One advantage to filing for a Chapter 13 Bankruptcy is the option to "cram down" certain types of secured debts, including cars, trucks, and motorcycles.  Cramming down quite simply means that the amount owed will be reduced to the fair market value of the items.  Often times the value of an vehicle depreciates much faster than the payments are made.  For example, let's consider that an individual purchased a vehicle in July 2010 for $15,000 dollars.  The monthly car payment is $250 dollars.  For ease of understanding we will exclude interest calculations in the example. In February of 2012 that individual will have paid $5,000 dollars towards the vehicle, leaving a remaining balance of $10,000.  However, in the time the person has owned the vehicle it has depreciated due to normal use and age.  So now, if the car is valued at $7,000 dollars the individual owes $3,000 dollars more than the value of the car.  In a Chapter 13 proceeding it is possible to cram down the amount owed to the fair market value of the vehicle.   Fair market value can be determined by appraisals or commonly accepted authorities, such as Kelley Blue Book values.  It is important to note that where an individual has a substantial amount of equity in the vehicle and they owe less than what the vehicle is worth the individual will be required to pay the amount owed under the loan.  There are certain qualifications for cramming down the amount owed to the fair market value.  The asset must be personal property guaranteed by a secured loan.  This simply means that the creditor can take a vehicle used for personal use in the event the debtor defaults on payments.  The most common example of a secured loan is a vehicle purchased from a dealership.  Furthermore, when talking about vehicles for personal use, the loan must have been taken out more than 910 days prior to filing for bankruptcy to be eligible for cram down.  When a debt can be crammed down it is then rolled into the Chapter 13 reorganization plan and paid back over 36-60 months, depending on the plan you choose.  This means that not only is the amount the individual pays back decreased, but the payments may still be lower as the individual will have more time to make payments.  As with anything in a Chapter 13, at the end of the repayment plan the vehicle is yours and you will not own anything further on the vehicle. In the example above we ignored interest for ease of calculation and understanding.  However, when a debt is crammed down interest will still be calculated, though it will not be the amount of interest on the original loan.  Missouri uses the formula approach to calculating interest on the loan.  The court will first look at the national prime rate for credit worthy lenders.  The court will then adjust that rate to account for the increased risk a non-payment with a debtor in bankruptcy and will account for duration of the plan, feasibility of the plan, and the type of security. There are a few more things to consider concerning cram down.  If there is a co-signer on the loan who is not a part of your bankruptcy, i.e. a friend, parent, or significant other, the cram down will not apply to that persons obligation.  Using the example above, if our debtor had a co-signer that was not a part of his bankruptcy the debtor would only owe $7,000 dollars, however, the co-signer will still be responsible for the full 10,000 left on the loan.  This means that creditors can take action to recover the $3,000 difference between the cram down and the original loan value from the co-signer.If you still have questions about cram down contact a St. Louis Bankruptcy Attorney today. 

You find the new bill introduced by Senator Crowell here:http://www.senate.mo.gov/12info/pdf-bill/intro/SB683.pdf Among  other things, the new bill will include earned income credits as being exempt from creditors. This can be helpful in filing for bankruptcy when the tax refund comes in and someone has to turn over a portion of the tax refund to the trustee. The Earned Income Tax Credit will be exempt. The remaining part of the tax refund might be exempt by applying other exemption or by planning the time of the bankruptcy filing.  

Many people who are considering bankruptcy may also be in the process of losing their home due to foreclosure. In fact, oftentimes, these two situations are closely related. Yet, depending upon your circumstances, you could actually be able to save your home from foreclosure – or at least delay the process - by filing for bankruptcy. This could be tricky, however, and it is highly advised that you seek the advice of an attorney before moving forward. How the Procedure WorksFirst, it is important to understand the primary types of bankruptcy and how each can affect your debt repayment obligations. The two types of bankruptcy that are filed by individuals include Chapter 7 and Chapter 13. Chapter 7 BankruptcyFiling a Chapter 7 bankruptcy will completely cancel all of the mortgage debt – including second mortgages and home equity loans – that you owe on. You want to differentiate two things here which is causing some headache to understand for most people. There are two different rights your mortgage company has. One is the right to demand payment for you that is based on your contract (the note) which says you pay to the mortgage company a monthly amount. You don’t have that obligation anymore after filing for bankruptcy. However, you also pledged your home as security to the bank in the case you don’t pay anymore (the mortgage). That’s means you can stop paying if you are willing to surrender (meaning giving it back to your mortgage lender) your home. If you want to keep it, you still need to continue paying on it. Chapter 7 bankruptcy will also usually eliminate your unsecured debt such as credit card balances.By going with a Chapter 7 bankruptcy proceeding, you can keep your home, car and any other personal property you own. However, this filing may very well postpone foreclosure, giving you some additional time to find alternate living arrangements if you choose to surrender your home. In many cases, the procedure for Chapter 7 bankruptcy takes around four months. You can remain in your home until the mortgage company forecloses on your home. Foreclosure will change title to your home, meaning someone else owns the home. In some instances, the procedure may take longer. Chapter 13 BankruptcyIf you opt for – and are eligible for – Chapter 13 bankruptcy, you may have a chance to save your home from foreclosure. This is especially true if you are able to make up missed mortgage payments in the future. This bankruptcy option allows you to essentially restructure your existing debts. Therefore, with a Chapter 13, you may be able to make up for missed mortgage payments over a certain period of time. This time frame is in the St. Louis area (Eastern District of Missouri) three years. In the St. Louis Metro East area (Southern District of Illinois), you can stretch out the arrearage over up to 5 years. Proceed With CautionMany people will do whatever it takes in order to save their home. If, however, for some reason you are unable to keep up with the mortgage payments during the repayment time frame, your mortgage lender could ask the court to lift your bankruptcy protection and subsequently start the procedure of foreclosure again. Therefore, it is important to be sure that you will be able to afford the mortgage payments when putting together your debt repayment plan.Before moving forward with any option, it is a good idea to speak with a qualified attorney who specializes in the area of bankruptcy. This way, you will be more assured of getting the correct advice that will work in your specific situation as well as that is in compliance with the laws in your particular state of residence. Our attorneys in the St. Louis and Metro East area offer a free consultation.

Filing for bankruptcy can be a very personal and emotional decision.  You are probably worried about a number of things, including what filing for bankruptcy will do to your credit now and in the future. Bankruptcy certainly will affect your credit, but it is important to realize that if you are currently considering bankruptcy, your credit is probably already suffering. To truly understand the impact that debt, late payments, and even bankruptcy have on your credit it you first must understand how credit is calculated.  Credit is calculated by evaluating five different areas, including: payment history, amounts owed, the length of your credit history, and new credit, and the types of credit you use.  Your payment history accounts for about 35% of your credit score and the amounts owed accounts for about 30% of your credit score, for a combined total of about 65%.  If you are currently making all of your minimum payments on time you are doing well in that area, but depending on how much debt you have your credit may still be lower than you would like.  If you are not currently making your minimum payments on time and you owe a substantial amount of money your credit score is taking a hit in both areas.  It is also important to remember that the types of credit your use affect your score, so if your debt is primarily consumer your credit score may be negatively affected.  Bankruptcy can eliminate your unsecure debt.  This means that you will not owe any money and you will not continue to take negatively affect your credit every month with late or missed payments.  In fact, filing for bankruptcy actually increases some individual's credit scores.  Even for those individuals that do not see an immediate credit score increase, we can provide you with advice on how to begin to improve your credit after filing for bankruptcy.  Many people like to have a credit card available for emergencies or unexpected expenses.  Others prefer to charge small amounts monthly, like gas, and then pay the balance in full each month.  Whatever your preference, you are likely curious about obtaining credit after bankruptcy and when you are eligible for more credit.  In many cases, after you file for bankruptcy, you will begin to get a number of unsolicited credit card offers in the mail.  You should be wary of these offers.  A lot of times, though they offer to help you rebuild your credit, these are not good offers.  Many of those credit cards charge annual fees, usage fees, and have high interest rates and you will likely have a large balance right away.  If you want to rebuild your credit you should ask your St. Louis Bankruptcy Attorney for a referral or make an appointment with your bank or credit union to discuss the best options for you.

Whentwo sections of the laws are Code-oriented (the Bankruptcy Code and theInternal Revenue Code), the interaction of those laws can create complexity foran individual or their adviser. As many of you are aware, at Shenwick &Associates we do many bankruptcy filings for individuals to discharge personalincome taxes. In a priore-mail, we discussed what taxes qualify for discharge in personalbankruptcy. A gloss or complexity, however, is when an individual who files forbankruptcy to discharge taxes (which are dischargeable in bankruptcy) and theInternal Revenue Service has filed a Notice of Federal Tax Lien prior to thebankruptcy filing. First, some background information on tax liens. Section 6321 of the InternalRevenue Code provides that: "If any person liable to pay any tax neglects or refuses to pay the sameafter demand, the amount (including any interest, additional amount, additionto tax, or assessable penalty, together with any costs that may accrue inaddition thereto) shall be a lien in favor of the United States upon allproperty and rights to property, whether real or personal, belonging to suchperson." One of the consequences of a tax lien is that the IRS obtains an interest inthe taxpayer's property, whether it be a condominium, a house or a car, andthat property cannot be sold or refinanced (since the lien applies also appliesto the taxpayer's credit) without paying the IRS. Additionally, if the IRS isso inclined, they can foreclose on the property (via a tax levy) to obtaintitle to the property. In fact, Section 522(c)(2)(B) of the Bankruptcy Codeprovides that if a tax authority has an outstanding tax lien, the tax authoritycan still collect on the lien, even if the tax is dischargeable in bankruptcy.This provision provides that property exempt under the Bankruptcy Code is notliable during or after the case for any debt that arose before the commencementof the case except "a tax lien, notice of which is properly filed."Unfortunately for the taxpayer, Section 6502 of the Internal Revenue Codeprovides that a tax lien is collectible for ten years after the date ofassessment. And even worse, the Supreme Court case of GlassCity Bank v. United States, 326 U.S. 265 (1945), held that tax liensattach to all property owned by the taxpayer during the ten years in which thelien is collectible. So what are the consequences of the discharge of a tax where the IRS has fileda tax lien prior to the bankruptcy filing? To understand this issue, one mustgo back to a painful time in most lawyers' lives, the first year of law school,when we learned the distinction between an in personam obligation and an in remobligation. An in personam obligation or liability means that an individual isliable for the debt, and an in rem liability or obligation means that only theproperty is liable for the payment of the debt. Accordingly, if an individual files bankruptcy to discharge income taxes, andbased on the statutory requirements of the Bankruptcy Code those taxes are infact discharged, but the IRS had filed a Notice of Federal Tax Lien, then whilethe individual is not personally liable for the debt, any assets owned by theindividual during the ten years after the date of filing of the tax lien aresubject to being seized by the Internal Revenue Service. Accordingly, if an individual files bankruptcy and discharges taxes, and a taxlien has been filed by the Internal Revenue Service, then the individual mustmake sure not to acquire property after they receive their discharge of debtsduring the pendency of the ten year statute of collections. And in fact, thetaxpayer must make themselves "judgment proof." Let us clarify this analysis by a recent example. An individual recentlycontacted us who wanted to file bankruptcy to discharge taxes. Our analysisindicated that many of her taxes for the early tax years were dischargeable. Wedid the bankruptcy filing and commenced an adversary proceeding (bankruptcylitigation) to determine whether her taxes were dischargeable. The InternalRevenue Service then contacted us and indicated that they had filed a Notice ofFederal Tax Lien in 2003 and that, while they agreed the taxes weredischargeable, the tax lien was in effect through 2013. The debtor received herdischarge of debts in 2011, and she agreed that she would not acquire propertyuntil 2013 to make herself "judgment proof." In 2013, after the taxlien expires, she will then be able to acquire property. In the interim, sincethe debtor is married, she will put property in her husband's name, ifnecessary. In conclusion, a couple of rules: 1. If an individual is considering filing bankruptcy, they should filebankruptcy prior to the Internal Revenue Service filing a tax lien. Theautomatic stay that goes into effect upon filing for bankruptcy will preventthe Internal Revenue Service from filing a tax lien. 2. If an individual files bankruptcy and they are subject to a tax lien, theymust determine when the tax lien expires and they cannot put property in theirname until the tax lien expires. 3. A tax lien, by statute, is good for ten years. While the IRS can renew taxliens, in our experience, they rarely do. Anyone with questions concerning tax liens and the discharge of taxes shouldcontact Jim Shenwick.

Print PageThere is nothing quite like the horror of realizing that a deadline has been missed. As the heart pounds at the thought of notifying client and carrier, the mind should shift to damage control. Was this a deadline which could be extended after the fact based on excusable neglect? O'Brien v. Harnett, Adv. No. 11-5010 (Bankr. W.D. Tex. 1/19/12), which can be found here, is a nice addition to the jurisprudence of excusable neglect.The point is that the notion of “excusable neglect” of necessity presumes that someone has made a mistake, someone has been careless, someone has been negligent. It is no answer, then, to a request for mercy that the party making the request should not have made the mistake. Hindsight always affords the clarity that confirms that, had the person simply been paying strict attention, no mistake would have been made. The reality is that human beings often are not paying strict attention all the time. Not even lawyers.***Of course it was a mistake for counsel not to then go back to the docket to confirm the entry of the order itself. Hindsight, as we have seen, makes us all perfect (or seem that we should have been). But his secretary was out of the office, it was the week between Christmas and New Years, and thus counsel, as most people in that time period tend to be, was more distracted than usual. (emphasis added).Opinion, p. 4.This opinion is not only a handy resource to use in making pleas for mercy in the case of inadvertently missed deadlines, but is also a good commentary on human nature. Anyone can be perfect in hindsight. However, the reality is that we don't always pay attention as well as we could and that condition is magnified during the holidays. Thank you, Judge Clark, for saying it.

By TARA SIEGEL BERNARD Blacks are about twice as likely as whites to wind up in the more onerous and costly form of consumer bankruptcy as they try to dig out from their debts, a new study has found. The disparity persisted even when the researchers adjusted for income, homeownership, assets and education. The evidence suggested that lawyers were disproportionately steering blacks into a process that was not as good for them financially, in part because of biases, whether conscious or unconscious. The vast majority of debtors file under Chapter 7 of the bankruptcy code, which typically allows them to erase most debts in a matter of months. It tends to have a higher success rate and is less expensive than the alternative, Chapter 13, which requires debtors to dedicate their disposable income to paying back their debts for several years. The study of racial differences in bankruptcy filings was written by Robert M. Lawless, a bankruptcy expert and law professor, and Dov Cohen, a psychology professor, both with the University of Illinois; and Jean Braucher, a law professor at the University of Arizona. A survey conducted as part of their research found that bankruptcy lawyers were much more likely to steer black debtors into a Chapter 13 than white filers even when they had identical financial situations. The lawyers, the survey found, were also more likely to view blacks as having “good values” when they expressed a preference for Chapter 13. “Unfortunately I’m not surprised with these results,” said Neil Ellington, executive vice president of Consumer Education Services, a credit counseling agency in Raleigh, N.C. “The same underlying issues that created the problem in mortgage lending, with minorities paying higher interest rates than their white counterparts having the same loan qualifications, are present in all financial fields.” The findings, which will be published in The Journal of Empirical Legal Studies later this year, did not suggest that there was any obvious evidence of discrimination in the bankruptcy process. “I don’t think there is any overt conspiracy,” Professor Lawless said. “But when you have a complex system, these biases can play out and the people within the system don’t see the pattern because nobody is in charge of looking at these big issues.” Changes in the bankruptcy law in 2005 were intended to force more debtors to file under Chapter 13 and repay some of their debts, but that has not been the effect. In fact, the rate of Chapter 13 filings has remained relatively steady, at about 30 percent. Last year, overall bankruptcy filings were 1.4 million. Chapter 13 is not always an inferior choice. Many distressed borrowers go that route because they may be able to save their homes from foreclosure. But even that does not explain away the difference: among blacks who did not own their homes, the rate of filing for Chapter 13 was still twice as high as the rate for other races. And the trend persists across the country, beyond regions like the South where Chapter 13 tends to be a more popular option among all debtors (perhaps, in part, because Chapter 13 originated in the South). If a debtor chooses an inappropriate chapter, there can be serious implications. Chapter 13 plans, for instance, are more likely to fail than a Chapter 7. Nearly two of every three Chapter 13 plans are not completed, which means the filers’ remaining debts are not discharged, leaving them right where they started. One bankruptcy judge, who sees filers once they can no longer make the required payments in the plans, said the debtors usually do not have enough income to stick with the budget. “They thought they could cut back on this or that, and you might be able to do that for three or four months,” said the judge, C. Ray Mullins, chief judge for the United States Bankruptcy Court in the Northern District of Georgia. “But in a Chapter 13, it will be either three or five years. There are certain things you can’t anticipate — a spike in gas prices.” The study has two parts. One used data from actual bankruptcy cases from the Consumer Bankruptcy Project, the most detailed trove of information on filers currently available. The project surveyed 2,400 households nationwide who filed for bankruptcy in 2007. Results from the second part of the study, which illustrated the lawyer’s influence in determining which bankruptcy chapter to choose, came from a survey sent to lawyers asking them questions based on fictitious couples who were seeking bankruptcy protection. When the couple was named “Reggie and Latisha,” who attended an African Methodist Episcopal Church — as opposed to a white couple, “Todd and Allison,” who were members of a United Methodist Church — the lawyers were more likely to recommend a Chapter 13, even though the two couples’ financial circumstances were identical. Even though the attorneys’ fees for the more labor-intensive Chapter 13 are more than double the charge for a Chapter 7, some truly distressed debtors will pursue a Chapter 13 anyway, several bankruptcy experts said. That is because they can pay the fee over time, unlike in a Chapter 7, which typically requires a payment before the case is filed. If blacks are perceived as less likely to have the resources — or a family with resources — to come up with a lump sum, some lawyers may be inclined to suggest a Chapter 13, these experts suggested. But Professor Lawless said he and the other researchers accounted for this possibility in their results. As to the possibility that unscrupulous attorneys could push Chapter 13 filings in an attempt to get higher fees, Professor Lawless said that effect should be apparent across all races. He said the study has no information about whether other players in the process — judges and bankruptcy trustees, among others — were contributing to the difference in filings rates. William E. Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, and a practicing lawyer in Raleigh, N.C., disputed the premise of the study that Chapter 13 was always more burdensome and always required debtors to pay more to their creditors. “The study does not adequately control for the numerous complex factors that dictate chapter choice,” he said. “Having said this, Nacba intends to present the study to its members for discussion and self-reflection.” Other, more limited studies have also shown the higher incidence of Chapter 13 among blacks. In Chicago, the Woodstock Institute, a research and policy group, reported last May that in mostly black communities in Cook County, nearly half the cases from 2006 to 2010 were filed under Chapter 13, compared with 32.8 percent of all cases filed in the county. “For people of color, who historically have fewer assets, preservation of assets is a top priority,” said Tom Feltner, vice president at Woodstock, who added that lawyers often have a financial incentive to push Chapter 13 filings. “It is possible that the higher levels of Chapter 13 in communities of color can be explained by a combination of higher attorney’s fees and a filer’s desire, or advice that elevates a filer’s desire, to preserve as many assets as possible.” Henry E. Hildebrand III, who has served as a Chapter 13 trustee in Tennessee for 30 years, said he had noticed that blacks and other minorities appeared to be overrepresented in Chapter 13 cases. “We should focus not on picking apart the conclusions,” Mr. Hildebrand said, “but use this study as an indication that we should be attempting to fix what has become a complex, expensive, unproductive system.”Copyright 2012 The New York Times Company.  All rights reserved.

Print PageA pair of new opinions suggests that dischargeability of taxes is even more complicated subsequent to BAPCPA. In Matter of McCoy, No. 11-60146 (5th Cir. 1/4/12), which can be found here, the Fifth Circuit found that, under Missisippi law, late filed returns did not constitute "returns" at all and thus were not subject to being discharged. In In re Hernandez, Adv. No. 11-5126 (Bankr. W.D. Tex. 1/11/12), which can be found here, Judge Leif Clark found that returns filed after the IRS made its own assessment on unfiled returns were not subject to discharge either. While these decisions may be consistent with the prevailing sentiment, they are not necessarily rooted on solid legal reasoning.The Other Hanging ParagraphOne of BAPCPA's legacies will be the hanging paragraph, a piece of text hanging by itself which is not part of a specific subsection. We are reasonably familiar with the hanging paragraph of Section 1325(a)(*) which has to do with the valuation of vehicles in chapter 13 cases. Now, six years after BAPCPA took effect, a new hanging paragraph has been discovered, Section 523(a)(*), having to do with dischargeability of taxes. While dischargeability of taxes is dealt with in Section 523(a)(1), which would have been a logical place to put the additional language, Congress saw fit to add a codicil to Section 523(a)(1) at the end of Section 523(a). The new language states:For purposes of this subsection the term "return" means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to ajudgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.Why do we care about the definition of return? Section 523(a)(1)(B) states that a debt is not dischargeable "with respect to which a return . . . was not filed or given; or" was filed "after two years before the date of the filing of the petition."Prior to BAPCPA, a return could be filed late but at least two years before bankruptcy and still be dischargeable.However, under the new jurisprudence, some late returns, even if filed more than two years before the date of the petition, are not returns at all.Going to MississippiLinda McCoy, a resident of Mississippi, filed bankruptcy. Mississippi is one of those states that are not Texas which have a state income tax. (While most states have state income taxes, it is an unwritten law here in Texas that proposing a state income tax is a sacrilege on the same level as urinating on the Alamo). Linda McCoy did not file her state income tax returns for 1998 and 1999 when they were due. She did ultimately file her returns, but she filed them after the date they were due. The Fifth Circuit held that under Mississippi law, a "return" meant a timely filed return. Therefore, a late return constituted an unfiled return and could not be discharged.Turning to TexasA few days later Judge Leif Clark interpreted the hanging paragraph of section 523(a)(*) in the context of federal taxes in Texas. (Have you ever noticed that "taxes" and "Texas" contain most of the same letters. It seems subversive since Texans hate taxes--just ask Rick Perry). The Hernandez decision involved a lot of years of taxes. The Debtor did not file timely returns for 1999 through 2006, although he eventually got them all filed. For the seven years in question, the IRS assessed liability for three years before the Debtor got around to filing returns. For the other four years, the IRS either did not get around to making assessments before the returns were filed or no taxes were due. The IRS did not contest dischargeability for the years in which the Debtor filed his returns prior to taxes being assessed or where it acknowledged that no taxes were due. However, for the three years in which assessments preceded returns, it contended that the taxes could not be discharged--and the court agreed. The RationalePrior to BAPCPA, the term "return" was not defined. Case law held that "a late filed return that required the government to assess the tax without the tax payer's assistance would not be treated as a return for section 523 purposes." McCoy, at 5. In order to constitute a "return" under prior law, it had to satisfy four requirements:1. It had to purport to be a return;2. It had to be executed under penalty of perjury;3. It must contain sufficient information to allow calculation of the tax; and4. It must represent an honest and reasonable attempt to satisfy the requirements of the tax law.The new hanging paragraph replaced the old test with three guidelines:1. The return must be a "return that satisfies the requirements of applicable nonbankruptcy law (including filing requirements);"2. It would include a return "prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal; and3. It would not include "a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.The Mississippi State Tax Commission argued that under the first factor an untimely return was not "a return that satisfies the requirements of applicable bankruptcy law (including filing requirements)." The Debtor argued that MSTC's construction would read the reference to section 6020(a) out of the statute. As acknowledged by the Fifth Circuit, returns under section 6020(a) involve cases in which the Debtor fails to file an actual return but nevertheless provides the IRS with all of the information necessary to calculate the liability. The Fifth Circuit adopted MSTC's reasoning stating:We find MSTC''s interpretation of section 523(a)(*) more convincing. We have previously explained that "the plain language of the [Bankruptcy] Code should rarely be trumped. Although the Code at times is 'awkward, and even ungrammatical . . . that does not make it ambiguous." (citation omitted). The plain language interpretation of section 523(a)(*) comports with this admonition. McCoy at 8-9. The Court went on to find that returns prepared under section 6020(a) constituted a narrow exception to the rule that late filed returns were not returns. It also referred to other courts which have reached the same result.The Hernandez Court did not significantly expand upon the Fifth Circuit opinion, stating:Anticipating consistency on the part of the circuit court, this court concludes that late-filed returns cannot be treated as filed, for purposes of section 523(a)(1), save for returns that comport with the requirements of section 6020(b)(sic) of title 26. The exception is a narrow one, and does not apply on the facts of the case sub judice.Hernandez at 9. If Every Other Court Jumped Off a Building Would You Join Them?The Courts following the majority interpretation of section 523(a)(*) show a lemming-like ability to follow the crowd without careful thought. Section 523(a)(1)(B) provides that taxes are not dischargeable in two instances:1. Where a return was not "filed or given;" or2. Where the return "was filed or given after the date on which such return, report, or notice was last due, under applicable nonbankruptcy law or under any extension, and after two years before the date of the filing of the petition.Thus, section 523(a)(1)(B) has two components to it: a substantive one and a temporal one. If no return was filed, then the tax cannot be discharged. However, if the return was filed at least two years before bankruptcy, even if it was not timely filed, it could be discharged (assuming that the other requirements for dischargeability are met).The McCoy decision does not state when the returns were actually filed. However, In Hernandez, the Court's finding of fact explicitly recite that the returns for 1999, 2003 and 2004 were each filed more than two years before the petition date. Thus, Hernandez raises the Catch-22 situation in which a return filed more than two years before bankruptcy may be subject to discharge but a return filed one day late is not a return at all. To be blunt, McCoy and Hernandez obliterate section 523(a)(1)(B)(ii) by stating that late-filed returns, much like disgraced party members in the Soviet Union, are non-returns. (In the Soviet Union, party members who had fallen from favor would be erased from photographs and treated as though they had never existed). Why would the statute allow for returns filed more than two years prior to bankruptcy to be considered when all late filed returns would necessarily be considered non-returns? The obvious answer is that the hanging paragraph was meant to address the question of whether the document submitted was sufficient to constitute a return rather than whether it was a timely return. The reference to "filing requirements" in the hanging paragraph is best understood as a reference to whether the document was filed rather than when it was filed.The language of the hanging paragraph reinforces the interpretation that it was meant to be a substantive rather than a temporal requirement. Under the hanging paragraph, "a written stipulation to a judgment or final order entered by a nonbankruptcy tribunal" would constitute a return. Thus, if the Debtor did nothing and waited for the taxing authority to file suit and agreed to the assessment would have been deemed to have filed a return. On the other hand, if the debtor filed his return one day late and the ever-vigilant taxing authority made its assessment in the intervening hours, the return would cease to exist. This makes no sense. I may be missing something profound or obvious. However, these decisions appear to be just plain wrong.Hat tip to Michael Baumer who got the word out on these decisions on the State Bar of Texas Bankruptcy Section listserve. Michael is a smart guy and caught the importance of these opinions before I did.

The decision to file for bankruptcy is a very important and personal decision.  If you are considering filing for bankruptcy there are a number of things to consider and a number of common pitfalls to avoid.  Even after making the decision to file for bankruptcy you probably still have many questions about how the process works and how long it will be until the bankruptcy is final.As bankruptcy law is quite complex, the first thing you will want to do is schedule a consultation with an attorney.  At this consultation we will take some information, evaluate the case, and answer any questions you may have.  At the end of the consultation we will advise you about whether you qualify to file for bankruptcy, and if so whether you should file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.Should you decide to retain A & L, Licker Law Firm, LLC, an attorney will go over a contract with you.  At this time we will discuss attorney fees, possible payment plans, and all court fees.  We will then go over the information you will need to provide.  This will include creditor information and other personal information.  It is advisable to begin working on this as soon as possible.Once you have made your final payment on attorney fees and have submitted all of your information we will begin work on your case.  From this time it may take a few weeks to work on your case.  Once we have finished our work and you have paid at least half of the court fees we will then file your case.  The filing date is the most important date in a bankruptcy proceeding.  As of the filing date creditors are legally barred from contacting you or trying to collect any money from you.  Should creditors attempt to make contact or collect you should advise them that you have filed for bankruptcy and that you are represented by an attorney.  You may give them your attorney's name and contact information.  Once you have filed your case it generally takes about four months until the bankruptcy is finalized.  At some point you will be called before a trustee who oversees bankruptcy proceedings.  This is a very short meeting where you will be asked a few questions.  Should you retain counsel a lawyer will be at the meeting with you.  When the bankruptcy is finalized you will be notified my mail that your debt has been discharged.

In all bankruptcy proceedings certain assets are exempt from being taken, meaning that you are entitled to keep them. These assets are protected by exemptions and are defined by the state. Federal exemptions are not available in Missouri.  These state exemptions are automatic and do not require any other qualification.  For many of the exemptions listed below the amounts can be doubled if you are filing for bankruptcy with your spouse.  However, it is important to note that there are some exceptions to doubling, including the homestead exemption. Some of the most commonly applicable exemptions are as follows: The Homestead Exemption.  Individuals filing for bankruptcy may exempt up to $15,000 of real property or up to $5,000 of a mobile home.  However, in some cases, where a husband and wife own real property in a tenancy by the entirety, the entire value of a home may be exempt if only one spouse is filing for bankruptcy.  To have a tenancy by the entirety a husband and wife must own the property together and must have come into ownership of the property at the same time, by the same deed, and must share complete possession and ownership.  Finally, to exempt the entire value of the home to the husband and wife must not have any other joint debt.  It is important to note that medical bills are considered to be joint debt in the State of Missouri.  This means that if one or both spouse have medical bills this exception does not apply, however, the standard $15,000 exemption still applies.Motor Vehicle Exemptions.  Individuals filing for bankruptcy may exempt up to $3,000, or $6,000 for married filers, for a motor vehicle.  Married joint filers may each apply $3,000 to one car, or if you jointly own only one shared vehicle you may apply the full $6,000 exemption to one vehicle.  An individual filer may not split the exemption among vehicles, regardless of value.Household Goods Exemptions.  Individuals filing for bankruptcy may exempt up to $3,000, or $6,000 for married filers, in household goods.  Household goods include clothing, appliances, furnishings, books, animals, musical instruments, and crops.Jewelry Exemptions.  Individuals filing for bankruptcy may exempt up to $1,500, or $3,000 for married filers, for wedding rings.  Much like motor vehicles, a married couple may split the $3,000 exemption between two rings, one belonging to each spouse.  Here, the couple may not combine the individual exemptions to one ring owned by either spouse under any circumstance.  In addition to wedding rings, individuals filing for bankruptcy may exempt any other jewelry up to $500, or $1,000 for married filers.  Burial Grounds Exemptions.  Individuals filing for bankruptcy may exempt up to $100, or one acre, of burial grounds.Retirement Accounts Exemptions.  Individuals filing for bankruptcy may exempt certain tax exempt accounts, including: IRA's, 401(k)s, profit sharing, and money purchase plans.  However, it is important to note, that certain life insurance policies and annuities may not be exempt if there is a current cash value.Tools of Trade Exemptions.  Individuals filing for bankruptcy may exempt up to $3000, or $6,000 for married filers, for professional books or tools of a trade.  In some cases, a vehicle may fall under this designation, however, using a vehicle to commute to and from work does not qualify under this exemption.Head of Household Exemption.  An individual filing for bankruptcy may exempt any asset up to $1,250 if the filer provides a majority of the income for the household.  If a filer qualifies for a head of household exemption he/she may also exempt $350 for each child under the age of 18 living in the household.Wildcard Exemption.  Individuals filing for bankruptcy may exempt any asset up to $600.  This amount can be stacked on top of other exemptions to increase the exempt value of a particular asset or interest.