The General Assembly has amended the protections given to debtors. These protections are known as exemptions. Under state law, the debtor asserts exemptions by filing a homestead deed in the county in which he/she resides. A separate homestead deed is filed for each debtor, even if both spouses file in a bankruptcy. In a bankruptcy filing, the homestead deed must be filed within five (5) days from the conclusion of the creditors' meeting. There are numerous exemptions by amount, by category and by the status or age of the person asserting the exemption. Commencing on July 1, 2011, a debtor may claim an exemption up to a value of $6,000 for an automobile. Also commencing on July 1, the Commonwealth grants families an exemption to own a firearm valued up to $3,000.
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Monday, May 23, 2011
Thursday, March 17, 2011
DELAWARE BANK ACCOUNTS PROVIDE ASSET PROTECTION
Last year European authorities got angry with American authorities complaining about Swiss Bank accounts. They responded to American authorties (particularly) the I.R.S., that you have Delaware and Nevada, which sometimes act as if they were offshore banking centers. Why don't you clean these up before you find fault in the financial institutions and laws of other countries?
What does that mean to a lay person? Well, let me be very specific. Under Title10 Section 3502 of the Delaware Code, "banks, trust companies, savings institutions and loan associations" . . . "shall not be subject to the operation sof the attachment laws of this State." This simply means that a creditor cannot garnish or attach funds in the bank account of a Delaware chartered banking institution or any bank or financial institution located in Delaware using state law collection procedures. If you put your funds in the correct banking institution then your bank account is safe from creditors! This state law does not bar the federal Internal Revenue Service. The Supremacy Clause of the United States Consitution trumps Delaware law.
What banks do you use? I would not use a nationally chartered bank. That's the bank with "N.A." after its name. Instead, use a Delaware chartered state bank that only has branches in Delaware. You can find a list of these banks on the website of the Office of the Delaware State Bank Commissioner. A deposit into a Delaware charted bank located in Delaware should protect your money. Look for an account that allows you to wire money or to transfer money to other accounts online. That way you can keep your current account in Virginia and use the Delaware savings account only when needed.
Please be aware, the Delaware account will give you only so much protection. You may not lie on bankruptcy schedules, and if a court compels you to sign over the account on penalty of jail, then you will have to comply or else suffer the consequences. Nonetheless, a Delaware bank account ought to be considered for asset protection
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
What does that mean to a lay person? Well, let me be very specific. Under Title10 Section 3502 of the Delaware Code, "banks, trust companies, savings institutions and loan associations" . . . "shall not be subject to the operation sof the attachment laws of this State." This simply means that a creditor cannot garnish or attach funds in the bank account of a Delaware chartered banking institution or any bank or financial institution located in Delaware using state law collection procedures. If you put your funds in the correct banking institution then your bank account is safe from creditors! This state law does not bar the federal Internal Revenue Service. The Supremacy Clause of the United States Consitution trumps Delaware law.
What banks do you use? I would not use a nationally chartered bank. That's the bank with "N.A." after its name. Instead, use a Delaware chartered state bank that only has branches in Delaware. You can find a list of these banks on the website of the Office of the Delaware State Bank Commissioner. A deposit into a Delaware charted bank located in Delaware should protect your money. Look for an account that allows you to wire money or to transfer money to other accounts online. That way you can keep your current account in Virginia and use the Delaware savings account only when needed.
Please be aware, the Delaware account will give you only so much protection. You may not lie on bankruptcy schedules, and if a court compels you to sign over the account on penalty of jail, then you will have to comply or else suffer the consequences. Nonetheless, a Delaware bank account ought to be considered for asset protection
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Friday, August 13, 2010
BEWARE OF DEBTOR INTERROGATORIES, YOUR JAIL TICKET
Your jail ticket. That's right. It is not a meal ticket. In the debt collection process, the debtors can be jailed for failing to attend state court collection proceedings. Sometimes it is, emotionally speaking, very difficult for debtors to actively open the mails and learn about their financial circumstances. Creditors often make threats or sound threatening; over time such threats become psychologically crushing, and our capacity to deny and avoid kicks in. Creditors cannot threathen criminal action. This is, not only a violation of the federal Fair Debt Collections Practices Act, but in Virginia it amounts to extortion under Sec. 18.2-59 of the Virginia Code. So if a creditor threatens you, tell them to back off.
On the other hand, there is one limited instance in which creditors may have debtors jailed. If a debtor is served with court papers, she ignores the service of such documents at her peril. First, a creditor may seek judgment against the debtor for a debt owing. If th debtor had contacted the creditor's attorney and admitted the debt, he may avoid attorneys' fees. Or sometimes a creditor will exaggerate its claim for prinicipal, interest or late fees; the debtor's active review coupled with his minimum level of participation at court may limit the amount of any judgment rendered against him. Second, once a judgment is taken, the creditor may begin enforcement of the judgment. In legal parlance, this is known as "execution" of the judgment. An execution can result in a levy by the sheriff on the debtor's personal belongings and automobiles. It can result in a garnishment of wages or bank accounts. As part of the execution process, the judgment creditor may also bring a debtor interrogatory (Virginia) or proceeding in aid of execution of judgment (Maryland). Debtors ARE FORWARNED the debtor interrogatory is the most effective weapon in the creditor's arsenal. The debtor can go to jail as a result of such a proceeding.
The Debtor Interrogatory is a proceeding actually started by Queen Elizabeth I of England as a part of the "Star Chamber." That should tell you something. If the debtor fails to appear at the proceeding, the court in which the proceeding is pending may issue a bench warrant for his/her arrest. If the debtor appears, but fails to bring documents requested or to answer questions about his estate, the court may give the debtor a free night's stay at the county hotel. The court can also compel the debtor to sign over property to the sheriff. If the debtor fails to comply, you guessed it, the bailiff (the Court's bodyguard) will escort the debtor to the jail. Also the debtor can be compelled to assign over her interest in bank accounts, patents, accounts receivable and a host of personal property (tangible or intangible). The creditor can also compel the debtor to grant the sheriff a deed to real property located outside of the Commonwealth of Virginia. The debtor interrogatory is a very powerful weapon. Thank goodness most creditors fail to utilize the proceeding to its fullest extent.
Basically, we advise clients, especially if they are anxious by nature, to contact our bankruptcy department and to file bankruptcy petitions before judgments are entered against them. That way the debtors avoid those nasty state court judgment execution proceedings.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
On the other hand, there is one limited instance in which creditors may have debtors jailed. If a debtor is served with court papers, she ignores the service of such documents at her peril. First, a creditor may seek judgment against the debtor for a debt owing. If th debtor had contacted the creditor's attorney and admitted the debt, he may avoid attorneys' fees. Or sometimes a creditor will exaggerate its claim for prinicipal, interest or late fees; the debtor's active review coupled with his minimum level of participation at court may limit the amount of any judgment rendered against him. Second, once a judgment is taken, the creditor may begin enforcement of the judgment. In legal parlance, this is known as "execution" of the judgment. An execution can result in a levy by the sheriff on the debtor's personal belongings and automobiles. It can result in a garnishment of wages or bank accounts. As part of the execution process, the judgment creditor may also bring a debtor interrogatory (Virginia) or proceeding in aid of execution of judgment (Maryland). Debtors ARE FORWARNED the debtor interrogatory is the most effective weapon in the creditor's arsenal. The debtor can go to jail as a result of such a proceeding.
The Debtor Interrogatory is a proceeding actually started by Queen Elizabeth I of England as a part of the "Star Chamber." That should tell you something. If the debtor fails to appear at the proceeding, the court in which the proceeding is pending may issue a bench warrant for his/her arrest. If the debtor appears, but fails to bring documents requested or to answer questions about his estate, the court may give the debtor a free night's stay at the county hotel. The court can also compel the debtor to sign over property to the sheriff. If the debtor fails to comply, you guessed it, the bailiff (the Court's bodyguard) will escort the debtor to the jail. Also the debtor can be compelled to assign over her interest in bank accounts, patents, accounts receivable and a host of personal property (tangible or intangible). The creditor can also compel the debtor to grant the sheriff a deed to real property located outside of the Commonwealth of Virginia. The debtor interrogatory is a very powerful weapon. Thank goodness most creditors fail to utilize the proceeding to its fullest extent.
Basically, we advise clients, especially if they are anxious by nature, to contact our bankruptcy department and to file bankruptcy petitions before judgments are entered against them. That way the debtors avoid those nasty state court judgment execution proceedings.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Wednesday, July 14, 2010
INCOME FOR BANKRUPTCY PURPOSES
When facing financial troubles, many people turn to family members or close friends for financial assistance. While these gifts or loans may be necessary in order to live, these contributions are considered as income for the purposes of filing bankruptcy. Regular or frequent contribution from anyone paid to a debtor qualifies as income. The Bankruptcy Code treats any money received in the six months prior to filing for bankruptcy as income. 11 U.S.C. § 101(10A). This includes any household expenses that are paid for by anyone other than the person filing for bankruptcy. 11 U.S.C. § 101(10A). For example, the car payments your brother made on your behalf is considered income for the purposes of filing bankruptcy. You should inform your attorney of any income you receive whether it is in the form of a gift, payment from your employer or a contribution to your household expenses, when discussing whether you qualify to file for bankruptcy.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Saturday, June 12, 2010
LIBERATING AMERICA, ONE DEBTOR AT A TIME
Have you ever wondered why we as a nation are in an economic downturn. You may think that it has something to do with Lehman Brothers going bankrupt. Sure that was the straw that broke the camel's back; on the other hand, the underlying cause is revealed by a branch of economics known as “macro economics,” which was founded during the Great Depression. Macro economics studies broad, underlying trends, such as trade balances, monetary supply, demand for goods and services, demographics, etc. What do the macro economists tell us? Well, the news is not good. The total indebtedness of America is at an all-time high. The current total indebtedness, public and private, dwarfs the nation’s total indebtedness in 1929, just before the Black Tuesday stock market crash. The consequence of all of these debts is that our unalienable rights of “life, liberty and the pursuit of happiness” are constrained by our obligations to pay creditors.
We need to eliminate our crippling debts. Some may have the income to pay off their debts or have the ability to refinance them at cheaper rates for longer periods of time. Others will need to default and declare bankruptcy. Either way, we need to soberly face our individual situations. We all fear change. We all deny our “issues.” We avoid sadness, confrontation, etc. But we can be free once we recognize our psychology and then take action. We can start over. We can take control of our lives. We can walk upright into a new day. We are our own best jailers, and the shackles of high interest, late fees and creditor harassment can end as soon as we decide to take control of our lives. Let’s free ourselves and in doing so let’s free America.
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
We need to eliminate our crippling debts. Some may have the income to pay off their debts or have the ability to refinance them at cheaper rates for longer periods of time. Others will need to default and declare bankruptcy. Either way, we need to soberly face our individual situations. We all fear change. We all deny our “issues.” We avoid sadness, confrontation, etc. But we can be free once we recognize our psychology and then take action. We can start over. We can take control of our lives. We can walk upright into a new day. We are our own best jailers, and the shackles of high interest, late fees and creditor harassment can end as soon as we decide to take control of our lives. Let’s free ourselves and in doing so let’s free America.
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Friday, June 11, 2010
SET-OFFS: LOOK AT THE FINE PRINT
Sometimes what you don’t know will kill you. In this posting we discuss set-offs. Most consumers don’t know that a creditor has the right to net out any debt(s) it owes the debtor against the debt that the debtor owes the creditor. This makes logical sense. Let’s adjust the obligations of the parties so that only the "real," net, number is at issue. Most people understand this concept.
However, most debtors do not know that a checking or savings account is a debt that the bank owes them. An account actually creates a contract between the depositor (debtor) and the bank (creditor). In the account relationship the parties are reversed. The debtor becomes a creditor of the bank for the amount on deposit, and the bank becomes a debtor for that amount. You may ask, “well so, what do I care?” Well, if one has an account at a bank and a loan at the same bank, for a mortgage, credit card, or installment loan, etc., the bank can set-off its banking account obligation to the debtor against the debtor’s obligation to pay back the loan.
Under Section 553 of the Bankruptcy Code, if the set-off is made by the bank within 90 days of the filing of the bankruptcy petition, the set-off may be set aside if it puts the bank in a preferred position over the debtor’s other unsecured creditors. While the bank has the right of set-off after the bankruptcy is filed, it is subject to the provisions of the automatic stay under Section 362, and it cannot exercise its right of set-off except by leave of court.
Basically, the debtor should never maintain his operating funds in an account with a bank, which is also the debtor’s lending institution. No one in the past told the debtor this, but the reason a lender usually gave the debtor around 1/4th of a point off his loan interest for also maintaining an operating account with the lender is so that in a pinch the lender could exercise its right of setoff against the operating account. It’s all in the fine print in the debtor’s banking account agreement.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
However, most debtors do not know that a checking or savings account is a debt that the bank owes them. An account actually creates a contract between the depositor (debtor) and the bank (creditor). In the account relationship the parties are reversed. The debtor becomes a creditor of the bank for the amount on deposit, and the bank becomes a debtor for that amount. You may ask, “well so, what do I care?” Well, if one has an account at a bank and a loan at the same bank, for a mortgage, credit card, or installment loan, etc., the bank can set-off its banking account obligation to the debtor against the debtor’s obligation to pay back the loan.
Under Section 553 of the Bankruptcy Code, if the set-off is made by the bank within 90 days of the filing of the bankruptcy petition, the set-off may be set aside if it puts the bank in a preferred position over the debtor’s other unsecured creditors. While the bank has the right of set-off after the bankruptcy is filed, it is subject to the provisions of the automatic stay under Section 362, and it cannot exercise its right of set-off except by leave of court.
Basically, the debtor should never maintain his operating funds in an account with a bank, which is also the debtor’s lending institution. No one in the past told the debtor this, but the reason a lender usually gave the debtor around 1/4th of a point off his loan interest for also maintaining an operating account with the lender is so that in a pinch the lender could exercise its right of setoff against the operating account. It’s all in the fine print in the debtor’s banking account agreement.
Martin Conway
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
Tuesday, March 2, 2010
STUDENT LOANS--DIDN'T YOUR PROFESSORS HAVE A PLAN FOR YOU!!
Time and Time again, I see clients with an enormous amount of student loan debt. Many times the debt is in excess of 5 figures. Unfortunately, student loan debt is not dischargeable in bankruptcy, and it is not a priority unsecured debt like taxes or domestic support obligations. Yes, there is a hardship exception to discharge student loan debt, but the case law indicates that such a discharge applies in very limited circumstances. For instance, if the debtor has a permanent disability, then the student loan debt would be dischargable.
I think we, the American citizenry, ought to lobby Congress and change the law. When students borrowed all of this money, no one undertook to underwrite the student loans to determine whether they made economic sense. The situation is particularly acute in the current economy because many graduates are unemployed , underemployed or have not received the salaries they anticipated. And forbearing or deferring the student loans is not a solution since many loans have negative amortization features. Also student loan interest is tax deductible, and one cannot take the deduction if he/she is not paying the loan.
ONE SOLUTION: on an experimental basis, we are taking a few Chapter 13 cases in which we are characterizing the student loans as long-term debt. Some courts have allowed student loans characterized as long-term debt to be paid in the ordinary course while credit card debt and other unsecured debts are given a lower priority. When such plans are confirmed, the debtor is able to devote more of his/her income to pay-off the student loans sooner.
We'll keep you posted whether the local bankruptcy courts approve the characterization of student loans as long-term debt with a higher priority.
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
I think we, the American citizenry, ought to lobby Congress and change the law. When students borrowed all of this money, no one undertook to underwrite the student loans to determine whether they made economic sense. The situation is particularly acute in the current economy because many graduates are unemployed , underemployed or have not received the salaries they anticipated. And forbearing or deferring the student loans is not a solution since many loans have negative amortization features. Also student loan interest is tax deductible, and one cannot take the deduction if he/she is not paying the loan.
ONE SOLUTION: on an experimental basis, we are taking a few Chapter 13 cases in which we are characterizing the student loans as long-term debt. Some courts have allowed student loans characterized as long-term debt to be paid in the ordinary course while credit card debt and other unsecured debts are given a lower priority. When such plans are confirmed, the debtor is able to devote more of his/her income to pay-off the student loans sooner.
We'll keep you posted whether the local bankruptcy courts approve the characterization of student loans as long-term debt with a higher priority.
This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.
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