Bankruptcy & Litigation Series: #10 Criminal Cases

Over the course of our bankruptcy & litigation series we have explored many ways that a bankruptcy can affect the course or outcome of a civil case.  Criminal cases, however, are not typically affected by bankruptcy.

The Automatic Stay will not stay the imposition of a criminal sentence or criminal penalty.

Criminal penalties are non-dischargable to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.

Additionally, debts arising out of frivolous claims filed by prisoners are not dischargable.

Bankruptcy & Litigation Series: #9 Personal Injury & Torts - Defendant Bankruptcy

Personal injury proceedings where the debtor is the defendant are automatically stayed pursuant to 11 U.S.C. s. 362.  The debtor or debtor's counsel should file a Suggestion of Bankruptcy in the civil suit, but NOT filing a suggestion of bankruptcy does not have any prejudicial effect.  The Plaintiff should file a proof of claim if the case is filed under Chapter 11 or Chapter 13, or in a Chapter 7 where there are assets to distribute. The underlying debt will be included in the debtor's discharge, and should the Plaintiff pursue the case, will be in contempt of either the Order of Discharge or the Order of Automatic Stay, and face civil contempt penalties, including being forced to compensate the debtor for actual damages, attorney's fees and punitive damages.

Note that depending on the case, certain damages claimed in a civil or personal injury suit are not dischargable:

1 Debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
2. for willful and malicious injury by the debtor to another entity or to the property of another entity;
3. for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance

See complete list at 11 U.S.C. s. 523.

What if there are multiple defendants?

In cases where there are multiple defendants, the case will be stayed as to the debtor, but the case WILL proceed as to the remaining defendants.  See 11 U.S.C. s. 362.

If you are a defendant and file for bankruptcy, the case will be stayed with respect to you while you are in bankruptcy, but may proceed against other named defendants.

Bankruptcy & Litigation Series: #8 Personal Injury & Torts - Plaintiff Bankruptcy

If you are the Plaintiff in a personal injury case and you file bankruptcy, it is generally a good idea to file a suggestion of bankruptcy to alert the court to the bankruptcy filing.  Most courts will temporary delay the hearing of the case, however 11 U.S.C. s. 362 is not designed for this application.  

Ultimately, the suit itself is an asset of the bankruptcy estate.  Like any other asset, it may be exempt depending on the value of the potential claim.  In the event that it is not exempt (and at all times before being abandoned by the trustee), the Trustee steps into the plaintiff's shoes during the administration of the bankruptcy estate.  The Chapter 7 trustee may then offer to settle, or compel the debtor to pursue the suit (although the Trustee will bear the cost of compensating counsel for any post-petition legal fees).  Any proceeds obtained during the suit (less any exempt portions of any receipts) will be turned over to the trustee as property of the bankruptcy estate and distributed to creditors.   Note that there are additional exemptions for personal injury cases in bankruptcy:  

1. $22,975 for personal injury damages, but not any recovery for pain and suffering or pecuniary loss

2. 100% of any award for loss of future earnings needed for support

3. 100% of any recovery for wrongful death of person you were a dependent of needed for support, and

4. 100% of any award of compensation received for being a crime victim.

5. Pain and suffering and pecuniary loss damages may be exempted under the wildcard exemption and/or unused home equity exemptions 11 U.S.C. 522 (d)(5). 

Therefore, if you are a personal injury plaintiff and file for bankruptcy during the pendency of your case or the possibility of bankruptcy is on the horizon at the conclusion of your case, it is important to work with your personal injury attorney to structure the settlement of your case in a way that maximizes the potential exemptions. 

Practice Tips:

1. If you are close to a personal injury settlement, make sure you consult with a bankruptcy attorney first.
2. Try to settle out the PI case before filing. A right to sue is an asset, and can be taken by the trustee if not exempt, and the trustee then decides how to settle the case.
3. Make sure your PI attorney considers how to structure your settlement in a way that protects as much of the judgment as possible: there are limits to the amount of personal injury damages that can be exempted ($21,625.00), but awards for future medical payments, lost earnings, disability payments, wrongful death and crime victims reparations are exempt 100%.

Bankruptcy & Litigation Series: #7 Foreclosures and Short Sales

Foreclosures are down for the sixteenth straight month in Massachusetts (Source: Massachusetts Real Estate: Foreclosure Activity down yet again).  Whether you credit government intervention programs, improvements in the economy, or something else, this is good news for most people.  However, not everyone will be able to avoid a foreclosure of their property.

Homeowners encounter serious problems when they cannot pay (and have not paid) the mortgage especially if they have negative equity in the property (meaning that the mortgage is more than the fair market value).

Whether you took on a mortgage payment that you could not afford - i.e., purchased "too much house" - or some other temporary situation has impacted your finances such as an unexpected medical expense, loss of a job or other significant interruption in income, the bank will begin threatening foreclosure when you get behind on payments.  At this point, you must weigh your options.

If you can afford your mortgage payment and have just gotten behind then you may be able to work out a mortgage modification directly with your bank, but if they are not willing or able to work with you then bankruptcy can forestall a foreclosure proceeding.  In a Chapter 7 bankruptcy, you will have to pay any mortgage arrears if you want to keep the property, but the foreclosure will likely be delayed partially during the process.  In a Chapter 13 bankruptcy, the mortgage arrears can be included in your payment plan so long as they will result in a full payoff of the arrears by the end of the plan.

If you can't afford the payments, and your financial situation does not permit a mortgage modification, then your options may include bankruptcy, short sale, or foreclosure, or some combination of those.

Short Sales:

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Borrowers are able to mitigate damage to their credit history, and partially control the debt. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer. The borrower must work directly with the lender to seek approval of the short sale by the bank, obtain a purchaser, and complete the transaction before any foreclosure proceedings are completed. (In some cases, the bank may have initiated foreclosure proceedings, in addition to contemplating consent for the short sale.) Timing is critically important, and the debtor is an important part of the short sale process.

However, if the individual does not then pay off the deficient portion of the mortgage (the unpaid portion of the mortgage after the short sale proceeds were applied to the balance), the lender can take further legal action against the debtor to collect the unpaid portion of the mortgage, which may include trustee process attachments, garnishments, or seizure of other assets, depending on the debtor's other property. The debtor may, after the short sale is complete, file for Bankruptcy upon completion of the short sale to discharge any deficiency and extinguish any further liability to the lender.  If the homeowner is already in bankruptcy, they will need the trustee or court's approval to transfer the property in a short sale.

Foreclosure and Bankruptcy:

A final option is to simply file for bankruptcy, and indicate that the debtor's intention is to surrender the property to the bank. Procedurally, the Bankruptcy case will progress through the Bankruptcy Court, and eventually the secured lender will seek permission from the Bankruptcy Court to be relieved of the automatic stay protections, and begin foreclosure proceedings. Regardless of whether the foreclosure auction is completed by the bank before or after the debtor's discharge (meaning they no longer owe certain debts, including the mortgage debt), any deficiency from the foreclosure auction is discharged by the bankruptcy court. From the debtor's perspective, the whole process is completed through the bankruptcy, and does not require any specific participation directly with the lender.

This option provides a swift resolution to the issue of past-due mortgage debt, the pending foreclosure on the property, and any mortgage deficiency all in one process that, in the case of a Chapter 7 bankruptcy, can be completed from filing to discharge in under six months. It is best utilized when the lender will not agree to a short sale, when there is insufficient time to arrange a short sale, or when the debtor's other financial concerns (such as collection actions on other debt) require immediate action. It also does not require the lender's permission or cooperation - provided you qualify for bankruptcy, the Bankruptcy Laws dictate the result, not the lender's business decision.

The credit implications of a foreclosure and bankruptcy (or in the context of bankruptcy) are more detrimental than a short sale followed by bankruptcy, if the debtor wants to obtain a mortgage again in the future.

Bankruptcy & Litigation Series: #6 Eviction - Tenant Bankruptcy

When one of the parties in a landlord-tenant relationship goes bankrupt, the result is very different depending on whether it is the landlord or the tenant.  As described in the previous post, when the landlord files for bankruptcy, the lease may continue even if the landlord abandons it to the trustee.  But what happens to a Landlord or Eviction Suit when the Tenant files for bankruptcy?

Just like a collection action, an Eviction proceeding is automatically stayed during the pendency of the filing.

The tenant can elect to assume or reject the lease.  If the tenant assumes the lease, any arrears must be brought current.  The landlord can file a motion for relief from stay to proceed with the eviction, but cannot pursue the debtor for pre-petition unpaid rents.   If the debtor assumes the lease, his financial obligations to the tenant must be either current, or in the case of a debtor in possession, must provide adequate assurances (in the form of money) that he can continue to afford his maintenance of the lease obligations.  Otherwise, the lease is deemed rejected.

Bankruptcy & Litigation Series: #5 Eviction - Landlord Bankruptcy

The tenant will receive a notice of bankruptcy.  A landlord can elect to assume (i.e., keep) or reject (i.e., end) a lease per 11 U.S.C. s. 365.

If the debtor-landlord elects to reject the lease, the terms of the lease can be administered by the trustee.  If the debtor assumes the lease, his financial obligations to the tenant must be either current, or in the case of a debtor in possession, must provide adequate assurances (in the form of money) that he can continue to afford his maintenance of the lease obligations.  Otherwise, the lease is deemed rejected.  If a tenant will be displaced by a debtor-landlord, he should file a proof of claim for his damages, and will be compensated pro-rata in the event that there are any bankruptcy assets.

Bankruptcy & Litigation Series: #4 Collections - Defendant Bankruptcy

When one of the parties in a collection action goes bankrupt, the result is very different depending on whether it is the defendant or the plaintiff.  As described in this previous post, when the Plaintiff files for bankruptcy, the suit may continue but becomes an asset of the estate.  But what happens to a collection suit when the Defendant files for bankruptcy?

Collection proceedings against a debtor are automatically stayed pursuant to 11 U.S.C. s. 362.  The debtor or debtor's counsel should file a Suggestion of Bankruptcy in the civil suit, but NOT filing a suggestion of bankruptcy does not have any prejudicial effect.

The Plaintiff should file a proof of claim if the case is filed under Chapter 11 or Chapter 13, or in a Chapter 7 where there are assets to distribute. The underlying debt will be included in the debtor's discharge, and should the Plaintiff pursue the case, will be in contempt of either the Order of Discharge or the Order of Automatic Stay, and face civil contempt penalties, including being forced to compensate the debtor for actual damages, attorney's fees and punitive damages.

What if there are multiple defendants?

In cases where there are multiple defendants, the case will be stayed as to the debtor, but the case WILL proceed as to the remaining defendants.  See 11 U.S.C. s. 362

Note that depending on the case, certain damages claimed in a civil or personal injury suit are not dischargable:

1. Money, property or services or an extension of credit obtained by false pretenses or actual fraud; or by a false statement
2. Debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
3. domestic support obligations
4. Debts for, what is essentially, bank fraud
5. for any payment of an order of restitution issued under title 18, United States Code
6. Election law penalties
7. Certain condo fees

See complete list at 11 U.S.C. s. 523.

Bankruptcy & Litigation Series: #3 Collections - Plaintiff Bankruptcy

A bankruptcy case can impact other litigation in many ways.  Some cases will be halted automatically by the filing of a bankruptcy due to the automatic stay.  Others might not be stopped, but might not be controlled by the bankruptcy trustee.  And some cases may not be affected at all.  Navigating these interactions can be difficult even for attorneys who are experts in other areas of the law if they don't practice in the bankruptcy court.

What happens to a Collection suit when the Plaintiff files for bankruptcy? 

It is generally a good idea to file a suggestion of bankruptcy to alert the court to the bankruptcy filing.  Most courts will temporary delay the hearing of the case, however 11 U.S.C. s. 362 is not designed for this application.  Ultimately, the suit itself is an asset of the bankruptcy estate.  Like any other asset, it may be exempt depending on the value of the potential claim.  In the event that it is not exempt (and at all times before being abandoned by the trustee), the Trustee steps into the plaintiff's shoes during the administration of the bankruptcy estate.

The Chapter 7 trustee may then offer to settle, or compel the debtor to pursue the suit (although the Trustee will bear the cost of compensating counsel for any post-petition legal fees).  Any proceeds obtained during the suit (less any exempt portions) will be turned over to the trustee as property of the bankruptcy estate and distributed to creditors.

If I move to Massachusetts, do I need to register my guns?

If you are moving to Massachusetts and bringing firearms, you should first obtain the appropriate license and ensure your firearms are legal to possess as previously outlined in this post: I am moving to Massachusetts from another state, do I need a gun license?

Assuming you have obtained the proper license and your firearms are legal to possess under that license, then you are not required to register firearms you brought with you as a new Massachusetts resident under the current statute.  The E-FA-10 registry system allows you to register your firearms if you want to, as described further in this previous post: Do guns in Massachusetts need to be registered?

Be careful not to confuse a relocation situation with the requirement to register firearms purchased from an out-of-state dealer.  If you are a Massachusetts Resident, and the firearms were directly obtained from an out-of-state dealer, then you would have to register them under this system.

Given the intricacies of Massachusetts firearms laws and the unique legal issues facing firearms owners in the Commonwealth, it is advisable to have an attorney who understands and practices in firearms law, criminal law and civil litigation.

Do guns in Massachusetts need to be registered?

In specific circumstances firearms are required to reported to the Massachusetts Firearms Records Bureau, a division of the Executive Office of Public Safety and Security (EOPSS).  This form of “registration” is handled at a state level, and not by the individual town police departments.

That being said, Massachusetts does not have a firearm registration system, per se.  However, the personal sale, transfer or acquisition of firearms by a Massachusetts resident must be recorded with the Massachusetts Firearms Records Bureau.  Therefore, there is a de facto registration requirement, but it does not apply in all cases.  Registration is accomplished by completing a “FA-10” (hard copy) or “E-FA-10” (electronically-submitted) form.  The submission of an FA-10 or E-FA-10 is required when:

1. You personally buy or sell a firearm in a personal transaction (of which you are permitted only four (4) per calendar year);
2. You are a Massachusetts resident and obtained a firearm from an out-of-state dealer;
3.  The loss or theft of a firearm (additional requirements apply);
4.  You acquire a firearm by inheritance.

Additionally, the E-FA-10 system will permit you to “register” firearms in other circumstances, such as:

1. You moved into Massachusetts from out-of-state, and wish to register your firearms;
2. You are in possession of firearms where no previous FA-10 has been submitted.
3. You have surrendered a firearm to the police.

The launch of the E-FA-10 system in Massachusetts this past year was met with significant opposition from the firearms community, as it inaccurately describes the law, and would seem to coerce registration in circumstances where no registration is required.  For example, there is no current statutory requirement that the firearms, brought in from out of state when a new Massachusetts resident moves from another state, must be “registered” or an FA-10 must be submitted.  Be careful not to confuse a relocation situation, though, with the requirement to register firearms purchased from an out-of-state dealer.

Given the intricacies of Massachusetts firearms laws and the unique legal issues facing firearms owners in the Commonwealth, it is advisable to have an attorney who understands and practices in firearms law, criminal law and civil litigation.

I am moving to Massachusetts from another state, do I need a gun license?

If you wish to bring guns with you from another state to Massachusetts, or to purchase and possess firearms in Massachusetts, then you need to obtain a license.  To obtain an LTC (License to Carry) or an FID (Firearms Identification Card) you need to follow the same process as a current resident of Massachusetts, which we outline in this previous post: How do I obtain a gun license in Massachusetts?

Some firearms or accessories that may be legal in other states may not be legal in Massachusetts or may only be legal to possess if you obtain the full LTC/A.  You should confirm that any firearms you bring in are legal to possess in Massachusetts and that you have applied for the correct license to possess that firearm.

It is also important to note that the law exempts the move in and possession of firearms in the home for new residents for sixty (60) days.  Until you receive the proper license, do not transport any firearms and/or ammunition.

While there is this “grace period” for new residents, new license applications are taking more than the 60 days allotted by statute so you should apply right away.  Additionally, it may be necessary to temporarily store your firearms with a properly-licensed individual or FFL until your license is approved to be in full compliance with the law.

How do I obtain a gun license in Massachusetts?

In Massachusetts to legally possess firearms you need to have an LTC (License to Carry) or a FID (Firearms Identification Card).  Since the LTC allows you to possess more types of firearms than the FID and obtaining an LTC/A (Class A) will also grant you the rights and privileges that attach under the lesser FID, we recommend that everyone apply for an LTC/A.  You do not need to apply for both licenses.  (See M.G.L. c. 140 §§ 129B and 131).

You will need to apply to the Chief of Police of the Massachusetts town in which you reside, or, if you own a business, the Town in which you reside or own a business.  The official state application for an LTC/A is a three-page form; however some towns have additional requirements, such as additional letters of recommendation, or request that you sign a memorandums on the lawful use of force.

We suggest that you contact the police department in the town you intend to reside, and request their “packet”, which will have all the forms required.  The fee to apply for an LTC/A is $100.00.  (See M.G.L. c. 140 § 131).

Before you can submit your application, you will need to take a firearms safety course approved by the Massachusetts State Police.  There are a number of certified courses available, and you should not have any difficulty obtaining a safety course certificate.  Most instructors charge between $60.00 and $100.00 for the basic firearms safety course, and the course generally runs four (4) hours.  When signing up for the course, be sure to confirm beforehand that the course is sufficient to obtain your LTC.

Even once you have your LTC/A there are many restrictions on the types of firearms you can own in Massachusetts and on how you must store and otherwise maintain them.  Given the intricacies of Massachusetts firearms laws and the unique legal issues facing firearms owners in the Commonwealth, it is advisable to have an attorney who understands and practices in firearms law, criminal law and civil litigation.

Can I Expunge a Criminal Conviction in Massachusetts?

Unlike some other states, Massachusetts does not have an Expungement statute.  It is not possible to expunge a conviction in Massachusetts.  In fact, the Massachusetts Supreme Judicial Court recently ruled again in Commonwealth v. Moe 463 Mass. 370 (2012) that the Court lacks the authority to order a record expunged, even where the resulting record is the result of fraud on the Court.

It is sometimes possible to reopen a trial and undo a conviction, but this can only be done in very specific circumstances, and the arrest will still appear on your record.  Attorney Trask was successful in one case in reopening a juvenile conviction from almost thirty years earlier and thereafter having the charges dismissed based on the client's clean record since.  While the original conviction is no longer on the record, the charge is not expunged.

It is sometimes possible to seal a record, so that access to the record is prevented from certain requests.  For more information on that possibility read our previous post entitled: Can I Seal My Criminal Record in Massachusetts?

Do the New Child Support Guidelines affect my Bankruptcy Case?

On Thursday, June 20, 2013 Chief Justice of the Massachusetts Trial Court, Robert A. Mulligan, announced via Press Release the latest revisions to the Massachusetts Child Support Guidelines which will become effective on August 1, 2013.  We have provided a summary of the new Guidelines here.

The new guidelines will result in a typical reduction of between 10 and 15% for most cases, which could also affect bankruptcy cases.

Here are a few of the ways in which a change in child support could affect your bankruptcy case:

1. If you pay child support and are in the process of filing for bankruptcy, the budget your are preparing as part of the required schedules and your means test qualification calculations can both change if your child support changes.
    
2. If you receive child support and are in the process of filing for bankruptcy, your income and your means test qualification calculations can both change if your child support changes.
    
3. If you receive child support and you have already filed a Chapter 7 liquidation bankruptcy but have not received a discharge yet, a change in child support could require amending your filings to update your current income (or you might be asked this question at your Section 341 meeting).
    
4. If you receive or pay child support and you are currently paying a Chapter 13 bankruptcy plan, your plan payment could be affected by a change in support and you may need to file an amended plan and notify the trustee of the change.

These are just a few of the ways that a child support change could affect a bankruptcy filing, and if you believe that you might be subject to a child support modification you should also discuss this issue with your bankruptcy counsel.

SCOTUS decision on DOMA affects Joint Bankruptcies

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. Previously this section prevented federal agencies from treating same-sex marriages as marriages for benefits and tax purposes. This means that many federal spousal benefits (such as spousal benefits for federal workers) were not be available to same-sex spouses.

Additionally, for Federal tax returns, same-sex married couples could not file under married status. The ruling in Wilson changed all this and for federal purposes marriages valid in Massachusetts are now also recognized by the federal government.

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 law, bankruptcy courts were required to follow the requirements of DOMA (the Defense of Marriage Act) and refuse to recognize joint bankruptcy filings by same-sex married couples.  Under DOMA section 3 the definition of marriage for federal law was limited to marriage between one man and one woman, thereby excluding same-sex marriages from federal recognition.

The Wilson decision now provides same-sex married couples the same bankruptcy benefits as all other married couples including:

1. A married couple can petition for relief jointly. 
2. Debts that are owned by either spouse individually, and/or by both spouses jointly can be discharged under one proceeding. 
3. 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. 
4. There is 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.
5. There is also 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.

Can I Seal My Criminal Record in Massachusetts?

sealing records. The act or practice of officially preventing access to a particular (esp. juvenile-criminal) records, in absence of a court order. See expungement.

expungement of record. The removal of a conviction (esp. for a first offence) from a person’s criminal record.

(Black’s Law Dictionary – Seventh Edition)

Under the Massachusetts 2010 Criminal Offender Record Information (CORI) Reform Act, an individual convicted of a crime (including entry of a plea of guilty) may seek permission from the court to seal (restrict access to information regarding the conviction) but not expunge (remove the conviction) from their criminal record.

Records may be sealed in generally three circumstances for most convictions:

1. Upon the expiration of time (10 years for a felony conviction; 5 years for a misdemeanor conviction)
    
2. Cases that were dismissed without probation, or that resulted in a not guilty finding may be sealed immediately; and
    
3. Offences that are no longer a crime (e.g., possession of less than one ounce of marijuana).

Determining when a record may be sealed is important. The waiting period is calculated from the date that the convicted person was released from custody, if incarcerated; or if the defendant was not incarcerated, the date of the disposition of the case. Additionally, conviction of any subsequent offence will reset the timing. This means that the five/ten year rule is determined from the date of the last criminal conviction.

In instances where there is no conviction (including a continuation without finding without probation, an acquittal, a finding of no probable cause, or a nolle prosequi), a petition to seal records may be filed immediately, but the Court must make a specific finding on the record that by sealing, substantial justice must be served. A vague risk of future harm, including a general threat to reputation or privacy is insufficient.

Are there any exceptions?

Yes.

Certain sex offenses can be sealed after 15 years, provided that the defendant has no duty to register as a sex offender and/or was never, at any time classified as a Level 2 or Level 3 sex offender. Otherwise, sex offense convictions may not be sealed. Crimes against public justice, such as perjury, filing a false report, witness intimidation, escape from custody and resisting arrest, as well as certain firearms offenses cannot be sealed under any circumstances.

Bankruptcy & Litigation Series: #2 My Ex is filing Bankruptcy!

While we have previously posted about the many issues that can arise when a bankruptcy happens at the same times as a divorce, what happens if a bankruptcy is filed after the divorce is final?

If a Bankruptcy action is filed immediately after the divorce becomes final it is possible for the Bankruptcy Court to undo the Agreement or Judgment of the Divorce Court if it appears the parties were attempting to defraud creditors (for instance if all of the assets were transferred to the non-debtor spouse rather than split equitably).  If the division is equitable, though, then it is unlikely that the Bankruptcy Court would want to revisit the divorce division.

However, the debtor might be bound to make payments in the divorce case which could affect eligibility for bankruptcy, and might have made promises to divide property that is now an issue. Domestic Relations Orders are non-dischargeable in most cases and therefore the decisions made in a divorce settlement, will have significant impact on what can and can't be discharged in the bankruptcy. There are three main areas where a bankruptcy can affect or be affected by a divorce judgment:  property division issues, support issues, and joint debts.

Property Division Issues in a Post-Divorce Bankruptcy:

If a divorce judgement requires that certain property be transferred from the debtor to their ex-spouse then the bankruptcy could affect that transfer.  If the transfer is made within 1 year prior to the bankruptcy then this could be considered a transfer to an insider and if it is not for fair value (for instance if the property division was not equitable), then the bankruptcy court can, upon motion of the trustee, require that the property be returned to the debtor's estate.

If the transfer hasn't been made yet, then that property is included in the debtor spouse's bankruptcy estate and the ex-spouse becomes another creditor of the estate.  Whether they take priority or not will depend on the nature of the property to be divided, and whether their claim is a non-dischargable domestic relations order or not.  Domestic relations orders are treated slightly differently for Chapter 7 and Chapter 13 bankruptcies, so the type of bankruptcy that is filed may also affect whether the property transfer is required or not.

Usually a failure to transfer property required by a Divorce Judgment would subject the debtor spouse to a Complaint for Contempt in the Probate & Family Court.  However, the Bankruptcy Court takes precedence and the Automatic Stay prevents creditors (even ex-spouses) from proceeding in other courts without first getting the permission of the Bankruptcy Court.

Support Issues in a Post-Divorce Bankruptcy:

Alimony and Child Support are considered Domestic Support Obligations, which are non-dischargable and must be paid by the debtor in a bankruptcy.  Any child support or alimony arrears are non-discharable in a bankruptcy and take priority over other debts.  In addition, if the family court awards the costs and attorneys fees of collecting alimony and child support in a Contempt action, those debts are non-dischargable as well.  In a Chapter 13, arrears may be paid overtime as part of the plan, but in a Chapter 7 they remain due immediately.

Practically speaking, going through a bankruptcy, might gain a debtor spouse some leeway from the Probate & Family Court in obtaining a payment plan for payback of the arrears, but they will still need to be paid.  If the ongoing support order itself is incorrect or onerous, this cannot be changed in the Bankruptcy Court, but can still be revisited by the Probate & Family Court by the filing of a Complaint for Modification.

If the debtor spouse is receiving child support or alimony this counts towards their income for bankruptcy means test purposes.  If it is owed but is not being paid then it does not need to be included, though the arrears may be an asset that should be listed.

Joint Debt Issues in a Post-Divorce Bankruptcy:

Post-Divorce there may be debts for which both parties are liable to the creditor but one or the other party has agreed (or been ordered) as part of the divorce to pay these debts.  Some typical examples of joint debts are home mortgages, joint credit cards, joint tax debt, and co-signed car loans.  If a joint debt is not paid off in the divorce, then from the creditor's perspective it is still owed by both parties.  If the divorce judgment requires one spouse to pay the debt and they do not make payment, it will affect both spouse's credit and the creditor can come after either or both of them to collect.  The spouse who was supposed to be protected in the divorce can likely file a Complaint for Contempt against the other spouse but this won't undo any credit damage and doesn't stop the collection action by the creditor.

In a Bankruptcy, the debtor is required to list co-debtors and the Bankruptcy Court can discharge debts to the third party creditor.  Whether or not the obligation of a debtor spouse to their ex-spouse is also discharged will depend on whether or not it is considered a domestic support obligation or non-dischargable domestic relations order.  It is likely important for the ex-spouse to participate in the bankruptcy and file a Proof of Claim if they believe there is an obligation to them as well as the creditor.  However, it is also important to note that even if a debt is non-dischargable, as a practical matter it may still be difficult to collect.  A debtor with no assets, found in Contempt in the Probate & Family Court, may not be able to pay the joint debt and the creditor will still pursue the non-bankrupt spouse.  It is therefore important to anticipate potential issues such as this at the time of the divorce, especially if it is obvious that one spouse's budget will not allow them to pay the bills they are agreeing to pay.

My Firearms License Application was Denied. Can I appeal?

There are two categories of reasons your application for a firearms license may be denied.

An application for a License to Carry Firearms will be denied if you are disqualified under the terms of M.G.L. c. 140, s. 131. Generally, if you have been convicted of any crime punishable by more than 2 1/2 years in prison, been convicted of a violent crime or crime involving firearms, controlled substances, or any other felony, you are ineligible to obtain a license to carry firearms (LTC). You may also be unable to obtain an LTC if you have been treated for substance abuse addiction, or been confined to an institution for mental illness.

However, even if you have not been convicted of a disqualifying offense, the Chief Law Enforcement Officer in your town must still subjectively determine that you are "suitable" to possess firearms. Even if you are statutorily eligible to obtain an LTC, if the police chief finds you "unsuitable", your license will be denied. The Chief Law Enforcement Officer may consider nearly any evidence at his or her disposal, including police reports, court records that did not result in convictions, sealed records, the applicant's truthfulness on the application, and a number of other subjective factors.

Appeals to District Court

A denial made on the basis of "suitability" must be challenged in the District Court where the applicant resides. The burden of proof is on the applicant to prove that the chief's decision to deny the license to carry firearms was "arbitrary and capricious".

Appeals to the FLRB

A denial made on the basis of the applicant's statutory ineligibility may, in certain cases, petition the Firearm License Review Board for a determination that the conviction is not to be considered a statutory barrier to obtaining the sought after license. The FLRB only has the authority to review certain misdemeanor convictions, and the burden of proof falls on the petitioner to demonstrate that the disqualifying conviction does not impact their suitability to possess a firearm.

It is important that you understand that the Firearms Licensing Board (FLRB) has the authority to review only misdemeanor convictions, and that the FLRB may not review convictions for:

a) an assault or battery on a family or household member, or a person with whom you have had a substantive dating relationship, as defined by G.L. c. 209A, § 1;

b) a crime involving use, possession, ownership, transfer, purchase, sale, lease, rental, receipt or transportation of weapons or ammunition for which a term of imprisonment may be imposed; or

c) a crime regulating the use, possession or sale of controlled substances.

In addition, the statute specifies that the FLRB may not review a petition if the petitioner:

a) has a disqualifying felony conviction;

b) has multiple misdemeanor convictions, unless the offenses arise from one incident;

c) was denied a license to carry on the basis of suitability rather than a disqualifying conviction (the District Court is the appropriate forum for appeal in this case); or

d) is disqualified for a reason other than a misdemeanor conviction, such as having an active warrant or restraining order.

Finally, the FLRB may not review a petition until after the passage of five (5) years since the misdemeanor conviction or release from supervision, whichever is last occurring.

Also note that a decision by the FLRB in the applicant's favor does not automatically grant a firearms license - the chief of police may still exercise his or her discretion with respect to the applicant's overall suitability. The FLRB can only grant state relief to the issue of statutory ineligibility

Can a "Federally Prohibited Person" still obtain a Massachusetts FID Card?

An applicant seeking to possess certain firearms in Massachusetts may obtain a Massachusetts Firearm Identification Card (FID) even if they have been previously convicted of certain offenses. Under state law, as long as at least five years have passed since the completion of the imposed sentence on certain non-violent felony offenses as either an adult or juvenile; convictions for the use, possession or sale of controlled substances; conviction of certain non-violent misdemeanors punishable by imprisonment for more than two years; or the conviction under any law relating to weapons or ammunition for which imprisonment may be imposed, the Commonwealth of Massachusetts shall issue the applicant a Firearms Identification Card.

However, an applicant with any criminal record should proceed extremely cautiously. Even though Massachusetts has issued an FID, the possession of a firearm by certain individuals convicted of the above offenses may still be federally prohibited from possessing firearms, and doing so is a crime punishable by up to ten years in federal prison.

Every time you purchase a firearm from a licensed dealer, the dealer will complete a form ATF 4473, and will perform a NICS check with the FBI to ensure you are not a "Federally Prohibited Person" as defined in the Brady Handgun Violence Prevention Act (18 U.S.C. § 922(g)). The information supplied on form ATF 4473 will be run through millions of electronic records in state and federal databases to see if the person trying to buy the firearm meets one of nine different categories of reasons for which federal law would prohibit them from being in possession of a firearm. Under federal law, the conviction of many of the crimes described above will create a permanent federal prohibition on firearms ownership.

Should the instant records check discover information which establishes you are ineligible to possess a firearm, your transaction will be denied (i.e., you can't purchase the gun), but the story does not end there.

A Brady denial means it is illegal for you to be in possession of any firearms, even those you already own at home, and even if you were able to obtain a Massachusetts FID Card. If you want to avoid possible seizure and forfeiture of your guns, get them into storage with either an FFL or transferred to a friend or relative who you know is legal to possess firearms and who agrees to hold them and not let you have them until your situation is resolved. You may need to memorialize this transfer on an FA-10 or E-FA-10, if you are in Massachusetts.

Once you get your guns safe and receive the statement of reasons for your denial, you should contact an attorney who is familiar with the field of firearms law.

Median Family Income Figures for Chapter 7 Qualification Rise April 2013

Every six months the United States Department of Justice releases new Median Family income figures for each state and territory. These figures are used to calculate a debtor's eligibility to file for bankruptcy under Chapter 7 of the Bankruptcy Code. If a debtor's income is greater than the median income for their state of residence and family size, they many not be able to file a Chapter 7 bankruptcy case.

The Means Test calculation compares the average monthly income (as calculated over the last six (6) months) to the median family income in a debtor's state for a household of their size. If the average monthly income is lower than the median family income for the debtor's state of residence and family size, then they pass the means test and there is a presumption that they may file for Chapter 7 relief.

The Median Family Income for Massachusetts as of November 1, 2012 were as follows:

Family size 1: $54,475 per year
Family size 2: $66,076 per year
Family size 3: $80,822 per year
Family size 4: $101,523 per year

add an additional $7,500 per year for each additional household member.

These figures went down slightly in each category from these figures.

The Median Family Income for Massachusetts as of April 1, 2013 are as follows:

Family size 1: $55,602 per year
Family size 2: $67,443 per year
Family size 3: $82,495 per year
Family size 4: $103,624 per year

add an additional $8,100 per year for each additional household member.

If your income is greater than the median income for your state of residence and family size, you still might meet part (b) of the means test after taking into consideration certain expenses as defined by the Bankruptcy Code and other deductions, including regular charitable donations (up to 15% of your income), school expenses, payments on 401(k)/IRA loans, and health Insurance. If you are subject to this calculation an attorney can help you perform this task.

Click here to learn more about The Means Test or use our Means Test Calculator.

To have an attorney help you with these calculations call 508.655.5980 to schedule a consultation or e-mail us here.

Bankruptcy & Litigation Series: #1 Divorce

When a bankruptcy is filed, the automatic stay precludes creditors from proceeding in lawsuits against the debtor. If a bankruptcy is filed during a divorce case, the automatic stay applies to the divorce case as well.

The divorce Judge may proceed on issues of child support, alimony and custody of children, but may not make any decisions relating to the division of assets and debts without the permission of the bankruptcy court, and any decisions made by the divorce Judge are reviewable by the bankruptcy Judge.

Therefore, it is very important to consider the right timing of a bankruptcy and a divorce when a client will likely have to go through both process.

Filing Divorce First: Finishing the divorce action before beginning the bankruptcy filing allows the divorce action to proceed to its natural conclusion without interruption by the bankruptcy court. It is still possible, though, for the Bankruptcy Court to undo the Agreement or Judgment of the Divorce Court if it appears the parties were attempting to defraud creditors (for instance if all of the assets were transferred to the non-debtor spouse rather split equitably). Despite this risk, it is unlikely if the division is equitable that there would be any issue, and both cases would like proceed more smoothly one after the other, rather than simultaneously.

However, the debtor might be bound to make payments in the divorce case which could affect eligibility for bankruptcy, and might have made promises to divide property that is now an issue.  Domestic Relations Orders are non-dischargeable in most cases and therefore the decisions made in a divorce settlement, will have significant impact on what can and can't be discharged in the bankruptcy.  This is even further complicated by joint debts.  It's therefore important to have bankruptcy counsel review a potential divorce settlement prior even if the intention is to complete the divorce case first.

Filing Bankruptcy First: Likewise, there are certain circumstances where it might make more sense to file for bankruptcy prior to filing the divorce. For instance in a case where both spouses had significant debt, they can file as joint debtors so long as they are still married. Even if only one of the parties intended to file, there is a case which suggests that some of the protections for the debtor extend to the non-debtor spouse (protections that might not apply if the parties are already divorced).

The facts of each case will control whether it makes sense to file the bankruptcy or divorce first.  If you are assisting a client with a divorce case but don't have expertise in bankruptcy we recommend reviewing your strategy with an attorney trained in bankruptcy.  The terms of the proposed property settlement or transfers of property under the agreement may be hurtful to your bankruptcy case if your client plans on filing for bankruptcy shortly after the conclusion of the divorce matter. These issues are even more complicated when a Chapter 13 plan is in place, because a divorce can cause problems with making plan payments.  Having an attorney that can explain the bankruptcy consequences of the decisions made during the divorce will be critical in helping your client get a fresh start.

Bankruptcy & Other Litigation: A Ten Part Series

A bankruptcy case can impact other litigation in many ways.  Some cases will be halted automatically by the filing of a bankruptcy due to the automatic stay.  Others might not be stopped, but might not be controlled by the bankruptcy trustee.  And some cases may not be affected at all.  Navigating these interactions can be difficult even for attorneys who are experts in other areas of the law if they don't practice in the bankruptcy court.

The next ten posts will outline how bankruptcy cases can interact and may affect different types of litigation.  In the following posts we will cover how a bankruptcy case can affect or be affected by these types of cases:

#1: Divorce
#2: Post-Divorce
#3: Collections - Plaintiff Bankruptcy
#4: Collections - Defendant Bankruptcy
#5: Evictions - Landlord Bankruptcy
#6: Evictions - Tenant Bankruptcy
#7: Foreclosures
#8: Personal Injury & Torts - Plaintiff Bankruptcy
#9: Personal Injury & Torts - Defendant Bankruptcy
#10: Criminal Cases

Expanding the Discussion about Your Freedoms

While it may seem obvious to those of us who live here and sometime take our freedoms for granted, what makes the United States of America such a great place to live is that the design of our government and legal system is based on the protection of freedoms.  The founding fathers recognized, because of their recent violent fight with a tyrannical government, that authority will always seek more authority over the governed.  Therefore, the only government that stood a chance of respecting the freedoms of individuals was one built first on principles that outlined those freedoms.

In the past, this blog has concentrated primarily on debt relief and bankruptcy.  While you might not necessarily associate that subject with other fundamental freedoms, bankruptcy is one of the oldest laws in the United States, and was included in the original 1787 draft of the U.S. Constitution. In fact, the originating language is older than the Bill of Rights. The Founding Fathers recognized that a system of laws was necessary to protect the “honest but unfortunate debtor”, and such laws were in the general interest of the country and its citizens.

While we will continue to cover bankruptcy news and provide information about options for obtaining financial freedom, we will also begin including posts on this blog specific to other freedoms provided for by our Constitution and Bill of Rights.  We hope that you continue to frequent our site for news about financial freedom, criminal defense rights and protections, and freedom from infringement on the individual right to bear firearms.  We also invite you to leave your thoughts and join the debate in the comments section of our posts.

Many people are proud to stand up for, and take advantage of, their constitutional protections – and they should be. From its original incarnation and its amendments over the years, such protections have become the cornerstone of our society, our government and our way of life.

Translating the Second Amendment

As seen in the MetroWest Daily News:


Following the Newtown shooting, people asked for an open and honest discussion about firearms rights and gun control. This has inexorably led to discussions of the meaning and purpose of the Second Amendment. Until we can all at least understand the amendment’s purpose, fruitful discussion is impossible.

So, what does the amendment say? “A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.”

Most of the controversy about the Second Amendments stems from the phrase “a well regulated militia”. Many take the position that a well-regulated militia is a military body bound by governmental restrictions, akin to the Armed Forces or the National Guard. However, at the end of the late 18th Century, the term “well regulated”, especially with respect to troops, is more accurately defined as “properly disciplined”. Also, it should be noted that, unlike today, there was no Federal standing army. The defense of the fledgling colonies fell to individual citizens – the people.

If we were to translate the text of the Second Amendment into modern American English: “A properly disciplined body of citizens is necessary for the security of the citizens of a free Country. Therefore, the right of the people to possess and use firearms shall not be infringed.”

Today, the “security of the free state” is maintained by one of the largest professional military organizations in the world. Still, the Supreme Court has recognized the relevance of the Second Amendment. In 2008 and 2010, the Supreme Court issued two landmark decisions officially establishing individuals' rights to possess firearms and employ them for lawful purposes. In District of Columbia v. Heller, the Court ruled that the Second Amendment protects an individual's right to possess a firearm, unconnected to service in a militia, and to use that arm for traditionally lawful purposes, such as self-defense within the home. In McDonald v. Chicago, the Court ruled that the Second Amendment limits state and local governments to the same extent that it limits the federal government. Nevertheless, the Supreme Court has ruled that the modern Second Amendment is not absolute, and holds that some restrictions on firearms are consistent with the Constitution.

Still, I think the Court missed the mark by focusing primarily on personal protection and “militia service”. While certain limitations have practical import, the drafters of the constitution did not intend the amendment to protect an individual’s ability to defend his hearth and home against vagabonds, delinquents and criminals. The founding fathers did not have the Wild West in mind – they feared a much more powerful enemy. The Second Amendment’s purpose is very sobering, very heavy and very real: It is to ensure that the governed have a way to forcibly limit the actions of those who govern them. It is an implicit challenge which states that if representative politics fail, the people still hold the power to exert their collective will on a corrupt or tyrannical governing body. The Second Amendment as it was written never contemplated the rights of sportsmen, hunters, or the potential victim of a crime.

We should not view the importance of the Second Amendment as a partisan political issue. The question is not “should people be allowed to have guns”, but rather “should the people have the ability to protect themselves from an oppressive government”. This cornerstone right protects individuals hailing from all sides of the political divide.

We all want to limit crime, protect our children and protect ourselves. But, we need to be cautious – a knee-jerk reaction to address incidents like Newtown will have long-term and detrimental consequences to all our collective rights. After 9/11, many people responded out of fear and anger, calling on the government to ensure that something like that would “never happen again”. What it got us, though, was a systematic gutting of other rights, liberties and privacy in the interest of safety. We need to ask ourselves if we are willing to go down that road again.

In 221 years since the Second Amendment was ratified, we have thankfully never needed to implement its true purpose, and I hope that we never do. Still, it doesn’t mean it is not important and worth saving.