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bk-and-small-busFiling bankruptcy for small businesses just got a whole lot easier!  The Small Business Reorganization Act of 2019 takes effect on February 19, 2020.  Some of the new features are that it adds a new subchapter V to Chapter 11 of the Bankruptcy Code which is good for small business bankruptcies because:

  • There are no quarterly trustee fees;
  • There is no absolute priority rule;
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Discharge-taxesOrlando Bankruptcy Judge Jennemann’s ruling to discharge taxes was just affirmed in Mass. Dept. of Rev. v. Shek, Case #18-14922 (11th Cir. Jan. 23, 2020).  Several Circuits around the country including the 1st, 5th and 10th hold that tax debts for late filed returns can never be discharged.  The 11th Circuit joined the 4th, 6th, 7th and 10th Circuits in favor of discharging this debt.  As you can see it can make a big difference where you live, as this is a pretty even split among the country’s Circuit Courts.

The Court found this definition fit best under Section 523(a)(1)(B)(ii) which implies that a tax debt can be discharged if there is a delay of at least 2 years between the filing of the return and the filing of the bankruptcy.  This would essentially give the IRS two years to collect on this debt, before a debtor could discharge the tax in bankruptcy.

While we are not tax attorneys, we consult with tax attorneys whenever necessary, for the best results in bankruptcy for our clients.  I spoke with a potential client this week who was unaware that nearly $50,000 in past due taxes, interest and penalties could be discharged in full provided certain tests and timelines were met.  This can be a valuable tool to reset someone’s financial lives to move forward.

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Fresh Start, Not False Start: How New Bankruptcy Student Loan Programs Are Tackling Student Loan Debt

January 23 @ 1:00 PM ET

ABI’s Consumer Bankruptcy Committee will discuss how new bankruptcy student loan management programs are helping debtors solve their student loan problems. The panel discussion will cover issues affecting debtors and their student loans, as well as solutions and tools the courts are implementing.

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This year, the Swift Law Group with whom we work closely on our consumer harassment cases sent us a wonderful holiday gift — a chocolate treasure chest!  Everyone who saw it exclaimed “Oh Wow!”.  Everyone!  Then it was a free for all…  Thank you to the Swift team!

choc-chest

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arbitrationAre you looking down the barrel of an arbitration clause in your consumer/creditor agreement?  I’ve posted before (Arbitration Clauses in Consumer Contracts – How to Avoid Being Thrown out of Court) on some local case law here in Florida to help avoid arbitration clauses – but here’s a new case in the consumer’s favor in Bankruptcy Court for the Middle District of Florida.

The Bankruptcy Court ruled that an arbitration clause did not constrain the court’s contempt powers, “[w]ords in a consumer agreement cannot deprive the bankruptcy court of the inherent power to enforce compliance with an injunction.”  Verizon Wireless Personal Communications, LP v. Bateman, No. 14-5369, Adv. Pro. No. 18-1394 (M.D. Fla. Sept. 24, 2019).

So if you’re in bankruptcy, or had a previously filed one that you can reopen (without a filing fee), challenge the arbitration clause in bankruptcy – you may be much more likely to win!

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgThere is a separate process from the Social Security Administration’s process that is available through NelNet to discharge federal student loans (no matter who the servicer is).  It’s called a Total and Permanent Disability Application.  The good news is that it has been taking our firm only about two months to obtain this 100% discharge of student loans.  It’s also tax free for any applications approved prior to 2025.  After that, it will depend upon whether the program’s tax forgiveness waiver is extended by Congress.

A couple critical issues arise when filing these applications.  First, is the need to get it right the first time around — in other words don’t file a half-%$$ application and expect it to be approved by the Department of Education.  Second, many jobs nowadays are performed remotely and at all hours of the day or night.  So an employer’s inability to reasonably accommodate an employee under the Americans with Disabilities Act may need to be explored and included as a supplement to the TPD application.  Third, you can work, although at a minimal level and earning no more than the poverty level for a family of two.

This begs the question:  how much work can be performed, but yet qualify as being unable to engage in “substantial gainful activity”.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgStudent debt is no longer just a young persons’ issue. As of December 2018, approximately 8.4 million Americans aged 50 and older owe $289.5 billion in student loans, approximately 20% of total student loan debt.  This represents a 512% increase from the $47.3 billion owed by that cohort in 2004, making the growth of student loan debt among older borrowers the greatest among any age group.

A 2017 analysis by the Consumer Financial Protection Bureau reveals that from 2012 to 2017, total student loan debt for borrowers aged 60 and above increased by 72% in New Jersey, 107% in Pennsylvania, and 146% in Delaware. Many of the growing number of older borrowers face challenges that make them more reliant on their loan servicers for assistance and more vulnerable to misrepresentations by those servicers.

The data also shows that record numbers of older student loan borrowers are struggling with repayment.  Delinquency rates for student loan borrowers over 60 has jumped by 80-106% in the Northeast United States.  Typically, student loans are often a bigger problem here in the Southeast, so I would guess Florida’s delinquency rate has increased at least 100% from five years ago.  AARP reports that federal student loan borrower defaults increase with age.  In 2015, approximately 29% of federal student loan borrowers between 50 and 64 were in default; for borrowers aged 65 and above, the default rate rate rose to 37%  The default rates for those below 50 is 17% – still high unfortunately.

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https://www.tampabankruptcylawyerblog.com/wp-content/uploads/sites/10/2015/07/christie_d._arkovich_p.a_1_small.jpgIn an effort to ensure debtors receive a “fresh start” and not a “false start”, the Bankruptcy Court for the Middle District of Florida has implemented a Student Loan Management Program which utilizes a transparent portal to obtain relief from federal and private student loans.  The SLMP is an attempt to tackle the $1.5 trillion student loan debt that is currently owed by 44 million Americans.  The goals of SLMP are threefold: 1) increase communication which is presently lacking between both federal and private student loan borrowers and their servicers; 2) raise awareness among borrowers and their counsel of available options; and 3) end unnecessary and costly forbearance during bankruptcy.  The SLMP will start October 1, 2019.

Rather than simply leaving these loans on hold to accrue capitalizing interest in a Chapter 13, the SLMP is designed to enhance communication and availability of available options and end needless forbearance which causes larger loan balances.  For instance, a Debtor who owes $100,000.00 in student loans with an interest rate of 8% ends up owing over $148,000.00 after a five-year plan if the loan is simply put on hold.  The Portal is also designed to accommodate settlements of private student loans via a mediation.  The automatic stay will be lifted as to matters addressed via the portal.

In a similar vein, in 2010, the MDFL implemented a Mortgage Modification Program to assist debtors in seeking mortgage modification. The MMM program uses a portal to exchange documentation and communicate with mortgage servicers. It has been a great success, has reduced litigation and is recommended by mortgage creditors as a “model” for bankruptcy loss mitigation programs. It has been duplicated in many bankruptcy courts across the country and has saved thousands of borrowers from homelessness.

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