“You mean to tell me you don’t have any underwear!” When I was much younger, I practiced bankruptcy law in Baltimore City. Judge Kiser, the bankruptcy judge, made people inventory their underwear.  Today, the bankruptcy court in Alexandria Virginia does NOT do that. The court here is NOT interested in your underwear or any of your clothes. But there are lines of the official bankruptcy papers for your clothes and furniture; we need to fill in those lines.When you file bankruptcy, Virginia law allows you to keep up to $1000.00 worth of clothing. Somebody would have to work really hard to sell your clothes for more than a thousand.  (Take a look at this article. Haley Marie, worked four apps for a year to sell 171 items. She made $1485. The bankruptcy trustee does not want to spend a year selling your stuff.) So, you can safely assume yours are not worth a thousand dollars to the bankruptcy court.What About My Furniture?Most used furniture has no value. Used furniture costs money to get rid of.A few years ago, my wife and I decided to downsize our house in Falls Church and move to a smaller home. We needed smaller–and newer–furniture. We quickly found out used furniture costs money to get rid of. My wife found a service that came to our house with three trucks. The first truck took some very expensive pieces out to a dealer in the Shenandoah Valley. The second truck took about half of our stuff to Goodwill and the Salvation Army. The third truck took furniture we couldn’t donate to the dump.We broke even  We made enough money off the originally very expensive pieces to cover the cost of the trucks and dump fees to get rid of the rest.Virginia law allows you $5000 worth of furniture. If you want to spend two minutes valuing your furniture for your bankruptcy papers, look at this value chart. The value of used T Vs starts at $5.ConclusionWhen filling you your clothes and furniture for your bankruptcy papers, do NOT leave them blank. The trustee can see you have clothes.  But do not stress on the values. Just fill it out.The post Valuing Your Clothes and Furniture on Your Bankruptcy Papers appeared first on Robert Weed Bankruptcy Attorney.

“You mean to tell me you don’t have any underwear!” When I was much younger, I practiced bankruptcy law in Baltimore City. Judge Kiser, the bankruptcy judge, made people inventory their underwear.  Today, the bankruptcy court in Alexandria Virginia does NOT do that. The court here is NOT interested in your underwear or any of your clothes. But there are lines of the official bankruptcy papers for your clothes and furniture; we need to fill in those lines.When you file bankruptcy, Virginia law allows you to keep up to $1000.00 worth of clothing. Somebody would have to work really hard to sell your clothes for more than a thousand.  (Take a look at this article. Haley Marie, worked four apps for a year to sell 171 items. She made $1485. The bankruptcy trustee does not want to spend a year selling your stuff.) So, you can safely assume yours are not worth a thousand dollars to the bankruptcy court.What About My Furniture?Most used furniture has no value. Used furniture costs money to get rid of.A few years ago, my wife and I decided to downsize our house in Falls Church and move to a smaller home. We needed smaller–and newer–furniture. We quickly found out used furniture costs money to get rid of. My wife found a service that came to our house with three trucks. The first truck took some very expensive pieces out to a dealer in the Shenandoah Valley. The second truck took about half of our stuff to Goodwill and the Salvation Army. The third truck took furniture we couldn’t donate to the dump.We broke even  We made enough money off the originally very expensive pieces to cover the cost of the trucks and dump fees to get rid of the rest.Virginia law allows you $5000 worth of furniture. If you want to spend two minutes valuing your furniture for your bankruptcy papers, look at this value chart. The value of used T Vs starts at $5.ConclusionWhen filling you your clothes and furniture for your bankruptcy papers, do NOT leave them blank. The trustee can see you have clothes.  But do not stress on the values. Just fill it out.The post Valuing Your Clothes and Furniture on Your Bankruptcy Papers appeared first on Robert Weed Bankruptcy Attorney.

Law Review: Kilborn, Jason J., The 'Market Model' of Debt Counseling and Bankruptcy in the United States (March 1, 2024) Ed Boltz Wed, 04/24/2024 - 18:21 Available at SSRN: https://ssrn.com/abstract=4752879Abstract: This paper is a chapter in a comparative volume examining social state, legal, and socio-political influences on debt counseling, in particular the challenges for the practice of counseling that arise from prevailing social and socio-political ideas about debt, help for those in debt, and over-indebtedness. It analyzes the US system of debt counseling as representative of the "market model" (in contrast with the "liability model" in Germany and Austria, the "grace model" in Sweden, and the "restrictions model" in England). This chapter reveals the unique trajectory of development of debt/credit counseling in the US, which arose not as a branch of social work or public support, but as a market-driven adjunct to small-loan lending, and it expanded as a market-driven response to a rise in personal bankruptcy. The “market model” thus quite aptly characterizes both credit counseling and personal bankruptcy in the US. Both represent efforts to keep the wheels of commerce turning in the face of market challenges, with a minimum of intervention, regulation, or funding by public government. The U.S. challenges arising in both credit counseling and personal bankruptcy also demonstrate the limitations and risks of leaving such complex and sensitive matters to private market resolution. Commentary: This short article,  which,  as shown by its secret  file name of "Schulden, Schuldenberatung und Sozialstaat", was written  for a German comparative law course,  provides a brief twinned history in the U.S. of not just bankruptcy but also the debt settlement/credit counseling.  And while I have been refreshing my high school German by using the Babbel app,  I doubt it is sufficient to read this book auf Deutsche,  so further summaries from that work of other countries' bankruptcy systems should not be anticipated until that has been translated. The reminders of how debt settlement and credit counseling are wholly captured by the financial services industry,  putting the interests of credit cards above those of their putative clients,  would be useful  for the  U.S. Trustee Program (and Bankruptcy Administrators) in evaluating what disclosures,  requirements and restrictions should be put on providers of pre-bankruptcy credit counseling briefing.  (Which certainly should be brief.) As bemoaned in Footnote 1,  financial education classes for young people would be far more effective  than credit counseling for people already in deep financial distress.  More  states seem to be  offering and even requiring high school students to take such a course,  with North Carolina instituting that in 2019.  See  N.C.G.S. § 115C‑81.65. While the article does a remarkably  good job of describing in lay person's terms the application of the Means Test,  describing it as "often somewhat awkward, to put it mildly", as seems to be de rigueur in  academic literature on consumer bankruptcy,  it  describes Chapter 13 as a less preferable option to Chapter 7 because in it  "debtors promise to relinquish three to five years’ of their future income beyond that which is necessary to support their reasonable domestic support needs".   This ignores both that if a debtor has disposable income they are not  eligible for Chapter 7 and that  the disposable income test in Chapter 13 is more generous, as it allows greater deductions for expenses,  including retirement savings, than in Chapter 7.   The  assertion that "consistently  around 90 percent of all debtors preferring chapter 7 relief pass this median-or-below income test", while probably accurate is statistical  cherry-picking,  since it does not recognize that those debtors (having competent consumer bankruptcy attorneys) that  fail the Chapter 7 Means Test generally do not file Chapter 7, either filing Chapter 13 or not filing bankruptcy at all. The ~10% who file Chapter 7 and do not receive a discharge because they fail the Means Test  almost certainly were borderline cases, had improved circumstances or did not have a lawyer. To read a copy of the transcript, please see: Blog comments Attachment Document the_market_model_of_debt_counseling_and_bankruptcy_in_the_united_states.pdf (140.38 KB) Category Law Reviews & Studies

Research Paper: Lee, Brian Jonghwan, Bankruptcy Lawyers and Credit Recovery (April, 2024). FRB of Philadelphia Working Paper No. 24-10, Ed Boltz Tue, 04/23/2024 - 16:20 Available at SSRN:  https://ssrn.com/abstract=4788212 or http://dx.doi.org/10.21799/frbp.wp.2024.10Abstract: The author studies how bankruptcy law firm advertisements affect credit recovery of households in financial distress. Exploiting the border discontinuity strategy associated with the geographic unit in which local TV advertisements are sold, the author empirically uncovers bankruptcy filings and credit recovery related to exogenous variations in bankruptcy law firm advertisements. The author first documents a significant advertising effect on filing rates and shows that advertising-induced filers are similar to existing filers. The author then finds a positive effect of advertisements on credit outcomes including credit score, new homeownership, and foreclosure. The author interprets these findings as evidence that lawyers address information frictions in households’ assessment of the bankruptcy option. Commentary: When paired with other research,  including Why Don't More Households File for Bankruptcy?,  which examined how as many of 15% of households would  benefit from filing bankruptcy,  but don't,  this paper gives meaningful insight into how the advertising and free consultation by consumer bankruptcy attorneys  overcomes,  at least in some small degree, the frictions and fictions  that keep folks from  even considering bankruptcy. It is interesting that this finds that advertising does not change or broaden the demographics of bankruptcy filers,  but instead increase the numbers of filers in those groups. Further,  this paper also finds  that "ad-induced"  filers have better post-bankruptcy outcomes in terms of credit risk scores,  new home ownership and avoidance of foreclosure. And no,  the Law Office of John T. Orcutt did not commission this research  to justify our ads.  Those speak for themselves. https://www.youtube.com/watch?v=v7k7nDyzjRY To read a copy of the transcript, please see: Blog comments Attachment Document bankruptcy_lawyers_and_credit_recovery_compressed.pdf (729.65 KB) Category Law Reviews & Studies

Whether You Can File Chapter 7 Bankruptcy and Keep Your House Depends on Your State Homestead Law Until 2020, Virginia had the worst bankruptcy homestead protection in the country. Single homeowners (Virginia has great protection for real estate owned by married couples), could protect only $5000. That was written in the Virginia Code in 1919, when $5000 would have protected almost every house in Northern Virginia. Starting July 1, 2024, single homeowners can protect up to $55,000 in equity while filing Chapter 7 bankruptcy. The 2020 legislature raised that $5,000 to $30,000. That was a big increase, although still small compared to 10 acres in Texas or the entire District of Columbia.   In 2024, the General Assembly raised the Virginia bankruptcy homestead again, from $30,000 to $55,000, taking effect July 1, 2024. Fairfax County Del. Marcus Simon was the key legislator pushing this through. Special thanks also go to Darden Hutson, a bankruptcy lawyer in Richmond for his hours and hours of work on this issue. This was made much easier by Democrats taking control of the Virginia Senate in the 2023 elections.  (Republicans voted overwhelmingly in favor of this change when it came to the floor, but consumer laws rarely make it out of committee when Republicans are in control.) Virginia Homestead Law Still Isn’t That Great Also this year, the state legislature in Oregon raised their exemption for single home owners from $40,000 to $150,000. The post Better Homestead for Single Homeowners in Virginia July 1 appeared first on Robert Weed Bankruptcy Attorney.

Whether You Can File Chapter 7 Bankruptcy and Keep Your House Depends on Your State Homestead Law Until 2020, Virginia had the worst bankruptcy homestead protection in the country. Single homeowners (Virginia has great protection for real estate owned by married couples), could protect only $5000. That was written in the Virginia Code in 1919, when $5000 would have protected almost every house in Northern Virginia. Starting July 1, 2024, single homeowners can protect up to $55,000 in equity while filing Chapter 7 bankruptcy. The 2020 legislature raised that $5,000 to $30,000. That was a big increase, although still small compared to 10 acres in Texas or the entire District of Columbia.   In 2024, the General Assembly raised the Virginia bankruptcy homestead again, from $30,000 to $55,000, taking effect July 1, 2024. Fairfax County Del. Marcus Simon was the key legislator pushing this through. Special thanks also go to Darden Hutson, a bankruptcy lawyer in Richmond for his hours and hours of work on this issue. This was made much easier by Democrats taking control of the Virginia Senate in the 2023 elections.  (Republicans voted overwhelmingly in favor of this change when it came to the floor, but consumer laws rarely make it out of committee when Republicans are in control.) Virginia Homestead Law Still Isn’t That Great Also this year, the state legislature in Oregon raised their exemption for single home owners from $40,000 to $150,000. The post Better Homestead for Single Homeowners in Virginia July 1 appeared first on Robert Weed Bankruptcy Attorney.

4th Cir. : Morgan v. Bruton- Tax Lien not Required for IRS to Pierce Tenancy by the Entireties Ed Boltz Sun, 04/21/2024 - 04:37 Summary: The Court of Appeals affirmed the decision of the district court regarding Ronald Lee Morgan's Chapter 7 bankruptcy filing. Morgan had sought to exempt his home, owned as tenancy by the entirety with his wife, from the bankruptcy estate to shield it against an outstanding tax debt owed to the IRS. The bankruptcy court, however, disallowed the exemption, and the district court affirmed this decision. The appeal centered on whether Morgan's home could be exempt from the bankruptcy estate under 11 U.S.C. § 522(b)(3)(B), which allows for the exemption of certain property interests from creditors under applicable nonbankruptcy laws. The courts found that while North Carolina law protects such properties from creditors of a single spouse, federal tax law under 26 U.S.C. § 6321 creates a lien for unpaid taxes that can attach to property owned in entirety. The Supreme Court's decision in United States v. Craft supported this interpretation, allowing the IRS's claim against the property despite the non-joint nature of the tax debt. Morgan argued that an actual lien must be perfected by the IRS before filing for bankruptcy, which was refuted based on precedents that do not require such a lien for the property to be considered non-exempt under federal law. The court concluded that federal law permits a tax lien to attach to an individual's interest in entirety properties, rendering Morgan's home not exempt from the bankruptcy estate concerning the IRS debt.  Commentary: Even after navigating through the Tenancy by the Entireties  dangers that  having overtly joint debts present,  the risk that a modest IRS tax claim can result in the loss of the marital home, means that,  with utterly insufficient an homestead exemption in North Carolina,  debtors simply cannot file Chapter 7 if they own real estate. To read a copy of the transcript, please see: Blog comments Attachment Document morgan_v_bruton.pdf (140.95 KB) Category 4th Circuit Court of Appeals

th Cir.: Berman v. PHEA- Derivative Sovereign Immunity for Student Loan Servicer Ed Boltz Sun, 04/21/2024 - 04:32 Summary: TheCourt of Appeals affirmed the district court's decision to dismiss Todd Berman's lawsuit  against the Pennsylvania Higher Education Assistance Agency (PHEAA) for lack of subject matter jurisdiction, as PHEAA was entitled to derivative sovereign immunity. Berman had sued PHEAA, alleging their misinformation cost him the chance for student loan forgiveness under the Public Service Loan Forgiveness program, especially after he worked for Blue Cross Blue Shield of North Carolina, which PHEAA initially and incorrectly said did not qualify as a public service employer. The court found that the Department of Education, which had contracted with PHEAA to service loans, authorized PHEAA’s actions, and thus, PHEAA was acting under derivative sovereign immunity. The contract stipulated procedures PHEAA needed to follow in verifying employers for loan forgiveness eligibility, and PHEAA adhered to these, including consulting the Department on ambiguous cases. Furthermore, the Department of Education explicitly directed and later confirmed the actions PHEAA took in Berman’s case. Hence, any error in employer qualification was on part of the Department, not PHEAA. The court suggested Berman could challenge the Department’s decision under the Administrative Procedure Act but not seek damages against it or its agent, PHEAA. Commentary: This case should be used as Exhibit A in and SLAP where the bankruptcy court  questions whether a student borrower might have been mistreated and lied to by servicers and USED.  That this often led to those borrowers often not participate in the various IDR and other relief programs,  might,  just might (as explicitly recognized by both the CFPB,  by USED, and by the Department of Justice,) explain their skepticism. As this decision would further insulate student loan servicers against their own incompetence,  student loan borrowers need to find ways to ensure  that failures by those servicers have remedies.  This is likely harder for student loan borrowers who do not have any judicial supervision over their loans,  but fortunately this is not the situation for those in Chapter 13.  With  the HEA regulations becoming final and effective on July 1,  2024,  that will provide credit towards IDR forgiveness for the time in a Chapter 13,  it is not unreasonable to be concerned  that these servicers will not comply (or even understand)  these obligations.  Adding plan provisions which incorporated these regulations  could provide authority for the bankruptcy courts to hold servicers and even USED in contempt,  including providing for damages.   Paralleled on the obligations against mortgage servicers that were made subject to review by Bankruptcy Rule 3002.1,  hopefully not only the E..D.N.C. and M.D.N.C., where I have the greatest involvement,  but also the National Bankruptcy Rules Committee,  will consider amending the standard Chapter 13 Form Plan to include the following provisions: Notice of Number of Months of IDR Credit.  After the debtor completes all payments under the plan, the debtor may file and serve on the  U.S. Department of Education and [name of student loan servicer, guarantor, or holder] a notice stating that the debtor has completed all plan payments and the number of months credit toward loan forgiveness  for each month that the debtor made a payment under the plan to the trustee, as indicated on the Trustee's Final Report.  The notice shall also inform  U.S. Department of Education and/or [name of student loan servicer, guarantor, or holder]  of their obligation to file a Response to the  Notice of Final Plan Payment and Number of Months of IDR Credit as described in the following section. Response to the  Notice of Number of Months of IDR Credit.   Within 21 days after service of the above notice under subdivision (f) of this rule,  U.S. Department of Education and/or [name of student loan servicer, guarantor, or holder] shall file and serve on the debtor, debtor’s counsel, and the trustee a statement indicating (1) whether it agrees with the number of months of credit towards loan forgiveness in the notice, and (2) whether  U.S. Department of Education and/or [name of student loan servicer, guarantor, or holder]  has credited the the debtor with that number of months towards loan forgiveness. The  response  shall itemize the remaining balance owed  as of the date of the response and will identify the current  [name of student loan servicer, guarantor, or holder], its address, and the amount and next due date of payment. The response shall be filed as a supplement to the holder’s proof of claim and is not subject to Rule 3001(f). Determination of  Number of Months of IDR Credit.  On motion of the debtor filed within 21 days after service of the response described above, the court shall, after notice and hearing, determine the number of months of IDR Credit. To read a copy of the transcript, please see: Blog comments Attachment Document berman_v._pheaa.pdf (130.45 KB) Category 4th Circuit Court of Appeals

Before Bankruptcy, There Are Two Ways Your Credit Score Tricks You   Are you worried about what bankruptcy will do to your credit score? Your credit score is the tool the banks and credit card companies use to trick you into paying them, even when you can’t afford it. Think for a moment. Is your credit score more important than feeding your children?  Probably not. Is it more important to pay Capital One or take care of you family? Back in 1934, the Supreme Court said that a fresh start in bankruptcy is “of public, as well as private, interest.” Here’s what they meant. The country is better off if you take care of your family; Capital One will be ok without your help. The fear of your after-bankruptcy credit score tricks people into worrying about the wrong thing. There’s a second reason it really is trick. When you file bankruptcy, your credit score will go up.  (At least for most people.) I talk to people whose score is around 550 and assume with bankrutpcy it will drop into the 400;s.  The opposite will actually happen. For most people, your credit score after bankrutpcy will shoot up over 600. Not only that. Within six months, Capital One will be offering you a new credit card.     The post Before Bankruptcy, Don’t Let Your Credit Score Trick You appeared first on Robert Weed Bankruptcy Attorney.

Before Bankruptcy, There Are Two Ways Your Credit Score Tricks You   Are you worried about what bankruptcy will do to your credit score? Your credit score is the tool the banks and credit card companies use to trick you into paying them, even when you can’t afford it. Think for a moment. Is your credit score more important than feeding your children?  Probably not. Is it more important to pay Capital One or take care of you family? Back in 1934, the Supreme Court said that a fresh start in bankruptcy is “of public, as well as private, interest.” Here’s what they meant. The country is better off if you take care of your family; Capital One will be ok without your help. The fear of your after-bankruptcy credit score tricks people into worrying about the wrong thing. There’s a second reason it really is trick. When you file bankruptcy, your credit score will go up.  (At least for most people.) I talk to people whose score is around 550 and assume with bankrutpcy it will drop into the 400;s.  The opposite will actually happen. For most people, your credit score after bankrutpcy will shoot up over 600. Not only that. Within six months, Capital One will be offering you a new credit card.     The post Before Bankruptcy, Don’t Let Your Credit Score Trick You appeared first on Robert Weed Bankruptcy Attorney.