Pay off Students and Buy a House

What’s the number one way to pay off your student loans and buy a house?  Get on an income based payment plan for your student loans.  Whether you’ve got $15,000 or $300,000 in student loans, the income based plan counts as full payments that are not deferments.  Why is this important?  Because all student loans end and are discharged in their entirety twenty five years (25) after first repayment plus deferments.  What is this so important?  Think about it this way….if you were sued by your student loan servicer and a judgment was obtained, the servicer can garnish your wages for at least 15% of net income and sometimes even more.  Plus all of your tax refunds are seized until the loan is paid off.  Compare this to an income based program where you may pay 5% to 15% of your income voluntarily, without a judgment, garnishment or seizure of your tax refund.  Not only is your credit rating great but so are possibilities to move forward with your life, such as buying a house, starting a family and building wealth through home equity, retirement planning and paying off long term debt.

When should I convert my chapter 13 bankruptcy to a chapter 7

When should I convert my chapter 13 bankruptcy to a chapter 7?  Loss of employment loss of income plan is no longer feasible. You no longer need save your home or cars.

Section 348 of the bankruptcy code says that the qualification for a chapter 7 discharge is the petition date and not the conversion date. Therefore if you didn’t qualify for a chapter 7 filing on the date your chapter 13 is filed you cannot convert to a 7

However if it has been at least 8 years since you filed your prior chapter 7 you can dismiss your chapter 13 and then filed a brand new chapter 7


Mindy filed a chapter 7 bankruptcy on August 1 2007.  The case was discharged on February 1 2008 and was closed the same day.  Mindy filed her present chapter 13 case on August 5, 2011.  On August 2 2013 Mindy filed a motion to convert her case to a chapter 7.  The case cannot be converted to a chapter 7 because Mindy did not qualify for a chapter 7 discharge on the date of her chapter 13 filing.  Mindy can however dismiss her chapter 13 on August 2 2013 and filed a new chapter 7 on August 3 2013.

Celebrity Bankruptcy – Fisker Karma Motors – Gone but Not Forgotten – Justin Bieber it’s time for a New Car



Celebrity Bankruptcy – Fisker Karma Motors – Gone but Not Forgotten – Justin Bieber it’s time for a New Car   If you are a fan of Duesenburg or Tucker than you know as well as anyone that just because a car company goes out of business doesn’t mean its cars won’t be popular. Right now Jay Leno is driving both a Duesenburg and a Stanley Steam. Justin Bieber and Al Gore are driving Karma’s. Don’t worry it won’t be more than 30 years before these Karma’s ….and Saab’s start showing up at Pebble Beach.

A Chinese Investor is looking to buy the assets and manufacture some version in the US. Or as Tesla has already learned, probably just to mine the patents and intellectual property from the company. It would be great if they would manufacture Karma’s here because it would provide jobs in Wilmington Delaware where Karma’s shuttered former GM Manufacturing plant hasn’t turned out a car in over a year.

Here’s the biggest kicker of all – and its not in the court filings: Hurricane Sandy really did Karma in by destroying over 400 unsold by completed cars. When you consider that the 48 or so Tuckers manufactured average a million dollars a piece, that’s about 400 million in todays dollars.

The government of course lost money on this deal, but so did a lot of other people when “Cash for Clunkers” came out and destroyed a whole bunch of used car dealers and auctioneers, plus you can’t find any late 1970’s Cutlass Supreme’s anymore.

Case Summary:

Fisker filed two cases on November 22, 2013.  One as Case No. 13-13087 and one as Case No. 13-13086.  Both are case summaries are available below.

Case.Summary.Fisker.13-13086 Case.Summary.Fisker.13-13087_Redacted

Here’s the link for the Chicago Tribune Article that support some of the information in this blog.

Contact our office today


Atari U.S. operation files for bankruptcy

Atari U.S. operation files for bankruptcy.

A former colleague of mine mentioned this article to me today.  It is surprising to see Atari file Chapter 11 when it seemed recently that there had been a resurgence in interest in playing the classic Atari games such as Asteroids.  Recently I saw someone wearing a re-issued Atari t-shirt with the classic early 1980’s logo.   As a kid growing up in Sheboygan, I remember the afternoon after Christmas morning probably around 1983.  There had to be at least 4 thrown out Atari Game System boxes sitting out on the street for the trash.  A lot changes, many of you out there will remember the ill-fated Radio Shack TRS-80 computer system or the Commodore 64 all early competitors to Atari who always kept their focus on games.  They tried a computer system, but quickly learned that consolidation in the industry doomed them to the scrap yard.

Although I am not intimately aware of the details and facts surrounding Atari’s bankruptcy, it is a Chapter 11 filing which is usually filed where a corporation wishes to survive after a “reorganization” which is a friendly way of saying reducing debt balances, interest rates and eliminating some types of debt.  In this case, Atari (of the United States) is trying to separate from its from its French owner to save its “classic” assets which include classic games such as Asteroids.

When considering debt relief, please consider NLO Nelson Law Office, our firm is a full service personal bankruptcy firm concentrating its practice in the areas of Chapter 13 and Chapter 7 Bankruptcies.  At this time, our firm provides referrals for bankruptcy work that requires either a personal or business Chapter 11 bankruptcy.

If you have ever wondered why a person would file a Chapter 11, think of it simply as a large Chapter 13.  Chapter 13 only allows about $340,000 in unsecured (credit card style) debt and about $1,000,000 in secured debt.  Clients with multiple investment properties and large lines of credit often look to a personal Chapter 11 to handle problems too large for Chapter 13.

seized argentine ship remains in ghana

seized argentine ship remains in ghana

Why A Hedge Fund Seized An Argentine Navy Ship In Ghana : Planet Money : NPR.

Here is a good example of a non-bankruptcy debt relief solution.  Ultimately, the article shows a pretty picture of a beautiful ship, but ship is symbolic of the assets that can be seized worldwide when a country defaults on its debts.

Do you know of another country that has alot of debt – how about the United States. It’s unlikely someone would try to seize one of our aircraft carriers, but I think articles like this are good reminders that we can’t borrow forever.

principal reduction loan modification Fannie Mae and Freddie Mac Disallow



principal reduction loan modification Fannie Mae and Freddie Mac Disallow

News Alert
from The Wall Street Journal
The federal regulator for Fannie Mae and Freddie Mac will not permit the taxpayer-supported mortgage giants to participate in an Obama administration program that reduces mortgage balances for certain troubled homeowners.
The Treasury Department, which had put heavy political pressure on the Federal Housing Finance Agency to permit the companies to participate in a limited program of debt forgiveness, immediately responded by questioning the regulator’s assumptions and asking the agency to reconsider.

Today, the Wall Street Journal announced that Fannie Mae and Freddie Mac will not allow mortgage lenders to reduce mortgage loan balances on their loans.  This is a shock to some people, but not shocking or surprising to me.  A lender simply has no benefit in reducing the balance of a mortgage loan.  If they do this, then they subject all mortgage loans to being subject to the same modification for the same reasons.  This means that practically no mortgages would ever be foreclosed, instead mortgages would be reduced to what “people can afford”.  While this seems like a good thing – think again.  If a bank cannot count on the legal and financial stability of absolute security in their loan balances, they will have to build this uncertainty into loan pricing – i.e. higher interest rates.

Right now – nobody seems to care about loan pricing because “life is good” with interest rates less than 4%.  Guess What – the last time we had this type of rate – it was 1934 and the height of the great depression.  Just think about 1980 when interest rates were 21% on mortgages.  Trust me….at that time, people will be happy that the sanctity of loan agreements has been preserved.

Conclusion:  Every underwater mortgage in this country that no longer seems justifiable or payable by the borrower will be foreclosed.  Only those homeowners who treat their homes as tools will remain.  I would estimate that by the end of this second great depression we will see at least 50% of all underwater mortgages go into foreclosure if not more.  However, for those who value their home as a tool, I would estimate that none will go into foreclosure except those cases where borrowers become ill, disabled or unemployed.

Recommendation:  I strongly recommend that Congress Amend the Bankruptcy Act to allow mortgage loan balances to be modified in adverserial proceedings within a Chapter 13 and Chapter 11 Proceeding.  This will allow court supervision of loan balances and allow for the integrity of loan agreements to be preserved.

Write your congressman today and ask them to support amendments to the Bankruptcy Code that give real debt relief to homeowners.  For more information, visit the National Association of Consumer Bankruptcy Attorneys at: for this ongoing effort.

joint tax refund ownership

Midwest Athletic Club Garfield Park Chicago Illinois

Midwest Athletic Club Garfield Park Chicago Illinois

joint tax refund ownership

Joint Tax Refunds are not presumably owned equally by married couples.  Instead they are owned by the spouse that earned the income that allowed for the refund to exist.  In this case, the debtor was the spouse who earned all of the income for the family.  Therefore, he was the sole owner of the refund.  Therefore, all of the refund is owned by his bankruptcy estate.  In this case exemptions did not exist for this tax refund.  Therefore the debtor had to turn over all of his tax refund to the trustee in a turnover order.

The case does specifically say this, but is can be implied that in fact a tax refund resulting from the filing of a joint tax return is owned in proportion to the income of each spouse to the total income of the family.  Another better way to look at this is that the producer of the income that resulted in the credit that is a tax refund is the one who owns that refund.

For most debtors who have relatively equal income, the old rules that the refund is owned 1/2 by each spouse will work well.  But under this case, where either one spouse earns all of the income or make substantially more, that spouse will own all or most of the refund.  This is very important where only one spouse of a married couple files bankruptcy. In the case where the debtor did not make any of the income on the tax return that resulted in the refund, he or she is not the owner of that refund.


Debtor and her husband file a joint tax return showing $100,000 in income.  They receive a refund of $6000.00.  Joint Tax Return is filed April 15, 2012.  Refund is received May 15, 2012.  Debtor Files her bankruptcy on March 15, 2012.  In this case, the Debtor and her husband have received a tax refund after the bankruptcy was file.  This refund is not the property of the estate as it was not in existence on or before the date of filing.



Debtor and her husband file a joint tax return showing $100,000 in income.  They receive a refund of $6000.00.  Joint Tax Return is filed April 15, 2012.  Refund is received May 15, 2012.  Debtor files her Chapter 7 Bankruptcy on May 16, 2012.  The refund has been received but not spent on the date of filing.    In this case, Debtor and her husband are in possession of $6000.00 of non-exempt tax refund on the date of her bankruptcy filing on May 16, 2012.  However, the refund is not owned by the debtor because she did not earn any of the income that was listed on the Joint Tax Return.  Therefore, in her bankruptcy petition, she will list the $6000.00 tax refund but will list herself as a 0% owner and the bankruptcy estate will have no ownership over this interest.  The tax refund will be kept in its entirety by its owner, the husband spouse of the debtor.

Example used with conflicting cases in the Central District and Northern District (the often quoted rule by trustees)

Debtor and her husband file a joint tax return showing $100,000 in income.  They receive a refund of $6000.00.  Joint Tax Return is filed April 15, 2012.  Refund is received May 15, 2012.  Debtor files her Chapter 7 Bankruptcy on May 16, 2012.  The refund has been received but not spent on the date of filing.    In this case, Debtor and her husband are in possession of $6000.00 of non-exempt tax refund on the date of her bankruptcy filing on May 16, 2012.  The refund is considered owned 1/2 by each spouse.  Therefore, in her bankruptcy petition, she will list the $6000.00 tax refund and will list herself as a 50% owner and the bankruptcy estate will have 50% ownership over this interest.  50% of the  The tax refund will be turned over to the trustee.

To read the actual case giving rise to this conclusions, please see:

In Re Ronald W. Ruhl, Debtor

NACBA Board of Directors Election Debate – Hear David Nelson talk about his candidacy

Today, an unofficial debate was held by three of the four candidates running for seat #4 in the National Association of Consumer Bankruptcy Attorneys Board of Directors.  Hear David Nelson talk about his candidacy and his passion for consumer advocacy and bankruptcy rights.  Covered in this meeting are the topics of outreach, qualifications, the future and legislative trends.  HAMP, Principal DownPayment, Private Student Loans and Marketing are discussed.

To listen to the recorded debate, goto:  NACBA Debate

royal crown cola bankrupt

royal crown cola bankrupt

Read the fine print –  you can still buy Royal Crown Cola whose recipe is owned by Dr. Pepper Snapple Group and Distributed Locally by itself and not through a bottler.  This bottler is a former bottler and distributor of Royal Crown Cola and hasn’t bottled and sold Royal Crown for several years.  The good news is:  You can still get Royal Crown Cola – a personal favorite.


As Reported by the Chicago Tribune, January 23, 2012;

Royal Crown Bottling Co. of Chicago Inc. filed for Chapter 7 bankruptcy last Friday and said it plans to dissolve the business.

Its 20 biggest unsecured creditors include the Pension Benefit Guaranty Corp., which has a disputed claim of nearly $4.5 million for retirement plans for the company’s employees. The PBGC is a federal agency that protects pension benefits in private-sector defined benefit plans, which typically pay a set monthly amount at retirement.

Another unsecured creditor is the Soft Drink Industry Local Union No. 710 Pension Fund, which has a disputed claim of nearly $3.7 million, bankruptcy records show.

Royal Crown has total liabilities of $8.2 million and total assets of $28,635.

As of 2001, it had been the nation’s largest independent Royal Crown bottler.

Seyfarth Shaw LLP lawyer Jason DeJonker, who is representing Bolingbrook-based Royal Crown Bottling Co. of Chicago, declined to comment on the bankruptcy. According to bankruptcy documents, 43 percent of the company is owned by Fred Adamany of Rockford, and 46 percent by the estate of Dan Weil and Weil trusts.

Royal Crown is a brand of Dr Pepper Snapple Group. A spokesman for the beverage chain said that it has been several years since Royal Crown Bottling of Chicago carried its brands. Dr Pepper Snapple handles its own sale and distribution of Royal Crown Cola in the Chicago area from a Northlake bottling facility, the Dr Pepper Snapple spokesman said.

eastman kodak bankruptcy

eastman kodak bankruptcy

Eastman Kodak filed for bankruptcy protection today.  Below is a Wall Street Journal snippet and link to full article.  Corporations come and go:  Do you remember Polaroid….the now defunct company that invented analog instant photography.  Kodak is a legend, having produced film that has captured images of families for over a century.  They are still the only source for all types of niche films such as 16mm movie film and other specialty films.  However, Kodak never did a good job of moving to digital photography.  This is a classic case where they didn’t want to cannibalize an incredibly profitable film business for a new (digital) venture that might not be as profitable.  Ultimately, this philosophy may have worked for investors who got out prior to 2005 because stock prices remained high through the middle 2000’s until the first inklings of the recession hit.  Bottom line – it’s sad to say goodbye to this old veteran, but unfortunately it was inevitable.  I predict a full and total liquidation of Kodak with only its name and rights to specialty chemicals and films being sold off to specialty chemical companies.

It is important to note the amazing 131 year history of Kodak, for a history of its founder and his exemplary philanthropy, please view the Wikipedia article on George Eastman – click here.


Quoted from the Wall Street Journal, January 19, 2012:

Eastman Kodak filed for bankruptcy protection after the film pioneer failed to raise fresh cash to fund a long-sputtering turnaround.

The 131-year-old company struggled for decades to cope with the emergence of competitors in its film business and the rise of digital technology. But its final pivot — an attempt to transform itself into a company selling printers — proved too costly amid declining film sales and expensive obligations to its retirees.

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