This article originally appeared on Forbes on February 16, 2021 the article can be found at:https://www.forbes.com/sites/markkantrowitz/2021/02/16/student-loan-forgiveness-myths/?sh=36f6097450c5Student Loan Forgiveness MythsBorrowers and policymakers have been urging President Joe Biden and Congress to forgive student loan debt. Student loans are complicated and confusing. This has contributed to many misconceptions about student loan forgiveness. Some of these myths support student loan forgiveness and some oppose it.Let’s debunk some of the more common student loan forgiveness myths.There are many misconceptions and myths about student loan forgiveness. GETTY President Biden Will Forgive All Student LoansThis myth asserts that President Biden will forgive all student loans.Senator Bernie Sanders proposed forgiving all student loans, not President Joe Biden.Even if Congress were to pass legislation forgiving student loans, it is likely to fall short of forgiving all student loans. The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), which passed the U.S. House of Representatives but did not pass the U.S. Senate, proposed forgiving up to $10,000 in student loans per borrower. President Biden has said that he supports $10,000 in student loan forgiveness per borrower.Due to the cost, Congress is likely to limit the forgiveness in various ways, such as limiting it to borrowers who are experiencing economic distress, borrowers who owe less than $10,000 and borrowers who earn less than $125,000.The President Can Forgive All Student LoansThis myth claims that the President can forgive all student loans through executive order.A few policymakers have stated that the President (actually, the Secretary of Education) has the legal authority to forgive all student loans.MORE FOR YOU Student Loan Cancellation Less Likely If Stimulus Checks Get Cut3 Reasons Why Biden Excluded Student Loan Relief From Stimulus – And What It Means For BorrowersBiden Comes Out Against $50,000 In Student Loan Forgiveness - But Supports This Amount, InsteadThis false assertion is based on a misreading of the waiver authority in the Higher Education Act of 1965 [20 USC 1082(a)(6)], taken out of context. The waiver authority, which applies only to loans made under the Federal Family Education Loan (FFEL) and Federal Perkins Loan programs, is limited to operating within the scope of the statute. Specifically, when Congress authorizes a loan forgiveness program, such as Public Service Loan Forgiveness, Teacher Loan Forgiveness or the Total and Permanent Disability Discharge, the U.S. Department of Education has the authority to forgive student loans as authorized under the terms of these loan forgiveness programs.Also, the parallel terms clause in the Higher Education Act of 1965, which requires Direct Loan program loans to have the same terms and conditions as FFEL program loans, does not apply to waiver authority, which is not part of the terms and conditions of the loans.Only Congress has the power of the purse. The executive branch cannot spend money that has not been appropriated by Congress. Congress can pass legislation to forgive student loans, but without this legislation, the President does not have the legal authority to issue blanket student loan forgiveness.The waiver authority also does not apply to private student loans.The Legal Authority for the Payment Pause and Interest Waiver Can Be Used to Forgive Student LoansSome people claim that President Trump used the waiver authority to implement the payment pause and interest waiver, setting a precedent that could be used to forgive student loans.President Trump did not identify the legal authority used to implement the payment pause and interest waiver in his executive memo, but there are three possibilities that do not rely on a misreading of the general waiver authority.The statutory definition of the economic hardship deferment provides the Secretary of Education with the authority to create other eligibility criteria for the economic hardship deferment. [20 USC 1085(o)(1)(B)]The regulations for the Direct Loan program allow the Secretary of Education to provide administrative forbearance “due to a national military mobilization or other local or national emergency.” [34 CFR 685.205(b)(8)]The Heroes Act of 2003 authorizes the Secretary of Education to ensure that “recipients of student financial assistance under Title IV of the Act who are affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals” in connection with a war or other military operation or national emergency. Affected individuals include individuals who “suffered direct economic hardship as a direct result of a war or other military operation or national emergency.” [20 USC 1098bb(a)(2)(A)]Student Loan Forgiveness Will Stimulate the EconomyThis myth claims that “student debt cancellation can … give a boost to our struggling economy through a consumer-driven economic stimulus that can result in greater home-buying rates and housing stability.”Forgiving student loan debt yields an annual financial impact that is about 6% of the amount forgiven, corresponding to the amount borrowers are actually paying on their student loans.Student loan payments total about $100 billion a year, approximately 0.4% of GDP. (For comparison, the cost of the payment pause and interest waiver is about $60 billion a year.) Forgiving all student loan debt will yield a smaller positive impact on the economy in the short term than other stimulus efforts.Student loan forgiveness will also not have a big impact on home-buying rates.According to research by Federal Reserve economists, a $1,000 increase in student loan debt before age 23 causes “a decrease of about 1.5 percentage points in the homeownership rate,” which is the “equivalent to a delay of 2.5 months in attaining homeownership.” This effect, however, disappears by the time borrowers enter their early thirties. Thus, student loan debt affects only the timing of homeownership, not the attainment of homeownership.Student loan debt outstanding is one-sixth of mortgage debt outstanding. A similar ratio applies to comparisons of student loan and mortgage balances and loan payment amounts.Based on data from 2017 follow-up to the 2016 Baccalaureate and Beyond longitudinal study (B&B:16/17), the average student loan payment among Bachelor’s degree recipients is $306, compared with an average car payment of $392 and an average mortgage payment of $1,254. The average rent payment for borrowers who don’t own homes is $875, yielding a difference of $379, which is greater than the average student loan payment.Student Loan Forgiveness Will Provide Immediate Financial ReliefThis myth claims that student loan forgiveness will provide immediate financial relief to millions of student loan borrowers who are experiencing economic distress because of the pandemic and recession.Forgiving less than the full amount owed might not yield much of an immediate impact because it will change the remaining time in repayment but not the monthly payment amount. This is especially true of borrowers in income-driven repayment plans, where the loan payments are based on the borrowers’ income and not the amount they owe. Even with $50,000 in student loan forgiveness, more than 40% of borrowers in income-driven repayment plans will still owe some student loan debt.Thus, student loan forgiveness provides long-term financial relief but not necessarily short-term financial relief.The payment pause and interest waiver, on the other hand, provides immediate financial relief.Student Loan Forgiveness Will Solve the Student Loan ProblemThis myth claims that student loan forgiveness is a solution to the student loan problem.There really isn’t a student loan problem, so much as a college completion problem. Students who drop out of college are four times more likely to default on their federal student loans than borrowers who graduate, and represent more than two-thirds of the defaults. Borrowers who drop out of college have the debt, but not the degree that can help them repay the debt.Most borrowers who graduate are able to repay their student loans. Only 0.1% of Bachelor’s degree recipients and 1.1% of Associate’s degree recipients default on their federal student loans.Forgiving student loans will not increase the number of students enrolling in college. It will not increase the number of students graduating from college. It will not make college more affordable.The average federal student loan debt of borrowers who are in default on their federal student loans is about $22,000.Student Loan Forgiveness Will Close the Racial Debt GapThis myth claims that student loan forgiveness is the best way to address racial disparities in student loan debt.Students who attend Historically Black Colleges and Universities (HBC Us) are twice as likely to borrow to pay for college. They also graduate with 25% more student loan debt. Their student loan payments represent a greater share of income.But, forgiving $50,000 in student loan debt per borrower is not the most effective way of closing the racial debt gap. Only 18% of the financial benefit from blanket student loan forgiveness will go to Black or African-American borrowers. Instead, why not just forgive the student loan debt of all borrowers who attended HBC Us? This student loan debt was caused, in part, by chronic underfunding of these institutions. The cost of this forgiveness is about $30 billion.The Federal Government Can’t Forgive Private Student LoansThis myth asserts that the federal government can’t forgive private student loans, just federal education loans.The Truth in Lending Act [15 USC 1650(e)] bans prepayment penalties on private education loans. The Higher Education Act of 1965 [20 USC 1083(a)(14)] bans prepayment penalties on federal education loans, including those held by private lenders.So, Congress could pass a law to forgive private student loans by appropriating funds to pay off the loan balances.This would cause losses for the lenders and investors in student loan securitizations, since they would not receive the future interest revenue they were expecting, just par value for the loans.Lenders might respond by no longer offering private student loans or by charging higher interest rates.All Student Loan Forgiveness Is Tax-FreeThis myth claims that all student loan forgiveness is tax-free.Some student loan forgiveness is tax-free and some is taxable.Generally, if student loan forgiveness is provided by the loan program, it is tax-free if the loan forgiveness requires the recipient to work in certain professions for a specified period of time. Examples include Public Service Loan Forgiveness and Teacher Loan Forgiveness.Certain student loan discharges are also tax-free. These include the death and disability discharges (through December 31, 2025), closed school discharges, false certification discharges, unpaid refund discharges and the borrower defense to repayment discharge.Employer-paid student loan repayment assistance programs, or LRA Ps, are also tax-free through the end of 2025.Otherwise, the cancellation of debt is treated like taxable income to the borrower under current law. It is as though someone provided the borrower with income to pay off the debt. Thus, the forgiveness after 20 or 25 years in an income-driven repayment plan is taxable.The IRS will forgive tax debts when the taxpayer is insolvent (total debt exceeds total assets). A borrower who has been in an income-driven repayment plan for two decades is likely to be insolvent. But, there are no guarantees that the tax debt will be forgiven.Student Loans Can Be Discharged in BankruptcyThis myth asserts that student loan forgiveness is not necessary because student loans can be discharged in bankruptcy.Bankruptcy discharge of student loans is very rare.There is an exception to bankruptcy discharge of student loans unless the debt imposes an “undue hardship” on the borrower and the borrower’s dependents. This is a very harsh standard, requiring a current and future inability to repay the debt while maintaining a minimal standard of living. One bankruptcy court judge referred to it as requiring “a certainty of hopelessness.”Certain other types of student loans, such as bar study loans and residency/relocation loans, can also be discharged because they are not considered to be qualified education loans.The Federal Government Has Never Previously Forgiven Student LoansThis myth asserts that the federal government generally does not forgive student loans.The source of this myth is the very low approval rates for public service loan forgiveness and borrower defense to repayment discharges. Only about 3% of borrowers who applied for public service loan forgiveness have been approved. Some of those borrowers were not eligible for loan forgiveness (yet) and the loan servicer miscounted the number of qualifying payments for other borrowers. A similarly low percentage of borrower defense to repayment claims were approved by the Trump Administration.But, borrowers do qualify for other types of loan forgiveness. About 37,000 teachers qualify for teacher loan forgiveness each year. About 4,700 borrowers qualify for an automatic closed school discharge each year.Student Loan Forgiveness Creates A Moral HazardThis myth asserts that student loan forgiveness creates a risk of moral hazard.Moral hazard occurs when a student borrows to the limit because they expect their student loans to be forgiven.Most student loan forgiveness programs cap the amount of forgiveness per borrower, thereby limiting the potential for moral hazard.The main exceptions are public service loan forgiveness and income-driven repayment plans. Public service loan forgiveness cancels the remaining debt after the borrower has made 120 qualifying payments. The income-driven repayment plans cancel the remaining debt after 240 or 300 loan payments. A borrower must have very low income for a decade or longer to qualify for some loan forgiveness.Blanket student loan forgiveness is likely to be a one-time event and the amount of loan forgiveness is likely to be limited.Obama Student Loan ForgivenessThis myth claims that borrowers are eligible for Obama Student Loan Forgiveness after paying down 10% of their student loan debt or satisfying other easy criteria.There is no such thing as “Obama Student Loan Forgiveness.” This is a name used by some student loan scams who say that they will help you apply for student loan forgiveness, if you pay them an up-front fee. The promised loan forgiveness never materializes. Changing an up-front fee for credit repair, including student loan forgiveness, violates federal and state consumer protection laws. The Federal Trace Commission (FTC) and several state attorneys general cracked down on such advance-fee loan scams in Operation Game of Loans.Often, these scams describe a fictional loan forgiveness program that garbles characteristics of Public Service Loan Forgiveness (PSLF) and certain income-driven repayment plans.Public Service Loan Forgiveness was created by the College Cost Reduction and Access Act of 2007, during the Bush Administration, not the Obama Administration. The loan forgiveness program became effective on October 1, 2007, before President Obama took office. This law also created income-based repayment, which became available starting on July 1, 2009. Neither of these programs were ever called Obama Student Loan Forgiveness.Private student loans are not eligible for Public Service Loan Forgiveness or income-driven repayment.Follow me on Twitter. Check out my website or some of my other work here. Mark KantrowitzI am Publisher of PrivateStudentLoans.guru, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA, scholarships, 529… Read MorePrintReprints & Permissions

Essential Distinctions Between a Student Loan Forgiveness & Discharge Arizona Bankruptcy Attorneys Explain Student Loan Debt Relief Methods Student loan debt is one of the biggest debts that people carry – and one of the biggest reasons they start thinking whether or not to file for bankruptcy. Unfortunately, it is very, very difficult to discharge student debt in bankruptcy. It is so difficult that most bankruptcy attorneys will tell you that it’s not possible. Instead, bankruptcy can be a tool for getting other debt relief so that you have the money needed to pay your student loans. However, there are other ways that you may be able to relieve your burden for student loans. Student loan discharge eliminates the debt so you no longer have to pay it. Student loan forgiveness is a means of removing your obligation to pay the debt. Both require that you meet certain criteria. Here’s what you need to know: Student Loan Discharge There are few situations in which the government will agree to discharge your student loans. Your loans can be discharged if you die, but most people aren’t going to count on their own deaths for debt relief. However, if your spouse dies, know that you will be able to discharge the debt. The government may also discharge student debt for: Total & Permanent Disability Identity Theft: You will have to prove that someone has stolen your identity to open a line of credit in your name. Fraudulent Misrepresentation: You will have to prove that your school fraudulently signed your name to a loan application, misled you about the school or your career options after graduation, or failed to let you know about reimbursement money you were owed. As you can see, the options for getting a student loan discharge are scarce, and the criteria are narrow. If you are simply looking to have your debt discharged because you are unable to pay it, you won’t be successful. Student Loan Forgiveness If you have worked in a certain field, you may be eligible to have your student loans forgiven after a certain time period. The government offers this benefit in exchange for needed service, such as teaching or other public service. Two primary programs are available for student loan forgiveness: Public Service Loan Forgiveness and Teacher Loan Forgiveness. Under the Public Service Loan Forgiveness, you need to have worked in a public service position for at least 10 years and have made your student loan payments for the previous 120 months. Public service positions might include police officer, firefighter, social worker, doctor, or nurse. Under the Teacher Loan Forgiveness program, you must have been a teacher in a qualifying school for five years, as well as meeting other criteria. If you qualify, you can have up to $17,500 of your debt forgiven. You may have much more debt than that, so this option does not offer total debt relief. As you can, there are not many options for relieving yourself of your student loan burden. Even if you find yourself unable to pay your loans, the best the government will do is defer your payments or lower them to match your ability to pay. However, that only kicks your debt problem down the road. It doesn’t solve it. To get true debt relief, you will need to look at options like bankruptcy. Though you may not be able to discharge your student loan debt in bankruptcy, you can discharge other debts, and that can free up a lot of money to pay down your student debt (or just to manage your monthly payments). Talk to a bankruptcy attorney about how bankruptcy can help your particular financial circumstances. Contact Experienced Bankruptcy Lawyers In Phoenix, AZ Call My AZ Lawyers today to talk with a bankruptcy attorney about what kind of debt relief is possible for you through bankruptcy. Our attorneys represent clients in Chapter 7 bankruptcy, which offers a total discharge of unsecured debts, as well as Chapter 13 bankruptcy, which restructures a client’s debt into an affordable repayment plan. We can help you understand how each of these options can help you, as well as how they may impact assets such as your home or vehicle. Our goal is to help you get the maximum debt relief possible. Contact our bankruptcy law office today to talk with a bankruptcy lawyer and learn more. We serve clients throughout the Phoenix area.   Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: info@myazlawyers.com Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Essential Distinctions Between a Student Loan Forgiveness & Discharge appeared first on My AZ Lawyers.

 In February 2020, Congress passed a new law establishing a new small business bankruptcy filing subchapter, known as “Subchapter V”. The original debt limit for Subchapter V was $2.7 million, however, in March 2020, the CARES Act increased the debt limit to $7.5 million for one year. Unless Congress renews the $7.5 million debt limit established last March, the debt limit will revert back to $2.7 million on March 27, 2021.Subchapter V was designed to be a fast track, cheaper alternative, to traditional chapter 11’s for business. The law is extremely helpful for restaurants, retailers, and other small businesses who prefer reorganization to liquidation or shutting down. In a prior blog post at we discussed many of the benefits of Subchapter V:  https://shenwick.blogspot.com/search?q=subchapter+v   If a small business has debt that exceeds $2.7M and they want to file under Subchapter V, they must file their bankruptcy petition on or before March 27, 2021, unless Congress raises the debt limit.  Any individuals or businesses with questions about Subchapter V should contact Jim Shenwick: (212) 541-6224; jshenwick@gmail.com

Arizona Bankruptcy Exemptions in Chapter 7 & Chapter 13 Bankruptcy Filings Expert Arizona Bankruptcy Attorneys Take a Look at The Exemptions When Filing For Bankruptcy Our Arizona Bankruptcy Lawyers take a look at the exemptions that will be applicable if you are going to file for bankruptcy in Arizona. Bankruptcy exemptions play a large part in both Chapter 7 and Chapter 13 bankruptcy filings in AZ. Bankruptcy exemptions are used to keep property in a bankruptcy filing. Property that you are able to keep by using bankruptcy exemptions is called “exempt property”. Many people mistakenly believe that if you declare bankruptcy, you have to surrender all of your property. While you may have to surrender certain properties to your bankruptcy trustee, you won’t have to give up anything at all with proper planning. If you qualify for Chapter 7 Bankruptcy in Arizona, you need to understand the exemptions and how they apply to your situation. What is a Bankruptcy Exemption Regarding Arizona Bankruptcy Filings? Bankruptcy Exemptions are laws that protect your property when filing for bankruptcy. There are both State of Arizona Bankruptcy Exemptions and Federal Bankruptcy Exemptions. Bankruptcy exemptions are a way to level the playing field so that people can keep some of their property when they are considering filing for bankruptcy in Arizona. Bankruptcy Exemptions in Arizona Homestead Exemption The homestead exemption in Arizona is $150,000. You may have up to $150,000 equity in your home, meaning your home can be worth more than that amount if you have enough balance left on your mortgage. For example, your home is worth $500,000 but your mortgage balance is $400,000. Your equity is $100,000, which is safely under the exemption limit of $150,000. Your house would be safe in the bankruptcy. However, let’s say your house is worth $300,000 and your balance is $100,000. Your equity would be $200,000, which is enough over the exemption limit for the bankruptcy trustee to pursue selling the home. The $150,000 would be returned to you, and any excess proceeds from the home sale would be distributed amongst your creditors. You will only have one homestead exemption to use, regardless of if you are married. Motor Vehicles In Arizona, you may have up to $6,000 equity in your vehicle in a Chapter 7 bankruptcy. If you are married, you may have two vehicles with up to $6,000 each or one vehicle with up to $12,000 equity. For example, if you are married and have a paid off car worth $5,000, and a financed vehicle worth $25,000 and a balance of $10,000, you could keep the paid in full car but would have to surrender the financed vehicle. The exemption limit for vehicles increases to $25,000 if the filer has a disability that requires special equipment in their vehicle. Bank Accounts When filing your bankruptcy petition, it is important that you pay close attention to your payday and bank account balance. In Arizona, you may either have $300 as a single filer or $600 as a married filer in one bank account on the day that you file. The trustee will request your bank statements to make sure that the balance matches what you listed on your petition. If you had more than the state exemption in your bank account on the day you filed, your trustee may require you to pay that amount towards your bankruptcy estate or have your case dismissed. Personal Items & Household Goods This exemption has a wide reach and can be used on furniture, electronics, and other miscellaneous items around your house. The exemption for a single filer is $6,000, which is doubled for married filers. Clothing The exemption for clothing in Arizona is $500, which doesn’t increase for additional family members. Don’t forget to list your clothing as personal property on your petition, unless you plan on appearing at your 341 Meeting of Creditors without it. Pets, Horses, etc. While pets are often viewed more as a treasured family member than a piece of property, it wouldn’t be fair to let someone with a herd of thousand dollar designer puppies or an expensive equestrian habit to discharge their debts without acknowledging how valuable their pets are. The exemption for pets in Arizona is $500. Exemptions are based on the asset’s current value, so you probably don’t need to worry if you spent slightly more than that on a puppy or kitten that is now fully grown. Engagement & Wedding Rings While you should always try to be presentable for any court appearance, don’t wear your finest jewels to your 341 Meeting of Creditors. The exemption for rings in Arizona is $2,000. Tools & Equipment The exemption for this category is $5,000, and filers may not try to include a vehicle under this exemption to keep an extra vehicle. This is primarily for tools of the trade. Pensions & Retirement Accounts These are generally safe in bankruptcy in Arizona. The reasoning behind this is that requiring low-income debtors to surrender retirement savings will mean more government-funded support for these people in the future. Social security income is also entirely exempt in bankruptcy as an asset and for income qualification purposes. Let Your Arizona Bankruptcy Lawyers Assist You With Bankruptcy Exemptions Clearly, there are many things to keep in mind when deciding whether to file bankruptcy, which chapter to file, and how to best use the bankruptcy exemptions to your benefit. Exemption mistakes could result in you having to surrender beloved assets or your case being dismissed. That’s why you should, at the very least, consult with a bankruptcy attorney before filing your petition. Even if you think you can’t afford an attorney, our firm offers free consultations. We also offer affordable rates and payment plan options, so bankruptcy might be more affordable than you thought. Call to get started today.   Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: info@myazlawyers.com Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Arizona Bankruptcy Exemptions in Chapter 7 & Chapter 13 Bankruptcy Filings appeared first on My AZ Lawyers.

Summary: Firstar Bank, N.A. (pay close attention to the names) lent Linda Shaw funds to purchase her home subject to a Deed of Trust. When Ms. Shaw died, the property passed subject to her will to Theresa Hall, who took … N.C. Ct. of App: Wilmington Savings Fund Society v. Hall- Indorsement of Mortgage Notes and Ratification of Transfers by Loan Modification Read More »

Commentary: The effects of that intestacy and the Law of Partition, which this video  by  Prof.  Thomas Wilson Mitchell   very clearly encapsulates, have,  particularly on People of Color,  is routinely an issue in consumer bankruptcy cases.  Too often the successful,  … Video: Thomas Wilson Mitchell, Property Law Scholar & 2020 MacArthur Fellow- Racial Bias and Impact of Intestacy and the Law of Partition Read More »

Accelerated Rehabilitative Disposition in Pennsylvania (hereafter referred to as ARD) is a Pennsylvania Statute that is encoded at Title 75 Section  1552.  ARD is a minimally reporting probation, that varies from county to county in terms of the requirements, that can be used to resolve first-time offender cases that are either “driving under the influence” […] The post Accelerated Rehabilitative Disposition (ARD) and the Chichkin Case appeared first on .

   In an analysis of the Florida exemption laws and exceptions to such laws, Judge Vaughan dismissed adversary proceedings against two debtors (a husband and spouse) in separate bankruptcy cases.  Roberts v. Hopkins (In re Hopkins), 2021 Bankr. LEXIS 260, Adv #6:20-ap-00032-LVV (Bankr. M.D. FL, 3 February 2021).  The underlying debt arose from debt from Hopkins to purchase a business from the plaintiff, secured by stock in the business.  Hopkins transferred the stock to himself and his spouse as tenancy by the entireties.  Plaintiffs then sued in state court, after which the business made a series of payments on behalf of Hopkins and his spouse, including mortgage payments, and subsequently dissolved the corporation and transferred its remaining assets to a business owned by the debtors for no consideration.  Plaintiffs filed objections to exemptions in both cases requesting that the court impose an equitable lien on their property.  Defendants sought to dismiss under Fed. R. Civ. P. 12(b)(6) (made applicable in bankruptcy by Rule 7012 Fed. R. Bankr. Proc.) for failure to state a claim.  Rule 12(b)(6) requires that a plaintiff provide the grounds of his entitlement for relief, with sufficient factual matter to state a claim to relief that is plausible on it's face.1   The plaintiff must plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.2    As the only count in the complaint filed was a request for the Court to impose an equitable lien on the Debtors' homestead, the court analyzed whether such relief was available to Plaintiffs on the facts alleged.  In Florida, the homestead exemption is exempt from execution by a creditor except for 1) the payment of taxes and assessments thereon; 2) obligations contracted for the purchase, improvement, or repair thereon; or 3) obligations contracted for house, field or other labor performed on the realty.   Fla. Const. art. X §4.  Florida has established a broad and liberal application of the homestead exemption.    The primary case examining the limits of this protection is Havoco of America, Ltd. v. Hill, 290 So.2d 1018 (790 So.2d 1018, 1028 (Fla. 2001).  This case ruled that the exemption is protected even when the homeowner transferred non-exempt assets into the homestead with the intent to hinder, delay or defraud creditors.  The Havoco court did limit this protection but solely where the funds converted into the homestead were obtained through fraud or egregious conduct.  This can include funds obtained by fraudulent transfer.3  The imposition of an equitable lien remedy is designed to prevent unjust enrichment.4   The remedy is only permitted when the funds used to invest in, purchase, or improve the home were obtained through fraud or egregious conduct.   Courts look at how the money was obtained rather than how the funds were used.   Creditors seeking the remedy must establish both the fraud and the egregious conduct and then trace those funds into an investment in, purchase, or improvement of the homestead.  As the Plaintiffs in this case failed to establish the first two requirements.  They fail to assert how the transferred funds end up in the homestead.    The Court went on to note that simply making mortgage payments on the home is insufficient to support the imposition of an equitable lien.  They support their allegation by showing three mortgage payments of $1,297.70 each in successive months from the businesses.  The court found that ongoing mortgage payments are not funds 'used to invest in, purchase, or improve the homestead.'  Plaintiffs do not even allege that the mortgage on which the payments were made had been used to purchase the property. To invest in a property requires the addition of value to such property.  The three mortgage payments do not equate too improvement of the homestead.  The court granted the motion to dismiss under Rule 12(b)(6) for failure to state a claim, in failing to state grounds under Florida law for their request to impose an equitable lien on the property.1 Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).↩2 Id↩3 LaMarca v. Jansen (In re Bifani), 580 F. App'x. 740, 747 (11th Cir. 2014).↩4 Palm Beach Sav. & Loan Ass'n, F.S.A. v. Fishbein, 619 So. 2d 267, 270 (Fla. 1993).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

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If you or a loved one has been charged with a felony or a misdemeanor, you may wonder what that means and what the differences between the two types of crimes are. Misdemeanors are more minor crimes and felonies are more serious. But both can carry significant consequences. The Bucks County criminal defense lawyers at […] The post What Is the Difference Between a Felony and a Misdemeanor in Pennsylvania and NJ? appeared first on .