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ABTJ Volume 35 Issue 4
 

In This Issue

Winter 2019 | Volume 35 | Issue 4

Terminating Tax-Qualified Retirement Plans in a Chapter 7 Bankruptcy

Many businesses maintain tax-qualified retirement plans—such as 401(k) plans or pension plans—to help employees accumulate funds for retirement. When a company maintaining such a plan is liquidated in bankruptcy, the Chapter 7 trustee must oversee the termination of the plan and the application of its assets for the benefit of the plan’s participants. Retirement plans are subject to complex regulatory requirements enforced by three different federal agencies. Accordingly, the trustee must proceed carefully—and with competent professional assistance—in carrying out its plan termination responsibilities. This article examines the steps a Chapter 7 trustee must undertake to terminate a tax-qualified retirement plan in a bankruptcy case and provides practical pointers to help ensure those tasks are accomplished in accordance with all applicable federal laws, including the Bankruptcy Code, the tax code, and the comprehensive federal employee benefits law known as ERISA. Read Full Article

Small Business Reorganization Act of 2019

There is now a new subchapter of chapter 11 for small businesses. Small business cases will look a lot like cases under chapters 12 or 13 under this new law.

The Small Business Reorganization Act of 2019 (SBRA), P.L. 116-54 was signed into law on August 23, 2019. The result of bipartisan legislation, the law will take effect on February 19, 2020. The SBRA was modeled after work done by the National Bankruptcy Conference and American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11. Read Full Article

Tax Attributes Available to Bankruptcy Estates

Separate bankruptcy estate is created when a debtor files a petition with the Bankruptcy Court under Chapter 7 of the bankruptcy code. The Chapter 7 Trustee is responsible for preparing and filing the estate’s tax returns and paying any tax liability that arises within the estate. Gross income of the estate includes proceeds from any of the assets to which the estate is entitled. This gross income may be offset by expenses of the estate, including administrative expenses and allowable deductions that are tied to the assets within the estate. In addition, the estate is entitled to any tax attributes of the debtor at the time the bankruptcy estate is established. Read Full Article

Tax Consequences Following a Student Loan Income Based Repayment Plan

The interplay between Income-Driven Repayment Plans (“IDR”) and the undue hardship analysis when a debtor seeks to discharge student loans in bankruptcy has been heavily litigated with differing results.

Congress authorized the U.S. Department of Education to design and offer IDR plans. While the specifics vary, most IDR plans base the debtor’s monthly payment on a percentage of discretionary income above the poverty line.1 For debtors living near or below the poverty line, their monthly payment is often little to literally nothing. Many borrowers are eligible for monthly payments of $0 under an IDR plan. Read Full Article

Sovereign Citizens: Their Playbook to Abusing the Bankruptcy Process and How to Fight Back

What would you do if you came home from vacation and found a new family living in your home? This happened to the Donovan family in Colorado. However, eviction isn’t easy when bankruptcy is used as a shield to further a house squatting scheme. I evicted “sovereign” squatters during my first full year as a trial attorney in Denver, Colorado. In 2012, the Assistant U.S. Trustee tasked me with combatting a rise in bankruptcy petition preparers, which lead to a ring of sovereign citizen house squatters that used the bankruptcy process to further their criminal enterprise. This article surveys what happened when the sovereign squatters occupied Troy and Dayna Donovan’s home and outlines tools practitioners can use to fight back: fines, penalties, injunctive relief, and dismissals. Read Full Article

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