Recently I have had problems with several of my Chapter 13 cases where the Chapter 13 trustee has objected to confirmation on the grounds that the debtor (my client) has one or more years of unfiled tax returns.
Because Chapter 13 cases must pay out in five years, unknown tax debt is a big problem. If your tax debt is unknown, it is impossible to create a repayment plan that pays out in five years since we don’t know exactly how much debt is involved in the case.
My client intake questionnaire specifically asks if there are any years where tax returns have not been filed. In each of these cases, my clients (three cases total) did not reveal any information about unfiled tax returns.,
If you have not filed tax returns, your Chapter 13 case can never be confirmed. Rather than misleading your lawyer, a better option is to acknowledge this issue and get working immediately on solving the problem. The IRS will provide you with W-2′s and 1099′s that you can use to prepare tax returns from previous years. IRS and Georgia DOR forms for previous years are widely available on the Interent and most tax preparers can prepare tax returns for previous years.
Technorati Tags: unfiled tax returns, tax returns and bankruptcy, tax returns and Chapter 13
Filed under Chapter 13 issues, Trustee objections in Chapter 13 by 
I received an interesting question from a divorce lawyer:
I just filed a divorce complaint for a client. Her husband is talking to a bankruptcy attorney about filing for bankruptcy. He probably will not fit into a Chapter 7. Is there any reason that my client should file jointly with him or hold off the divorce? Thanks.
Here is my response: Sometimes it does make sense for a divorcing couple to file a joint bankruptcy. If there is a lot of joint debt, a joint case can allow them to get rid of debt, surrender a house or motor vehicles, and cancel leases and other executory contracts.
In a Chapter 13, the divorcing couple would have to demonstrate that even with two households the proposed budget would allow for a trustee payment. Further, if one spouse or the other is keeping certain property, the Chapter 13 payment would have to be allocated and both parties agree to a division of the trustee payment obligation. As you might imagine keeping a joint 13 alive months or years after a divorce can be difficult.
I would also look at this case in terms of what might happen if the parties go ahead with the divorce and your client’s ex-spouse files his own bankruptcy. Would your client get stuck with joint credit card bills, a vehicle, tax debt?
In general I am not a big fan of a jointly filed case by divorcing spouses. However, I do think that it might be worthwhile for your client to consult with a bankruptcy lawyer to run through the different scenarios. You, as the wife’s lawyer, would benefit from knowing what might happen if the husband files his own case down the road so that you can include provisions in the divorce agreement that would protect her interests.
Technorati Tags: divorce and bankruptcy, joint bankruptcy filing by divorcing spouses
Filed under Divorce and bankruptcy issues by
First – I LOVE your blog – you have great info!! Little background. Discover card sued us for around $15,000 on cc debt, we disputed etc and after going back and for in court the attorney who BOUGHT the debt filed for summary judgment, we filed for a motion to reconsider. Judgment was granted on 8/13 and our motion to reconsider was heard on 9/4. The judge denied the motion to reconsider and at that time I informed him we signed papers and paid/hired an attorney to file bankruptcy.
They judge did not say anything about re-affirming the summary judgment he just said he denied our motion to reconsider and right after that I gave him the paperwork where we hired attorney and paid to start BK proceedings. We are pretty sure we are going to have to file chapter 13. My question is this – we received paperwork today – 9/13 that since the court entered judgment against us on 8/13 they were filing a judgment lien- it did not specify on what.
My question is can this be enforced or will the BK stay or stop the judgment/lien?
Jonathan Ginsberg’s response: First, thank you for the kind words about my blog. I can alreay tell that you are a perceptive and intelligent reader. 
You did not say where you live, so I’ll answer as if you were in Georgia, where I practice. If you live outside of Georgia, my observations may not be correct.
A judgment lien in Georgia attaches to any and all property you own. It can also be used to garnish your wages. As such a judgment lien is considered a secured debt since all of your property secures it.
If you file a bankruptcy, all action to enforce or perfect the lien would stop immediately pursuant to the automatic stay. During the course of your bankruptcy you and your counsel should consider filing a Motion to Avoid the Judicial Lien pursuant to Section 522 of the Bankruptcy Code. If the judicial lien is avoided the secured judgment lien becomes an unsecured debt paid at the same percentage as your other unsecured debts. If you don’t avoid the lien, the judgment lien will be paid in full by the trustee as a secured claim.
Technorati Tags: judgment liens, Motion to Avoid Lien, 522 Motion, judgment creditors, enforcement of judgment
Filed under Automatic stay issues, Georgia Bankruptcy by
Can my wife file for BK on her own? She has about 80k in credit card debt. We are together on a couple of other credit cards and our house mortgage. What is the effect on me…if any? She has no income – I am the source of all household income.
–Gary
Jonathan Ginsberg responds: Yes, your wife can file an individual bankruptcy. She would need to schedule all debt, including the joint credit card debt. With regard to the joint credit card debt, her obligation would be extinguished but you would remain liable for the full balance.
Her individual bankruptcy would not negatively impact your credit, although, as noted above, you would most likely get a collection letter from the joint credit card issuer since you would remain obligated.
You did not say how much you earn but your income would also be relevant to the median income/means test. If your household income exceeds the median income for the state, then Chapter 7 might not be an option. Your wife could file a Chapter 13 using your income as her source of "regular income" if you did not qualify for a Chapter 7.
Technorati Tags: individual bankruptcy filing for married couple, median income test, means test, Chapter 7, Chapter 13
Filed under General consumer bankruptcy info, Means Test issues, Median income test issues by
Back in April, I wrote a post about the issue of balance transfers and Chapter 7 bankruptcy. In this post I note that balance transfers were dangerous because from the perspective of the new credit card issuer, the transfer was new debt. In other words, if you have been carrying a $10,000 balance on your Discover account, for 5 years, and two weeks ago you transferred this balance to a new Citibank account to get a better interest rate, that $10,000 debt is new debt as far as Citibank is concerned.
Because credit card lenders are particularly sensitive to unusual patterns of debt and access to credit shortly before bankruptcy, there is a good chance that this $10,000 new debt in my example would generate an objection and discharge challenge.
One of the Chapter 7 trustees on the panel in the Northern District of Georgia emailed me to note an additional issue. Remaining with our example, the act of tranferring the $10,000 debt to Citibank would serve as a payoff to Discover. Under the preference rules, the payment of an antecedent (old) debt to Discover within 3 months of filing would be considered a preferential transfer. The Chapter 7 trustee would then have the right to demand that the recently paid off creditor – Discover – remit the $10,000 to the trustee for distribution as part of the bankruptcy estate.
In this scenario would the debtor end up facing both a discharge complaint from Citibank because of the new debt and as well as a discharge complaint from Discover since the the $10,000 had to be forfeited to the trustee?
The Chapter 7 trustee who wrote me says that she is not aware of any examples where the paid off creditor (Discover in our example) came after the debtor to recoup its loss. But such a scenario is certainly possible.
If you are a debtor or debtor’s lawyer and have been faced with this situation, please let me know what happened in your case.
Technorati Tags: credit card balance transfers, preference issues, Chapter 7 trustees, bankruptcy estate
Filed under Chapter 7 issues, Discharge issues, Georgia Bankruptcy, Preferences by
I often advise my clients that if they are sitting my office discussing their financial problems with a bankruptcy lawyer, then everything needs to be on the table. The house, the cars, the big screen tv, the electronics, and even the time share (!). My job, as the bankrutpcy lawyer is to help my client chart a course of living within one’s means and getting rid of debts that are not necessary for survival. Bankruptcy is about what you need, not what you want.
To this end, my colleage Cathy Moran from the Bankruptcy Law Network, forwarded to me a link to a web page entitled "10 Financial Lies We Tell Ourselves." I recommend that you take a look at this web site, not as a means to chastise yourself, but as a tool for moving forward. Resolve that starting today, you will not make the mistakes of the past that have brought you to the brink of bankruptcy. Recognize that financial hardship can happen to anyone and that you should always prepare yourself for tough times. Whether you end up filing bankruptcy or not, use the experience of financial distress to clear away bad habits and bad decisions.
Technorati Tags: rebuilding credit after bankruptcy, avoiding financial mistakes
Filed under General consumer bankruptcy info, Post bankruptcy credit rebuilding by
