Here you will find the results of some of my legal research on various issues clients have come to me with regarding their bankruptcy. Some of this is rather technical, more lawyer talk than conversational, but it is all part of what a good bankruptcy attorney knows.
Old Car Allowance – Atlanta Bankruptcy Lawyers
I was conducting some research on expenses allowed and not allowed with regard to the Chapter 7 means testing provision of the U.S. Bankruptcy code and found some interesting information. In a case out of the Southern District of Florida, In re Koch, 408 B.R. 539 (Bankr. S.D.Fla. 2009), which is a precursor case to Ransom v. FIA Card Services, the court held in part that ownership expenses on vehicles that have no lease or loan payment obligation associated with it will not be allowed. With regard to this issue, it was argued before the United States Supreme Court in Ransom v. FIA Card Serv. 131 S.Ct 716 (2011) and was basically put to rest. The court held the same as the court in the 2009 Koch case that without any debts associated with a vehicle, i.e. the vehicle is owned free and clear, ownership expenses pursuant to the IRS standards are not allowed to be taken in a Chapter 7 means test calculation.
There is, however, a $200 old car allowance that can be used for vehicles that are more than six (6) model years old or have more than 75,000 miles on them. However, according to a bankruptcy attorney in the Southern District of California, a Chapter 13 Trustee has been challenging the use of this allowance. This allowance has generally been conceded by trustees but for some unknown reason, this trustee is trying to disallow it in Chapter 13 cases. In the article blog written by Raymond Schimmel, the California bankruptcy attorney, this $200 allowance has been allowed by the Executive Office of the United States Trustee (“EOUST”) even though it is not specifically covered by any language in the U.S. Bankruptcy Code. Rather, the EOUST referred to the Internal Revenue Manual wherein it states in I.R.M. 5.8.5.20.3 (10-22-2010) under Transportation Expenses, item numbered 5, “In situations where the taxpayer has a vehicle that is currently over six (6) years old or has reported mileage of 75,000 miles or more, an additional monthly operating expense of $200 will generally be allowed per vehicle.” Although this language in the IRS Manual is not legally binding, it has generally been accepted as an expense and I see no reason that the EOUST would change there position on this matter in the future. Therefore, if you have an older car that fits this category, I would take the deduction as it may just help you qualify for Chapter 7.
Child Support – Atlanta Divorce Attorneys or Lawyers
If a person files for bankruptcy, what happens when he or she has an obligation to pay child support? The short answer is not much. Child support, which is termed a Domestic Support Obligation in bankruptcy, is non-dischargeable. A divorced parent cannot eliminate such debt in a bankruptcy case and the person filing must continue to pay the child support regardless. In fact, a Chapter 7 or Chapter 13 Trustee is required to send notification to the support recipient to advise them of what rights they have when a case has been filed. So even if John Doe filed and did not advise his ex-wife that he filed, she is going to find out anyway. If a person files a Chapter 13 bankruptcy case, then he or she may be able to include in the Chapter 13 Plan their child support arrearages, but must continue paying all future payments on time. The good news for those receiving such payments, any Domestic Support Obligations are first in the line to be paid once the case has been confirmed by the court.
What happens if I simply walk away from my mortgage in Georgia?
A potential client called me the other day and said, “I am upside down on my mortgage and simply cannot afford the house any longer, what would happen if I just walk away?” Obviously, I couldn’t advise him specifically because he was not my client, so I answered the question in a general fashion.
The reader should be aware that the answer herein does not provide any legal advice and should not be considered as such by the reader.
When a party defaults on his mortgage, the mortgage company will usually contact the owner to try to find out why payments have not been made. If the default continues, the mortgage company will refer the case out to their attorney for foreclosure. Should the property be foreclosed upon and there appears to be a deficiency, the mortgage company does have the option to certify the deficiency in state court and upon receiving an order accordingly, can then attempt to collect on that deficiency from the prior homeowner.
The other way to address this type of issue is to look at filing a bankruptcy case. Bankruptcy may be a way to eliminate any possibility of the mortgage company pursuing you.
Are those taxes dischargable? – Bankruptcy Attorneys in Atlanta
So you think your tax debt has been extinguished by a bankruptcy filing? Perhaps. With regard to the IRS, provided that all of the prerequisites have been completed and your debts are more than three years old, most likely the taxes are dischargable. However, in a recent case, a debtor had some old state tax debt and although more than three years had passed with regard to collection and discharge was assumed, the Georgia Department of Revenue stated that because the debtor failed to file an amended return within 180 days after the IRS changed the debtor’s net income, any taxes assessed based on that change of income were not discharged.
The Official Code of Georgia section 48-7-82, subsection (e)(1) provides, “When a taxpayer’s amount of net income for any year under this chapter as returned to the United States Department of the Treasury is changed or corrected by the commissioner of internal revenue or other officer of the United States of competent authority, the taxpayer, within 180 days after final determination of the changed or corrected net income, shall make a return to the commissioner of the changed or corrected income, and the commissioner shall make assessment or the taxpayer shall claim a refund based on the change or correction within one year from the date the return required by this paragraph is filed. If the taxpayer does not make the return reflecting the changed or corrected net income and the commissioner receives from the United States government or one of its agents a report reflecting the changed or corrected net income, the commissioner shall make assessment for taxes due based on the change or correction within five years from the date the report from the United States government or its agent is actually received.”
I highlighted the word shall in the law because that is what prevailed in the case of In Re: Jones, 158 B.R. 535 (Bankr. N.D. Ga. 1993). Judge Bihary, the chief bankruptcy judge of the Northern District of Georgia, held in the Jones case that because the debtor, despite his assumption that an amended return was not necessary, did not file the amended return, the state’s tax assessment based on the change of income reported by the IRS, was not dischargable. It would therefore be wise to make sure that all the necessary returns have been filed when they need to be filed if a debtor wants taxes to be discharged in a bankruptcy filing.
Annuities and bankruptcy filings in Georgia
Annuities and bankruptcy
When a bankruptcy case is filed, one of the questions asked is how does the debtor earn his or her income? When you have a younger, working age debtor, that answer most likely will be that he or she has a job. However, when dealing with older, retired debtors, they may not earn income but receive income from investments. One way might be an annuity that provides a certain amount of funds every month. The question then is whether this annuity income may be claimed as exempt from the bankruptcy case. In Georgia, for example, an annuity can be claimed as exempt under O.C.G.A. Section 44-13-100(a)(2)(E), provided that certain factors are present with regard to that annuity.
After reviewing a couple of situations involving annuities and bankruptcy, I discovered that if a debtor is drawing monthly distributions from an annuity, those distributions may be claimed as exempt provided that the annuity was created prior to the filing of the bankruptcy case and those funds are being used to replace what was considered income. Additionally, support for exemption will also be evident if the annuity was funded by the debtor through his or her savings. Where a trustee may challenge the exemption of an annuity is when a debtor created that annuity with funds he or she has inherited within approximately 1 to 1-1/2 years prior.
If you are one of these types of debtors who is living on the distributions from an annuity and may be facing the possibility of filing bankruptcy, then it would be wise to seek legal advice from a bankruptcy attorney to see if the annuity will in fact be exempt.
What are credit card companies allowed to do when attempting to collect on your delinquent account in Georgia?
Consumers need to know that protection against unscrupulous collection practices is in place through the Fair Debt Collection Practices Act (FDCPA). The Act covers any collection activity related to a credit card, personal loan, auto loan, medical bill and even your mortgage. A creditor cannot, for example, contact a debtor about a debt owed during inconvenient times, i.e. before 8:00am and after 9:00pm. Creditors are not allowed to contact other people about a person’s debt but may inquire about their location. If a creditor does make contact with the debtor, the creditor must send the debtor a validation of the debt owed. This validation must include the name of the original creditor which includes a procedure if the debtor does not believe the debt is valid. The debtor can also send a letter to the collector advising them to stop contacting you which they must do, however, should the creditor send the debtor a validation letter, then they may begin contact again. Additionally, if the debtor is represented by an attorney, the creditor must contact the attorney and not the debtor for any questions. Continue reading
If I file a bankruptcy is my credit ruined forever?
If I file bankruptcy, is my credit ruined forever?
Short answer – no. The Fair Debt Reporting Act controls how your credit history is treated and reported. The maximum time any information regarding a debt stays on your report is 10 years.
The filing of a Chapter 7 case will be reported on your credit history and will stay there for 10 years. If you file a Chapter 13 case, that information stays for 7 years. If you have negative information such as late payments, that also stays for 7 years. Therefore, if you know that this negative information is already on your report, it is unlikely that the filing of a bankruptcy case will make matters worse.
You are probably wondering how the concept of creditworthiness is viewed by potential creditors. Well, first off, they know that if you get a discharge in a Chapter 7 case, you cannot file again for eight years. Who do you think is more creditworthy? A consumer who has discharged all his debts and is now basically debt free, or one who owes $50,000 in credit card debt, and barely stays afloat by borrowing from Peter to pay Paul?
If you have a steady job – a regular income – and few debts after bankruptcy, financial institutions would be foolish not to approve a mortgage or car loan.
What about Consumer Credit Counseling? – Credit Counseling Atlanta Georgia
What about Consumer Credit Counseling?
Over the past few years, a popular alternative to bankruptcy has surfaced. Consumer Credit Counseling Services (CCCS), a nonprofit organization financed by credit card companies and other consumer finance organizations, works with you to reduce some of your debt and create a plan to pay off the rest of your debt without the intervention of the Bankruptcy Courts. If your debt is not too overwhelming and you have sufficient income, CCCS may be able to create a payment plan that allows you to pay back your debts over time.
While CCCS is an excellent organization, they may not be able to help if you are behind with your car or house payment. Their concentration seems to be on the handling of your credit card. Please note that CCCS is an organization created by credit card companies and their mission is to assist you in paying back all of your credit card debt. CCCS counselors are not attorneys and they are not required to discuss with you bankruptcy or other options, although I have had some clients advise me that CCCS advised them that bankruptcy may be their only option.
CCCS is not the only “credit counseling service” out there. You may have seen advertisements in the phone book, on television ads, through unsolicited mail or even nailed to a telephone pole. Some of these services offer to clear your credit file or to get you a new credit file. Usually, these organizations are rip-offs and you should avoid them. A good rule to follow is “if it sounds too good to be true, it probably is.”
Finally, if you do attempt to get your financial life under control, realize that it will take a great deal of both discipline and money to pay off substantial credit card debt. Let’s say you have $10,000 in credit card debt and you want to pay it off in two years, in order to accomplish this goal, you will need to pay $520 per month. Or if you take three years, you will need $382 per month. If you reduce the amount you are paying per month to $200, then that $10,000 will take over ten years to pay off.
Many clients tell me that they attempted to reduce the interest rate they were paying on their credit card debt only to find themselves even farther in debt when they miss one payment under that new rate. Credit card companies are notorious in jacking up the interest rate to over 25% if you default on a payment. Always remember to read your credit card small print to see how your account will be handled if you do default.
Remember, interest rates at levels of 18% to 20% will increase your balances immensely. You can figure out how long it would take you to pay off your debt by using an on-line calculator located at the Motley Fool financial web site.
How to Hire a Bankruptcy Attorney in Atlanta
1. Don’t choose a bankruptcy lawyer based on cost alone. The expense of hiring a lawyer to assist you with your case can range anywhere from a few hundred dollars to over a thousand. Bankruptcy is not one of the major areas of practice for attorneys. It is a specialized area just like criminal law or medical malpractice. Make sure you choose an attorney who has, as they say, been around the block a few times.
2. When looking for a bankruptcy lawyer, try to choose one who has been practicing for at least 5 years in this specialty. Make sure to look at the lawyer’s total background. Prior to becoming a lawyer, he may have done something else that you can benefit from. Yes, we all agree that all lawyers need to get experience somewhere. What you want to avoid is having him get that experience at your expense.
3. Look for a lawyer who goes beyond just assisting you with the filing of your case. Your lawyer should be there to help you in the recovery process. Obviously he is not going to be able to provide financial assistance, but he may be able to provide you with advice and direction. Remember also that he may have resources available that you may not. Don’t be afraid to ask, “what can you do to help me after my case is over?”
4. Law firms come in all sizes. There are some attorneys who work only by themselves. There are some attorneys who work in small 2, 3 or 4 attorney firms. Then there are those firms that have 10, 20, 30 or more attorneys working for them. Be careful because hiring a large law firm may not be to your advantage. Remember time is money to an attorney. Those large firms generally work on a billable hours basis. In those large firms, every minute you spend with an attorney will cost you money.
5. A few years ago, it was impossible for an attorney to advertise his services. Fortunately for attorneys, that restriction no longer applies. Attorneys are free to advertise, albeit under some controlled conditions, the services they provide to the public. Advertising can help you learn about the services a lawyer provides, but it may not provide you with any details about the attorney or his firm. Before hiring an attorney, make sure you ask questions and make sure that the lawyer is qualified and competent to handle your case.
6. Many people will ask a friend or family member for a referral. Yes, this is a good way to find an attorney. If he was good enough for my friend, he is good enough for me. Right? Well, maybe. Don’t use the referral as your only measurement. Meet with the attorney. Make sure that you are comfortable with him and that he will be able to do the job you are looking for.
7. Location is sometimes a barrier when looking for an attorney. Many people want to find someone that is close to them. Convenience becomes a measurement. But convenience may not bring you to the attorney that can do the job. In today’s electronic age, nearly all the paperwork that is done can be handled by fax, e-mail or over the internet. It is far more important to you to choose an experienced, qualified lawyer – than to choose one because he is close to home.
8. One of the many irritations that clients have is that their attorney will not return their phone call. Yes, this is a problem, so make sure that you can contact your lawyer when you need him.
9. When hiring an attorney to assist you with a legal problem, be it bankruptcy, criminal or anything else, make sure you are getting the service you intend.
10. Finally, when choosing a lawyer, make sure that his fees are fair, that he does not charge you for phone conversations, or that he responds to your questions so that you understand the answers and that you do respect or like him. When you hire an attorney, you must be comfortable with him and confident that he will do the job you are hiring him to do.