In the case of In re Jokiel, 447 B.R. 868 (Bankr. N.D. Ill. 2011), the debtor was employed when he filed his Chapter 7 case. A few months later he was notified that his employment would be terminated and that he would be receiving a severance payment from his former employer. The chapter 7 trustee filed a motion for the debtor to turn over the severance payments to the trustee, as the trustee considered the payment as part of his bankruptcy estate. The debtor responded that since he did not become entitled to the severance payment until after his case was filed, it was not part of the bankruptcy estate.
The bankruptcy court held that §541 of the Bankruptcy Code, which is the section that describes what constitutes property of the estate, should be interpreted very broadly. The court found that the severance payments were part of the debtor’s employment contract and was given to him as an incentive to sign the original employment contract. Accordingly, the court found that the severance was not for post-petition services performed by the debtor and was therefore part of his bankruptcy estate.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Tuesday, November 1, 2011
Tuesday, September 20, 2011
New Laws in Maryland Tighten Requirements for Creditors to Obtain Judgments Against People
The Maryland Court of Appeals just amended certain rules to protect consumers from paying on debts to creditors who are not really entitled to any payments. The new law will require creditors to demonstrate that they own the debt, that the statute of limitations to collect the debt has not expired and that they are licensed to operate business in Maryland.
The changes to Rules 3-306, 3-308 and 3-509 of the Maryland Rules take effect January 1, 2012. If the creditor wants to obtain a judgment against a debtor and does not want to have to appear in court, it can file a request for judgment with an Affidavit.. Under the new laws, the person making the affidavit must have personal knowledge of the facts contained in the affidavit and must be competent to testify about the facts. In addition, the affidavit must be accompanied by detailed evidence of liability, specifically indicating the amount claimed, any interest with an interest worksheet, and proof that the attorney’s fees sought are reasonable, along with authenticated copies of the documents on which the claim is based.
If the complaint is being brought by a collection agency, then the agency must provide the following: (1) proof of existence of the debt; (2) proof of the terms and conditions of the debt; (3) proof of ownership; (4) identification of the nature of the debt; (5) proof of entitlement to damages under the contract in the case of a future services contract; (6) pertinent account charge off information (statue of limitations); (7) pertinent non-charge off account information; and (8) identifications of all Maryland collection agency licenses currently held by the creditor.
A person being sued in Maryland still needs to file a notice of intent to defend and needs to appear in court. If the creditor has not submitted all the evidence required by these new rules, the creditor will not be able to obtain a judgment against the debtor. If the person does not file a notice to defend or does not appear in court, the judge may consider whether the creditor fulfilled its requirements under the new law and may or may not enter judgment in the creditor’s favor.
These laws should help people avoid having to pay for debts that are beyond the statute of limitations to collect, or pay for debts to an agency not licensed to collect the debt in Maryland, or where the creditor has no documents to prove the existence of the debt.
By: Laura J. Margulies and Ruth Clayton
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The changes to Rules 3-306, 3-308 and 3-509 of the Maryland Rules take effect January 1, 2012. If the creditor wants to obtain a judgment against a debtor and does not want to have to appear in court, it can file a request for judgment with an Affidavit.. Under the new laws, the person making the affidavit must have personal knowledge of the facts contained in the affidavit and must be competent to testify about the facts. In addition, the affidavit must be accompanied by detailed evidence of liability, specifically indicating the amount claimed, any interest with an interest worksheet, and proof that the attorney’s fees sought are reasonable, along with authenticated copies of the documents on which the claim is based.
If the complaint is being brought by a collection agency, then the agency must provide the following: (1) proof of existence of the debt; (2) proof of the terms and conditions of the debt; (3) proof of ownership; (4) identification of the nature of the debt; (5) proof of entitlement to damages under the contract in the case of a future services contract; (6) pertinent account charge off information (statue of limitations); (7) pertinent non-charge off account information; and (8) identifications of all Maryland collection agency licenses currently held by the creditor.
A person being sued in Maryland still needs to file a notice of intent to defend and needs to appear in court. If the creditor has not submitted all the evidence required by these new rules, the creditor will not be able to obtain a judgment against the debtor. If the person does not file a notice to defend or does not appear in court, the judge may consider whether the creditor fulfilled its requirements under the new law and may or may not enter judgment in the creditor’s favor.
These laws should help people avoid having to pay for debts that are beyond the statute of limitations to collect, or pay for debts to an agency not licensed to collect the debt in Maryland, or where the creditor has no documents to prove the existence of the debt.
By: Laura J. Margulies and Ruth Clayton
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Thursday, May 12, 2011
Can a Debtor Exempt an Inherited IRA?
A person who has an Individual Retirement Account (IRA) may designate a beneficiary to receive the balance in the account if the person dies before the account is depleted. If the person dies before the funds are depleted, the beneficiary is now the owner of the account. Under Maryland exemption laws, a debtor, filing bankruptcy may exempt all the funds in his or her own IRA. The question arises whether a person, other than a surviving spouse, who inherits an IRA may also exempt all the funds in the inherited IRA.
The surviving spouse has the right to transfer the IRA to his or her own name. This is commonly referred to as a “rollover distribution.” Once this is done, the spouse’s IRA is exempt under Mayland law.
A nonspousal beneficiary does not have this option. Instead, the nonspousal beneficiary must keep the account in the deceased name and must take distribution of all the funds within either 5 years, or if an election is made, over the beneficiary’s life time. Neither type of beneficiary may make an contributions to the IRA, but both may withdraw the funds in the account without penalty even if he or she has not reached retirement age.
Courts split on whether the nonspousal beneficiary may exempt the IRA in a bankruptcy case. In one case, In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010), the court allowed the exemption. While in the case of In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex 2010), the court denied the exemption. However, in Maryland, the law specifically provides that:
“In addition to the exemptions provided..... any money or other assets
payable to a particiapant or beneficiary from, or any interest of any
participant or beneficiary in, a retirement plan qualfied under §401(a),
§403(a), §403(b), §408, .... of the United States Internal Revenue Code
...., shall be exempt from any and all claims of the creditors of the
beneficiary or participant...” (Emphasis supplied)
Accordingly, under Maryland exemption statute, the beneficiaries of an IRA, even a nonspousal beneficiary, should be able to exempt the IRA in their bankruptcy case.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The surviving spouse has the right to transfer the IRA to his or her own name. This is commonly referred to as a “rollover distribution.” Once this is done, the spouse’s IRA is exempt under Mayland law.
A nonspousal beneficiary does not have this option. Instead, the nonspousal beneficiary must keep the account in the deceased name and must take distribution of all the funds within either 5 years, or if an election is made, over the beneficiary’s life time. Neither type of beneficiary may make an contributions to the IRA, but both may withdraw the funds in the account without penalty even if he or she has not reached retirement age.
Courts split on whether the nonspousal beneficiary may exempt the IRA in a bankruptcy case. In one case, In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010), the court allowed the exemption. While in the case of In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex 2010), the court denied the exemption. However, in Maryland, the law specifically provides that:
“In addition to the exemptions provided..... any money or other assets
payable to a particiapant or beneficiary from, or any interest of any
participant or beneficiary in, a retirement plan qualfied under §401(a),
§403(a), §403(b), §408, .... of the United States Internal Revenue Code
...., shall be exempt from any and all claims of the creditors of the
beneficiary or participant...” (Emphasis supplied)
Accordingly, under Maryland exemption statute, the beneficiaries of an IRA, even a nonspousal beneficiary, should be able to exempt the IRA in their bankruptcy case.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Thursday, February 10, 2011
Debtor’s Obligations After Property Is Surrendered
When a debtor files for bankruptcy, he or she may want to surrender certain property that is subject to a lien back to the lender. For example, the debtor may want to surrender a car that is only worth $2,000 but has a lien of $10,000 back to the car lender. Another common example is when the debtor does not want to keep a house worth $100,000 that has mortgage liens that total more than $200,000. In a Chapter 7 case, the debtor indicates his or her intention to surrender in a separate form entitled “Statement of Intent.” In a Chapter 13 case, the debtor indicates his or her intention in the Chapter 13 Plan. The Chapter 13 trustee may also require that the debtor provide him or her with evidence of the surrender of the collateral.
Unfortunately, even after the lender is notified of the debtor’s intent to surrender the property, the lender in these circumstances is generally not obligated to repossess or foreclose on their collateral. The personal obligation of the debtor for the debt is discharged, but until the title changes or the car is repossessed, the debtor is still the owner of the property. In the case of a car, if the car is not picked up by the lender then as long as there are tags on the car, the debtor must keep the car insured. In the case of a house, the debtor should still maintain hazard insurance until the property is sold or at least until the date of a foreclosure sale. The debtor will also be required to maintain the property, such as cutting the grass, until it is sold. In addition, if the property is subject to condominium or homeowner association fees, after the filing of the bankruptcy case the debtor will need to pay these fees on a monthly basis until the property is sold.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
Unfortunately, even after the lender is notified of the debtor’s intent to surrender the property, the lender in these circumstances is generally not obligated to repossess or foreclose on their collateral. The personal obligation of the debtor for the debt is discharged, but until the title changes or the car is repossessed, the debtor is still the owner of the property. In the case of a car, if the car is not picked up by the lender then as long as there are tags on the car, the debtor must keep the car insured. In the case of a house, the debtor should still maintain hazard insurance until the property is sold or at least until the date of a foreclosure sale. The debtor will also be required to maintain the property, such as cutting the grass, until it is sold. In addition, if the property is subject to condominium or homeowner association fees, after the filing of the bankruptcy case the debtor will need to pay these fees on a monthly basis until the property is sold.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
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