Highlights of the June 2012 Contra Costa Lawyer edition include Keeping A Slice Of The Pie For Yourself: Exempting IRAS, 401KS and 529 Plans – David Arietta; Proprietor Beware: Corporate Refuge Can Ensnare – David Katzen; Family Law Attorneys Beware: Possible Exceptions to the Chapter 7 Bankruptcy Discharge- Marlene Weinstein; Lien Strip Basics And The Evolving Law On “Chapter 20″ – Steven Knuppel; To file or not to file: How the timing of the bankruptcy can impact the exclusion of cancellation of indebtedness income – Mark Ericsson; Unintended Consequences of Preliminary Agreements – Roger Brothers, Dominic Signorotti and Ericka Ackeret
Highlights from the May 2012 Contra Costa Lawyer edition include Tax Traps That Can Arise During Divorce – by Mark Ericsson; QDRO: Malpractice Lurking – by Harry L. Styron ; Getting the 411 from the 911: Obtaining Information and Reports from Law Enforcement Agencies in Family Law Matters – by Richard Grossman; Independent Contractor or Employee? The Consequences of Getting it Wrong- by Janet L. Everson and Matthew A. Cebrian; Another Offshore Assets Reporting Requirement- by Jenny C. Lin
Goodness, lots to report. Where do I start? Many attended the “Fast Track Bench/Bar Meeting” on May 1, 2012 at the noon hour. Nice to see it was very well attended, both by attorneys and judges. Thanks to Lisa Reep and her excellent staff for organizing that annual event.
In this edition of the Contra Costa Lawyer, we explore and discuss the impact and significance of both time-tested and newly articulated aspects of both bankruptcy and real estate law. In these (still) troubling and unsettled economic times, it behooves almost all legal practitioners to have at least an awareness of certain basic tenets of bankruptcy law in order to have a general discussion concerning the prospect of a bankruptcy with one’s clients. In this issue, we have selected some of the lesser known, but significant, issues of which practitioners should be aware in the bankruptcy context. We also examine certain established and developing law in the area of real estate and its interaction with bankruptcy law.
This month, an urgent message from our Presiding Judge, Diana Becton: “Justice Delayed Is Justice Denied”
When a debtor files for bankruptcy relief, an estate is created. 11 U.S.C. §541(a) provides that the estate consists of all legal and equitable interests of the debtor in property as of the filing date. Section 522 then allows a debtor to exempt (or protect from creditors) certain property from his or her estate depending on his residence. Congress conferred upon the states very limited authority to legislate in the bankruptcy area. Section 522(b)(1) gives narrow authority to the states to either accept or reject the use of the federal bankruptcy exemptions found in section 522(d) by either opting in or out of the federal exemptions. California is one of the states that has opted out of the federal exemption scheme.
In theory at least, business owners incorporate (or form similar entities) to limit personal risk. However, these precautions mostly don’t affect tort exposures like negligence (hence, one still needs insurance), and the touted benefit is nil if the principal blithely guaranties the company’s significant obligations. Worse, the extra structural layer can cause mischief beyond pointless red tape: If the business fails and oppressive debt flows through, the shareholder can face more grief than a sole proprietor would.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (hereinafter “BAPCPA”) enacted on April 20, 2005, and generally applicable to all cases filed on or after October 17, 2005, made various revisions to Title 11 of the United States Code (hereinafter “Bankruptcy Code”) with regard to divorce-related debts. For example, debts such as child and spousal support were given the new classification of “domestic support obligation” and were given added protection.
With the advent of the housing crisis, many homeowners find themselves owing a great deal more on their property than it is worth. Under the right facts, a “lien strip” can provide relief to such homeowners.
To File or Not To File: How the Timing of the Bankruptcy Can Impact the Exclusion of Cancellation of Indebtedness Income
In this era when homes are often worth less than the loans they secure and of dropping or nonexistent incomes, more and more people are forced to consider walking away from their homes. In a foreclosure or short sale, the banks holding the note and deed of trust will receive less than full value for their note. This gives rise to cancellation of indebtedness income. It has long been tax policy that when a debtor is released from a debt, that person has become wealthier and therefore realizes ordinary income to the extent of that increase of wealth. One of the driving forces in filing for bankruptcy is protection against taxes arising from cancellation of indebtedness income.
When does a preliminary agreement become an enforceable contract? When does a “final proposal” become a binding agreement? How can parties be sure that memoranda of understanding exchanged during negotiations will not create enforceable, contractual obligations?
How many times have you been involved in state court litigation and your adversary advises you that his/her client has just filed bankruptcy? Don’t fret – it may just be your lucky day!
In Wolfe v. Jacobson (In re Jacobson), 2012 U.S. App. LEXIS 8103 (9th Cir. Apr. 23, 2012), the Ninth Circuit Court of Appeals held that bankruptcy debtors who successfully asserted a homestead exemption nevertheless lost the protected layer of value (here, $150,000), because a judgment creditor forced a postpetition execution sale of the house, and the debtors failed to reinvest their share of the proceeds in a new dwelling within six months. The court effectively reasoned that whenever a California exemption is allowed in a bankruptcy case, the debtor’s right to postpetition proceeds from the exempt value is subject to California’s time-limited protection of proceeds.
If you haven’t been to court in the past two years, you’ll notice a big change. All of the judges you knew have retired, and you’ll have to learn the rules and requirements of three new judges. To that end, here is a little information about our current bench.
Access to Justice Committee Chair Nick Casper and Diversity Committee Chair Robin Pearson represented the CCCBA along with Executive Director Lisa Reep, Wendy Graves of Certified Reporting Services.
CoffeeTalk: Should bankruptcy judges be allowed to modify first mortgages (residential deeds of trust)? Why or why not?
Yes, Congress should at least experiment with letting bankruptcy courts treat home mortgages like other secured debts, which can be reworked in chapter 11 or 13 if the creditor is assured the economic value of …