January 24, 2019

Can You File Bankruptcy if You Have Been the Victim of Identity Theft?

If you have been a victim of identity theft, you can file bankruptcy but you need to be prepared for potential complications.

Identity theft is a big problem in 2018 and a number of large retailers and even credit bureaus have been hacked. Personal and financial information about millions of Americans is available for sale on the “dark web” and criminals use this stolen data to open credit card accounts, sign for personal loans, and even buy houses and cars. You will not know that there was a problem at all until the bills start to arrive.

I have personally been a victim of identity theft twice. One time, a thief got hold of my credit card number and charged $5,000 to a custom suit maker in Hong Kong. In another instance, a fraudster hacked my American Express account and purchased (and picked up) a high end desktop Mac. In both of these situations the credit card company accepted my fraud report and canceled all charges. [Read more…]

Debts that Arise from Personal Disputes are Often Trouble in Bankruptcy Court

bankruptcy litigationWhen I meet with a new client, I am always on alert for certain types of debts that I know will be trouble.  Sometime the trouble factor is so great that I advise my client not to file.

One area that almost always results in expensive, drawn out bankruptcy litigation are cases where a potential bankruptcy debtor has been sued by another person over a debt and the underlying issues are personal and not just about money.

Broken business partnerships where one or both parties feel betrayed and use the courts to beat up on one another are always trouble.  I remember one such case in which I represented the party who had run out of money after several years of litigation and had turned to bankruptcy in what turned out to be a futile attempt to make the entire situation go away.  The former partner, who was objecting to just about everything in my client’s case turned to me at one point and said “I don’t care how much this costs, I just want to see your client and his family homeless.”

Not a good situation if you are the party in bankruptcy who will be writing checks to a bankruptcy lawyer to litigate endlessly in bankruptcy court.

I saw a writeup of another such case on the Clerk of Court’s website.  This case involved a dispute between two neighbors who did not like each other much.   After engaging in a verbal dispute one neighbor went to the police and accused the other neighbor of a variety of crimes.  The police arrested neighbor #2 based on these accusations and neighbor #2 spent 2 weeks in jail before her case was eventually dismissed for lack of probable cause.

[Read more…]

Can I Pay my Taxes with a Credit Card, then File Bankruptcy to Discharge the Debt?

no discharge of tax debt paid with credit cardWith April 15 just around the corner, many of us will be scrambling to come up with money to pay Uncle Sam.  For those who are self employed, estimated tax liability payments are due every quarter.  The IRS does allow you to pay your tax debt with a credit card, but you can expect to pay a “convenience fee” of around 2% of the amount charged. for this option.

Further, if you do use your credit cards to pay your tax debt, the Bankruptcy Code specifically disallows that part of your credit card debt to be discharged in a bankruptcy case, unless the tax you are paying is dischargeable as well.

The Bankruptcy Code is silent as to how long the non-dischargeability status remains associated with credit card debt when you continue to use and make payments on that credit card for several months prior to filing for bankruptcy, and that makes for some interesting conjecture. [Read more…]

Will Recent Use of Credit Cards for Necessities Like Food and Clothing Prevent me from Filing Bankruptcy?

expensive litigationThere is no perfect time to file for bankruptcy.  Ideally, you should wait to file at a point when you have not touched your credit cards for several months and your credit card charges over the past year have not taken a big jump.  Further there is less chance that you will face any objection if you have made at least the minimum payment over the past 6 months or longer.

Section 523 of the Bankruptcy Code sets out a number of situations in which credit card debt will not be discharged.  Section 523(a)(2)( c) makes non-dischargeable consumer debt totaling more than $500 for luxury goods and services owed to any one creditor that are incurred within 90 days of filing, or cash advances totaling $750 or more owed to any one creditor made within 70 days of filing.

Section 523(a)(2) makes non-dischargeable debt owed to a creditor that was incurred by false pretenses or by fraud.

Basically, then, Section 523 gives credit card lenders at least two arguments to challenge a debtor:

  1. recent credit card use (within 3 months) for anything but necessities like food, clothing and shelter
  2. any credit card use in the recent past (in my experience this can be up to a year prior to filing) if a debtor makes charges where there is no reasonable expectation of repayment.    [Read more…]

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