Recently I met with a client who was looking into filing bankruptcy because of credit card and medical debt. Among his creditors, however, was an individual, an insurance company and fines due a local county. When I asked about this, he explained that about a year ago, he was involved in an auto accident that was his fault. He further explained that the individual sued him and that damages awarded were more than his insurance coverage, and that he also had fines because the accident occurred when he was under the influence.
He was unhappy to learn that Section 523(a)(9) of the Bankruptcy Code specifically excepts from discharge debts arising from the "death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance."
I read this Code section to mean that my client cannot discharge:
- any damage award due to the accident victim
- restitution ordered by the local county court
- fines imposed by the local county court
What about property damage arising from this drunk driving accident. I read the Code section to limit non-dischargeability to personal injury so I do not think that property damages would be excepted here.
Washington D.C. bankruptcy lawyer Morgan Fisher wrote a post about DUI damages and bankruptcy dischargeability last year. He notes that an insurance company seeking subrogation damages (recovery of car repair payments from the negligent driver by an insurance company) could argue against dischargeability under other provisions of Section 523. I believe that Morgan is referring to Bankruptcy Code Section 523(a)(6) which excepts from discharge debts arising from the "willful and malicious injury by the debtor to another entity or to the property of another entity."More on Debts Arising from Impaired Driving are Not Dischargeable
Filed under Chapter 7 issues, Creditor discharge actions by 
It is commonly known that filing for bankruptcy can be a very trying and emotional time for those filing. But it is less common to hear about how a bankruptcy can impact the children of bankruptcy filers. If you have children or dependents and are considering bankruptcy, it is important that you understand the potential consequences bankruptcy can have on your children.
1) Unfortunately, if a debtor contributes money towards a child's college tuition or to a college fund, filing for
bankruptcy could potentially prevent these contributions from occurring. When you file for bankruptcy, the court and creditors will attempt to limit the amount of your expenses and may prioritize their collection accounts above your child’s education. While bankruptcy courts will allow necessary expenses such as housing, utilities, and food, your child’s education may not be viewed as essential. If you find yourself in this situation, I strongly recommend that you consult with a bankruptcy lawyer to understand more about how your child’s education may be affected when filing for bankruptcy.
2) When you file for bankruptcy, the line can get blurred between your assets and your child's assets. For example, say you opened a bank account for your child but failed to take the adequate steps to set it up correctly to be protected from something like a bankruptcy. When it comes time to file bankruptcy, you may run the risk of the money in that account being considered your money and not your child’s. This type of problem can occur if the account is under just your name (and not your child’s) or if you have ever used it to pay your own bills. Your children’s assets can be better protected from bankruptcy if the accounts are opened under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). If your child’s assets are at risk of being affected by bankruptcy, I again recommend consulting a bankruptcy lawyer to help find the best means of fixing this problem.
3) Children are protected from bankruptcy whether or not an in-debt parent is behind on child support payments. Child support obligations are a top priority and are ineligible for bankruptcy debt discharge. If you file for Chapter 7 bankruptcy, child support payments become a top priority when assets are being liquidated. If you file for Chapter 13 bankruptcy, child support payments will be arranged in the repayment plan. In either case, the hope is that ex-spouses find it easier to pay child support since the bankruptcy may be able to lessen many of their other debt burdens.
Filed under General consumer bankruptcy info by
As you probably know, there are two types of consumer bankruptcy cases available to you – a Chapter 7 which wipes out debt, and a Chapter 13 which creates a five year payment plan in which you pay back some or all of your debt with your "disposable income." When I prepare a Chapter 13 case, we work with you to create a liveable budget. The money "left over" after you pay for housing, food, transportation, insurance, utilities and other necessities must be sent to the Chapter 13 trustee, who then disburses these funds to your creditors based on a plan of reorganization that we submit to the court.
What happens if you need to file a Chapter 13, you have not yet filed your tax return for last year, but you know that a refund will be coming your way. The simple answer is that unless you are paying back your creditors at 100%, your Chapter 13 will demand that you turn over your tax refund check, and will use that money to pay your creditors. If you know that a refund is headed your way, make sure to tell your lawyer before you file – there are some steps you can take to preserve some or all of your tax refund money.
Your Chapter 13 trustee will also want future refunds paid to the trustee. This situation is easier to handle – you will want to adjust your payroll withholdings so that you do not have any refund coming. As far as the Chapter 13 trustee is concerned, your tax refund is kind of like a savings account that artificially reduces your net pay amount.
All of the Chapter 13 trustees in the Northern District of Georgia require debtors who are paying less than 100% to creditors to include in their Chapter 13 plans a provision that authorizes the IRS to intercept any refund payable during the years that your plan is in effect and send this money to the Chapter 13 trustee. And until now, the IRS has cooperated with the Chapter 13 trustees in redirecting refund money.More on IRS May Soon be Out of the Business of Seizing Income Tax Refunds for Benefit of Chapter 13 Trustee
Filed under Chapter 13 issues, Chapter 13 plan calculations, Tax issues by
My office colleague, Susan Blum is in the process of filing a Chapter 7 bankruptcy for a young woman. Our client currently lives in a rented apartment, and her lease runs through July of this year. Our client would like to find a cheaper place to live, however, she is concerned that she may not be eligible to sign a new lease after filing for bankruptcy. Our client asked for our advice about what to do.
First, we advised out client that her bankruptcy filing would not prevent her from finding a new apartment later this year and signing a lease. However, the the months immediately following a bankruptcy are a time when a debtor's credit is most damaged – it is very possible that our client would have a difficult time finding a landlord who would lease her an apartment right after the bankruptcy.
A better option in cases like this would be for our client to to sign a new lease prior to filing bankruptcy and reject the current lease in the bankruptcy filing.
Under the bankruptcy law a lease is considered an "executory contract," meaning that our client still has on-going obligations to perform under the contract. In this case, our client has the contractual obligation to pay her lease. Other examples of executory contracts are vehicle leases, health club memberships and cell phone contracts.
The bankruptcy law allows a debtor to "reject" or "assume" an executory contract. If the contract is assumed, the debtor remains obligated under the terms of the contract. If the contract is rejected, the debtor's obligations terminated.
In our client's case if she rejects her old apartment lease, the law deems the lease contract as breached as of the day before the bankruptcy filing. The landlord is entitled to repossess the apartment in accordance with state law. Any damages that the landlord might suffer are treated as pre-petition general unsecured claims. Per the Bankruptcy Code, the rejection damages that the landlord is entitled to are limited to either 15 percent of the balance of the rent that is left in the lease or the rent due for one year from the filing date or the date the apartment was surrendered, whichever is earlier. Fortunately the debtor can include any outstanding rent in her petition and wipe out the debt along with other unsecured debt.
Susan's client took our advice and has already signed a new lease on an apartment and she will be rejecting her current lease in the Chapter 7, including all future rent and penalties incurred for not fulfilling the lease’s terms.
Filed under Executory contracts by
There are many reasons that bankruptcy filing rates are so high. Clearly an unexpected job loss or reduction in earnings can lead many honest, hardworking people into a bankruptcy lawyer's office. When a job loss is coupled with a divorce, I think that the likelihood of bankruptcy by husband or wife goes up exponentially.
I recently read a column written by attorney John Mayoue, a divorce lawyer here in Atlanta who is known for his representation of celebrities and other high profile clients. John notes that in the domestic relations legal community, Atlanta is known as the "divorce belt." In the bankruptcy lawyer community, Atlanta is known for having one of the highest bankruptcy filing rates per capita. I do not think that this is a coincidence.
Just as an ethical bankruptcy lawyer will advise you to search for alternatives to Chapter 7 or Chapter 13, a thoughtful family law attorney will advise you to search for alternatives to divorce. Bankruptcy or divorce may be inevitable, but when you seek legal counsel, look for a lawyer who does not offer "one size fits all" solutions and recommends alternatives – this would be a good sign that you are talking with a lawyer who has your best interests at heart.
John was gracious enough to give me permission to reprint his thoughtful article about why couples struggling in their marriages ought to consider alternatives to divorce. I recommend that you take his message to heart.
Divorce Lawyer John Mayoue Offers Advice to Couples Contemplating Divorce
The divorce rates in the United States are some of the highest in the world. Increased financial pressure brought on by the current economy is fueling the fire for marriages already in jeopardy, and the rapidly increasing number of homeforeclosures further demonstrates the severe consequences these pressures can produce.
According to Atlanta, Georgia based divorce attorney John C. Mayoue, who has been counseling couples through divorce cases for more than thirty years, the approaching holiday season will cause these numbers to spike further and will also be a busy time for lawyers specializing in divorce cases, as the holiday season often proves to be a breaking point for marriages in crisis.
“During the holidays, people’s pent-up thoughts about relationships and careers and where they are with life become intensified,” Mayoue says. “In December, for example, we have the highest number of suicides, divorce filings and bankruptcies of any month. It's just a very difficult time for people.”
Although our society makes divorce seem to be an easy and acceptable way out for couples who aren’t quite happy in their situation, Mayoue cautions couples not to be too hasty to start the divorce process. Divorces that make it to trial are painful and embarrassing, and the results are often not fair for both parties involved. If you are considering divorce, Mayoue suggest taking the following steps first.
1. Try to work out your differences
Ask yourself why you want a divorce. Are you just responding to life’s pressures? Are you looking for a way out of a stressful situation and not just your marriage? Or do you have legitimate concerns that are truly irreconcilable?More on Divorce and Bankruptcy – an Unhealthy Relationship
Filed under Bankruptcy budgets, Divorce and bankruptcy issues by
Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed Kenny Golde, a self employed filmmaker who found himself almost a quarter of a million dollars in debt when when a business deal fell victim to the economic downturn. Using negotiation techniques he developed (and has subsequently written about in a book), Kenny has managed to eliminate more than half of this debt through negotiation. Here is part six of our conversation – it lasts about 4 minutes. This is the last segment of this interview – parts 1 through 5 may be found in the five posts immediately preceding this one. In this segment, Kenny and I talk about the tax consequences of debt forgiveness and the insolvency rule that eliminates tax liability for most people.
Link to IRS Form 982 – used to declare forgiven debt as non-taxable
Link to Kenny Golde's book "The Do It Yourself Bailout."
Filed under Alternatives to bankruptcy, Debt negotiation by
Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed Kenny Golde, a self employed filmmaker who found himself almost a quarter of a million dollars in debt when when a business deal fell victim to the economic downturn. Using negotiation techniques he developed (and has subsequently written about in a book), Kenny has managed to eliminate more than half of this debt through negotiation. Here is part five of our conversation – it lasts about 7 minutes. In this segment, Kenny notes that most lenders will not consider negotiation with you until you are 90 days late. He also talks about credit scores – and why this number is less important than most people think. Part 6 – the final segment – will be posted tomorrow.
Link to Kenny Golde's book "The Do It Yourself Bailout."
Filed under Alternatives to bankruptcy, Debt negotiation by
Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed Kenny Golde, who found himself with $250,000 of credit card debt and no way to pay it all back. However, with tenacity and focus, Kenny has managed to eliminate more than half of this debt through negotiation. Here is part four of our conversation – it lasts about 8 minutes. We discuss the procedure for entering into a written settlement agreement with your creditor and the steps you must take to ensure that your settlement is honored by the creditor or collection agency. Part 5 will be posted tomorrow.
Link to Kenny Golde's book "The Do It Yourself Bailout."
Filed under Alternatives to bankruptcy, Debt negotiation by
Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation. Here is part three of my conversation – it lasts about 8 minutes. Kenny points out that there is nothing morally wrong with settling debt. He explains that the term "charged off debt" means nothing – it usually just means that the creditor has sold its debt to a debt buyer. He points out that many collection agencies buy debt for 5 to 10 cents on the dollar, which is why they would be willing to settle for 50 cents on the dollar or less. Finally Kenny notes that any debt settlement should be in writing and that you should never send any money without a written agreement. Part 4 will be posted tomorrow.
Link to Kenny Golde's book "The Do It Yourself Bailout."
Filed under Alternatives to bankruptcy, Debt negotiation by
Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation. Here is part two of my conversation – it lasts about 8 minutes. Kenny and I discuss the psychology of debt collection and the importance of seeing debt negotiation as a business transaction free of emotions or guilt. "You are the CEO of your own corporation," Kenny advises. Part 3 will be posted tomorrow.
Link to WalletPop article discussed by Kenny in this segment
Link to Kenny Golde's book "The Do It Yourself Bailout."
Filed under Alternatives to bankruptcy, Debt negotiation by
Jonathan Ginsberg
