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THE CONSUMER BANKRUPTCY LETTER |
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In This Issue:
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May 10, 2004
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BANKRUPTCY ACADEMY - ENROLL NOW AND SAVE $100
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FEE SURVEY RESULTS RAISE QUESTIONS
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SENATE WILL LOOK AT PRIVATE TAX COLLECTION
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PETITION PREPARER HELD PRACTICING LAW WITHOUT LICENSE
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FTC SHUTS DOWN MAJOR CREDIT COUNSELING AGENCY
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KING BANKRUPTCY ACADEMY SCHEDULES 3-DAY SEMINARS ON DISCHARGING TAXES - LAS VEGAS & SAN FRANCISCO
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 & 10, and at FISHERMAN'S WHARF, San Francisco, October 27, 28, 29, 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); 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 hands-on handlng of tax discharge cases.
Early registration for the either 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.
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FEDERAL TRADE COMMISSION SHUTS DOWN NATIONAL CONSUMER COUNCIL
The Federal Trade Commission on Monday shut down National Consumer Council Inc., citing "misrepresentations and omissions" by the Santa Ana nonprofit credit-repair firm and its for-profit affiliates.
A notice on the locked door at National Consumer's Deere Street office
said a federal judge had appointed a financial guardian to take over the firm and affiliates London Financial Group, National Consumer Debt Council, Solidium, J.P. Landis and Financial Rescue Services Inc.
The notice said the FTC, in an April 23 lawsuit, "alleged that the companies violated the FTC Act by misrepresentations and omissions and violated other regulations and laws." The notice also said the state Department of Corporations, which regulates financial companies, had issued a desist-and-refrain order against National Consumer.
Better Business Bureau of the Southland President Bill Mitchell called National Consumer the largest and most egregious of deceptive debt-relief operations. He said the company collected high upfront fees but often left clients worse off than they started, sometimes in bankruptcy protection -- a statement disputed by a National Consumer spokeswoman.
SOURCE: Los Angeles Times
For the complete article click on HEADLINES below.
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PROLIFERATION OF CREDIT COUNSELING AGENCIES IN RECENT YEARS
The credit counseling industry has grown dramatically in recent years, as Americans increasingly file for personal bankruptcy. According to a Congressional report, 1.66 million individuals filed for bankruptcy in 2003, with many of the filers seeking debt management help from nonprofit credit counseling agencies.
There are approximately 1,000 active tax-exempt credit counseling agencies in the United States the majority of which have had their tax-exempt status recognized within the past four years. According to the Washington Post, an estimated 9 million Americans seek credit counseling advice annually and "industry officials estimate that 2 million consumers are on active credit repair programs at any one time."
SOURCE: Hoovers.com
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FEE PRACTICES SURVEY RAISES QUESTIONS ABOUT LEGALITY OF FEE COLLECTION
The final results of the Consumer Bankruptcy Letter survey on Chapter 7 fee practices (view results - click on image at right or RESULTS at bottom) reveal, among other things, that approximately 71% of respondents collect a prepetition retainer fee large enough to cover both prepetition and foreseeable postpetition work.
The lawyers who collect, prepetition, for postpetition services are at risk, because the portion of the funds in the lawyer's possession that have not been consumed by prepetition services (i.e., the portion still credited to the client to cover postpetition services) has been held in a number of cases to be property of the estate; and, under the Supreme Court ruling in Lamie v. United States, 124 S.Ct. 1023 (2004), the debtor's attorney in Chapter 7 cases cannot be paid out of property of the estate unless previously appointed by the court to represent the estate. The basis of this ruling was the literal meaning of the text of 11 U.S.C. § 330, which permits professionals in certain categories to be paid out of the estate, but omits any mention of the debtor's attorney being among them. This suggests strongly that any funds the attorney is holding after date of filing cannot be used to pay for the attorney's postpetition services, such as the 341 hearing or contested or adversary issues.
For further comment on he results and their possible ramifications, click on image at right or RESULTS below.
Also - we invite you to SHARE YOUR REMARKS on the results of the survey - a submit form is found on the results page by clicking on image at right or RESULTS below.
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DEBTOR'S TAX RETURN FILED AFTER IRS SFR AND ASSESSMENT WAS NOT A "RETURN" FOR PURPOSES OF BANKRUPTCY DISCHARGE
The Court concludes that the document Ehrig submitted to the IRS in 2000 for year 1990, the accuracy of which was ultimately rejected by the IRS, although it may have been as accurate as was possible after such an extended delay, was a self-serving attempt to reduce his liability after the IRS (1) prepared and fifed an SFR without the cooperation of Ehrig, (2) sent a notice of deficiency, to which Ehrig failed to respond, (3) assessed the 1990 Liability, which Ehrig [failed] to contest, and was so long belated that it cannot, as a matter of law, be deemed an honest attempt to comply with laws. Moreover, the filing served no purpose; it did not allow liability to be
assessed, it did not affect the amount of liability, nor it did abate or purge penalties or other liabilities incurred on account of failing to timely file.
Accordingly, the Court concludes, as a matter of law, that the document was not a "return" as that tennis given effect in Section 523(a)(1)(B)(i). Closely allied with the conclusion that the document served no purpose is the fact that a return was [not required once the IRS had filed an SFR] and therefore Ehrig's 2000 submission did not cure his filing delinquency for year 1990. Pursuant to both of these theories, the Court declares the 1990 Liability non-dischargeable.
IN RE EHRIG, (N.D.Okla. 2004)
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BK PETITION PREPARER WAS PRACTICING LAW WITHOUT LICENSE
A bankruptcy petition preparer engaged in the unauthorized practice of law by interpreting the terms "market value" and "secured claim or exemption" in connection with completion of bankruptcy forms.
Taub and the Greenwaldts disagreed about how to treat a 401(k) retirement account on the bankruptcy forms. Schedule B, an official form included with the Greenwaldts' Chapter 7 filing, required listing the "market value" of the debtors' personal property. The heading on the form read: "CURRENT MARKET VALUE OF DEBTOR'S INTEREST IN PROPERTY, WITHOUT DEDUCTING ANY SECURED CLAIM OR EXEMPTION." In their draft documents, the Greenwaldts indicated that the retirement account held approximately $80,000. The Greenwaldts also noted that they had borrowed $39,000 against the account. The Greenwaldts thus filled out draft bankruptcy forms listing what they believed was the net value of the account-$41,000. Taub, however, prepared the forms with a market value listing of $80,000. As the bankruptcy court explained: "The discrepancy was pointed out, but Taub gave no explanation. [The] Greenwaldts asked him to change the entry but he refused. They eventually relented, assuming that he knew what he was doing."
Held, [A]ll personal contact between defendants and their customers in the nature of consultation, explanation, recommendation or advice or other assistance in selecting particular forms, in filling out any part of the forms, or suggesting or advising how the forms should be used in solving the particular customer's marital problems does constitute the practice of law.
Taub v. Weber (9th Cir. 2004)
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RIGHT TO RECEIVE FAMILY MAINTENANCE WAS NOT PROPERTY OF THE ESTATE
The trustee contends that Vicki’s right to receive maintenance postpetition accrued prepetition and is, thus, an asset of the bankruptcy estate, subject to an allowed exemption of $500.00 per month. He, therefore, asks this Court to order Vicki to turn over to the trustee, each month, the sum of $750.00. But the exemption provisions only apply as to property that would have been property of the estate. So the issue is whether a debtor’s right to receive maintenance comes into the estate in the first instance.
Held, maintenance is a personal statutory right analogous to income, not a property right, and that the right to receive maintenance arises each month as the payment is due. Thus, section 541(a)(5) is not applicable to the right to receive maintenance payments. I will, therefore, overrule the trustee’s objection to Vicki’s claim of exemption.
In re Mitchem (Bankr. W.D. Mo. 2004)
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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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