Jacksonville Bankruptcy Lawyer Blog

The recent rejection of Natalie Suleman's bankruptcy petition illustrates the importance of having counsel when filing for bankruptcy. Suleman's petition filed in April only included the first five pages of a normal petition and a mailing list of her creditors that failed to indicate their priority.
A typical bankruptcy petition is between forty and fifty pages. Many of the pages missing were those that outline the income, expenses, assets and liabilities of the debtor. A general summary of some of these items is featured on the first page of the petition, but since the other sections were omitted, it is impossible to really know what Miss. Suleman owed, owned or if she even qualified for a Chapter 7 bankruptcy.
Taking into account that she did not hire an attorney, failed to file proper paperwork and appears to have filled out the petition on a type-writer (which is uncharacteristic of modern petitions), I have serious doubts about the legitimacy of her intent to file for Chapter 7 bankruptcy protection. This may have been a cry out to energize the public's interest in her to restore the celebrity status she once enjoyed. Although filing a sham petition to make money appears to fall in line with the intentions of the bankruptcy system as it helps someone who can't pay their bills, it is an unorthodox and reproachable method.
When someone files for bankruptcy without an attorney, they risk the seizure of assets that would otherwise be exempt. They also risk, as Miss Suleman did, rejection of their petition and dismissal of their case for failure to file the proper paperwork. There is an age old phrase which reads: "He who represents himself has a fool for a client."
If you are considering filing for bankruptcy and would like assistance of counsel, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

A recent article in Forbes states, "Octomom Files for Bankruptcy, because our Bankruptcy Laws Are Great". While this seems to quote Nadya Suleman (The Octomom) as having made such a statement, the term "great" only comes up in their article in a quote from the french political philosopher, Alexis de Tocqueville who said in relevant part: "There is no American legislation against [...] bankruptcies. Is that because there are no bankrupts? No, on the contrary, it is because there are many. In the mind of the majority the fear of being prosecuted as a bankrupt is greater than the apprehension of being ruined by other bankrupts..." What Tocqueville says here is not that the bankruptcy laws of the United States are great, but that because we as individuals see so many bankruptcies in our friends and neighbors that we realize that the possibility of our own bankruptcy as possible reality. This causes us to fear anti-bankruptcy legislation because we may one day need the relief ourselves. The fear of losing the ability to go bankrupt as a debtor is greater than the fear of losing the money we are owed as creditors. This is interesting because we don't enter into the same kind of analysis when forming other laws. For instance, we don't prevent laws that punish murder because we know as individuals that we may one day murder someone. This proves that there is something unique when it comes to bankruptcy, which I believe to be the public opinion that bankruptcy happens in large part by no fault of the debtor. It is well understood that medical debt, unexpected job loss, natural disaster, having eight babies, etc. are "out of our hands" as individuals. If we believe this negates the responsibility, we are less likely to punish people for it.
Octomom has filed for bankruptcy due to her financial inability to care for such a great number of children on her own. She may be an extremely unlikely example of a scenario that could happen to anyone but having a similar scenario could bring about the same result. I personally know someone who had unexpected twins. This caused an unexpected financial hardship and they did in fact file for bankruptcy, though they didn't indicate the kids were the cause (who with other places to point the blame would?).
The causes of bankruptcy are vast, frequent and are well recognized as being indiscriminate in whom they afflict. If you, like so many successful Americans before you, would like to explore your options in bankruptcy, contact a Duval County Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

When people think of foreclosures these days they know bankruptcy may not be far behind, but it's the amount of bankruptcies brought about by medical debt that's most astonishing. Back in 2009 medical bills were cited as the cause of more than 60% of all U.S. bankruptcies. This occurred despite 78% of those people having some form of health insurance. It's the gaps in the insurance, the deductible and benefit limits that cause the majority of medically bankrupt people to be unable to pay their bills. Now in 2012, with foreclosure rates flying higher than we ever thought the percentage of bankruptcies caused by medical issues has gone down to 20%, but this is more likely due to the enormous increase in foreclosure related bankruptcies rather than a decrease in medical bankruptcies as a whole.
Unfortunately, not everyone who files a medical bankruptcy does so at the right time. If a case is filed before the person has recovered from their surgery or illness, there may be other bills that the person is unable to pay. The outcome of these cases are people who owe money they can't repay and who aren't eligible for a bankruptcy discharge for up to eight years.
If you've suffered a major illness or medical expense that won't be covered by your insurance, you should contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 to discuss your options.

Florida Middle District Judge Alexander Paskay passed away on Friday after an extraordinary life. He was born in Hungary in 1922 and after being conscripted into the German army, he defected to the American side of the war. He proved useful as he spoke four languages -Hungarian, Italian, French and English. Although he had been an lawyer in Hungary, the Florida Bar required him to attend law school again, which he did. He became a judge in 1963 and served until 1999 when he retired for a brief period, then served again until December 2011. Federal records show that he handled over 150,000 bankruptcy cases in his many years, making him one of the longest-serving bankruptcy judges in our nation's history.
He was known to have a strong sense of humor and a firm grasp on bankruptcy law, always keeping abreast of recent changes. His wisdom will undoubtedly be missed by those in the bankruptcy community.

Let's face it, when student loans were made nearly impossible to discharge in bankruptcy, lenders realized they could hand over as much money as they wanted to to kids with no risk. Schools could then charge whatever exorbitant fees they could convince students to sign up for and could give them an altogether useless degree in underwater basket weaving. Since parents have ritualistically repeat the mantra, "Go to college." since the child was a mere babe, it's easy to see why our young graduates owe more than $1 trillion dollars in total.
Rule 11 U.S.C. 523 (8) governs the discharging of student loans in bankruptcy cases. In summary, it requires that an undue hardship to the debtor or their dependent would occur were the loan(s) not discharged.
Judges have had fun in deciding what an "undue hardship" is, but have basically boiled it down to the following: An undue hardship occurs if a debtor can show that they (1) cannot maintain, based on current income and expenses, a "minimal" standard of living for themselves and their dependents if forced to repay the loans, (2) additional circumstances exist indicating that the debtor's financial situation is likely to persist for a significant portion of the repayment period for the student loans, and (3) they have made good faith efforts to repay the loans. As each of these three prongs must be proven to discharge the debt, this is a hefty standard. This has been made especially difficult since the passage of the 2007 "College Cost Reduction Access Act", which created the Income Based Repayment plan. Income Based Repayment reduces Federal Student Loan payments to 15% of the difference between the debtor's gross income and 150% of the poverty line. Without forcing you to do complicated mathematics, I will say that it makes student loan payments very manageable. As a result, hardships are impossible to prove if the loans can qualify for the Income Based Repayment option. Income Based Repayment allows you to pay a fraction of your income for ten to twenty-five years depending on the type of employment you have. At the end of the repayment period, the U.S. Government discharges your remaining debt, i.e. pays your loan.
So, we've gone from a system where we used to force private lenders to be responsible with their lending practices by allowing debtors to discharge irresponsibly large loans in bankruptcy, to a system where we allow private lenders to lend as much as they'd like to new students and have our government pay those loans off after a period of time and a repayment of a fraction of the debt.
Regardless of the arguments against the policies of this system, it is still possible to discharge student loan debt even if the loans qualify for Income Based Repayment and that is by a simple procedure known affectionately in the legal world as a "default judgment".
A default judgment can occur in nearly every kind of case. It occurs when a petition, complaint or motion is filed and served upon a respondent. Service in Florida generally requires a twenty day period to respond to what was served. If no response is filed with the court or the petitioner, a default can be entered by the clerk of the court and then by the judge. It works like this: I say that a loan can be discharged in a bankruptcy for reason X. Regardless of the merits of reason X, if the respondent fails to answer in sufficient time, the court has to rule in my favor. This happens in divorces very frequently. If the wife says the husband should surrender his interest in all personal property and he's properly served with the document and fails to respond, he's just surrendered his interest in all personal property. Failure to object to these terms is considered an agreement with them.
Default judgments can be attempted against student loan companies by serving their corporate headquarters and waiting for a response. The recent case of In Re Gourlay, this very fact pattern emerged and Miss. Gourlay was successful. Still, discharging student loans is risky business, but not a business that should be overlooked 100% of the time. If you have the need to file bankruptcy anyway and it looks like a hardship could be argued, talk to your attorney about the possibility of discharging your student loans or contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

If somebody broke into my home while I was gone and took all of my personal property, I would want to be compensated for my loss, and I should be, right?
Imagine that like many in Florida today, you live in a home that is underwater on it's mortgage. You consult an attorney and because you fear a deficiency judgment or a 1099 for debt forgiveness income, either of which could result from a foreclosure. That attorney suggests that you file bankruptcy, which you do. You indicate in the bankruptcy petition that you want to surrender the home to the creditor. You are also required to provide a list of personal property to the court, but because you know you're only allowed to keep a certain amount of property in a bankruptcy, you decide to omit some valuable items. You rent a side apartment, but don't completely move out of the house. One day you return to the house to pick up some items and find it completely bare. You call your attorney and find out that the mortgage company violated the bankruptcy rules by entering your home and that you can sue them to recover the value of the lost property. You quickly create a list for your attorney of all the property that is missing and the attorney stops you. You did not list all of these items on your petition. This brings about at least two problems: first, you lied to the court under oath. This is perjury and your attorney may have to withdraw from representation because you used their services to perpetrate a fraud. Second, when you filed your petition you swore that you provided a complete list of your personal property and at the 341 hearing, you were sworn in and asked if the list was complete. If you now sue the creditor for taking your property, you're going to have to explain to the court why you failed to disclose property on your schedules and show that the property did, in fact, exist in the first place.
Listing all of your assets is a requirement of the Title 11 bankruptcy code. This is in the code because you're only allowed to keep a limited amount of non-exempt property in a bankruptcy. Situations like the one above turn the law on it's head, but really do stress the importance of honestly and accuracy on bankruptcy schedules. If you're considering a bankruptcy, it is important to get legal advice. Contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

When a person files for bankruptcy, they must list all of their assets and liabilities on their bankruptcy schedules. This is to help the court administrate and determine which assets the debtor should be permitted to keep and which assets will be subject to liquidation by the trustee for the benefit of the creditors. If someone is going to keep property during a bankruptcy case, it will need to be listed in their bankruptcy schedules with the proper exemption provision (if any) indicating why that property is allowed to be retained.
Often times, people forget what may be included as an asset. The following are commonly overlooked assets that if not listed in the bankruptcy schedules, could lead to seizure of the assets by the bankruptcy trustee: Accrued vacation pay, unpaid insurance claims, class action lawsuits, liquor licenses, timeshares, trademarks, season tickets, and security deposits.
I have even had the circumstance where the debtor disclosed at their 341 hearing that they had forgotten that their daughter's home was in fact titled jointly in both their names. Fortunately for the debtor, that home had very little equity and the debtor's bankruptcy petition was easily modified to protect the asset. Had the property had a lot of equity, this could have been a fatal mistake.
Just as there are things that people often forget are assets there are also things that people think are assets that actually are not. For instance, homes and cars are almost always thought of to be assets. However, this is not the case when the property is worth less than what is owed on it. In the case of property being worth less than what is owed on it, it ceases to be an asset of the debtor and is instead an asset of the secured creditor. This means that the debtor needn't use up any of their exemptions to maintain ownership of the asset.
If you would like to know what may qualify as an asset in your case, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

"What happens when I marry someone whose filed bankruptcy?" Is a common question. People want to know what affect a spouses' prior bankruptcy may have on their own credit or borrowing power. The classic attorney answer is, "It depends."
Generally speaking, the fact that your fiance filed a bankruptcy in the past is irrelevant to your current or future credit score. Marriage does not merge scores or credit histories, what it does do is require you both to sign some kinds of contracts when a lender extends you more credit.
One of the few ways having a spouse who has a bankruptcy in their past can effect you is when it comes to borrowing. You can only borrow as much as your credit allows. Married couples are allowed to borrow as much as their combined credit allows. So, if your spouse has a low credit score, your combined credit score will be lower, thereby limiting your combined borrowing power. There are ways around this. A co-signer with a strong credit score can help you qualify for a larger loan amount. Some banks, such as Bank of England even have programs by which you start a mortgage with a cosigner and then after one year of proper payments they may offer you a refinance to remove that cosigner's name. Another way to deal with your spouses' credit problems is to take time and work on increasing their credit score. By taking out a secured credit card, you can help build your spouse's credit score but you must be sure that the card actually reports your history of good payments to the credit bureaus. Capital One offers a Visa that is supposed to report to the three bureaus. Some of these cards have annual fees, so shop around to find the best rates. After a year of good payment history, you should then have your spouse apply for a unsecured credit card with the same company -this time in only their name. They are more likely to get approved this way and once the card is in their name only, their credit should be able to build faster.
Some mortgage companies will extend a mortgage loan to someone two years after filing a bankruptcy. They may extend credit sooner if that person has a non-filing spouse. If you have more questions about how to get a mortgage after your bankruptcy or how a bankruptcy will effect your spouse or yourself, contact a Mandarin Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Bankruptcies are down nearly 20% in the Middle District of Florida when comparing 2011 to 2010. Many in the industry attribute the decrease in filings to the moratorium on foreclosures caused by the robo-signing scandals and studies show that there is a strong relationship between foreclosures and bankruptcies. The inventory of the real estate market may not be flooded with foreclosures and short sales as we may imagine, but according to Key Property Partners, such "distressed" property sales did make up more than 43% of all closings in March.
What happened to all of the bankruptcies? My first thought was that perhaps everyone who was going to go bankrupt had done so, but only about 3.5% of the population of Jacksonville has filed for bankruptcy since 2007. Since 46% of Florida home mortgages are considered to be "underwater" there still stands to be a large number of bankruptcies for people looking to get rid of negative-equity homes. One must remember that there is not a 1:1 ratio from bankruptcy to foreclosure or vice-verse. Some people filing bankruptcy have no home, one home or multiple homes and some people being foreclosed upon never file bankruptcy at all. Still, the correlation is there. As long as homes are underwater, strategic and involuntary foreclosures will occur and bankruptcies will follow.
If you have questions about a short sale, strategic foreclosure or a bankruptcy, contact a Jacksonville Beach Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

The economic squalor many of us have been enduring over the last year has lead to foreclosures, bankruptcies and a larger than usual amount of debt settlement.
Debt settlement is a useful tool in improving an individuals financial situation, but it is not without pitfalls. When someone has a large unsecured debt, such as a credit card, they can offer their creditor an alternative payment plan. For example: Marc owes $7,000 to a credit card company. Marc has had a severe drop in income and hasn't been able to make payments to his creditor for several months. Marc wants to pay his debt, but can't afford the large payment the company requires. He goes to his attorney friend and the attorney negotiates with the creditor on his behalf. Creditors often prefer large initial payments, with a promise to pay small incremental amounts thereafter. If the credit card company agrees, Marc can pay them $1,000 today and make $200 payments each monthly for twenty-four months. They may agree to this because he hasn't been making payments thus far and it is well known that his attorney friend files bankruptcy cases. If Marc were to file a bankruptcy, this creditor knows they would get little to nothing in payment. When they agree, Marc has struck a deal that has him paying $5,800 to satisfy a $7,000 debt obligation. This is a $1,200 dollar savings which makes Marc happy because it's more manageable and less than he originally owed. Just before taxes are due, when Marc's debt is long forgotten, he gets a letter in the mail from the IRS. He nervously opens it to find a Form 1099-C for $1,200 in income, the exact amount he saved in his settlement. This is called "Debt Forgiveness Income". The IRS' theory is that because Marc's overall worth has gone up by a net $1,200, he has in effect earned $1,200 in value and should be taxed on it.
In Marc's situation he can probably handle the tax liability from an extra $1,200 in income for the year, but as the debt forgiven gets larger, the ability to absorb that liability decreases.
It's important to know that in a bankruptcy, there is no such tax liability. Once a discharge is granted the debtor's obligation to repay those debts is extinguished and the debtor can never again be asked to pay them- and there's no Form 1099 to worry about.
Granted, there are circumstances in which debt settlement is better than bankruptcy. Hiring good legal counsel can help you make that distinction. If you would like to know your options when it comes to debt, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

If someone needs automobile financing but lacks the necessary credit, a second person can cosign for them. When someone cosigns on a loan, they are just as liable for the debt as the person their signing for. So, if Jon needs to borrow $5,000 for a car and his friend Charlie cosigns on the debt with him, they are both liable for the payment. This means if for some reason Jon loses his job or can't pay, Charlie has to pay. This happens most often in the context of a divorce. Even if a family court judge orders a wife to make payments on the mortgage, this doesn't remove the liability from the husband. This often leads to bankruptcy for both parties since most couples borrow as much as they can, leaving them with a debt that neither can pay individually. This is why cosigners are given special notice when the party they signed for files a bankruptcy.
However, just because a party files bankruptcy, it doesn't mean that the non-filer can't finish making the payments. If Jon were quit paying on the loan in the example above, Charlie could make the payments for him to preserve his own credit. This often happens in the context of student loans. I personally know a husband and wife who cosigned on their son's private student loans. Upon graduating, the loans came due and he's been unable to find employment that would enable him to make payments for over a year. His parents, now well into their 50's, are now saddled with tens of thousands of dollars in debt for his apparently unmarketable education.
If you are a codebtor on a loan and the borrower or yourself are filing for bankruptcy, you should consult with an attorney about what your rights and obligations may be, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Divorce in Jacksonville, Florida is not a rare thing. According to Daily Beast, the city of Jacksonville has the ninth highest divorce rate of all cities in the United States. Many of these couples are jointly liable on home mortgages when they file for divorce. Since 46% of homes that have mortgages are underwater, many people are "left holding the bag" for mortgage payments they can't make, refinance or otherwise settle with. Often times the only option for these people is bankruptcy. Bankruptcy and Refinancing are often the only options for debtors to have their personal liability removed from un-payable mortgage notes.
When one ex-spouse files for bankruptcy, it almost invariably causes the other to file. Of course this depends on whether or not couple had purchased a home using combined credit scores and on whether or not the non-filing individual can handle the mortgage payment on their own. If the individual is able to make the payment on their own, they may be able to refinance the mortgage, allowing for the other party to be removed from the liability on the note.
If you have questions relating to the interplay of bankruptcy and divorce, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

When one files for bankruptcy, a petition must be created. That petition is made up of several different sections called, "Schedules". Each of these sections deals only with one specific issue, for instance, Schedule A deals with real estate, Schedule B with personal property, and so on. It is generally accepted that these schedules can be amended at any time, however a recent case out of the Middle District of Florida has limited this freedom somewhat.
Although every schedule is important, the schedule most debtors are interested in is Schedule C. Schedule C is where the debtor lists which property (s)he wishes to keep a exempt from collection by creditors. The rules allowing for property to be kept are called "exemptions" and are outlined by either state or federal statutes.
In Florida the use of one such exemption may forbid the use of another. As such, debtors can choose only door A or door B, but not both. Since there are so many rules in the bankruptcy code and because those rules are not always clear, it is often the case that people filing bankruptcy without a lawyer (pro se) mistakenly choose incompatible exemptions. This forces the Trustee to file an Objection to Claim of Exemptions, which requires a hearing for the judge to determine whether or not the objection is valid. If the objection is valid and the exemptions are denied, the trustee can then file a motion for turnover. The motion for turnover is the trustee's way of asking the judge to force the debtor to surrender their rights in the property to the trustee. This is where the turning point is. Up to and until the judge orders turnover, the debtor can amend their Schedule C list of exemptions and change the amount and type of property they wish to keep, but once the judge signs an order requiring the debtor to surrender their rights, the debtor can no longer amend.
Thus it is vital to make sure the claim of exemptions is correct when filed and that no incompatible exemptions are used. If you are considering filing for bankruptcy and want to ensure that it's done correctly, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

Senate Bill 1813 will allow for the revocation of passports from anyone who owes more than $50,000 to the Internal Revenue Service. The Bill will Amend Sub-chapter D of Chapter 75 of the Internal Revenue Code of 1986 to read:

``SEC. 7345. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN TAX
DELINQUENCIES.

``(a) In General.--If the Secretary receives certification by the
Commissioner of Internal Revenue that any individual has a seriously
delinquent tax debt in an amount in excess of $50,000, the Secretary
shall transmit such certification to the Secretary of State for action
with respect to denial, revocation, or limitation of a passport
pursuant to section 4 of the Act entitled `An Act to regulate the issue
and validity of passports, and for other purposes', approved July 3,
1926 (22 U.S.C. 211a et seq.), commonly known as the `Passport Act of
1926'."

The Bill goes on to list a few exceptions to passport revocation such as if a deficiency has since been paid, for a pending hearing to determine the legitimacy of the debt or lastly in the case of joint filers who are no longer married or were subject to other separated, joint filing scenarios.
I don't believe that there is a large number of people emigrating for purposes of income tax-avoidance, but that's only because I've never heard or read of it being an issue. That being so, this appears to be more of a punitive provision, made to punish those who don't or can't pay their taxes by preventing them from vacationing or visiting friends or relatives abroad. This is similar in effect to the powers of the County Family Law Court to take driver's licenses away from non-child support paying parents.
Whether this bill passes or not, people who owe Federal Income Tax should know that under the right circumstances, income taxes can be discharged in a bankruptcy. The general caveats are that the taxes must be filed at least three years prior to the date of filing and that the assessment by the IRS needs to have occurred more than 240 days ago. I have been fortunate enough to do this, which requires service upon Eric Holder as the Attorney General.
If you have income tax debts that you wish to discharge, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

As a counselor for others, attorneys are obliged to be fair and honest in their candor with everyone, including clients. Unfortunately, this idealist principle often falls short when it comes to attorney practice. There is a segment of the population of lawyers who intentionally try to persuade debtors to file Chapter 13 cases when Chapter 7 would serve them better. The reason for this is the fees. Chapter 13 cases pay almost twice that of Chapter 7. Therefore, we as attorneys stand to gain double the fees if we can convince you that a Chapter 13 is better for you. Lawyers are not the only ones whose morals cause clients to fall victim to greed. In 2011 Judge Mark Ciavarella of Pennsylvania was sentenced to 28 years in prison as a result of a "cash for kids" deal with a local private prison. If the judge sent a child to prison, the prison would in turn send the judge a check. After the judge had received nearly a million dollars in so called "finder fees" from the prison, suspicion grew. It is unlikely that we will ever know how many innocent children were sentenced to prison terms or how many guilty children had their prison terms unjustly extended as a result of this ghastly corruption, but when it comes to lawyers helping you choose which chapter of bankruptcy best suits you, you have been warned.
There are four chapters of bankruptcy available for individuals in the United States. These chapters vary in their usefulness in different situations as much as people do. They also often vary greatly in cost. When you consult an attorney for bankruptcy advice, their job is to determine which chapter, if any, best fits your financial situation. As time permits, they should explain to you why that chapter is best for you and equally important, why the other chapters do not work for you.
In Jacksonville and even across the United States, the attorney's fees for a Chapter 7 is about half that of a Chapter 13. The court filing fees are about the same. The Chapter 11, which is rare but not unheard of has enormous attorney's fees when compared to the other chapters as it is typically only filed by either businesses or by individuals with a very great amount of money and/or debt. It also has filing fees that are more than three times that of 7 and 13. Chapter 12, which requires the petitioner to be a commercial farmer or fisherman, is so rare that I can't even approximate the fees as I've never known any attorney who filed one. The court's fees are slightly lower than those of 7 and 13 and because a Chapter 12 is very similar to a Chapter 13, I would imagine the fees for it to be similar.
Contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.