Creeping Debt and Chapter 13 Bankruptcy Debt Limits

Not long ago it seemed that $20,000 of credit card debt was a lot. I would file a bankruptcy for a person who had that without giving it a second thought. Now, however, as things go in my world, that’s not a lot of debt for most people. Unless the debtor is sick, disabled or hopelessly low income, I would be reluctant to file for someone with such a small debt.

What’s happening is that I rarely see anyone who’s not more than $50,000 in debt, and over $100,000 of consumer credit card debt is common. Once the total of the debt tops $100,000 I tend to ignore how much higher it goes, as my software keeps a running tally of the total. The fact is that for me, and I’m afraid for the whole country, the amount of credit card debt that seems normal is creeping steadily upward.

So the other day when I was reading my mail on a bankruptcy lawyer listserve, I had a bit of a start. One of the emails reminded me that for a Chapter 13 bankruptcy, there is a limit as to how much debt one is allowed to have. I quickly pulled out the most recent Chapter 13 I had filed and checked the balances of the debts, to make sure we had not exceeded the legal limit. Up until that moment it never occurred to me that one day someone will probably walk into my office with consumer debts in excess of the Chapter 13 limits. All of a sudden, those limits don’t seem as high to me as they used to. A lawyer who files a case where the limits are exceeded is subject to sanctions. If I did that it could cost me thousands of dollars. I must start paying more attention to those limits.

In order to qualify for a Chapter 13 bankruptcy, the person’s secured debt must not exceed $1,010,650 and the unsecured debt must not exceed $336,900. The way things are going right now, I would not be surprised to meet someone within the next week whose debts are over those limits. From my perspective the current economic downturn has been frightening and unbelievable.

I don’t mean to imply that I have never met a person with debts that high. Back in the early 1980s, during a serious recession we had in those years, I did a Chapter 7 bankruptcy for a real estate developer who had gone out of business and who had millions of dollars in debt. There’s no limit to the amount of debt you can run through a Chapter 7. I have also done Chapter 7 work for small business owners who’s debts would have exeeded the Chapter 13 limits.

But now people I see with consumer debt are actually starting to push those Chapter 13 limits, and that is something I have never seen before.

Burnt Out License Plate Light and DWI

Recently I had a case where the reason the officer stopped my client was a non functioning license plate light. The only problem was that the light in fact was working, and there was a witness to that fact besides my client.

I got excited. I had gotten arrests thrown out for similar reasons in the past. I thought this one would be easy. Naturally, I dug into the case law looking for the case that would say I win. To my surprise, what I found was the opposite. This past January the Minnesota Court of Appeals said, if I was reading it right, that if the officer THOUGHT that the light was out, the stop was valid even if the light was actually working. What kind of deal was that?

It seems the police can stop you for a perceived equipment violation, even if they are mistaken about whatever it is. Once they have you stopped, if they find you have been drinking, you get a DWI ticket; and it makes no difference if you can show later that your equipment was fine. The bottom line is that there is no sure way to not get caught if you are drinking and driving. Being careful isn’t good enough. There’s no way you can possibly control all the factors that might lead to a stop and an arrest. The only answer is to just not do it.

I have suspected for some time that there are officers who stop drivers because they just have a feeling that something is not right. Then later they make up something to legally justify the stop. On one hand I suppose you could say that these are good officers and a value to the community. But I really think that they should be required to stay truthful and not just be making up stories.

Bankruptcy and DWI, Judge Arrested

I have been practicing bankruptcy law and DWI defense for some time now, and it always seems a bit difficult to explain why those two areas of the law seem to mesh for me. So when I saw a story about a bankruptcy judge being arrested for DWI, I woke up and took notice.

Massachusetts bankruptcy judge Robert Somma won’t be returning to his job. Why? He has “agreed” to leave his job to pursue other endeavors. Seems he has been off work since his arrest for DWI in February. When I first read the headline I was surprised, because lots of public officials get DWIs. At least one of the Hennepin County judges currently on the bench has received a DWI while in office. They have to take their punishment, but they are not removed from their jobs.

There were other complications in Judge Somma’s case, however. Seems that when he was arrested, he was wearing a dress. That in itself, while a bit unusual, doesn’t seem to be justification for losing his job either. Apparently he was a good judge and well liked by those who practiced in his courtroom. There’s nothing illegal or unethical about wearing a dress that I know of, although I suppose I have to concede that it could have been inappropriate.

Here’s a link to the Boston Globe story.

"Click It or Ticket" May Mobilization: May 19 to June 1st

This holiday weekend and for the rest of this week, there is once again enhanced law enforcement on our streets and highways in Minnesota. This time the emphasis is “designated nighttime seat belt enforcement periods to prevent unbelted deaths …”

This “Click It or Ticket” mobilization program is one of a series of “Safe and Sober” mobilizations which has been in progress for the last few years. It is specifically aimed at looking for belt non-use and for improper child seat use.

The bottom line, however, is that for the next few days there will be extra law enforcement on the roads. Whenever this happens I know it’s time for me to stay close to my phone. My office phone is forwarded to my cell, and I’ll be answering that all this weekend. I just got back from a nice trip to Hollywood, so I don’t‘ feel bad about staying in town this weekend.

If you hear from someone who has just been stopped or arrested, you might want to do a quick review of the tips I have posted on my First Arrest First Aid page. I wrote up the materials on that page after receiving a call one night from another lawyer who had a client who had just been arrested. This other lawyer did no criminal defense work at all, and wanted to pick my brain about what to tell his client, who he had on the other line. Before that call I had assumed that there was no use writing that topic up on my site, because someone who has just been arrested would not have web access. Since then I have heard from several spouses and parents who have referred to the contents of that page over the phone when they were called by a family member who was in police custody.

With the onset of cell phone web access, I guess a person could access that page directly after being arrested. Nobody has reported to me that they have done that, however, at least not yet.

Out of the office until May 21st.

I’m am on my way to Hollywood. That’s where the National Association of Consumer Bankruptcy Attorneys is having a big three day seminar. I’ll be gone between May 15th and May 20th. I’ll be back in the office on the morning of Wednesday May 21st.

I wish I could say I was going to be on American Idol, but that’s not it. There are things I can learn at this seminar that would be hard to find anywhere else. What it comes down to is that I can’t afford to not go. The law of bankruptcy has been in a hard to track state of flux since the new legislation became effective in late 2005. It seems that every few days a judicial decision turns up that changes the landscape. I need all the help I can get in keeping up with this stuff.

Of course, I am planning on seeing a few sights as well. I’m allowing one day in the trip just for that. Right now I would say that the beach could be a priority.

So email me or leave me a message. I will probably be checking my email. I no longer travel without my laptop. The wireless Internet for the hotel where I’ll be did get a poor review, but I expect I’ll figure it out. I’ll be returning my calls on Wednesday, May 21st.

Debtor Audits in Bankruptcy Cases Resume Today

My email today brought me a notice that the U.S. Trustee’s office is resuming debtor audits as of today. They stopped in January because Congress didn’t fund it.

An audit in this context involves the U.S. Trustee’s office hiring an outside accounting firm to go over the debtor’s records. Previously the policy was that one in 250 cases would randomly be audited. Now the policy is one in a thousand will be audited. That’s a 400% improvement, but I’m still sad to see this stuff starting again.

Minnesota Bankruptcy: The Income Limits

Since the passage of the “new law” in October of 2005, there have been rules based on level of income about who can file a Chapter 7 Bankruptcy. Unless you are at or below the median income for the State of Minnesota based upon your family size, you can only file a Chapter 7 if you pass the so-called means test. The means test is a whole other topic, which I will have to deal with some other time. For now, however, here’s a video I posted recently on Youtube where I discuss the median income levels for Minnesota by household size.

The numbers are subject to change every few months, but I have them posted on my site on my Chapter 7 page under the subheading of “Qualifying for Chapter 7 in Minnesota.”

David J. Kelly, Attorney
Kelly Law Office
1013 Ford Rd.
Minnetonka, MN 55305
952-544-6356
http://www.mn-bankruptcy.com/
http://www.mn-dwi.com/
http://www.kelly-law.com/

Bloviating about Short Sales on Youtube

The topic of short sales is hard to understand, and also hard to explain. In this video I spoke without a script, which I think was a mistake. I was trying to be clear, but I don’t think I got close to that goal. If I would have written a script first, it would have read about like what follows.

The term “short sale” can mean that:

1) The mortgage company will accept less than full payment and will release both the property and the debtors from the remaining balance of the debt; or

2)The mortgage company will accept less than full payment of the debt, will release the property from the mortgage, but will NOT release the individual debtors from the remaining unpaid balance of the debt.

I hear from lots of people who are trying to do a short sale, but don’t know which one they are trying to do or which one they want to do. The first kind leaves you in the clear, but the second variety brings you into my office in need of a bankruptcy.Most short sales are of the second variety, and they are worse than just doing nothing and letting the bank foreclose. Worse yet, often the realtors and mortgage companies involved in these transactions seem to purposely keep the sellers/debtors in the dark as to exactly what kind of deal it is.

If you are doing a short sale, you better consult an accountant about the tax consequences. Under certain circumstances, the amount of the debt forgiveness can be taxable income.This video and these comments are for general information purposes only and are not intended to be legal advice. Viewing these materials does not create an attorney-client relationship. I recommend that you consult the attorney of your choice concerning the details of your case.

David J. Kelly
Kelly Law Office
952-544-6356
http://www.mn-bankruptcy.com/

Out for Blood in Dakota County

I just got off the phone with a gentleman who was arrested for DWI in Hastings, which of course is in Dakota County, Minnesota. The police had asked him to take either a blood test or urine test, but he refused. He asked for a breath test, but the police would not give him that.

I explained that I have heard that the judges in Dakota County for the most part have stopped accepting breath test results, at least when asked to throw out the evidence in a proper motion. So now the police in that county have stopped offering breath testing, at least that is what I am hearing from my contacts.

The Dakota County judges – or many of them at least – have lost faith in the reliability of the breath test, because the manufacturer of the machine has refused to produce the computer programming source code. In my opinion they are right to do this. Without that code, nobody really knows how the machine works. The law seems to be way up in the air over this, which is why there is so much variation from judge to judge and county to county.

Here in Hennepin County, where I do most of my work, however, about 90% of the judges still put their faith in that breath machine. As a result, I find myself very reluctant to jump into the fray – since there is a high probability that after laughing at me, the next emotion the judge will express will be anger. I have been telling my clients that we can try doing that if they want to, but here in this county it is probably not that good of a gamble. My fee would be high, and the odds are better at Mystic Lake.

The gentleman I just spoke with is now charged with refusing the test. This is a gross misdemeanor – more serious than the usual first offense DWI – and with this comes a one year revocation of his driver’s license.

I’m just putting this out here as a warning. If arrested for DWI in Dakota County, and perhaps elsewhere now in Minnesota too, you are more likely than ever to be offered a blood test but not a breath test. My understanding is that refusing the test under those circumstances is the same as refusing a breath test when that is offered. If it happens to you, take the test. You would also be well advised to have an additional test taken at your own expense.

I am watching the development of this issue as closely as I can . Right now the State of Minnesota is suing the manufacturer, and the manufacturer has counter-sued the State. The State in this case is also the customer. My Dad used to say that the customer is always right, but I guess that manufacturer doesn’t fee that way.

David J. Kelly
Kelly Law Office
952-544-6356
http://www.mn-dwi.com

Youtube Video Bankruptcy Update Part IV

Rambling in front of the video camera the other day, it was not long before I got on the subject of how unethical, illegal, fraudulent and criminal it is to attempt charging attorney fees for a bankruptcy on a credit card – with the intent of getting rid of the credit card debt in that bankruptcy. If you run up a debt intending to list it in a bankruptcy, that is fraud. It can be grounds to have a particular debt not discharged in your case; or it could be grounds to have the entire bankruptcy thrown out. Worse yet, it’s fraud and could be prosecuted as a felony. Here’s what I said about it on Youtube: