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Law Firm of Marilyn Ann Solomon

We won an interesting case this week involving two parents had a written agreement in 2007 that the father would deed to the mother the former marital home in exchange for $300.00 per month credit towards his child support obligation for 7 years for a total of $25,200. He deeded the house to her.
Four years later, the mother sued the father for contempt and child support arrearages for the $300.00... per month. She asked the court to put him in jail for not paying the child support. The Warren County Juvenile and Domestic Relations District Court held the father in contempt and found he had a child support arrearage for the full amount since 2004. The Warren County Circuit Court found dad was entitled to credit for the entire $25,200 amount pursuant to the parties' Agreement and that the father was not in contempt. The issue was whether the father was entitled to pay his child support with equity in a house instead of cash.
The court said the mother had to honor the agreement as she had the house which was also a home for the parties' child.

Another interesting case we won this week was a medical malpractice case. In that case, the patient went to the hospital having terrible back pain. She was given medicine in tbe ambulance. The doctor told the nurses to give her medicine through a shot in the muscle, but a new nurse made a mistake and gave it to her in the vein. This caused the patient to go into respitatory failure from a drug overdose and almost die. She had to be admitted to the hospital. We sued and after many discovery motions, the hospital finally settled the case.

We also won a trial in bankruptcy court. In that case, the client had stock in a club that owned hunting land. He claimed the stock was a "family heirloom" and the creditors challenged whether stock could be an heirloom. The client testified that he and his father hunted on that land when he was a child and it was filled with sentimental memories. He planned to pass the stock and hunting rights to his own child. The bankruptcy judge ruled that the stock was a family heirloom and he was entitled to exempt it from his bankruptcy estate.

transfering property before filing bankruptcy

Many people give away property and then see an attorney about filing bankrutpcy. If you give away property or sell it to a relative for less than value and then file bankruptcy, the bankruptcy court will take the property away from the person you gave it to, sell it, and distribute the proceeds to your creditors. The court can go back two years for these kinds of transfers and, in some cases, up to five years. Many times, I can protect your property in bankruptcy if you do not transfer it. Once you give it away or sell it cheap to a family member, it becomes fair game for the creditors, and I cannot protect it for you. If you are thinking of filing bankruptcy, see an attorney BEFORE deciding whether or not to give away property. You may even want to do some long-term planning in this type of situation.

What do do when creditors send you a 1099 for debts you discharged in bankruptcy

Sometimes when people have debts discharged in bankruptcy, their creditors send them a 1099 showing the discharged debt as income. I have noticed that many accountants do not know that this is NOT income pursuant to federal law. 26 United States Code Section 108(A) (1) excludes from income debts that are discharged by bankruptcy. It also excludes debts that were forgiven by the creditors, in whole or in part, to the extent the person was insolvent. I constantly see clients with tax returns showing large amounts owed to the IRS or Virginia Department of Taxation after a bankrutpcy discharge for "forgiven debts." These are not forgiven debts. They are discharged debts, and they are NOT TAXABLE. If you have any questions about whether or not your should pay taxes on these kind of debts, ask a bankruptcy attorney, not an accountant. Apparently, many of them are not aware of the law and give incorrect advice.

Obamacare may yet Fail in Virginia

Obamacare may yet fail in Virginia: What do the recent 4^th Circuit rulings in Commonwealth of Virginia v. Kathleen Sebelius and Liberty University v. Timothy Geithner mean?

            On September 8, 2011, the 4th Circuit Court of Appeals in Richmond issued two critical rulings in cases concerning President Obama’s signature health care legislation passed by Congress and signed into law on March 23, 2010, the Patient Protection and Affordable Care Act, sometimes referred to as “Obamacare.”  Procedurally, two United States District Court judges in Virginia the 4^th Circuit had previously ruled against the United States federal government, holding in both cases that the entirety of the Obamacare law was unconstitutional. The federal government appealed both rulings to the 4^th Circuit Court of Appeals, and the parties argued the issues in briefs and orally before a panel of the appellate court.  The Court of Appeals issued two separate rulings, one in each case, overturning the lower court decisions.

            The legal reasoning in each, however, was far from the popular perception that the Court of Appeals had somehow declared that Obamacare is “constitutional.”  Both focused on a very narrow conclusion which leaves the question of the “constitutionality” of Obamacare open to further challenge.

            In Virginia v. Sebelius, the Commonwealth of Virginia filed suit against the federal government to declare Obamacare unconstitutional, on the grounds that it conflicted with a recently-enacted Virginia statute (the Virginia Health Care Freedom Act) declaring that no Virginia resident “shall be required to obtain or maintain a policy of individual insurance coverage.”  The U.S. government argued that Virginia, as a state, lacked standing to bring the suit n the first place, primarily because Virginia, as a state, suffered no injury as a result of Obamacare’s provision, and because the Virginia state statute lacked any enforcement mechanism and was otherwise ineffective since it merely declared that Virginians were exempt from federal law.  The 4^th Circuit ruled in favor of the federal government, found that Virginia lacked standing to sue, and remanded the case to the district court with instructions that the district court dismiss it. 

            In Liberty University v. Geithner, two individuals filed suit seeking an injunction to stop enforcement of the Obamacare legislation, and in particular, the provision requiring individuals to obtain and maintain health insurance.  Their argument was that the individual mandate unconstitutionally required them to purchase a product they had chosen not to purchase, and mandated that they do so from another private party.  Liberty University, also a plaintiff, sued to enjoin enforcement of the law due to its application of certain onerous requirements on “large employers.”  The federal government argued that existing federal law prohibits any plaintiff from obtaining an injunction against the IRS on the stated grounds to prevent it from collecting taxes.  The lower district court found that the penalties and enforcement mechanism in the Obamacare legislation were not taxes, and therefore were not authorized by the Constitution’s taxing power.  Consequently, the federal law preventing injunctions against tax enforcement therefore did not apply.  Interestingly, on appeal to the 4^th Circuit, while both sides agreed with the lower court that the specific federal anti-injunction law did not apply, the Court of Appeals disagreed.  The appellate court determined that the Obamacare legislation created a tax and an enforcement mechanism, and therefore the federal anti-injunction law applied, leaving the district court without jurisdiction to award an injunction prior to an actual instance of the tax being collected (the Obamacare penalty for noncompliance goes into effect in 2014).

The 4^th Circuit never reached the question of constitutionality in either of the two cases, and therefore, in the 4^th Circuit, that is still an open question.  These two opinions, however, should be read and studied by every practicing lawyer and law student as incredibly interesting examples of what happens when you (a) name the wrong party plaintiff, and (b) request relief that cannot be granted. 

Law students in particular should be conscious of the series of seemingly inane (but quite important) hurdles to overcome in every case they plead or file.  Have I named the correct Plaintiff and/or Defendant?  Has my plaintiff actually suffered some form of injury or is he or she granted standing to sue by some other statute or case law?  Can the Court grant me the relief I’m requesting?

Perhaps most importantly, do I have the ability to explain, believably and convincingly, to a Court what logical process I followed to make each decision as I put together my case?

Other jurisdictions have already taken up the substantive constitutional issues implicated in Virginia v. Sebelius and Liberty University v. Geithner.  Most recently, the 11^th Circuit Court of Appeals issued a lengthy (304 pages), but fascinating, opinion in State of Florida ex rel. Atty. Gen. v. U.S. Dept. of Health & Human Services, 11-11021 (11th Cir. Aug. 12, 2011).  The 11^th Circuit struck down the so-called individual mandate provision of the Obamacare legislation because, the Court said, it exceeds Congress’ constitutional authority to regulate interstate commerce under the Commerce Clause.  Congress does not have the authority, the Court said, to require by law an individual to purchase a product or service from another private party.  The 11^th Circuit affirmed the remainder of the law, which stretches to more than 900 pages, as constitutional.  The opinion is an excellent primer on the historical development of Commerce Clause jurisprudence, and is also recommended reading for all lawyers and law students with even a passing interest in constitutional law.

Each of these cases is likely to be appealed to the United States Supreme Court, and the repeal of Obamacare is likely to be a hot-button issue in the 2012 Presidential election.

                                                                        -           Tom Ashton, September 8, 2011

What are schedules I and J in a bankruptcy petition

If you pass the Means Test, the next question is whether you qualify under Schedules I (Income) and J (Expenses). Schedules I and J measure your actual income and expenses but totally disregard any expenses you will get rid of in the bankruptcy. All income counts. Child support counts. Social Security income counts. Unemployment income counts (but not in the means test). Profits you make from your business count but not the gross income of the business. All income counts. Not all expenses count.

 You are not allowed to have too high a budget for discretionary items like recreation. You can tithe up to 10% of your income to churches or give it to charities. Your grocery bill on Schedule J is often less than it actually is. Clothing expenses are limited. What isn’t limited are medical expenses, health insurance, car insurance, and other necessities. Most people actually have more expenses than income to cover them when Schedules I and J are done.

You also want to look at the assets you are allowed to keep to see what you may have to give up to your creditors. Most people can exempt everything they own but check my website at www.marilynsolomonlaw.com to see a list of items you are allowed to keep in Virginia and West Virginia.

Also, remember bankruptcy consultations are free at the Law Firm of Marilyn Solomon.

What is the Means Test to qualify for bankruptcy?

When the bankruptcy law was totally revised in 2005, a new requirement called "the means test" was added to it. The Means Test is supposed to measure the average income in each state. The debtor's income is compared to the "mean" or "average" state income. If your income is less than the mean income in your state, you qualify to file a Chapter 7 bankruptcy under the law assuming you meet other requirements. If your income is more, than you must take "part two" of the means test.

Part two of the Means Test calculates your particular allowable expenses including priority expenses like child and spousal support and taxes, your secured debt like the debts against your house, car, or furniture, and other expenses like health insurance and medical expenses then determines if you have any money left over to pay your creditors. Basic living expenses are filled in for you depending on the city or county you live in and are based on what the IRS thinks it cost, not what it actually cost. The second part of the Means Test is, thus, partly hypothetical.

If you have no money left over to pay creditors, you qualify. If you do have money left over, you have to file Chapter 13. Many people pay enough for health insurance or medical expenses or support that they qualify even with a very high income.

As it happens, some people have money left over under the second part of the means test but do no actually earn enough money to qualify for Chapter 13 because the means test does not use all of your actual living expenses and for some of your expenses, it substitutes hypothetical ones. It assigns expenses to you based on where you live except for priority and medical expenses. Many people are trapped in the middle and thus have no bankruptcy option available to them. They make too much for Chapter 7 and not enough for Chapter 13.

The good news for Virginia is that the Means Test here is about the third highest in the nation as all the high wage earners in Northern Virginia pull up the average income for everyone. Right now, a family of one (just you) can make up to almost $50,000 and a family of four can earn up to about $86,000. These numbers change every month or two and, because of the economy, have gone down a time or two as well.

If you make more than the mean amount, it is still worth inquiring about Chapter 7 as you may pass part two of the means test and be eligible anyway.

How to avoid foreclosure

A lot of clients ask me what to do to stop a foreclosure on their home. There are several options that may be available: deed in lieu of foreclosure, modification of the loan, or short sale. Here is the difference.

Usually, a deed in lieu of foreclosure can only be done when there is only one mortgage on your home. If you have a second mortgage, equity line, or judgment or tax lien, it is usually not possible to do a deed in lieu. How this works is the mortgage company takes back the house instead of foreclosing on the house. They wipe out any deficiency between the value of the house and the amount owed on the loan. The bank keeps the house, and the homeowner can walk away with no debt owed to them.

A short sale means the homeowner puts the house on the market for sale and sells it. It is more difficult to do a short sale when you have more than one loan because all the lien holders have to agree to do the short sale and how to divide up the money received. You need to receive permission from the bank to do a short sale. Most of them require a “hardship letter” to qualify which means you need to explain why you hare having a hard time and the bank gets to decide if your reason qualifies. The most commonly accepted reasons are medical expenses, job lay offs, and divorce but the bank considers many problems as hardships. They appraise the house to get an idea of how much to sell it for. The house is sold for less than is owed on the mortgage (you sell it “short” of your loan amount). The bank forgives the difference.

Another option is refinancing. Many homeowners cannot refinance because their house is upside down or underwater (you owe more on it than it is worth). Sometimes the bank will cooperate any way but, again, if you have more than one mortgage this is probably not an option for you unless you can refinance the amount you owe to both. There are some federal programs around to assist homeowners but they have very particular qualifications and you have to make every payment on time if they decide to give you a chance. Most consider these programs to be failures, but some people have successfully refinanced with them. Some of those programs are:

Homeowner Affordability and Stability Plan (HASP) also known as the Making Home Affordable Plan (MHAP)

Home Affordable Modification Program (HAMP)

Home Affordable Refinance Program (HARP)

Hope for Homeowners (H4H)

A new program to help with second mortgages (second lien, home equity loans) has just started too.

Home Equity Loan Modification (HELM)

Here is a good website for more information on the federal programs available

http://trackthestimulus.com/Home_Equity_Loan_Modification.aspx

bankruptcy, student loans, and judges

When the bankruptcy law was overhauled in 2005, there were major changes regarding discharge of student loans. In the last, certain student loans could be discharged including private, non-government guaranteed loans and ones that were very old. Now, even those cannot be discharged. The only exception is for “hardship” which has been decided is almost exclusively for permanent disability of the debtor or, maybe, the debtor’s child.

On another note, Judge Krum, the bankruptcy judge for the Western District of Virginia for over 20 years, announced that he is retiring. A new judge has not been determined yet.

In Frederick County, Virginia, we are still waiting to find out which judge the General Assembly will choose to replace Judge Prosser who retired in February of this year. There are several names up for consideration. Meanwhile, the circuit judges of Winchester and Shenandoah Counties along with retired judges from other circuits are doing their best to keep Frederick County’s docket current.

Welcome to my new blog about Virginia divorce and bankruptcy law

My name is Marilyn Solomon. I've practiced law in Virginia for over 20 years. My firm focuses on divorce and bankruptcy law, and I will be blogging about interesting aspects of both. If I have a chance, I will also answer questions from my blog followers so feel free to ask!

In July of this year, Virginia finally made a change to the property Virginia citizens are allowed to keep. You used to be able to keep $2,000 of equity or value in a vehicle. As of July 1, 2011, you can now keep up to $6,000 in a vehicle of your choice. You can also keep up to $3,000 in a gun. For more information about bankruptcy or divorce, please feel free to review my website at:
marilynsolomonlaw.com

I am now also offering super fast uncontested divorces in Virginia at very affordable prices. I can get people divorced in less than 3 weeks if both parties are willing to sign the papers. I can also handle a divorce anywhere in Virginia and over the internet or telephone so no appointment is necessary.

I look forward to hearing from you with questions and providing information as we go.

Sincerely,

Marilyn Solomon