Tax day was two weeks ago.  If you are currently in a Chapter 13 bankruptcy in New Hampshire, you are required to send the Trustee a copy of your 2011 tax return.  This is a friendly reminder. 

There isn't really a great category for these items so I'll just include them in a miscellaneous post.  Three issues that arise during consultations are: 1. Utilities; 2. Employment Discrimination; 3. Driver's License.  I will go over each in order.

1. Can my electric company shut off my power because of bankruptcy? In many cases, a client owes their electric company a few months of service and have received a service interuption notice.  Once a bankruptcy is filed, the electric company is required to make your account current and cannot refuse service.  The electric company can require a deposit, however.

2. Can an employer of governmental agency fire me solely for filing bankruptcy? No, you can not be fired for filing bankruptcy.  That doesn't mean you are immune from being fired.  An employer can still fire you for cause.

3. Can I get my driver's license back if I lost it because I could not pay court ordered fines for damages caused in an accident?  Yes, if you lost your license solely for failure to pay then bankruptcy will allow you to get your license back.

Each one of these issues is more complicated then the above descriptions.  Please consult a local New Hampshire or Massachusetts attorney to discuss these issues in more depth.

Many New Hampshire and Massachusetts bankruptcy attorney's are attending the National Association of Consumer Bankruptcy Attorney's annual conference in San Antonio this weekend.  A few of the topics at this years annual conference are: Securitization, Protecting Retirment Assets, Tax Claims, and Preferences.  

To start with, once you file your bankruptcy petition your assets become part of the bankruptcy estate.  Each of the 50 states and the federal government allow you to exempt certain asets, thereby removing them, from your bankruptcy estate.  Generally, there are two types of exemptions:  In-Kind and Limited Interest.  An In-Kind exemption allows you to exempt an asset in full, regardless of value.  An example of an In-Kind exemption is disability benefits.  In contrast, a Limited Interest exemption has a dollar cap for each category.  An example of a Limited Interest exemption is the federal motor vehicle exemption.  A debtor can only exempt up to $3450 of equity in one motor vehicle.

If you are unsure about your available exemptions, consult a local bankruptcy attorney 

The long and short answer to that is yes.  Although you may surrender your property in bankruptcy, you are still the owner of that property until the foreclosure and recording of the deed.  The bankruptcy simple means that you are no longer obligated to pay the mortgage.  However, you are still liable for anything that happens on the property.  You need to protect yourself and others during the foreclosure process. 

As of May 1, 2012, the Federal U.S. Trustee is updating their means test household income numbers for New Hampshire and Massachusetts.  The new numbers are slightly higher for both states and is good news for potential Chapter 7 filers.  An individual can earn a little bit more money and still qualify for Chapter 7.

In Massachusetts:

Family Size:       1                          2                                3                            4

$55,185                $66,200                $82,873          $102,194

In New Hampshire:

$53,177                  $63,626                $81,854          $94,646

Section 525(b) prohibits an employer from firing a debtor SOLELY for filing bankruptcy.  Of course, a savy employer will argue that the firing was not solely because of the bankruptcy.  In that situation, it's likely that litigation in the bankruptcy court will follow.

A typical scenario is one in which the debtor is employed at a bank, and the employee has a loan at that bank.  Once the petition is filed, the bank, who is also the employer, can no longer request the loan amount from the employee and ultimately that the bank's loan will be discharged. This can create a situation where the bank decides to simply fire the employee.  Many employers are not well versed in the bankruptcy code and do not realize that it is illegal to fire the employee because of the bankruptcy. 

The Supreme Court recently held in Ransom v. FIA Card Services that when calculating disposable monthly income a debtor cannot include an ownership expense deduction on the means test when the car is owned free and clear.  A debtor's disposable monthly income is calculated by averaging the prior 6 months of the debtor's income and subtracting out expenses.  The ownership expense is one of the deductions available to a chapter 13 debtor when calculation disposable income. An interesting result of this holding is that it almost entices a debtor to purchase a car with a payment before filing a chapter 13 so that the ownership expense can be included.  Obviously, incurring debt in anticipation of filing for bankruptcy is illegal, but this holding may result in unintended consequences. 

When drafting a chapter 13 bankruptcy petition, projected disposable income is determined using the mechanical approach found in the Bankruptcy Code.  However, the Court in In Re Lanning held that in certain cases the mechanical approach must be modified to account for the financial reality of the debtor.  For example, the means test utilizes a 6 month look back period, but let's say that in our example the debtor was laid off in month 5:

Month 1: 4000

Month 2: 4000

Month 3: 4000

Month 4: 4000

Month 5: 3000

Month 6: 0

According to the means test, this debtor's monthly income is 3167.  However, in reality the debtor's current monthly income is zero.  To alleviate this absurd result, the Court adopted a looking forward result. If the debtor has faced a known changed in circumstances, the proposed Chapter 13 Plan can use the numbers generated in Schedules I and J.  In the case where the Trustee objects, the debtor will have to show why Schedules I and J are more accurate number.

A question that some of my clients have is whether or not they can continue to send there children to private school and file a chapter 13 bankruptcy.  Private school for minor children can present a problem in bankruptcy.  When your bankruptcy petition is being completed you must list all of your expenses.  Obviously tuition is a real expense that you incur; however, the bankruptcy code mandates that the expense be reasonable and necessary.

The question then becomes, is private school tuition a reasonable and necessary expense?  Most circuits have found that it is not, unless the debtor can demonstrate why it is.  The fact of the matter is that debtor's already pay for school through their property taxes.  And if they are renters, through their rental payments.  When children are sent to private school, the debtor is paying for their child's education twice. However, a debtor can rebut the presumption that the private school is unnecessary.   Typically, this can be shown because the child requires special education.  Public schools are not designed to handle all special needs children, and a private school may be able to provide a more appropriate setting.  Most courts have found that religious instruction is NOT a special need that requires private school.

If you have questions, consult a local New Hampshire bankruptcy attorney.