A bankruptcy court can dismiss a Chapter 7 bankruptcy filing for “bad faith” even if the debtor passes the means test or is exempt from the means test because his debts are primarily non-consumer debts. A Florida bankruptcy court dismissed a Chapter 7 filing because the court found that the bankruptcy filing was not appropriate and was not consistent with the purpose of the bankruptcy code. Continue reading
A bankruptcy court today gave one of my bankruptcy clients a $10,000 judgment against one of his creditors for attempting to collect a debt after the entry of the debtor’s discharge. A key part of my client’s success was his detailed documentation of collection letters and calls as well as my own repeated written warnings to the creditor.
After the entry of the Chapter 7 discharge one of the creditors made several collection calls to the client/debtor. I wrote a warning letter to the creditor reminding it of penalties for collection of debts after discharge. The creditor sent bills and letters. I wrote another warning letter. Collection continued.
Seeing my letters being ignored I filed a Motion for sanctions and attorneys fees against the creditor. The creditor representative then wrote a letter of apology promising that there would be no more calls. Even after the apology and promise the creditor continued calling my client and even left a threatening voice mail message.
In court, my client produced “screen shots” from his cell phone showing phone calls from a phone number that matched the creditor’s phone. The judge was also very interested in listening to my client’s recording of the collection voice mail that was recorded with date and time of call. Continue reading
An attorney called me to ask whether he continue a residential eviction after the tenant filed Chapter 13 bankruptcy. The landlord’s attorney had already obtained a writ of eviction for non-payment of rent. Continue reading
Sometimes a creditor with a cause of action against a corporation will try to “pierce the veil” of the corporation to hold liable the owners of the company if the creditor believes the owners have significant assets. There is a different concept called “reverse piercing” when a creditor will try to attack a corporation and its assets to satisfy a claim initially brought against the individual owners. Continue reading
There have been many news reports recently about the large amount of student loan debt burdening young people entering the workforce. Most people know that bankruptcy may not discharge student loan debt except in circumstances of “extreme hardship.” . I am often asked by clients or just blog readers for suggestions dealing with large amounts of student loan debt. Continue reading
Chapter 7 bankruptcy debtors who surrender upside down real estate in Chapter 7 bankruptcy sometimes are surprised by liabilities that arise after the bankruptcy filing. A common example is the debtor’s liability for HOA dues that accrue in the months after the bankruptcy petition is filed. Continue reading
Bankruptcy debtors are bound by the information on their bankruptcy petition, and debtors should not assume they can edit financial information to protect assets after the bankruptcy trustee requires the assets to be turned over. Continue reading
The general rule is that a debtor may exempt proceeds from an exempt asset held in the debtor’s bank account so long as he can trace the funds to the exempt asset. Most bankruptcy courts interpret Florida’s asset exemptions to apply to the exempt assets and its proceeds derived from the asset. Continue reading
Many people have suggested buying a car through a small business corporation they own in order to protect the car from personal creditors. One debtor found that this planning back-fired when he filed Chapter 7 bankruptcy because it disqualified him from claiming an exemption for the vehicle which he otherwise would be entitled if the vehicle were owned in his personal name.
In one Florida Chapter 7 bankruptcy case the debtors filed in Florida using the default federal exemptions inasmuch as the debtors had not been Florida residents long enough to use Florida exemptions. Federal exemptions permit debtors to exempt vehicles which are “tools of the trade.” The federal vehicle exemption in better than Florida’s $1,000 vehicle exemption amount.
The debtors had titled a work truck in the name of their Illinois business corporation. The stock in the business was not exempt. The bankruptcy trustee could sell the truck if he took possession of the non-exempt corporation stock. The debtor listed his truck as a personal asset ( “his truck”) and claimed the tools of trade exemption to protect the truck from the Chapter 7 trustee. The debtor essentially was trying to “reverse pierce” his own corporation and treat assets titled in the company name as his own property.
The bankruptcy court did not allow the debtor to exempt his truck under the tools of trade federal exemption. The court explained that veil piercing is an equitable remedy used to prevent the fraudulent or improper uses of a corporation from injuring the party seeking to pierce the corporate veil. Veil piercing arguments are usually used by a creditor seeking to pursue a shareholder where the shareholder/debtor used the corporation as his personal alter-ego or where the debtor used the corporation for a fraudulent purpose.
In this case, the court said that there as no evidence the debtor had used his corporation for any fraudulent or improper purpose. The debtor may not use or disregard a corporation as it suited his purposes. The debtor elected to title the truck in a company name for no improper purpose, and the debtor had to accept the consequences of his planning when he filed bankruptcy. The court ordered the debtor and his corporation to turn over the truck to the trustee.