Author: Andrew M. Thaler
The answer to the question of whether you can discharge taxes in personal bankruptcy is – it depends. This is a very complicated area of bankruptcy law. Whether a tax will be discharged depends in part on the type of tax, when the tax was incurred and the conduct of the tax payer. While most taxes cannot be discharged in bankruptcy, there are some taxes that can.
Author: Andrew M. Thaler
Upon the filing of an individual chapter 7 bankruptcy petition the court schedules a meeting of
creditors. The meeting, by statute, must be held between 21 and 40 days from the filing date. The
debtor will receive a notice from the court shortly after the filing notifying him to appear for the
examination. The meeting of creditors affords the trustee, creditors and parties in interest with the
opportunity to question the debtor with regard to his or her property and debts. The debtor is
required to file Bankruptcy Schedules and Statement of Financial Affairs with their Petition. Those
documents provide a road map that outlines the Debtor's property and debts as of the filing date,
and discloses certain financial transactions that took place in various time periods prior thereto. The
trustee will read those documents before the meeting. They documents are available to the public and
may be read by creditors and parties in interest. The trustee will ask questions at the meeting of
creditors which are designed to uncover assets that might not be disclosed in the Schedules and
Statement of Financial Affairs. Those assets are typically previously owned real property, prior
business interests, prior or future litigation and generally any asset that might have a value large
enough to potentially make a distribution to creditors.
Authors: Andrew M. Thaler & Spiros Avramidis
Third party payment of the debt of another is not unusual. Parents pay student loan obligations of children; companies pay personal expenses of owners. However, accepting third party payment poses risk. Specifically, recipients of third party checks place themselves at risk of having to disgorge payments if the payer is in bankruptcy or insolvent. Banks that process thousands of transactions each day are most vulnerable to disgorgement actions.
Disgorgement often arises in bankruptcy proceedings. Bankruptcy law is designed to achieve two primary goals: (1) “obtaining a maximum and equitable distribution for creditors” and (2) “ensuring a fresh start for individual debtors.” In furthering the first goal, the law is designed to preserve and recover assets to pay creditors. To achieve that goal, debtors’ financial histories, including bank transactions, are inspected by creditors, bankruptcy trustees and the court. This scrutiny is, in part, designed to uncover and “claw back” assets from third parties for distribution to creditors.
There are many recurring themes in chapter 7 bankruptcy filings. One in specific is where a debtor discloses his interest in a vehicle, but either in the petition or the Section 341 Meeting of Creditors states that he holds only bare legal title in the vehicle; his child, spouse, or some other relative is the “real” owner. The story usually follows that the vehicle is in the debtor’s name for convenience or insurance purposes (oddly enough, the debtor usually claims an exemption in the vehicle, which is contrary to the position that he holds only bare legal title). For numerous reasons this “setup” will likely not prevent the vehicle from becoming bankruptcy estate property and administered by the chapter 7 trustee.
As eloquently stated by Chief Judge Craig in in re Balgobin, “when can a claimed equitable interest in property in which the debtor holds legal title, asserted by a third party, be given effect in bankruptcy?” In Balgobin, the court looked at whether the vehicle was held by the debtor in an express or constructive trust. Under NY law, an express trust may only be created by writing, unless part performance is “unequivocally referable to the [unwritten] agreement.”
AUTHOR: Andrew M. Thaler
Personal injury counsel (“PI Counsel”) learns that the client has filed for chapter 7 bankruptcy. This is a major event that requires immediate action by PI Counsel. The failure to follow proper bankruptcy protocol could result in devastating financial and other consequences to PI Counsel.
Exactly what does PI Counsel need to know to keep out of trouble? The first thing is to recognize that upon filing of the bankruptcy the cause of action becomes property of the bankruptcy estate, which will be administered by a Chapter 7 Trustee under the supervision of the bankruptcy court. Upon the filing of the petition, the debtor/client no longer has control of the cause of action. PI Counsel must confirm if the cause of action has been disclosed in the bankruptcy schedules filed by the debtor with the bankruptcy court. If the action has not been disclosed, debtor’s bankruptcy counsel must be notified so the debtor’s Schedules can be amended to reflect the asset. PI Counsel must cease prosecuting the cause of action on behalf of the debtor and decide if it wants to accept an invitation by the bankruptcy trustee to be retained by the bankruptcy estate to prosecute the matter. Ordinarily, the Trustee will seek to retain PI Counsel because of counsel’s familiarity with the action, the relationship developed with the debtor and the attorneys’ lien that can be asserted against any future recovery.