Bankruptcy lawyers sometimes forget: not everyone worried about debt actually needs to file bankruptcy. The anxiety that brings someone to your office may not be grounded in a real understanding of the rights of their creditors.
I recently saw a woman drawing disability pay and looking at very substantial retirement income. It seemed unlikely that she would work again. Her income, under the means test, would have triggered an obligation to unsecured creditors.
But, under California state law, her sources of income were fully exempt. A creditor who got a judgment could not reach those funds, either at the source or once they were in her possession. Doing nothing was a far better deal for her.
My friend Kansas bankruptcy lawyer Jill Michaux sent me a case where a lawyer put a woman whose income was solely from Social Security in bankruptcy, forgetting that as a newcomer to the state, she couldn’t use the unlimited Kansas homestead to protect the $200,000 in equity in her newly purchased house.
Under state law, creditors couldn’t reach the house. Under bankruptcy law, she lost the house to the trustee.
The moral of these stories is clear: make sure you assess whether the client is really vulnerable to creditors under non bankruptcy law. If they have exposure to creditors, weigh that against the probable bankruptcy outcome for filing their case.
April 15th is so ingrained in our thinking as Tax Day that it’s easy to forget that the tax for the previous year is owed on the first day of the next tax year. Payment isn’t due til April 15th, but the obligation exists before the return and payment are due.
Why is this important for [...]
Read the full article »
Real danger for client and lawyer lurks in the emergency bankruptcy petition: file without all the information about the client’s assets and recent transfers and you risk getting family members sued and the client losing assets.
Chapter 5 of the Bankruptcy Code deals with avoidable transfers, property of the estate, and exemptions. Those are potential potholes [...]
Read the full article »
The last check before you file your client’s bankruptcy schedules should be a step back to see if the schedules “tell the story”. The background and the color don’t make it to schedules and SOFA, but you need to read them from the trustee’s point of view to see if they make sense and reflect [...]
Read the full article »
Old and new consumer bankruptcy lawyers have a treasure in John Bates’ masterpiece on the exemption laws of each state and the availability of those laws to non residents in bankruptcy. Check out www.exemptionexpress.com, then send John a thank you.
Why do I care what the exemptions are in any state but California? The Bankruptcy Code! [...]
Read the full article »
When the means test projected disposable income number is greater than 100% of the unsecured claims, full repayment is sufficient. The means test calculation only kicks in under 1325(b) if a party objects; no one objects to repayment of everything that is owed.
A new bankruptcy attorney brought me a B 22 form for a review: [...]
Read the full article »
All three consultations on Friday featured clients intent on filing bankruptcy IMMEDIATELY. Each of them was certain that they had no time before some disaster would befall them if they didn’t file bankruptcy. Yet, as we talked, I concluded the consequences of an immediate filing were worse than the perceived goblins chasing the clients
Waiting, in [...]
Read the full article »
When the means test look back period for a well paid individual includes the end of the year, a bankruptcy lawyer cannot rely on the paystubs to define the tax deductions. That’s because contributions to Social Security and other some other taxes are capped at certain income levels. Wages above the cap are not subject [...]
Read the full article »
Twice yesterday new bankruptcy practitioners asked about how to deal with debts or assets not listed in the debtor’s original schedules. The answer in either situation is amend the schedules. As soon as you know that the schedules are not accurate on a meaningful issue, make them accurate.
For an omitted creditor, you want to add [...]
Read the full article »
Have you found Judge Randall Newsome’s bankruptcy research binder on the Northern District Bankruptcy Court’s website? This is an awesome compilation of leading cases on the total range of bankruptcy topics.
While it’s focused on the 9th Circuit, I suggest that new bankruptcy lawyers use it as a starting point for their personal bankruptcy law resource [...]
Read the full article »
