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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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MAR. 8, 2004
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BANKRUPTCY ACADEMY SCHEDULES SEPTEMBER DATE
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SUPREMES TAKE UP SOVEREIGN IMMUNITY
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MEDICAL BILLS MAJOR CAUSE OF BANKRUPTCY
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NEW! AFFORDABLE CASE RESEARCH BY BANKRUPTCY MEDIA
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FAMILY FARMERS HOSTAGE TO REFORM BILL?
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KING BANKRUPTCY ACADEMY SCHEDULES 3-DAY SEMINAR ON DISCHARGING TAXES - SEPT. 8, 9, AND 10
The first date scheduled for the 5th annual Bankruptcy Academy program on discharging taxes in bankruptcy cases has been scheduled for Las Vegas, Nevada, on Sept. 8, 9 & 10, 2004.
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); and Eric M. Casper, formerly Senior Trial Attorney, Tax Division, U.S. Department of Justice - Washington, D.C.
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).
Additional tax discharge programs will be scheduled for Fisherman's Wharf in San Francisco, and San Antonio, Texas. Dates will be announced soon.
Academy courses on other aspects of consumer bankruptcy practice will be announced soon.
Early registration for the September program saves $100 off the regular enrollment fee of $695. All 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. For more information on the Academy in general, click on the image at right or visit BankruptcyAcademy.com.
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FILINGS EXPECTED TO RISE AS CONGRESS RECONSIDERS REFORMS
By Richard Burnett, Sentinel Staff Writer
Although the pace of personal-bankruptcy filings appeared to taper off toward the end of the year, experts said Tuesday the number could surge again in coming months as Congress considers -- yet again -- legislation that would make bankruptcy a less-attractive alternative for people in financial trouble.
"In the past, when reform was being considered, there would be a spike in bankruptcies as consumers rushed to file," said Scott Spradley, a bankruptcy specialist for the law firm GrayRobinson in Orlando. "And that will certainly happen again."
Experts said a "rush to file" contributed to last year's record total as the bill was working its way through Congress. But many other factors played a role, too.
"One of the biggest was the cost of health care," said Jordan Goodman, a finance writer and spokesman for the Cambridge Consumer Credit Index, a monthly research survey. "I've heard numbers as high as 50 percent of the bankruptcies were because of medical debt. And that will only increase as more and more people lose their health insurance. If you don't have coverage or you have inadequate coverage, it only takes one critical event to put you under."
Medical expenses and rising credit-card debt are the most prevalent culprits behind a personal bankruptcy, said Becky Nichol, a counselor and certified financial planner in Maitland. And bankruptcies touch all levels of society, from affluent, two-income families to single-parent, low-income homes, she said.
Sentinel Communications Co.
Orlando Sentinel (Florida)
SOURCE: Maureen Thompson
Senior Partner
The Hastings Group
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ELIZABETH WARREN: MEDICAL BILLS MAJOR CAUSE OF CONSUMER BK
Harvard law professor Elizabeth Warren studies the widespread financial impact of illness and accidents on the American family.
ELLIS: Nationwide, medical bills are now the second-leading cause of personal bankruptcies. Last year a record 800,000 families filed for bankruptcy because of medical debt.
Ms. ELIZABETH WARREN: Every 30 seconds, someone files for bankruptcy in the aftermath of a serious health problem.
Those families are sinking. Middle-class families, hard-working, play-by the-rules families, even families with health insurance.
ELLIS: The pressure to file bankruptcy is even worse for the growing number of uninsured. They often pay more because they don't have insurance companies negotiating for lower fees.
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CREDIT CARDS DANGLE CARROT TO PAY TAX BILL WITH PLASTIC
With tax season under way, credit card companies are rolling out super-sized rewards programs that allow customers with certain cards to charge their tax payments and earn double miles or extra reward points.
This tax season, Bank One Corp. said holders of the United Mileage Plus Visa card can earn two miles for every dollar spent when they use their cards to pay federal and state income taxes at www.officialpayments.com between today and April 30.
Last year, 559,566 people paid their taxes by credit card, a 78 percent rise from 2002, according to figures on the IRS Web site. Those taxpayers collectively charged almost $878 million in taxes, according to the IRS.
Reuters News Service
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AVERAGE COSTS OF CREDIT COUNSELING
In 2002, the average cost for a budget counseling session was $13, the average debt management plan (DMP) enrollment fee was $23 and the average monthly DMP services fee was $14, according to the Houston-based National Foundation for Credit Counseling (NFCC). The CFA advised going elsewhere if the DMP is more than $50 and monthly fees exceed $25, or the agency is reluctant to talk about specific fees.
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CHAPTER 13 DEBT LIMITS INCREASED
ADMINISTRATIVE OFFICE OF THE U.S. COURTS ANNOUNCES INCREASES IN VARIOUS DEBT LIMITS
As of April 1, 2004 the eligibility debt limits for Chapter 13 pursuant to 11 U.S.C. § 109(e) are raised. The new limits are:
Uncontingent, liquidated unsecured debts ... $307,675.
Uncontingent, liquidated secured debts ...... $922,975
New limits for exemptions under 11 U.S.C. § 522(d):
Section 522(d)--value of property
exemptions allowed to the debtor:
(1)--in paragraph (1)............... 18,450
(2)--in paragraph (2)............... 2,950
(3)--in paragraph (3)............... 475
9,850
(4)--in paragraph (4)............... 1,225
(5)--in paragraph (5)............... 975
9,250
(6)--in paragraph (6)............... 1,850
(7)--in paragraph (8)............... 9,850
(8)--in paragraph (11)(D).......... 18,450
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BOTH SIDES PREDICT REFORM TACTIC WILL FAIL
Recently the House amended S. 1920, farmer chapter 12 extension, by substituting the text of the bankruptcy reform legislation, the so-called Bankruptcy Abuse Prevention and Consumer Protection Act, for the text of the farmer relief bill, effectively replacing S. 1920 with H.R. 975, but retaining its designation as S. 1920. Supporters of amended S. 1920 view the maneuver as a means to expedite enactment of the stalled bankruptcy reform legislation because the House's passage of a bill designated as S. 1920 enabled the House to request the appointment of a joint House-Senate conference committee to resolve the differences between the divergent versions of the bill. The Speaker of the House immediately appointed House conferees.
Although the House passed amended S. 1920 by a vote of 265-99, opponents of the bankruptcy reform bill criticized the procedural maneuver of tying the controversial legislation to the extension of chapter 12. For example, Senator Russ Feingold (Democrat, Wisconsin) accused the House leadership of "holding the most vulnerable family farmers hostage." As in the past, those opposed to the comprehensive bankruptcy reform legislation were Democrats. Senators on both sides of the aisle have expressed their belief that the House tactic will not succeed in forcing acceptance in the Senate of the extremely controversial bankruptcy reform legislation. In the meantime, family farmers are left without the safety net of chapter 12.
Bankruptcy Abuse Prevention and Consumer Protection Act of 2004, S. 1920, 108th Cong., 2d Sess. (2004).
SOURCE: Weil, Gotshal & Manges Bankruptcy Bulletin
CURRENT ISSUES IN RESTRUCTURING AND REORGANIZATION • VOL. 11 NO. 3 • MARCH 2004
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FANNIE MAE & FREDDIE MAC REFORM SOUGHT
WASHINGTON -(Dow Jones)- Senate Banking Chairman Richard Shelby, R-Ala., said Wednesday that legislation he is drafting that would overhaul Fannie Mae (FNM) and Freddie Mac's (FRE) regulation also needs to include a new legal framework to unwind the companies and pay out creditors in case either went bankrupt.
"I hope these institutions are never insolvent. But I think you have to plan for the day," said Shelby, speaking to reporters after company executives testified at a hearing before his panel.
Federal Reserve Chairman Alan Greenspan told Shelby and other lawmakers at a hearing the day before that, under the current system, it would be extremely difficult to avoid a federal bailout if either government-sponsored enterprise failed.
SOURCE: SmartMoney.com
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ORAL ARGUMENT IN S. CT. REGARDING STATE SOVEREIGN IMMUNITY
Sovereign Immunity (Whether Congress has the Authority Under the Bankruptcy Clause to Abrogate State Sovereign Immunity)
The issue in this case is whether the United States Constitution gives Congress, under the Bankruptcy Clause, the power to abrogate state sovereign immunity.
Pamela Hood received a Chapter 7 bankruptcy discharge in June 1999. Due to the prohibition in 11 U.S.C. section 523(a)(8) against discharging student loans held by governmental bodies except upon a showing of “undue
hardship,” Ms. Hood filed for a hardship discharge of her student loans in September 1999. The Tennessee Student Assistance Corp. (TSAC) moved for dismissal on grounds of sovereign immunity. The Bankruptcy Court for the Western District of Tenn. denied the motion, holding that the grant of authority under the Bankruptcy Clause of the U.S. Constitution allowed Congress to abrogate state sovereign immunity when it enacted the Bankruptcy Code. The Bankruptcy Appellate Panel affirmed, holding that Congress‚ power to enact bankruptcy laws carries with it the authority to abrogate state sovereign immunity with respect to those laws. TSAC appealed. The Sixth Circuit Court of Appeals analyzed the facts under Seminole Tribe of Florida v. Florida and the original intent of the framers, holding that the Bankruptcy Clause of the Constitution, Article I, section 8, clause 4 gives Congress the authority to abrogate state sovereign immunity in bankruptcy law. On appeal to the United States Supreme Court, Tennessee argues nothing in the Constitution compels this interpretation, and that the facts of this case do not warrant abrogation of Tennessee‚s rights.
Tenn. Student Assistance Corp. v. Hood
Date Argued: 03/01/04
Court Below: 319 F.3d 755
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RULING ON SUBSTANTIALLY CONTEMPORANEOUS TRANSACTION
A transaction can be substantially contemporaneous even if some temporal separation exists between the new value provided and the payment received. Ssection 547(c)(1) applies whether the new value is given before or after the transfer by the debtor; the statute requires only that the exchange be 'substantially' contemporaneous.
Where payment was made by EFT within 15 days of receipt of goods by the debtor per the agreement between the parties, the payments were intended to be, and were, substantially contemporaneous.
In re Payless Cashways, Inc. (8th Cir. BAP 2004)
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SPENDTHRIFT TRUST IS PROPERTY OF ESTATE WHEN CONTINGENCIES ARE SATISFIED
Where all events necessary to vest the interest of a beneficiary under a spendthrift trust have occurred, the beneficiary's rights become property of the estate even if the trustee has not yet distributed the property to the beneficiary.
In re Revelle (Bankr. N.D. Tex. 2004)
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DEBTOR SOLE SHAREHOLDER MAY QUALIFY FOR ERISA
The working owner and sole shareholder and president of a professional corporation may qualify as a "participant" in a pension plan covered by ERISA. If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants. Such a working owner, in common with other employees, qualifies for the protections ERISA affords plan participants and is governed by the rights and remedies ERISA specifies
Yates v. Hendon (S.Ct. 2004)
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ATTORNEY'S FEES DISCHARGED
Fees earned by debtor's attorneys during Chapter 11 proceeding were dischargeable following involuntary conversion of debtor's case to a Chapter 7 case.
In re Fickling (2d Cir. 2004)
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DEBTOR'S POSTPETITION INCOME FROM CORPORATION APPORTIONED AS TO PROPERTY OF THE ESTATE
A corporation's accounts receivable can be "wages" entitled to exclusion from property of the estate in an employee/owner/debtor's bankruptcy, but the debtor must establish the extent to which the receivables are attributable to his efforts rather then the efforts of other employees of the corporation.
In re Christy (Bankr. C.D. Ill 2004)
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RETURN FILED AFTER SFR IS STILL A “RETURN”
A tax return filed after the IRS independently assesses a tax is still a "return" for purposes of determining dischargeability of the tax.
In re Payne (Bankr. N.D. Ill. 2004)
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