Because I practice bankruptcy law everyday, it is sometimes nice to take a momentary diversion from Chapter 7, Chapter 13, debt, creditors, consumers, etc... This blog is going to veer away from bankruptcy, but, fear not, it will still be law related.
By now, I am sure that many of you have heard that the reality show star and celebrity, Kim Kardashian, is suing Gap Corporation for the use of a Kim K. lookalike in it's "Super Cute" Old Navy commercial. When I first heard this, I thought the claim was pretty far fetched and just another way for the "celebrity" to get her name in the spotlight. Upon further reading of some very interesting cases, I have changed my stance a little.
I cannot find a public copy of Miss K's initial complaint against Gap, but based on the newspaper articles and cases I have read, I can imagine that her claims will fall under the common law right of publicity and Section 43(a) of The Lanham Act, 15 U.S.C. Sec. 1125(a). The right of publicity basically states that a individual (most likely a celebrity or someone in the public eye) has a property right in his/her likeness and should have the sole right to exploit that interest. No other entity should be allowed to appropriate the celebrity's likeness for purposes of pecuniary or commercial gain without the celebrity's consent. Section 43(a) of The Lanham Act addresses, more specifically, false advertising. A Lanham Act claim will allege that a celebrity's likeness has been used in a manner that would confuse the public, perhaps confusing the public into believing the celebrity endorses that product. Initially, Section 43(a) claims dealt mostly with the use of trademarks, but case law has adapted this so that a celebrity's "mark" is viewed as his/her identity.
I found two cases relevant to Miss Kardashian's case that I would advise her to look at if I were her attorney (and wouldn't that be great if I was?). The first is White v. Samsung Electronics America, Inc., 971 F.2d 1395 (9th Cir. 1992). Essentially, Vanna White sued Samsung for using a robot in it's commercial that was stylized to look like Vanna White and was placed on a set that resembled Wheel of Fortune. White initially lost on summary judgment, but the United States Court of Appeals for the Ninth Circuit reversed the lower court on both Ms. White's right of publicity and Lanham Act claims. The most significant aspect of this case for Kardashian is the Court's determination that the appropriation does not have to be just of the celebrity's likeness, image, or signature. It can also be of their overall identity. Here, although Samsung used a robot and not a picture of White, the Court found that sum of all the elements in the commercial pointed to the identity of White and left no doubt as to who the figure was supposed to represent. Impersonation was enough for the Ninth Circuit to determine that a jury should hear this case.
The second case is Rosa Parks v. LaFace Records, et al, 2003 FED App. 0137P (6th Cir. 2003). The Sixth Circuit in this case examined the lawsuit of Rosa Parks against the music group, OutKast, over their song titled Rosa Parks. The Sixth Circuit focused mainly on the Lanham Act claim, and OutKast's proposed defense that their use of Ms. Parks' identity was protected by their First Amendment right to freedom of speech. The Court looked at whether there was any artistic relevance between the title of the song and the underlying work. If there was any artistic relevance, the Court would then determine if there was an explicit misrepresentation between the title of the song and the content of the work. The Sixth Circuit could not find any artistic relevance between the persona of Rosa Parks and the words of the OutKast song. Thus, the group did not have a defense to Ms. Parks' claims. What is significant in this case for Ms. Kardashian is that purely commercial speech, such as the Old Navy ad, is granted even lower consideration in the free speech spectrum.
Will Kim win her lawsuit? The typical lawyer answer is, "it depends." I think she has a chance based on both of the cases I have read. Although, Old Navy isn't using a clip of the actual Kim without her permission, her assertion is that they are using an impersonator, or are appropriating her identity. I think it's a claim that would withstand summary judgment and could go to trial. However, I don't know if a jury would necessarily find that the connection between the "fake Kim" and the "real Kim" is so strong that Old Navy is either infringing on her property right in her own identity or confusing the public that Kim Kardashian endorses the Old Navy brand. But, for someone who has capitalized on being famous for just her image, it is an important battle to wage. Which brings me to perhaps my favorite statement by a judge, "the law protects the celebrity's sole right to exploit this value (celebrity value) whether the celebrity has achieved her fame out of rare ability, dumb luck, or a combination thereof." White, 971 F.2d 1395 at 1399.
Check out the commercial on YouTube to make your determination.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Friday, July 29, 2011
Friday, June 10, 2011
A Tale of Two Mortgages
The tale of two mortgages begins something like this: the real estate market is booming and property values are soaring. A clever homeowner decides to take out a second mortgage or home equity line of credit (HELOC) on his/her home to pay some credit cards, purchase a boat, or buy an investment property. It's easy enough to do and looks like a surefire idea. This is a happy tale. Flash forward about three years, and things begin to look a little grim. House values have fallen, and now that second loan is sopping up any chance at equity the home had. The homeowner is now burdened with two house payments and desperately wants to get out and recoup whatever value in his/her home. Is this a tale with no happy ending? Not quite...
We see this tale many times as bankruptcy attorneys, and there is some relief we can offer. A burdened homeowner does have the possibility of getting out from that second mortgage or HELOC through a Chapter 13 bankruptcy. If you are not familiar with bankruptcy, a Chapter 13 is kind of like a super debt consolidation plan. Debts are consolidated and broken into different priorities of debts. The lowest priority, general unsecured debts (i.e. credit cards) are usually paid a small portion of what is owed, and the remainder is discharged. It's a super debt consolidation because it is done through the bankruptcy court and under all the protections of the bankruptcy laws. The repayment period lasts anywhere from three to five years, depending on the debtor's income.
A Chapter 13 can be the hero of the tale of two mortgages because of something called the "cram down" or "strip off" provision. Interpreted from sections 506(a) and 1322(b)(2) of the bankruptcy code, the "strip off" provision allows a completely unsecured junior lien on a residence to be treated as a general unsecured debt in the Chapter 13. Which means, in a Chapter 13 you can, potentially, get rid of the burdening second or third mortgage(s) and have the lien released upon completion of the Chapter 13. However, the junior lien(s) must be completely unsecured, meaning that house must be valued lower than what is owed on the senior lien so that there is not even $1.00 of equity in the junior liens. If you can prove this, you can get rid of those extra mortgages and free up equity in your home, which is a pretty good ending to this tale.
Is this happy ending only available in a Chapter 13? For the time being it looks like the answer is yes. Several courts have addressed whether a debtor can strip off a second mortgage in a Chapter 7. In April of this year, the United States District Court for the Eastern District of Wisconsin determined that the provision is not available in a Chapter 7 bankruptcy, but is available in a Chapter 13 where a debtor would not be eligible for a Chapter 13 discharge, as long as the bankruptcy was filed in good faith. But, a bankruptcy judge in the Eastern District of New York has said otherwise and determined the lien could be stripped in Chapter 7. Bottom line, we do not really know if a "strip off" would be allowed in a Chapter 7. In which case, I advise only try it through a Chapter 13.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
We see this tale many times as bankruptcy attorneys, and there is some relief we can offer. A burdened homeowner does have the possibility of getting out from that second mortgage or HELOC through a Chapter 13 bankruptcy. If you are not familiar with bankruptcy, a Chapter 13 is kind of like a super debt consolidation plan. Debts are consolidated and broken into different priorities of debts. The lowest priority, general unsecured debts (i.e. credit cards) are usually paid a small portion of what is owed, and the remainder is discharged. It's a super debt consolidation because it is done through the bankruptcy court and under all the protections of the bankruptcy laws. The repayment period lasts anywhere from three to five years, depending on the debtor's income.
A Chapter 13 can be the hero of the tale of two mortgages because of something called the "cram down" or "strip off" provision. Interpreted from sections 506(a) and 1322(b)(2) of the bankruptcy code, the "strip off" provision allows a completely unsecured junior lien on a residence to be treated as a general unsecured debt in the Chapter 13. Which means, in a Chapter 13 you can, potentially, get rid of the burdening second or third mortgage(s) and have the lien released upon completion of the Chapter 13. However, the junior lien(s) must be completely unsecured, meaning that house must be valued lower than what is owed on the senior lien so that there is not even $1.00 of equity in the junior liens. If you can prove this, you can get rid of those extra mortgages and free up equity in your home, which is a pretty good ending to this tale.
Is this happy ending only available in a Chapter 13? For the time being it looks like the answer is yes. Several courts have addressed whether a debtor can strip off a second mortgage in a Chapter 7. In April of this year, the United States District Court for the Eastern District of Wisconsin determined that the provision is not available in a Chapter 7 bankruptcy, but is available in a Chapter 13 where a debtor would not be eligible for a Chapter 13 discharge, as long as the bankruptcy was filed in good faith. But, a bankruptcy judge in the Eastern District of New York has said otherwise and determined the lien could be stripped in Chapter 7. Bottom line, we do not really know if a "strip off" would be allowed in a Chapter 7. In which case, I advise only try it through a Chapter 13.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Wednesday, May 11, 2011
Real Bankruptcy Stories of Jersey
What does this lovely lady have to do with bankruptcy and my bankruptcy blog? Mostly it is just reality show curiosity, but there is also a cautionary bankruptcy tale present here.
If you are not a reality show junkie like some of us, you may not recognize this woman. She is Theresa Giudice of the Real Housewives of New Jersey. If you do follow these shows (and it's ok to admit it), you probably know that she and her husband filed Chapter 7 bankruptcy in 2009. As I was doing some fun bankruptcy searching on the internet, I came across several articles about the current status of this bankruptcy. It appears that the trustee in the Giudice's case has filed an objection to their Chapter 7 discharge claiming that they should not be allowed a discharge because they have misled the bankruptcy court and knowingly hid some of their assets.
If you will recall, a Chapter 7 bankruptcy is a liquidation bankruptcy. Meaning that the bankruptcy trustee assigned to your case has the right and the duty to look for assets that can be liquidated for distribution to your creditors and payment towards your debts. These are assets that are not protected by what are known as your state's exemption laws. If you do not disclose all of your assets to your bankruptcy trustee, the trustee is not going to be very happy. And if the trustee is not happy, no one is happy. What can result is the case of this Real Housewife; denial of the bankruptcy discharge, which is the whole reason you filed bankruptcy in the first place. If a reality show "star" is not above the bankruptcy laws, then you probably aren't either. This is why we bankruptcy lawyers get frustrated when you "forget" to tell us about that extra bank account or parcel of land you just remembered you have in your name. We want you to have a successful bankruptcy, and we can only ensure that happens when we are fully informed of all of the assets you have.
Oh yeah, what assets did Mrs. Giudice allegedly forget to mention? Nothing big...just a bank account, a book royalty, and a fashion line.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
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| http://www.buzztab.com/ entertainment/teresa-giudice-nephew -makes-things-worst/ |
If you are not a reality show junkie like some of us, you may not recognize this woman. She is Theresa Giudice of the Real Housewives of New Jersey. If you do follow these shows (and it's ok to admit it), you probably know that she and her husband filed Chapter 7 bankruptcy in 2009. As I was doing some fun bankruptcy searching on the internet, I came across several articles about the current status of this bankruptcy. It appears that the trustee in the Giudice's case has filed an objection to their Chapter 7 discharge claiming that they should not be allowed a discharge because they have misled the bankruptcy court and knowingly hid some of their assets.
If you will recall, a Chapter 7 bankruptcy is a liquidation bankruptcy. Meaning that the bankruptcy trustee assigned to your case has the right and the duty to look for assets that can be liquidated for distribution to your creditors and payment towards your debts. These are assets that are not protected by what are known as your state's exemption laws. If you do not disclose all of your assets to your bankruptcy trustee, the trustee is not going to be very happy. And if the trustee is not happy, no one is happy. What can result is the case of this Real Housewife; denial of the bankruptcy discharge, which is the whole reason you filed bankruptcy in the first place. If a reality show "star" is not above the bankruptcy laws, then you probably aren't either. This is why we bankruptcy lawyers get frustrated when you "forget" to tell us about that extra bank account or parcel of land you just remembered you have in your name. We want you to have a successful bankruptcy, and we can only ensure that happens when we are fully informed of all of the assets you have.
Oh yeah, what assets did Mrs. Giudice allegedly forget to mention? Nothing big...just a bank account, a book royalty, and a fashion line.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
The Means Test Just Got Meaner
If you have done any preliminary research on bankruptcy, you have most likely run into or seen mention of something called the Means Test. The Means Test was formulated in 2005, when the bankruptcy laws were changed, in order to prevent abuse of Chapter 7 bankruptcy. Prior to 2005, almost anyone could qualify for Chapter 7 bankruptcy, whether they had the means to pay their creditors or not. By 2005, Congress had enough and decided to create the Means Test to prevent those who have the ability to repay some of their debt from filing Chapter 7 and avoiding Chapter 13 bankruptcy.
As bankruptcy practitioners we are just as scared of the means test as you are, and we try our hardest to get clients to "pass" the Means Test. Unfortunately, passing the Means Test may no longer be enough. The situation just got meaner as the United States Court of Appeals for the Fourth Circuit recently ruled on a case (Calhoun v. United States Trustee) in which the Debtors "passed" the Means Test but were determined to still have the ability to repay their creditors. When we say someone "passes" the Means Test, we say that the person has so little disposable income that there is no presumption that they are abusing the bankruptcy process if he/she files a Chapter 7 bankruptcy. This rule is outlined in the bankruptcy code section 707(b)(2). However, there is another relevant code section that we often forget. This is section 707(b)(3), which states that a case can be dismissed for abuse if the Debtor is found to have filed in bad faith or if the totality of the circumstances would show abuse (i.e. despite the Means Test result, the Debtor can actually repay some of his/her debt). The Court in Calhoun cited another case in which the factors of abuse were outlined. These included 1) the reason for the bankruptcy filing; 2) whether the family budget and expenses would be considered reasonable; 3) whether the Debtor took cash advances or incurred new consumer debt prior to filing and in amount beyond his ability to repay; 4) whether the filed bankruptcy schedules accurately reflect the Debtor's income and true financial condition; and 5) whether the petition was filed in good faith (In re Crink, 402 B.R. 159 (Bankr. M.D.N.C. 2009)). In Calhoun, the Court of Appeals affirmed a finding of abuse because Mr. Calhoun had significant income from both retirement and social security. While social security income is not counted in the Means Test it is present, and it gave the Calhouns a monthly income of nearly $8,000.00 for their household of two. Additionally, the Court looked heavily at the Calhoun's monthly budget and found some of their expenses to be extravagant.
So, as we review our clients' bankruptcy cases, we must keep in mind that the Means Test is not the only test out there. There is a potentially meaner test that the bankruptcy court can apply that looks at all of the circumstances in a case. While Calhoun is not a case in the Arizona Circuit, we should not overlook 707(b)(3) when we analyze our cases. It is a warning that there are limits to what we can do for our clients. This also means that a potential client should not expect that his/her attorney will file a Chapter 7 bankruptcy when it is not legitimate because it is likely to now be scrutinized under 707(b)(2) and 707(b)(3).
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
As bankruptcy practitioners we are just as scared of the means test as you are, and we try our hardest to get clients to "pass" the Means Test. Unfortunately, passing the Means Test may no longer be enough. The situation just got meaner as the United States Court of Appeals for the Fourth Circuit recently ruled on a case (Calhoun v. United States Trustee) in which the Debtors "passed" the Means Test but were determined to still have the ability to repay their creditors. When we say someone "passes" the Means Test, we say that the person has so little disposable income that there is no presumption that they are abusing the bankruptcy process if he/she files a Chapter 7 bankruptcy. This rule is outlined in the bankruptcy code section 707(b)(2). However, there is another relevant code section that we often forget. This is section 707(b)(3), which states that a case can be dismissed for abuse if the Debtor is found to have filed in bad faith or if the totality of the circumstances would show abuse (i.e. despite the Means Test result, the Debtor can actually repay some of his/her debt). The Court in Calhoun cited another case in which the factors of abuse were outlined. These included 1) the reason for the bankruptcy filing; 2) whether the family budget and expenses would be considered reasonable; 3) whether the Debtor took cash advances or incurred new consumer debt prior to filing and in amount beyond his ability to repay; 4) whether the filed bankruptcy schedules accurately reflect the Debtor's income and true financial condition; and 5) whether the petition was filed in good faith (In re Crink, 402 B.R. 159 (Bankr. M.D.N.C. 2009)). In Calhoun, the Court of Appeals affirmed a finding of abuse because Mr. Calhoun had significant income from both retirement and social security. While social security income is not counted in the Means Test it is present, and it gave the Calhouns a monthly income of nearly $8,000.00 for their household of two. Additionally, the Court looked heavily at the Calhoun's monthly budget and found some of their expenses to be extravagant.
So, as we review our clients' bankruptcy cases, we must keep in mind that the Means Test is not the only test out there. There is a potentially meaner test that the bankruptcy court can apply that looks at all of the circumstances in a case. While Calhoun is not a case in the Arizona Circuit, we should not overlook 707(b)(3) when we analyze our cases. It is a warning that there are limits to what we can do for our clients. This also means that a potential client should not expect that his/her attorney will file a Chapter 7 bankruptcy when it is not legitimate because it is likely to now be scrutinized under 707(b)(2) and 707(b)(3).
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Wednesday, May 4, 2011
Help Wanted
Contrary to the bankruptcy rumor mill and what you might have heard from your mother, brother, next door neighbor, or friend of a friend, personal bankruptcy filings in Arizona are not posted in the newspaper. I do believe that business filings are sometimes posted. Also, your employer will never get notification that you filed for bankruptcy. The only exceptions being if you have a writ of garnishment where you employer is the garnishee or if you have, for some reason, listed your employer as a creditor. The latter has happened. For example, we have had clients that work for American Express and also happen to have an American Express credit card. However, it is not a very common occurrence.
What if your employer does, by one way or another, discover that you filed bankruptcy? How can I be so certain that you will not get fired because of your bankruptcy filing? I am certain because the bankruptcy code says so, and no one wants to mess with the code. The specific section we are talking about is 11 U.S.C. Sec. 525(b). This section states that a private employer may not discriminate with respect to employment nor terminate the employment of an individual solely because that person filed for bankruptcy or did not pay a debt that was dischargeable. Plain meaning of this: your employer can't fire you or negatively affect your employment even if it is known that you filed for bankruptcy.
An important distinction in the code is the term private employer. The Government has different rules when it comes to discriminatory behavior based on the filing of bankruptcy. One of the important differences, as determined by the Fifth Circuit Court Appeals on March 4, is that the Government can also not deny employment because an individual has filed bankruptcy. The same does not apply to private employers, and the Fifth Circuit determined that there is nothing in the construction of the bankruptcy code that would prove that it would apply. The Fifth Circuit determined that if Congress felt a private employer should not be able to refuse to hire someone who has filed for bankruptcy, it would have expressly stated so in 11 U.S.C. Sec. 525(b). Therefore, if you file for bankruptcy relief and then apply for a job at financial institution (the most common example), that employer does have the right to consider your bankruptcy filing when deciding whether or not you will be hired. But, if you already work for that institution and then file, you can not be fired only because you sought bankruptcy relief. If this were the case, your employer would be violating the code and be subject to penalties. And that is why no one likes to mess with the bankruptcy code.
The moral here is that if you are considering bankruptcy and it is something that will help you get back on your feet, you should not let rumors of what can happen after you file affect your decision to seek the financial relief you need.
(On a side note, I do believe that, while the government can not discriminate with regards to employment, it can deny the granting of certain security access if a government employee files for bankruptcy).
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Wednesday, April 27, 2011
Back in the Day Cafe
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| Picture from http://zapp3.staticworld.net/news/graphics/141867 -opener-old-1990s_slide.jpg |
I remember that one of the local radio stations used to have a segment called "Back in the Day Cafe" during which they would play "old school" hits from the 80's and 90's. Well, today we are going back in the bankruptcy day to 1994. This was a very different time in the bankruptcy world; a time when 341 hearings were not held at the bankruptcy courthouse on 1st Avenue and Van Buren but at the Firstar Metropolitan Bank & Trust building.
This was also a time of the "zero-down" bankruptcy epidemic. A few select bankruptcy firms in Arizona were offering zero-down bankruptcies, meaning a potential bankruptcy client only had to pay the bankruptcy filing fee up front. All attorney's fees would be paid after the bankruptcy was filed and on an installment plan. These firms would actually issue unsecured promissory notes for repayment. The notes would then be sold to collection agencies and pursued aggressively post-bankruptcy filing.
So, why do you have to pay your bankruptcy attorney all those fees before they can file your case? Because of the lesson that bankruptcy in the 1990s taught us: that attorneys should not be your existing creditors when you file a bankruptcy case. If an attorney is owed money at the time your bankruptcy case is filed, that money would be an antecedent and dischargeable debt. If the attorney attempted to collect from you, they would be in violation of the bankruptcy code. And besides all of that, attorneys want to get paid for the work they do, and you should pay them to ensure the work they complete is the high standard of work you expect. What happened in the 1990's is that the "zero-down" bankruptcy firms produced such shoddy work that the bankruptcy community became very concerned. The end result was that many of the zero-down attorneys were sanctioned and suspended from practicing law.
Additionally, there is a little bankruptcy rule found at 11 U.S.C. Sec 526(a)(4), which states that a debt relief agency (your bankruptcy attorney) can't advise you to incur more debt prior to filing for bankruptcy. What is a zero-down bankruptcy if not an incurring of more debt prior to filing?
If you do go for a bankruptcy consultation, and the attorney makes the statement that your case will not be filed until all fees are paid in full, please try to remember that this attorney is not greedy. Remember this little trip back to the wild bankruptcy days of the 90's and the lessons learned from zero-down bankruptcy law firms.
(The background for this blog was taken from a very interesting article in Phoenix NewTimes. If you wish to read the entire article, you can find it at http://www.phoenixnewtimes.com/1994-02-02/news/debt-in-the-water-zero-down-bankruptcy-firms-cost-their-clients-plenty/)
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Wednesday, April 20, 2011
Name that Creditor
Having filed numerous bankruptcy cases, we have met a variety of people and seen the spectrum of situations. Sometimes we have clients with just three or four creditors, and sometimes we have clients with twenty or thirty creditors. Regardless of how many creditors they have, our clients often can't remember just who they owe money to, and this can cause problems when it comes time to receive the bankruptcy discharge.
Whether the quantity is large or small, it is important to make sure that each potential creditor is adequately identified and named in your bankruptcy petition. If you fail at playing Name that Creditor, you may give a creditor a loophole to claim non-dischargeability of a debt that would have otherwise been discharged in your bankruptcy.
The United States Bankruptcy Code, Section 523(a)(3) states that a debt may be non-dischargeable if is not listed or scheduled in the bankruptcy petition in such a way that a creditor would have notice of the case. Creditors must have notice of your bankruptcy filing in order to be able to file a claim for the money you owe them or to object to discharge. In bankruptcy, everything is processed through the mail. There is no physical service on parties in interest. Generally speaking, if you make your best attempt to list your creditors with correct addresses, and information regarding your bankruptcy filing is deposited in the mail, you will be deemed to have given notice to your creditor. However, an Arizona bankruptcy judge issued an opinion this year that tends to say that proof of mailing is not enough. The general facts must also show that the notice was adequately received by the creditor in question. The judge made a clear distinction between service and notice. Service is complete upon mailing, but notice may only be achieved if your creditor received the court paperwork and had knowledge of the bankruptcy filing.
Another important question in Name that Creditor is who is the proper party to serve and give notice to? Sometimes debts are passed around from collector to collector, and it is difficult to discern who is the actual owner of a debt. In the same case addressed above, the judge determined that the proper party would be whoever intends to enforce the debt after the bankruptcy is filed. This is important for those debtors that have been sued in state court prior to filing bankruptcy. Just because an attorney represented a creditor in a state court lawsuit against you, does not mean that they are now the interested party and agent for that creditor in your bankruptcy case. In this instance, it would be safer to have your attorney list both the attorney handling the lawsuit and the original creditor.
What all of this says to you as potential bankruptcy debtors is that a lackadaisical approach to completing your bankruptcy petition is not the best approach. You really want to identify each of your creditors for your bankruptcy attorney. This will ensure that you do not give any creditor an easy way to claim that they did not know you filed bankruptcy and therefore, assert that their debt is non-dischargeable.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Whether the quantity is large or small, it is important to make sure that each potential creditor is adequately identified and named in your bankruptcy petition. If you fail at playing Name that Creditor, you may give a creditor a loophole to claim non-dischargeability of a debt that would have otherwise been discharged in your bankruptcy.
The United States Bankruptcy Code, Section 523(a)(3) states that a debt may be non-dischargeable if is not listed or scheduled in the bankruptcy petition in such a way that a creditor would have notice of the case. Creditors must have notice of your bankruptcy filing in order to be able to file a claim for the money you owe them or to object to discharge. In bankruptcy, everything is processed through the mail. There is no physical service on parties in interest. Generally speaking, if you make your best attempt to list your creditors with correct addresses, and information regarding your bankruptcy filing is deposited in the mail, you will be deemed to have given notice to your creditor. However, an Arizona bankruptcy judge issued an opinion this year that tends to say that proof of mailing is not enough. The general facts must also show that the notice was adequately received by the creditor in question. The judge made a clear distinction between service and notice. Service is complete upon mailing, but notice may only be achieved if your creditor received the court paperwork and had knowledge of the bankruptcy filing.
Another important question in Name that Creditor is who is the proper party to serve and give notice to? Sometimes debts are passed around from collector to collector, and it is difficult to discern who is the actual owner of a debt. In the same case addressed above, the judge determined that the proper party would be whoever intends to enforce the debt after the bankruptcy is filed. This is important for those debtors that have been sued in state court prior to filing bankruptcy. Just because an attorney represented a creditor in a state court lawsuit against you, does not mean that they are now the interested party and agent for that creditor in your bankruptcy case. In this instance, it would be safer to have your attorney list both the attorney handling the lawsuit and the original creditor.
What all of this says to you as potential bankruptcy debtors is that a lackadaisical approach to completing your bankruptcy petition is not the best approach. You really want to identify each of your creditors for your bankruptcy attorney. This will ensure that you do not give any creditor an easy way to claim that they did not know you filed bankruptcy and therefore, assert that their debt is non-dischargeable.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Wednesday, April 13, 2011
Having an A+ Credit Report After Filing for Bankruptcy
Bankruptcy is going to affect your credit. It can't be avoided. But most of the time, your credit has already taken a hit by the circumstances that have you lead you to our offices. Being late on payments, having accounts sent to collections agencies, and carrying multiple high balances are all things that are going to bring your credit score down. In this situation, a bankruptcy filing can be just what your credit needs to wipe the slate clean. Each of those individual negative blips will all be wiped out and replaced with a reporting of "included in Chapter 7 or Chapter 13 bankruptcy." This may even cause a quick jump in your credit score. Another reason bankruptcy doesn't impact your credit score as negatively as one might imagine is that your credit score, or FICO score, is calculated by comparing you to others in your situation. So, the score of a bankruptcy filer is computed by looking at scores of other bankruptcy filers and not non-bankruptcy filers.
So, bankruptcy wipes the slate clean and everything is good to go? Well, almost. After filing bankruptcy, particularly Chapter 7, you will receive numerous credit card and vehicle loan offers. So new loans are a possibility, but you may not receive the same terms as you would have pre-bankruptcy. However, you can improve your credit over time and, in turn, improve your loan terms. In order to do so, you need to make sure that your credit report has been properly adjusted and that no accounts are still listed as delinquent (call the credit bureaus if this is not the case). After that you can attempt to get a unsecured credit card with a small credit limit or secured credit card. Make minimal purchases and pay them off each month. This positive reflection on your credit will help you quickly rebuild. Also, if you do have a home or vehicle loan, make sure you continue to make timely payments on these installments. This is just another positive ding to your credit that will help over time.
Lastly, most clients ask if there is a difference in filing Chapter 7 or Chapter 13 for credit purposes. The answer is really no. Both are going to be reported on your credit and affect your credit score. The only real difference is that a creditor may be more willing to extend new credit to you, despite the bankruptcy on your credit report, while you're in a Chapter 13 because you are making repayments on your debt. However, this would really be more of a "personal" decision on the part of lender.
Despite which way you go, Chapter 7 or Chapter 13, it is clear that there is life after bankruptcy, and the decision to break free from your debt should not be hindered by fear of your credit future.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, http://www.perezlawgroup.com/.
Thursday, March 31, 2011
The Game of Life
Well, it seems that if the Game of Life happens to bring you to bankruptcy court in Arizona, you may soon be playing the Game of Life Insurance. In this game, that life insurance policy that you probably did not value when playing a game as a kid, but hold dear as an adult, is also highly coveted by your bankruptcy trustee. We are going back to our favorite Arizona exemptions here. Remember, when you file Chapter 7 bankruptcy, you can exempt certain assets from your bankruptcy estate and your creditors. Arizona statutes allow for protection of insurance proceeds where the policy has been held for two years and has named as the beneficiary a spouse, child, parent brother, sister, or any other dependent family member (A.R.S. Section 33-1126).
Last year, two trustees in Tucson challenged the exemption of benefits where adult children were named as the debtors' beneficiaries. The trustees contended that the beneficiary must be a dependent child in order to exempt the proceeds from the bankruptcy estate. Unfortunately, a bankruptcy appellate panel agreed with them. If you read the opinion a lot of the decision comes down to sentence construction and what the phrase "any other" is modifying. I know its crazy to think that a legal issue might be decided based upon sentence structure, but, in the absence of other court decisions, it can often happen that way.
So, what do the players in The Game of Life Insurance do? It's hard to say. The decision is supposedly on appeal, so it is not hard and fast law. Which means, you may get a trustee who does not view the proceeds in the same way and will not pursue them. Whatever the case, it is important that, as a debtor, you mention the existence of life insurance policies to your bankruptcy lawyer. Especially if you have whole life insurance policies (which carry cash surrender value) and have adult children as your beneficiaries. In this case, you may want to cash out the policies prior to filing and live off the proceeds. Of course, you also want to be careful of being a bankruptcy hog (see pigs vs. hogs below).
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Friday, March 18, 2011
Pigs and Hogs in Bankruptcy
What do pigs and hogs have to do with consumer bankruptcy? They can be potentially liquid "assets" in a Chapter 7, but in this instance they are acting as a symbols for Chapter 7 debtors. Because Chapter 7 is a liquidation bankruptcy, protecting assets becomes very important. That is where the pigs (those Debtors that want to intelligently, but reasonably protect assets) and the hogs (those that greedily hoard their assets from the trustees) come in.
Recently, there has been concern that Debtors are being more hog-like than pig-like and that they are being assisted by their attorneys in doing so. Usually, bankruptcy attorneys refer to the strategic protection of assets as pre-bankruptcy planning. At times this means your attorney will identify what assets are non-exempt (for example, stocks in Arizona) and suggest that cash out your stock and use it to live off of or for other necessary expenditures. A necessary expenditure may even be the purchase of an exempt vehicle or other exempt item that you need. The question becomes is pre-bankruptcy planning just good strategy or is it being so greedy that the act becomes fraudulent?
In 2002, the Arizona bankruptcy court heard a case concerning questionable pre-bankruptcy planning. This case is still considered good law despite having occurred before the bankruptcy law changes in 2005. In In re Crater, 286 B.R. 756, , Judge Haines determined exemption,or pre-bankruptcy, planning, alone, is not enough to show that a Debtor may have intended to "hinder, delay, or defraud" his/her creditors. In this case, the Debtors cashed out $40,000.00 of stock and used the funds to pay toward there second mortgage, which increased the equity in their home, but not beyond the allowable homestead exemption. This was done just months before their bankruptcy was filed. Judge Haines stated that there must be something in addition to the timing of an act to demonstrate an improper purpose. For example, concealment of the act on the bankruptcy paperwork (i.e. not disclosing the sale of stock as a transfer), transfer of property to a friend or family member, or providing an explanation for the transfer that demonstrates lack of honesty or credibility.
For those of you thinking about filing Chapter 7, I think this opinion is very significant. While, Judge Haines determined that the converting of a non-exempt asset to an exempt asset is not, on its face, fraudulent, he did not say that this will always be the case. A frequent occurrence for bankruptcy attorneys is that we get a client in our office for an initial consultation who has all the "what ifs" down. "What if I take all of the money out of my bank account and hide it under the mattress?" or "What if I take this asset and move it here or put that asset there?" My response is, "why would you be a hog when you only need to be a pig?" Pre-bankruptcy planning is important because we do not want our clients to lose everything, especially if there are options and ways to safely protect them. We have to advocate for our clients. But Chapter 7 debtors should be weary of getting too greedy and too creative. The issue in the Crater case was whether the Debtors should be denied their discharge. This is what Chapter 7 debtors want most of all, and we should be careful that the right to receive the bankruptcy discharge is not lost because of hog-like behavior.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Recently, there has been concern that Debtors are being more hog-like than pig-like and that they are being assisted by their attorneys in doing so. Usually, bankruptcy attorneys refer to the strategic protection of assets as pre-bankruptcy planning. At times this means your attorney will identify what assets are non-exempt (for example, stocks in Arizona) and suggest that cash out your stock and use it to live off of or for other necessary expenditures. A necessary expenditure may even be the purchase of an exempt vehicle or other exempt item that you need. The question becomes is pre-bankruptcy planning just good strategy or is it being so greedy that the act becomes fraudulent?
In 2002, the Arizona bankruptcy court heard a case concerning questionable pre-bankruptcy planning. This case is still considered good law despite having occurred before the bankruptcy law changes in 2005. In In re Crater, 286 B.R. 756, , Judge Haines determined exemption,or pre-bankruptcy, planning, alone, is not enough to show that a Debtor may have intended to "hinder, delay, or defraud" his/her creditors. In this case, the Debtors cashed out $40,000.00 of stock and used the funds to pay toward there second mortgage, which increased the equity in their home, but not beyond the allowable homestead exemption. This was done just months before their bankruptcy was filed. Judge Haines stated that there must be something in addition to the timing of an act to demonstrate an improper purpose. For example, concealment of the act on the bankruptcy paperwork (i.e. not disclosing the sale of stock as a transfer), transfer of property to a friend or family member, or providing an explanation for the transfer that demonstrates lack of honesty or credibility.
For those of you thinking about filing Chapter 7, I think this opinion is very significant. While, Judge Haines determined that the converting of a non-exempt asset to an exempt asset is not, on its face, fraudulent, he did not say that this will always be the case. A frequent occurrence for bankruptcy attorneys is that we get a client in our office for an initial consultation who has all the "what ifs" down. "What if I take all of the money out of my bank account and hide it under the mattress?" or "What if I take this asset and move it here or put that asset there?" My response is, "why would you be a hog when you only need to be a pig?" Pre-bankruptcy planning is important because we do not want our clients to lose everything, especially if there are options and ways to safely protect them. We have to advocate for our clients. But Chapter 7 debtors should be weary of getting too greedy and too creative. The issue in the Crater case was whether the Debtors should be denied their discharge. This is what Chapter 7 debtors want most of all, and we should be careful that the right to receive the bankruptcy discharge is not lost because of hog-like behavior.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Wednesday, March 9, 2011
Commissions and Chapter 7 Bankruptcy
As I have said before, "even the simple Chapter 7 bankruptcy can turn out to be not so simple." For example, you are a married couple wanting to file bankruptcy with a below median income, partly consisting of social security income. You have the normal assets: house, car, clothes, wedding rings, but no "toys" like boats or RVs. Should be easy, right? Should be, but things can get complicated quick. Let's say that you, the husband, are a real estate agent, and your income is derived from insurance contracts and commissions off of those contracts. And that right there is where things get ugly.
The issue in this "simple" bankruptcy is that when a Chapter 7 is filed, a bankruptcy estate is automatically created, which includes all of your legal and equitable interests in property 11 U.S.C Sec. 541(a)(1). This includes your rights under a contract created prior to filing bankruptcy and any contingent interests. So, if you're an insurance agent that has already existing contracts, your Chapter 7 trustee will be able to step right into your shoes and take over those contract rights, including the right to receive commissions.
So, what do you do? Are you out of luck? Not quite. However, a lot depends on what jurisdiction you have filed in and also the demeanor and mindset of the trustee assigned to your case. First, your lawyer should take a look at whether any of the commissions are due to your post-petition work and services rendered. This may be difficult if it is a renewal commission for which little effort is expended in getting clients to renew. Earnings from work started and completed post-filing are not property of the bankruptcy estate. Additionally, the Arizona bankruptcy court has determined that commissions are the same as other earnings and are also subject to the "75% of earned, but unpaid wage" exemption. This means that if you have completed work prior to filing bankruptcy, but will not get paid until after filing, you can protect up to 75% of those earnings. If you're the insurance agent in this example, you can attempt to protect 75% of the commissions earned from pre-filing work as your unpaid wage.
I think the lesson of this story is that bankruptcy can be a complicated area of law with many unforeseen issues and surprises. Because of that, anyone who is considering filing on their own should maybe think again or, at the very least, consult with an experienced attorney to determine if the case is more complex than it looks.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
The issue in this "simple" bankruptcy is that when a Chapter 7 is filed, a bankruptcy estate is automatically created, which includes all of your legal and equitable interests in property 11 U.S.C Sec. 541(a)(1). This includes your rights under a contract created prior to filing bankruptcy and any contingent interests. So, if you're an insurance agent that has already existing contracts, your Chapter 7 trustee will be able to step right into your shoes and take over those contract rights, including the right to receive commissions.
So, what do you do? Are you out of luck? Not quite. However, a lot depends on what jurisdiction you have filed in and also the demeanor and mindset of the trustee assigned to your case. First, your lawyer should take a look at whether any of the commissions are due to your post-petition work and services rendered. This may be difficult if it is a renewal commission for which little effort is expended in getting clients to renew. Earnings from work started and completed post-filing are not property of the bankruptcy estate. Additionally, the Arizona bankruptcy court has determined that commissions are the same as other earnings and are also subject to the "75% of earned, but unpaid wage" exemption. This means that if you have completed work prior to filing bankruptcy, but will not get paid until after filing, you can protect up to 75% of those earnings. If you're the insurance agent in this example, you can attempt to protect 75% of the commissions earned from pre-filing work as your unpaid wage.
I think the lesson of this story is that bankruptcy can be a complicated area of law with many unforeseen issues and surprises. Because of that, anyone who is considering filing on their own should maybe think again or, at the very least, consult with an experienced attorney to determine if the case is more complex than it looks.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Wednesday, February 23, 2011
The Power of Thank You
Ok, so I am diverting from strictly bankruptcy topics once again, but I try to mix it up a little. Keep it interesting. This morning our law firm, Perez Law Group, made another trip to St. Vincent de Paul to volunteer and serve breakfast.
I'm not going to lie to any of you. We have to get up early to do this, and that is never easy for a non-morning person like myself to do. The first ten minutes are pretty difficult. I am basically a robot. I wish desperately that I had my Starbucks or that I was back in my cozy bed. But, once that initial drowsy feeling is shaken, the rewards of the experience take over, and I am grateful that I'm there.
Today I got to hand out the trays to each person in the breakfast line. This time there were over 300 people in Phoenix in need of the service provided by St. Vincent's. Those numbers a pretty staggering, and the people in the line are varied. There are the truly homeless and there are those that look like they have just fallen on to some hard times. What they all have in common, however, is appreciation for what is being given to them. I cannot count how many times my tray offering was met with a polite smile and warm "thank you." Those two words, "thank you," really got to me this morning. It made me realize that even the smallest act, such as handing out a breakfast tray, can mean something to someone. It brought a smile to my face.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
I'm not going to lie to any of you. We have to get up early to do this, and that is never easy for a non-morning person like myself to do. The first ten minutes are pretty difficult. I am basically a robot. I wish desperately that I had my Starbucks or that I was back in my cozy bed. But, once that initial drowsy feeling is shaken, the rewards of the experience take over, and I am grateful that I'm there.
Today I got to hand out the trays to each person in the breakfast line. This time there were over 300 people in Phoenix in need of the service provided by St. Vincent's. Those numbers a pretty staggering, and the people in the line are varied. There are the truly homeless and there are those that look like they have just fallen on to some hard times. What they all have in common, however, is appreciation for what is being given to them. I cannot count how many times my tray offering was met with a polite smile and warm "thank you." Those two words, "thank you," really got to me this morning. It made me realize that even the smallest act, such as handing out a breakfast tray, can mean something to someone. It brought a smile to my face.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Wednesday, February 16, 2011
The Rules of Purchasing a New Vehicle Prior to Filing Chapter 7 Bankruptcy
Many times we have clients that own an older car with lots of miles or one that is not cost-effective, and they wish to purchase a replacement vehicle. If they are the kind of clients that we as bankruptcy attorneys love, they will call us before they purchase this vehicle and ask if it is ok for them to do so. Our initial reaction has always been "of course, go for it as long as you don't exceed your bankruptcy exemption amount of $5,000 equity per vehicle." Recently, I read a judicial opinion that has made me change my tune a little.
There is a 2009 Chapter 7 case out of Tucson in which a Debtor purchased a vehicle prior to filing his bankruptcy. He could not finance the entire amount of the vehicle himself, so he asked an acquaintance to finance part and record a lien on the vehicle in her name. The dealership offered to record the lien and sent it to a title agency after her check cleared. That title agency did not submit the title application until 33 days after the purchase of the vehicle. One day after that, the Debtor's Chapter 7 bankruptcy was filed.
Ok, so what's the problem? Well, Arizona law says that to validly create and enforce a lien on a vehicle, the lien must be recorded within 30 days of purchase of the vehicle. Additionally, bankruptcy law states that a Chapter 7 trustee can avoid certain preferential transfers (in this case a transfer of the interest in the vehicle) made 90 days before the filing of the bankruptcy petition. The exception is the transfer of a security interest, if perfected, or secured, on or before 30 days after purchase of the collateral. So, if the lien on your brand new vehicle has not been properly or timely recorded, the trustee can avoid the "lien" and declare your vehicle owned free and clear. Once it is free and clear, the trustee can auction any vehicle that is worth more than the bankruptcy exemption amount. You can bet that if you just purchased a vehicle, it is going to be worth more than $5,000 or $10,000 without a lien. If you are in this situation, you can bet that your Chapter 7 trustee's ears will perk up when he or she finds out your purchased a vehicle within 90 of filing your bankruptcy, and then he or she will happily investigate the recording of the title.
So, what was the outcome of this case and what does it mean for all of our clients who are thinking about buying a vehicle before filing bankruptcy? The docket report in this case shows that the Debtor and trustee ended up settling the issue, so neither clearly won the argument. In my opinion the trustee settled because the lienholder's (the generous friend's) attorney discovered a technicality, in this particular case, that may have barred the trustee from taking the vehicle. It is not something that would exist in every case, and I have seen more and more Chapter 7 trustees asking Debtors if they have purchased a vehicle in 30-90 days before their case was filed. Therefore, I would caution all potential bankruptcy Debtors to wait to file their bankruptcy until 90 days have passed from the financing of a vehicle, or at least wait 30 days from purchase of a new vehicle (for the lender who waits until the 30th day to record a lien), and to follow-up with the DMV and make sure the lien has been recorded. As always, please be the client we love and notify your attorney of your intent to purchase a vehicle close to the filing of a bankruptcy.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
There is a 2009 Chapter 7 case out of Tucson in which a Debtor purchased a vehicle prior to filing his bankruptcy. He could not finance the entire amount of the vehicle himself, so he asked an acquaintance to finance part and record a lien on the vehicle in her name. The dealership offered to record the lien and sent it to a title agency after her check cleared. That title agency did not submit the title application until 33 days after the purchase of the vehicle. One day after that, the Debtor's Chapter 7 bankruptcy was filed.
Ok, so what's the problem? Well, Arizona law says that to validly create and enforce a lien on a vehicle, the lien must be recorded within 30 days of purchase of the vehicle. Additionally, bankruptcy law states that a Chapter 7 trustee can avoid certain preferential transfers (in this case a transfer of the interest in the vehicle) made 90 days before the filing of the bankruptcy petition. The exception is the transfer of a security interest, if perfected, or secured, on or before 30 days after purchase of the collateral. So, if the lien on your brand new vehicle has not been properly or timely recorded, the trustee can avoid the "lien" and declare your vehicle owned free and clear. Once it is free and clear, the trustee can auction any vehicle that is worth more than the bankruptcy exemption amount. You can bet that if you just purchased a vehicle, it is going to be worth more than $5,000 or $10,000 without a lien. If you are in this situation, you can bet that your Chapter 7 trustee's ears will perk up when he or she finds out your purchased a vehicle within 90 of filing your bankruptcy, and then he or she will happily investigate the recording of the title.
So, what was the outcome of this case and what does it mean for all of our clients who are thinking about buying a vehicle before filing bankruptcy? The docket report in this case shows that the Debtor and trustee ended up settling the issue, so neither clearly won the argument. In my opinion the trustee settled because the lienholder's (the generous friend's) attorney discovered a technicality, in this particular case, that may have barred the trustee from taking the vehicle. It is not something that would exist in every case, and I have seen more and more Chapter 7 trustees asking Debtors if they have purchased a vehicle in 30-90 days before their case was filed. Therefore, I would caution all potential bankruptcy Debtors to wait to file their bankruptcy until 90 days have passed from the financing of a vehicle, or at least wait 30 days from purchase of a new vehicle (for the lender who waits until the 30th day to record a lien), and to follow-up with the DMV and make sure the lien has been recorded. As always, please be the client we love and notify your attorney of your intent to purchase a vehicle close to the filing of a bankruptcy.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Friday, February 4, 2011
The Bittersweet Side of Bankruptcy - Your Tax Refund
Tax time is quickly approaching, and a lot of you are probably on the ball and getting your returns prepared. It is highly possible that because of mortgage interest paid, child deductions, or owning energy efficient appliances, your tax preparer has given you the wonderful news that you are getting a sizable tax refund this year! Think of all the things that you can spend that refund on...
But, slow down just one second. If you have decided to also file for bankruptcy, getting that refund is a bittersweet gift, as it will most likely become part of your bankruptcy estate when you file. In a Chapter 7 bankruptcy, you have a trustee assigned to your case. It is the job of the case trustee to review all of your assets and determine if there is anything available for liquidation and distribution to your creditors. Now, the trustee is limited in what he/she can liquidate. The only available assets are those that are non-exempt assets, as determined by your state's exemption laws. In Arizona, a liquidated debt owed to you, like an outstanding tax refund, is non-exempt property (Arizona exemptions are found in the Arizona revised statutes). If it has not been paid out by the time you file bankruptcy, the mean bankruptcy trustee will snatch that big check right up and pay your debts with it. This applies to all refunds from the years prior to your bankruptcy filing and the year of your filing, not for the years after. So, if you are in a rush to file bankruptcy your refund blessing can quickly become a burden.
However, there is some light at the end of the tunnel. If you are able to wait to file bankruptcy, so that you can receive your refund and spend it, that check is yours. In this case, though, you will have to be careful of how you spend your check. No boat, flat screen, or Rolex purchases please. Necessity items only. Now, a necessity can be clothing, home repairs, even a vehicle (if you are without one and desperately need transportation). It can even be mortgage payments if you are behind or want to pay a month in advance to give yourself a cushion. Whatever you do with the check, you will also need to keep receipts and an accounting of where the money went. Because you can bet that if you spend what could have been his/hers, your case trustee will want you to account for every penny of that refund.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
But, slow down just one second. If you have decided to also file for bankruptcy, getting that refund is a bittersweet gift, as it will most likely become part of your bankruptcy estate when you file. In a Chapter 7 bankruptcy, you have a trustee assigned to your case. It is the job of the case trustee to review all of your assets and determine if there is anything available for liquidation and distribution to your creditors. Now, the trustee is limited in what he/she can liquidate. The only available assets are those that are non-exempt assets, as determined by your state's exemption laws. In Arizona, a liquidated debt owed to you, like an outstanding tax refund, is non-exempt property (Arizona exemptions are found in the Arizona revised statutes). If it has not been paid out by the time you file bankruptcy, the mean bankruptcy trustee will snatch that big check right up and pay your debts with it. This applies to all refunds from the years prior to your bankruptcy filing and the year of your filing, not for the years after. So, if you are in a rush to file bankruptcy your refund blessing can quickly become a burden.
However, there is some light at the end of the tunnel. If you are able to wait to file bankruptcy, so that you can receive your refund and spend it, that check is yours. In this case, though, you will have to be careful of how you spend your check. No boat, flat screen, or Rolex purchases please. Necessity items only. Now, a necessity can be clothing, home repairs, even a vehicle (if you are without one and desperately need transportation). It can even be mortgage payments if you are behind or want to pay a month in advance to give yourself a cushion. Whatever you do with the check, you will also need to keep receipts and an accounting of where the money went. Because you can bet that if you spend what could have been his/hers, your case trustee will want you to account for every penny of that refund.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Tuesday, February 1, 2011
Breakfast and Karaoke
What do breakfast and karaoke have to do with another? More importantly, what do they have to do with bankruptcy? Usually, not too much. But on this Tuesday morning they had everything to do with one another as this bankruptcy law firm (+ one immigration lawyer) volunteered to serve breakfast at St. Vincent de Paul.
After waking up bright and early, we arrived at the St. Vincent de Paul site on 7th Ave. and Jackson. We were immediately put to work prepping food and setting up for the breakfast serving. We knew we were in for a challenge when the full time volunteers mentioned (more than once) that they wished that more volunteers had showed up and that we needed to move fast to keep the line moving. At about 7:00am people started to arrive and line up for the meal. We were taken aback by the numbers, but happy that we could be of service to so many people. The staff requested that three of the people who came for food volunteer to assist us, and three of them kindly offered to help us. We moved to preparing all the trays so they could be handed out to each person. We were paired with a man named Bobby who both entertained us and touched our hearts. He came all the way here from Alabama, and by a series of circumstances has ended up living in a group home. He uses the computer at his home to search for jobs, but has had no luck. And, after hearing our mention of karaoke for my upcoming birthday celebration, he began to entertain us with his own singing. By the way, he's a fan of blues and southern rock.
By 8:30, they were closing off the line, and we had served over 400 people, heard some karaoke, and made a new friend. The experience reinforced for us that even the smallest thing, like donating your time, can really make a difference for someone else and will show you what's truly important in life. We plan on making this a monthly event for our office and can't wait to do it again. I strongly encourage everyone to contact St. Vincent de Paul and find out how else to get involved: http://www.stvincentdepaul.net/volunteer.htm
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
After waking up bright and early, we arrived at the St. Vincent de Paul site on 7th Ave. and Jackson. We were immediately put to work prepping food and setting up for the breakfast serving. We knew we were in for a challenge when the full time volunteers mentioned (more than once) that they wished that more volunteers had showed up and that we needed to move fast to keep the line moving. At about 7:00am people started to arrive and line up for the meal. We were taken aback by the numbers, but happy that we could be of service to so many people. The staff requested that three of the people who came for food volunteer to assist us, and three of them kindly offered to help us. We moved to preparing all the trays so they could be handed out to each person. We were paired with a man named Bobby who both entertained us and touched our hearts. He came all the way here from Alabama, and by a series of circumstances has ended up living in a group home. He uses the computer at his home to search for jobs, but has had no luck. And, after hearing our mention of karaoke for my upcoming birthday celebration, he began to entertain us with his own singing. By the way, he's a fan of blues and southern rock.
By 8:30, they were closing off the line, and we had served over 400 people, heard some karaoke, and made a new friend. The experience reinforced for us that even the smallest thing, like donating your time, can really make a difference for someone else and will show you what's truly important in life. We plan on making this a monthly event for our office and can't wait to do it again. I strongly encourage everyone to contact St. Vincent de Paul and find out how else to get involved: http://www.stvincentdepaul.net/volunteer.htm
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Monday, January 31, 2011
The Big Bad Credit Union and Why You Should Avoid Them
If there is one thing I could suggest to any potential bankruptcy client, or anyone for that matter, it is to avoid credit unions at all costs. Well, at the very least, avoid getting an auto loan and a credit card with your local credit union. This is because most credit unions (and some other financial institutions) cross collateralize their loans.
If you take a look at your account numbers one will be XXXX-XXXX-01 and the other will be XXXX-XXXX-02. That "-01" and "-02" signifies that those are actually two parts of one account. If you fall behind on the credit card part of that account, the credit union has the right to call in the entire account, including your vehicle loan. This means that even if you have made every single one of your car payments, but can't keep up on your credit card, the credit union can repossess your vehicle to satisfy the account.
It also means that I am in a tough spot when you come to me to file Chapter 7 bankruptcy and want to include your credit union credit card but keep your vehicle. If this is the case, the credit union will say that you either have to pay all accounts or surrender the vehicle. I know it's unfair. That's why I am warning you now. We have a few options in bankruptcy, but none of them are full-proof:
1. Option 1 is to redeem the vehicle at its current market value. Essentially getting a new loan for the current market value of your vehicle and paying off all of the cross-collateralized loans. However, the credit union has to agree on the current market value. There are companies that will assist in redemption.
2. Option 2 is to settle with the credit union on all loans and get the lien released on the vehicle. Kind of like redemption, but without getting another loan.
3. Option 3 is to pay off the credit card debt before you file. I am not sure that this is really advantageous because you still have to pay on the vehicle, but at least it avoids repossession.
4. Option 4 is to avoid Chapter 7 all together and file Chapter 13 to pay-off the total amount of the loans over a 3 to 5 year period.
5. Option 5 is to avoid the headache by just surrendering the vehicle and purchasing something newer and better.
I hope that this article will reach many of you in time so that you can choose Option 6 - do not get multiple loans with your credit union! Whatever you decide to do, please remember to mention if you have loans with a credit union when you see a bankruptcy attorney for a consultation. It will save them future headaches as well.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
If you take a look at your account numbers one will be XXXX-XXXX-01 and the other will be XXXX-XXXX-02. That "-01" and "-02" signifies that those are actually two parts of one account. If you fall behind on the credit card part of that account, the credit union has the right to call in the entire account, including your vehicle loan. This means that even if you have made every single one of your car payments, but can't keep up on your credit card, the credit union can repossess your vehicle to satisfy the account.
It also means that I am in a tough spot when you come to me to file Chapter 7 bankruptcy and want to include your credit union credit card but keep your vehicle. If this is the case, the credit union will say that you either have to pay all accounts or surrender the vehicle. I know it's unfair. That's why I am warning you now. We have a few options in bankruptcy, but none of them are full-proof:
1. Option 1 is to redeem the vehicle at its current market value. Essentially getting a new loan for the current market value of your vehicle and paying off all of the cross-collateralized loans. However, the credit union has to agree on the current market value. There are companies that will assist in redemption.
2. Option 2 is to settle with the credit union on all loans and get the lien released on the vehicle. Kind of like redemption, but without getting another loan.
3. Option 3 is to pay off the credit card debt before you file. I am not sure that this is really advantageous because you still have to pay on the vehicle, but at least it avoids repossession.
4. Option 4 is to avoid Chapter 7 all together and file Chapter 13 to pay-off the total amount of the loans over a 3 to 5 year period.
5. Option 5 is to avoid the headache by just surrendering the vehicle and purchasing something newer and better.
I hope that this article will reach many of you in time so that you can choose Option 6 - do not get multiple loans with your credit union! Whatever you decide to do, please remember to mention if you have loans with a credit union when you see a bankruptcy attorney for a consultation. It will save them future headaches as well.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Monday, January 24, 2011
To Trial We Go
Well ... to the Aiken Schenk mock trial competition we go. This Saturday my colleague, Cristina Perez, and I had the opportunity to judge a national mock trial competition for teams from several universities. I think we can both say that the experience was both interesting and rewarding.
Although, it diverted us from our usual bankruptcy practice, I believe the process of judging this competition will make us better lawyers. The case we presided over was a products liability case involving a fictitious toy and the death of a child. In bankruptcy, we have few opportunities to actually get inside a courtroom and litigate, and even when we do get the chance, it is a very different experience from litigating in state court. Jury trials are rare in bankruptcy. Most of the litigating is done at a podium before a bankruptcy judge. So, Saturday was a refreshing change of pace for us and a great opportunity to reconnect with all those civil and evidentiary concepts we may have forgotten since law school. Both Cristina and I felt our interest in other areas of law reignited, and we both made it a priority to go to more continuing legal education classes that focus on areas of law besides bankruptcy.
I would also like to give a virtual round of applause to the wonderful students we saw and judged. Our team was from Arizona State University and were very impressive. They were all knowledgeable, composed, and articulate. I think we saw some great future lawyers in this group.
Now it's back to bankruptcy we go...
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Although, it diverted us from our usual bankruptcy practice, I believe the process of judging this competition will make us better lawyers. The case we presided over was a products liability case involving a fictitious toy and the death of a child. In bankruptcy, we have few opportunities to actually get inside a courtroom and litigate, and even when we do get the chance, it is a very different experience from litigating in state court. Jury trials are rare in bankruptcy. Most of the litigating is done at a podium before a bankruptcy judge. So, Saturday was a refreshing change of pace for us and a great opportunity to reconnect with all those civil and evidentiary concepts we may have forgotten since law school. Both Cristina and I felt our interest in other areas of law reignited, and we both made it a priority to go to more continuing legal education classes that focus on areas of law besides bankruptcy.
I would also like to give a virtual round of applause to the wonderful students we saw and judged. Our team was from Arizona State University and were very impressive. They were all knowledgeable, composed, and articulate. I think we saw some great future lawyers in this group.
Now it's back to bankruptcy we go...
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Thursday, January 20, 2011
I have to pay HOW MUCH to my creditors if I file Chapter 13 bankruptcy?
When our clients are faced with filing a Chapter 13 bankruptcy, their first concern, inevitably, is that magic number that represents what they will have to pay each month to the bankruptcy court as repayment of their debts. Chapter 13 is kindly referred to as the "wage earner's" bankruptcy. This means people who have higher incomes, but still need bankruptcy assistance, will generally have to file under Chapter 13 and make a repayment of their consolidated debts. While Chapter 13 can be a useful tool for many bankruptcy filers, it often strikes fear in our clients' hearts as it creates a monthly payment, which many people are afraid they will not be able to maintain.
Well, the Supreme Court of the United States has just given us a tool to lessen this fear and has made filing Chapter 13 a bit easier. In March of last year, the Supreme Court heard and ruled on a case titled, Hamilton v. Laning. This case determined that a Chapter 13 monthly payment should be based on the income and expenses a debtor is reasonably expected to have in the future. Before this decision, the bankruptcy court, in some states, would base the monthly payment on the average of income received within the six months prior to the bankruptcy filing. To top it off, the Court would then require expense deductions based on standards and not actual payments made by the debtors. So, if you filed bankruptcy in February after you received a permanent reduction in overtime, the court was able to look at your income for August - January and use that to determine your disposable income and monthly payment. Now, that is scary!
Obviously, this standard approach to calculating a monthly payment for debtors who have had an unexpected or non-reoccurring change in income can lead to unrealistic results. But now we have the ultimate legal authority telling us that we have the go ahead to take into consideration our clients' change in circumstances going forward and to develop a realistic and manageable Chapter 13 payment.
What does all of this mean for our clients? It means that Chapter 13 isn't as scary as it once was. Clients don't have to fear payments that are too high and do not have to avoid a Chapter 13 bankruptcy and all of the benefits it has to offer.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
Well, the Supreme Court of the United States has just given us a tool to lessen this fear and has made filing Chapter 13 a bit easier. In March of last year, the Supreme Court heard and ruled on a case titled, Hamilton v. Laning. This case determined that a Chapter 13 monthly payment should be based on the income and expenses a debtor is reasonably expected to have in the future. Before this decision, the bankruptcy court, in some states, would base the monthly payment on the average of income received within the six months prior to the bankruptcy filing. To top it off, the Court would then require expense deductions based on standards and not actual payments made by the debtors. So, if you filed bankruptcy in February after you received a permanent reduction in overtime, the court was able to look at your income for August - January and use that to determine your disposable income and monthly payment. Now, that is scary!
Obviously, this standard approach to calculating a monthly payment for debtors who have had an unexpected or non-reoccurring change in income can lead to unrealistic results. But now we have the ultimate legal authority telling us that we have the go ahead to take into consideration our clients' change in circumstances going forward and to develop a realistic and manageable Chapter 13 payment.
What does all of this mean for our clients? It means that Chapter 13 isn't as scary as it once was. Clients don't have to fear payments that are too high and do not have to avoid a Chapter 13 bankruptcy and all of the benefits it has to offer.
This blog is for informational purposes only and is not to be construed as legal advice.
More information about Perez Law Group can be found on our website, www.perezlawgroup.com.
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