2016 Legal Elite Georgia Trend Magazine-Bankruptcy
Recent Speaking Engagements
34th Annual ICLE Family Law Institute Jekyll Island, GA
Aspects of Different Fields of Law We Must Know as Family Law Attorneys Presented May 20, 2016
Bankruptcy—Five “Epic Fails”
The Law Office of Shannon D. McDuffie—Decatur, GA
- Clients who do not understand joint and several liability (and whose agreements reflect that lack of understanding). That your client’s name ‘appears 2nd on the bill’ does not mean that he or she is ‘secondarily liable.’
- Clients who transfer property (with equity) within two years of filing bankruptcy with intent to defraud hinder or delay or without giving “reasonably equivalent value” See In re Knight, (Mann v. Brown) BK 08-13767 WHD, AP 10-01074) [trustee loses—good explanation of REV—does not necessarily require a dollar for dollar exchange], and In re Pullen, (Gordon v. Love) BK 09-61108 MGD AP 11-5620 [trustee wins on MSJ finding actual fraud, discusses practicality of partition ], and In re McFarland, (Wallace v. McFarland) BK 11-10218 AP 11-01021 [trustee wins—badges of fraud explained, more details re finer points of REV]
- Remember that the Chapter 7 trustee can avoid a transfer that occurs within two years of the bankruptcy filing if there is sufficient evidence of actual fraud 11 USC 548 (a)(1)(A), or if there is evidence to support constructive fraud 11 USC 548 (a)(1)(B). Trustee has the burden and absent direct proof, proving actual fraud can be challenging. But, ‘badges of fraud’ can be amassed to show actual fraud. [Filing chapter 13 means that that the SOL will be tolled by consent]
- Proving constructive fraud only requires showing by PPE that less than reasonably equivalent value was exchanged at the time of transfer AND that debtor was insolvent at time of transfer. Note: there is no requirement that the trustee has to show that the debtor had the specific intent to defraud to win on constructive fraud. (If your client transfers his car to soon to be ex in the divorce, and he’s insolvent at the time of transfer, and she doesn’t give him REV, and he files bankruptcy within two years of the transfer, guess what the trustee can do re that car?)
- Clients whose divorce papers lack specificity with regard to differentiating between a domestic support obligation 11 USC 523 (a)(5) not dischargeable in either Chapter 7 or 13, and a marital property obligation 11 USC 523 (a)(15) dischargeable only in Chapter 13. This distinction should be nuts and bolts for divorce attorneys.
- Clients who get stuck with paying their ex’s attorney’s fees.
- See In re Millner, (Aldridge v. Milner) BK 14-62557 WLH AP 145315. Rule it does not matter who the order says—it’s the nature of the debt.
- The language in the attorney fee award can come back to haunt your client particularly if awarded under OCGA 9-15-14. If the order says your client unnecessarily expanded litigation, prepare client to deal with good faith objections when he or she tries to discharge that obligation in Ch 13 bankruptcy.
- Final papers that indicate that the attorney(s) failed to contemplate that one/both spouses might file bankruptcy. Suggested best practices include:
- Review your client’s credit report(s) with your client(s). (AnnualCreditReport.com)
- List all debts of both parties on the papers.
- Make it clear on the papers whether the debts are individual or joint or authorized user per the credit reports.
- Include the last 4 digits of all account numbers on the papers.
- Indicate whether each debt is being shared by both parties, paid by your client, or assumed by the other party. If a debt is to be assumed by the other party indicate clearly on the papers whether it’s a MP/DSO debt.
- Have client ‘sign off’ that he or she understands that a joint debt means that both parties are joint and severally liable, and that the only remedy for non-compliance with the Superior order is contempt in Superior Court—e.g. when Discover sues your client in Magistrate/State, it does not care what the Superior agreement/order says.