If you have been sued and have a judgment against you, it is likely that from time to time the judgment holder will try to garnish your wages. The way it works is as follows:
At least once a year the creditor, or their attorney, is required to send you a form by which you can tell the judgment holder that your wages cannot be garnished.
The main reasons your wages cannot be garnished are that you presently receive (or within the prior six months have received) "government assistance based on need. The most common forms of government assistance based on need are fuel assistance, Medical Assistance, or MinesotaCare. (Other things qualify, such as MFIP). If you have qualify, you should return the form to the creditor which will entirely protect you from being garnished.
If you don't return the form, the creditor (or, usually, their attorney) sends a form to your employer that instructs your employer to take a portion of your wages.
The amount that can be taken by the creditor is the smaller of:
one-fourth of your "net"wages; or
the amount over $290 per week (40 times the federal minimum wage).
In this context, :"net wages" means: total wages minus "amounts required by law to be withheld". In English, that means wages minus taxes.
As an example, if you make $12 per hour for 40 hours per week, and if your taxes are 20% (FICA + federal + state), the math works out as follows:
$480.00 gross
96.00 taxes
384.00 net
1/4 of $384 = $96
amount over $290 = $94.00
So, the creditor could take $94 from this paycheck.
A garnishment lasts for 70 days (10 weeks) from the date it is served on your employer. The employer is required to set aside the garnished amount for 180 days.
The bankruptcy angle is this: If, when you file bankruptcy, the creditor has received more than $600 within the previous 90 days, that amount is ordinary a preference, and can be recovered from the creditor.
If you are being garnished, feel free to contact my office at: 320-252-4473.
Friday, April 14, 2017
Sunday, March 26, 2017
New Means test numbers
Back in 2005 Congress inserted a "means test" into the bankruptcy code.
What this means is that when you file bankruptcy, we must add up your income from all sources (except Social Security payments and, arguably, unemployment compensation benefits) for the six months before the month in which your case is filed.
We then multiply that number by two [really, that's how the formula works!] and compare that result to a chart which shows the "median income" for a household of your size in Minnesota.
The significance of this is that if your household income is over the applicable number, and if you file a chapter 13 case, you need to be in a five year plan; if your household income is under the applicable number, you can file a plan of as short as three years. Additionally, if your income is over the means tests number, you must complete an additional "budget" based on IRS exemption numbers.
The Census Bureau periodically updates the number, and the new numbers have just been announced.
For cases filed April 1 2017, and for about six months thereafter, the numbers in Minnesota are as follows:
household of one person: $52,785.00
household of two people $70,889.00
household of three people: $85,033.00
household of four people: $101782.00
If there are more than four people in the household, add $8,400.00 per additional person.
For comparison, if your case was filed in April 2015 the numbers were:
household of one person: $50,934.00
household of two people $66,566.00
household of three people: $81,044.00
household of four people: $94,807.00
What this means is that when you file bankruptcy, we must add up your income from all sources (except Social Security payments and, arguably, unemployment compensation benefits) for the six months before the month in which your case is filed.
We then multiply that number by two [really, that's how the formula works!] and compare that result to a chart which shows the "median income" for a household of your size in Minnesota.
The significance of this is that if your household income is over the applicable number, and if you file a chapter 13 case, you need to be in a five year plan; if your household income is under the applicable number, you can file a plan of as short as three years. Additionally, if your income is over the means tests number, you must complete an additional "budget" based on IRS exemption numbers.
The Census Bureau periodically updates the number, and the new numbers have just been announced.
For cases filed April 1 2017, and for about six months thereafter, the numbers in Minnesota are as follows:
household of one person: $52,785.00
household of two people $70,889.00
household of three people: $85,033.00
household of four people: $101782.00
If there are more than four people in the household, add $8,400.00 per additional person.
For comparison, if your case was filed in April 2015 the numbers were:
household of one person: $50,934.00
household of two people $66,566.00
household of three people: $81,044.00
household of four people: $94,807.00
Saturday, December 5, 2015
Prenda Law Attorney's Case Converted
A Minnesota attorney named Paul Hansmeier was "sort of famous" for being involved in a set of cases often called the Prenda Law cases. The gist of those cases was that the Prenda Law Firm would threaten to sue person "X" for downloading copyrighted pornography, but would settle the case for a few thousand dollars.
According to that infallible resource, Wikipedia:
In the 2013 civil ruling, Prenda Law, and three named principals, John Steele, Paul Hansmeier, and Paul Duffy, were found to have undertaken vexatious litigation,[4]:FOF.5 p.4 identity theft,[4]:FOF.9 p.5 misrepresentation and calculated deception (including "fraudulent signature"),[4]:FOF.6 p.4, FOF.9–11 p.5, p.6–8 professional misconduct and to have shown moral turpitude.[4]:p.10 The principals were also deemed to have founded and been the de facto owners and officers of the shell company plaintiff and their alleged "client", created in order to "give an appearance of legitimacy".[4]
(accessed by me on Dec. 5, 2015).
Mr. Hansmeier was ordered to pay a lot of financial sanctions on account of those cases. There are a lot more interesting facts, including that he recently started suing businesses here in Minnesota for violations of disability access laws. This year he filed a chapter 13 bankruptcy here in Minnesota and promptly ran into a buzzsaw. The United States Trustee (a part of the Department of Justice) brought a motion to convert his case to a chapter 7. Their motion says, in part:
According to that infallible resource, Wikipedia:
In the 2013 civil ruling, Prenda Law, and three named principals, John Steele, Paul Hansmeier, and Paul Duffy, were found to have undertaken vexatious litigation,[4]:FOF.5 p.4 identity theft,[4]:FOF.9 p.5 misrepresentation and calculated deception (including "fraudulent signature"),[4]:FOF.6 p.4, FOF.9–11 p.5, p.6–8 professional misconduct and to have shown moral turpitude.[4]:p.10 The principals were also deemed to have founded and been the de facto owners and officers of the shell company plaintiff and their alleged "client", created in order to "give an appearance of legitimacy".[4]
(accessed by me on Dec. 5, 2015).
Mr. Hansmeier was ordered to pay a lot of financial sanctions on account of those cases. There are a lot more interesting facts, including that he recently started suing businesses here in Minnesota for violations of disability access laws. This year he filed a chapter 13 bankruptcy here in Minnesota and promptly ran into a buzzsaw. The United States Trustee (a part of the Department of Justice) brought a motion to convert his case to a chapter 7. Their motion says, in part:
For the reasons stated in the motion to convert, the United States Trustee believes that the debtor’s chapter 13 plan cannot be confirmed. Specifically,it appears thatthe proposed plan does not comply with § 1322(a)(1),pays unsecured creditors an amount that is less than the amount that would be paid if the debtor’s estate was liquidated in chapter 7, was not proposed in good faith under 11U.S.C.§1325(a)(3), and the debtor does not have an ability to make payments under 11 U.S.C. § 1325(a)(6). In addition, the petition was not filed in good faith under 11 U.S.C.§1325(a)(7).
This week Judge Kathleen Sanberg granted the motion and converted the case to a chapter 7. The case will play out in the bankruptcy court (case number 15:42460) and we will see what happens to Mr. Hansmeier.
This week Judge Kathleen Sanberg granted the motion and converted the case to a chapter 7. The case will play out in the bankruptcy court (case number 15:42460) and we will see what happens to Mr. Hansmeier.
Thursday, November 19, 2015
New Forms Coming
My staff and I spent an hour today with a webinar about the new and "improved" Official Forms which we will be required to use starting December 1, 2015.
The forms have much of the same information, but they are arranged differently and named differently. There will be a steep learning curve when we are required to file new cases with these forms.
Some of the changes make sense -- for instance, now that same-sex marriage is legal, the terms are "spouse 1" and "spouse 2". Some of the changes don't make sense -- for instance, instead of listing the collection agency which is trying to collect for Discover Card immediately after Discover Card, the collection agency gets listed on a different page!
Anyway, these changes are not the end of the world, but expect trustee meetings to take longer for a few months while we get used to these changed forms.
The forms have much of the same information, but they are arranged differently and named differently. There will be a steep learning curve when we are required to file new cases with these forms.
Some of the changes make sense -- for instance, now that same-sex marriage is legal, the terms are "spouse 1" and "spouse 2". Some of the changes don't make sense -- for instance, instead of listing the collection agency which is trying to collect for Discover Card immediately after Discover Card, the collection agency gets listed on a different page!
Anyway, these changes are not the end of the world, but expect trustee meetings to take longer for a few months while we get used to these changed forms.
Tuesday, September 8, 2015
Ask your mom!
On four different times in the last few months, I have come across the following situation. Fortunately, only one of these was originally my own client; another person's lawyer was no longer practicing, so I helped that person out, although could not protect all of the value in question; two other cases are being handled by different lawyers, and I am waiting to see how those cases are handled.
The situation is this: Mom "adds" her children's names to her house. She does this by signing and recording a deed, listing herself as a "life tenant" and her children's names as "remaindermen". What this means is that Mom can use the house as long as she is alive. When she dies, her interest ends, and the children own the house.
There is a state law problem with this, which is that since 2003, if Mom was getting Medical Assistance, the State of Minnesota will pretend that Mom did not die, and assess a recovery amount against the home, up to the amount that the State paid on Mom's behalf. The recovery amount is based off a chart published by the Minnesota Department of Human Services, found in Section 0015.58 of the Combined Manual. The chart says, for example, that if Mom is age 75 when she passes way, that her interest in the house is about 52%. That's bad enough, of course.
But, the bankruptcy problem is this: If Mom put your name "on the house" before you filed bankruptcy, you had an ownership interest in that house when you filed bankruptcy. Filing bankruptcy requires you to list all of your assets, not just the ones you feel like listing. When Mom passes away and the family goes to sell the house, the title company will likely do a bankruptcy search against each owner of the house. When the title company finds a bankruptcy against one of the owners of the house (one of Mom's children), the title company for bankruptcy clearance -- basically, proof that you listed the property in your bankruptcy papers and that you claimed it exempt or that the case trustee released the property back to you ("abandoned it"). But if you do not list an asset in your bankruptcy papers, it is never "abandoned" by your bankruptcy trustee and it is never exempted.
So, now, when this comes to light years after your bankruptcy, you must reopen the case. There is a fee for that paid to the Clerk of Court. Then there are likely attorneys fees to be paid. Then you must try to claim your interest in the house as exempt. But the value now may be much more than it was worth back when your filed bankruptcy. So you may not be able to claim all of your interest in the house as exempt. Which may mean that the trustee gets cut in for a piece of the action now, even though you could have protected the entire interest if you had listed it when you filed!
So the moral of the story is: Ask Mom if she has done any estate planning and if she has put any assets into your name. If you know before you filed bankruptcy, you can have a plan. If you don't know, you may be caught by surprise and may lose part (or all) of an asset that you could have protected if you had known about it.
It may be embarrassing to ask Mom now, but a little embarrassment now can protect thousands of dollars of equity in the future.
The situation is this: Mom "adds" her children's names to her house. She does this by signing and recording a deed, listing herself as a "life tenant" and her children's names as "remaindermen". What this means is that Mom can use the house as long as she is alive. When she dies, her interest ends, and the children own the house.
There is a state law problem with this, which is that since 2003, if Mom was getting Medical Assistance, the State of Minnesota will pretend that Mom did not die, and assess a recovery amount against the home, up to the amount that the State paid on Mom's behalf. The recovery amount is based off a chart published by the Minnesota Department of Human Services, found in Section 0015.58 of the Combined Manual. The chart says, for example, that if Mom is age 75 when she passes way, that her interest in the house is about 52%. That's bad enough, of course.
But, the bankruptcy problem is this: If Mom put your name "on the house" before you filed bankruptcy, you had an ownership interest in that house when you filed bankruptcy. Filing bankruptcy requires you to list all of your assets, not just the ones you feel like listing. When Mom passes away and the family goes to sell the house, the title company will likely do a bankruptcy search against each owner of the house. When the title company finds a bankruptcy against one of the owners of the house (one of Mom's children), the title company for bankruptcy clearance -- basically, proof that you listed the property in your bankruptcy papers and that you claimed it exempt or that the case trustee released the property back to you ("abandoned it"). But if you do not list an asset in your bankruptcy papers, it is never "abandoned" by your bankruptcy trustee and it is never exempted.
So, now, when this comes to light years after your bankruptcy, you must reopen the case. There is a fee for that paid to the Clerk of Court. Then there are likely attorneys fees to be paid. Then you must try to claim your interest in the house as exempt. But the value now may be much more than it was worth back when your filed bankruptcy. So you may not be able to claim all of your interest in the house as exempt. Which may mean that the trustee gets cut in for a piece of the action now, even though you could have protected the entire interest if you had listed it when you filed!
So the moral of the story is: Ask Mom if she has done any estate planning and if she has put any assets into your name. If you know before you filed bankruptcy, you can have a plan. If you don't know, you may be caught by surprise and may lose part (or all) of an asset that you could have protected if you had known about it.
It may be embarrassing to ask Mom now, but a little embarrassment now can protect thousands of dollars of equity in the future.
Monday, June 1, 2015
Lien Stripping Still Possible Despite Supreme Court Case
You may have seen this headline in today's news:
The Supreme Court syllabus (synopis) says:
A debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor’s claim is both secured by a lien and allowed under §502 of theBankruptcy Code.
The Minnesota Bankruptcy Judges have never, as far a I know, allowed a person to strip an underwater second mortgage in a chapter 7.
However, the rules of the game in Chapter 13 are different. The courts have been allowing persons in a chapter 13 to strip a second mortgage, and since the Caulkett case was not a chapter 13, it is my hope and belief that lien stripping is still available in a chapter 13 case.
"Supreme Court says homeowners underwater on loans can't void second mortgage in bankruptcy"
HOWEVER, this decision was issued in a Chapter 7 case. The case is
entitled: Bank of America N. A. v.. Caulkett, and was issued June 1,
2015.
The Supreme Court syllabus (synopis) says:
A debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor’s claim is both secured by a lien and allowed under §502 of theBankruptcy Code.
The Minnesota Bankruptcy Judges have never, as far a I know, allowed a person to strip an underwater second mortgage in a chapter 7.
However, the rules of the game in Chapter 13 are different. The courts have been allowing persons in a chapter 13 to strip a second mortgage, and since the Caulkett case was not a chapter 13, it is my hope and belief that lien stripping is still available in a chapter 13 case.
Monday, March 23, 2015
Pending legislation
People who have to file bankruptcy often have judgments against them from before their bankruptcy case was filed. Bankruptcy discharges the personal obligation, but does not remove the judgment from the state court recrods.
Minn. Stat. 548.181 provides a simple mechanism to remove pre-bankruptcy judgments from the state court records. The statute states that there is a $5 fee payable to the court administrator for each judgment.
Unfortunately, in the last year or so court administration has been requiring the payment of a full filing fee -- $324.00 in Stearns County -- to discharge judgments. The theory is that the application to discharge judgment is the "first paper filed in an action", and that you must pay the full filing fee in order to "file the first paper in an action".
There is a bill in the Minnesota Legislature that would change this result, by providing that "This paragraph does not apply to the filing of 1.17 an Application for Discharge of Judgment. An Application for Discharge of Judgment filed by a party shall not be considered a first paper filed in an action."
The bill in the House is called HF 652; the companion bill in the Senate is called SF 999.
I hope our legislators will pass this bill this Spring.
Minn. Stat. 548.181 provides a simple mechanism to remove pre-bankruptcy judgments from the state court records. The statute states that there is a $5 fee payable to the court administrator for each judgment.
Unfortunately, in the last year or so court administration has been requiring the payment of a full filing fee -- $324.00 in Stearns County -- to discharge judgments. The theory is that the application to discharge judgment is the "first paper filed in an action", and that you must pay the full filing fee in order to "file the first paper in an action".
There is a bill in the Minnesota Legislature that would change this result, by providing that "This paragraph does not apply to the filing of 1.17 an Application for Discharge of Judgment. An Application for Discharge of Judgment filed by a party shall not be considered a first paper filed in an action."
The bill in the House is called HF 652; the companion bill in the Senate is called SF 999.
I hope our legislators will pass this bill this Spring.
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