Bankruptcy and the Automatic Stay

When a debtor files any type of bankruptcy, a “automatic stay” is created which prevents all creditors from pursuing the debtor.  That is, creditors cannot call or otherwise contact the debtor to ask for payment, they cannot sue the debtor (and any pending lawsuits are immediately halted), they cannot collect on a judgment and they cannot foreclose on any property of the debtor.  As the description implies, this “stay” of the creditors is automatic.  The filing of the bankruptcy case alone, and nothing else, creates the stay.  So, even if a creditor does not know of the bankruptcy filing, any action the creditor takes against a debtor can be cancelled.

For example, let us assume that there is a lawsuit pending against a debtor who has not yet filed for bankruptcy.  The debtor decides not to file an Answer in the lawsuit and therefore the creditor requests that a default be entered against the debtor.  Before the default is entered, however, the debtor files for bankruptcy.  The next day, before the debtor has a chance to inform either the creditor or the court in which the lawsuit is pending of the bankruptcy filing, the court enters the default against the debtor.  Sometime later, for whatever reason, the bankruptcy gets dismissed and the debtor now wants to file an Answer in the lawsuit.  Normally, once a default is entered, the debtor (or defendant) can no longer file an Answer.  However, in this case, since the bankruptcy was filed prior to the default being entered, the automatic stay prevented the default from being effective.  Although neither the court nor the creditor knew of the bankruptcy, the default must be set aside.

Some time ago, our office represented a client in this exact situation.  We filed a motion to set aside the default entered against our client after the client had filed for bankruptcy.  Although the creditor opposed our motion, the Judge recognized that due to the automatic stay being in effect on the date the default was entered, the default was ineffective.  We won the motion, and our client was able to file his Answer and defend the lawsuit.

The Origami Lawsuit

Swan by Akira Yoshizawa, the father of modern origami techniques.

Origami, the art of folding paper into various three-dimensional shapes, has been around for centuries. It started in Japan sometime in the 17th Century, and has developed into a modern art form.  Over the past several years the folding patters have gotten so complex that schematics, called crease patterns, are used as a blueprint for folding.

Recently, one artist — Sarah Morris — has taken some crease patters created by Origami artists — such as Robert J. Lang — and has created her own art from these patterns.  Lang, along with five other artists from Japan, Italy and Spain, have filed a copyright infringement lawsuit against Morris.  Lang claims that the crease patterns are independent works of art protected by the Copyright Act, and thus any derivative works are also protected from copying.  While the Copyright Act does protect derivative works (a work of art which is based upon a prior work), the question here is whether the crease patters are protected by copyright laws in the first place.  If they are, Morris may have infringed on such rights.

The list of categories which are protected by the Copyright Act are provided in 17 USC §102, and includes pictorial and graphic works (§102(a)(5)).  It is important to note that copyright laws do not protect “any idea, procedure [or] process.”  (§102(b)).  So, are the crease patterns merely “procedures” for folding, or are they independent “pictorial or graphic works”?  One way to look at it is to see whether other types of blueprints are protected by copyright.  In fact, they are.  Architectural works are specifically listed as a category of protected work (§102(a)(8)).  However, these architectural works must be drawings or blueprints for the construction of a building.  Whatever the definition of a “building” is, it certainly does not cover folded pieced of paper.

Crease patterns on the left, Morris’s artwork on the right.

Lang and his fellow artists argue that the crease patterns are works of art and that the copyright laws protect these patterns as they do any other work of pictorial or graphic art.  Lang: “Crease patterns have a beauty and interest far beyond their role within origami. I have exhibited and sold my original crease patterns as standalone artworks for nearly a decade in venues ranging from commercial galleries to the Museum of Modern Art.” (Lang’s website.)

It will be interesting to see how this case develops and, if it goes to trial, how the court will rule on the applicability of the copyright laws to these crease patterns.

Discharging Tax Debt in Bankruptcy

In addition to debts such as a mortgage, line of credit and credit cards, many bankruptcy debtors are also behind on their tax obligations. The question often comes up: Can taxes be discharged in bankruptcy?

The answer to that question can be complicated. For instance, some tax debts can be discharged while other tax debts cannot. If you run a business, for example, and owe sales tax, that sales tax can never be discharged in bankruptcy. On the other hand, ordinary income tax can be, depending on various factors.

If you owe the IRS (or your State) for income tax, you may be able to discharge that debt in bankruptcy. First, you must understand how taxes are treated in your bankruptcy. There are essentially three types of debts for bankruptcy purposes: secured debt (such as your mortgage and car loan,) unsecured debt (such as credit cards and medical bills,) and priority debt (such as taxes.) If you are filing a Chapter 7 these different types usually do not make a big difference (but they still must be scheduled correctly on Schedules D, F and E, respectively.) In a Chapter 13, however, the type of debt can make a big difference. Since you are paying back at least some of your debts in a Chapter 13, the amount of each type of debt can determine how much you would have to pay into your Chapter 13 Plan.

Putting aside scheduling and treatment of debts, the conditions for discharging income tax debts are as follows:
1. The debt has to be for an income tax that was due at least 3 years prior to the filing of your bankruptcy petition. As an example, if you file your bankruptcy on May 1, 2012 then any taxes you owe for 2008 (which were due on April 15, 2009) may be discharged, but taxes for 2009-2012 cannot be discharged; and
2. You must have filed your income tax return at least two years prior to the filing of your bankruptcy petition. Taking the above example, if you filed your tax return on time (on or prior to April 15, 2009) and file your bankruptcy on May 1, 2012, then you have satisfied this 2-year rule. But let’s assume that you did not file your 2008 income tax return on time. Instead, you filed it late — let’s say on November 1, 2011. In that case, you must wait until November 2, 2013 (two years since the filing of the return) to file your bankruptcy if you want that tax debt to be discharged, even though it was due more than 3 years prior.

Things get more complicated if you owe for multiple years, some of which meet the above two requirements and some which do not. These are complex issues which can easily get confusing and not handled properly without the right guidance. The bankruptcy forms may seem simple and straight forward, but they are not. If you are contemplating filing for bankruptcy, call us for a free consultation.

The Marital Privilege

Can I Tell My Spouse Everything? Is It Safe To Speak With My Spouse? Can My Spouse Be Forced To Testify Against Me? Can I Prevent My Spouse From Testifying Against Me?

The Marital Privilege, codified in CA Evidence Code §980, in its simplest form, prevents any person and/or entity from forcing one spouse to testify against the other spouse. This long standing privilege is based on the public policy that the institution of marriage is one of the cornerstones of a successful civil society. As a highly functioning civil society, so the theory goes, we want to create an environment conducive to strong, long lasting, trustworthy marriages. Granting a married couple the peace of mind that any communications conducted between the spouses will remain private, serves as the legal cornerstone for the idea that a strong marriage is based on trust and that spouses should be able to confide in one another yet rest assured that such communications will always remain private. Sounds like a simple enough concept right? But wait, before you run to your spouse and open that Pandora Box of secrets you have been keeping for the last 10 years, as is the case in most areas of the law, the devil is definitely in the details and the Marital Privilege is no exception to the rule.

First and foremost, we need to separate between two different scenarios that are covered by the Marital Privilege.
1. Can one spouse be forced to testify against another spouse even if the testifying spouse does not wish to testify? The short answer is… in most situations, NO. However, in a handful of situations, YES. (keep reading for the detailed and complete answer).
2. In a situation where one spouse wants to testify against the other spouse, can the non-testifying spouse prevent the testifying spouse from testifying? The short answer is… depends on the situation (keep reading for the detailed and complete answer).

The key element to understanding the Marital Privilege lies in the form of the communication that is at issue. If the communication is considered a CONFIDENTIAL COMMUNICATION, then no one can force one spouse to testify against the other spouse. Furthermore, if the communication is considered confidential, then one spouse can prevent the other spouse from testifying against him/her, even if the testifying spouse willingly wishes to testify against the non-testifying spouse. As such, the CONFIDENTIAL COMMUNICATION is absolutely the most protected form of communication between spouses and rarely can be revealed in a court of law, unless both spouses agree to the waiver of the privilege.

The next logical question is: what constitutes a CONFIDENTIAL COMMUNICATION? The answer to this question is fluid and extremely complicated to be explained in the limited space available in this blog. However, some key factors are: was the communication uttered in a public or private environment. Two examples of the extreme ends of the spectrum in this situation would be:
1. A husband and wife are lying in bed, the husband is visibly upset, the wife keeps asking her husband what is wrong, he keeps telling her that he can’t tell her… finally the husband turns to the wife and tell her that he just robbed a bank. This type of communication is clearly a confidential communication and even if the wife wanted to testify against her husband, her husband could prevent her from doing so.
2. Same situation but instead of being in their private bedroom, the couple is in a busy restaurant and the husband yells out to his wife “I just robbed a bank.” Clearly, there is no reasonable expectation to privacy in this situation and the communication would not be privileged. In this scenario, the husband could not prevent the wife from testifying, because the communication was not confidential, but the wife could choose not to testify because no one can force a spouse to testify against the other spouse if the content of such testimony would amount to ADVERSE SPOUSAL TESTIMONY, or stated differently: no one can force one spouse to testify against the other spouse if the testimony sought will be “bad” for the non-testifying spouse. The public policy behind this rule is that we do not want to force one spouse to testify adversely against the other spouse and at the conclusion of the testimony send the two home on their way to continue their strong and loving marriage. You can only imagine the horrible situation the wife in our scenario would be facing if at 10 a.m. she was forced to testify that her husband admitted to her that he robbed a bank and at 10 p.m. she would have to lay in the same bed with him to try to get a good night’s rest for the next day of her husband’s trial. Once again, public policy is to create an environment conducive to a strong and faithful marriage. Forcing one spouse to adversely testify against the other is clearly not conducive to a stable marriage environment.

Some exceptions to this rule are cases of domestic violence where the entire privilege is essentially waived (the theory is that if the privilege applied, then one spouse would be able to not only beat the other spouse, but then prevent the victimized spouse from testifying in court relative to the beating).

In conclusion, the Marital Privilege can be understood in its simplest form as follows:
1. The privilege against Adverse Spousal Testimony only belongs to the testifying spouse and that spouse can choose whether or not to testify.
2. The privilege against Confidential Marital Communications belongs to both spouses and as long as the communication in question is considered confidential, neither spouse can testify against the other, even if the testifying spouse wishes to testify against the other spouse.

So tonight when you are lying next to your spouse one, feel free to tell them anything your little heart desires, knowing full well that your confessions are safely protected by our long standing Marital Privilege. But make sure that no one else can hear you, that you do not beat up your spouse while you utter your dirty little secrets and for G-d sakes make sure that the person lying next to you is indeed your legal spouse.

 

Raviv Netzah, Esq.
NETZAH & SHEM-TOV
(818) 995-4200

Can the DUI Prosecutor Elect to Drop the Refusal Enhancement?

Yes. As part of plea negotiations, the prosecutor will often dismiss or “strike” the refusal enhancement. Many prosecutors hate to go to trial on refusal DUI cases because they don’t have a BAC test result to use against the defendant. So they are often willing to settle the cases on more favorable terms, depending on the state of the other the evidence.

Can I Fight The Refusal Charge in My DUI Case?

Yes, you can. The refusal charge only holds if it is proven at the DMV hearing and if the DUI prosecutor successfully proves the charge beyond a reasonable doubt in court, so your DUI defense lawyer can fight the charge for you in both situations. Possible grounds for defense include:

*Your DUI arrest was unlawful. The DUI and the refusal enhancement may be dismissed if there was not sufficient basis for the DUI officer to pull you over or arrest you.

*You were not under the influence. In the event that a jury acquits you of the underlying DUI charge, the refusal enhancement no longer exists in the eyes of the court. Please note, this may not prevent the DMV from pursuing suspension of your drivers license.

*You were not properly advised of the consequences of refusing. The DUI officer is required to advise you of the consequences of refusing the chemical test through a very specific set of warnings. (See Jury Instruction on Refusal) Neither the court nor the DMV can hold the refusal against you if the DUI officer failed to give you the warnings properly.

*The DUI officer was unclear about the BAC test requirement. All warnings must be given in such a way that they’re comprehensible to the DUI suspect. As such, the refusal penalty may be negated in the event that the officer’s explanation caused confusion regarding the requirement to take the BAC test.

Qualifying for Chapter 7: The Means Test (Part I)

The most common types of bankruptcy filings for consumer debtors are Chapter 7 and Chapter 13.  Both of these types of bankruptcy cases have certain qualifying requirements.  This article discusses the requirements for a Chapter 7 bankruptcy.

In 2005 Congress revamped the Bankruptcy Code, adding certain requirements for consumer debtors.  For example, no matter what type of bankruptcy you file, if you are an individual (as opposed to a corporation or other entity), you must complete a Credit Counseling Course prior to filing your petition, and additionally complete a Debtor Education Course after your case is filed and before you receive your discharge.

In addition, in Chapter 7 cases, you must now pass the Means Test.  In this Part I of a series of articles on the Means Test, we will look at the Median Family Income.

The Means Test examines your household income (and certain allowed deductions) and compares it to the Median Family Income as published by the Census Bureau.  This number is updated every year and is specific to the State in which you file your bankruptcy.  For example, as of the writing of this article (May 2012), the Median Family Income in California is $49,188 for a household of one person, $63,481 for a two-person household and $77,167 for a four-person household.  This means that if you are married and have two children (under 18), and you and your wife make less than $77,167 combined per year, you will automatically pass the Means Test and qualify for a Chapter 7.  If, however, you make more than that amount, you may still be able to qualify for a Chapter 7 bankruptcy after certain deductions are taken (this will be discussed in a future article).  On the other hand, if after all the deductions are taken, your income is still above the Median Family Income, you will most likely not qualify for a Chapter 7, but may still be able to file a Chapter 13 (depending on certain other criteria).

Several questions often come up as to the calculation of the household income:

Q: Do the qualifying figures change whether my spouse is working or not?
A: Your income is calculated as to your entire household.  If you are the only one working, you will enter that income into the Means Test.  If both you and your spouse are working, then your combined income is used.

Q: What if I file the bankruptcy on my own, without my spouse, what figures are used?
A: Whether you file the bankruptcy on your own or jointly with your spouse, the figures used in the Means Test do not change.  Your combined household income is used in the Means Test no matter whether you file alone or jointly.  Further, the Median Family Income figure is based on your State and family size, and does not change depending on whether or not you file the petition jointly.

Q: What if I am married and have more than 2 kids (family size is larger than 4)?
A: Assuming you file your petition in California, for each additional member of the family add $7,500 to the Median Family Income figure.  For example, if you are married and have 3 children, the Median Family Income for the purposes of the Means Test is $$84,667.

Q: Are only parents and children counted as family members?
A: If you are taking care of an elderly parent, for example, that person could potentially count as a member of the family for the purposes of the Means Test.

The above discussion gives you a general understanding of how the Income portion of the Means Test is calculated.  In future parts of this series of articles, we will examine other portions of the Means Test.  As always, before making any decisions or filing for bankruptcy, you should discuss your specific situation with a qualified bankruptcy attorney.

For More Information:

Is Chapter 7 Right for You?

It is not uncommon for a new client to come into my office and tell me, “I need to file for a Chapter 7.” My first question to such a statement is always “Why?” The response varies, but has a common theme: “Because I can’t pay my bills.”

Not being able to pay your bills is, of course, a factor in making the difficult decision of filing for bankruptcy. Once making that decision, however, the next decision is whether to file for Chapter 7 or Chapter 13 (other chapters also exist, but they are not relevant to most consumers). While this decision may be made for you — based on, for example, the amount of debt you have — often you will qualify for both chapters. In that case, you must decide which will be more beneficial to you.

The major and most basic difference between these two varieties of bankruptcy protection available to most consumers is that, in a Chapter 7, you effectively “raise your hands and quit,” informing your creditors that you simply have nothing left. If you do not own a house or other property, and your income is just enough to make ends meet but not enough to save each month, then a Chapter 7 will probably be the right choice for you.

In a Chapter 13, on the other hand, you essentially tell your creditors that, while you do have some limited means to pay, you cannot pay all of them everything you owe. In filing a bankruptcy under Chapter 13, you propose a payment Plan, under which you promise to pay a certain amount each month to the Chapter 13 Trustee (assigned by the court and an employee of the Department of Justice), who then will distribute these funds to creditors. You will do so for 3 to 5 years and each of your creditors will get a portion of its debt paid off. At the conclusion of the Plan, any remaining
debts are wiped out.

So which chapter is right for you? While you should not decide the answer to this questions without speaking to a qualified bankruptcy attorney, the simple answer is that if you have no assets and
little income, you would probably end up in a Chapter 7. On the other hand, if you have assets, or your income is above the qualifying maximum income for a Chapter 7, a Chapter 13 may be right for
you.

DMV’s 10-Day Rule

What is the DMV 10 Day Rule?

If you have recently been arrested for a DUI, you should keep in mind the DMV 10 Day Rule – You have exactly ten (10) days from the date of your arrest to setup your DMV administrative hearing regarding the suspension of your driver’s license.  (10 days includes weekends and holidays.)  If you miss this deadline, your suspension with the DMV will be automatic.  If you are already past the 10 days, yet have failed to setup the DMV hearing, contact us immediately, there is still hope to setup your DMV hearing and avoid the automatic suspension.

 

Netzah & Shem-Tov can help set up your DMV hearing Contact us today!