Bankruptcy Mastery - Becoming a better bankruptcy lawyer

Crushing Tax Change For Injured Consumers

By William Purdy 1 Comment 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 recovery. Welcome to tax "reform". Consumers get shafted It isn't that way for every plaintiff, and it wasn't that way before tax "reform". If you operate a business and hire an attorney to assist you with business issues, your legal fees will typically be fully deductible under IRC Section 162 as ordinary and necessary business expenses. Recoveries for personal physical injuries or physical sickness are non-taxable and the change in the law won't affect you. But the vast bulk of all other legal recoveries ARE taxable under IRS Section 104 . However, you used to be able to … [Continue reading...]

Delay Division of Community Property At Peril of Bankruptcy

By Cathy Moran, Esq. Leave a Comment Filed Under: Bankruptcy Practice

Put off the division of community property in a marital dissolution at your peril. Hesitate and you risk all of the community property being swept up in a bankruptcy by the other spouse. And you'll have little control where community property assets fall. Community property is all in The threat begins with the bankruptcy law provision that all the community property becomes … [Continue reading...]

700 Words Yield $21K

By Cathy Moran, Esq. Filed Under: Attorneys fees

Have I got a story for you. A rousing tale of schedules, hearings, frustrations, and ultimately fortunes, traceable to a good story in the fee application. Maybe that's a bit overblown, but I'm telling this story with a purpose. Good stories lead to fair compensation for bankruptcy attorneys. Fee applications aren't hard Filing fee applications is central to sustaining an above-average … [Continue reading...]

Parker: Sweet Decision On Stay Violations

By Cathy Moran, Esq. Filed Under: Chapter 13

I don't know just what makes Parker such a treat for me, but it delivers multiple thrills to my bankruptcy lawyer heart. It's a stay violation case with a BIG sanctions award. It's a clearly, simply written opinion that lays out the circuit law on multiple issues. It hits hard at HOA hubris. It analyzes when a claim arises. It looks at surrender and vesting, mysteries near and dear … [Continue reading...]

List It Or Lose It: When Actual Knowledge Isn’t Enough

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

To actually effect abandonment of unadministered assets in a bankruptcy case, the asset in question must appear on Schedule A/B. That's the hard teaching of Stevens v. Whitmore from the 9th Circuit BAP. A passing reference to an asset in the SOFA isn't sufficient. Neither was the fact the trustee explicitly knew about the claim then subject to litigation. If the claim wasn't scheduled … [Continue reading...]

Why Your Bankruptcy Client Doesn’t Understand You (And How To Fix the Problem)

By Cathy Moran, Esq. Filed Under: Before filing

Bankruptcy terminology, so familiar to lawyers, stymies clients. Even common English words seem to flumox our clients. We are a pair, divided by our common language. Even without legal jargon, we talk past each other. Words at war How do we misunderstand each other? Let me count the ways: Property: I don't have any property, lost the house to foreclosure last … [Continue reading...]

Diaz & The Tax Refund

By Cathy Moran, Esq. Filed Under: Means test

On its face, Diaz (Diaz v. Viegelahn , No. 19-50982 (5th Cir. Aug. 26, 2020)) is a pretty straightforward decision that struck down a local form plan as violating a below-median income debtor's right to use her tax refund to finance necessary expenses for maintenance and support. On a deeper level, it appears to highlight the complications of using the IRS to effect non-tax social policy. In … [Continue reading...]

Ensure You Understand Insurance In Bankruptcy

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Sometimes, issues that you've just skimmed over burst forth in bunches, demanding attention. Lately, that issue in my bankruptcy cases has been insurance. Because its treatment varies so, we need to be asking more pointed questions of clients about both insurance policies and the debtor as beneficiary. Unmatured life insurance Starting with exemptions, §522(d)(7) makes an unmatured … [Continue reading...]

6 Steps to Ethical Unbundling of Bankruptcy Representation

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

No matter how many hoops the client dutifully jumped through, without adequate inquiry and communication, the bankruptcy attorney was slammed for unbundling his services. The representation agreement at issue excluded representation in any adversary proceeding filed, as do most such agreements, I imagine. The client initialed every paragraph of the 19 page representation agreement, and the … [Continue reading...]

Reaffirmations Impose Impossible Demands On Bankruptcy Counsel

By Cathy Moran, Esq. Filed Under: Counseling clients

When BAPCA gutted the ipso facto clause, reaffirmation was left as the only way a debtor could be assured of retaining his wheels. Car lenders took sides back then, then changed sides, on whether they would automatically repossess a vehicle when the debt was not reaffirmed. Some wanted the in terrorem effect of losing the car to spur reaffirmations and the full panoply of legal … [Continue reading...]

Hearsay Exception: How Do I Get This Into Evidence?

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, lawyer skills

Quick: tell me everything you know about Federal Rule of Evidence 803(17)! If you're like me, there's deafening silence. I've apparently skated through forty years of bankruptcy practice without really considering how Kelly Blue Book figures get into evidence. If it worked, I just went on. (Hint: it's FRE 803(17). But a change in California homestead law, and a nudge from Judge Stephen … [Continue reading...]

Wrestling With The Means Test

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, Means test

The timeless questions asked by mankind include "why are we here", "which came first..." and "coffee or tea". Bankruptcy lawyers wrestle with "which controls, b-22 or Schedules I and J". My argument is: if Congress wanted a means test, then the means test controls, unless you show special circumstances. But if I minus J controls, then every time the means test doesn't work as some … [Continue reading...]

Unpacking The Enhanced California Homestead

By Cathy Moran, Esq. Filed Under: Exemptions

On January 1, 2021, California's homestead exemption grew from a prior low of $75,000 to a minimum of $300,000, to as much as $600,000, depending on county wide home prices. A big part of the change is that the increased homestead is available to homeowners regardless of age, health, or marital status. But with the increase comes a couple of complexities not usually part of our bankruptcy … [Continue reading...]