The client owes a fistful of taxes from years ago and has spent another fistful of dollars with widely advertised outfits that solve your tax problems.  None of these tax professionals told him that old income taxes can be eliminated in bankruptcy.!

The client first hired J K Harris, with no results, except a lighter wallet.  Then he hired a tax attorney, who took another couple of thousand dollars, without submitting a single thing to the IRS in writing.

It was a looming foreclosure that brought the client to my office where, for the first time the client learned that these taxes of years ago could be discharged in bankruptcy.

I have a real problem with “professionals” who tell the public only as much truth about their field of knowledge as benefits the professional.  The essence of being a professional is a sworn commitment to the client’s interest.  These tax fixers never discussed the bankruptcy option because it wouldn’t benefit them.

Having learned that taxes are dischargeable, the client asked his tax attorney why, in all their conversations, the tax attorney never mentioned bankruptcy.  His reply:  I’m not that kind of attorney (!).

My question is:  what kind of attorney are you?  My proposed response is not kind.

Several years ago, the Chapter 13 trustees and the bankruptcy judges in the Northern District of Georgia added a new administrative burden to lawyers who file Chapter 13 cases in the Atlanta area.  Under this local rule, within 30 days after the “bar date” for creditors to file claims, lawyers must review all of the claims filed in their client’s Chapter 13 case and file a 1 page report certifying this review.  A lawyer’s failure to file this report can result in a reduction of his fee.

Normally, I am not in favor of court mandates, especially those that involve fines.   However, in this case, I think that bar date review local rule makes a lot of sense and it protects the interests of debtors.

Unlike some other bankruptcy filing districts, the Northern District of Georgia allows for the “confirmation” of Chapter 13 cases long before the last date that creditors can file claims.  Thus, it is very possible that a case will be confirmed before all of the claim information is known.  If a claim comes in higher than expected, or if an unexpected claim is filed, a Chapter 13 case could easily go over term - i.e., the payout could exceed 60 months, contrary to law. Read the rest

“The US health care financing system is broken, and not only for the poor and uninsured”  According to a recent study in The American Journal of Medicine, middle-class families are collapsing under the strain of “a health care system that treats physical wounds, but often inflicts fiscal ones”.

The study, (http://pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf) claims that 62.1% of all bankruptcies filed in 2007 were due to medical problems, including high medical bills or loss of income because of illness.  This is a 49.6% increase from 2001.  Less than one quarter of the debtors studied were uninsured when they filed for bankruptcy.  Many found themselves under-insured and responsible for thousands of dollars in out-of-pocket costs.  Others had private coverage but lost it when they became too sick to work.

Only in America!  Medical impoverishment, according to the study, is virtually unheard of in wealthy countries other than the U.S.  Most other countries have stronger safety nets, and all have some form of national health insurance.

Although filing Chapter 7 bankruptcy usually wipes the slate clean as far as most of your debts are concerned, there are some debts that may not be discharged. 

Certain debts, such as most taxes, child or spousal support, and student loans usually survive the Chapter 7 discharge.  Debts incurred through fraud, may also survive the discharge.  And in cases where the Chapter 7 debtor has lied on his/her bankruptcy petition or meeting of creditors, or attempted to withhold assets, a creditor, the Chapter 7 Trustee, or the US Trustee could object to the entire discharge. 

Sales tax, withholding tax (or if a corporation owed the tax, you are only personally liable for the “trust fund” portion) and income taxes assessed less than 3 years prior to the bankruptcy filing are not dischargeable.  Property taxes are dischargeable as to you, if you are giving up the property, but if you are keeping the property they will remain on the property. Read the rest

When you file for bankruptcy you are required to file certain documents - your bankruptcy petition, bankruptcy schedules, and a host of other papers. These papers must all be completed accurately, honestly and completely.

You do not get the option of filing blank forms “just for now.” If you do, the bankruptcy trustee or the bankruptcy court judge may look at it as a bad faith filing and may dismiss your case.

If your case is dismissed you may not be permitted to re-file for bankruptcy for a certain period of time. And even if you are permitted to file again, you may not be given the full benefit of the automatic stay.

So when filing for bankruptcy, always be sure that your papers are completed. A blank document could ruin your chances of a fresh financial start.

On Friday, June 26, 2009, Governor Ted Kulongski signed HB 2306, which provides increased protection for a debtor to protect his vehicle and his home from creditors.   Formerly, a debtor could protect $2150 in value of a motor vehicle.   The bill amends Oregon Revised Statute 18.345(d) motor vehicle exemption value up to $3000.    Oregon has exemption laws which protect many  different kinds of property, some of which have not been amended in many  years. ** Read the rest

Your Credit Score can be an important asset.  It determines your ability to get credit, and the cost.  It could be a factor in your getting a job, renting an apartment, and purchasing a house or a car.  When you file a Chapter 7 bankruptcy, your credit score will be affected.  In some cases, however, it’s affect on your credit score may be minimal, and may be temporary.

If you are way behind on paying your bills, and have been for some time, your credit score is already bad.  When you file bankruptcy, and receive a bankruptcy discharge, your credit score might actually go up.  This happens because all of the creditors listed on your credit report indicate your current balance, your available credit, your past due balance and your payment history.  When you get your bankruptcy discharge, each listing on your credit report will simply say “included in bankruptcy” or “discharged in bankruptcy”.  The balance due and past due balances will be listed as zero.  While the bankruptcy filing is a negative on your credit score, the omission of balances due and past due balances will have a positive effect on your score.

Even if your credit score decreases when you file your bankruptcy, it will not stay low forever.  Most people who file Chapter 7 bankruptcy find that within two years of filing, their credit score improves to a good or excellent level.

The myth that you cannot get credit for 10 years after filing bankruptcy is just that…a myth.  The advertisements you see or hear urging you to enter into debt settlement to “avoid filing bankruptcy” are designed to give the impression that debt settlement would not harm your credit score like bankruptcy would.  The truth is often the opposite.  Working with debt settlement companies usually hurts your credit because you get further behind in payments, have larger past-due balances, and settlement itself is a negative on your credit score.  Also, many people working with debt settlement companies find that they get sued by creditors anyway and then have to turn to bankruptcy after they have spent thousands of dollars trying to avoid filing bankruptcy.

Preparing the paperwork to file a bankruptcy is, generally, the next step after you have hired an attorney, met with him to discuss your options, and provided him with all of the information requested.

The initial paperwork for a chapter 7 bankruptcy consists of the petition; the schedules and the statement of financial affairs.  Additionally, there are several other documents that must be prepared and filed, including form B22 A, “the Means Test;” and the “Statement of Intentions.”

It is this paperwork that will provide the trustee and your creditors with information about your assets and debts.  Thus, it is very important that it is complete and truthful.

Normally you will provide your attorney with this information by filing out some forms that he provides you either on-line or from his office. Read the rest

Dairy farmers in Upstate New York are facing a crisis.  While the cost of milk at the grocery store continues to climb, the price dairy farmers receive has not.  Farmers are currently receiving $13.33 per hundredweight.  This is $4.25 below the cost of production in New York, even in the most efficient dairy farms.  Even the safety net Congress put in place, the MILC Program, isn’t enough to get farmers to the breakeven point.

Farm lenders are telling their customers that if they do not have lots of cash in reserve, they should sell off their herd and wait until milk prices come back up.  Few farmers have enough cash reserves.  Meanwhile, with so many dairy farmers going out of business and selling their herds, the prices paid for dairy cows have plummeted. 

So what is a farmer to do?  One option to consider is Chapter 12 bankruptcy.  A Chapter 12 operates much like a Chapter 13 but with some much stronger modification provisions for mortgages.  A farmer in a Chapter 12 can modify all of their secured loans, including their farm/home mortgages by lowering the principal balance to the actual value of the property, stretch it over a longer term AND lower the interest rate in many cases.  (This provision, by the way, was similar to the bill that would have allowed all homeowners to modify their home mortgages in Chapter 13… which passed in the House but was defeated in the Senate).

Other than Chapter 12, there may be a glimmer of hope for farmers.  Recently appointed US Senator from upstate New York, Kristen Gillibrand sits on the Senate Agriculture Committee, and has introduced legislation that would double the amount farmers can receive from the MILC program, and tie the MILC trigger price to inflation.  She is also going to hold Agriculture Committee hearings in Washington and New York to discuss dairy pricing and other proposals to reform the system.

New York farmers in financial distress should do the same thing other stressed out New Yorker’s should do… consult with a knowledgeable bankruptcy lawyer to see what their options are.