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THE CONSUMER BANKRUPTCY LETTER |
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In This Issue:
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September 13, 2004
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NEXT - DISCHARGING TAXES AT FISHERMANS' WHARF
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BankruptcyBooks.com - FEATURING KINGSPRESS
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PENDING EVENTS, SEMINARS & CLE
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HEADS-UP ON RECENT CASES
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BANKRUPTCY OF U.S. GOVERNMENT PENDING?
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JOIN US AT FISHERMAN'S WHARF - SAN FRANCISCO -
OCTOBER 27, 28, 29
CLE CREDITS APPROVED IN ELEVEN STATES TO DATE
The Academy on Discharging Taxes in Bankruptcy has been approved for CLE credit in eleven states, for from 16 to 19 hours. The states approved so far are: Arkansas, California, Colorado, Florida, Indiana, Iowa, Minnesota, Ohio, Tennessee, Texas and Utah. Accreditation from all other states having mandatory CLE is expected.
KING BANKRUPTCY ACADEMY - DISCHARGING TAXES MADE SIMPLE!
TWO SEMINARS ON DISCHARGING TAXES - SAN FRANCISCO & SAN ANTONIO
The next dates scheduled for the 5th annual 3-day Bankruptcy Academy on discharging taxes in bankruptcy cases have been scheduled for -
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; and other experts including 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. Also appearing - enrolled agents Jerry Satterberg and Bobby Covic. The specific faculty may change depending on speaker availablity.
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.
CLE ACCREDITATION
Previous programs have qualified for CLE in all states for which CLE accreditation was requested. The Academy is applying for attorneys' CLE accreditation in all states for which CLE is mandatory.
CPE accreditation from the IRS for enrolled agents has been approved.
TUITION
Single attorney for Fisherman's Wharf or San Antonio $645
Double attorney registration any location $995 (saves $400!)
Paralegal or other office staff any location $350
Enrolled agent or CPA any location $495
For more information about the Tax Discharge program, or to enroll, click on red below or call (925) 829-6460 west coast time.
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EXPERTS PREDICT ECONOMIC CATASTROPHE
Predicting an economic "catastrophe" fiscal experts say the U.S. budget deficit will grow to some $60 trillion in the next 10 years. These experts predict that the government may be unable to meet social security, medicare, education, and military needs without doubling taxes and reversing current trends in rising expenditures. The size of the looming deficit is set at $72 trillion by the Social Security Board of Trustees; at $40 trillion by the Government Accountability Office; and $47 trillion by the international Monetary Fund. In the near future much, if not all of the government's disposable income will go to paying interest to foreign entities that are funding today's budget deficit.
"This administration and previous administrations have set us up for a major financial crisis," said laurence Kotlikoff, economics chairman at Boston University.
SOURCE: Chronicle Washington Bureau
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LENDERS MAY SEE LOANS TO CHAPTER 13 DEBTORS AS A NEW MARKET
The 1.5 million U.S. households filing for personal bankruptcy every year offer a sizeable niche market for lenders—if they could just figure out who was least likely to get into financial trouble again. Apparently, First Hallmark Mortgage Corp has found a way to tap this market. The New Jersey-based mortgage lender targets borrowers in Chapter 13 bankruptcy repayment programs who own their homes.
Chapter 13 involve a court-administered debt workout program through which the borrower repays a sizeable portion of his/her unsecured debt, at the same time maintaining ownership of their assets such as primary residence and automobiles. First Hallmark specializes in debt consolidation loans that fold existing mortgage and credit card debt into a two-year hybrid adjustable rate mortgage. The company markets its product through direct mail and referrals from bankruptcy attorneys. The key is to find borrowers who are able to stay current on their repayment plans and mortgages for two or three years. Borrowers who receive a First Hallmark consolidation loan and stay current with payments are offered the chance to refinance into a lower-cost conventional mortgage. Bruno Viscariello, president of First Hallmark, told the industry newsletter Inside Mortgage B&C Lending (Bethesda, MD) that about 80% of the company's customers are able to take advantage of the refinance option. About half of the company's $15.5 million in monthly originations comes from borrowers in bankruptcy. The company operates in New Jersey, New York, Pennsylvania and Florida.
SOURCE: SpotlightonFinance.org
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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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KEEPING CURRENT ON PAYMENTS OF SECURED CLAIM NOT AN OPTION IN CHAPTER 7
A debtor who is current on his secured debt cannot retain the collateral of a secured creditor simply by continuing to make contractual payments on the debt.
These two chapter 7 cases present an issue that has been considered by numerous courts, including at least nine circuit courts of appeal: whether a debtor who is current on his secured debt can retain the collateral of a secured creditor simply by continuing to make contractual payments on the debt. Because this court concludes that 11 U.S.C. § 521(2) interpreted in light of the Sixth Circuit Court of Appeals’ decision in General Motors Acceptance Corp. v. Bell (In re Bell), 700 F.2d 1053 (6th Cir. 1983), does not permit this result, the creditor’s motions for relief from the automatic stay will be granted.
In a chapter 7 case, however, because a debtor will generally receive a discharge of his personal liability well before the completion of the contractual installments, a secured creditor may lose all three benefits provided by its bargain: repayment of its debt, the collateral which was security for the debt, and the ability to hold the debtor personally responsible for the obligation. Absent express statutory authority, this court will not permit such a result over the secured creditor’s objection. See In re Boodrow, 126 F.3d at 60 (J. Shadur, dissenting) (Because Congress explicitly provided for retention of collateral in the cram-down process in chapter 13, it would be improper to infer congressional approval of a similar cram-down option in chapter 7. “When Congress wants to provide for a ‘cram down’ that enables a debtor to keep property over the objection of a secured creditor, it knows full well how to do so.”)
In re Chubb (Bankr. E.D. Tenn. 2004)
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PREPETITION ATTORNEY'S FEES ARE NOT DISCHARGEABLE IN CHAPTER 13
The bankruptcy court erred in holding that services performed prepetition by an attorney for a Chapter 13 debtor must be fully paid before filing or else be treated like any other prepetition claim.
Section 1322(a)(2) states that, unless the holder of a priority claim agrees to different treatment, a Chapter 13 plan shall "provide for full payment, in deferred cash payments, of all claims entitled to priority under section 507[.]" Section 507(a)(1) affords first priority to "administrative expenses allowed under section 503(b)[.]" Section 503(b) states, in relevant part, that "there shall be allowed administrative expenses,... including-... (2) compensation and reimbursement awarded under section 330(a) of this title[.]" Reading these statutes together, an attorney fee awarded under § 330(a) is entitled to a first priority under § 507(a)(1) and must be paid in full under the terms of the Chapter 13 plan, unless the attorney agrees otherwise.
Compensation for an attorney representing a Chapter 13 debtor is authorized under § 330(a)(4)(B), which states:
"In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section."
In re Busetta-Silvia (10th Cir. BAP 2004)
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ATTORNEY SANCTIONED FOR FRIVOLOUS ASSERTION OF PLAN TREATMENT
Sanctions were appropriate when a debtor's attorney contended that a secured creditor's claim, which was supported by a timely-filed proof of claim and which the confirmed plan stated would be paid in full, was not entitled to payment as a secured claim nor as an unsecured claim.
The debtor's attorney contended that the City’s secured claim could not be paid through the Plan because the Plan did not provide for its payment as a secured claim. Second, he contended that the City could not be paid through the Plan as an unsecured creditor because the City did not file a proof of claim for an unsecured claim, only a proof of claim for a secured claim. The Court finds both contentions frivolous.
While an attorney may not be sanctioned for making a creative argument, the argument must be plausible. The Debtor's attorney's contention is ridiculous. A creditor must be able to rely on a proof of claim asserting secured status to preserve its underlying monetary claim in the event its security interest is avoided. Otherwise, it would have to file multiple claims or plead in the alternative in every case on the chance that a debtor might challenge its lien.
The sanctions imposed must be limited to what is sufficient to deter repetition of comparable conduct by others similarly situated and may include nonmonetary sanctions. In this case the debtor has a history of prior disciplinary problems in connection with bankruptcy practice. In order to constitute a sufficient deterrent to similar conduct in the future, the court imposed sanctions of attorney's fees of $10,671 plus suspension from practice in the bankruptcy courts for six months.
In re Brooks Hamilton (Bankr. N.D. Cal. 2004)
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DEBTOR'S PLAN PROVIDING FOR HARDSHIP DISCHARGE IS BINDING IF CREDITOR FAILS TO OBJECT
Generally speaking, a Chapter 13 bankruptcy debtor is relieved of her debts following completion of the bankruptcy plan; in other words, the debts are discharged. 11 U.S.C. § 1328(a). There are, however, exceptions to discharge, including a student-loan debt. §§ 1328(a)(2); 523(a)(8). But there is also an exception to this exception: if excepting a student loan debt from discharge would impose an undue hardship on the debtor and the debtor's dependents, the debt will be discharged. § 523(a)(8). In Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), we held that, where the debtor's plan contained an express finding of undue hardship, the creditor's failure to object to confirmation barred its attempt to collect the debt because the plan with its finding of undue hardship was res judicata. Unlike the factual scenario in Andersen, it was not established in this bankruptcy that excepting the student-loan debt from discharge would impose undue hardship on the debtor. As a result, the debt was not discharged, and, consequently, we reverse the district court's order upholding discharge of the debt.
In re Poland (10th Cir. 2004)
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9TH CIR. AFFIRMS RULE THAT OMITTED CREDITOR IN NO-ASSET CASE IS DISCHARGED
Failure to list creditor in no-assets Chapter 7 bankruptcy does not justify revocation of discharge. We publish this opinion primarily to reaffirm established Ninth Circuit law on the effect of failure to list a creditor in a no-assets, no-bar-date Chapter 7 bankruptcy. We previously held in In re Beezley that such a failure does not justify revocation of the discharge, but much of the reasoning in that decision was set out in a concurrence rather than in the terse per curiam opinion. We follow the holding of that opinion and adopt the reasoning of the concurrence.
In re Nielsen (9th Cir. 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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