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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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Nov. 24, 2003
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BANKRUPTCY THIS WEEK . . .
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LEGISLATION & REFORM NEWS . . .
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WILL THE SENATE ACT ON THE REFORM LEGISLATION THIS WEEK?
See Legislation & Reform News, below.
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AMERICANS OWE $750.9 BILLION IN CREDIT CARD DEBT
At the end of 2002, American households owed an average balance of $8,940 on all credit cards, up 36% since 1997, and a whopping 173% increase over the past decade. Of the $8,940 that was owed, Americans paid finance charges on an average balance of $7,286. This means the cost of credit card debt for the average household is slightly above $1,000 per year.
The $8,940 in card debt for 2002 compares to $8,234 for 2001, and $7,842 for 2000. This figure is arrived by dividing total credit card debt of $750.9 billion by the 84 million American households that have at least one credit card. (If total credit card debt is divided by all 105 million American households, then the figure becomes $7,151 per household.)
The $750.9 billion in credit card debt that consumers owed at the end of 2002 includes $660.9 billion for bank credit cards (VISA, MasterCard, American Express, and Discover) and $90 billion for retail credit cards (store cards, gas cards, etc).
SOURCE: CardWeb.com
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The One-Stop site for Consumer Bankruptcy Lawyers
Books / Software / Periodicals
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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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Aspen, Automatic Stay Litigation $195
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CD TimeValue, TValue5 Interest Calculator $149.00
CD Gold, Tax Discharge Chronometer $139.00
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OVER 100 SELECTIONS TO CHOOSE FROM
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3 WEEKS OF BEAUTY SCHOOL - ED. LOAN HARDSHIP DISCHARGE GRANTED
To satisfy the second prong of the Brunner test, Plaintiff must prove that her state of affairs is likely to persist for a significant portion of the repayment period.
The repayment period for the subject loan began on March 30, 1986, which was Plaintiff's anticipated graduation date from beauty school. This was more than 17 years ago. Plaintiff was only able to attend beauty school for three weeks in 1985. Plaintiff never acquired any specialized job skills or training, and Plaintiff does not appear at this time to be underemployed.
While Plaintiff has not made any voluntary payments on the loans, this was not the result of any willfulness or negligence on her part. Plaintiff's sporadic and minimal income over the years has been insufficient to cover her minimal household expenses, let alone permit her to make payments on the subject indebtedness.
IN RE COMAN, (C.D.Ill. 2003)
SOURCE: LOISlaw / LawWatch
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CH 13 DEBTOR'S ATTORNEY'S FEES FOR PREPETITION WORK COULD NOT BE PAID POSTPETITION AS ADIMINSTRATIVE EXPENSE
A claim by a Chapter 13 debtor's attorney for the fee which he had earned in connection with prepetition legal services was not entitled to priority as an administrative expense, a New Mexico bankruptcy judge has held. Rather, the claim had to be treated as any other unsecured, non-priority dischargeable debt, to be paid pro rata along with other unsecured non-priority claims.
An application for the payment of compensation and expenses filed by a Chapter 13 debtor's attorney prompted the bankruptcy court to question "whether counsel may be compensated postpetition, as an administrative claim from estate assets, for work performed for the debtor in preparation for the [C]hapter 13 filing." The Chapter 13 trustee and the attorney, as well as the court, agreed that the fees in question had been incurred in connection with the debtor's case and the underlying work was reasonable, necessary, and benefitted either the estate or the debtor.
Thus, the court concluded, "prepetition attorney fees, not listed in either the priority or dischargeability statute, are treated as any other unsecured non-priority dischargeable debt: they may be paid pro rata along with the other unsecured non-priority claims, but no more."
In re Busetta-Silvia, (Bkrtcy.D.N.M.,2003).
SOURCE: Thomson/West Bankruptcy Newsletter
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TAX PENALTIES DISCHARGED DESPITE TAXES' NONDISCHARGEABILITY
Held, subsections (A) and (B) of 11 U.S.C.A. § 523(a)(7), the discharge exception for certain debts that are in the nature of a fine, penalty, or forfeiture, must be construed disjunctively, so as to permit the discharge of tax penalties imposed for tax periods more than three years prior to the petition date, even if the underlying tax liability was nondischargeable.
In re Miller, (Bkrtcy.N.D.Ohio 2003).
SOURCE: Thomson/West Bankruptcy Newsletter
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DEBTOR'S ATTORNEY SHOULD NOT SUPPORT DEBTOR'S UNETHICAL OR UNFEASIBLE PROPOSALS
Counsel to a debtor in possession cannot be expected to perform functions inconsistent with the debtor’s fiduciary duties and counsel’s own fiduciary duties to the estate. Counsel's failure to pursue management's improper and unsupported positions did not warrant denial of fees.
Counsel to a debtor in possession cannot be expected to perform functions inconsistent with the debtor’s fiduciary duties and counsel’s own fiduciary duties to the estate. See ICM Notes, Ltd. v. Andrews & Kurth, 278 B.R. 117, 123 (S.D. Tex. 2002) (concluding that attorney for debtor-inpossession owes a general fiduciary duty to preserve the bankruptcy estate); Zeisler & Zeisler v. Prudential Ins. Co. of Am. (In re JLM, Inc.), 210 B.R. 19, 25 (B.A.P. 2d Cir. 1997) (determining that “[b]oth management and its counsel have fiduciary duties to an estate in bankruptcy”); In re Sky Valley, Inc., 135 B.R. 925, 929 (Bankr. N.D. Ga. 1992) (discussing a debtor’s attorney’s duty as a fiduciary of the estate). If counsel was required to act illegally, unethically or contrary to fiduciary responsibilities, counsel cannot be penalized for failing to comply with such requirements. determining that attorney had ethical obligation to employ professional judgment to consider the plausibility and appropriateness of client’s desires)
In re The Phoenix Group Corporation, (Bankr. N.D. Tex. 2003)
SOURCE: BKInformation.com
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LAVISH LIFESTYLE EQUATES WITH WILLFUL ATTEMT TO EVADE TAX - TAXES HELD NOT DISCHARGEABLE
A debtor's mere nonpayment of taxes — a matter which is present in every case, and which would make section 523(a)(1)(C)'s requirements surplusage — does not, by itself, satisfy section 523(a)(1)(C)'s requirements. But the caselaw applying section 523(a)(1)(C) has consistently held section 523(a)(1)(C)'s requirements to be satisfied in situations where the debtor — even without fraud or evil motive — has prioritized his or her spending by choosing to satisfy other obligations and/or pay for other things (at least for non-essentials) before the payment of taxes, and taxes knowingly are not paid.
the Court here finds knowing conduct on the part of Ms. Lynch — among other things, spending money on a Central Park West Apartment at a cost of more than $6,000 per month; eating dinner in restaurants four days a week; traveling considerably, to California, China and Paris; running up credit card bills; and making huge gratuitous transfers to her church, all ahead of payment of the back taxes due — of the same type that has been held to constitute a willful attempt to evade the payment of taxes in earlier cases.
IN RE LYNCH, (S.D.N.Y. 2003)
SOURCE: LOISLaw / LawWatch
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"Earlier this week the Senate voted 97-to-0 for tougher regulations. For example, when corporations buy a senator, they must now get a receipt." —Jay Leno
AP REPORTS MOVEMENT TO BUILD NEW CAPITOL BUILDING
WASHINGTON, DC—Calling the current U.S. Capitol "inadequate and obsolete," Congress will relocate to Charlotte or Memphis if its demands for a new, state-of-the-art facility are not met, leaders announced Monday.
Above: An architectural firm's proposal for a new retractable-dome capitol. Inset: Hastert addresses reporters.
"Don't get us wrong: We love the drafty old building," Speaker of the House Dennis Hastert (R-IL) said. "But the hard reality is, it's no longer suitable for a world-class legislative branch. The sight lines are bad, there aren't enough concession stands for lobbyists and vested interests, and the bathrooms lack sufficient privacy for sensitive deal brokering. It hurts to say, but the capitol's time has come and gone."
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