What New Bankruptcy Lawyers Need To Know: Beyond The Code

Finding the Flaws in IRS Tax Liens

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Tax liens in bankruptcy sometimes don't stand up to close scrutiny, to the delight and profit of bankruptcy debtors. I was reminded of two such instances by the excellent presenters at the NACBA 2021 Workshop. Lien perfection follows state law The secret tax lien attaches to all of a taxpayer's property of any kind, wherever located. However, a tax lien is perfected against other creditors only by compliance with state laws on perfection of liens. And during the pendency of a bankruptcy case, counsel only has to deal with the properly perfected tax lien. State law controls lien perfection. Tax liens on realty Under California state law, liens on real estate are perfected by filing notice of the lien with the county recorder. Recordation perfects a lien only on real estate in that county. So, property in other counties is subject to the tax lien only if the lien is recorded there. In one of my recent cases, IRS recorded in Santa Clara County when the debtor's … [Continue reading...]

Your Duty of Loyalty And Married Clients

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Are your loyalties divided When a married couple books a bankruptcy consultation, you have an immediate problem: There be dragons, as early map makers helpfully provided. Because, as a lawyer friend of mine says: Anytime there are two people sitting across from you, you have a conflict of interest. That pithy expression has stuck with me and made me continually aware that … [Continue reading...]

Taxes & Timing: Calculating Outcomes for Bankruptcy Debtors

By Cathy Moran, Esq. Filed Under: Tax

Bankruptcy lawyers regularly evaluate the dischargeability of taxes when deciding when to file a client's bankruptcy case. At base, the 3 year rule, the 2 year rule, and the 240 day rule routinely drive timing of a bankruptcy. But as we approach the end of the tax year, a client’s current year tax situation becomes another moving part in the “when do we file” analysis, unrelated to tax … [Continue reading...]

Is Your Law Practice Evolving To Incorporate New Technology

By Jay Fleischman Filed Under: Bankruptcy Practice

When the world was forced to adjust to new routines in March 2020 due to the global pandemic, I was instantly struck by how little my professional life changed. I'd worked remotely for over a decade, and my systems and procedures didn't change. Sadly, the same couldn't be said for many of my fellow consumer bankruptcy lawyers. I watched many of them struggle with remote videoconferencing … [Continue reading...]

All Bankruptcy Roads Pass Through Chapter 5

By Cathy Moran, Esq. Filed Under: Before filing, Start Here

Regardless of the ultimate destination, all bankruptcy roads lead through Chapter 5. A few bankruptcy cases are derailed there. Because Chapter 5 provisions tell you what comes into the bankruptcy estate, what can be exempted, and what can be changed using Chapter 5. Sometimes the results from bankruptcy lawyers in Hyannis tell you that bankruptcy is not the right choice for your client, at … [Continue reading...]

Do You Know These Exceptions To Discharge Not In The Bankruptcy Code?

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Not all exceptions to discharge in bankruptcy are found in the Bankruptcy Code. Inconvenient, but true. The first two non-Code exceptions to discharge that I encountered in practice were HEAL loans, dischargeable only if denying the discharge would be "unconscionable." (42 U.S.C. sec. 292f(g)); and a scholarship to attend a U.S. Military Academy. Turns out that my 2011 version of … [Continue reading...]

Is This Corporation Really Separate From Its Owners: A Checklist

By Cathy Moran, Esq. Filed Under: Business bankruptcy

In a perfectly executed world, clients who do business via an entity like a corporation or LLC would arrive with their business life neatly separated from their personal lives. However, that's not the world I practice in. It's probably not yours, either. Instead, I have to sleuth out the facts, and compare them to the individual's version. I see prospective debtors where the business … [Continue reading...]

What Goes Into The Liquidation Analysis

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

The liquidation analysis is central to every form of consumer bankruptcy. Yet too many attorneys think the formula is Assets minus Secured Debts minus Exemptions = Distributable estate Not by a long shot. So let's walk through the elements of a comprehensive liquidation analysis. You need it if you're assessing the vulnerability of assets to the trustee in a Chapter 7. It's one of … [Continue reading...]

Sole Proprietorships In Chapter 7 In Trustee’s Cross Hairs

By Cathy Moran, Esq. Filed Under: Business bankruptcy

Why would a Chapter 7 trustee shut down a sole proprietorship business with no value? That question comes up again and again from newish bankruptcy lawyers who can't imagine that a trustee would demand the closing of the debtor's business. After all, goes the argument, the debtor needs to make a living and the business has no non-exempt value. The trustee's insistance on closing the … [Continue reading...]

One Trait Makes A Bankruptcy Lawyer Great

By Cathy Moran, Esq. Filed Under: Counseling clients, lawyer skills

One trait makes a bankruptcy lawyer stand out. Bankruptcy forms promote the view that filing a case is just recording what the debtor owns and owes today. If all you focus on is the here and now, you can assemble a bankruptcy petition. But if there is one, uniform failing in average bankruptcy lawyers, it's that they confine their attention to the here and now-what does the client … [Continue reading...]

Rescuing A Troubled Chapter 13: The Unseen Threat

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, Chapter 13

We all get sucked in, at some time, to trying to rescue a Chapter 13 bankruptcy case gone bad. Dismiss and refile if often an appealing strategy. But, make sure that you don't let a bad situation get worse. Get your arms around Bankruptcy Code §109(g). When only a do-over will do, don't wait around. No payments for months The debtor came to me for help when the trustee moved for … [Continue reading...]

What Bankruptcy Counsel Forgot

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

How do you forget capital gains taxes? More easily than you would think, apparently. When I see the same blunder twice in two months and the price tag to the client approaches $100,000, it's time to write about it. It surfaced in two Chapter 11 cases for individuals where I have subbed upon conversion to Chapter 7. My first reaction was to write this as a "see, you shouldn't take … [Continue reading...]

Crushing Tax Change For Injured Consumers

By William Purdy Filed Under: Bankruptcy Practice, Opinionated, Tax

The "Tax Cut Act" actually increased the tax on consumer recoveries. Under the new tax law, most damage awards a consumer recovers stand to go, in large part, to the IRS. So even if you are successful in vindicating your legal rights, the expenses of getting the award aren't deductible from the gross award. The taxing authorities end up getting a large hunk of the total … [Continue reading...]