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Year in Review-Bankruptcy Law, Part II

January 23rd, 2008    •  by Showell    •   Comments Off on Year in Review-Bankruptcy Law, Part II

Well, we started 2007 in South Carolina wondering if we actually had our $50,000 per debtor homestead exemption, as several parties were debating appealing Judge Burris’s December, 2007 decision giving us the exemption. Happily, no one did and we enjoy an excellant exemption and can protect $100,000 of equity in a married couple’s residence, which is very cool; much better than the shameful $10,000 per married couple we had prior to that. Hopefully, the rest of SC’s exemptions will be amended in 2008 to bring us into the modern era.

Other issues the Bar grappled with this year included the Court’s actually requiring chapter 13 plans to be feasible (which means that the client’s budget must actually show that the debtor can afford to make the plan payment, and all other living expenses, and not just a deflated “$25/month for beans/food” for 5 years’-type budget. The idea was to cut down on the number of dismissals by limiting the number of shaky cases which are filed). The SC courts have not enforced this in the past, which, while that created more tottering cases which were dismissed, it gave people who otherwise were going to lose their homes one last chance to turn their income around in a very short window of time; and people did do that.

All year long we argued about Section 524(i) and whether debtor’s counsel can include language from it in their plans or whether that is objectionable. Some argue it is necessary to include it in order to hold the banks’ feet to the fire when they misapply funds during the course of a bankruptcy. Others argue it is not necessary, as it is in the Code and putting it in the plan is not necessary to have the right. Another argument is that our plan is a form plan and we just cannot modify its terms. Of course, the opposite camp says that we can and should be able to do so. These issues are still working their way through the courts and being debated on the debtors’ attorney listserve.

We obtained a new method of attorneys’ fee payment from the Courts which took effect (I think) in June (I am too lazy to look it up right now; it was around then). It necessitated a new form plan. Of course, we have what I should call a Really new method of attorney’s fee payment from the Courts which takes effect January 1, 2008 and necessitated a new form plan. I am not repeating myself. It’s just that in bankruptcy law, since the law changed in 10/05, especially, things just keep changing pretty regularly.

Also, a really annoying thing that has been going on more this year than ever before is that the trustees are taking people’s tax refunds for any year for which a refund is owed at the time of the filing of the case (this does NOT affect future years, so don’t panic). This has been happening for years and is perfectly permissible but it has gravitated from being an issue that is a problem from January til May to almost being a yearround issue now that the trustees are prorating the refund due for a given year and claiming the right to take the amount owed for the year in which the debtor files bankruptcy, even if it is 6-7 months before returns are due.Attorneys must really pay attention to clients who get big refunds every year and do some planning if their clients expect to keep all of that refund.

I am sure that there are a lot of other Ivory Tower issues that I did not address which just don’t spring to mind; but it’s been a long day and I’m tired; and I am taking a watercolor class and I have homework to do for tomorrow night or I will be the unprepared idiot in the class; it’s hard enough being the least talented one there. Anyway, now that the “Bankruptcy Year in Review” is done (more like d.o.a.), i will start trying to do a daily blurb on a particular issue, just a short summary of whatever ridiculous or scary law or situation is on my mind.

  • Can I go to Jail for not Paying my Bills?

    No, not unless you committed a crime in the creation of the debt (for example, fraud). Simply borrowing money and not being able to pay it back is not a crime. Many creditors representatives will tell you lies on the telephone and say that they will have you put in jail. Perhaps they are too ignorant to know they are wrong or that it is illegal for them even to say that. See More Bankruptcy Q&A