The controversial use of bifurcated attorney fees in Nebraska chapter 7 cases has reached critical mass.  We can expect US Trustee complaints to be filed against attorneys using BK Billing and Fresh Start Funding in the near future. Under a bifurcated fee arrangement, the bankruptcy attorney charges a small amount down to file an incomplete bankruptcy petition.  A few days later a second fee agreement is signed to to prepare the remaining schedules which allows the…

Most people think the bankruptcy process is just about wiping out debt.  Indeed, discharging debt is the key mission of bankruptcy. However, there is another important goal of the bankruptcy process: ensuring fair treatment of creditors. To achieve equality of treatment the bankruptcy law empowers its Trustees to avoid payments that unfairly prefer one creditor over another. When a debtor has paid back money borrowed from family members within one year of filing they must…

It costs a lot of money to go broke.  The cost of filing Chapter 7 bankruptcy in Nebraska is $1,300 to $1,800 on average, and once a complete bankruptcy petition is filed attorneys are bared from collecting unpaid fees.  The bankruptcy petition wipes out all debt, including unpaid legal fees associated with preparing a bankruptcy petition. Many debtors need to file bankruptcy immediately to stop garnishments, but how can they pay legal fees when their…

The Nebraska bankruptcy court discharged student loan debts for a 50-year-old debtor raising a disabled grandson. See In re Mudd. The Court overruled the Department of Education’s argument that a debtor must work two jobs to meet her burden of showing undue hardship. In discharging the student loans the Court pointed out several factors: The debtor has never earned more than $13 per hour. Prospects of higher income in the future was speculative. The…

Senator Elizabeth Warren has introduced a law to radically change the consumer bankruptcy practice entitled the Consumer Bankruptcy Reform Act of 2020. This revolutionary document would make dramatic changes to bankruptcy practice. Chapter 7 and 13 is eliminated and replaced with a single system called Chapter 10. Student Loan debts become dischargeable just like any other debt. Discharges are issued immediately upon confirmation of payment plans instead of waiting until all payments are made.…

The 9th Circuit Court of Appeals is the first court of appeals to rule on the issue of whether a bankruptcy court must approve a lease assumption.  See Bobka v. Toyota Motor Credit Corp, 968 F.3d 946 (2020). What happened? When Melissa Mather Bobka filed a Chapter 7 she was leasing a Toyota Rav4.  She wished to keep her vehicle and called Toyota Motor Credit to let them know of her intention to keep…

Rambling thoughts on the impact of the 2020 elections on the practice of bankruptcy law. Unless both Georgia senate runoff races are won by the Democratic Party candidates, it appears that the United States Senate will still be ruled by the Republicans and Mitch McConnell. Why does this matter? Because if the Democrats take control of the Senate you can expect Senator Elizabeth Warren to lead up a crusade to overturn the Bankruptcy Reform Act…