Okay, I'll admit that I've been conspicuously silent for a while. Did you miss me? I didn't think so. But here are some interesting, inspirational, informative and, yes, disturbing stories from the world from Bankruptcy, and beyond ... Downturn in Corporate defaults The next wave of Debtors -- Mom and Dad (Senior Citizens) "Legitimate" debt-management companies -- an oxy-moron? Rockford collection agency pays $300,000 to FTC A good recap of the ABA 2004 Technology Show by Jeff Beard. Hope you all made it. Sobering but true -- disbarred Bankruptcy lawyer pleads guilty to Bankruptcy fraud (shudder) Shock and awe -- Bankruptcy filings roll on apace despite a continued social stigma. But what do you expect? Record debts lead to record Bankruptcy filings, with a harsh "new" Code on the way. Expect more trouble ahead.

Short post this week folks: I've finally got what my 4 1/2 year old has had and it's hitting me hard. In the meantime, here are some URLs that are worth following up if you do any corporate work. Enjoy. http://www.10kwizard.com/ http://www.thecorporatecounsel.net/home.asp http://www.thecorporatecounsel.net/blog/blogindex.html http://www.nytimes.com/marketing/email/DealBook.html http://www.realcorporatelawyer.com/ http://www.law.uc.edu/CCL/index.html P.S. Hopefully back on a more active schedule next week! Have a great weekend.

Courtesy of BankruptcyMedia.com: Student Loans Not Dischargeable in Chapter 13 Held, the bankruptcy court did not err in vacating the debtor's student loan discharge pursuant to Fed. R. Civ. P. 60(b)(4) on the grounds that her educational loan creditor was denied due process of law by the Debtor's discharge of her student loan through her plan rather than by filing a separate adversary proceeding. In re Ruehle (6th Cir. BAP 2004) ____________________ No Fraudulent Intent per Bankruptcy CT ND IL Held, a debtor who followed his estate planner's advice with respect to prepetition transfers to a family member lacked the fraudulent intent required for denial of his discharge. Although expert opinion indicated that the transfers lacked estate planning benefits, the debtor's intent was to accomplish estate planning thus negating fraudulent intent. In re Meyer (Bankr. N.D. Ill. 2004) ____________________________ Tax Liability Held Nondischargeable Held, the bankruptcy court did not err in finding that a debtor's tax liabilities were nondischargeable under 11 USC 523(a)(1)(C) where the debtor/attorney: (i) led a lavish lifestyle, (ii) used nominee bank accounts and (iii) had the ability to pay the taxes In re Gardner (6th Cir. 2004) ___________________________ Preference Complaint Cannot Be Extended By Trustee Held, a bankruptcy trustee cannot amend a preference complaint after limitations have run to add new preference causes of action. Each transfer is a separate preference, and a transfer not pled prior to limitations running cannot be added through amendment on a relation back theory. In re MBC Greenhouse Co. (Bankr. DE 2004)

Courtesy of the Consumer Bankruptcy Letter from BankruptcyMedia.com:

Courtesy of BankruptcyMedia.com's Consumer Bankruptcy Letter

With a presidential election looming, sluggish job growth and military action continuing in Iraq, candidates for the White House and Congress must find ways to move their message out to their core constituencies and gain the attention of voters, a major barrier to bipartisanship. Consumer issues are likely to gain greater traction as the year wears on as well if key Democrats jump ship to wait for more consumer-friendly legislation. This is likely to lead to a delay in bankruptcy reform or emergence of a bill that incorporates a wide range of the credit card industry would view as watering down the impact of the law. And in the Senate, expect the abortion language to be back, which the Republican-controlled Congress again would find hard to swallow. SOURCE: Hoovers Online / Card News Mar. 17, 2004

With a presidential election looming, sluggish job growth and military action continuing in Iraq, candidates for the White House and Congress must find ways to move their message out to their core constituencies and gain the attention of voters, a major barrier to bipartisanship. Consumer issues are likely to gain greater traction as the year wears on as well if key Democrats jump ship to wait for more consumer-friendly legislation. This is likely to lead to a delay in bankruptcy reform or emergence of a bill that incorporates a wide range of the credit card industry would view as watering down the impact of the law. And in the Senate, expect the abortion language to be back, which the Republican-controlled Congress again would find hard to swallow. SOURCE: Hoovers Online / Card News Mar. 17, 2004

OK, it may not be strictly Bankruptcy related, but here is a list of the Top-10 Securities scams according to the Illinois Secretary of State (I thought it would make interesting reading). Obviously, not all of the following are fraudulent all of the time. Nonetheless, the SOS thought that these items were important enough to mention: 1 Ponzi Schemes 2 Investment Fraud on Seniors 3 Promissory Notes 4 Unscrupulous Brokers 5 Affinity Fraud 6 Unlicensed Securities peddlers (including Insurance Agents) 7 Prime Bank Schemes 8 Internet Fraud 9 Mutual Funds 10 Variable Annuities

A Judicial Sale has been ordered for the South Hill Apartments located at 8115 Glimmer Way in Louisville, Kentucky and the Lake of the Woods Apartments located at 7100 Leisure Court also in Louisville. There will be public inspections on Friday, April 9th from 11:00 AM to 2:00 PM, and again on April 13th during the same hours. South Hill Apartments consists of 124 units of varying configurations. The Lake of the Woods complex consists of 228 units. Both properties have tremendous views and are located within 2 miles of major expressways. Please visit www.tranzon.com where you can download, in .pdf format, property information packages for both properties.

March 2004 Synopsis of Bankruptcy Cases Prepared for the DBCA Bankruptcy Subcommittee Open-Ended Order Permitting Payment to Any Vendor Without Analysis is Invalid In re Kmart Corporation, 2004 WL 343520 (7th Cir. 2004): The Seventh Circuit examined the issue of whether Bankruptcy Courts have the discretionary authority to authorize full payment to certain unsecured creditors for pre-petition debt. In Kmart, the Debtors moved the Bankruptcy Court to permit full payment of certain pre-petition claims that the Debtors deemed “critical” for a successful reorganization. The theory behind this request was that these “critical” vendors would be unwilling to do business with delinquent Debtors, thus resulting in injury to all vendors if business were to shut down. Without factual or legal analysis, the Bankruptcy Court entered an Order granting the Debtors’ request. The District Court reversed and the Seventh Circuit affirmed, holding that that Section 105 of the Bankruptcy Code does not authorize full payment of any unsecured debt, unless all unsecured debt in that particular class are paid in full. The Seventh Circuit hinted at the possibility of using Section 363(b)(1) as a means to permit payments to certain unsecured creditors however the record must clearly reflect the prospect of benefit to the other disfavored creditors. Failure to Timely File Income Tax Obligations Are Not Per Se Disqualified under Section 523 In re Payne, 2004 WL 404482 (Bankr.N.D.Ill.): Judge Schmetterer held that an untimely filed income tax return was not per se disqualified under Section 523 of the Bankruptcy Code. In Payne, the Debtor neglected to file his income tax returns for tax years 1983 through 1990. This resulted in the IRS to investigate and determine the Debtor’s tax liability. Sometime in 1990 the Treasury made assessments to the Debtor’s tax liabilities. In 1992, the Debtor prepared (with the assistance of an accounting firm) and mailed his 1040 income tax returns for all of the delinquent tax years without payment. In 1997 the Debtor filed for relief under Chapter 7 of the Bankruptcy Code, listing the IRS as a creditor for unpaid income taxes for tax years 1983 through 1991. The IRS did not file a claim nor did it file an adversary complaint. After discharge the IRS continued to pursue the Debtor, prompting the Debtor to file an adversary complaint for violating the discharge injunction. The issue at trial was whether the late-filed return qualified as an “honest and reasonable attempt to satisfy the requirements of the tax law.” The Bankruptcy Court found for the Debtor, stating that Congress could have conditioned the discharge of tax debt on whether a return was filed prior to assessment but instead, chose not to. Refund on Joint Federal Income Tax Return Presumed to be a Joint Asset In re Barrow, 2004 WL 383378 (Bankr.W.D.N.Y.): The Bankruptcy Court for the Western District of New York examined the issue of whether a non-Debtor spouse was entitled to a joint income tax refund. In Barrow, the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. Amongst his outstanding debts were liabilities to the IRS resulting from non-joint income taxes returns. Shortly after petitioning for relief, the Debtor filed a joint income tax return along with his non-Debtor spouse. Because of the automatic stay, the IRS held the current income refund until the Bankruptcy Court provided proper guidance to the IRS. The non-Debtor claimed the refund due to an IRS exception providing relief to innocent spouses. The Trustee objected, claiming that he was entitled to a portion of the refund. The Bankruptcy Court acknowledged a rift amongst other courts. The majority view allocates a joint tax refund between spouses in proportion to their tax withholdings. A second approach divides refunds in proportion to the income that each spouse generated. Other courts have ruled that each spouse owned the refund equally. The Bankruptcy Court sided with the latter view, reasoning that total tax liability are not necessarily linked to income. Rather, a refund may be attributable to a number of factors, such as a tax credit or credits for education, etc. In the absence of evidence for separate ownership, such as present conduct or a history of financial managements, the refund should be presumed equal. Qualification for a Chapter 13 Plan Constitutes Abuse For Dismissal of Chapter 7 Bankruptcy In re Behlke, 2004 WL 314905 (6th Cir. 2004): The Sixth Circuit addressed the issue of whether contributions to a Debtors’ retirement plan, which were excluded from the Debtors’ disposable income, constituted “substantial abuse” for dismissal purposes. In Behlke, the Debtors had accumulated over $100,000.00 in credit card debt. The Debtors also listed in their Schedule I a voluntary contribution of $460.00 to an employer-sponsored 401K plan. The Debtors also listed monthly income of $4,923.00 and monthly expenses of $4,749.00. The Trustee determined that the Debtors were not “needy” and subsequently filed a motion to dismiss under Section 707(b) of the Bankruptcy Code. The Bankruptcy Court noted that the 401K contributions should be included in their disposable income and because of those contributions; the Debtors had the ability to pay out of future income and subsequently dismissed the Debtors’ Chapter 7 Bankruptcy. The Sixth Circuit affirmed noting that a finding of “dishonestly” was not necessary to conclude substantial abuse under the Code.

If anyone is interested themselves or knows of Clients who may be interested. WANTED: INVESTOR (DEBT OR EQUITY) -- SHORT TERM INVESTMENT OK Illinois corporation holds 2 Great Clips franchise stores: brand new, with excellent locations. Stores essentially operate themselves: all of the employees are in place including a full-time manager at each location. One of the two stores was recently in the top rankings of area franchise units. Demographics are strong, with both operations in growing areas. Owner just needs short-term financing to get over personal cash-flow issues unrelated to the stores. This is an opportunity to trade on strong potential for growth in a proven business model. Owner is looking for liquidity and can offer a short, intermediate or longer-term horizon for return on investment. Contact M. Hedayat & Associates, P.C. for more details or just e-mail me at mmhedayat@hotmail.com.

If anyone is interested themselves or knows of Clients who may be interested. WANTED: INVESTOR, PARTNER OR BOTH Cafe/Restaurant in 4,000 sq.ft., magnificent space. 1922 Hotel Lobby and Ballroom. 10 year lease that caps @ $2,500/month. 8 parking spaces, etc. Lease alone is a Gold Mine! Business owner was only able to secure such a deal because he was personally involved in securing zoning for the space on behalf of the building's owner. Operation currently features live shows 7 days a week, from Jazz & Theater to Indy Films & Fire Dancers. This is the largest coffee house in Chicago, and the owner wants to make an even more ambitious use of the space. Owner looking for an investor to help outfit kitchen to serve hip fusion meals, Breakfast, Lunch & Dinner. Owner prepared to secure liquor license for the new enterprise. Contact M. Hedayat & Associates, P.C. for more details or just e-mail me at mmhedayat@hotmail.com.

CHAPTER 13 DEBT LIMITS INCREASED ADMINISTRATIVE OFFICE OF THE U.S. COURTS ANNOUNCES INCREASES IN VARIOUS DEBT LIMITS As of April 1, 2004 the eligibility debt limits for Chapter 13 pursuant to 11 U.S.C. § 109(e) are raised. The new limits are: Uncontingent, liquidated unsecured debts ... $307,675. Uncontingent, liquidated secured debts ...... $922,975 New limits for exemptions under 11 U.S.C. § 522(d): Section 522(d)--value of property exemptions allowed to the debtor: (1)--in paragraph (1)............... 18,450 (2)--in paragraph (2)............... 2,950 (3)--in paragraph (3)............... 475 9,850 (4)--in paragraph (4)............... 1,225 (5)--in paragraph (5)............... 975 9,250 (6)--in paragraph (6)............... 1,850 (7)--in paragraph (8)............... 9,850 (8)--in paragraph (11)(D).......... 18,450

ORAL ARGUMENT IN S. CT. REGARDING STATE SOVEREIGN IMMUNITY Sovereign Immunity (Whether Congress has the Authority Under the Bankruptcy Clause to Abrogate State Sovereign Immunity) The issue in this case is whether the United States Constitution gives Congress, under the Bankruptcy Clause, the power to abrogate state sovereign immunity. Pamela Hood received a Chapter 7 bankruptcy discharge in June 1999. Due to the prohibition in 11 U.S.C. section 523(a)(8) against discharging student loans held by governmental bodies except upon a showing of “undue hardship,” Ms. Hood filed for a hardship discharge of her student loans in September 1999. The Tennessee Student Assistance Corp. (TSAC) moved for dismissal on grounds of sovereign immunity. The Bankruptcy Court for the Western District of Tenn. denied the motion, holding that the grant of authority under the Bankruptcy Clause of the U.S. Constitution allowed Congress to abrogate state sovereign immunity when it enacted the Bankruptcy Code. The Bankruptcy Appellate Panel affirmed, holding that Congress‚ power to enact bankruptcy laws carries with it the authority to abrogate state sovereign immunity with respect to those laws. TSAC appealed. The Sixth Circuit Court of Appeals analyzed the facts under Seminole Tribe of Florida v. Florida and the original intent of the framers, holding that the Bankruptcy Clause of the Constitution, Article I, section 8, clause 4 gives Congress the authority to abrogate state sovereign immunity in bankruptcy law. On appeal to the United States Supreme Court, Tennessee argues nothing in the Constitution compels this interpretation, and that the facts of this case do not warrant abrogation of Tennessee‚s rights. Tenn. Student Assistance Corp. v. Hood Date Argued: 03/01/04 Court Below: 319 F.3d 755 _______________________ RULING ON SUBSTANTIALLY CONTEMPORANEOUS TRANSACTION A transaction can be substantially contemporaneous even if some temporal separation exists between the new value provided and the payment received. Ssection 547(c)(1) applies whether the new value is given before or after the transfer by the debtor; the statute requires only that the exchange be 'substantially' contemporaneous. Where payment was made by EFT within 15 days of receipt of goods by the debtor per the agreement between the parties, the payments were intended to be, and were, substantially contemporaneous. In re Payless Cashways, Inc. (8th Cir. BAP 2004) ______________________ SPENDTHRIFT TRUST IS PROPERTY OF ESTATE WHEN CONTINGENCIES ARE SATISFIED Where all events necessary to vest the interest of a beneficiary under a spendthrift trust have occurred, the beneficiary's rights become property of the estate even if the trustee has not yet distributed the property to the beneficiary. In re Revelle (Bankr. N.D. Tex. 2004) ________________________ DEBTOR SOLE SHAREHOLDER MAY QUALIFY FOR ERISA The working owner and sole shareholder and president of a professional corporation may qualify as a "participant" in a pension plan covered by ERISA. If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants. Such a working owner, in common with other employees, qualifies for the protections ERISA affords plan participants and is governed by the rights and remedies ERISA specifies Yates v. Hendon (S.Ct. 2004) _____________________ ATTORNEY'S FEES DISCHARGED Fees earned by debtor's attorneys during Chapter 11 proceeding were dischargeable following involuntary conversion of debtor's case to a Chapter 7 case. In re Fickling (2d Cir. 2004) ________________________ DEBTOR'S POSTPETITION INCOME FROM CORPORATION APPORTIONED AS TO PROPERTY OF THE ESTATE A corporation's accounts receivable can be "wages" entitled to exclusion from property of the estate in an employee/owner/debtor's bankruptcy, but the debtor must establish the extent to which the receivables are attributable to his efforts rather then the efforts of other employees of the corporation. In re Christy (Bankr. C.D. Ill 2004) _____________________ RETURN FILED AFTER SFR IS STILL A “RETURN” A tax return filed after the IRS independently assesses a tax is still a "return" for purposes of determining dischargeability of the tax. In re Payne (Bankr. N.D. Ill. 2004)

Any resemblance to actual events is purely concidental. THE WISE HOME BUYER'S GUIDE The road to buying a house is paved with dwindling bank accounts, devious brokers, and home owners who (you hope) are desperate to sell. Yes, it's a challenge. But with the help of these easy to follow instructions, you can negotiate your way into unthinkable debt..." 1. Calculate what you can afford to pay. Promise yourselves not to exceed it by thirty grand. 2. Choose where you'd like to live. Check real estate ads. Call a few brokers. Select more realistic locale. 3. Wonder if you can afford it even with loans from both pairs of parents. Conclude you can't unless you each get a twenty percent raise. Go ahead and buy it anyway. 4. Order title search. Learn that a piece of the driveway's on public land. Learn that a neighbor's fence is on your future land. Worry. Learn there's no reason to worry. Wonder why you bothered with a title search. 5. Attend closing. Sign reams of paper you don't understand. Papers your lawyer says are "standard." Give lawyer money for valuable advice. Give sellers money. Give bank money. Give title insurer money. Go home. Have a martini. 6. Look up Chapter 13 lawyers in the phone book for future reference.

------------------------------------------------------------------- BANKRUPTCY FILINGS ARE UP, AS JOBLESS CLAIMS RISE ------------------------------------------------------------------- A government report released on Wednesday showed U.S. bankruptcy filings in 2003 were barely changed from record 12-month highs reported three months earlier. Personal bankruptcies for 2003 were up 5.6 percent to 1.63 million from last year while business filings fell 9.1 percent to 35,037, according to data from the Administrative Office of the U.S. Courts. The bill would make it harder for individuals judged able to pay some of their bills to wipe out all of their debts. Instead, they would be put on a five-year repayment plan. Banks, retailers, credit card companies and auto lenders say the legislation would stop consumers from running up massive debts only to turn to the courthouse and file for bankruptcy to avoid their repayments. Consumer advocates, labor unions and civil rights and women's groups say the measure is needlessly harsh on people already hit by job uncertainty, while rewarding businesses such as credit card companies that aggressively market consumer loans. The number of Americans filing for initial jobless benefits rose modestly last week, in line with market expectations, a government report showed on Thursday. First-time claims for state unemployment insurance benefits rose to 350,000 in the week ended Feb. 21, up 6,000 from an unrevised 344,000 the prior week, the Labor Department said.

U.S. 7th Circuit Court of Appeals IN THE MATTER OF KMART CORP. (02/24/04 - No. 03-1956) Bankruptcy judge erred in permitting debtor to pay in full its pre-petition debts to any vendor deemed "critical" in its unilateral estimation. Preferential payments to a class of creditors are proper only if the record shows the prospect of benefit to the other creditors.

This message represents a second welcome, though hopefully not the last, to recent participants in this online discussion about Bankruptcy law. This particular Blawg, as the name implies, was created to foster communication among Members of the Bankruptcy Law Subcommittee of the DuPage County Bar Association. For those joining us by way of the DCBA listserv, we're happy to have you and urge you to spread the word among Bankruptcy practitioners, wherever located, so that we can have a robust and lively discussion. As already mentioned, this Blawg is produced by M. Hedayat & Associates, P.C. and is brought to you courtesy of the DuPage County Bar Association. Finally, our gratitude to the people who made this Blawg "official:" Chairman Tom Else, Esq. and DCBA power-brokers Jackie Hamler and Gloria Norton. Your support has made this possible and you are rightfully thanked. Now, let's keep blogging ...

If anyone has Clients, or is themself, invested with our through Edward Jones, you may want to take a look at this article. Whoopsi-daisy!

If anyone has Clients, or is themself, invested with our through Edward Jones, you may want to take a look at this article. Whoopsi-daisy!

Well, fellow Members, I was on a holy tear tonight on the MH+A Blawg, so feel free to take a look for yourself. I sounded off on a number of issues from legal technology to the old New Economy (remember the 1990's, when we all had money?). Take a peek and see if anything interesting pops up.

Okay, from the "let's try that again" category comes this little number: the address where you can look into CM/ECF classes at the website for the Bankruptcy Court for the Central District of Illinois (which should have appeared in the last message) is: http://www.ilcb.uscourts.gov/training. And now you know the rest of the story.

For those of us keeping score, the United States Bankruptcy Court for the Central District of Illinois recently sent out an Invitation to all practitioners regarding CM/ECF Training -- that is, training on the use of the new (and soon to be mandatory) Electronic Filing system. Training is offered free of charge in Danville, Peoria or Springfield. Visit the Court's website for class schedules and descriptions. Finally, remember that the "Live" date for Central District practitioners is April 2004. Tick-tock.

Welcome to the unofficial Weblog of the DuPage County Bar Association's Subcommittee on Bankruptcy Law. This Blawg is sponsored by M. Hedayat & Associates, P.C. and hosted by your humble Vice Chair. As soon-to-be-incoming Chair, what I would like to see is participation (or a reasonable facsimile thereof) by as many Members of the DCBA BK Subcommittee as possible. I know you're out there: I've seen your names on the roll of Members or seen you at meetings. But to get the ball rolling, our office would like to use this space to post interesting news concerning Bankruptcy practice in Northern Illinois, case updates, and ... well, whatever else the Membership would find to be of interest. So, without further ado ... let the blogging begin.