Legal Articles, Credit & Debt

The Nevada Supreme Court has recently clarified the law on how payments are applied.

If you get sued by a debt collector in Michigan, learn how to protect your legal rights and understand the legal process

Filing a proof of claim in a chapter 13 bankruptcy case in connection with a debt for which the applicable statute of limitations has passed does not violate the FDCPA.

In response to a $140 million judgment Hulk Hogan, known legally as Terrence Bollea, obtained against, inter alia, Gawker Media, LLC (“Gawker”) and its founder and erstwhile CEO Nicholas G.A. Denton in connection with Mr. Bollea’s allegations that Gawker damaged him by publicizing a video depicting Mr. Bollea and the wife of his friend engaged in sexual intercourse, Mr. Denton filed a chapter 11 bankruptcy case seeking to discharge his personal obligations arising from the judgment and other debts. See In re Nicholas G.A. Denton, Case No. 16-12239 (Bankr. S.D.N.Y.).

Bankruptcy courts are special courts. They are neither Article III courts (Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982)) nor their adjuncts (Stern v. Marshall, 564 U.S. 462 (2011)), but nonetheless have inherent powers (Law v. Siegel, 134 S. Ct. 1188, 1194, 571 U.S. __ (2014)) and—pursuant to 11 U.S.C. § 105—certain equitable powers. This means that they have broad powers to order equitable remedies—such as specific performance—where no adequate remedy at law exists, to the extent not inconsistent with any other provisions of the Bankruptcy Code. See Law v. Siegel, 134 S. Ct. at 1194, 571 U.S. at __. This is the backdrop against which inequitable conduct by a creditor may lead to subordination of its claim in a bankruptcy proceeding under established, codified, equitable principles. Subordination means that a claim, by judicial decree, is lowered, in whole or part, in priority relative to its ordinary position in respect of one or more other claims.

This article discusses Minnesota law relating to the removal (“discharge”) of judgments following a judgment debtor’s bankruptcy.

Done properly, chapter 13 provides certain above-median wage earners—and others with special considerations, often relating to a mortgage—with debt relief.

The Internal Revenue Code ("I.R.C." or the "Code") broadly defines gross income as "all income from whatever source derived, including . . . [i]ncome from discharge of indebtedness" I.R.C. § 61(a)(12). Although the I.R.C. does not define "discharge," this has long been understood to include the taxpayer's release from a monetary obligation such as debt forgiveness or by way of a discharge in a bankruptcy case.

Many debtors—and a few attorneys—are unaware that the Bankruptcy Code provides a way for debtors in a chapter 7 case to "redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted [by the debtor] . . . or has been abandoned . . . [by the trustee], by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption." 11 U.S.C. § 722. There is quite a bit to unpack here, but at bottom, almost any non-commercial physical personal property subject to a security interest can be exempted and redeemed in a chapter 7 case.

Debtors are often pleasantly surprised to learn that, in Minnesota, roommates generally count toward their household size for purposes of the means test, permitting certain debtors who would otherwise fail the means test, and thus not qualify for a chapter 7 case (permitting almost immediate discharge of all debts, not otherwise dischargeable, without any repayment required, as with a chapter 13 case), to qualify.