Thursday, September 30, 2010

New Ban on Texting While Driving Goes Into Effect in Massachusetts Today

We don't typically handle many moving violations at Kelsey & Trask, but a new law in Massachusetts goes into effect today, banning text messaging while driving. As a public service announcement to our readers, the text of the statute that applies to drivers over the age of 18 (M.G.L. 90 § c. 12A) is reproduced below:

Section 12A. (a) No operator of a vehicle or vessel used in public transportation, including a train, passenger bus, school bus or other vehicle used to transport pupils, passenger ferry boat, water shuttle or other equipment used in public transportation owned by, or operated under the authority of the Massachusetts Bay Transportation Authority, the Woods Hole, Martha's Vineyard and Nantucket Steamship Authority, Massachusetts Port Authority, or the Massachusetts Department of Transportation, shall use a mobile telephone, hands-free mobile telephone or other mobile electronic device while operating such vehicle or vessel; provided, however that this section shall not apply to the operator of a vehicle or vessel used in public transportation using a mobile telephone, hands-free mobile telephone or mobile electronic device in the performance of the operator's official duties; provided, however, that in order for the use of any such device to be made "in the performance of the operator's official duties,'' such use must have been made in conformance with applicable written guidelines issued by a public entity listed in this paragraph relative to circumstances when operators are permitted to use said devices in the performance of their official duties or pursuant to directives from federal authorities having regulatory jurisdiction over such public entity's operations.

Whoever violates this section shall be punished by a fine of $500. A violation of this section shall not be a moving violation for purposes of the safe driver insurance plan under section 113B of chapter 175.

(b) It shall be an affirmative defense for an operator under this section to produce evidence that the use of a mobile telephone that is the basis of the alleged violation was in the case of an emergency. For the purpose of this paragraph, an emergency shall mean that the operator needed to communicate with another to report any of the following: (1) that the vehicle or vessel was disabled; (2) that medical attention or assistance was required on the vehicle or vessel; (3) that police intervention, fire department or other emergency services was necessary for the personal safety of a passenger or to otherwise ensure the safety of the passengers; or (4) that a disabled vehicle or an accident was present on a roadway.

The statute that applies specifically to drivers under the age of 18 (M.G.L. c. 90 § 8M) is as follows:

Section 8M. No person under 18 years of age shall use a mobile telephone, hands-free mobile telephone or mobile electronic device while operating a motor vehicle on any public way. For the purposes of this section, a junior operator shall not be considered to be operating a motor vehicle if the vehicle is stationary and not located in a part of the public way intended for travel.

A junior operator who violates the preceding paragraph shall be punished by a fine of $100 and shall have his license or permit suspended for 60 days for a first offense and shall not be eligible for license reinstatement until he also completes a program selected by the registrar that encourages attitudinal changes in young drivers; for a second offense by a fine of $250 and shall have his license or permit suspended for 180 days; and for a third or subsequent offense by a fine of $500 and shall have his license or permit suspended for 1 year.

It shall be an affirmative defense for a junior operator to produce evidence that the use of a mobile telephone, hands-free mobile telephone or mobile electronic device that is the basis of the alleged violation was for emergency purposes. For the purpose of this section, an emergency shall mean that the junior operator used the hands-free mobile telephone or mobile electronic device to communicate with another to report any of the following: (i) that the motor vehicle was disabled; (ii) that medical attention or assistance was required; (iii) that police intervention, fire department or other emergency service was necessary for the personal safety of the operator or a passenger; or (iv) that a disabled vehicle or an accident was present in the public way.

A penalty under this subsection shall not be a surchargeable offense under section 113B of chapter 175.

Monday, September 27, 2010

Inconvenient Convenience Accounts: What happens to a Joint Bank Account in Bankruptcy?

What is the effect of having your name on a joint bank account if you later file for bankruptcy?

Sometimes it just makes sense to give a trusted friend or family member access to our bank accounts. Commonly referred to as "convenience accounts," this often happens when parents wish to give their adult children the authority to take care of their affairs as they age by putting their child's name on their bank accounts. If that child later files for bankruptcy, a bankruptcy trustee might view the account as being the child's property, meaning that all or a portion of it may be at risk of being seized in bankruptcy proceedings.

In determining whether a convenience account is an asset which may be seized in a bankruptcy proceeding, courts will look at whether the original account holder intended to make a gift of access to the account or rather for their own convenience (so that an additional person could merely write checks to pay for the original account holder's bills), and the extent to which the additional person exercised ownership of the account (in other words, did he or she use the funds from the account for personal expenses, or was his or her use consistent with the original account holder's intent?). The law presumes that adding another person onto a bank account is a gift, which means that it can be difficult to convince a court that the additional person was added to the account for convenience, and the account should not be considered an asset to be seized in a bankruptcy proceeding.

The easiest way to avoid this risk is to execute a Durable Power of Attorney. This still allows for another person to write checks from your bank account should the need arise, and doesn't risk a bankruptcy trustee seizing your personal savings if your child files for bankruptcy.

If you need help weighing your options, contact Attorney Matthew Trask or call 508.655.5980 to schedule a one-hour consultation.

UPDATE! Reaffirmation of Mortgage Debt

Last week, we addressed whether or not a debtor should consider reaffirming mortgage debt to ensure that their right to remain in their home, in the event the debtor does not reaffirm debt secured by real property. One open question is whether a the failure to reaffirm a debt creates a risk that the lender may foreclose on an otherwise current mortgage gives the lender the right to immediately foreclose on the mortgage. Many mortgages contain a term whereby the act of filing bankruptcy constitutes a default, even if payments are current, and the bank can recover its security interest securing the loan.

Prior to the 2005 Bankruptcy Abuse Protection Act (“BAPCPA”) reforms, debtors could retain personal property (mortgages, car loans, etc.), provided they remained current on the monthly payments, called "ride through". However, BAPCPA largely eliminated the so-called “ride through” option for security interests in personal property; the result of which is that now, in order to keep personal property securing a loan, the debtor and creditor would have to execute a reaffirmation agreement. In a reaffirmation agreement, the creditor would contractually exclude the debt from discharge in bankruptcy.

While the law was clear that BAPCPA imposed a reaffirmation requirement on personal property transactions, the law made no clear indication as to whether a debtor could retain a security interest in real property, absent a reaffirmation agreement. Recently, in In re Caraballo, the Connecticut Bankruptcy Court addressed this issue, and determined that debtor’s ongoing retention of real property does not require the execution of a reaffirmation agreement. 386 B.R. 398, 400 (Bankr. D. Conn. 2008). As such, bankruptcy petitions may keep their property during and after bankruptcy, as long as they remain current on their payments. Additionally, the “ride through” option preserves the previous terms of the loan or finance agreement, thereby preventing creditors from imposing harsher terms on debtors during the bankruptcy process.”

The Caraballo court, in reaching its conclusion, held that the mortgage holder could not foreclose on the debtor who did not reaffirm as long as payments continued on the mortgage, thereby providing an additional layer of protection to a debtor who has not reaffirmed his mortgage debt (either intentionally or at the lender’s refusal), and adds an additional layer of complexity when determining whether or not to reaffirm mortgage debt.

Tuesday, September 21, 2010

Protecting your Home: Reaffirmation of Mortgage Debt

Upon filing for bankruptcy, the assisted debtor has the option of discharging mortgage debt, meaning that they are not obligated to continue to make a monthly mortgage payment. Of course, it is a near certainty that the secured creditor will foreclose on the mortgage and take the debtor’s house. Occasionally, during the course of a bankruptcy proceeding, a debtor will determine that it is in his or her best interest to keep their primary residence, and continue to pay the mortgage.

Reaffirmation is an undertaking not to be considered lightly. Once you receive a discharge under Chapter 7, you may not file bankruptcy again for 8 years. So, if you experience economic hardship after you have received your discharge and re-obligated yourself to pay the mortgage, you may be held personally liable for any deficiency in the event of a foreclosure. This could mean liens, wage garnishments and personal property attachments.

If you and your attorney believe it is in your best interest to reaffirm mortgage debt, you must execute a reaffirmation agreement: a contract between you and your creditor indicating that you wish to remain liable on a debt. The reaffirmation is complete when the creditor prepares the formal reaffirmation agreement, which the debtor reviews and signs, and is then filed with the bankruptcy court by the creditor.

Unfortunately, you cannot force a creditor to reaffirm a debt – you can only indicate your willingness to do so. A creditor’s refusal to reaffirm happens more often than you may think. Unlike personal property, the bankruptcy law does not require an executed reaffirmation agreement for a debtor to retain real property securing a debt. (Put another way, if your lender is unwilling to reaffirm your car loan, you can either pay off the loan in full or allow the lender to repossess the car. If your mortgage company refuses to reaffirm, there is no requirement that you must turn the house over to the bank unless the bank initiates a foreclosure). In the current market, lenders will rarely, if ever, attempt to foreclose on a loan if the creditor is current with the payments and remains current on the mortgage. Practically speaking, the lender wants to continue to earn interest on the loan and not inherit the burden and expense of foreclosing the mortgage and auctioning your property.

So, even if your lender refuses to reaffirm despite your intention to do so, if you stay current, you can keep the home. If the lender attempted to foreclose at a later date (say, when you had significant equity accumulated after paying down the principal), certain equitable remedies (e.g., latches) would provide you with a defense to a foreclosure action.

Often, the greatest impact of a bank’s refusal to reaffirm mortgage debt is that after discharge, subsequent “on time” payments will not be reflected on your credit report, thus hampering your ability to repair your credit post-discharge. To get 'credit' again, you may want to refinance, and you would start fresh with a new loan.

Tuesday, September 7, 2010

Can a Same-Sex Married Couple File for a Joint Bankruptcy?

UPDATE: On June 26, 2013, the Supreme Court of the United States declared in United States v. Wilson, that section 3 of DOMA (the "defense of marriage act") is unconstitutional.  Read our analysis of what this changes: SCOTUS decision on DOMA affects Joint Bankruptcies


A recent article in The Boston Globe indicated that bankruptcy filings are at an all-time high in Massachusetts (since the 2005 changes to the bankruptcy law went into effect). The reasons are varied: overwhelming debt, bad mortgages, a loss of income, or an effort to avoid foreclosure. These economic realities are blind to the sexual orientation or familial relationships of debtors. A down economy affects us all, whether we are gay or straight.

The U.S. Bankruptcy laws are some of the oldest in our country, predating even the Bill of Rights and, are intended to protect honest people who have experienced difficult financial hardships. Your sexual orientation should not affect how this law protects you, but it does.

Why is the law different for same-sex married couples?

The U.S. Bankruptcy Code is a federal program and is overseen by the U.S. Department of Justice. Although it is administered at a state level and each state has the ability to specify its own procedural rules and an alternate exemption scheme, the Bankruptcy Court applies federal law. Since the Bankruptcy Code applies federal, not state, law, bankruptcy courts are required to follow the requirements of DOMA and refuse to recognize joint bankruptcy filings by same-sex married couples. DOMA, short for the Defense of Marriage Act, is a federal law passed in 1996 that bars federal recognition of same-sex marriage in federal programs.

How is the law different for same-sex married couples?

Under the bankruptcy code, a heterosexual married couple can petition for relief jointly. Debts that are owned by either spouse individually, and/or by both spouses jointly can be discharged under one proceeding. Both debtor-spouses proceed through the bankruptcy process together under the same case, meaning that all conferences and appearances are jointly held with both debtors, and both spouses can count on consistent relief from one bankruptcy court judge and one bankruptcy trustee.

There is also a financial savings to filing jointly. Joint debtors pay only one filing fee for the petition (ranging from $274 to $1,049, depending on the chapter) and usually attorney’s charge less fees for one joint filing then they would for two separate individual filings.

Finally, there is a significant benefit to filing jointly because of how exemptions are calculated. Exemptions, i.e. the amount of property that cannot be taken to pay your debts, doubles for a joint filing, making it possible to protect more assets, regardless of which spouse owns the property.

What is the current law in effect?

Over the years, the bankruptcy court has refused to extend the benefits of a joint filing to same-sex couples. Decisions such as In re Allen, 186 B.R. 769, 773 (Bankr. N.D. Ga. 1995) held that two debtors were ineligible to file a joint bankruptcy petition because they were not legally married. A different court reached a similar result in 2004 with In re Kandu, 315 B.R. 123, 148 (Bankr. W.D. Wash. 2004), where the bankruptcy court, citing DOMA, dismissed a joint chapter 7 petition filed by a lesbian couple validly married in Canada. Despite the fact that they were validly married under Canadian law, the court cited that DOMA restricted marriage to heterosexual couples in the eyes of federal law, including the bankruptcy code, and refused to extend the federal benefits of a joint filing for bankruptcy to the debtors.

What has changed?

In Commonwealth of Massachusetts v. Health and Human Services and Gill v. Office of Personnel Management, the Massachusetts Attorney General and same-sex spouses, respectively, sought relief from the U.S. Court for the District of Massachusetts, requesting that the Court find DOMA unconstitutional for prohibiting the extension of federal benefits to same-sex spouses. The Court concluded that DOMA’s definition of marriage, and its attempts to limit the benefits thereof to heterosexual couples did not constitute a legitimate government interest, and was therefore, unconstitutional. U.S. District Judge for the District of Massachusetts, Joseph Tauro, wrote in the Gill decision: “As irrational prejudice plainly never constitutes a legitimate government interest, this court must hold that Section 3 of DOMA as applied to Plaintiffs violates the equal protection principles embodied in the Fifth Amendment to the United States Constitution.”

Although neither of these cases dealt directly with the federal benefit of joint bankruptcy filing, the door is now open to argue that married same-sex joint debtors may rely on the Court’s decision in Gill, and obtain the same legal and practical benefits of a joint bankruptcy filing.

Despite the court’s recent decision, DOMA is still the law, and we would anticipate that a bankruptcy Trustee would likely move to dismiss any joint filing by a same-sex marriage until there is a case which deals specifically with this issue (or DOMA is repealed). However, given the rationale provided in Gill, we believe a debtor stands a reasonable chance of succeeding before the bankruptcy appellate panel or the U.S. District Court if that specific issue were presented on appeal.

How can we help?

Kelsey & Trask, P.C. understands that not everyone wants to be a constitutional test case, and for some, operating within the restraints of the law, no matter how unfair, is better in the short term than changing the legal thinking of an entire system. We recognize the limitations and restrictions presented by DOMA. While we cannot extend all benefits of a joint filing, we do recognize and support the same-sex community.

If you need assistance in the bankruptcy court, we will not charge you as separate clients; rather, we will charge the same fee as we would any married couple. We will also do our best to ensure your cases are presented to the same trustee, and remain in front of the same Judge, by filing them simultaneously (giving them the best chance to be in front of the same trustee and Judge).

Joint filings were created in order to protect the family unit and allow for collective financial planning. While federal law currently chooses to deny same-sex married couples from such federal benefits, we have chosen to treat same-sex married couples with the same dignity and treatment as their heterosexual counterparts. It is not a perfect solution, but if it helps your family to get a fresh start, we don’t want you to go alone.

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