Indiana Bankruptcy Blog: Is it possible to be "too broke" for Bankruptcy?
Yes
Saturday, March 26, 2011
Thursday, March 17, 2011
Debt collectors and payment allocation
17 March 2011
If you are a debtor with multiple debts, chances are you may have one debt collector collecting on a number of them simultaneously. If this is the case, there are some additional considerations that you should bear in mind. There are numerous stories out there where a debtor has negotiated a payment arrangement with respect to debt. The debtor thought (or assumed) that the payments were being applied in a manner that favored them, like paying one debt, maybe with the highest interest rate, first. They later learn the payments are being applied in a manner that is not in their favor.
As the debt collector is collecting on other debts of the debtor as well, the collector will most likely apply an equal portion of the payments received across the board. However, you can avoid this scenario. If you would prefer that one specific debt is paid first, indicate so on your payments. If the debtor designates that the payment is intended for a particular debt, the debt collector must pay that debt with the funds received. See 15 U.S.C 1692h. Keep in mind, getting the agreement in writing is best to avoid any future disagreement.
But, this is only one problem that can arise in this context—there could be more. If you are facing this issue, you should probably seek legal counsel to help guide you through the process. Feel free to give this office a call.
If you are a debtor with multiple debts, chances are you may have one debt collector collecting on a number of them simultaneously. If this is the case, there are some additional considerations that you should bear in mind. There are numerous stories out there where a debtor has negotiated a payment arrangement with respect to debt. The debtor thought (or assumed) that the payments were being applied in a manner that favored them, like paying one debt, maybe with the highest interest rate, first. They later learn the payments are being applied in a manner that is not in their favor.
As the debt collector is collecting on other debts of the debtor as well, the collector will most likely apply an equal portion of the payments received across the board. However, you can avoid this scenario. If you would prefer that one specific debt is paid first, indicate so on your payments. If the debtor designates that the payment is intended for a particular debt, the debt collector must pay that debt with the funds received. See 15 U.S.C 1692h. Keep in mind, getting the agreement in writing is best to avoid any future disagreement.
But, this is only one problem that can arise in this context—there could be more. If you are facing this issue, you should probably seek legal counsel to help guide you through the process. Feel free to give this office a call.
Wednesday, March 2, 2011
Payroll Taxes and the Internal Revenue Service (IRS)
2 March 2010
Business owners who are behind on paying their payroll taxes may find themselves in a big mess. The IRS requires employers to withhold money from their employees’ paychecks that those employees owe or will owe the government in the future. Federal law requires employers to hold these funds in “trust for the United States.” 26 U.S.C. § 7501(a) (West 2011). Should employers fail to pay these trust fund taxes, the government is able to collect the amount due from the officers of the company who are responsible for their collection and payment. In other words, these officers may become personally liable for the unpaid trust fund taxes of the corporation.
An employer may also fall behind on its ordinary corporate income tax or other “non-trust fund” taxes. These taxes are not collectable from individuals, but only from the corporation.
Often when a business owner owes trust fund taxes, their business likely owes ordinary corporate taxes as well. In this case, there may be something the business owner can do to limit his personal liability. IRS policy has long permitted a taxpayer that “voluntarily” submits payment to the IRS to allocate where they would like the payment to go—i.e. to the ordinary corporate income tax debts or to the “trust fund” debt. In re Energy Resources Co., Inc., 871 F.2d 223 (1st Cir. 1989). So an easy way to limit personal liability is to designate any future payment to the IRS specifically for the trust fund taxes. If you don’t, the IRS will choose how it wants to apply the payment.
In closing, it is always best to make your tax payments on time, however, if you do get behind, consider writing directions on your checks to allocate payment to the trust fund portion of your tax debt. However, if a company is facing this issue, it probably needs legal counsel. Feel free to give this office a call.
Business owners who are behind on paying their payroll taxes may find themselves in a big mess. The IRS requires employers to withhold money from their employees’ paychecks that those employees owe or will owe the government in the future. Federal law requires employers to hold these funds in “trust for the United States.” 26 U.S.C. § 7501(a) (West 2011). Should employers fail to pay these trust fund taxes, the government is able to collect the amount due from the officers of the company who are responsible for their collection and payment. In other words, these officers may become personally liable for the unpaid trust fund taxes of the corporation.
An employer may also fall behind on its ordinary corporate income tax or other “non-trust fund” taxes. These taxes are not collectable from individuals, but only from the corporation.
Often when a business owner owes trust fund taxes, their business likely owes ordinary corporate taxes as well. In this case, there may be something the business owner can do to limit his personal liability. IRS policy has long permitted a taxpayer that “voluntarily” submits payment to the IRS to allocate where they would like the payment to go—i.e. to the ordinary corporate income tax debts or to the “trust fund” debt. In re Energy Resources Co., Inc., 871 F.2d 223 (1st Cir. 1989). So an easy way to limit personal liability is to designate any future payment to the IRS specifically for the trust fund taxes. If you don’t, the IRS will choose how it wants to apply the payment.
In closing, it is always best to make your tax payments on time, however, if you do get behind, consider writing directions on your checks to allocate payment to the trust fund portion of your tax debt. However, if a company is facing this issue, it probably needs legal counsel. Feel free to give this office a call.
Thursday, January 27, 2011
Massachusetts foreclosure defense; what has Massachusetts done to help homeowners avoid foreclosure?
3 January 2011
States across the country have passed various laws to aid their residential homeowners to face the foreclosure crisis that has been sweeping the country. Massachusetts has passes two different Acts, the second largely building on the provisions of the first, directly aimed at helping Massachusetts homeowners keep their homes and avoid foreclosure. The first was “An Act to Preserve and Protect Home Ownership”, which applied to foreclosures initiated on or after May 1, 2008. It was designed to help financially distressed homeowners with foreclosure relief. Its most important component was a “right to cure,” which provided homeowners a period of time to pay a mortgage arrearage/delinquency and avoid entering the usual foreclosure process in Massachusetts. Massachusetts then went further to protect homeowners. Massachusetts enacted "An Act to Stabilize Neighborhoods Through the Protection of Tenants of Foreclosed Properties" which in pertinent part became effective August 7, 2010. It extended the right to cure established by the prior law to 150 days, unless the foreclosing entity took certain steps, including “engag[ing] in a good faith effort to negotiate a commercially reasonable alternative to foreclosure.” If the lender complies and the negotiations do not work, it can start the usual foreclosure process earlier than the 150 days, but no less than the 90 days established by the first Act.
The aim of these Massachusetts laws is clear; get the lenders to the bargaining table. This is necessary because sources report that the federal programs, such as the (Obama’s) Home Affordable Modification Program (HAMP), have not worked as expected and widespread foreclosures are expected to continue for many months to come.
Keep in mind, this posting only briefly discusses one part, albeit an important part, of these Massachusetts foreclosure laws, so there may be other parts that could help you. With so much as stake, it is advisable to consult with an attorney to learn how these laws, and other foreclosure defense related laws, could help you.
States across the country have passed various laws to aid their residential homeowners to face the foreclosure crisis that has been sweeping the country. Massachusetts has passes two different Acts, the second largely building on the provisions of the first, directly aimed at helping Massachusetts homeowners keep their homes and avoid foreclosure. The first was “An Act to Preserve and Protect Home Ownership”, which applied to foreclosures initiated on or after May 1, 2008. It was designed to help financially distressed homeowners with foreclosure relief. Its most important component was a “right to cure,” which provided homeowners a period of time to pay a mortgage arrearage/delinquency and avoid entering the usual foreclosure process in Massachusetts. Massachusetts then went further to protect homeowners. Massachusetts enacted "An Act to Stabilize Neighborhoods Through the Protection of Tenants of Foreclosed Properties" which in pertinent part became effective August 7, 2010. It extended the right to cure established by the prior law to 150 days, unless the foreclosing entity took certain steps, including “engag[ing] in a good faith effort to negotiate a commercially reasonable alternative to foreclosure.” If the lender complies and the negotiations do not work, it can start the usual foreclosure process earlier than the 150 days, but no less than the 90 days established by the first Act.
The aim of these Massachusetts laws is clear; get the lenders to the bargaining table. This is necessary because sources report that the federal programs, such as the (Obama’s) Home Affordable Modification Program (HAMP), have not worked as expected and widespread foreclosures are expected to continue for many months to come.
Keep in mind, this posting only briefly discusses one part, albeit an important part, of these Massachusetts foreclosure laws, so there may be other parts that could help you. With so much as stake, it is advisable to consult with an attorney to learn how these laws, and other foreclosure defense related laws, could help you.
Cash advances and bankruptcy, do they mix?
1 January 2011
Cash advances prior to bankruptcy are common, but do raise some concerns that should be addressed by a professional to assess the risk of bad results in a potential bankruptcy prior to filing. If the cash advances were recently taken, or as bankruptcy practitioners may describe as “on the eve of bankruptcy,” there are a number of sections of the bankruptcy code that may apply to the circumstances.
At least one section that may apply and to watch out for is 523(a)(2)(C)(i)(II). It states “cash advances aggregating more than $875.00 . . . on or within 70 days of the [the bankruptcy filing date] are presumed to be nondischargeable . . . .” “What does this mean,” one might ask. Well, as I also state in my last posting, it doesn’t automatically mean the cash advances are not eliminated (nondischargeable). The creditor (or the bankruptcy trustee assigned to your case) needs to take affirmative action. If the creditor (or trustee) does not take appropriate action to begin with, as long as your listed the debt on your petition properly, the debt should be discharged. But a creditor (or trustee) can file an adversary proceeding, which is essentially a law suit related to a bankruptcy case, to determine if the cash advances can be eliminated (discharged) or not.
An adversary proceeding is separate from the bankruptcy case itself. Normally, you will need to secure legal representation to defend an adversary proceeding separately. This is because even if you have a lawyer representing you in the bankruptcy, the agreement with that bankruptcy lawyer typically does not include representation in an adversary proceeding.
The tough part with section 523(a)(2)(C)(i)(II) is that it provides a presumption that the debt cannot be eliminated, which gives your opponent an advantage. There is a dispute in the law as to the extent of the presumption, but nonetheless, it is an uphill battle for the debtor. In re Ritter, 404 B.R. 811, 822 (Bankr. E.D. Penn. 2009).
“But I didn’t take cash advances, I just used convenience checks provided by my credit card company to draw cash” you might say. “Convenience checks” to draw cash from a credit card account is likely to be considered a cash advance per the bankruptcy code. In re Ritter, 404 B.R. at 827 fn.17.
As stated, this is just one of the many sections of the bankruptcy code (and concerns) that arise when cash advances have occurred prior to contemplating bankruptcy. It pays to consult with an experienced bankruptcy practitioner to review the issues and assess the risk prior to filing.
Cash advances prior to bankruptcy are common, but do raise some concerns that should be addressed by a professional to assess the risk of bad results in a potential bankruptcy prior to filing. If the cash advances were recently taken, or as bankruptcy practitioners may describe as “on the eve of bankruptcy,” there are a number of sections of the bankruptcy code that may apply to the circumstances.
At least one section that may apply and to watch out for is 523(a)(2)(C)(i)(II). It states “cash advances aggregating more than $875.00 . . . on or within 70 days of the [the bankruptcy filing date] are presumed to be nondischargeable . . . .” “What does this mean,” one might ask. Well, as I also state in my last posting, it doesn’t automatically mean the cash advances are not eliminated (nondischargeable). The creditor (or the bankruptcy trustee assigned to your case) needs to take affirmative action. If the creditor (or trustee) does not take appropriate action to begin with, as long as your listed the debt on your petition properly, the debt should be discharged. But a creditor (or trustee) can file an adversary proceeding, which is essentially a law suit related to a bankruptcy case, to determine if the cash advances can be eliminated (discharged) or not.
An adversary proceeding is separate from the bankruptcy case itself. Normally, you will need to secure legal representation to defend an adversary proceeding separately. This is because even if you have a lawyer representing you in the bankruptcy, the agreement with that bankruptcy lawyer typically does not include representation in an adversary proceeding.
The tough part with section 523(a)(2)(C)(i)(II) is that it provides a presumption that the debt cannot be eliminated, which gives your opponent an advantage. There is a dispute in the law as to the extent of the presumption, but nonetheless, it is an uphill battle for the debtor. In re Ritter, 404 B.R. 811, 822 (Bankr. E.D. Penn. 2009).
“But I didn’t take cash advances, I just used convenience checks provided by my credit card company to draw cash” you might say. “Convenience checks” to draw cash from a credit card account is likely to be considered a cash advance per the bankruptcy code. In re Ritter, 404 B.R. at 827 fn.17.
As stated, this is just one of the many sections of the bankruptcy code (and concerns) that arise when cash advances have occurred prior to contemplating bankruptcy. It pays to consult with an experienced bankruptcy practitioner to review the issues and assess the risk prior to filing.
Can I eliminate debt recently incurred from gambling by filing chapter 7 bankruptcy?
29 December 2010
Generally, debt that arises from gambling is not per se treated any differently under the bankruptcy code than any other unsecured debt. But if you have recently incurred gambling debt, it depends. Some initial questions: How recent was the debt incurred? How much is the debt? What were the circumstances? How long had any credit account at issue been open? These questions are likely to be raised, if not by your attorney during your pre-filing consultation(s), then at the meeting of creditors by the trustee that will be assigned to your case. This is in part because there is a question on what is called the “Statement of Financial Affairs,” which is a required part of the bankruptcy paperwork, that specifically probes losses from gambling.
There are a number of sections under the bankruptcy code that may apply to gambling debt and are important to consider. One such section is §523(a)(2)(C)(i)(I) which states in pertinent part “consumer debts owed to a single creditor and aggregating more than $600 for ‘luxury goods or services’ incurred . . . 90 days before [the bankruptcy filing date] are presumed to be nondischargeable . . . .” Debts, such as cash advances, for the purpose of gambling can be found to be “luxury goods or services” because they arguably are not “goods and services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” If the creditor does not take appropriate action to begin with, as long as your listed the debt on your petition properly, it should be discharged. But a creditor can file an adversary proceeding, which is essentially a law suit related to a bankruptcy case, to determine if the debt at issue (as defined generally above) can be discharged (eliminated) or not. Although related, an adversary proceeding is separate from the bankruptcy case itself. Normally, you will need to secure legal representation to defend an adversary proceeding separately. This is because even if you have a lawyer representing you in the bankruptcy, the agreement with that bankruptcy lawyer typically does not include representation in an adversary proceeding.
If an adversary proceeding is filed, there is still hope. Although you face the presumption the debt cannot be discharged (eliminated) the presumption is rebuttable. There are a number of unresolved legal questions on this subject regarding the extent of the presumption and how it applies. In re Ritter, 404 B.R. 811, 822 (Bankr. E.D. Penn. 2009). Thus, an experienced bankruptcy attorney is needed for this type of litigation. The determination is fact intensive and made case-by-case, so a trial in the bankruptcy court is typically necessary to resolve unless the matter is settled. The trial is likely to focus mainly on what your intent was at the time you obtained the ‘luxury goods or services’ at issue. You can count on a thorough examination of your financial affairs.
As stated, this is just one of the many sections of the bankruptcy code (and concerns) that arise when gambling has occurred prior to contemplating bankruptcy. Don’t go it alone, get counsel on your side.
If you are considering filing bankruptcy and are concerned about recent gambling debt, feel free to give us a call.
Generally, debt that arises from gambling is not per se treated any differently under the bankruptcy code than any other unsecured debt. But if you have recently incurred gambling debt, it depends. Some initial questions: How recent was the debt incurred? How much is the debt? What were the circumstances? How long had any credit account at issue been open? These questions are likely to be raised, if not by your attorney during your pre-filing consultation(s), then at the meeting of creditors by the trustee that will be assigned to your case. This is in part because there is a question on what is called the “Statement of Financial Affairs,” which is a required part of the bankruptcy paperwork, that specifically probes losses from gambling.
There are a number of sections under the bankruptcy code that may apply to gambling debt and are important to consider. One such section is §523(a)(2)(C)(i)(I) which states in pertinent part “consumer debts owed to a single creditor and aggregating more than $600 for ‘luxury goods or services’ incurred . . . 90 days before [the bankruptcy filing date] are presumed to be nondischargeable . . . .” Debts, such as cash advances, for the purpose of gambling can be found to be “luxury goods or services” because they arguably are not “goods and services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” If the creditor does not take appropriate action to begin with, as long as your listed the debt on your petition properly, it should be discharged. But a creditor can file an adversary proceeding, which is essentially a law suit related to a bankruptcy case, to determine if the debt at issue (as defined generally above) can be discharged (eliminated) or not. Although related, an adversary proceeding is separate from the bankruptcy case itself. Normally, you will need to secure legal representation to defend an adversary proceeding separately. This is because even if you have a lawyer representing you in the bankruptcy, the agreement with that bankruptcy lawyer typically does not include representation in an adversary proceeding.
If an adversary proceeding is filed, there is still hope. Although you face the presumption the debt cannot be discharged (eliminated) the presumption is rebuttable. There are a number of unresolved legal questions on this subject regarding the extent of the presumption and how it applies. In re Ritter, 404 B.R. 811, 822 (Bankr. E.D. Penn. 2009). Thus, an experienced bankruptcy attorney is needed for this type of litigation. The determination is fact intensive and made case-by-case, so a trial in the bankruptcy court is typically necessary to resolve unless the matter is settled. The trial is likely to focus mainly on what your intent was at the time you obtained the ‘luxury goods or services’ at issue. You can count on a thorough examination of your financial affairs.
As stated, this is just one of the many sections of the bankruptcy code (and concerns) that arise when gambling has occurred prior to contemplating bankruptcy. Don’t go it alone, get counsel on your side.
If you are considering filing bankruptcy and are concerned about recent gambling debt, feel free to give us a call.
Criminal trespass in Massachusetts exists under more than one Massachusetts statute.
20 December 2010
We have blogged about what would be referred to as the “general” criminal trespass statute, but there is one specifically addressing those “willfully and maliciously” entering a garden or the like, and destroying or stealing. It can be found in section 115 of chapter 266 of the Massachusetts General Laws; the general criminal trespass statute in Massachusetts can be found at section 120 of chapter 266.
The law found in section 115 has distinct differences to the general criminal trespass statute. It has an enhanced penalty compared to the general criminal trespass statute. Instead of a maximum fine of $100 and/or 30 days in jail found in the general criminal trespass statute, this section allows a judge to sentence a convicted defendant up to $500 or six months in jail. Another key difference is that it does not require a notice element like the general statute, which many times takes the form of a letter that can be referred to by police as a “No trespass notice (or letter)” or sometimes by lawyers as a “Letter of Disinvite.” Next are the elements of “willful and malicious.” “Willful and malicious” are terms used in other Massachusetts statutes and have long-established legal definitions that to explain properly would exceed the scope of this blog, but suffice to say, use your common sense. Don’t assume because you think that it is clear that you were acting with a pure heart because you were simply picking some roses for your friend; someone else may not see it that way. The last difference is obvious and is the subject matter. Instead of the (arguably) simple and broad definition for the physical land or space contained in the general criminal trespass statute in Massachusetts, with this statute you must enter an “orchard, nursery, garden, or cranberry meadow.” And mutilate or destroy a “tree, shrub, or vine,” or steal or take and carry away “any fruit or flower.” These terms may not enjoy long-established legal definitions in Massachusetts law, but just the same, it is best not to test their definition in court. But if this blog has not found you before an incident has occurred, you may have to.
If you want to know more about the criminal trespass statutes in Massachusetts or just received a No trespass notice/letter (of Letter of disinvite) or are thinking about sending one, feel free to contact us.
We have blogged about what would be referred to as the “general” criminal trespass statute, but there is one specifically addressing those “willfully and maliciously” entering a garden or the like, and destroying or stealing. It can be found in section 115 of chapter 266 of the Massachusetts General Laws; the general criminal trespass statute in Massachusetts can be found at section 120 of chapter 266.
The law found in section 115 has distinct differences to the general criminal trespass statute. It has an enhanced penalty compared to the general criminal trespass statute. Instead of a maximum fine of $100 and/or 30 days in jail found in the general criminal trespass statute, this section allows a judge to sentence a convicted defendant up to $500 or six months in jail. Another key difference is that it does not require a notice element like the general statute, which many times takes the form of a letter that can be referred to by police as a “No trespass notice (or letter)” or sometimes by lawyers as a “Letter of Disinvite.” Next are the elements of “willful and malicious.” “Willful and malicious” are terms used in other Massachusetts statutes and have long-established legal definitions that to explain properly would exceed the scope of this blog, but suffice to say, use your common sense. Don’t assume because you think that it is clear that you were acting with a pure heart because you were simply picking some roses for your friend; someone else may not see it that way. The last difference is obvious and is the subject matter. Instead of the (arguably) simple and broad definition for the physical land or space contained in the general criminal trespass statute in Massachusetts, with this statute you must enter an “orchard, nursery, garden, or cranberry meadow.” And mutilate or destroy a “tree, shrub, or vine,” or steal or take and carry away “any fruit or flower.” These terms may not enjoy long-established legal definitions in Massachusetts law, but just the same, it is best not to test their definition in court. But if this blog has not found you before an incident has occurred, you may have to.
If you want to know more about the criminal trespass statutes in Massachusetts or just received a No trespass notice/letter (of Letter of disinvite) or are thinking about sending one, feel free to contact us.
Subscribe to:
Posts (Atom)
