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Congress has made it very difficult to discharge a student loan. However, as illustrated by a recent decision from the Second Circuit, not all obligations owed by students in connection with their schooling are excepted from discharge. Homaidan v. Sallie Mae, Inc., 2021 U.S. App. LEXIS 20934 (2nd Cir. 7/15/21). What Happened Hilal Homaidan attended Emerson College from 2003-2007. He took out two “direct-to-consumer Tuition Answer Loans, totaling $12,567, from Sallie Mae, Inc.” These loans were not made through Emerson’s financial aid office nor, according to Homaidan, were they made solely to cover the cost of attending college. Homaidan filed bankruptcy and received a discharge. Navient hired a collection firm “to pester Homaidan about paying back his Tuition Answer Loans.” Homaidan assumed that if Navient was trying to collect from him, the debt must have been excluded from discharge and he paid back the loans. In 2017, he reopened his case and brought suit against Navient for violation of the discharge. Navient moved to dismiss the adversary proceeding on the basis that the loans were non-dischargeable. Judge Elizabeth Strong denied the motion to dismiss and an interlocutory appeal followed. The Second Circuit affirmed. The Court’s Ruling According to the Second Circuit, there are three types of student obligations which are non-dischargeable: (1) loans and benefit overpayments backed by the government or a nonprofit; (2) obligations to repay funds received as an educational benefit, scholarship, or stipend; and (3) qualified private educational loans. Navient argued that the loans constituted an educational benefit, conceding that neither the first nor the third category applied. Homaidan argued that educational benefits referred to a narrow category of conditional grant payments rather than all private student loans. The Second Circuit found that Navient’s construction tortured the English language. It quoted a Tenth Circuit decision that said that “no normal speaker of English . . . would say that student loans are obligations to repay funds received as an educational benefit.” In re McDaniel, 973 F.2d 1083 (10th Cir. 2020). The Court used the canon of noscitur a sociis, “the canon that counsels that a word is given more precise content by the neighboring words with which it is associated.” 11 U.S.C. Sec. 523(a)(8)(ii) refers to “an obligation to repay fund received as an educational benefit, scholarship, or stipend.” The Court reasoned that “educational benefit” must be similar to scholarship or stipend. It ultimately concluded that: "Educational benefit" is therefore best read to refer to conditional grant payments, similar to scholarships and stipends. The Reserve Officer Training Corps and the National Health Service Corps, for example, pay tuition in exchange for a promise to serve in the military after graduation or to practice medicine in an underserved region. See Jason Iuliano, Student Loan Bankruptcy and the Meaning of Educational Benefit, 93 AM. BANKR. L.J. 277, 292 (2019). A recipient who breaks that promise incurs an "obligation to repay [the] funds" that they previously received "as an educational benefit."    Opinion at *15. Commentary This decision can have far-ranging consequences for Navient and other creditors who sought to collect Tuition Answer Loans after discharge. Attempting to collect, or actually collecting as happened here, is a violation of the discharge. This leaves Navient exposed to damages in this case and similar cases.  Navient had to resort to legal gymnastics because the two main clauses of Sec. 523(a)(8), while quite broad, have very definite meanings. Loans backed by the government or non-profits cannot include private student loans. Private student loans may be non-dischargeable, but only if they are “qualified student loans” under the Internal Revenue Code. That means that any lender which cannot establish one of the main exceptions to dischargeability is left to argue that the debt is an obligation to repay funds received as an educational benefit, scholarship or stipend. As bad as this result, was, future cases may be worse. There is now a developing body of law as to what does not constitute an obligation to repay an educational benefit. In addition to this opinion from the Second Circuit and the Tenth Circuit’s McDaniel decision, the Fifth Circuit ruled against Navient in Crocker v. Navient Solutions, LLC (In re Crocker), 941 F.3d 206 (5thCir. 2019) in a case involving a loan made in connection with a program to study for the bar exam. Given the trend in the law, students with unconventional loan products should be able to expect an easier time establishing that their debt was discharged. Conversely, lenders making arguments that “no normal speaker of English” would make could find themselves in an uncomfortable position.

The Impact of Bankruptcy on Your AZ and Federal Tax Refunds What Happens to Your Tax Refund After Filing For Bankruptcy? You’ve gotten to the point where you’re realizing that bankruptcy is going to be the best way to deal with your overwhelming debt. Yet you know that you have a tax refund coming up, and you’d like to be able to use that money to start getting back on your feet after your debts have taken up all your resources for so long. Will you actually be able to keep your tax refund? Or will the bankruptcy court take your refund to satisfy your creditors? The answer is: It depends. By working with a Tucson bankruptcy attorney, you can understand how the law applies to your specific situation and what you can do to keep more of your tax refund (if possible). However, here’s a general overview of what bankruptcy law allows: Tax Refund by Year under Chapter 7 Bankruptcy A tax refund will be considered disposable income that can be used for paying your creditors. If the tax refund was for the tax year before your bankruptcy filing, the entire refund will be considered part of your estate, which can be ordered to be paid to your creditors. So, if you’re expecting a $5,000 check, all of that will likely go to your creditors before your remaining debts can be discharged. If you are expecting a tax refund for the current tax year, the court will likely prorate the refund according to the income you made up to your bankruptcy filing. So, only part of that check will likely be earmarked for your creditors. You may be able to keep the other part. If you get a refund for the tax year following your bankruptcy filing, you will be able to keep all of that refund. Knowing how tax refunds are handled by the bankruptcy court, you can plan with your Tucson bankruptcy attorney on when to file your bankruptcy. You might wait until you have actually received your tax refund so that you can spend it before you file for bankruptcy. Just be sure you are spending it on allowable things. You cannot spend it on: Repayment of just one debt Large, luxury items Repayment or gifts to family or friends You can spend your tax refund on housing expenses, car payments and repairs, food and clothing, medical care, and education. Talk with your bankruptcy attorney in Tucson if you are unsure about what’s allowable. Tax Refunds under Chapter 13 Bankruptcy A Chapter 13 bankruptcy plan reorganizes your debts and sets up a new payment plan based on your ability to pay. If you receive a tax refund under Chapter 13 bankruptcy, it will be included among your assets, and it will likely be distributed to your creditors. However, a tax refund will not be used to determine your payment plan as it is not consistent income. Deciding voluntarily to apply your tax refund to your Chapter 13 bankruptcy plan can help you pay off your debts faster, so you may want to consider this. However, if you want to keep the refund, you can talk to your bankruptcy attorney in Tucson about applying for an exemption. You will have to file a plan modification, and you will have to specify how much you want to exempt and what you will be spending it on. Some allowable expenses can include: House repairs Car repairs Appliance repair or replacement Unexpected medical costs If the exemption is approved, you will also have to provide receipts for these expenses, as well as other documentation. Tax refunds can be tricky under bankruptcy law, but your Tucson bankruptcy attorney can guide you through each of the possibilities to help you understand how best to handle them. You may also be encouraged to adjust your withholdings so that you don’t end up with a large refund. That way, you can spend more of your money from each paycheck, rather than having a big payout at the end of the year. Your bankruptcy attorney serving Tucson will help you understand the options and the benefits of each. Call An Experienced Tucson Bankruptcy Law Firm Call My AZ Lawyers if you are thinking about filing for bankruptcy because you have become overwhelmed by debt. Our experienced bankruptcy attorneys represent clients in both Chapter 7 bankruptcy and Chapter 13 bankruptcy, and they can help you understand how assets like tax refunds, property, and bank accounts are treated under each so you can make the best plan to meet your goals. Our Tucson bankruptcy lawyers are committed to helping you get the maximum debt relief possible. Call us today to schedule a consultation and learn more.   Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: https://myazlawyers.com/ Phoenix Location: 343 West Roosevelt, Suite #100 Phoenix, AZ 85003 Office: (602) 609-7000 Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post The Impact of Bankruptcy on Your AZ and Federal Tax Refunds appeared first on My AZ Lawyers.

While several North Carolina bankruptcy courts have asserted that “[n]ot only is there no legislative history for § 1C-1601, In re Ragan, 64 B.R. 384, 387 (Bankr. E.D.N.C. 1986), this may be merely received wisdom that was not actually researched. … North Carolina Exemptions Legislative History Read More »

Depositions serve two important functions in pre-trial procedure. First, they can be used to discover what a witness or party will say and tie down the witness’s story. Second, they can be used to create testimony which can be used at trial. However, the ability to use a non-party deposition at trial differs between Texas state and federal courts, a distinction which can be important into an attorney’s trial preparation. A recent decision from the Fifth Circuit highlights this distinction. Case No. 20-50604, Spectrum Association Management of Texas, LLC v. Lifetime HOA Management, LLC. (5th Cir. 7/13/21). A copy of the decision can be found here.  Under Texas Rule of Civil Procedure 203.6(b), a deposition taken in a case can be “used for any purpose in the same proceeding in which it was taken.” Federal Rule of Civil Procedure 32(a) allows a deposition to be used in three instances: (a) impeachment of a witness who testifies at trial; (b) if the deposition was of a party opponent or that party’s officer, director, managing agent or designee; or (c) if the witness is unavailable to testify at trial. A witness is unavailable if the witness is (a) dead, (b) is more than 100 miles from the place of hearing or trial or is outside the United States, unless it appears that the witness’s absence was procured by the party offering the deposition, (c) if the witness could not appear due to age, illness, infirmity, or imprisonment, (d) the witness’s attendance could not be compelled by subpoena, or (e) other exceptional circumstances. The federal rule limiting when a deposition can be used at trial seems designed to protect the finder of fact’s ability to determine the credibility of a witness, as well as to allow opposing counsel the ability to cross-examine the witness at the time of trial. These purposes are balanced against the inconvenience to the witness and the prejudice to counsel if a party is truly unavailable. The Spectrum case (which was not a bankruptcy decision) involves the 100-mile rule.  A case was filed in San Antonio but was re-assigned to a judge sitting in Waco. The case remained docketed in San Antonio. Three months before trial, the parties were notified that the trial would take place in Waco rather than San Antonio. One month before trial, Spectrum gave notice that it intended to present the testimony of Spencer Powell, a former Lifetime partner, by deposition.  The Lifetime parties waited until trial to object to use of Powell’s testimony. They argued that the case was pending in San Antonio and that Powell was a resident of San Antonio. Spectrum argued that because the trial was being held in Waco, and Waco is more than 100 miles from San Antonio, that Powell was unavailable for trial and his deposition could be used. The District Court Judge allowed the use of the deposition and the Fifth Circuit affirmed. The Fifth Circuit reasoned that the term “place of hearing or trial” refers to the actual place where the hearing or trial would take place. Although there was not any Fifth Circuit authority on point, it relied on Tatman v. Collins, 938 F.2d 509 (4th Cir. 1991). In that case, a District Judge refused to allow a deposition to be used because the witness resided less than 100 miles from border of the district where the trial was to take place. The Fourth Circuit reasoned that if the rule was interpreted to mean 100 miles from the edge of the district that the burden on the witness would vary depending on the size of the district. Lifetime also argued that it was prejudiced by use of the deposition because it had strategically withheld its cross-examination during the deposition. The Fifth Circuit rejected this argument, finding that Lifetime had three months before trial and one month after the witness was designated to request leave to re-open the deposition and cross-examine the witness. As a result, the Fifth Circuit affirmed the trial judge’s decision to allow the use of the deposition and ultimately affirmed the award of damages against the Lifetime parties. The Spectrum case illustrates why practitioners who are used to practicing under either the state or federal rules can sometimes be surprised when appearing in the less familiar forum. It also illustrates how parties may have to adjust their trial preparation when underlying circumstances change. Lifetime’s decision not to cross-examine Powell during his deposition was a sound one when it thought that the case was going to be tried in San Antonio. However, when the place of trial shifted, Lifetime needed to shift its strategy as well. The trial in the Spectrum case took place in February 2020, just before the Covid-19 pandemic shut down normal court operations. How should the court apply the rule on the “place of hearing or trial” when court is being conducted remotely? Would the place be where the judge was sitting? If the judge was appearing from a remote location, would the “place” be where the court staff was present? Or would the place of trial be construed to be anywhere with internet access? The same issues arise with regard to Fed.R.Civ.P. 45, which requires a person served with a subpoena to appear for a trial or deposition if served within 100 miles of “where the person resides, is employed or regularly transacts business in person.” Could a person in Austin, Texas be subpoenaed to appear in court in Anchorage, Alaska if the person is able to appear from a computer located in Austin? The two rules could be interpreted together in the instance where the witness had previously been deposed, was subpoenaed to appear remotely, and then was unable to appear due to an electricity or internet failure. What these hypotheticals illustrate is that “place” has a definite meaning for in-person trials and hearings but is less certain when applied to remote proceedings. As the pandemic winds down and courts return to in person sessions, it is less likely that we will need to know the answers to these questions. However, if future circumstances require us to go remote in the future, it will be wise to remember the lessons learned during the time of Covid.  

It may surprise you to learn that, depending on the “age” of the tax debt and whether you filed a tax return for the taxes in question,...

Chapter 7 was designed to get folks out of debt quickly and relatively easily. If you pass the means test, own few or no non-exempt assets, and have primarily unsecured debt, you could find yourself debt-free in four or five months. Our experienced Pennsylvania bankruptcy lawyers will help ensure the process runs smoothly. Under the […] The post How Often Can You File a Chapter 7 Bankruptcy Case in Pennsylvania appeared first on .

Some people still struggle after completing a Chapter 13 bankruptcy. An unexpected medical condition, job loss, or divorce could send someone into a financial tailspin – even if they managed to alleviate their previous economic difficulties through a prior bankruptcy filing. Fortunately, most people have the right to filing for protection under the Bankruptcy Code […] The post How Often Can You File for Chapter 13 Bankruptcy in Pennsylvania? appeared first on .

In 2017, one of the most notorious social media promotional campaigns and musical festivals came crashing down, leaving vendors, investors, and ticket holders to pay for the disaster. Billy McFarland was accused and sentenced for defrauding hundreds of people out of millions of dollars. In an attempt to recoup some of the money they were […] The post Fyre Festival Attendees Will Receive Nothing from Bankruptcy appeared first on .