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August 2011 Archives

Porcellio Reported as One of the Judgeship Candidates for Rochester Bankruptcy Court

Sharon M. Porcellio, Esq., a partner in the Rochester law firm Ward Greenberg Heller & Reidy, is reported, by reliable sources, to be one of the finalist candidates for the Bankruptcy Judgship in Rochester, opening in 2012 upon the retirement of Judge Ninfo.  Ms. Porcellio has rarely appeared in bankruptcy court in the Western District of New York, but is a highly regarded litigator in the federal courts.  The website American Inns of Court reports that she will be receiving the 2011  Professionalism Award for the Second Circuit.

Below-Median Income Debtor Case Dismissed as Abusive: Glavin

As a reminder that passing the means test does not end the possibility of a chapter 7 case being considered abusive, a debtor in Albany had just such a case dismissed in June. In re Glavin; Northern District of New York Bankruptcy #10-10094 Judge Littlefield; June 22, 2011). This is also a reminder that Chapter 7 cases with high income are reviewed very closely by the bankruptcy system, and need to be reviewed by an experienced chapter 7 and Chapter 13 bankruptcy practitioner before being filed. For more information about chapter 7, see my bankruptcy website or contact me directly. The debtor in the Glavin case filed chapter 7 than a year ago, January 15, 2010. According to his amended schedule of income and expenses, he was, at that time, single with no dependents and employed in marketing for three months.

Flee the country to avoid student loans -- a good idea?

In my blog of April 11, I commented about the difficulty in using bankruptcy to provide any relief for high student loan debt. One person commented that he/she intended to flee the country to get away from these debts. That's one option, I suppose. It would have been better not to incur $200+k in student loans in the first place, unless you were entering a profession guaranteed to provide sufficient income to repay, such as medical school (definitely NOT law school.)As a legal matter, I would assume that a lawful contract entered in in the United States (such as a student loan contract) could be enforced in a foreign country, although I doubt many lenders would pursue borrowers out-of-country. I am not sure what it means to 'renounce' citizenship, but I doubt it would legally absolve someone from liability on a contracted debt.Before fleeing to wherever, one question is whether the debt is from government-backed student loans or strictly private loans. Both are non-dischargeable in bankruptcy, but it is the government-backed loans that have extraordinary collection powers. For example, a government-backed loan in default can subject the borrower to an administrative wage garnishment (that is, a garnishment without the creditor first obtaining a court judgment) of 15% of disposable income, and this would be in addition to any state law garnishment by another creditor (under New York law, of several creditors have judgments against a debtor, only one at a time can garnish 10% of wages, but a government student loan can be imposed on top of a state law garnishment.A borrower can also lose tax refunds if in default on a government student loan.
And social security or other government benefits (beyond $9,000 p/y) may be seized to repay government student loans, under a 1996 law upheld by the Supreme Court in 2005 But if the student loans are strictly private, not guaranteed by the government, then the lender can only use the collection options available to any creditor. The lender must sue the borrower and get a judgment. Under New York law, a judgment creditor may then garnish 10% of gross wages, put a lien against real estate (but not actually sell the real estate, if it is the debtor's residence, in most cases) and seize bank accounts if the balance is over $1,740.00. As unpleasant as these collection practices are, they may be preferable to leaving the country and attempting to make a living - and a new life - in a foreign country.

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