Handling Creditor Claims, Distributing Property and the Discharge   After the meeting of creditors, the trustee will begin to sell or convert to cash any of your property available in a Chapter 7 bankruptcy. While this is happening, the trustee handling your bankruptcy case will evaluate the claims made by your creditors. A claim is [...]

     The First Circuit affirmed a decision sanctioning a student loan creditor when they resumed collection efforts after the chapter 13 discharge in a case where the debtor's objection to their claim was sustained.  In re Hann, 2013 WL 1277132 (1st Cir., 2013).  In the chapter 13 the Debtor objected to the $54,756 claim filed by ECMC asserting inadequate documentation, conflicting statements from the creditor, and that she had paid more than the original loan amounts.  The creditor did not appear at the hearing on the objection, but the Debtor testified extensively regarding the payments made on the account and her attempts to reconcile her accounting with the creditors.  After further submission of an affidavit detailing her accounting records, the claim was allowed in the amount of $0.     After entry of the discharge, ECMC resumed collection efforts, and continued after Debtor's counsel advised that they were in violation of the discharge.  Debtor then filed an adversary proceeding seeking declarative and injunctive relief, contempt, actual and punitive damages, and fees.  ECMC argued that since the student loan debt was non-dischargeable, the court did not adjudicate on the balance due on the loan.  The Bankruptcy Court rejected this argument finding an adjudication on the merits that the balance owed on the student loan was $0.  The BAP affirmed.   ECMC acknowledges that a claim disallowance order can dissolve an underlying nondischargeable debt if it is based on a factual finding that the debt has been repaid.  The creditor disputes that the bankruptcy court in fact made such a finding of fact.   Since the order did not state that ECMC is owed nothing, but simply said the claim is allowed in the amount of $0, ECMC states it is not an adjudication of the underlying debt.     The 1st Circuit noted that it would be better if the trial court specified that the basis of the disallowance was that the debt was paid in full, but a review of the underlying record shows that the basis of the order was the Court's finding that the Debtor had repaid the loan.  The Debtor explained, during her testimony and in her subsequent affidavit, that she “believe[d] the student loan claims were paid in full prior to the commencement of the Chapter 13 proceeding.” She submitted materials appearing to support that belief. Her arguments and documentation went unrebutted.  ECMC also complained of the sanctions awarded. It alleged inadequate notice and opportunity for hearing in the adversary matter.  However, since the Debtor specifically requested sanctions under §105, and since the trial court gave ECMC 14 days to object to the affidavit of fees and costs; and considered the objections filed, the trial court satisfied the notice and hearing requirements.   Finally, ECMC argues that it cannot be sanctioned for doing something that was not clearly proscribed by the Bankruptcy Court's order, alleging that the order was not clear and unambiguous.  But the Bankruptcy Court did not sanction ECMC based solely on the order,  it was ECMC's entire course of conduct that led the BAP to conclude that ECMC had abused the bankruptcy process.  ECMC filed a proof of claim against Hann, ignored the claim objection process, and then resumed its efforts to collect on the underlying debt without attempting to verify whether the debt had survived the bankruptcy. ECMC also ignored an effort by Hann's counsel to explain that the claim order had settled the issue. At the very least, ECMC—having sat out the claim objection process—could have sought a clarification from the court after Hann's counsel asserted that the Claim Order had indeed extinguished the debt.    This case highlights both the importance of having explanatory language in the proposed orders submitted to the Courts (which might have avoided the issue), and of having a complete record on appeal for the appellate courts.

From 1989 to 2007, Judges Larry Kelly and Frank Monroe occupied the bankruptcy bench in Austin, providing a period of judicial continuity rivaled only by their colleagues in San Antonio (Judges Leif Clark and Ronald King served at the same time from 1988 to 2012).   Effective today on April 1, the Austin bar will be welcoming its third new judge in six years as Judge Craig Gargotta moves to San Antonio and Judge Tony Davis takes the bench.   Here is an introduction to the newest jurist to oversee Austin insolvency proceedings.Judge Tony Davis spent his time as a student and a young practitioner in three very different locales.    He received a B.A. in economics and mathematics from the University of Minnesota at Morris in 1980, was awarded a J.D. from the University of Virginia School of Law in 1983 and then was admitted to the Oklahoma bar.   He spent his early years as an associate with Conner & Winters in Tulsa before making his move to Baker Botts, LLP.    Immediately prior to taking the bench, Judge Davis was a partner in the Houston office of Baker Botts.    One of the most challenging cases that he worked on was the Asarco case, which involved nearly $6.5 billion (with a B) in environmental claims.    According to the Judge on that case:Debtors' counsel, lead  by Tony Davis with Baker Botts, initiated and ultimately set in place a procedure for pre-trial, discovery, mediation and trial schedule for the estimation of the environmental claims that would have resulted in Court orders or settlements in months instead of years even if all such claims had to be estimated to a final judgment. This incredible process required Debtors' counsel to prepare for multiple-tracked sites teams of environmental and bankruptcy lawyers toward mediation, trial or settlement of each site, yet coordinated such that overlapping legal issues, overlapping facts and experts, could be efficiently implemented.In re ASARCO, LLC, 2011 Bankr. LEXIS 2880 at *26-27 (Bankr. S. D. Tex. 2011).Some of his other noteworthy cases include representing Ralph S. Janvey, the court appointed receiver in the Stanford International Bank, Ltd. case and representing the Russian Federation in the short-lived bankruptcy of Yukos Oil Company.  (The Yukos case involved a Russian company which moved its offices to the home of its CFO in Houston and paid a retainer to Fulbright & Jaworski to qualify for bankruptcy in the United States.   The case was dismissed after about three months).    Thus, he has experience chasing fraudsters and oligarchs and cleaning up the financial fallout from environmental claims.    According to Bill Stutts, who worked with Judge Davis at Baker Botts, described his former colleague as “measured and thoughtful,” stating:He started practice in bankruptcy in Oklahoma during the oil-patch bankruptcies of the 1980's.   He is known to be measured and thoughtful, and rarely (if ever) rash.  Responsibility and an expectation that others will be responsible can be hallmarks of his approach to the practice.  He is pretty well organized (I don't want to over-sell his work habits too soon), having even found some time during practice to write published law review articles.  I believe that he really and honestly views his upcoming service on the bench to be just that-- service. Mr. Stutts also characterized Judge Davis as a voracious learner and said that by the time he handles his first chapter 13 hearing, he will have studied until he knows as much as or more than anyone else in the room.In a 2009 interview, Judge Davis stated that the Bankruptcy Code had already seen “excessive reform.”   He said:If anything, bankruptcy law has seen excessive reform. The Bankruptcy Code, as originally enacted in 1978, has been and continues to be such a remarkably flexible and efficient way to conduct a financial restructuring under court supervision that it is the envy of the commercial world.   Since it was enacted, however, a number of special interest groups have succeeded in carving out special interest legislation to address or protect unique issues that apply to specific industries. These numerous amendments have somewhat increased the complexity of the Bankruptcy Code but, fortunately, have not materially impaired the Bankruptcy Code’s overall effectiveness.Law 360, Q & A with Baker Botts’ Tony Davis, which can be found here.            When asked what advice he would give a young lawyer, he said:Seek and take on responsibility — responsibility for understanding the facts and issues involved in the case, responsibility for advising clients, and responsibility for preparing for and conducting in-court hearings and out-of-court negotiations. Accepting and discharging responsibility is the surest way to develop the professional growth you need to be an accomplished and successful lawyer.This is good advice for lawyers of any age.   

You definitely have the ability to keep your house and car in a Chapter 7 if you are current on your payments, provided you do not have significant nonexempt equity in those properties.  Most people who come to see me for a Chapter 7 and who may be homeowners do not have significant equity.  It+ Read MoreThe post Can I keep my house or car if I am current on my payments in a Chapter 7? appeared first on David M. Siegel.

There are some cases under Chapter 7 where I will file a case prior to being paid in full.  Those cases involve wage garnishments, bank citations or other court appearances required that would be a burden to the debtor and would actually hinder the debtor’s ability to pay the law firm in the long run. + Read MoreThe post As an attorney, will I file a case before being paid in full? appeared first on David M. Siegel.

Did you put off filing bankruptcy until after somebody got a judgment against you? Pre-bankruptcy judgments are liens on property you own before the bankruptcy.  (Sometimes they can be removed;  sometimes they can’t.)   But they cannot put a lien on a house you buy after the bankruptcy. At least, not legally. The purpose of bankruptcy is a new start in [...]The post Can they put a lien on a house I bought after the bankruptcy? appeared first on Robert Weed.

A debtor avoided losing her home in a recent case illustrating the perils of do it yourself legal forms.    Lowe v. Vazquez, No. SA-12-CV-00399-DAE (W.D. Tex. 3/28/13).    The Debtor paid $10 to download a living trust form while she was living in Nevada.   When she moved to Texas, she conveyed her homestead to the trust.   Her stated reason for setting up the trust was: The one and only reason I created the Living Trust after my divorce was to be sure my son could have access to any assets I owned at the time I die and to avoid probate, so I named my son as Successor Trustee. Probate proceedings in Nevada are lengthy and costly and I only wanted to make things easier for him when I die. When she filed bankruptcy in Texas, the trustee objected to her exemption on the basis that title to the home was vested in the trust.   The Bankruptcy Court denied the objection.    In re Vazquez, 2012 Bankr. LEXIS 642 (Bankr. W.D. Tex. 2012).    On appeal, the Court found that notwithstanding some confusing language in the pre-printed form, that the Debtor was the sole beneficiary of the trust.   As the sole trustee and sole beneficiary, a valid trust had not formed as of the petition date and the property remained vested in the Debtor.U.S. District Judge David Ezra had some insightful words for individuals who might want to save money by creating their own legal documents. This case is a poster child for the proposition that one should not rely on prepaid legal forms with boilerplate language for important legal matters. Had Debtor passed away, it is clear to the Court that the document would not have accomplished what she hoped; indeed, all of the tax consequences she hoped to avoid would have been visited upon her son. It is also clear that a properly drafted trust prepared by a competent lawyer would have accomplished the goal she sought in the first instance. Opinion, p. 8, n. 2.I cannot say it any better than Judge Ezra.    If you own a Texas homestead, do not EVER convey it to a trust.   You may place your homestead exemption at risk for no good reason.    The Debtor in this case did not lose her homestead.   However, she had to defend an objection to exemption and an appeal at her own expense.  Disclosure:   My firm represented Karen Vazquez in the appeal.    

While many people are busy preparing their tax returns, in this post we will focus on the treatment of tax refunds in bankruptcy. In a Chapter 7 personal bankruptcy, a debtor filing in New York State may exempt up to $5,000 of cash or cash equivalents ($10,000, if the debtor is a married couple filing jointly), if the homestead exemption isn't taken. Accordingly, for a single debtor, if his or her New York State or federal tax refund exceeds $5,000, then the bankruptcy trustee can require the debtor to turnover to the bankruptcy trustee the difference between the tax refund(s) and $5,000. However, if a debtor files for bankruptcy in June of a given tax year, then the amount of the tax refund would be prorated between the pre–bankruptcy period (the beginning of the tax year through the day before the filing date, which monies would be paid to the bankruptcy trustee for distribution to creditors) and the post–bankruptcy period (the filing date through the end of the tax year, which monies would be retained by the debtor). If a debtor expects a large tax refund post–bankruptcy filing, he or she could lower the number of withholding allowances or amount withheld to reduce his or her tax refund, or delay the bankruptcy filing until after receipt of the tax refund. For questions about the complex interplay between taxes and bankruptcy, please contact Jim Shenwick.

At the time of this writing, the filing fees for Chapter 7 bankruptcy are $306.  The filing fees for Chapter 13 bankruptcy are $281.  Each law firm differs on how much they require down as well as how much they require in terms of a total fee to file a type of bankruptcy.  In my+ Read MoreThe post How much is it to file a Chapter 7 or a Chapter 13 bankruptcy? appeared first on David M. Siegel.

Once a Chapter 13 bankruptcy case is filed and a plan is proposed, it’s going to run for a certain number of months, typically between 36 and 60 month.  Now, there are some cases that end much earlier than 36 months and there are no cases that can exceed the 60 months.  So somewhere between+ Read MoreThe post How many payments do I have left in my Chapter 13 bankruptcy case? appeared first on David M. Siegel.