Notice of Disapproved Claim for Social Security Benefits
If you apply for social security disability or SSI benefits, you may be staring at a letter that states, “Notice of Disapproved Claim” on top. What does this mean? It might be means that you are denied social security benefits. Is this usually the end? No, you should likely appeal this denial. The social security administration denies a lot of people for social security disability benefits that are later approved after appealing. Unfortunately, some people give up when they get denied. Don’t give up. If you have serious medical problems that will keep you out of work for at least one year, keep reading.
Should I appeal my social security benefits denial? For our clients, this is usually a given. At Hoglund law offices, we expect to fight through two denials to get to a social security disability hearing. Keep in mind this: Social Security outsources the first two decisions in social security claims. What does this mean? Technically, social security does not make the first two decisions. Social security hires state agencies to make the first two medical decisions about your ability to work. And the state agencies use their own state agency doctors that you will never meet. In our legal opinion, the disability standards are too high and the review is misleading at the application and reconsideration levels. We tell our social security disability clients every day that we are helping them appeal. And we do it. Daily.
What does a “Notice of Disapproved Claim” really mean? It means that you have a deadline to appeal or your case is closed. The instructions to appeal are in your denial letter. At Hoglund law offices, we help our clients appeal denials like yours. We make sure these denials are in on time. And we get receipts to prove it.
Can I hire Hoglund law offices to help me when I’m denied? Yes. We help people at different stages. It depends when the call in.
We know that in a perfect system, the right people would be approved for disability benefits when they should be. But this doesn’t always happen. In fact, social security hearings actually apply the law the right way. At social security hearings, our licensed attorneys are standing next to you making legal arguments, cross-examining experts, and making sure the judge understands the medical evidence in your favor. Our lawyers fight for approvals at social security hearings on almost every working day of the year.
So if you have gotten denied social security disability benefits, you’re not alone. You absolutely need to appeal to get approved. Expect to go to a social security hearing with your lawyer to have your best chance to get the benefits you deserve.
What if I missed my appeal deadline for Social Security benefits? There can be good cause. You must act quickly and document why you do not appeal on time. This sometimes works, and sometimes doesn’t. Your Hoglund lawyer can give you a legal opinion about whether it is worth trying to appeal vs. refiling a new claim. Call us today, and we will let you know if we can help you. We charge nothing unless you are approved for social security benefits. Our fees are limited to ¼ your back payments. There are no other charges. Call now.
Consumer spending over the last three quarters of 2011 has shown a reversion to credit card use over debit card. Silvio Tavares, senior vice president at First Data, which processes card transactions for 4.1 million merchants, notes that “Consumers have spent the last couple of years de-leveraging and reducing credit card use, but the past month — and since April — they’ve been using their credit cards more and are starting to return to pre-recession buying.” The first quarter of 2011 saw an 8.2% increase in credit card use, followed by a 9% increase in the second quarter and a 10.6% increase in the third quarter. On the other hand, debit card use increased by 9.6%, 8.3%, and 5.9% in quarters one, two and three respectively. On black Friday alone, credit card use jumped 7.4% from the same day a year ago.
A major contributing factor to the rise in credit card use is that the banks are encouraging consumers to switch from debit to credit. Credit card use is more profitable and cost effective for banks compared to debit/checking accounts. To get consumers to make the switch, credit card mailings have increase 85% since early 2010, and many of these credit card offers come with new perks such as rewards points, miles, or cash rebates. The number of credit cards offering such perks has increased over the past two years from 6 out of 10 of the credit card offers in 2009 to 8 out of 10 credit card offers today.
Analysts believe that an increase in credit card offers will continue to intensify as debit cards become less cost-effective for banks. Banks have started to raise checking account fees and charge debit card usage fees, all of which is part of the attempt to get consumers to switch to credit cards. Although consumers will not be charged with the same usage fees on their credit cards, Bill Hardekopf, CEO of LowCards.com warns consumers to pay off their balance each month because the interest payments will be much greater than any new debit card fee.
Blake Ellis, Credit card use is on the rise, http://money.cnn.com/2011/12/05/pf/credit_card_use/index.htm?iid=SF_PF_LN (accessed 12/7/11)
Written by Hoglund Law
While the once large auto business network owner Denny Hecker serves out his 10-year sentence in the Duluth Federal Prison Camp, bankruptcy trustee Randy Seaver is on the search for hidden assets. Randy Seaver, assigned trustee in handling the bankruptcy estate of Denny Hecker, believes that there are hidden assets and the persons may have been aiding and abetting Hecker while he in prison. To begin his search, Seaver has asked for permission to question several people close to Hecker and his wife Christi Rowan-Hecker.
David Leibowitz, a bankruptcy expert from Chicago believes this is a bit of a fishing expedition on Seaver’s part, but contends, “Seaver obviously feels there’s a fish in the water here.” Leibowitz goes on the mention that this activity is consistent with the aggressive manner in which Seaver has handled the case. Seaver has sought to speak with Hecker’s second wife Sandra Hecker, Hecker’s former lawyer John Neve, as well as and Barbara Tourville, George Johnson, and Molly Jensen, all of whom have allegedly put money in Hecker’s prison accounts and have been assisting him in business and financial matters.
Rowan-Hecker, who married Denny via telephone back in March, recently was released from a federal prison in Illinois to a halfway house in Minneapolis where she will finish out her 14-month sentence for bankruptcy fraud. This is a typical procedure for inmates nearing the end of their sentence to be transferred to a halfway house for the last one to six months of their sentence. During this time at the halfway house, Rowan-Hecker will be assisted in finding a job and helping her return to society.
MaryJo Webster, Hecker trustee seeks hidden assets; Rowan released to Minnesota halfway house, http://www.twincities.com/business/ci_19489778 (accessed 12/9/2011)
Written by Hoglund Law
In March of 2010, President Obama signed into law the Affordable Care Act. The Affordable Care Act is the highly controversial health care reform law. This Act is said to be one of the signature accomplishments of the President. Since the Act was signed into law, 26 states have filed suit in federal courts around the nation challenging the constitutionality of the Act.
That big-ticket provision of the Act that is being challenged is the “individual mandate” that requires nearly all Americans to purchase a minimum level of health insurance. The Supreme Court recently agreed to hear two major questions: 1) whether the “individual mandate” provision is unconstitutional; and 2) whether the entire law must be invalidated due to the centerpiece provision which is the “individual mandate.”
Both advocates and adversaries of the Act have serious concerns regarding the constitutionality of this Act. The federal government reported that last year approximately 45 million Americans were without health insurance. As a result of uninsured Americans, the federal government sites $43 billion in uncompensated medical costs. On the other side of the aisle, arguments have been made that the health care law has not lived up to its promises and actually is creating a substantial burden on small businesses. Opponents of the Act also contend that the Affordable Care Act unconstitutionally reduces individual freedoms.
The Supreme Court will begin to hear oral arguments in late February or March, and a ruling is expected by June. The result undoubtedly will influence the political debates in this presidential election year.
Bill Mears, Supreme Court takes up challenge to health care reform law, http://articles.cnn.com/2011-11-14/politics/politics_health-care_1_oral-arguments-health-care-reform-law-affordable-care-act?_s=PM:POLITICS (accessed 11/15/2011)
Written by Hoglund Law
The U.S. Postal Service has been struggling financially. Patrick R. Donahoe, the postmaster general, has stated that if Congress does not take action the agency will not be able to make a $5.5 billion payment this month and may be forced to shut down this winter. Recently, the Postal Service has proposed cuts to eliminate a deficit that will rise to $9.2 billion this year. The proposed cuts include ending Saturday delivery, closing 3,700 locations, and laying off 120,000 employees.
The financial problems can be attributed to lower revenue and increasing costs for the Postal Service. Fewer people and businesses are utilizing post office services, largely because of increased Internet usage. Additionally, the Postal Service has contractual obligations to its employees, including no-layoff provisions, which have resulted in increased costs. Labor costs account for 80% of the Postal Service’s expenses, compared to 53% at UPS and 32% at FedEx. Postal Service employees also receive better health benefits than other government employees.
The Senate Homeland Security and Governmental Affairs Committees will consider the Postal Service’s situation this week. Democrats and Republicans have been unable to reach an agreement on a solution. If the Postal Service does miss the $5.5 billion payment due at the end of September, an emergency will not immediately occur. However, in early 2012, the Postal Service will be unable to pay for its operations and will have to shut down.
Steven Greenhouse, Postal Service on Verge of Going Broke, Shutting Down, http://www.msnbc.msn.com/id/44396682/ns/business-us_business/#.TmUMDzuF4ro (accessed September 5, 2011).
Written by Hoglund Law
According to data from Credit Karma, the average credit score in the United States is 666. The current trend for lenders is that a credit score of 660 is needed to obtain a mortgage, car loan, or credit card. Approximately 40% of Americans have a credit score lower than 660. This means four out of ten consumers will likely be denied credit or pay high interest rates. This illustrates the importance of credit scores. New federal regulations have increased consumers’ access to their credit scores. However, many think the new regulations do not go far enough. Here are a few things to know about credit scores.
- You may have the right to see your credit score for free. If you are denied credit or are forced to pay higher interest rates because of your credit report, you are entitled to see your credit report for free. However, this regulation does not apply to all consumers, only to those who are denied or given high interest rates.
- The threshold for obtaining credit is always changing. Previously, a credit score of 660 was considered a good score. During the recession, a score of 720 or 750 became the new standard. Lenders also focus on credit history and other credit details when deciding whether to lend.
- Track your credit score. Credit scores change, so it is not enough to just check your score once. Monitor your credit score to see how decisions affect your score and identify areas where you can improve your score.
- Do not be surprised if your credit score varies. There are many different credit score models used by lenders. Focus on risk factors, such as amount of debt, number of accounts, and credit use, because improvement in risk factors will likely improve your score no matter what model is used.
Justine Rivero, 4 Things to Know About Credit Scores, http://money.msn.com/credit-rating/4-things-to-know-about-credit-scores-forbes.aspx (accessed August 24, 2011).
Written by Hoglund Law
Robert Sylvester Kelly, better known as R & B singer R. Kelly, is facing foreclosure on his home in Olympia Fields, Illinois. J.P. Morgan Chase Bank filed the $2.9 million foreclosure suit against R. Kelly last month. It appears that R. Kelly has not lived in the home since early last year. Kelly has not made any mortgage payments on the house since June 2010. The 11,140 square foot home is located near Chicago and was built in 2000. The home includes six full and seven half bathrooms, and a four stall garage.
The foreclosure suit is not the first of Kelly’s legal problems. He was acquitted of producing child pornography in 2008. Additionally, Kelly’s former manager reportedly sued him last month for $1 million in unpaid commissions.
R. Kelly Facing Foreclosure on Chicago House, http://marquee.blogs.cnn.com/2011/07/13/r-kelly-facing-foreclosure-on-chicago-house/ (accessed July 18, 2011).
Written by Hoglund Law
According to new research, popular food chains Denny’s, Wendy’s and Domino’s may be in danger of going bankrupt. TheStreet.com ranked restaurants’ chances of going bankrupt by their Altman Z-Score. The score is based on financial information from each company, and predicts the likelihood of bankruptcy within two years. TheStreet has been using their scoring system since 1968, and they claim to have a 72% rate of accuracy in predicting bankruptcies two years before the filing.
Denny’s is the restaurant most at risk for bankruptcy, according to the most recent ranking. Wendy’s/Arby’s came in second, and Domino’s Pizza was fifth. Additionally, DineEquity, which operates Applebee’s and IHOP, ranked fourth on the list. Other restaurant chains, including Sbarro, Perkins and Marie Callender’s, have already filed for bankruptcy this year.
Pete Kenworthy, Report: Denny’s, Wendy’s and Domino’s Among Restaurants in Danger of Bankruptcy, http://www.abcactionnews.com/dpp/news/national/wews-report-dennys-wendysand-dominos-among-restaurants-in-danger-of-bankruptcy1309574048690 (accessed July 3, 2011).
Written by Hoglund Law
Narayana Kocherlakota, president of the Federal Reserve Bank in Minneapolis, recently suggested a change in the U.S. tax system to discourage debt growth. High consumer and bank debt lowers the stability of the economy. This makes economic trouble, like what occurred in 2007 through 2009, more likely.
Currently, the tax code encourages debt by allowing taxpayers to take advantage of interest deductions. Consumers are encouraged to incur mortgage debt and banks are encouraged to take on debt for financing. Kocherlakota urged Congress to reduce the deduction for mortgage interest and reduce the interest deduction for corporations. This would reduce the incentives for people to take on debt that destabilizes the economy.
Officials are attempting to avoid another economic downturn. President Obama signed a bill last year that gives the Federal Reserve the power to supervise financial institutions whose failure could cause an economic crisis.
Vivien Lou Chen, Fed’s Kocherlakota Calls for Tax-system Changes to Discourage Debt
Growth, http://www.bloomberg.com/news/2011-06-27/fed-s-kocherlakota-calls-for-tax-systemchanges-to-discourage-debt-growth.html (accessed June 28, 2011).
Written by Hoglund Law
The federal government is attempting to help turn around the struggling housing market and reduce the number of home foreclosures. The Emergency Homeowners Loan Program will help homeowners who are behind on their mortgage and struggling to make payments. Loans of up to $50,000 will be available to the unemployed. Additionally, the loans do not require repayment if certain conditions are met.
The purpose of this loan program is to provide assistance to people who will only need it short-term. The loans offered will last up to two years, borrowers will not be charged interest, and funds will go to the mortgage lender to cover monthly payments and late fees. The loans will be forgiven at a rate of 20% per year. Therefore, a homeowner who stays in their home for five years and stays current with their mortgage will not have to repay the loan. To qualify for the program, borrowers must be in danger of foreclosure and have experienced a loss of income. The program will cost $1 billion.
Critics of the program say that homeowners will be at risk for incurring additional debt. If borrowers do not stay current with their mortgage or sell the home before the loan is completely forgiven, they will be responsible for the loan. However, supporters of the program do not think the program will help enough people. Approximately 4 to 4.5 million homeowners are in foreclosure or at least 90 days behind on their payments. The Emergency Homeowners Loan Program will only provide assistance to about 30,000 people.
Annamaria Andriotis, More Money for Struggling Homeowners,
http://www.smartmoney.com/spend/real-estate/more-money-for-struggling-homeowners-1309312646029/ (accessed June 29, 2011).
Written by Hoglund Law
The number of Americans who filed for bankruptcy in January through June of this year decreased from the same period in 2010. According to data from the National Bankruptcy Research Center, 709,303 consumer bankruptcies have been filed in 2011. During the first six months of 2010, 770,117 consumer bankruptcies were filed. The 2011 numbers represent an 8% decrease from the number of filings in the first half of 2010.
Bankruptcy filings in June 2011 decreased 5% from the number of filings in June 2010. However, the bankruptcy filings in June represent a 4% increase from May filings. The director of the American Bankruptcy Institute has said that the recent decrease in bankruptcy filings indicates that consumers are attempting to lower their debt.
In Minnesota, 10,376 consumer bankruptcies were filed in the first six months of 2011. This represents a 10% decrease from the 11,532 filings in the first half of 2010. June bankruptcy filings in Minnesota were down from May filings, and also down from the number of filings in June 2010 and June 2009.
Kara McGuire, Bankruptcies Decline in 2011,
http://www.startribune.com/lifestyle/blogs/125007464.html (accessed July 5, 2011).
Written by Hoglund Law
Fourteen well-known dresses worn by the late Princess Diana will be auctioned off in Toronto. The proceeds from the sale will be used to settle bankruptcy debts. Maureen Rorech Dunkel, a Florida entrepreneur, bought the dresses in 1997 when Diana sold them to raise money for charity. Princess Diana died in a car accident just two months after the original sale.
Dunkel belived the dresses were a good investment when she purchased them. She put the dresses on display in many different countries and formed the People’s Princess Charitable Foundation. However, Dunkel went bankrupt in 2010 and decided to sell the dresses to cover her debts. The fourteen dresses are worth more than she owes.
One of the most famous dresses in the collection is a black dress Diana wore to a White House dinner in 1985, where she danced with John Travolta. That dress is expected to raise between $800,000 and $1 million. Bidders from the United States, Canada, China, Germany, and Britain have all shown interest in the dress.
Ellen Tumposky, 14 Dresses: Princess Diana’s Iconic Gowns Go Under the Hammer, http://abcnews.go.com/US/princess-dianas-dresses-hammer-toronto/story?id=13904367 (accessed June 23, 2011).
Written by Hoglund Law
One of the many ways creditors can collect on delinquent accounts is by obtaining a judgment against the debtor. The creditor will typically hire a law firm to sue the delinquent account holder, and in virtually every case, a court will grant a judgment in the creditor’s favor. Because Minnesota law allows service by mail and default judgments are issued frequently, the process of getting the judgment is relatively easy.
Once the creditor has a judgment, the creditor will utilize the judgment to recover the funds owed by the debtor. Prior to obtaining a judgment, the creditor was limited to collecting via phone calls and mail. Those collection efforts, while often upsetting to the debtor , do not allow the creditor to collect unless the debtor voluntarily agrees to make payment arrangements. However, once the creditor has been granted a judgment, the creditor can force the debtor to make involuntary payments. Creditors typically use the following methods to collect on a judgment:
Once the creditor has the initial judgment, the most common next step is to get a garnishment order. Once this is granted by the court, the judgment creditor will be able to force the debtor’s payroll to deduct up to 25% of the debtor’s net pay and give it to the creditor until the judgment is satisfied in full. The debtor will be garnished in intervals with occasional breaks in the garnishment.
There are some limitations to this method. Not all sources of income can be garnished. A creditor cannot for example garnish social security or certain types of pensions. When the debtor is given notice of the pending garnishment, he or she will also receive a notice of exemption to be filled out and returned to the judgment creditor. Typically if a debtor is receiving state aide a creditor will not be able to garnish wages or levy bank accounts even from nonexempt sources. For example, if an individual is working but is also receiving food stamps, the creditor will not be able to garnish the individual’s wages even though the wages are not from a nonexempt source. An individual will need to fill out an exemption form in order to prevent the garnishment. Additionally, if the debtor is self-employed or otherwise receives income through channels other than payroll, a garnishment will be of little use.
2. Bank Levies
A creditor may also utilize bank levies. Once the court grants a levy order, the judgment creditor is able to freeze the debtor’s checking or savings account and force the bank to turn over the funds to the creditor. The creditor can take a lump sum of money up to the amount of the judgment. If the funds in a debtor’s account can be shown to be exclusively from an exempt source such as those mentioned above, then the debtor may fill out an exemption form and the funds will be returned to the debtor. Also if the funds in the account were not the sole property of the debtor, the debtor may request a hearing to have some portion of the funds refunded to the co-owner of the funds.
A judgment creditor can also seize property to satisfy the debt. The creditor can have a sheriff seize any of the debtor’s property that is not exempt under state law.
A secured creditor is able to repossess any assets secured by the loan without acquiring a judgment. This is most often the case with items such as vehicles (repossession) and real estate (foreclosure). A creditor can also seize other items such as furniture, jewelry, and electronics that were purchased on credit if a purchase money security agreement is in place. Many creditors such as Best Buy or Goodman Jewelers place a purchase money security clause into most of their contracts. If proceeds from the sale of the seized property are insufficient to cover the amount owed on the delinquent loan, the creditor may still collect on the deficiency balance. The creditor can pursue a judgment for this deficiency balance and then will able to use garnishments and bank levies to collect the remainder of what is owed.
Written by Hoglund Law
For debtors, the path they traveled which led to a bankruptcy is long and varied. There were generally many signs along the way that point towards a looming bankruptcy. For many debtors, the final indicator that a bankruptcy is their best option is a wage garnishment or a bank levy. Prior to that point, the creditor’s only option had been to accept voluntary payments from the debtor.
With a wage garnishment or a bank levy, the creditor can now force the debtor to make involuntary payments. It is the involuntary nature of these payments, coupled with the fact that a garnishment is 25% of every paycheck and a bank levy is 100% of the funds on deposit, which often triggers a debtor to file bankruptcy.
When a debtor files for bankruptcy and an involuntary payment has been made to a creditor in the 90 days before filing, it is possible to recover those funds for the debtor as a preferential transfer. The funds that the creditor obtains by a garnishment or a bank levy are a preference under 11 U.S.C. § 547(b) because the garnishment or levy is a transfer of an interest in the property of the debtor to a creditor made while the debtor was insolvent and within 90 days before the date of filing. This transfer has therefore enabled the creditor to receive more than it ordinarily would not have received but for the transfer.
In order to recover the funds for the debtor, certain requirements must be met. First, the amount garnished in the 90 days before filing must equal $600.00 or more. Also the garnishing creditor must have actually cashed the checks from the debtor’s payroll within the 90 days. Because a garnishment is a two step process (step one: payroll withholds the debtors wages; step two: the money is sent to the creditor), it is possible for a debtor to have had money taken out of his/her pay without that money every reaching the creditor. It is therefore important for the debtor’s attorney to determine which funds were remitted to the creditor and when.
Any funds still being held by payroll at the time of filing will be returned to the debtor, not because it is a preference, but because it violates the court’s injunction which takes effect at the time of filing.
Second, the debtor must have listed this preference on the Statement of Financial Affairs and on Schedule B and have exempted it on Schedule C of their bankruptcy petition. In essence, the garnishment is an asset which must be protected using the debtor’s exemptions. If the debtor does not have room to protect the garnishment under the debtor’s exemptions, the Trustee assigned to the case will be entitled to the returned garnishment. If the funds are taken by the Trustee, the Trustee will then redistribute the funds more fairly amongst all of the debtor’s creditors after paying their own fees.
Third, no objection can have been filed by the creditor in question. If an objection to the dischargeability of the debt in the bankruptcy is raised, that matter must be resolved before a recoupment of the garnished funds can be considered.
Once it is determined that the garnishment is recoverable, a debtor can work with his or her attorney regarding the proper method of recovery. If the creditor does not return the garnishment voluntarily, a debtor has the option to sue the creditor to return the preference. Generally, creditors will return the funds voluntarily to the debtor once a demand letter has been sent. The window of opportunity to file the law suit is only open during the pendency of the bankruptcy. After that point, the debtor has no legal remedy if the creditor refuses to cooperate and can only hope that the creditor returns the funds voluntarily.
It is important for the debtor’s attorney to understand the timeline associated with a garnishment recovery. Sending a demand letter before the time limit for the creditor’s objection to be filed has passed, for example, is pre-emptive: the debtor is not yet entitled to that preference. By the same token, filing a law suit to recover the funds too late can preclude recovery entirely. Also important to note is that a debtor understands his/her rights to the garnishment and the importance of providing his/her attorney promptly with any information that is needed to determine the recoverability of the garnishment.
Written by Hoglund Law
According to statistics compiled by the Administrative Office of the U.S. Courts, consumer bankruptcy filings for the first half of 2010 are up 15% compared to filings for the first half of last year.
Chapter 7 filings have increased 17 have increased% from last year.
An ABI study also notes that bankruptcy filings for people ages 55 and older have increased.
This year will mark the first time that have been more than 1.5 million bankruptcy filings in a year since the bankruptcy laws were dramatically changed in 2004.
Written by Hoglund Law
The Making Home Affordable Program can help homeowners keep their homes even if they have filed a bankruptcy. The HAMP program helps homeowners modify their mortgage to make their payments more affordable.
Some of the requirements for HAMP are:
– Monthly mortgage payments including tax, insurance and association dues which exceeds 31% of the debtors’ gross income
– Ownership of a one- to four-unit home which is the principal residence for the debtor
– The mortgage having been received prior to January 2009
– The amount of the mortgage being equal to or less than $729,750 (on the first mortgage)
– Documented financial hardship
To apply for HAMP, a homeowner must submit an initial packet to their mortgage servicer. This packet must include a completed Request for Modification Affidavit, A completed Tax Authorization Form, and proof of income. These forms can be found at www.MakingHomeAffordable.gov.
Written by Hoglund Law
When an individual files bankruptcy, the trustee assigned to his/her case will examine payments made to creditors before a case was filed. If the payments to an individual’s creditors meet certain requirements, they are considered preferential payments.
If an individual filing bankruptcy has made preference payments, the trustee administering the case may go after the creditor to whom the payment was made and force the creditor to give the trustee the amount of the payment. The trustee will then take the payment and distribute amongst all of the debtor’s creditors.
Under § 547(b) of the Bankruptcy Code, a “preference” is any transfer made by the debtor that meets the following criteria: (1) the transfer is to or for the benefit of a creditor, (2) the transfer is for or on account of a prior debt owed by the debtor before said transfer was made, (3) the transfer was made while the debtor was insolvent, (4) the transfer was made either 90 days before filing the bankruptcy petition, or one year before the filing of the bankruptcy if the payment was made to an insider, and (5) the transfer enables the creditor to receive more than the creditor would have received either under a Chapter 7 case or if the transfer had not been made at all.
Preferences are most commonly problematic within the context of payments to friends or family. If a transfer is made to a non-insider, the debtor typically is concerned less about the effect on the creditor.
When the preference payment has been made to a friend or family member, there are several ways to handle the situation.
Sometimes a debtor will wait until the preference period has run out before filing their bankruptcy. For example, if a debtor repaid his/her mother in September of 2009, he/she may wish to wait to file his/her case until it has been after a year since the payment was made. If the debtor waits for the preference period to run out, then there will not be an issue in his/her case regarding the payment.
It should be noted that the debtor will want to make certain of when the payment was made. A miscalculation of one day can make the difference in whether a payment is a preference or not.
If the debtor absolutely cannot wait, another option would be to file a Chapter 13 case. Under Chapter 13, as long as the total amount paid by the debtor over the course of the Chapter 13 plan is at least as much as the debtor transferred, then no additional funds need to be paid, and the trustee will not pursue the matter with the transferee.
If a Chapter 13 is not an option, then the trustee who is assigned to the Chapter 7 Bankruptcy will attempt to retrieve the funds. Sometimes the trustee will allow the debtor to stand in the shoes of the individual to whom the preferential payment was made and allow the debtor to pay back the preference on the behalf of the transferee. Most trustees will allow the debtor about five months to pay the preference amount.
Written by Hoglund Law
When an individual files for bankruptcy, a trustee is assigned to his/her case. It is the trustee’s duty to administer the case. Part of the administration of a bankruptcy case involves an examination of financial transactions occurring before an individual files for bankruptcy. One thing trustees look at is whether a debtor has transferred any property out of his/her name before filing. The trustee is able to look into transactions between a debtor and a family member or close friend that have occurred within six years of filing a bankruptcy.
Many transfers of property which are commonplace outside of a bankruptcy context can be characterized as fraudulent if a debtor files for bankruptcy. If a transfer is considered fraudulent, the trustee is allowed to go back to the individual who received the transferred asset and demand the asset or the fair market value of the asset. If that individual does not return the asset or the value of the asset willingly, the trustee then may sue that individual and get a judgment against that person for the value of the asset or force the person to return the asset. Understandably, many debtors are greatly distressed by this.
Whether a transfer is considered fraudulent is determined by the bankruptcy code and surrounding case law. Section 548 of the Bankruptcy Code defines fraudulent transfers as transfers made with  “actual intent to hinder, delay, or defraud” a creditor or  a transfer in which the debtor “received less than a reasonably equivalent value in exchange for such transfer…and was insolvent on the date that such transfer…or became insolvent as a result of such transfer…”
Actual Fraud occurs when the debtor transfers property with the intent to hinder, delay, or defraud a creditor. A debtor may not always disclose the true reasons behind the transfer, and to prove intent the court may look to the circumstances surrounding the transfer. The badges of fraud that indicate fraud include: the timing of the transfer, the relationship between the debtor and the recipient, the lack of adequate compensation the debtor got for the transfer, and whether or not the debtor maintained control over the asset after transferring title.
A common example of actual fraud is: A debtor is behind on his credit card payments and realizes that he is on the verge of being sued by his creditors. He has hunting land up north that is free and clear and worth $30,000. He is worried that creditors will sue him and take the land. He transfers title to the property to his brother without having the brother pay him the $30,000 that the land is worth.
This is actual fraud because the debtor intended to hide property from his creditors. The trustee has a few options. He or she can (1) not discharge the debtor’s debts, (2) make the brother pay $30,000 or (3) force the sale of the property. The trustee will distribute the $30,000 among the creditors to pay a portion of the debt owed to them by the debtors.
Another form of fraud is called “constructive fraud.” It is constructive rather than actual because there need not be any intent on the part of the debtor. Constructive fraud occurs when a debtor (1) sells or gives away an asset for less than fair market value (2) at a time when he or she is insolvent. Fair market value is determined on a case by case basis. In essence, when the court takes into consideration all factors surrounding the transfer, it is determining if the debtor did not receive proper consideration for the transfer, i.e. whether or not the debtor gave someone a deal or a gift.
Insolvency is shown by determining that the debtor’s liabilities are greater than his or her assets. A simple way to conceptualize this is by answering the question: was the debtor able to pay his debts at the time of the transfer? If the answer is no, the debtor is insolvent.
A common example of constructive fraud is: A debtor who has not been able to stay current on his credit card bills, has an adult daughter whose car has just broken down. The debtor gives his daughter his older car worth $3000 to take and use as her own. The debtor transfers the title to his daughter’s name without having the daughter pay for the car.
This is constructive fraud because the debtor did not give the car to his daughter intending to hide it from creditors. Instead, his motives were innocent: he only wanted to help his daughter who was without a car. However, the trustee can make the daughter (1) pay $3000 to keep the car or (2) force the sale of the car, using the profits to divvy up among the creditors.
Debtors who file for bankruptcy generally do not want to involve their family or friends in the process and see it as unfair that the trustee can take back property given to them. However, creditors also have rights and sometimes have a right to repayment in a bankruptcy case.
This aspect of the bankruptcy code is designed to keep individuals who are filing bankruptcy from cheating their creditors by hiding assets. Although this is often not the debtor’s true intention when the transfer occurred, the person filing the bankruptcy may still encounter problems under this section of the bankruptcy code.
It is important for an individual who may consider a bankruptcy to speak to an experienced attorney before any such transfers are made.
Written by Hoglund Law
Attorney Jeff Bursell from Hoglund, Chwialkowski & Mrozik will be a participant in the annual golf tournament held by Anastasi and Associates.
The tournament will benefit local charities. All donations will go directly to the selected charities. Plus Anastasi and Associates will match every dollar donated.
The proceeds from this event will be donated to Family Pathways and Family Means. Family Pathways is a local, grassroots organization which offers a food shelf, thrift store and senior and youth services. Family Means offers mental health counseling, consumer credit counseling, caregiver support, an employee assistance program and youth enrichment programs.
Written by Hoglund Law
According a study prepared for the AARP’s Public Policy Institute, “the rate of bankruptcy filings among Americans 55 and older has nearly tripled since 1991.” The results of this study are a cause for concern because the results “indicate that financial security is progressively eroding for many older Americans.” (As printed in Consumer Bankruptcy News, Volume 18, Issue 16, 2, July 3, 2008.) A logical question may be why some of these older Americans are filing bankruptcy, especially where many may be exempt from the actions of their creditors. Unfortunately, many of these older Americans choose to file to stop creditor harassment or file as a means of estate planning so their relatives do not have to “deal with the debt.” One common pitfall in bankruptcy that tends to harm elderly debtors or their family members is the creation of a life estate.
Life estates may pose a hurdle to elderly persons if they do not live in the home, but more often, the elderly person conveys real estate to a family member and reserves a life estate for him or herself. If the family member experiences financial difficulty, then the transfer of property may be an insurmountable obstacle in the family member’s bankruptcy case. This remainder interest in real property is an interest in real property that must be protected in a bankruptcy case. If the interest is unprotected, then the remainder interest becomes property of the bankruptcy estate, which causes problems for both the life estate holder and the remaindermen.
Under the Bankruptcy Code, the conveyance of a fee simple, reserving a life estate, acts as a present conveyance of the real property and, therefore, the real property becomes property of the bankruptcy estate. Rarely is it a problem to protect the debtor’s interest where the debtor is the holder of the life estate and where the debtor lives in the home of which he holds the life estate. (See Peoples’ State Bank v. Stenzel (in Re Stenzel), 301 F.3d 945, 948 (8th Cir. 2002). This debtor typically can exempt the interest in the life estate under the homestead exemption using federal or state exemptions. However, life estate issues arise when the life estate holder or the remainderman is a debtor who does not live in the home even where the debtor’s interest in the real property has not vested. See State ex rel. Cooper v. Cloyd, 461 S.W.2d 833, 838, 839 (Mo. en banc 1971). See also In re Dennison, 129 B.R. 609 (Bankr. E.D. Mo. 1991). In this scenario, the debtor’s interest cannot be protected using the homestead exemption and can be protected only under the wildcard exemption of the federal exemptions. 11 U.S.C. § 522 (d)(5).
Oftentimes, the value of the interest exceeds the allowable exemptions under the Bankruptcy Code. In these situations, the interest must be purchased from the bankruptcy estate or face the potential sale of the interest. For these reasons, life estates can be a tricky business in bankruptcy cases.
Written by Hoglund Law
Much attention has recently been given to the disastrous bankruptcy filing of Denny Hecker. Clearly, the Hecker case is not a run of the mill case; however average individuals contemplating bankruptcy should take note of the things which got Mr. Hecker in hot water. These things can happen to average individuals as well.
The most important lesson an average person should take from this case is that one should never attempt to hide assets in a bankruptcy. When an individual files a bankruptcy they are required to list all of their assets. Most people are allowed to keep their assets as long as they are properly disclosed. Not disclosing an asset will result not only in the loss of that asset, but may result in the revocation of one’s bankruptcy discharge. A discharge is the order given by the judge at the end of a bankruptcy which alleviates the bankruptcy filer’s obligation on his/her debts. If a discharge is revoked, the debtor will have a bankruptcy on their record and will still owe all of their debt.
Many people may wonder how a non-disclosed asset is discovered in a bankruptcy. Simply put, it’s not hard to find undisclosed assets. When a person files a bankruptcy, a trustee is assigned to his/her case. It is the trustee’s job to try to verify that a person has been truthful in disclosing his/her assets in the bankruptcy. The trustee will typically run a public records search on a bankruptcy filer; this search shows all car titles, boat titles and real property listed in the debtor’s name. The trustee will also examine bank records. These records will show if a debtor has recently been making large purchases.
In addition, a trustee will often review a divorce decree to see if assets have recently been awarded to the bankruptcy filer. A trustee may also get tips from creditors regarding potentially non-disclosed assets.
If a trustee finds a significant asset that has not been disclosed, the trustee may move to have the case dismissed.
Another lesson learned from the Hecker case which the average person should walk away with is that transferring assets to another person before filing a bankruptcy will not help an individual keep the asset. In fact it will cause significant legal issues for the person to whom the individual has transferred the property. It may also cause the individual filing to loss their discharge.
Written by Hoglund Law
A recent Supreme Court decision should allow for debtors in future bankruptcy cases to have more affordable payments. The Supreme Court in Hamilton v. Lanning has made a decision which should allow debtors to propose Chapter 13 payment plans which take the debtors’ actual income and expenses into account.
Prior to this decision, debtors’ Chapter 13 payments were calculated based on the “means test.” The means test essentially takes the six month period before debtors filed bankruptcy and uses the income earned during that period to determine what debtors should be able to afford to pay their creditors through their Chapter 13 plan. This number frequently does not reflect the debtors’ actual income or expenses. Often debtors finds that they can not afford to file a Chapter 13 case.
With this decision the number determined by the means test is now merely a starting point. Debtors may now more easily propose a plan that will take their current and future situation into consideration. This decision will give more discretion to the court to approve plans where the plan payments deviate for the means test calculation, but conform with the debtors actual current financial situation.
This change should allow more individuals to qualify to file a Chapter 13 and should increase the likelihood that those individuals will be able to successfully complete their plans.
Written by Hoglund Law
Debts owed to ex-spouses through a provision in a hold-harmless provision in a divorce decree are automatically non-dischargeable in a bankruptcy filing, according to a court ruling.
A recent Court of Appeals decision (In re the Marriage of: Jason Paul East vs. Yvette Francis East, File No. 74-FX-05-000284) provides that the ex-spouse of an individual filing a bankruptcy does not need to make a formal objections to the discharge of obligations assigned to the filing former spouse through a marriage separation or dissolution proceeding. In others word, a hold-harmless obligation in the favor of a former spouse automatically can not be discharge through the bankruptcy.
The court stated that language used in the exception to discharge set forth in the Bankruptcy code, 11 U.S.C. Section 523(a)(15)(2006) is clear and should be interpreted as written.
The court also found the an aggrieved former spouse does not need to participate in the bankruptcy since the nondischargeablity of the debts outlined in a hold-harmless clause is automatic. The former spouse does not need to file an objection in the bankruptcy.
This case emphasizes the bankruptcy court’s limited ability power to undo the decisions made in a family court. A Chapter 7 Bankruptcy Proceeding can not provide relief for a debtor assigned debt through his divorce.
This decision should cause family law practitioners to pay special attention to the issue of debt assignment in a separation or dissolution proceeding.
Written by Hoglund Law
A new set of rules regarding the impact of a bankruptcy on a mortgage modification has taken effect as of June 1. Under these rules, a bankruptcy will not disrupt a HAMP modification.
Before this rule change, the filing of a bankruptcy would often disrupt the modification process. A modification typically will take several months to get set up. After it is set up, there is often a trial period usually lasting about three months. After the trial period the modification would be made permanent.
It used to be the case that if a bankruptcy was filed before the modification was made permanent, that the bankruptcy would halt the modification and the process would have to be started again. A new rule prevents the disruption of this process by a bankruptcy filing. Now a person can file a bankruptcy without having the modification halted.
In addition these new rules make it so that a mortgage company can not deny a HAMP modification because of a debtor did not sign a reaffirmation agreement after a bankruptcy filing. (A reaffirmation agreement essentially pulls a loan out of a bankruptcy. If an individual signs a reaffirmation agreement, they fully obligate themselves on the debt again. This is not always in the best interest of the debtor and mortgage companies often do not offer reaffirmation agreements if a person is behind on his/her mortgage. In addition, some mortgage companies simply do not offer the agreements.) It used to be the case that if an individual filed a bankruptcy and did not reaffirm the mortgage, the mortgage company would refuse to work with the person on a modification. Mortgage companies are no longer allowed to use the bankruptcy and the subsequent failure to reaffirm the mortgage as a basis deny a person a modification. In other words, a person may still receive a HAMP modification following a bankruptcy.
Written by Hoglund Law
The simple answer to this is “no, there are no debtor’s prisons.” Unfortunately, despite the lack of debtor’s prisons, some people are ending up in jail because of bad debt.
Minnesota law does not impose prison sentences because of bad debt, but Minnesota law which is rather pro-creditor provides a mechanism which allows a creditor to have a debtor arrested.
Creditors are able to manipulate Minnesota laws to apply pressure to debtors by having them arrested. The individual is not arrested for not paying a debt. They are arrested for contempt of court.
In Minnesota a creditor can sue an individual giving them notice of the suit through the mail. If the debtor does not read his mail carefully, the debtor might not even know he has been sued. In Minnesota a creditor can after not receiving a response from the debtor go to court and get a default judgment.
Once a creditor has a default judgment, he is able to send the debtor disclosure forms. If the forms are not filed out and returned to the creditor promptly, the creditor can have the debtor held in contempt of court and go back to court and request a bench warrant. These are given out as a regular course of business.
Once a bench warrant exists, different counties handle the matters differently. Some counties, for example Anoka County, have their police officers go out and actively seek the debtors. The debtors if found are arrested and dragged to jail where they are booked and detained. Often the debtor has to post bail. The bail is often set at the amount the debtor owes the creditor. Sometimes the debtor will be released without bail if the financial disclosure is filled out there and then.
Other counties, like Dakota County do not actively seek debtors, but will pursue the warrant if the debtor is stopped for another reason.
If you have fallen behind on your bills, it is imperative that you always read your mail. Not reading your mail can have severe consequences.
Never let your mail pile up. Never throw out your mail without reading it.
Written by Hoglund Law
Since the radical changes in the Bankruptcy Code in 2005, many people incorrectly believe that credit cards can no longer be discharged in a bankruptcy. However, there is nothing in the specific nature of credit card debt that makes them nondischargeable in a bankruptcy. Section 523 (a) of the Bankruptcy Code sets out a variety exceptions to discharge that are based on the type of debt itself. Credit card debt is not one of them.
When credit card debt is accepted from discharge it will usually be based on the provision in Section 523 (a)(2) which deals with fraudulently incurred obligations made by the debtor. This provision is used mostly by credit card companies to object to the dischargeability of their particular obligations in a bankruptcy case. The focus of Section 523 (a)(2) is on the conduct of the debtor in how the debt itself was incurred.
Section 523 (a)(2)(B) applies to the debtor that provides a creditor with a written false financial statement. Section 523 (a)(2)(A) applies if the creditor alleges “false pretenses, a false representation, or actual fraud, other than a statement representing the debtor’s or an insider’s financial condition.” This requires that the creditor prove both the debtor’s intent to deceive and the creditor’s reasonable reliance on the representation. For example if a debtor made false representation when applying for a credit card, this would be a basis for the creditor to object to the discharge of that debt.
Another typical example of conduct which could result in the nondischargeability of debt would be when a debtor charges large amounts on the credit card right before filing bankruptcy. Essentially the creditor would argue that the debtor was aware of their inability to repay the debt when incurring the debt and, therefore, the incursion of the debt was in itself fraud.
A debtor could also draw objections from a creditor if the credit card debt was incurred by using the card for gambling.
Section 523 (a)(2)(C) addresses luxury goods and services and cash advances. Specifically, with consumer debts owed to a single creditor in excess of $550 incurred within 90 days of the filing of the bankruptcy case are “presumed nondischargeable.” In the same provision, obligations to pay cash advances of $825 obtained within 70 days of the bankruptcy filing are also “presumed to be nondischargeable.” This presumption can be rebutted by the debtor.