Thursday, October 8, 2015

Consumer Bankruptcy for the Commissions-Based Employee

How will the Bankruptcy Court calculate my monthly income if I am 100 percent commissions-based?

Working solely for commission has its highs and lows. On one hand, employees may be able to make significantly lucrative sales deals with clients, resulting in major lump-sum cash payments each month. On the other, the sales sector can be unpredictable, leaving some of the best sales associates without significant income for weeks or months on end. For an employee whose salary is based 100 percent on commissions, this can be extremely difficult to manage – particularly as monthly bills and obligations continue to loom.

For the commissions-based employee who is struggling to make ends meet, consumer bankruptcy may be a viable option to gain financial traction. However, there are some nuances to the practice that may distinguish the commissions-based bankruptcy debtor from a traditional wage earner.

In one pivotal case, a debtor appealed a decision entered by the U.S. Bankruptcy court holding that a commission earned eight months after filing should be considered part of the bankruptcy estate – and therefore subject to disbursement to creditors. In the court’s opinion, it pointed to the language of the Bankruptcy Code that entitles the trustee to encumber the debtor’s legal and contractual interests as part of his assets – and concluded that a pending commission sale would be included in that mandate. In objection, the debtor asserted that, at the precise time of filing, the commission was not in his possession and therefore not a countable asset. The appeals court disagreed, and held that the imminent commission had “value” at the time of the filing, even if not yet realized – and should have been counted in the estate. See, In re Ryerson, 739 F.2d 1423 (1984).

In another similar case, the court held in the opposite after concluding that the debtor still had remaining “post-petition services” to render before collecting the entire commission. In other words, the debtor’s legal interest in the sum had not yet vested at the time of filing as she had not yet fulfilled the terms of the contract in their entirety. Accordingly, the commission was not counted as part of the bankruptcy estate. See, In re Wu, 173 BR 411 (1994).

If you are considering a consumer bankruptcy in Ohio and have questions about how the court will treat your commissions-based earnings, please contact a competent Miami Valley Bankruptcy today at 937.262.4789.

Sunday, September 27, 2015

How Ohio’s August Bankruptcy Filings Stack Up Against National Data

How does the state of Ohio compare to the nation in terms of the number of bankruptcy filings?

There are a number of factors that influence bankruptcy filing trends. Recent changes to healthcare laws, for instance, have worked to reduce the medical debt for many Americans, prompting a reduction in bankruptcies caused by major accidents or illness. While it may be too soon to tell what major factors impact 2015 as a whole, the month of August showed a consistent decline in filings, both in Ohio and nationwide.

On a national scale, bankruptcy data reveals that August has been the third-lowest month in terms of the number of bankruptcies filed, and new filings are down by 7,000 compared to August, 2014. In total, there were 67,712 new petitions for bankruptcy relief filed in the month, compared to the next lowest months of February (65,054) and January (59,087). By contrast, August 2010 saw over 134,000 bankruptcy filings, just shy of double that of August 2015.

Ohioans are similarly seeing a reduction in bankruptcy filings within the state. In the Northwest division, for instance, 346 new cases were filed in August, which is a nine percent reduction from August, 2014. Likewise, the total number of cases filed in 2015 is down by 11 percent compared to the first 8t months of 2014.

Regardless of the reasons for the fluctuations in bankruptcy filings, debt relief through Chapter 7 or Chapter 13 bankruptcy can be a welcome reprieve for those caught in the crosshairs of mounting debt and diminishing income. If you are experiencing difficulty, bankruptcy can help offer a fresh financial start, and should be considered a positive step toward freedom from the confines of debt.

If you are one of the thousands still struggling with debt in Ohio and would like to speak with a legal representative who understands the process of consumer bankruptcy, please do not hesitate to contact Miami Valley Bankruptcy today: 937-262-4789.

Friday, August 28, 2015

Eleventh Circuit Issues Important Ruling Involving Debt Collectors Filing Proofs of Claim

What is a “proof of claim” in bankruptcy, and when must a creditor file this document?

In a consumer bankruptcy action, the debtor is required to list any and all outstanding debts, including the name of the creditor and the amount owed. The purpose of the proof of claim form is for the creditor to ensure it will be paid when it comes time to restructure or liquidate the debtor’s estate, and is generally required for all unsecured creditors wishing to receive a piece of the pie.

Like any court filing, there are a number of formal requirements that apply to the proof of claim, including timely submission to the bankruptcy court. Under current guidelines, a proof of claim must be submitted within 90 days of the first creditors’ meeting – a procedural milestone that takes place early in the process.

This timeliness requirement was recently put to the test in a case reaching the U.S. Court of Appeals for the Eleventh Circuit. In that case, the debtor owed approximately $2,000.00 to a furniture company, and the last activity on the account occurred in October, 2001, at which point the company sold the debt to a credit recovery company. In October, 2004, the three-year statute of limitations on debt collection ran out, effectively time-barring the collector from recovering the outstanding balance.

In 2013, the debtor filed for Chapter 13 bankruptcy, during which the debt collector submitted a proof of claim for the debt. In a unique move, the debtor filed a defense against the debt under the Fair Debt Collection Practices Act (FDCPA), which prohibits any misleading conduct by a debt collector that insinuates it has a legal right to recover a debt when it, in fact, does not.

After a dismissal of the defense by the U.S. Bankruptcy Court, the Eleventh Circuit upheld the defense's claim, citing that the FDCPA undoubtedly applies to the situation, and “[the] debt collector’s filing of a time-barred proof of claim creates the misleading impression to the debtor that the debt collector can legally enforce the debt.”

Since debt can easily become overwhelming and bankruptcy can be a complicated process, if you are in need of assistance with a Chapter 13 or Chapter 7 consumer bankruptcy matter, please contact Miami Valley Bankruptcy today to receive expert legal advice and attention. Serving the entire Miami Valley area of Ohio, we can be reached at 937.262-4789.

Friday, August 14, 2015

Proposed Law Would Require Creditors to Reflect a $0.00 Balance on Consumers’ Accounts Post-Bankruptcy

If an account is discharged in consumer bankruptcy, how will this be reflected on my credit report? 

Credit repair is one of the hallmark reasons for a consumer to consider the option of bankruptcy. While a Chapter 7 or Chapter 13 bankruptcy will be reported on a consumer credit report for a period of seven years, the consumer stands to gain significant benefits in that overwhelming revolving debts will be forgiven and erased from memory -- right? Well, not always so lawmakers have proposed a potential legislative solution. 

Under current regulations, banks and credit card companies are not necessarily required to report a $0.00 balance on an account discharged in bankruptcy. As a result, consumers’ credit reports continue to show outstanding (unpaid) balances, which unfairly indicate that the consumer has a much more extensive level of debt than is actually the case. 

Fortunately, Ohio’s own United States Senator Sherrod Brown is sponsoring a bill in Congress that would require both banks and debt buyers to report a $0.00 balance on accounts discharged in bankruptcy to the major credit bureaus. Under the proposed Consumer Reporting Fairness Act, debtors could also pursue legal action against a bank or credit card company that fails to report the zero balance in a timely manner. 

The bill has garnered significant support from groups including Americans for Financial Reform, the Center for Responsible Lending and the National Consumer Law Center. A statement by the National Association of Consumer Bankruptcy Attorneys, “estimate[s] that more than a million Americans who have gone through the bankruptcy process and have legally discharged debts find that their debts continue to appear on their credit reports. This practice of flaunting the bankruptcy discharge by some of the largest banks in this country is intolerable.”

Several U.S. banks are under investigation for debt-reporting violations, including JP Morgan Chase, Bank of America and CitiGroup. 

If you are considering consumer bankruptcy, or have questions about the process, please do not hesitate to contact the attorneys at Miami Valley Bankruptcy, serving Beavercreek, Xenia and Jamestown, Ohio, by calling (937)262-4789. 

Thursday, July 30, 2015

UPDATE: Department of Education Issues New Statement on Student Loan Debts

What is the updated ‘undue hardship’ standard as published by the Department of Education in July, 2015?

With student loan debt crippling the nation, it is understandable that thousands of graduates are considering their options in bankruptcy. Historically, student loans were not considered a dischargeable debt in bankruptcy absent a showing of extreme undue hardship, which was considerably difficult to prove. 

However, the Department of Education has opted to extrapolate on its “undue hardship” concept, incorporating judicial holdings and its own interpretive guidelines to help students and bankruptcy attorneys alike better understand the threshold for obtaining relief. If you are struggling with seemingly insurmountable student loan debt, please do not hesitate to contact Miami Valley Bankruptcy to discuss your rights. 

Department to rely on formula

Essentially, the Department of Education has decided to implement a formula to help determine when not to object to an undue hardship request for student loan forgiveness. The Department’s position reads as follows: 

If [the government] determines that requiring repayment would not impose an undue hardship, the holder must then evaluate the cost of undue hardship litigation. If the costs to pursue the matter in bankruptcy court are estimated to exceed one-third of the total amount owed on the loan (including the current principal balance, any unpaid accrued interest, and current, unpaid accrued collection costs), the [government] may accept and/or not oppose an undue hardship claim by the borrower in an adversary proceeding.

Seems simple enough, right? Under the new guidelines, the government will likely not pursue an objection to loan discharge if the costs to litigate the matter would exceed one-third of the total loan balance. However, the statement does not give much detail on how the government plans to calculate its speculative litigation costs, nor does it provide students with an understanding on whether certain bankruptcy claims will involve more complex (i.e., more costly) litigation than others. Likewise, it does not offer guidance as to whether a loan servicer working on behalf of the Department is permitted to outright deny a request for discharge. 

With so many variables still in the air, we continue to recommend working closely with a Miami Valley bankruptcy attorney in order to maximize your chances of avoiding the burden of explosive student loan debt. 

For help with your student loan discharge request, please contact our Jamestown, Beavercreek and Xenia, Ohio bankruptcy attorneys right away: 937-262-4789. 

Monday, July 13, 2015

Debtors Seek Clarification on Whether Late-Filed Tax Returns – and Underlying Tax Liabilities – Are Excepted

Can a debtor discharge old tax debts in Chapter 7 or Chapter 13 consumer bankruptcy?

In December, 2014, the U.S. Court of Appeals for the Tenth Circuit weighed in on an unusual tax situation involving a consumer bankruptcy proceeding and outstanding individual income tax debt. In the case, two individual taxpayers – husband and wife – failed to file a tax return in 2000 and 2001, resulting in an undisputed deficiency notice. In 2006, the IRS began collection proceedings on the debtors – who thereafter filed for bankruptcy under Chapter 13 and, later, Chapter 7. 

The U.S. Bankruptcy Code allows for the discharge of a wide array of consumer debts, including – in certain circumstances – outstanding federal tax liability. However, these discharges are only available where the taxpayer has actually filed a tax return for the tax years implicated in the bankruptcy proceedings, and are excepted if a tax return was never filed. 

Here, the debtors failed to file a tax return in 2000 and 2001, and were thereafter barred in their subsequent bankruptcy proceeding from discharging the tax debt accrued in those years. In their argument, the debtors explained that they actually filed post-assessment appeals with the IRS after the deficiency notices were sent. However, the U.S. District Court held that a post-assessment tax return is not the same as a traditional tax return due on April 15 of each year, and the tax debt was not dischargeable.  

On appeal, the debtors pleaded to the Tenth Circuit that they should not be liable for the 2000 and 2001 tax debts, as a tax return was filed (eventually). However, the Tenth Circuit sided with the IRS and U.S. District Court, holding that a timely tax return must be filed in order to benefit from the dischargeability allowances in the Bankruptcy Code. In other words, a post-assessment filing is simply too little, too late. 

The debtors have since filed an appeal with the U.S. Supreme Court, and it is unclear whether the court will grant a writ of certiorari to review this complex issue at the intersection of bankruptcy and tax law. 

If you are struggling to meet your debt obligations, are considering bankruptcy and would like to speak to a reputable attorney about your situation, contact the knowledgeable legal team of Miami Valley Bankruptcy at 937-262-4789 today. 

Tuesday, June 30, 2015

Supreme Court Enhances Power of Bankruptcy Courts

In the event a bankruptcy matter involves an equitable or legal claim, can the bankruptcy court handle this matter or must the litigant resolve the issue separately? 

In a consumer or business bankruptcy matter, there often exists collateral matters that arise as parties settle with creditors or discharge debts. In 2011, the U.S. Supreme Court considered a bankruptcy action wherein the parties were in dispute over a common law matter, and the Court held that the bankruptcy judge had no actual jurisdiction to make a decision on the issue. While the U.S. Constitution clearly articulates this jurisdiction to the “Article III” Courts (i.e., federal district courts), the requirement to re-litigate collateral claims outside bankruptcy court was proving to be not only inconvenient, but wasteful and time consuming. 

In 2015, the Supreme Court revisited the issue, and arrived at an alternative conclusion in a 6-3 opinion penned by Justice Sonia Sotomayor. The case, described more fully below, stands for the notion that a collateral common law or equitable matter directly related to a bankruptcy filing can be decided by a bankruptcy judge, and U.S. bankruptcy courts should have jurisdiction to hear these issues – provided the issues are incident to the overriding bankruptcy claims. 

Court’s Decision in Wellness International Network, et. al. v. Richard Sharif

The Wellness case involved an individual consumer debtor seeking to have a debt owed to Wellness International discharged. Pursuant to the filing, Wellness International sought a declaratory judgment that Mr. Sharif maintained several trust accounts that should be accessible to creditors and available to help pay off or reduce debts prior to discharge. In the interim, the Supreme Court rendered its decision in the aforementioned 2011 case, and declared that only direct bankruptcy issues are to be decided by bankruptcy courts – and that a declaratory judgment does not fit into that category. 

In a contrasting decision, the Court reconsidered its position and held that parties may mutually agree to litigate non-bankruptcy matters in bankruptcy courts, so long as all parties consent to the decision voluntarily. More specifically, the Court premised its holding on the notion that “[a]djudication based on litigant consent has been a consistent feature of the federal court system since its inception.  Reaffirming that unremarkable fact, we are confident, poses no great threat to anyone’s birthrights, constitutional or otherwise.”

If you are considering consumer bankruptcy and would like to discuss your rights and obligations under current laws, please do not hesitate to contact our Miami Valley bankruptcy attorneys at today by calling (937)262-4789. 

Monday, June 29, 2015

Fair Finance Estate to Pay $35 Million to Creditors

What is a claims trade offer?

A settlement has finally been reached in the ongoing Fair Finance case.  A bankruptcy judge in Cleveland recently approved a settlement between the Fair Finance trustee and Fortress Credit Corp.  The parties reached the $35 million settlement in April and filed for approval with the court in May. The Trustee wants to use the settlement funds for interim distributions to satisfy thousands of claims by unsecured creditors.  

The firm is accused of running a $205 million Ponzi scheme that affected more than 5,000 Ohio investors.  The firm’s owners are currently in federal prison.  To date, parties have not been repaid any of the money that they invested in Fair Finance by purchasing uninsured investment certificates.  The settlement does not constitute an admission of liability by Fair Finance and amounts to approximately 17 cents for every dollar originally invested.  The parties allege that Fair Fortress ignored the warning signs of the Ponzi scheme when it provided financing for Fair Finance.  Fair Finance originally processed accounts receivables for other businesses but was sold by the Fair family to Durham and Chochran in 2002.  The offices closed due to FBI raids in late 2009.  The company entered bankruptcy in February 2010.  
This settlement is not the only anticipated money to enter the estate.  Actually, the moviemaker, National Lampoon, also reached an agreement to pay $3 million to the estate at the end of May.  However, that agreement has not been officially entered and or approved yet.

Creditors have received letters offering to buy out their financial interests in the case called claims trade offers.  The trustee is not allowed to advise people on what to do with regard to selling interests or allowed to endorse any of the claims traders.  Claims trading is common in bankruptcy proceedings and anyone who receives a letter should carefully review the contract or have an attorney look at the offer.  Accepting a claims trade offer can result in further liability for the investor.

Brian Lusardi is one of Miami Valley’s leading bankruptcy attorneys with extensive experience helping clients with the intricacies involved in bankruptcy filings and settlements.  Contact him today at (937) 262-4789 for a free consultation.    

Wednesday, June 17, 2015

Supreme Court Expands Bankruptcy Court Powers

Can bankruptcy judges determine lawsuits that are related to the bankruptcy proceeding?

The Supreme Court, in a 6-3 decision, recently held that parties in bankruptcy proceedings can consent to allowing a bankruptcy judge to decide their related cases. The ruling arises out of a case where a nutritional supplement distributor sued for breach of contract but failed to comply with discovery demands and owed hundreds of thousands of dollars in legal fees. When the distributor filed for bankruptcy, a creditor wanted the bankruptcy court to declare that a trust asset belonged to the distributor.

The Seventh Circuit Court of Appeals found that the parties could not consent to such a determination. An earlier Supreme Court decision had held that side matters to a bankruptcy proceeding had to be decided by federal judges operating under Article III of the U.S. Constitution. This removed some of the power Congress had given bankruptcy judges to decide disputes that were related to a bankruptcy proceeding.

Now, the Supreme Court reversed the Seventh Circuit and held that parties can waive their right to present a related case to a federal judge and consent to a bankruptcy judge deciding the matter. While bankruptcy judges do not have the same protections as Article III judges (such as life tenure and salary guarantees), they are subject to oversight from the Article III judges. Justice Sotomayor noted in her majority opinion that other areas of law allow parties to consent to an administrative judge determining the ruling subject to oversight by federal judges.

The majority found it beneficial for bankruptcy judges to have this power as it can alleviate the current caseload before federal district courts; however, the dissenting judges believe it jeopardizes the checks and balances system in the government by allowing Congress to take away judicial powers contrary to what Article III of the constitution allows.

If you are considering bankruptcy, the attorneys at Miami Valley Bankruptcy can provide the knowledgeable advice you need. Brian Lusardi is an experienced bankruptcy attorney serving clients in Xenia, Jamestown and Beavercreek, Ohio and the Miami Valley area. Call him today at (937)262-4789 for a free consultation.

Thursday, May 28, 2015

Medical Debt & Bankruptcy

My husband and I are facing bankruptcy primarily due to our insurmountable medical debt. Will these charges be forgiven? Or will we still owe a portion of the outstanding balances? 

Medical debt is one of the hallmark dischargeable debts in Chapter 7 consumer bankruptcy – and may be totally erased by a successful bankruptcy filing. According to data compiled by the U.S. Census Bureau and the federal bankruptcy courts, medical debt remains the reigning number one cause of bankruptcy in the United States. Fortunately, bankruptcy laws consider medical debt to be a “nonpriority unsecured debt,” meaning it will more than likely disappear at the conclusion of the discharge process – a welcome relief for overburdened debtors, many of whom are dealing with significant health issues as well. 

Understanding the debt hierarchy 

During the bankruptcy process, the trustee assigned to the file will be required to evaluate the petitioner’s assets and pay off as many outstanding debts as possible. Once an asset profile is identified, the trustee will begin with secured debts, which are those attached to underlying collateral (e.g., home, vehicle, boat). Debtors may choose to walk away from these debts, reaffirm the debt, or redeem the debt. From there, the trustee will require payment of high priority unsecured debts, including taxes or child support obligations. These types of debts are generally not dischargeable, and must be paid regardless of the petitioner’s status in bankruptcy. Lastly, unsecured nonpriority debts are those that are dischargeable in the bankruptcy process, provided the debtor is unable to pay the outstanding balance – and, fortunately, this category includes medical debts. 

Dealing with medical debt in bankruptcy 

If a petitioner’s available assets are depleted to pay secured or high priority debts, he or she may be able to discharge medical debt in its entirety. If, however, assets remain to put toward an outstanding balance at a hospital or practitioner’s office, the trustee will ensure the petitioner pays as much as possible toward the balance. After all assets and available cash are depleted, remaining nonpriority unsecured debts will be discharged, allowing the petitioner to move on toward a brighter financial future. 

If you are concerned about medical debt, considering personal bankruptcy and would like to speak with a reputable attorney about your situation, please contact Cox, Keller & Lusardi right away. You can reach our Xenia, Ohio office by calling (937)262-4789 today. 

Wednesday, May 27, 2015

Student Loans & Bankruptcy: What are the Options?

I am drowning in student loan debt. Is this debt dischargeable in bankruptcy? 

Traditionally, student loans were not considered a dischargeable debt under federal bankruptcy laws. However, as national student loan debt has skyrocketed into the trillions of dollars, struggling graduates may be able to escape the burden of four-figure monthly payments by successfully proving severe financial hardship. As well, there are a number of less common avenues through which student loan debt may be discharged, which could be a financial life-saver for those meeting eligibility criteria. 

Three-prong undue hardship test

Under current consumer bankruptcy law, there is a three-part test to determine if a student loan is dischargeable based on undue hardship. First, you must prove that, if forced to repay the loan under its minimum payment terms, you would be unable to maintain a minimum standard of living. While the phrase “minimum standard of living” has not been officially defined in the bankruptcy code, it is generally considered to mean the financial ability to maintain adequate housing and meet daily needs for the borrower and his or her dependents. 

Second, the borrower must show that the inability to maintain a minimum standard of living is not temporary in nature, and is likely to continue throughout the duration of the loan repayment period. Lastly, discharge may be possible if you have made a true good faith effort to repay the loan prior to filing for bankruptcy – which means a period of at least five years. 

Known as the Brunner test, this three-prong analysis looks for poverty, persistence, and good faith – and may be a good option for borrowers who have tried, but are simply unable, to repay that those looming and unrelenting education debts. 

Other options

As a debtor, there may be other options for avoiding student loan repayment, primarily if your alma mater is involved in any kind of investigation for fraud or consumer deceit. In some instances, students have earned relief from part or all of their student loans by successfully highlighting their school’s false promises or exaggerated graduation/employment rates – thereby triggering a consumer protection or breach of contract action. 

If you are struggling with student and consumer debt, please contact Miami Valley bankruptcy attorneys at Cox, Keller & Lusardi right away.  You can reach our office, conveniently located in Xenia, Ohio, by calling (937)262-4789 today. 

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