Bankruptcy filing fees increase on November 1. Chapter 7 filing fees will be $306.00, and chapter 13 filing fees will increase to $284.00. The costs to individuals to have access to the bankruptcy court system have steadily increased.
Filing Fees Increase November 1
November 3rd, 2011Florida Means Test Figures Change November 1
October 30th, 2011Florida bankuptcy attorneys must use new median income figures as of November 1.The median income for the State of Florida for a household of one was increased slightly to $40,766. However, the other income figures have decreased: for a household of 2, $49,729; for a houshold of 3, $52,840; and for a household of 4, $62,742. For a household of 4, this is a $2400 decrease in the median income.
There was a significant change in the means test expenses that may help numerous over median debtors. Debtors who are over median income must complete the balance of the means test which deducts authorized expenses to determine eligibility for chapter 7 (or to determine the amount of required payments to unsecured creditors in a chapter 13) The allowed expenses for renters for Broward County bankruptcies was increased by over $200 per month for each household size. For example, for a household of 1, the allowance is now $1272, and for a household of 4, the allowance is now $1784.
Cars and Bad Faith in Chapter 13
October 22nd, 2011BAPCPA changed the law and restricted cramming down car values unless the car was financed more than 910 days prior to filing. But a debtor can still extend the term and payoff the note during the chapter 13 plan. Additionally, the debtor can reduce the contractual rate to the so-called Till rate, which has been 5.25% for some time in the Southern District of Florida.
But in a recent case, Judge Olson held that the good faith requirements of chapter 13 to confirm a plan are relevant as to recently financed vehicles. In the case In re Blackmon, , 2011 Bankr Lexis 3619, 2011 WL 4543923(Case NO 10-41452)(September 29, 2011), the debtors had already met with bankruptcy counsel, financed 2 vehicles at high interest, and filed bankruptcy within less than 80 days after obtaining the vehicle. Judge Olson denied confirmation of the plan which reduced the interest rate.
Judge Cristol Scolds Trustee
October 16th, 2011I have previously discussed how the trustees do not like the $4,000 wildcard personal property exemption when the debtor owns a Florida homestead but elects not to claim it as homestead in the bankruptcy. Trustees do not want to lose out on the collection of funds on personal property while the debtor is effectively still keeping the home that is undersecured. The home is not really sellable so there would be no asset for the bankruptcy estate.
However, in In re Luban, 2011 WL 4344548, 2011 Bankr Lexis 3509, (Case NO. 11-13633)(Sept 15, 2011), the trustee tried to sell the home to, as Judge Cristol described, a vulture investor, so that the debtor would then have to pay rent to the investor. The debtor was still making payments on the first and second mortgage. Judge Cristol found that the trustee’s conduct selling to a vulture investor was “misguided and wholly inappropriate”. The trustee, simply to obtain funds that would primarily pay for the trustee and professionals, would cause mortgage payments to go into default and could lead to the debtor and disabled child losing their home.
However, debtors should still be careful on relying too much on this decision. Judge Cristol found that the trustee’s fiduciary duty applies to all creditors including first and second mortgages. The debtor had been paying the mortgages. In many cases, the debtor is in default and perhaps even in foreclosure. Perhaps there would be a different result in such case. A debtor might still be trying to modify the mortgages, but the fact remains that there is still a risk if the debtor is trying to retain the home and exercise the wildcard personal property exemption. It is imperative to consult with your bankruptcy attorney
Payday Loans in Bankruptcy
September 3rd, 2011Some banks have recently announced that they are essentially entering the payday loan business. These loans have traditionally led to high costs and abuses greatly jeopardizing the well being of consumers. It may be true that an employee desperately needs immediate funds and an advance on his or her paycheck might be needed for the rent, utility bill, or other necessity. But payday loans have high fees and lead to a need for a loan on each additional check creating a never-ending cycle of high fees and inability to catch up.
Payday loan companies are often the nastiest and toughest trying to call and collect when the loans are not repaid. They often lie threatening criminal prosecution for a bad check. But the checks they hold are post dated; the debt is based on a promise to pay. There is no current exchange of goods and services for a current check.
Payday loans can be discharged in bankruptcy like any other debt.
Do I really have to stay in ch. 13 for 5 years?
August 21st, 2011Chapter 13 plans are typically from 3-5 years. In Florida, which is bound by decisions of the 11th Circuit Court of Appeals, a debtor who is above median income on the means test must be in a 5 year plan. In re Tennyson. 611 F. 3d 873(11th Cir. 2010). The idea under BAPCPA is that the applicable commitment period for an above median income debtor is 5 years during which time the debtor must pay his disposable income.
What if the debtor is able to pay off the chapter 13 plan early? This could not be from increased income, because the debtor would have greater disposable income and would be able to increase the chapter 13 payments. But what if a family member could make a gift, or the debtor could fund the plan from exempt funds such as an IRA?
In the past, I have obtained early payoffs with the consent of Robin Weiner, Chapter 13 Trustee for Broward and Palm Beach counties in Florida. But Tennyson has caused a concern for the trustee that a chapter 13 case should perhaps remain open for the required term because the debtor could have additional income.
A recent case from the Middle District of Florida expressly authorized the early payoff of a chapter 13 plan when a motion was filed with clear notice to the creditors. In re Smith, 449 BR 817(Bankr. M. D. FL June 6, 2011). The court examined the Tennyson case and concluded it did not prevent an early payoff.
As a Fort Lauderdale bankruptcy attorney, I recognize that the early completion of a chapter 13 bankruptcy is extremely beneficial to clients who are able to obtain an independent source of funds to complete plan payments.
Inheritances after Filing: Exemption and Chapter 13 Issues
August 21st, 2011South Florida bankruptcy attorneys know that if a debtor inherits property within 180 days after filing of the bankruptcy, that the property becomes property of the estate subject to administration by a chapter 7 trustee. More specifically, this means that if a person dies within 180 days after the bankruptcy is filed, and the debtor has the right to receive an inheritance including life insurance proceeds, that the property belongs to the bankruptcy estate even if the asset has not yet been received by the debtor.
A couple of recent cases raised issues of great concern for debtors and had favorable rulings. In re Cutiignola, 450 BR 445, (Bankr. S.D. N.Y. 2011) upheld the debtors’ claim that that they could assert their bankruptcy exemptions to protect inherited property even though they had no interest in the property at the time of filing the bankruptcy petition. The debtors could claim as exempt property including homestead and an IRA that became property of the estate as a result of inheritance. The court relied in part on a decision binding in the Southern District of Florida, In re Wilson, 694 F. 2d 236 (11th Cir. 1982)(refund of attorney’s fees to the debtor could be claimed as exempt).
What if a person dies more than 180 days after the bankruptcy is filed, does the property belong to the bankrutptcy estate? In a chapter 7, clearly no. And one would think that the same rule applies in a chapter 13. But an 11th Circuit case raises a serious concern for a debtor who inherits property during the term of the plan, which can be up to five years. In re Waldron, 536 F. 3d 1239, (11th Cir 2008). In Waldron, the court concluded that a post-petition uninsured motorist claim was property of the estate.
This inheritance issue was addressed in In re Walsh, 2011 Bankr Lexis 2602(Bankr. S. D. Ga. June 15, 2011) The court stressed that unlike an accident claim, there was a specific time period of 180 days for inheritances for property of the estate in Section 541. Walsh noted there were conflicting earlier opinions in the Middle District of Florida. Walsh upheld the debtor’s position against a claim by the chapter 13 trustee that the inheritance should be added to the bankruptcy estate.
Fort Lauderdale bankruptcy attorneys should remain concerned about the issue of inherited property in a chapter 13.
New Chapter 13 Jurisdictional Limit Case: In re Hannon
August 7th, 2011The jurisdictional limit for unsecured debt in a chapter 13 is $360,475.00. One way around this limit is to consider the debt separately of a husband and wife who file bankruptcy. Essentially, a joint filing is really two individuals filing a case that is jointly administered. So, for example, if the husband owes $200,000 and the wife owes $250,000 in separate debt, then the court does have chapter 13 jurisdiction.
However, keep in mind that when a debtor has joint debt with the spouse, then this joint debt must be considered as debt when calculating both the husband’s and wife’s debt.
On August 4, 2011, Judge Olson sitting in the Broward County division of the bankruptcy court in the Southern District of Florida, held that debtors could treat separately their debt limit to remain in chapter 13. In re Hannon, 2011 Bankr Lexis 2949, Case No. 10-45771. However, on the facts of this case, the debtor has substantial joint debt which still placed each debtor over the jurisdication limit.
This decision will be of great help to those who file a Fort Lauderdale chapter 13 bankruptcy.
IRS Form 1099-C: Is the debt actually forgiven and released?
August 5th, 2011UPDATED August 25:
Judge Olson, at the end of an Order to Show Cause against several attorneys, in a short discussion, said that an issuance of a 1099 is not a basis to object to a Proof of Claim. Case no 10-49318(also can be seen at Case no 11-13345 JKO (DE 148) >(In re MacFArland)
The question often arises for a debtor as to the pros and cons of settling credit cards at a discount or a completing a short sale. The filing of a chapter 7 bankruptcy prior to any short sale or settlement should eliminate this problem because no debt is forgiven. Sometimes creditors on their own charge off an account and issue a 1099-c creating a taxable event for the recipient. This forgiveness of debt income is taxable, though an IRS Form 982 to show insolvency might often be used to avoid tax liability.
But does the filing of a 1099-c by the creditor mean the debt is released and that the creditor, or a debt purchasing company, can’t sue? Many would assume that the creditor cannot sue and that the issuance of the 1099 would be a defense. Similarly, could a creditor file a proof of claim in a bankrupcy after it had already issued a 1099C?
Bankruptcy courts have determined that the 1099c does not imply that the creditor has released its right to recover on the underlying debt or deficiency. In re Zilka, 407 BR 684(Bankr. W. D. Pa 2009). However, the debtor may have been forced to pay income taxes on the 1099. The creditor would then have to withdraw its 1099c reporting to IRS so that the debtor could receive a tax refund. Also see USA v Reed, 2010 U.S. Dist Lexis 96079(US D. Ct. E.D. Tenn.)
New 11th Cir Decision on Chapter 13 and Sovereign Immunity: State of FL Dept. of Revenue v Diaz
July 30th, 2011This past Wednesday the 11th Circuit Court of Appeals entered an important decision on sovereign immunity, In re Diaz, Florida Department of Revenue v Diaz, 2011 US App Lexis 15462 (11th Cir 2011). This is an important case for practitioners to review, but I am not going to review the sovereign immunity analyses of the case.
I do want to comment on how this affects chapter 13. Sometimes I just do not understand the 11th circuit decisions when they consider chapter 13 cases. In what appears to me to be directly contrary to the United States Supreme Court decision in US Student Aid Funds v Espinosa, the court held that a creditor with a non-dischargeable claim for child support as well as taxes is not bound by the claim allowed in the bankruptcy court. Even though the creditor was fully paid in the plan based on the allowed claim, the creditor could still claim moneys it is owed such as interest because the underlying debt could not be discharged.