By Jillian Berman A recent court ruling may offer hope for thousands of struggling borrowers looking to escape education-related debts. A Texas bankruptcy judge denied a request by student loan company, Navient, last month to dismiss a class-action lawsuit accusing the firm of illegally collecting on loans that were discharged in bankruptcy. Navient is appealing. Patricia Christel, a spokeswoman for the Navient, declined to comment on pending litigation, but noted in an email that the company supports reform “that would allow federal and private student loans to be dischargeable in bankruptcy for those who have made a good-faith effort to repay their student loans over a five-to-seven year period and who still experience financial difficulty.” The decision last month means the case can move forward and it also offers the opportunity for an appellate court to weigh in on whether loans historically viewed as exempt from bankruptcy discharge can actually be wiped away in the process. “This is one to watch for potential,” said John Rao, an attorney at the National Consumer Law Center and expert on consumer bankruptcies. The ruling comes as lawyers across the country are increasingly looking to challenge the conventional wisdom that any type of student loan isn’t dischargeable in bankruptcy. It also comes as the Department of Education is reviewing the high standard student loan borrowers must meet in order to have their debts discharged in bankruptcy. This case centers around a very specific type of debt — and a small share of Navient’s private loan portfolio — money loaned to borrowers to pay for unaccredited programs, such as bar exam study courses and K-12 educational expenses. The lawyers representing the class estimate that about 16,000 borrowers fall into this category, according to Austin Smith, one of those attorneys. But if the appellate court rules in favor of the plaintiffs that could indicate that borrowers with similar loans from other companies could also be entitled to relief. “If I were advising other companies who have these loans and have taken similar positions as Navient — I would be worried,” said Dalié Jiménez, a professor of law at the University of California-Irvine’s School of Law. Reasons for student loans to be exempt from discharge in bankruptcy To discharge a loan in bankruptcy, they must fall into one of four categories: 1. A federal student loan. 2. A student loan made by a qualified nonprofit (say, by a school). 3. A qualified education loan, which could be made by a for-profit company, but would need to be made for qualified educational expenses; in other words, those incurred at an accredited program for the cost of attendance. 4. Funds received as an “educational benefit.” Traditionally, bankruptcy courts have determined that the types of loans in question in this case can’t be discharged because they were received as an “educational benefit.” But recently, lawyers and judges have started to question whether loans to help borrowers study for the bar and other similar debts truly fit into that category. “It does definitely reflect a trend of this kind of decision,” Rao said of the recent ruling. In his order, the judge argues that the phrase “educational benefit,” likely refers to something different from simply a loan used for educational expenses. And, instead, refers to arrangements like money fronted by an employer for a worker to attend college that would need to be repaid if that employee leaves their job. “By its use throughout [the provision], Congress was certainly aware of the term “loan” and is presumed to have made a conscious decision of when to use it and when to choose something different,” the order reads. The legislative history of funds with ‘educational benefit’ That rationale appears to be in line with the legislative history of the educational benefit term, according to a recent paper by Jason Iuliano, a fellow at the University of Pennsylvania School of Law. The paper argues that — by viewing funds received for educational benefit to mean loans — judges have been interpreting the educational benefit language too broadly. Iuliano notes that during congressional hearings around the time the language was added, an expert explained to members of Congress that it was meant to only exempt conditional grants from being discharged in bankruptcy. “It was an effort to stop this very, very narrow category of exceptions,” Iuliano said. “It just ballooned up to cover pretty much anything you can make a case that advances one’s education.”Judges have been using this broader interpretation in part because it’s been so rarely challenged historically, Iuliano said. Because of the popular narrative that student debt is impossible to discharge in bankruptcy, it’s extremely rare for debtors to actually attempt to do so. What’s more, lawyers have also historically shied away from representing student loan borrowers trying to discharge their debt in bankruptcy, Iuliano said. Now that’s starting to change, said Rao. As more lawyers are beginning to challenge whether these debts are dischargeable in bankruptcy, judges are now hearing and carefully considering both arguments, he said. “Judges are not just going to automatically assume that the loan is entitled to this protection from discharge,” Rao said. Of course, the case is far from over. And Iuliano notes that even if the judge rules in a way that’s the most favorably possible to the debtors, the ruling would still only cover a fraction of borrowers or those with these very specific types of loans from this company. Still, he said there’s reason to believe these borrowers tend to be worse off than others with student loans and so it would help those who are struggling the most. “There’s probably a large swath of people that this applies to that they could get some fairly immediate relief,” Jiménez said. Copyright © 2018 MarketWatch, Inc. All rights reserved.
By Sarah O'Brien For people facing crushing debt, the weight of carrying it can seem unbearable. As bills go unpaid and debt collectors start calling, one nagging question might loom large: Would bankruptcy fix this? Depending on the type of debt you face and the rest of your financial picture, the answer could be yes. "Many people who file for bankruptcy probably never thought they would," said Harvey Bezozi, a certified financial planner and certified public accountant at The Tax Wizard in Boca Raton, Florida."It's freeing, but it definitely can be traumatic to do it." An estimated 733,000 businesses and individuals are expected to wipe out or reduce their debt through bankruptcy in fiscal year 2018, according to the U.S. Trustees Program. That's far below the peak of 1.5 million filings in 2010, yet up from an estimated 685,000 in 2017. Meanwhile, overall household debt stood at more than $13 trillion at the end of 2017, according to the Federal Reserve. That includes $8.8 trillion in mortgages, $1.4 trillion in student loans, $1.2 trillion in car loans and more than $1 trillion in credit card debt. While student loan debt currently is difficult to discharge in bankruptcy — you must prove undue hardship — most other consumer debt is fair game for either eliminating or negotiating a lower payback amount, depending on the specifics of your case. Of course, getting to the point of actually filing the paperwork with the bankruptcy court means overcoming the emotions that accompany the decision. "When people finally get to the point of coming to talk to me, it usually takes another six months for it to sink in that they have to file," said Cara O'Neill, a legal editor with Nolo who also is a bankruptcy and litigation attorney in Roseville, California. She said there often is a triggering event — such as a lawsuit filed by a creditor — that makes people realize how much trouble they're in. "People really don't want to have to go the bankruptcy route," O'Neill said. "They usually do everything they can to avoid it." In fact, some end up tapping their retirement savings to stave off bankruptcy. Experts say this is a big no-no and often just delays the inevitable. For starters, retirement assets — including 401(k) plans and individual retirement accounts that you own and contributed to — generally are protected in bankruptcy. (Inherited IR As do not get the same protection.) An exception to this broad rule applies to IR As, both traditional and Roth: Up to a set amount per person — currently about $1.28 million — is safe from creditors. Any excess could go to pay off creditors. Additionally, if you already receive retirement income, that money is not necessarily protected in bankruptcy. Meanwhile, if you are younger than 59½ and turn to your retirement assets to pare down debt, you will pay an early-withdrawal penalty of 10 percent unless you meet one of a few exceptions. That's on top of paying ordinary income taxes on the distribution. "The most significant thing to avoid is using retirement funds to pay back debt," O'Neill said. "If you can come out of bankruptcy without debt but with your retirement savings still intact, you'll be in a [more] stable financial place." Filing options There are several ways to file for bankruptcy. Most individuals typically choose between Chapter 7 and Chapter 13. Each has filing fees of a few hundred dollars, and enlisting an attorney can add $1,200 to about $3,500, depending on where you live and the complexity of your case. "Most filers will stop paying the debts that are getting discharged and instead use that money to pay the costs of filing," O'Neill said. It's also worth noting that while federal law governs bankruptcy, there are some differences among states regarding what property cannot be sold to pay off creditors. For instance, in some states, wedding rings up to a certain value are protected. Both Chapter 7 and 13 stop collection activity like calls from creditors or debt collectors, wage garnishments and, potentially, lawsuits from creditors. (Court judgments already in place are trickier to get rid of in bankruptcy.) However, there are differences in who qualifies and how debt is treated in each option. Chapter 7 generally is for people who lack enough income to repay their debt and have little in the way of assets. It also is the most common way to file individual bankruptcy. This approach quickly erases certain forms of debt, including from credit cards, medical bills and personal loans. It does not, however, necessarily stop your car from being repossessed or prevent home foreclosure, O'Neill said. Chapter 13 generally gives you three to five years to pay back certain debt and keep the asset (i.e., house or car). It also prevents creditors from garnishing your wages or putting a levy on your bank account. For this filing option, you must have income, and your debt must be below a certain amount (about $1.5 million total). For individuals with debt above that threshold, Chapter 11 — which is largely similar to Chapter 13 — might be the best choice. This is the least commonly used option for individuals. Credit impact The biggest downside of bankruptcy is the hit your credit report takes. "You exchange not having that debt for having a bankruptcy on your report," said Ike Shulman, co-chair of the National Association of Consumer Bankruptcy Attorneys' legislative committee. However, he said, many people who file for bankruptcy already have tarnished credit due to delinquent loans. The filing remains on a credit report for seven to 10 years, although the impact decreases over time and your score will tick upward. In fact, most Chapter 7 filers can qualify for a mortgage loan four years later, O'Neill said. Regardless of which bankruptcy approach you take, you should be prepared to provide detailed information on your financial life to the court. That includes tax returns, bank statements, pay stubs and the like. Keep in mind, too, that having an initial consult with a bankruptcy attorney often is free. They also might have suggestions for handling your debt that does not involve bankruptcy. "No one wants to acknowledge they can't handle their bills," Shulman said. "People don't file bankruptcy because it's an easy decision to come to. It's because they don't have other choices." © 2018 CNBC LLC. All Rights Reserved. A Division of NBC Universal.
By David LumbAs part of the budget that New York lawmakers passed last Friday, ride-hailing services and taxis face a new fee if they drive in Manhattan. These aren't nickel-and-dime increases, either: Uber, Lyft and the like face a $2.75 charge for each ride, taxis get a $2.50 increase and group ride services like Via and uberPOOL will be charged $0.75 per customer. It's meant to combat congestion and help fund subway repair and improvements, providing an expected $400 million per year going forward for the MTA. Unsurprisingly, it's already catching flak from customers and from taxi drivers, who have become faroutnumbered by ride-sharing cars in the last several years. Of the 103,000 vehicles for hire in NYC, 65,000 are driven by Uber contractors alone, while taxis remain capped by law at 13,600, The New York Times reported. As a result, average traffic in Manhattan has slowed from 6.5 miles per hour to 4.7."It'll hurt our business. People won't want to pay more money, and that's what's going to happen," taxi driver David Heller told NY1. "There's 130,000 Ubers, ok? They created the congestion, ok? Get rid of them."Other cities have enacted their own surcharges for ride-hailing services in recent years, but they are far lower than those New York just passed. Seattle instated a $0.24 charge for each trip in 2014, Portland, OR agreed to levy a $0.50 fee per customer in 2016, both of which funnel money collected toward regulating ride-sharing services. Chicago passed one in 2014 that will reach $0.65 this year and directs part of the funds raised toward public transit, much like New York's will.When reached for comment, both Lyft and Uber supported the surcharge but pushed for a broader fee plan affecting all vehicles: "Congestion will not be fully addressed until the Governor and Legislature enact a comprehensive plan that also addresses all commercial vehicles and the real issue driving congestion: personal vehicles," a Lyft spokesperson told Engadget over email."Uber supports the agreement between the Governor and the Legislature to target a per-trip fee on Manhattan riders where there is convenient access to public transit, and to adopt a first-in-the-nation tax discount on shared trips. We will continue to advocate for the adoption of a comprehensive congestion pricing plan that is applied to all vehicles because it is the best way to fully fund mass transit and reduce traffic in the central business district," read an Uber statement the company emailed to Engadget.© 2018 Oath Tech Network Aol Tech. All rights reserved.
By Danielle Furfaro and Rich CalderMayor Bill de Blasio said Friday he is once again willing to consider a cap on for-hire vehicles such as Uber — three years after wimping out on the move. Hizzoner made the comments on WNYC radio Friday morning in response to a question from a caller who asked him what he plans to do to end the recent spate of cabbie suicides, which taxi advocates say were fueled by financial woes caused by the car-app services. “I think the caps are the kind of thing we need to talk about again because this situation has gotten worse since then, both in terms of the pressure that has been put on the [cab-]medallion owners and everyday taxi drivers,” de Blasio told host Brian Lehrer. When de Blasio first tried to go toe to toe with Uber, there were about 47,000 black cars on the road.Now there are more than 100,000. The nasty battle over the issue in the summer of 2015 sputtered when de Blasio couldn’t get the City Council votes needed to push the cap through. Councilman Steve Levin, who was the one who first sponsored the bill back then, reintroduced it to the council earlier this year and is trying to garner votes. There also should be more regulation on the for-hire vehicles to get them more in line with the safety and other rigmarole that cabbies have to go through, de Blasio said. “We are trying to create parity across all of this industry,” he said. “Everything that yellow cabs do, the other should have to do too. So we applied disability-access rules to the for-hire vehicles. I want to see stronger safety and labor rules for them as well.” Taxi advocates say getting raises for all drivers has to be a part of the package, too. “There needs to be an immediate raise for the drives and regulations on labor standards to protect their income,” said New York Taxi Workers Alliance executive director Bhairavi Desai. De Blasio also said that since the city can no longer sell medallions because of the lack of demand, it needs to take steps to protect the value of the more than 13,000 that are already out there. Desai said the only way to do that is to cap Uber vehicles. Copyright 2018 NYP Holdings, Inc. All Rights Reserved. “The thing that has reduced the value is the driver’s ability to earn a living,” she said. Uber officials argued that there are still enough riders to go around. “Each week, 30,000 new New Yorkers sign up to use Uber for the first time,” said Uber spokeswoman Alix Anfang. “Uber’s riders take the majority of their trips outside the congested streets of Manhattan, and in the communities that have long been ignored by yellow taxis and are underserved by public transit.”
In Cadwell v. Kaufman, Englett & Lynd, PLLC, No. 17-10810, 2018 WL 1550612 (11th Cir. Mar. 30, 2018) the debtor had employed Kaufman, Englett & Lynd (KEL) to file a chapter 7 bankruptcy, and signed a contract for $1,700 attorneys fees with a $250 retainer, and an additional $250 shortly after that, with four monthly installments of $300. The client, Caldwell, asserted that KEL instructed him to pay the retainer and all subsequent payments by credit card, which the debtor did using 2 different credit cards. After terminating his relationship with KEL, Caldwell sued them under 11 U.S.C. §526(e) which provides A debt relief agency shall not ... advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer a fee or charge for services performed as part of preparing for or representing a debtor in a case under this title.11 U.S.C. § 526(a)(4). KEL moved to dismiss asserting failure to state a claim, and that the statute was unconstitutional because it restricts attorney-client communications. The district court granted KEL's motion, finding that Caldwell alleged no facts that would support an inference that KEL acted with an improper purpose with intent to manipulate the bankruptcy system. On appeal the 11th Circuit found initially that KEL was a debt relief agency, being a law firm that provides bankruptcy-related advice. It also found Caldwell was a 'assisted person or prospective assisted person' under the statute. Finally, it determined that the statute created two distinct prohibitions: 1) regarding incurring debt in anticipation of bankruptcy, and 2) regarding incurring debt to pay for bankruptcy related services. The issue in dispute is whether the phrase 'in contemplation of bankruptcy' applies to both restrictions, or just the first provision. The significance of such distinction is that the Supreme Court has interpreted the phrase 'in contemplation of' to require proof that the advice to incur debt was given for an invalid purpose. Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 239, 130 S.Ct. 1324, 176 L.Ed.2d 79 (2010). The Court considered the three different possible interpretations of the requirement. The Milavetz decision itself suggests a prohibition against either advising to incur more debt or to pay an attorney or preparer for services in preparation for filing. While not an unnatural reading, such an interpretation would flatly prohibit all advice to pay an attorney for bankruptcy-related representation, which conflicts with other provisions of the Bankruptcy Code clearly contemplating payment of attorneys for bankruptcy services. KEL suggests a reading that prohibits a lawyer from advising his client to incur debt to pay for bankruptcy legal services only if such advice was given for an improper purpose. Since Milavetz involved only the first prohibition, incurring debt in anticipation of bankruptcy, it does not control the issue here regarding incurring debt to pay for services. Application of the 'in contemplation of' provision to the 2nd prohibition would leave the language nonsensical: A lawyer shall not advice his client 'to incur more debt in contemplation of...to pay an attorney.' Further, application to both prohibitions would render the second prohibition essentially meaningless. The better reading is to interpret the statute to prohibit advice to incur more debt either 1) in contemplation of a bankruptcy filing, or 2) to pay an attorney for bankruptcy related services. Thus interpreted, the provision forbids lawyers from advising their clients 'to incur more debt ... to pay an attorney ... a fee or charge for services performed as a part of preparing for or representing a debtor in a case under this title.' Thus, the improper purpose limitation applies to the more general provision: prohibiting advise to incur more debt in contemplation of a bankruptcy filing. The more specific provision is aimed at one specific type of misconduct: advising debtors to incur debt to pay counsel. Such advise puts the attorney's financial interest ahead of the clients, possibly leading to a nondischargeability action by the creditor on which the charge was made. It also puts the lawyers interest ahead of the creditors in that while the lawyer is paid, it leaves a diminished estate on which creditors can draw. Caldwell adequately stated a claim under this section by alleging that KEL instructed him to pay the retainer and subsequent payments by credit cards. The instruction would satisfy the 'advise' requirement, and directing that such payment should be paid by credit card necessarily required him to incur more debt. Such an interpretation is consistent with the constitutional requirements regarding attorney client communications. The statute does not prohibit counsel from advising clients to pay attorneys fees. It does not prevents firms from discussion with debtors potential options and their legal consequences. It merely prohibits counsel from giving their clients 'affirmative advice' to incure more debt in order to pay for bankruptcy-related representation. Query: what practical limitations are there on debtor's counsel seeking fees for services? It would appear the case limits advising a client to borrow in order to pay for services (pre or post-petition: including borrowing from relatives or friends; probably including borrowing from IRA's or retirement accounts). Whether it would prohibit factoring of fees is an open question. The decision has no issue with charging for fees, given the norm of requiring all fees to be due prior to filing. Would fee splitting be an issue, given a post-petition contract with the debtor requiring payment for representation in the on-going case? If it is, would the same issue arise in the case when fees are paid up front but additional post-petition services are requires for lien avoidances, redemptions, or adversary proceedings? Does it make a difference whether the services are anticipated when the case was filed? Factoring of post-petition fees would seem more of an issue, assuming an actual promissory note is signed and then such note is sold to another party for debt collection. This seems very similar to the conduct complained of in Caldwell. The case raises additional issues that will have to be dealt with by courts in the future. Michael Barnett www.tampabankruptcy.com
By Nicole GoodkindCompetition from on-demand car services like Uber and Lyft is literally killing New York City taxi drivers, according to the New York Taxi Workers Alliance.The group claimed that four yellow-cab drivers committed suicide in the past few months due to financial hardships caused in part by the emergence of app-based taxi services in New York.We are "sick and tired of burying our brothers," Alliance President Bhairavi Desai told Fox Five news outside a City Hall protest where drivers had lined up four empty coffins and covered them in white flowers. Drivers in attendance shouted protest chants like “stop Uber’s greed.”Yellow cabs in New York face stricter regulations than Uber and Lyft cars, where city regulations prevent surge pricing and the number of cabs allowed on the road.New York City currently allows nearly 13,600 yellow cabs to operate, but there are about 61,000 cars affiliated with Uber on the road. Between 2013 and 2017, the amount of time taxi and app-based vehicles spent unoccupied increased by 81 percent in Manhattan, according to a recent study by Bruce Schaller, former deputy commissioner for traffic and planning at the New York City Department of Transportation.The crowding has a deeper financial impact on cab drivers than a lack of fares. A taxi medallion, which allows a driver to operate his or her own cab instead of leasing from others, peaked at $1 million in 2014 but is now worth less than $200,000. Many drivers were borrowing against their medallions and relying on their resale value to pay for retirement.Desai and other taxi drivers want the city to cap the number of cars using ride-hailing apps and to establish equal fare pricing.New York City Mayor Bill de Blasio’s office issued a statement saying, “We've worked closely with the [Taxi and Limousine Commission] and City Council to reduce regulations on drivers while balancing the need to protect customers and keep city streets safe—efforts which will continue as we seek to reduce the stresses drivers face." However, many taxi drivers claim they’re nearing bankruptcy and are losing their dignity and morale as they watch their lifelong careers become turned into “side gigs” by the tech industry.Some city council members are attempting to pass legislation to regulate ride-hailing apps. But when they tried in 2015, Uber launched a big ad campaign that worked to quash any potential reform. Meanwhile, the pressure is causing some drivers to take their own lives. On March 16th, 65-year-old Nicanor Ochisor was found dead in his Queens, New York, home. His family said that he was in financial trouble and had pegged his retirement plans on selling his medallion. In February, driver Douglas Schifter shot himself outside City Hall after writing a long Facebook statement chiding the government for its lack of taxi regulation.Copyright 2018 Newsweek LLC. All rights reserved.
By Doree LewakNYC cabbies are being driven to the edge of financial ruin and despair as ride-hail apps like Uber and Lyft continue to take their customers. Last week, in the fourth driver suicide since November, Nicanor Ochisor, 65, hanged himself inside his Queens home, depressed over the plummeting value of the taxi medallion he owned that was supposed to finance his home and looming retirement. The value plunged from $1 million to around $180,000 over the last five years. Last month, longtime black-car driver Doug Schifter shot himself in front of City Hall over money troubles. And two livery drivers killed themselves in recent months, one of whom, Danilo Castillo, pointedly wrote his suicide note on the back of a Taxi and Limousine Commission summons. “We’ve seen this building over the past three years in particular. The financial crisis is crushing enough, but it’s the political silence that’s destroying people,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance. Without the political will to cap them, the number of for-hire cars in circulation has swelled to about 100,000 (roughly two-thirds are Uber drivers). The number of yellow cabs is capped by the city at 13,587. The resulting yellow-cab ridership is way down, going from about 475,000 fares per day in 2014 to between 175,000 to 250,000 per day now, according to the TLC. “Very clearly, there is less work to go around. [Taxi driver] earnings have taken a hit,” said TLC spokesman Allan Fromberg. Full-time daytime cabbies saw a 23 percent drop in their annual earnings from 2013 to 2016, from $45,529 to $35,344, the Alliance says. While Uber and Lyft drivers have little overhead (they do pay onetime $550 TLC license fees), hacks who own their own medallions, which are usually financed through banks, have average monthly expenses of “$6,000 to $9,000 per month,” said Desai. This perfect financial storm has many cabbies — mostly immigrants with few career options — silently suffering, or seeking exits like bankruptcy, or worse. “Some people are too proud to tell anybody they’re failing,” said one medallion-leasing veteran. “For every 40 bankruptcy cases, I now see two or three cabbies. That’s a significant number of filings — all in the last two years,” a bankruptcy attorney told the Post. “Guys walk into the TLC to return their medallions in tears,” he said. Here five drivers share their stories: Nicolae Hent, 61, was Ochisor’s best friend. The cabbie of 30 years predicts a bleak future for fellow hacks. “There will be more like that — he’s not the first and he won’t be the last,” he said of his pal, whose words haunt him. “After the cold in January, he said, ‘I can’t make money — I think we’re in big trouble,’ and I told him, ‘We have to fight — things will get better.’” Hent, who owes about $140,000 on his medallion mortgage, told The Post, “I’m in worse shape than him. I’m scared — but I won’t [take my life.] I’ll fight my whole life.” He blames the inaction of lawmakers who refuse to level the playing field between ride-sharing apps like Uber and yellow cabs. “I like competition, it’s good for consumer,” he said. ”But it’s not competition when you have a free license.” He estimates he brought home less than $35,000 last year, after a decade of making upwards of $45,000. “My plan at 62 was to retire and give my medallion to a broker,” he said. Now he has to work harder than he did as a young man. “I don’t know why my wife is still with me,” he said. “I spend more time in this cab than I do with my own wife.” Mohammed Sheikh, 62, is drowning in debt. The Bronx-based married father of three who worked the night shift seven days a week for 18 years, reminisces about the good old days. “I used to make very good money — it was much easier,” he said of his $50,000 take-home. Passengers “would fight. One guy comes from the right, one from the left, and scream, ‘He’s stealing my cab.’ It was never empty.” Then Uber came along. Last year he estimates his pay at a paltry $17,000. “It’s not enough. I have to quit very soon. Every day I struggle about what to do — I can’t survive doing this anymore. “I never imagined this — I was always making good money. I would work seven days, but when you make good money, you don’t get tired.” His two adult children help support Sheikh, who suffers from diabetes, and his wife, but he’s on the brink. “The only way to survive is use credit cards” he said. “I just make rent,” he said of the $1,500-a-month two-bedroom. With a son off to college next year and tuition looming, Sheikh is panicked. “I’m going into debt with the credit cards — I’m more than $10,000 in debt.” Nick A., 28, is a rookie from St. Petersburg, Russia, who started driving a yellow taxi eight months ago. He thought he’d make some extra money for his family — his wife, 4-year-old son and year-old daughter — while working as a manager at Yellow Cab Management, where he’s been working four days a week for past two years. Now, he works seven days a week, starting his day at 3am tooling around in his Ford hybrid, armed with a pack of Newports and water bottle. “Sometimes you can drive for an hour and no passengers. Right now it’s hard, business is terrible, but it will get better.” This past week was his worst — netting $60 one day — but he’s determined to stay in the business and own his own medallion one day. “I still think I can make money in this business.” Still, if things get tough, the whippersnapper with an economics degree from Russia can always reinvent himself. “Besides yellow cab, I can always do another job. I would never make a decision like [he] did,” he said of Ochisor. “Maybe he bought medallion when it was high. You can still make money from the medallion.” Vinod Malhotra, 53, is a worrier. The 53-year-old Hicksville, LI married father of three is anxious about paying for college for his teen children, but he credits his kids for never hounding him for the latest phones and gadgets. “The kids are wise — they understand my income is down. They don’t ask for picnics or vacations. They say,‘Don’t worry — we’ll get a [college] scholarship.’” Still, the night-shift driver, who works from 5pm to 5am six days a week, worries about foreclosure and bankruptcy. He never imagined being in this position back in 2010 when he snagged a medallion for $600,000. “At that time, you feel lucky to get it for under a million. And now we are very worried about how to pay our [$6,000 monthly] bills.” Last year his take-home pay was $30,000, down from $45,000 during boom times. “We cannot survive long — we can’t make payments.” When it’s slow, he drives by Penn Station on Thursday rush hour to join a conga line of 15 cabs. “That never would have happened five years ago. Before, the customer would wait 15 minutes. Now, we do.” A close friend and fellow medallion owner is battling stage 4 kidney cancer and can’t work or even sell his medallion. “Anything can happen at any time,” said Malhotra. “We always thought the medallion was our pension. Now it only creates debt.” Bernard Sasu, 50, is about to jump ship. The married father of two teens from downtown Brooklyn is grim. “It doesn’t matter if you start early, if you start late. It’s the same thing every day. You don’t make any money.” His saving grace? “Old people don’t know how to use Uber.” When he first started driving in 2011 he’d take home $200 a day. “When I first started, it was all about the money. This is NYC — you can’t lose with a taxi. “Now, forget about it. You have the kids going to school, the parents going to work, but by 10 or 11, there’s nothing.” He said he can drive the length of Manhattan — sometimes for up to two hours — without a fare. “That’s all we do — drive around.” And that means critical cutbacks for his family. “You have to change some things?” he said, like not eating out or going to the movies. “You can’t go on vacations like you used to,” said Sasu, who would regularly visit his family in Ghana. “I haven’t been in five years — it’s too expensive.” Like many of his driver friends who fled in the past few years to become doormen, Sosa is ready to start over, having applied to be an MTA conductor three months ago. “You have to keep going, you can’t give up on life. If you can’t be a driver you do something else,” he said. “When I came to this country I was a dishwasher. I’m not going back to that.” © 2018 NYP Holdings, Inc. All Rights Reserved
By Janet Berry-Johnson Bankruptcy laws were designed to give people in dire financial situations a chance to start over. Whether your troubles stem from bad decisions or just bad luck, bankruptcy can help you resolve your debt and get back on stable financial footing. While stories of big companies declaring bankruptcy tend to make the news, individual bankruptcies are far more common. In 2017, there were just 23,157 business bankruptcy filings, compared to 765,863 non-business bankruptcies, according to the Administrative Office of the U.S. Courts. Of those, Chapter 7 is by far the most common, making up more than 60 percent of all non-business bankruptcy filings in 2017. If you’re facing financial troubles and considering declaring bankruptcy, you likely have some questions about what type of filing is right for you and the effect it will have on your credit score and assets. This guide will explain Chapter 7 bankruptcy, who is eligible to file Chapter 7, and how that will affect you now and in the future. Table of contents:PART I: Chapter 7 Bankruptcy Explained How does Chapter 7 affect my credit and for how long? Is Chapter 7 Bankruptcy right for me? PART II: Filing for Chapter 7 Bankruptcy Not ready for bankruptcy? Other ways to tackle debt Life after bankruptcy PART I: Chapter 7 Bankruptcy ExplainedChapter 7 bankruptcy is named for Chapter 7 of the Bankruptcy Code. In Chapter 7, the debtor’s assets are liquidated, or sold to pay off creditors. Other forms of bankruptcy, such as Chapter 13, typically allow the debtor to keep their property and work out a plan to repay creditors, but Chapter 7 does not. Eligibility requirementsTo qualify for Chapter 7, an individual must pass a means test, which is done using an official form. James Shenwick, personal and business bankruptcy attorney with Shenwick & Associates in New York, NY, says completing the means test calculations is very complicated and virtually impossible to do without a software program, so you should seek help from an experienced bankruptcy attorney before you attempt to complete the form on your home. The form requires you to provide your income and expenses, then make calculations using the information entered. Some of that information, such as your current monthly income, will come from your own records. Other information will come from the IRS and the Census Bureau but are available through the U.S. Department of Justice. The means test is designed to determine whether you have the means to repay a portion of your debts. If the calculation determines you can, then you don’t qualify for Chapter 7 bankruptcy. If the calculation determines you don’t have the means to repay your debts, you may consider filing for Chapter 13 bankruptcy. The forms needed to complete the means test and the instructions for completing them are available for download through the U.S. Courts website. They include: Form-122A-1, Chapter 7 Statement of Your Current Monthly IncomeForm 122A-2, Chapter 7 Means Test CalculationForm 122A-1Supp, Statement of Exemption from Presumption of Abuse Under §707(b)(2)Chapter 13 vs. Chapter 7Chapter 13 Bankruptcy vs. Chapter 7 BankruptcyChapter 13Chapter 7● Set up a plan to repay all or part of your debts while keeping your home, vehicle, and other personal property● Liquidate all non-exempt assets and use the proceeds to pay creditors● For debtors with a stable monthly income and the ability to make payments under the proposed plan● For low-income debtors with little or no assets● Cannot have more than $394,725 of unsecured debt or $1,184,200 of secured debt● No upper limit on debt● Receive discharge of eligible remaining debts after completion of repayment plan (usually three to five years)● Receive discharge of remaining eligible debts typically within three to five months● Allows the debtor to catch up on missed payments and avoid foreclosure or repossession● May not provide a way for the debtor to avoid foreclosure or repossession (depends on state law)● Remains on your credit report for up to seven years● Remains on your credit report for up to 10 yearsWhich debts can be forgiven?After Chapter 7 bankruptcy, many of your debts will be discharged, or wiped out, at the end of your case. However, this isn’t true of all debts. The discharge of debt is established by federal law. Some debts cannot be discharged in bankruptcy, so you will still owe them after your other debts have been discharged. Officially, any debts that you did not list on your bankruptcy paperwork can remain after you’ve declared Chapter 7 bankruptcy, but Shenwick says, in practice, that doesn’t usually happen. There are two types of Chapter 7 bankruptcies: asset (where the debtor owns assets that can be sold and the proceeds distributed to creditors) and no asset (where the debtor doesn’t own any nonexempt property, cash or valuables). “If a creditor is omitted and it’s a no-asset case, the debt will be discharged. If it’s an asset case, the paperwork can be reopened, and the omitted debt can be added,” Shenwick says. Debts that CAN be discharged in a Chapter 7 bankruptcy include: Credit card debtMedical billsLawsuit judgmentsMost debts arising from car accidentsObligations under leases and contractsPersonal loansPromissory notesDebts that CANNOT be discharged in bankruptcy include: Child support and alimonyFines, penalties, and restitution you owe for breaking the lawCertain tax debtsDebts arising out of someone’s death or injury as a result of your intoxicated drivingAnd finally, some debts can be discharged in a Chapter 7 bankruptcy unless a creditor objects and convinces the court that they should not be discharged. These include: Debts arising from fraudDebts for luxury purchases or cash advances made within a period of time prior to filingDebts arising from willful and malicious actsDebts arising from embezzlement, theft or breach of fiduciary dutyShenwick says, in his experience, less than one in ten debts are objected to by creditors in court. “It’s rare for the creditor or the trustee to object,” Shenwick says. “The presumption in bankruptcy is that the person is entitled to a discharge. The goal is a fresh start, so as many debts as can be wiped out should be discharged.” What assets will I lose?Chapter 7 bankruptcy requires the debtor to sell certain assets and use the proceeds to pay their debts. But some assets are exempt under federal and state bankruptcy laws, meaning the individual is allowed to keep the assets. The home is often the asset most people considering Chapter 7 bankruptcy are concerned with losing. Most states allow homeowners to protect a certain amount of the equity in their home from creditors. This is called the homestead exemption. The federal homestead exemption is currently $23,675, or double that amount for a married couple jointly owning a home. So if you own a home worth $300,000 with a mortgage of $285,000, your equity of $15,000 would be fully protected by the federal homestead exemption. That’s because the $23,675 exemption amount is larger than and covers the entire amount of the $15,000 equity. However, in some states, the state homestead exemption is much lower than the federal one, and not all states allow their residents to use the federal exemption amounts. So it’s a good idea to consult with an experienced bankruptcy attorney in your area to find out which set of exemptions apply. Federal bankruptcy law permits each state to adopt its own exemption laws in place of the federal exemption. In some states, the debtor has the option to choose between the federal and state exemption lists and select the one most beneficial in their circumstances. Exemptions may enable you to keep your home, one car, clothing, household items and even some proceeds from the sale of your property. Keep in mind that exemptions are not automatic. For an asset to qualify for an exemption, you must list the item on the exemption form and specify the amount of the exemption you’re claiming. The amount of exemption you are entitled to claim for different assets may also vary by state. For example, in California, you can claim a $2,300 exemption for a motor vehicle. If your vehicle is worth less than $2,300, you can keep your vehicle. If your vehicle is worth $5,000, the bankruptcy trustee will likely sell your car, pay you $2,300 for the exemption, and use the remainder of the proceeds to pay off your creditors. How does Chapter 7 affect my credit and for how long?Bankruptcy will no doubt hurt your credit score, but the extent of its impact depends on over overall credit profile. In reality, if you are in a position where your debts are so overwhelming that you need to file bankruptcy, chances are your score is already pretty low to begin with. And because of that, your score may not see a huge drop at all. However, if you have good credit, you can definitely expect to see a significant dip. .” Expect a Chapter 7 bankruptcy to remain on your credit report for up to 10 years from the date filed. But the negative impact of the bankruptcy on your credit score will lessen over time, meaning a bankruptcy that is only one year old will have a more significant impact than one that happened eight years ago. Pros and Cons of Chapter 7 Bankruptcy Pros & Cons of Chapter 7 BankruptcyBenefitsRisks● A fresh financial start● Will remain on your credit report for up to 10 years● You may be able to keep certain exempt assets● May impact your ability to get credit, buy a home, buy a car, rent an apartment, or even get a job for quite some time● Collection efforts by your debtors must stop as soon as you file Is Chapter 7 Bankruptcy right for me?Mark Billion, CEO of BankruptcyAnywhere.com, a software program that helps people act as their own attorney for a bankruptcy filing, says Chapter 7 may make sense for people who: Make less than 50% of the median income level in their state. “Those who make more than 50% of the median income for their state have to explain to the Court why they deserve to file,” Billion says.Are current on their rent/mortgage and car payment. “If you are not trying to catch up on secured debt (the technical term for loans secured by your home or car) a Chapter 7 should be your best bet. It eliminates payday loans, credit cards, medical bills, personal loans, and pretty much everything else.”Have little or no disposable income.Have not successfully filed Chapter 7 during the previous eight years. If you don’t meet the means test for Chapter 7, and you have income, but either through bad luck or bad decisions got in over your head in debt, Chapter 13 may be a better option. Chapter 13 bankruptcy helps you work out a court-approved payment plan to help you pay off your debts over a period of three to five years. Once the payment plan is completed, any remaining debts are discharged. If Chapter 13 is a viable option, it may be preferable. A Chapter 13 bankruptcy may be removed from your credit report after seven years (as opposed to 10 years with Chapter 7). Also, some creditors look more favorably on Chapter 13 bankruptcies since you’re paying more of your debts off than you would under Chapter 7. PART II: Filing for Chapter 7 BankruptcyHere’s an overview of the steps involved in filing for Chapter 7 bankruptcy. Find an attorneyMany blogs and websites have bankruptcy information, but your best course of action is speaking to an experienced personal bankruptcy attorney who is familiar with the laws of your state. Shenwick says in his experience, once a person realizes they have a problem that may lead to bankruptcy, they speak to their accountant. The accountant may know about the issue anywhere from six to 12 months before the individual consults an attorney. “So many people say they wished they’d come to see me a year ago,” Shenwick says. “It’s the avoidance reaction – they put off what is unpleasant or uncomfortable.” Despite those fears, Shenwick says delaying the inevitable is a mistake. “Some people make their problems worse by attempting to transfer assets to friends and family – that’s a big no-no. Or they might pay the wrong creditors. If you sense you’re in trouble, speak to an attorney as soon as possible to prevent mistakes that can make matters worse.” Shenwick recommends getting a referral from your accountant, family attorney or friend. If you can’t find someone through word of mouth, call your local bar association. They maintain a list of bankruptcy attorneys in your area. Great ready for credit counselingThe federal Bankruptcy Code requires individuals filing for bankruptcy to get credit counseling within a 180-day period before filing a bankruptcy petition. If you are married, both spouses must attend credit counseling. The credit counseling agency must be approved by the U.S. Trustee Program. You can find a list of approved agencies from the U.S. Department of Justice. Petition and paperworkNext, you’ll file a petition with the bankruptcy court in your area. In addition to the petition you will also have to submit: A schedule of assets and liabilitiesA schedule of current income and expensesA statement of financial affairsA schedule of contracts and unexpired leasesCertificate of credit counselingA copy of any debt repayment plan developed through credit counselingPay stubs (if any) for the last two monthsThe court is required to charge a $245 case filing fee, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. In most cases, you have to pay these fees before filing, but in some cases, the court will permit you to pay in installments over the course of 120 days. A trustee is appointed to your caseAfter your petition is filed, the U.S. trustee appoints an impartial case trustee to your case. It’s the trustee’s job to administer your case and liquidate any nonexempt assets. The trustee is also required to ensure that you understand the potential consequences of bankruptcy, including its effect on your credit rating, your ability to file for bankruptcy in the future, and the financial impact of receiving a discharge of your debts. It’s crucial to cooperate with the trustee and promptly deliver any financial records or documents the trustee requests. Time to meet your creditorsSomewhere between 21 and 40 days after your petition is filed, the trustee will hold a meeting of creditors. During this meeting, you will be placed under oath and must answer questions posed by the trustee and your creditors. You are required to attend the meeting and answer questions about your finances and assets. Your lawyer will prepare you for the meeting of the creditors and attend the meeting with you. In most cases, the questions will be very similar to the ones already asked by your attorney. The purpose of this meeting is simply to get you to confirm, under oath, that the written disclosures you provided in your paperwork are true and complete. Eligibility confirmedAt this point, your trustee has gathered enough information for the court to make a decision on whether or not you are eligible for Chapter 7 protection. If you are eligible according to the means test, your case will proceed. If you’re not eligible, you have the option to file for Chapter 13 bankruptcy. Nonexempt property is liquidatedIf you have nonexempt assets, the trustee will determine whether they are worth seizing and selling. In some cases, you may be able to keep certain non-exempt assets if the trustee determines that selling them is not worth the effort. For instance, if you own a boat worth $3,000, but owe $2,800 on the loan you used to purchase the boat and the cost to transport and sell the boat would be $200, the trustee may determine it’s not in your creditor’s best interest to sell the boat. The trustee also has the power to recover money or property under their “avoiding powers.” This includes the ability to reverse certain transfers made to creditors within 90 days of your petition for bankruptcy and undo certain transfers of property. DischargeOnce the trustee has sold nonexempt assets and paid out creditor claims, remaining eligible debts are discharged, and the creditors are no longer allowed to take any collection actions. In most cases, the Court issues the discharge order within 60 to 90 days of the meeting of the creditors. Not ready for bankruptcy? Other ways to tackle debtBankruptcy can give people in dire circumstances a fresh start, but it’s not a decision to be taken lightly. Bankruptcy has serious and long-term consequences. Before you file, consider some alternatives. Debt consolidationWith debt consolidation, you can roll all unsecured debts such as credit cards, personal loans, and medical bills into one new loan with one monthly payment. In most cases, you’ll also negotiate lower interest rates or a reduced balance with your creditors, so your payments are manageable. Debt consolidation still has a negative effect on your credit score because you aren’t paying your debts as agreed, but its impact is typically not as severe as declaring bankruptcy. Debt settlementDebt settlement involves negotiating with creditors to settle your debt for less than is owed. This is most often used when you have one large debt with a single creditor, but it can be used to deal with multiple creditors. Debt settlement still has a negative impact on your credit score because you aren’t paying the full amount owed. Also, the debt that is forgiven will be reported to the IRS and may increase your taxable income. Liquidating assetsIf you have cash in the bank or own other assets that can be sold to pay off your debt, this may be a viable alternative to declaring bankruptcy. Take into account any potential consequences. If you tap your retirement account to pay down debt, you may owe tax on the distribution as well as a ten percent penalty for early withdrawals. You could pay off one debt, only to find yourself owing the IRS. Default on payments/Do nothingIgnoring your debt problems won’t make them go away and may even make your situation worse. Interest and late fees will continue to accrue while you do nothing and the debt collectors may initiate a lawsuit. If you find yourself unable to pay your bills, work with a qualified credit counselor to explore your options and possibly set up a debt management plan. If that doesn’t work, seek out an experienced bankruptcy attorney who can help you navigate the bankruptcy filing process. Many people facing financial troubles fear they won’t be able to afford an attorney’s fees, but Shenwick says personal bankruptcy is handled on a fixed-fee basis, based on the complexity of your case, and often the attorney will adjust the fee based on the client’s ability to pay. “You’ll find that most bankruptcy attorneys are compassionate people. They do this work because they want to help people,” Shenwick says. Life after bankruptcyAfter filing a Chapter 7 bankruptcy, your credit score will be lowered, possibly by hundreds of points and the bankruptcy will remain on your credit report for the next ten years. But this doesn’t mean you won’t be able to access credit for the next decade. “After bankruptcy, your best bet is simply to start from scratch,” Billion says. “Get a credit card (they’re typically available starting six months after settling your bankruptcy case) or failing that, a secured credit card. Use them responsibly and do not keep a balance. Assuming you don’t go back into massive debt, you can get a car loan at a decent interest rate in one year and a home loan in two years.” It will take time to rebuild your credit score, and there’s no legal way to remove the bankruptcy from your credit report before the ten-year time frame has elapsed. But bankruptcy does give you a second chance, so don’t waste it. If you take this opportunity to learn a lesson about handling debt responsibly, over time, your credit score will begin to reflect that. © 2016 LendingTree, LLC. All Rights Reserved.
The 7th Circuit has ruled on a matter of great interest to chapter 13 debtors: under what circumstances are they required to turnover the tax refunds received during the chapter 13 case. In Marshall v. Blake, No. 17-2809, 2018 WL 1417550 (7th Cir. Mar. 22, 2018) the appellate court sustained a bankruptcy court's order overruling the trustee's objection to a number of plans for failing to turn over such refunds. The bankruptcy court found that while such refunds are income that had to be taken into account in computing disposable income for the plan payments, the debtors were permitted to prorate such refunds along with reasonably necessary expenses incurred through the year. The bankruptcy court certified the matter for direct appeal to the 7th Circuit. The debtor in the case under appeal is a single mother in subsidized housing with three dependent children. Her income as a security officer is low enough that she consistently qualifies for earned income credit on the tax refunds. On the means test form, 122C-1 she shows income of $30,144, well below median income for a family of four. Her schedule I included a pro-rated portion of her earned income credit, and on schedule J showed her monthly expenses. The plan proposed payments of just under the amount shown available on schedules I & J.for 36 months, with turnover of any non-earned income credit portion of the refund to the trustee each year. The chapter 13 trustee objected that the debtor was not committing all her disposable income to the plan. The court overruled the objection, noting that the refund due to over-withholding is automatically included in debtor's income because it is computed on gross income prior to any withholding. The court ordered that tax credits also must be included as income on schedule I prorated over the 12 month budget. The 7th Circuit found that it had jurisdiction to hear the direct appeal, since the bankruptcy court properly certified that the order involved a question of law for which there is no controlling decision of the court of appeals for the circuit or of the United States Supreme Court. It also ruled that the trustee's failure to comply with Rule 5 of the Federal Rules of Appellate Procedure, requiring the appellant to file a petition for permission to appeal in the circuit, was harmless error. As to the substance of the appeal itself, the 7th Circuit first analysed the code provisions. §1325(b)(4)(A) requires the debtor to pay all their projected disposable income into the plan during the applicable commitment period. §1325(b)(1) defines disposable income as current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended ... for the maintenance or support of the debtor or a dependent of the debtor .... Finally, §101(10A)(A) defines current monthly income as the average monthly income from all sources that the debtor receives ... without regard to whether such income is taxable income” in the six-month period before the bankruptcy petition was filed. The court found this definition was broad enough to include tax credits, noting that other sources of income were specifically omitted from disposable income. Also, the tax credit statutes provides that the credits shall not be treated as income for certain specific purposes, but omits bankruptcy from such exclusion. This leaves the gist of the argument on appeal, how can the debtor treat such credits? The trustee insists on turning over the entire credit as an additional plan payment, or seeking to amend the plan for each credit. The Court rejected this, noting that amounts reasonable necessary to be expended for the maintenance of the debtor and their dependents are excluded from disposable income. Rather, a number of courts have permitted debtors to pro-rate the tax refunds as additional income on schedule I as well as pro-rating the expenses the refund will be spent on in schedule J. The bankruptcy court had adopted this procedure for two reasons: first to alleviate the burdens that the motion to modify procedure places on trustees, debtor's counsel, and the court, and second to promote consistency among trustees that may have different practices as to whether a debtor may retain such refunds. In finding this procedure did not violate the projected disposable income requirement, the court looked to the decision in Hamilton v. Lanning,560 U.S. 505, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010). The Lanning case excluded from disposable income a one-time buyout the debtor had received during the six months prior to filing, finding that where a significant change in the debtor's financial circumstances is known or virtually certain, the court has discretion to make an appropriate adjustment. Adjustment to remove any non-repeating income in the 6 month prior to filing computation period is also consistent with §1325(b)(1)(B) permitting courts to overrule objections if all of the debtor's disposable income received during the applicable commitment period will be used to make payments to unsecured creditors. While Lanning involved an above-income debtor, the same policy should affect below-income debtors, allowing adjustment for creditors not received during the 6 months prior to filing. Such a computation is not illusory as argued by the trustee, since while the amount of the credit may vary, the approximate amount may vary, the courts may make a reasonably accurate estimate by looking at historical practice adjusted by known or virtually certain facts regarding the debtor's income or expenses. Nor should the fact that the income is received annually rather than monthly prevent such practice. Current monthly income is not limited to income received each month; rather it is computed as average income received during the six months prior to filing. The bankruptcy forms and instructions require debtors to pro-rate any income not received on a monthly basis. The real complaint of the trustee is not that the court allowed the debtor to include the refund as income, but rather the inclusion of the accompanying expenses on schedule J. Yet §1325(b)(2) requires subtracting from CMI amounts reasonably necessary to be expended for the maintenance of debtor and debtor's dependents. The trustee's approach entirely eliminates the expense portion of this formula when the income is received annually. Below-median income debtors often rely on these refunds to make their budgets work. The fact that the expenses paid by the refund do not exist at the time the schedules are filed does not exclude them from expenses reasonably necessary for the debtor. The use of the 'reasonably necessary' language rather than requiring 'actual' expenses is presumed to be an intentional choice by Congress in writing the language of the statute. Additionally, the rigid computation method argued by the trustee contravenes the forward-looking flexible approach mandated by Lanning. The approach is also consistent with the good faith requirement under §1325(a)(3). This test requires an examination of whether the debtor paying creditors to the reasonable limit if his ability or is attempting to thwart them, given the totality of the circumstances of the debtor's finances. While the debtor had amended her budget 3 times prior to confirmation, Rule 1009 allows amendment as a matter of course prior to closing the case, and precludes an inquiry into a debtor's good faith based solely on amendment of the schedules. Further, the nature and timing of the amendments in this case did not support a finding of bad faith, showing a reduction in some areas of expenses on each amendment. The fact that there was a prior case pending during the past year also does not show bad faith, given the debtor's satisfaction of §362(c)(3) by filing a declaration of loss of income from termination of social security benefits to one of her children. The Circuit Court also rejected that trustee's argument that an evidentiary hearing was required to allow cross-examination as to the debtor's budget; finding that the bankruptcy court was in the best position to determine when such a hearing is necessary. The bankruptcy court's approach also satisfies the feasibility requirement under §1325(a)(6). To meet this requirement the plan must have a reasonable likelihood of success based on the particular circumstances of the plan and the case. Just because the tax refund payments are received annually, does not prevent debtor's from being able to make their monthly plan payments, as debtors can adjust the timing of their expenses to correspond to the receipt of such refunds. This can be accomplished either by saving a portion of the refund, or deferring purchases until receipt of the refund. Finally, the 7th Circuit found that the procedure followed by the bankruptcy court promotes the purposes of chapter 13, which are to allow the debtor a fresh start where it is possible to do so without liquidating the debtor’s assets, while at the same time ensuring that the debtor devotes all of her disposable income during the life of the plan to repaying creditors. The purpose of the tax credit is to enable the working poor to meet the basic costs of life. By allowing the working poor to use the tax credit toward their necessary expenses it helps insure they can make their plan payments and get the fresh start envisioned by chapter 13. Michael Barnett www.tampabankruptcy.com