What New Bankruptcy Lawyers Need To Know: Beyond The Code

Bankruptcy Planning & The Means Test

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

The rookie bankruptcy lawyer reported her client had borrowed from his 401(k) and proposed to pay down some taxes before filing. Two questions popped to my mind: Are the taxes which the client was worried about priority taxes? If so, would the absence of those taxes alter the results of the means test analysis? Debtors frequently don't grasp that some taxes are dischargeable. They have … [Continue reading...]

6 Basic Points About Tax Liens in Bankruptcy

By Cathy Moran, Esq. Filed Under: Start Here, Tax

Everywhere I've looked this week, new bankruptcy lawyers are struggling with client tax liens. Here's my list of basics you need to know about federal tax liens. Tax liens create a secured claim in favor of the taxing authority. That claim incurs interest at the statutory rate.Exemptions, bankruptcy or state, are not effective against tax liens, which are statutory liens.Tax … [Continue reading...]

Bankruptcy Checklist: Social Security Numbers

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Do you check the client's proffered Social Security number against the number on their tax return? I'd never thought to do so til my partner returned from a 341 meeting with this story. She was sitting waiting for our client's turn at a first meeting of creditors when the trustee asked a debtor about the fact that the Social Security number on the petition didn't match the number on the … [Continue reading...]

Bankruptcy Notice: Scream or Die

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Add to your bankruptcy phrase book: " notice on a scream or die basis." This means that the notice sent to creditors requires an objection by a dissenting party or the described action will be approved. Contrast this with notice of a proposed action that will be considered at an actual hearing. Thus, the message to the recipient of the notice is scream or your objection will die. Scream … [Continue reading...]

Bankruptcy Abuse & Schedule J

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

The debtor passed the means test but lost a motion to dismiss for abuse of the bankruptcy system. Schedule J, the debtor's projected future expenses, showed a monthly excess of $500. Dollars to doughnuts, the debtor's bankruptcy lawyer followed the form and the budget provided by the client. Dismissal resulted. What happened here? Two things: debtor's lawyer accepted the categories on … [Continue reading...]

Bankruptcy Schedules Call For Payoff Balance

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, Start Here

Bankruptcy debtors hear something different when their lawyer asks, "What do you owe on your mortgage". It's as though they speak a different language, Client, while we speak Bankruptcy. As bankruptcy lawyers, we need to be bilingual. It shouldn't be a trick question, but all too often the answer a bankruptcy lawyer gets back is the principal balance. Gone, somehow, are the arrears and … [Continue reading...]

Bankruptcy’s 3 Year Rule for Taxes

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice, Start Here

Taxes are dischargeable in bankruptcy once they meet the 3 year rule. Don't get swept away on April 16th and file a bankruptcy designed to discharge taxes without knowing whether the client got an extension to file for the year on the bubble. The three year rule, found in §507(a)(8), starts counting from the day the return was last due without penalty. If the client got an … [Continue reading...]

Learn the Bankruptcy Lingo: Pots & Percentages

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

While we're learning to "walk the walk", we might as well learn to "talk the (bankruptcy) talk". Each profession has its shorthand for concepts that are encountered repeatedly. For bankruptcy lawyers, that includes the distinction between Chapter 13 "percentage plans" vs. "pot plans". These terms are alternative ways that the dividend to unsecured creditors in a Chapter 13 case is expressed … [Continue reading...]

Bankruptcy Exemption Mistakes Feed Trustee Coffers

By Cathy Moran, Esq. Filed Under: Exemptions

Bankruptcy lawyers who mess up claims of exemptions were the other target of the trustee's attorney I spoke with earlier this week. He rubbed his hands over attorneys who hadn't collected enough information to understand the asset or who simply didn't know that the homestead exemption didn't apply to property other than the debtor's residence. It's not surprising that exemptions are a … [Continue reading...]

New Bankruptcy Lawyers Targeted by Trustee

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Chapter 7 trustees plan to sue debtor's lawyers for undisclosed assets, I was told yesterday. In the course of discussing the flood of rookie bankruptcy lawyers into local court rooms, this veteran trustee's counsel was licking his chops at the opportunity to make creditors whole at the expense of the debtor's attorney. The stories of bad advice and dishonest behavior that accompanied that … [Continue reading...]

Bankruptcy Contested Matters: Won by Showing Up

By Cathy Moran, Esq. Filed Under: Bankruptcy Practice

Sometimes bankruptcy litigation is won by simple persistence. As Woody Allen says "80% of success is showing up". Two instances this week where being ready and willing to have a hearing on a disputed issue resulted in victory before the hearing. In my case, I had a marginal set of facts in a non dischargeability action against my client. The law on the subject was ugly but I cooked up the … [Continue reading...]

Bankruptcy Exemptions: 10 Ways to Deal with Excess Cash

By Cathy Moran, Esq. Filed Under: Exemptions, Start Here

Bankruptcy lawyers occasionally are confronted with the client with non-exempt cash, or other marketable assets, worth more than the available exemptions to protect them. And state exemption systems often protect the darndest things, like a mule and a plow. A milk cow. The family bible. Those aren't the things most of us are striving to protect. So if your client has cash … [Continue reading...]

Bankruptcy’s Means Test Doesn’t Apply to All

By Cathy Moran, Esq. Filed Under: Means test

New bankruptcy lawyers sometimes forget in the flurry over getting the means test right that it only applies when the debts are primarily consumer. Primarily means over half in dollar amount. The code defines consumer debts in §101(8) as debt incurred for a personal, family or household purpose. You may be surprised by the kinds of debt that are not consumer debt: TaxesBusiness … [Continue reading...]

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