcy protection. About a third of American households have a traditional IRA, which "typically represents an enormous investment in one's future," he said.
Goldstein said potentially hundreds of thousands of people will be affected by the court's decision. The Rouseys filed for Chapter 7 bankruptcy, something done more than 1 million times a year in U.S. courts.
Rousey v. Jacoway, 03-1407
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HOW BANKRUPTCY LAW IS MADE
The Hon. Rooker Feldman, judge of the U.S. Bankruptcy Court, District of Disneyland, published his opinion in a case, In re Broke Person, __ B.R. __ (12th Cir. 1995). A case of first impression in the Twelfth Circuit (as well as the 1st, 2nd, 3rd, 4th, 5th, 6th through 11th, and short circuits), it held that the debtor's attorney could not charge for the time spent dialing the phone to make a call in connection with the case.
"Didling, dawdling, dialing, dang!" is the way he described it "There's a long and sordid history of abusive dialing. Dialing the phone is not practicing law."
About a year later, he had a similar case, In re Pitiable. This time he cited precedent for the proposition that dialing the phone was not compensable. The case he cited as precedent was In re Broke Person.
Six months later he had a similar case in In re Givme Abrake. This time, his published opinion that dialing the phone was not compensable included the observation that "the clear trend in authority is toward disallowing compensation for phone dialing," and cited In re Broke Person and In re Pitiable.
A year later this same issue came up in another circuit, before the Hon. Oxoley Sarbanes. Judge Sarbanes' ruling in In re Flake was blunt and to the point: "Every case to rule on this issue has held that time dialing the phone is not compensable. See, In re Broke Person, In re Pitiable, and In re Abrake. This is a well settled rule in bankruptcy law. Disagreeable as it is for judges, we must be ever vigilant to prevent this kind of fee gouging. The attorney shall disgorge $1.42 expended dialing the phone, plus $5,000 sanctions."
And thus was spawned what has become known as the "Rooker Feldman" doctrine, which has since been expanded to time spent opening briefcases, typing in the web site address for online legal research, meeting the client in the waiting room, watching the printer print a petition, walking from the lawyer's office to the front desk to recover a phone message from the trustee, and saying "Good morning, your Honor" upon approaching the podium for a hearing.
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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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