Seventh Circuit Holds that Parking Tickets and Fines Are Chapter 13 ‘Admin’ Expenses
Appeals courts won’t allow bankruptcy to shield debtors from paying parking tickets and fines incurred in the course of a chapter 13 case.
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A Motion to Dismiss an Involuntary Petition Only Postpones Filing a Creditor List
Ninth Circuit BAP balances the need for quickly dealing with an involuntary petition against the petitioners’ right to discovery and a list of creditors.
Veterans Suffered, Investors Lost Millions in Nationwide Schemes
Many financially vulnerable veterans fell into a carefully conceived trap that lured them into redirecting part of their monthly benefits for a cash advance from investors, USA Today reported. This business of buying and selling military benefits spread to at least 33 states before unraveling. In the last two years, investigators cracked down on the companies. More judges ruled that their transactions violate states and federal laws. The fallout created two sets of victims: Veterans and the people who provided them money. Veterans fell deeper into debt, while investors saw their nest eggs vanish as the veterans stopped paying and the companies collapsed. The architects of these arrangements were the only ones who truly profited. Their bank accounts swelled, sometimes into seven figures. Their riches came from high commissions, sometimes up to 50 percent, hidden fees and exorbitant interest rates as high as 240 percent. The company Future Income Payments ballooned into what's been described as a billion-dollar enterprise. Investors lost $451 million when that business burst last year, according to records obtained by the FBI. Its founder, Scott Kohn, was indicted in Greenville, S.C., on a federal charge of conspiracy to commit wire fraud and mail fraud in connection with the buying and selling of military benefits. The charge carries a maximum 20-year prison sentence. Jury selection is set for February. A Government Accountability Office report issued in October said the U.S. Department of Veterans Affairs should do more to prevent the financial exploitation of veterans. One recommendation in the report: "Centrally collect and analyze information, such as complaints against companies, that could show the prevalence of these scams, help VA target outreach to veterans, and help law enforcement go after scammers."
More Borrowers Are Going Underwater on Car Loans
Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value, the Wall Street Journal reported. This phenomenon — referred to as negative equity, or being underwater — can leave car owners trapped. Some 33 percent of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28 percent five years ago and 19 percent a decade ago, according to car-shopping site Edmunds. Those borrowers owed about $5,000 on average after they traded in their cars, before taking on new loans. Five years ago the average was about $4,000. Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt. Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer. (Subscription required.)
Sixers’ Owner Michael Rubin on When He Nearly Filed for Bankruptcy
When Michael Rubin was still in high school, he opened a ski shop near where he grew up in Lafayette Hill. And within two years, the now-billionaire owner of Fanatics and the 76ers was about to file for bankruptcy — at age 16, The Philadelphia Inquirer reported. “I tell that story to show that growth comes from failure,” he said. Rubin said he hated high school. He was the son of a veterinarian and a psychologist, but “I was a terrible athlete. The only sport I was good at was skiing.” So he opened a ski shop and was pulling in $125,000 in revenue his first year of high school. Then, he said, he got cocky. “I had $200,000 in bills and $100,000 in inventory, and a Porsche I bought when I turned 16,” but that year, “there was no snow. I had to hire a bankruptcy attorney." The lawyer told Rubin he wasn’t technically old enough to have to file for bankruptcy, so he ended up settling with creditors for $38,000. He had promised his father that he would try college, but Rubin dropped out of Villanova University after six weeks and went into the resale-closeouts business, starting with athletic footwear and expanding into apparel. The business grew to $100 million in revenues and $10 million in net profits by the time he was 21. By 1998, Rubin began hearing about the internet, but dismissed it. “I knew nothing about it, and I thought, ‘Screw these internet people, they lose a lot of money.’ Then I asked some of my biggest accounts and vendors, like Sports Authority, and they told me e-commerce was a big opportunity. They said, ‘You’re young, you’re 25, can you solve this problem for us?’ So I started GSI Commerce.”
Courts Reject BAP Opinion on Estate Property When Individuals Convert from 11 to 7
Individuals in chapter 11 who convert to chapter 7 come out worse that those who convert from chapter 13.
One Owner May Strip a Lien Off Property Owned JTWROS, Judge Huennekens Says
Courts disagree on lien stripping by one owner of entireties property and jointly owned property.