Compromises are favorites of the law.   A compromise and settlement can avoid expensive litigation and as more than one judge has pointed out, the deal that the parties make will generally be better for them than the ruling the court provides.  However, bankruptcy involves many stakeholders so that when two parties reach a settlement which affects rights of the estate, the parties must go to the court for approval of their compromise under Fed.R.Bankr.P. 9019.   In submitting motions to compromise, the cases and standards are well-established.  My standard 9019 motion refers to the four factor test set out in  In re Cajun Electric Power Coop, Inc., 119 F.3d 349, 355-56 (5th Cir. 1997) and many other Fifth Circuit decisions.   Most opinions dealing with motions to compromise relate to settlements which were approved which is great help if you are on the compromising side, but not so much on the objecting side.    Bankruptcy Judge Ronald B. King who is notoriously reticent to publish, has provided an opinion demonstrating when a settlement should not be approved.   Case No.  16-51448, In re Jorge R. Alfonso and Naydimar Diaz (Bankr. W.D. Tex. 9/6/09), which can be found here.What HappenedThe Alfonso case involves a variation on a common theme.   A debtor files bankruptcy and failed to list a possible personal injury claim.   Shortly before the discharge was obtained, the debtor hired a law firm to file a lawsuit.   The PI firm ran a search to see if the potential plaintiff was in bankruptcy but did not find the case.   Suit was filed against Ms. Diaz's employer, Nordstroms and the case went to arbitration.  During the arbitration, Nordstroms learned of the bankruptcy and moved to dismiss.  At this point, the plaintiff's lawyer, continuing to do everything right, contacted the trustee, who moved to reopen the bankruptcy case.   After the case was reopened, the debtors amended their schedules to disclose the claim.  Ms. Diaz claimed her maximum exemption of $23,675 in the lawsuit which was allowed after an objection from the trustee.       The Trustee discussed employing the PI firm to represent him in pursuing the claim.   However, the Trustee decided instead to accept a settlement offer from Nordstroms.    The Trustee filed a motion to compromise which proposed to settle the claim for $105,000.   The law firm objected, pointing out that the claim was worth between $500,000-$1.5 million.   In fact, Ms. Diaz had medical expenses of over $367,000, most of which were the subject of letters of protection.There were claims of just over $120,000 in the estate, which meant that creditors would receive a sizable distribution but would not be paid in full.  Most of the filed claims were for student loans which would not be dischargeable.   Therefore, the losers under the trustee's proposed settlement were the law firm, which would miss out on its contingent fee, the medical expense providers who had letters of protection and the debtors and their student loan creditors.   The big winner would be Nordstoms and, to a lesser extent, the trustee.The RulingJudge King succinctly laid out the standards for approving a compromise as follows:A bankruptcy court has wide discretion to approve or deny a settlement proposed by a trustee. See id.; see also Nellis v. Shugrue, 165 B.R. 115, 122 (S.D.N.Y. 1994) (citing Sec. & Exch. Comm’n v. Drexel Burnham Lambert Grp., Inc. (In re Drexel Burnham Lambert Grp., Inc.), 960 F.2d 285, 293 (2d Cir. 1992)) (“The experience and knowledge of the bankruptcy court judge is of significance in assessing the propriety of the settlement.”). But the Fifth Circuit instructs courts to do so “only when the settlement is fair and equitable and in the best interest of the estate.” Conn. Gen. Life Ins. Co. v. United Cos. Fin. Corp. (In re Foster Mortg. Corp.), 68 F.3d 914, 917 (5th Cir. 1995) (citing Rivercity v. Herpel (In re Jackson Brewing Co.), 624 F.2d 599, 602 (5th Cir. 1980)). To determine whether a settlement is fair and equitable, courts compare the terms of the compromise with the likely rewards of litigation, by evaluating:• (1) the probability of success in litigating the claim subject to settlement, considering the attendant uncertainties in fact and law;• (2) the complexity and likely duration of litigation and any attendant expense, inconvenience, and delay, if any, to be encountered in the matter of collection;• (3) the best interests of the creditors, with proper deference to their reasonable views;• (4) the extent to which the settlement is truly the product of arms-length bargaining, and not of fraud or collusion; and• (5) all other factors bearing on the wisdom of the compromise. Cajun Elec. Power Coop., Inc. v. Central La. Elec. Co. (In re Cajun Elec. Power Coop., Inc.), 119 F.3d 349, 356 (5th Cir. 1997) (citing Foster Mortg., 68 F.3d at 917); Jackson Brewing, 624 F.2d at 602.As counsel for Nordstrom argues, a court need not “conduct a mini-trial to determine the probable outcome of any claims waived in the settlement.” Official Comm. of Unsecured Creditors v. Moeller (In re Age Ref., Inc.), 801 F.3d 530, 540 (5th Cir. 2015) (internal citation omitted). Instead, the court is to “canvas the issues” to see if the settlement falls “below the lowest point in the range of reasonableness.” ARS Brook, LLC v. Jalbert (In re ServiSense.com, Inc.), 382 F.3d 68, 72 (1st Cir. 2004).But while a bankruptcy court should not hold a full-blown trial on the merits, it must “apprise [itself] of the relevant facts and law so that [it] can make an informed and intelligentdecision” on whether the settlement proposed is fair and equitable to parties in interest. Age Ref., 801 F.3d at 541 (alterations in original) (quoting Cajun Elec. Power Coop., 119 F.3d at 356); see also LaSalle Nat’l Bank v. Holland (In re Am. Reserve Corp.), 841 F.2d 159, 163 (7th Cir. 1987). In other words, the court must do more than “rubber stamp” a settlement. See Nellis, 165 B.R. at 122 (“The bankruptcy judge is ultimately responsible for an unbiased and informed assessment of a settlement’s terms.”); Cousins v. Pereira (In re Cousins), No. 09 Civ. 1190(RJS), 2010 WL 5298172, at *4 (S.D.N.Y. Dec. 22, 2010) (holding that “[trustee’s] opinions are not to be automatically accepted as reasonable” and that the “bankruptcy court must make independent determinations in approving a settlement”). Opinion, pp. 6-7.  I set this out at length not because I am too lazy to summarize them, but because Judge King provides a great resource on cases and points to argue when supporting or opposing a compromise.In making his ruling, Judge King summarized the evidence and arguments of the two parties.  The Plaintiff's firm  established that it had extensively prepared for the arbitration hearing, identified facts that would establish liability, asserted that Ms. Diaz had "excellent facts for proving damages" of at least $367,828.87 representing her medical expenses and provided a "well-supported" estimate of a settlement figure closer to $750,000.   On the other hand, the Trustee and Nordstrom provided more general statements in favor of settlement.Judge King explained:Likewise, the trustee presents no evidence as to how or why $105,000 is a reasonable number for settlement. As the Firm pointed out, most of the trustee’s motion to approve the settlement contains generalizations and legal conclusions. See ECF No. 35, pp. 5–7. Thus, when comparing the Firm’s intensive investigation into both legal and factual issues to the figure proposed by the trustee, the second factor (i.e., complexity and likely duration of litigation) and third factor (i.e., best interest of creditors) also weigh against the Proposed Settlement—or at least do not support the trustee’s argument to approve it. Opinion, p. 9.    The Court thus left the parties to either litigate or propose an alternative settlement.The practice point here is that when supporting or opposing a compromise, the party who provides specific facts will have an advantage over the party offering platitudes.   One danger for a trustee is that if he proposes a settlement based on weaknesses in his case and the settlement is not approved, the trustee will have given the opposing party a roadmap to defeat the claim.

From: The New York TimesBy: Brian M. Rosenthalhttps://www.nytimes.com/2019/09/27/nyregion/AOC-taxi-medallion-bailout.html

Mistakes You Should Dodge When Seeking Debt Relief Falling into serious debt can make you feel stressed and overwhelmed. You may feel like you’re working harder and harder, but you aren’t getting anywhere. You can start to feel like you’ll never see the end of your debt, which can make you feel desperate. When you’re desperate, you’re in the worst place you can be. You won’t think clearly, and you’ll be more likely to make bad decisions – the kind of decisions that can make your situation even worse. Even if you don’t know what to do to get out of debt, you can do a lot to help yourself just by knowing what not to do. Here are a few of the mistakes you should try to dodge when you are trying to find debt relief: Prioritize Unsecured Debt Credit cards carry ridiculous interest rates, which causes their balances to go up fast. When you owe a lot of money to credit cards, it can feel like you aren’t making a dent in your balance because of the interest. So, you might start putting as much money as you can to paying them off. However, doing so is a big mistake. Funneling all your money to your credit cards means you have less money to pay for other things. That means that you might need to take out more credit card debt just to pay for your essentials. It also means that you might not have enough money to pay for your secured debts, such as your home or auto loan. If you fall behind on these secured debts, your lenders can actually come for what you have, such as foreclosing on your home or repossessing your car. Your problems will be exponentially worse if you don’t have a car to drive or a place to live. Always prioritize your secured debt payments over your unsecured debt payments. Unsecured creditors typically don’t have much recourse other than to harass you until you can’t take it anymore and pay off. Taking Out Loans When you don’t have the money to pay your creditors, you may look for other ways to pay, such as by asking friends for money or by taking out a loan. You may think that you just “need a little help” until the next paycheck, or until you get that raise you expect, or until you get that better job. The trouble with this strategy is that you can’t count on any of those things happening. You have to learn how to better manage the money you have right now. Taking out a loan will only compound your debt problem. Unsecured loans like payday loans have excessive interest rates and fees, and they will drive up your debt fast. Just avoid taking on more debt and look for other forms of debt relief. Give in to Creditor Pressure The calls may never seem to end when you owe money to creditors. You will start to feel like you’ll do anything just to get the harassment to end. You may give in and just offer everything you have to the creditor who is harassing you the most. But then you don’t have money to pay your other creditors, and another debt may have been more pressing. It’s important that you assess your debt objectively so that you can make a strategic plan that will benefit you the most. You can do that if you make decisions in the spur of the moment because of pressure from a creditor. Don’t make any of these mistakes when you are trying to get a handle on your debt. Instead, talk to professionals like a financial counselor or an attorney to learn about the best strategies. In many cases, filing for bankruptcy can bring you maximum debt relief, allowing you to get the fresh start you need more quickly. If you are mired in debt, call My AZ Lawyers to learn how filing for bankruptcy may be able to help you. If you qualify, filing for Chapter 7 bankruptcy may result in a discharge of all your unsecured debts, or filing for Chapter 13 may put you on a more affordable repayment plan so you can pay your debts and get control of your finances. Call our bankruptcy law office today to review your finances and explore your options for debt relief. Published By: My AZ Lawyers Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 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) 399-4222 The post Mistakes You Should Dodge When Seeking Debt Relief appeared first on My AZ Lawyers.

For many people in Pennsylvania, filing for bankruptcy is a way to relieve themselves from certain forms of debt and move ahead with a clean slate. Filing for bankruptcy is a good option for many people, but it can have some negative consequences, such as lowering credit scores. Some people that have declared bankruptcy may […] The post Can You Buy a Home in Pennsylvania If You File for Bankruptcy? appeared first on .

The Fifth Circuit has released a new opinion which underscores just how hard it is to discharge a student loan under the undue hardship standard.   Thomas v. Department of Education (In re Thomas), 931 F.3d 449 (5th Cir. 2019).    A Sympathetic DebtorVera Thomas wanted to improve her station in life.  She was working at a call center in Southeastern Virginia earning $11.40 per hour with benefits.  In 2012, she decided to enroll in a local community college.   She took out two loans for $3,500.00 each for her first two semesters.   She did not return for a third semester and her loans went into repayment.   In spring of 2014, she paid back about $82 on her loans.Here is what happened next as told by Judge Edith Jones:Ms. Thomas's health began to decline significantly in 2014 when she was diagnosed with diabetic neuropathy. The condition, which often reduces circulation in patients' lower extremities, caused muscle weakness, numbness, and pain in her legs and feet after prolonged standing. Ms. Thomas frequently took unpaid leave from work at the call center to manage her symptoms and incurred significant medical expenses. In 2016, her employer was acquired by another company, and the new employer fired her for violating company policies. Because she was terminated for cause, Ms. Thomas was ineligible for unemployment benefits. 931 F.3d at 440.    Ms. Thomas moved in with her then-boyfriend and held some jobs with Perfumania, Whataburger and UPS.   She was not able to keep these jobs because they required her to be on her feet.    She filed Chapter 7 bankruptcy on March 24, 2017.   At that time, she was 60 years old and survived on a combination of public assistance and private charity.   She qualified for an in forma pauperis filing and was represented by Noah Schottenstein, an attorney with Baker Botts who represented her pro bono.  She sued to have her student loans discharged as an undue hardship.   Her case was heard by the well-regarded Judge Harland D. "Cooter" Hale.  Unfortunately, Judge Hale found that she did not qualify for an undue hardship.   She appealed to the District Court which affirmed.     At the Fifth Circuit, Ms. Thomas continued to be represented by pro bono attorneys Tatiana Sainati with Wiley Rein in Washington D.C. and Stephanie Barnes with Siebman Forrest in Plano.  Ms. Thomas had amicus support from Tara Twomey representing the National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys.   With all this legal firepower on her side, surely Ms. Thomas would prevail at the Fifth Circuit level, right?  Unfortunately, the Brunner test was too much for her.The Fifth Circuit's Ruling Under 11 U.S.C. Sec. 523(a)(8), student loans are non-dischargeable unless the debtor can show that not discharging them would impose an undue hardship on the debtor and dependents.   The Fifth Circuit, along with most circuits other than the Eighth (more on that later), follows the Brunner test.   Brunner requires the debtor to prove (1) that the debtor cannot maintain, based on current income and expenses, a 'minimal' standard of living for [herself] and [her] dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.  931 F.3d at 451.Judge Hale found--and the Fifth Circuit agreed--that Ms. Thomas satisfied the first prong.  Her income of $194 per month and expenses of $640 per month did not allow her to pay her student loans.  However, Judge Hale found--and the Fifth Circuit agreed--that she did not meet the second prong of the test.   The Fifth Circuit explained that the exceptionally demanding second prong of Brunnerrequires more than a showing of dire financial straits because the debtor must show that circumstances out of her control have resulted in a "total incapacity" to repay the debt now and in the future.Id.   The Court found that the debtor did not meet this standard. The answer to this question must be negative. Ms. Thomas's argument that she meets the second Brunner prong is contradicted by the record. Foremost, she is, by her own admission, capable of employment in sedentary work environments. Second, her actual employment experience demonstrates that after losing the call center job, she was hired by three different employers, although she quit when they were unable to accommodate her need to remain sedentary for periods of time during her shifts. Finally, she lost her job at the call center not because of physical problems beyond her control but for a violation of company policies.In sum, there is no evidence that Ms. Thomas's present circumstances, difficult as they are, are likely to persist throughout a significant portion of the loans' repayment period. Under the standard  adopted by this court and the vast majority of other circuit courts, Ms. Thomas is not eligible for a discharge of her student loans.931 F.3d at 452-53.   This ruling seems rather callous.   Ms. Thomas suffers from a medical condition.  She has been unable to hold a job.  However, maybe, somehow, this will change in the future and allow her to pay the loans.   In the words of The Princess Bride,  “Life isn't fair, it's just fairer than death, that's all.” Can Anyone Who Is Not in a Coma Meet the Test?One of the interesting aspects of the opinion was that the Fifth Circuit noted that Bankruptcy Judge Hale, who tried the case, stated that in fifteen years on the bench, he had never discharged a student loan over the objection of the lender.  Judge Hale is not an unfair judge so that got me wondering whether anyone who is not in a coma can meet the test.  I did a LEXIS search for cases decided between 2017-2019 which directly ruled on the undue hardship standard.  I found seventy decisions.   The debtor completely prevailed in eleven cases, received a partial discharge in six cases and lost in fifty-three cases.  Thus, the debtor's chance of receiving at least partial relief was 24% which is more than 0%.So who are the debtors who received undue hardship discharges? In one case, a debtor who had never earned enough to make payments on her student loans was diagnosed with Bipolar Type I disorder with psychotic features and post-traumatic stress disorder.   Understandably, she was not able to work and her sole source of income was SSDI.  Hill v. Educ. Credit Mgmt. Corp. (In re Hill), 598 B.R. 907 (Bankr. N.D. Ga. (2019).   My biggest question about this case is why the lender could oppose the discharge with a straight face. Another debtor succeeded in getting an undue hardship discharge where he had suffered from a bi-polar manic depressive disorder for over 20 years and his illness made it hard for him to read and write.   Pierson v. Navient (In re Pearson), 2018 Bankr. LEXIS 3106 (Bankr. N.D. Ohio 2018).    Finally, a hardship discharge would be granted where a debtor's payment under an Income Based Repayment plan ("IBR") would be $0 and the debtor would be taxed on the forgiven debt at the conclusion of the IBR.    Murphy v. United States (In re Murphy), 2018 Bankr. LEXIS 1598 (Bankr. D. N.M. 2018).On the other hand, there are cases where debtors receive a hardship discharge despite the fact that they look very similar to debtors who were denied one.  Educational Credit Management Corp. v. Murray (In re Murray), 2017 U.S. Dist. LEXIS 155043 (D. Kan. 2017) is a case where the District Court affirmed a Bankruptcy Court's ruling allowing an undue hardship discharge.   The Debtors had disposable income of $1,658 per month and testified that they could afford to pay between $200-$500 per month on their student loans.   The debtors were in their 40s and were "potentially settled into the jobs they will hold for the rest of their careers."   To fully pay off their student loans would require payments of $2,614-$3,945 per month, sums which exceeded their disposable income.   They could also have entered into an IBR which would require them to pay $605-$907 per month and would leave them with a tax bill at the end of twenty-five years.    However, the record does not show that the debtors established that they could not potentially win the lottery or be adopted by Oprah.   Therefore, the mere fact that it was implausible that they would ever be able to pay off their student loans didn't mean that it was impossible.   Totality of the CircumstancesThere is one more twist.  The Eighth Circuit follows what is known as the "totality of the circumstances" test.   Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir. 1981).    On its face, totality of the circumstances looks similar to Brunner:   In evaluating the totality-of-the-circumstances, our bankruptcy reviewing courts should consider: (1) the debtor's past, present, and reasonably reliable future financial resources; (2) a calculation of the debtor's and her dependent's reasonable necessary living expenses; and (3) any other relevant facts and circumstances surrounding each particular bankruptcy case. (citation omitted). Simply put, if the debtor's reasonable future financial resources will sufficiently cover payment of the student loan debt-while still allowing for a minimal standard of living-then the debt should not be discharged. Certainly, this determination will require a special consideration of the debtor's present employment and financial situation-including assets, expenses, and earnings-along with the prospect of future changes-positive or adverse-in the debtor's financial position.Long v. Educational Credit Management Corp. (In re Long), 322 F.3d 549, 554-55 (8th Cir. 2003).  However, at least in my limited survey, totality of the circumstances vs. Brunner, makes a big difference in result.    When I looked at totality of the circumstances separate from other cases, there were five cases where relief was granted and five where it was denied, a 50% success ratio.  Looking only at the Brunner-based cases,  there were six complete discharges, six partial discharges and 48 cases where no relief was granted, representing a 20% chance of partial or complete discharge.   My examination of seventy cases is by no means definitive.  However, it strongly suggests that debtors are not fighting on a level playing field depending on whether they file in the Eighth Circuit or the rest of the country.   This is a promising research subject for a younger Warren & Westbrook.Concluding RantSection 523(a)(8) is broken.   A debtor should not have to demonstrate psychosis to discharge a student loan.   It seems absurd to me that a court could conclude that a 60 year old woman with diabetic neuropathy presently earning $194 per month would somehow be able to pay her student loans some day.  Inconceivable!    It also seems blatantly unfair to me that a debtor's chance of discharging a student loan varies dramatically depending on where a case is filed.  That seems to violate the Constitution's requirement that we have uniform bankruptcy laws. I see two ways out of this dilemma.   One is that the Supreme Court could resolve the split in circuits.  I do not have great confidence that the current court will do so in a way that helps people discharge their student loan debts.  The second is that Congress can get us out of this mess.   Congress dropped "undue hardship" into the Code without telling us what they meant.  At the time, undue hardship was one of two ways to discharge a student loan so that if someone couldn't meet a difficult undue hardship standard they could still receive a time-based discharge.   The current bills pending in Congress would repeal Section 523(a)(8) altogether.  That is not realistic.   What we need is a bill narrowly targeting undue hardship discharges.   Post-ScriptAlthough the attorneys in the Thomas case were not successful, they deserve our thanks.  Pro bono and amicus curiae attorneys are valuable friends of the law.     

   The bankruptcy court in In re Everhart, 2019 Bankr. LEXIS 2892, Case #18-31896-MCM (Bankr. N.D. Tex, Sept 17 2019) overruled almost all of the chapter 13 trustee's objections to the Debtors' plan based on the means test.  The Everharts filed chapter 13 bankruptcy on May 10, 2018.  Their form 122C-1 showed they were above median income, and 122C-2 reflected disposable income of $436.26, resulting in a proposed distribution to unsecured creditors in their plan of $26,175.60.  Shortly before confirmation, the Everharts amended schedules I, J, and 122C reducing their disposable income to $234.15 and distribution to unsecured creditors to $14,049.  Judge Mullin examined each area on the objection in turn.  The trustee had objected that the Everharts failed to reduce the tax liability on form 122C-2 by the amount of the tax refund.  Given the 2017 tax refund of $4,963, the trustee argued for a $246.92 reduction in line 16 of the means test for tax withholding.  Ruling for the Everharts, the Court accepted the Everharts' assertion that they do not expect a refund in the future in that the 2017 refund was unusual due to expenses related to the birth of their child.  The trustee also objected to a $50 expense for optional telephone services on line 23 of form 122C-2.  The Court accepted the Everhart's testimony that enhanced services, such as text messaging capability and other applications on her cell phone are necessary for her employment with the school district, as she needs to be accessible throughout the entire school district.  Also, Mr. Everhart's employment as a computer systems integration administrator requires him to work from home, necessitating higher internet speed, increased bandwidth, and greater storage capacity than is provided in basic cell and internet services.     The Court went in somewhat more depth in analyzing the trustee's objection asserting that the Debtor is only entitled under §707(b)(2)(A) to the applicable monthly allowed expense for mortgage and car payments as specified in the local standards. The applicable statute reads:Section 707(b)(2)(A)(ii)(I) provides, in pertinent part:The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor . . . . Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.Section 707(b)(2)(A)(ii)(V) further provides, in pertinent part:In addition, the debtor's monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary.        Section 707(b)(2)(A)(iii), on the other hand, provides in pertinent part:The debtor's average monthly payments on account of secured debts shall be calculated as the sum of—(I) The total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the filing of the petition; and(II) Any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title, to maintain possession of the debtor's . . . motor vehicle . . . necessary for the support of the debtor and the debtor's dependents, that serves as collateral for secured debts; divided by 60.The Court looked to §707(b)(2)(A)(ii) goes on to provide 'Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.'  Thus, debtors can deduct the full contractual payment on both mortgage and car loans, but shall deduct such payments from the allowances, which result in a $0 allowance when the  contractual payment is higher than the allowance.  The Judge found that the trustee misapplied clause (iii) in arguing that the allowable mortgage expense is limited to the maximum allowance under the local standards.  Rather, clause (iii) addressing a debtor's actual mortgage debt payment is separate and apart from local standards referred to in clause (ii).  This interpretation is supported by the instructions in Form 122C-2 itself, which the Court found to be usable as an advisory opinion on how to interpret the code.   The same analysis applies as to the vehicle payments.    The Everharts claimed a number of expenses on line 43 for special circumstances.  The Court approved the $154.65 deduction for repayment of a 403(b) retirement loan.  If such repayment were not made, debtors would incur a significant tax penalty for early withdrawal, but did require that the Everharts provide documentation of the expense.     Debtors also asserted a $384.91 special circumstance expense for housing and utilities, including itemized expenses for home insurance, maintenance, repair and upkeep, electricity, water, sewer, garbage, telephone, internet, and cell phone.  The Court sustained the trustee's objection as to $60 bi/weekly lawn mowing service despite debtor's one acre lot, given that Mr. Everhart used to mow the lawn until their mower broke down, and that this was the sole reason they did not mow their own yard.  The Court accepted the Everharts' testimony that other deductions were reasonable and necessary, and that the Everharts had no other reasonable alternatives to the requested deductions.   The Everharts likewise itemized their vehicle expenses, requesting an additional $81 as special circumstances.  They testified that they lived in a rural area and had to travel 15-30 miles one way to acquire groceries, clothing, and household goods.  The Court appeared to generally approve of the Debtor's use of the special circumstances means test category to match the I and J expenses, to the extent that such expenses were reasonable.Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

From: CNBC.comBy: Megan Leonhardthttps://www.cnbc.com/2019/09/18/student-loans-are-not-the-no-1-source-of-millennial-debt.html

Chronic back pain can prevent those who suffer from it from living a normal life. This can mean that they are unable to take part in everyday activities, including working to make a living. Fortunately, the Social Security Administration offers programs that can provide benefits to people who suffer from back pain as well as […] The post Qualifying for Disability Benefits (SSDI) with Back Pain in New Jersey appeared first on .

Your Social Security Statement is a secure, official record of your earnings and estimated disability benefits. These statements are important to check and review, because they will help to give you a more accurate idea of the benefits you might qualify for in the future. In this article, our Pennsylvania disability lawyers explain everything you […] The post How Do I Get My Social Security Statement in NJ or Pennsylvania? appeared first on .

A living trust is a legal document that states who you want to manage and distribute your assets if you're unable to do so, and who receives them when you pass away. Having one helps communicate your wishes so your loved ones aren't left guessing or dealing with the courts.This is what Legal Zoom says about Living Trusts.   What it does not say is that unless a living trust is set up properly, it can result in loss of the Texas homestead exemption as the Debtor found out in Case No.  18-50102, In re Steven Jeffrey Cyr (Bankr. W.D. Tex. 7/16/19) which can be found here.What Happened Dr. Steven J. Cyr is a doctor who retired from the Air Force with the rank of Lt. Colonel.  In 2007, he and his wife purchased a home in San Antonio with a mortgage of $2.1 million.  He also purchased a second property in 2017.   On September 12, 2014, Dr. Cyr and his wife created a living trust and transferred their home into it by warranty deed.   Dr. and Mrs. Cyr were the Trustmakers, trustees and beneficiaries of the living trust.  However, Dr. Cyr resigned as a Trustee as of January 1, 2018.On January 20, 2018, Dr. Cyr filed a petition under Chapter 7.   Several parties objected to his homestead exemption.   Additionally, there were adversary proceedings filed to avoid transfers, determine the dischargeability of a specific debt and dney discharge.Judge Craig Gargotta conducted a four day trial concluding on March 7, 2019.The RulingJudge Gargotta rejected the argument that the Cyrs had abandoned their homestead.   Although Mrs. Cyr and their children moved out of the residence post-petition, Dr. Cyr never did.   Even though a real estate agent created a brochure and video for sale of the property, the property was never actually marketed.However, the Court found that the property lost its homestead status when it was transferred to the living trust without complying with Texas Property Code Sec. 41.0021.Prior to 2009, there was a controversy over whether property transferred to a living trust could be claimed as homestead.   In 2009, the Texas legislature sought to fix this problem by enacting Sec. 41.0021 which states that property transferred to a "qualifying trust" which is occupied by the owner as his residence would constitute the owner's homestead.  A "qualifying trust" was defined as an express trust (1) in which the instrument or court order creating the trust provides that a settlor or beneficiary of the trust has the right to:(A) revoke the trust without the consent of another person;(B) exercise an inter vivos general power of appointment over the property that qualifies for the homestead exemption; or(C) use and occupy the residential property as the settlor’s or beneficiary’s principal residence at no cost to the settlor or beneficiary, other than payment of taxes and other costs and expenses specified in the instrument or court order:(i) for the life of the settlor or beneficiary;(ii) for the shorter of the life of the settlor or beneficiary or a term of years specified in the instrument or court order; or(iii) until the date the trust is revoked or terminated by an instrument or court order recorded in the real property records of the county in which the property is located and that describes the property with sufficient certainty to identify the property; and(2) the trustee of which acquires the property in an instrument of title or under a court order that:(A) describes the property with sufficient certainty to identify the property and the interest acquired; and(B) is recorded in the real property records of the county in which the property is located.Subsection (a)(1) is written in the disjunctive so that only one of its three options need be satisfied.  However, Judge Gargotta found that none of the provisions applied.First, Judge Gargotta found that the settlor did not have the right to revoke the trust without the consent of another person.  Under the trust document, both of the settlors had to consent to revocation of the trust.  Rather than interpreting the clause to mean that someone other than the settlors had to consent, Judge Gargotta found that the requirement for both parties to consent did not satisfy subsection (a)(1)(A).   The Trust also failed to include a provision allowing for an inter vivos general power of appointment over the property.Finally, the trust document allowed the owners to occupy the property "rent free and without charge" but did not say that they could occupy the property at no cost as required by the statute.   The problem is that Texas law has two definitions of a "qualifying trust."   A qualifying trust under the Texas Tax Code is one in which the party may occupy the property rent free and without charge.  Tex. Tax Code Sec. 11.13(j).    However, the Property Code requires that the person be allowed to use the property without charge.   Tex. Prop. Code Sec. 41.002(a)(1)(C).   Judge Gargotta concluded that the Texas legislature must have meant something different by the two formulations and that therefore, the Tax Code language would not satisfy the requirements of the Property Code.Thus, for lack of proper verbiage, the homestead exemption was lost.Why The Opinion May Be Wrong or At Least Should Be Wrong There are some reasons to believe that Judge Gargotta's ruling may be in error.   Homesteads are favorites of the law.   There was good law that transfers of property to a living trust did not forfeit homestead protection prior to the 2009 law.  Additionally, Judge Gargotta's hyper-technical application of the statute seems contrary to the intent of the statute.   (In giving my opinion, I am cognizant of the fact that Judge Gargotta has "Judge" before his name.  As a result, his opinions carry legal force and mine are merely an appeal to the court of public opinion).    Under Texas law, where one person holds both legal and equitable title to a property, the estates are merged and the person holds the property free of trust.   In re Vazquez, 2012 Bankr. LEXIS 642 (Bankr. W.D. Tex. 2012), aff'd. Lowe v. Vazquez, 2013 U.S. Dist. LEXIS 44271 (W.D. Tex. 2013).   Unfortunately, here there were two trustees and two beneficiaries.   However, it is not an outlandish argument to say that the community estate of the Cyrs held both legal and equitable title, therefore extinguishing the trust.Prior to the Cyr decision, there was not any precedent interpreting Sec. 41.0021.   Therefore, Judge Gargotta was free to interpret the text in a manner which harmonized  both its text and purpose.  The purpose was obviously to avoid loss of homestead protection when property was conveyed to a living trust.   I will acknowledge that the literal language of Sec.41.0021(a)(1)(A) says that a qualifying trust is one in which "a settlor or beneficiary" has the right to "revoke the trust without the consent of another person."  This language seems to say that one person must be able to unilaterally terminate the trust.  However, given the importance of the homestead exemption, I would read the phrase to say that no one other than another settlor or beneficiary is needed to terminate the trust.Finally, I think that the phrases "rent free and without charge" and "at no cost" say the same thing.   I don't think that whether someone gets to keep their homestead should depend on the slavish application of magic words.Finally, what is the consequence of the homestead being found non-exempt?   If both debtors had filed, the trustee could have exercised their power to revoke the trust.  However, that could not be done because Mrs. Cyr did not file bankruptcy.   So the property is owned by a trust rather than the estate.   Under Texas law, creditors can reach the interest of a debtor in a self-settled trust.   This means that the property contributed by the debtor is subject to claims of creditors.  Shurley v. Texas Commerce Bank-Austin, N.A. (In re Shirley).  115 F.3d 333 (5th Cir. 1997).    The debtor contributed an undivided one-half interest in the property to the trust.   Thus, the trustee can only reach that undivided interest.   Avoiding the ProblemThere is any easy solution to this problem.  Never, ever, ever, ever transfer your homestead to a living trust.   The advantage of a living trust is that it supposedly avoids the need to probate a will.  However, probate in Texas is easy.   If your client has already executed a living trust, revoke it prior to filing.   The essence of a living trust is that it is freely revocable.    Debtor's lawyers should always ask their client if they have conveyed their homestead to a living trust.   It may be necessary to ask the question in several different ways.  However, it is too important a step not to take. Post-Script:After the decision came down, the debtor filed a notice of appeal.  The parties then filed a joint motion to have the case mediated before another federal Bankruptcy Judge.  As a result, Mr. Cyr still has a chance to retain his home.