Columbia Bankruptcy Attorney Blog

Employer's Workman's Compensation liability is dischargeable

2012-03-13T02:45:36Z

Today I had a referral from a colleague whose client is facing a judgment related to personal injury that occurred on the job site. The question I was presented is whether a debtor, who is an employer, can discharge a debt that is the result of an employee's workman's compensation claim. This is an issue because the debtor chose to be self-insured (i.e., he/she does not have workman's compensation insurance).

Debts that are non-dischargeable in bankruptcy are defined in 11 U.S.C Section 523. To determine if workman's compensation insurance are non dischargeable, the United States Bankruptcy Court must find that the injury falls within 523(a)(6). Pursuant to 523(a)(6), a debt the occurs as a result of "willful and malicious injury ... to another entity or to the property of another" are non-dischargeable in Bankruptcy.

The Courts have interpreted this provision related to workman's compensation insurance are only non-dischargeable when the injury occurred as a result of the debtor's failure to have insurance for the purpose of intending injury to his or her worker. For example, the debt would be non-dischargeable if the employer assaulted an employee at work. The normal run of the mill injury that is the result of negligence is dischargeable in bankruptcy.

Thus, this general workman's compensation liability of an employer is dischargeable in bankruptcy if the employee's injury occurred not as the result of malicious or willful intent on the part of the employer with the intent to injure the employee.

If you are an employer and facing a judgment as a result of worker's injury, contact our office to discuss your options with filing bankruptcy.

1 in 4 homes were sold by short sale or foreclosure sale in 4th Quarter of 2011

2012-03-06T04:11:27Z

Short sales and purchases of homes undergoing foreclosure made up 24% of real estate sales in the 4^th quarter of 2011 according to CNN Money.

A short sale is a process where the servicer of a mortgage approves the listing of a home for less than is owed. If a consumer only has one mortgage, this is a viable option to sell a house that is upside down. However, if a consumer has a second mortgage or home equity line of credit (HELOC), the consumer will need permission from the 1^st mortgage and second lien holder. While possible, it can be difficult to obtain approval from two or more lien holders.

Short sale is also a viable option for those consumers that are current on other debt or do not qualify for Bankruptcy.

However, a short sale may also be necessary for a consumer that has obtained a discharge in Chapter 7 or Chapter 13 bankruptcy. For instance, if a consumer's home is in a development with Home Owners Association (HOA) fees, or Condominium Association fees, any past due fees accrued before the filing of bankruptcy are discharged in bankruptcy. However, any fees that become due and owed after the filing of bankruptcy are the responsibility of the consumer until the home is sold. In Maryland, the foreclosure process can take over a year. That means a HOA or Condo Association can sue the consumer and attach the wages of the consumer before completion of foreclosure.

Consumers that obtain a bankruptcy discharge may also want to consider a short sale even when there are no HOA or Condo fees due. Some consumers want to bring finality to the situation. They want that fresh start and do not want surprises in the future. These individuals will seek a short sale to bring finality.

Timothy J. Mummert, P.A. assists consumers with various debt relief options including loan modification, short sale, and deed in lieu of foreclosure. Call us today to schedule an appointment to discuss your options related to your home.

Baltimore Orioles minority owner denied a $173,364 tax refund.

2012-02-28T03:40:37Z

It's that time of the year. People are checking their bank accounts daily to see if large tax refunds from the IRS and State of Maryland are in their bank accounts. But one minority owner of the Baltimore Orioles received disappointing news on February 24, 2012 about her tax refund and she was reminded that there are two things certain in life: taxes and death.

Wanda King is a limited partner/owner of the Baltimore Orioles. For the tax years 1993-1999, the IRS and the State of Maryland took the position that certain deductions on the Baltimore Orioles tax return could not be claimed as a pass through deduction to individual owners. In 2005, the owners persuaded IRS to change its position and permit the pass through deductions. As such, Maryland had to change its position as well.

On January 3, 2006, Maryland Comptroller issued a letter notifying Ms. King of the permission to use the deductions, which would result in a refund of $173,364. Upon mailing, Ms. King has one year to request the refund. For some unknown reason, Ms. King did not request the refund until February 2, 2007. The Maryland Comptroller of Currency, who definitely does not want to return the $173,364 to a tax payer, denied her request for tax refund.

Considering that $173,364 is a lot of money, Ms. King filed an appeal. Her appeal was considered by the Tax Court, Circuit Court (the only Court that agreed with her), Court of Special Appeals, and ultimately ended up at the Maryland Court of Appeals. On February 24, 2012, the Maryland Court of Appeals in Wanda T. King v. Comptroller of Currency denied her request that the Comptroller of Currency should refund the overpayment of taxes.

This is an unfortunate lesson that tax deadlines are strict deadlines. If you are owed $173,364 by the State of Maryland, make sure you get your tax refund request in timely.

Timothy J. Mummert, P.A. is a general practice law firm. We can assist clients with various tax issues and offer legal services with offers and compromises as well as discharging income tax liability in bankruptcy. Gives us a call today to discuss your legal issues.

36% and $400 annual fee credit card?

2012-02-24T03:01:28Z

When clients come to my firm seeking assistance with their debt, one of their major concerns is the effect of bankruptcy on their credit. My concern is that they will become prey to creditors taking advantage of their bankruptcy.

And here comes First Premier turning my fear into reality. First Premier has released a credit card with an annual fee of $400 per year and an APR of 36%. After 13 months, you are ready for an increase...not a problem. They will raise your limit by a $100 to $200 and charge an additional fee of 25% of the new credit limit (i.e., $50 fee for a $200 limit increase) on top of the $400 dollar fee.

Despite what First Premier's CEO Miles Beacom claims, consumers that file bankruptcy can obtain credit after bankruptcy for a lot less. My clients will begin receiving credit card offers while in bankruptcy. Once out of bankruptcy, they will be approved for credit. Will these offers be for 9.99%? No, nor should they be. But they will receive an offer for much less than 36%.

Clients with mortgages and car loans and who keep paying these debts post bankruptcy rebuild their credit much faster. What is important about these debts is that consumer makes payments on mortgages and car loans during the bankruptcy case. These timely monthly payments help my clients rebuild their credit score and shows new creditors that the consumer will be trust worthy.

Clients without mortgages and car loans will need to obtain a credit card post bankruptcy to begin the rebuilding process. If the client can get an unsecured card, that is great. But if not, than the client needs to make sure the secured card is reported to the three credit report agencies.

At Timothy J. Mummert, P.A., we don't consider our clients case over after receiving an Order of Discharge from the United States Bankruptcy Court. Getting our clients a fresh start is the first part. Post bankruptcy, we want our clients to make good financial and legal decisions for their family and their future. We will gladly help our clients evaluate these offers and help them to find other professionals that will help them move into a successful future.

Give us a call today to discuss your debt relief options.

Debt Settlement Companies can't keep their promises!

2012-02-14T01:12:56Z

Recently, debt settlement companies have been flooding the radio airwaves advertising their superior option of resolving consumer debt. These commercials discuss the dangers of bankruptcy and how credit counselors work for the bank. What these commercials don't tell you is the dangers of their service.

Debt settlement companies promise they can settle your debt for pennies on the dollar. To do this, they want you to stop paying your credit card companies and to pay them instead. They will then create pot of money to negotiate with the creditors.

The problem with this approach is they are going to start with the smallest cards first. This will allow them to settle small debts because of the pool of money. These companies will in fact be successful with a couple small debts.

However, these companies will not be successful with the large debt. For consumers with credit card debts in the excess of $10,000, the debt settlement companies will need at least $2,500, but most likely $4,000.

Thus, if you are paying the debt settlement company $500.00 per month, it's going to take 8 months to get the $4,000. Bad news for the consumer, the credit card company will sue the consumer long before there is enough money for the debt settlement. The big credit card companies do not wait on debt settlement companies. They want a judgment against the consumer and against the consumer's home if he/she owns a house.

Consumers also need to understand that failing to pay a creditor for 7 months is as detrimental to consumers' credit report as a foreclosure or bankruptcy is to the consumers' credit report. Also, when a consumer fails to pay back a debt in full, the creditor will leave a detrimental mark on the consumers' credit report that the consumer failed to pay the debt back in full.

Before considering a debt settlement company, seek the assistance of a lawyer to discuss your debt relief solutions. At Timothy J. Mummert, P.A., we agree that not every consumer should file bankruptcy. We assist consumers with weighing their options and in certain situations, recommend debt settlement. When we recommend debt settlement, we will negotiate with the creditor and protect your rights.

Be careful of debt settlement offers

2012-01-17T03:59:35Z

Many of my clients attempt some type of debt settlement prior to seeking bankruptcy assistance. Unfortunately, my clients learn the truth of the adage that what appears to be too good to be true usually is.

Debt settlement is where a creditor accepts less than full payment and in exchange for a lump sum payment will consider the debt settled in full. Usually, if you can make a lump sum payment of 25% to 50% of the total debt owed, the creditor will consider the debt satisfied. Thus, a $10,000 debt can be settled for $4,000.

However, it's just not that simple:

Creditor will not accept a payment plan. If my clients can afford to make a large lump sum payment, they would be making the minimum payment.
Creditor will issue a 1099 for the foregiven debt. Nothing is free in our society, and neither is debt that is foregiven. The creditor is going to issue a 1099 for the debt that it "foregives". Now, my clients end up owing taxes on the foregiven debt to the IRS and Comptroller of Currency. So the 40 cents on the dollar settlement quickly turns in to 70 cents on the dollar when you consider the tax consequences.
Creditor will probably sell the foregiven debt to a third party to seek repayment. Often, Creditors will not issue a contract outlining the terms of settlement. Without a release / contract from the creditor acknowledging satisfaction of the entire debt, my clients end up being sued by a collection agency for the foregiven debt. It is then my client's word against the word of the collection agency that there was an agreement satisfying the debt. A money judgment can be entered in favor of the collection agency and then 25% of my client's gross wage is garnished to pay the remaining portion of the "forgiven" debt.

If you are considering debt settlement, we recommend you contact us to discuss all of your options first. We can evaluate your situation and give you an unbiased assessment of the best way to proceed. We can also negotiate with the creditors to make sure your rights are protected.

For more information, call us at (410) 766-1100 to schedule an appointment.

Income Taxes Can be Discharged in Chapter 7 Bankruptcy

2012-01-08T00:25:04Z

I recently attended a Continuing Legal Education (CLE) on Offers and Compromises. An Offer and Compromise is a technique that Lawyers and Accountants use to settle past due income taxes with the IRS and Maryland Comptroller of the Currency. What amazed me is that the attorneys teaching the CLE have the same perspective that many of my clients have that bankruptcy is not an option to discharge taxes. While taxes are not automatically dischargeable in Chapter 7, usually if sufficient time passes and the taxes are not the result of evassion and/or fraud, income taxes can be discharged in Chapter 7 Bankruptcy.

If you owe past due income taxes, you need to consult with a lawyer that is experienced in evaluating your tax issues. Generally speaking, an experienced attorney will obtain the client's tax transcripts from the IRS, and after the review of the tax transcript, conduct an analysis of when your taxes will be dischargeable in bankruptcy.

If you are facing levies or wage garnishments from the IRS or Comptroller of Maryland, contact our office to discuss your options in Chapter 7 as well as Offers and Compromises.

Welcome to our Columbia, Maryland, Bankruptcy Law Blog

2011-12-07T11:39:47Z

We established this blog to share stories and information about topics relevant to our practice. Our intent is to highlight local stories, as well as national subject matter, that we think you will find interesting. We will regularly update this blog and encourage you to share your thoughts on these posts.