Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

Can My EDD Overpayments be Discharged in Bankruptcy?

By Ryan C. Wood

If you received a notice from the California Employment Development Department (EDD) with a bill attached indicating you owe money to the state, you are not alone. Many Californians are issued overpayment notices. To add insult to injury, there are plenty of instances where the overpayment is not your fault. The EDD may have simply incorrectly calculated the amount to pay you and now they want their money back – with interest and penalties. It does not matter that the overpayment was not your fault; you may still be penalized for it. So what can you do about this overpayment? It depends on the circumstances of your case. EDD overpayments can be discharged in bankruptcy.

There are a few things you can try first before seeking the advice of a bankruptcy attorney to file bankruptcy and discharge the EDD overpayment. You can appeal the overpayment if it is within the window of time in which you may do so. If it is past the time where you can appeal or you lost the appeal and you do not have any other debts and the EDD overpayment is a manageable amount then you can try to negotiate or work out a payment schedule with the EDD.

Alleged EDD overpayments can be discharged in bankruptcy.

Alleged EDD overpayments can be discharged in bankruptcy.

If you have other debts in addition to the overpayment from the EDD you may consider bankruptcy as an option. You should consult with a bankruptcy lawyer regarding your situation as the answer always depends on your specific circumstances. If you qualify for Chapter 7 bankruptcy the EDD overpayments are dischargeable along with your other general unsecured debts. If you choose to file a Chapter 13 bankruptcy the EDD overpayments will be treated the same as your other general unsecured creditors. Depending upon your circumstances you may not be paying anything back to general unsecured creditors and the alleged EDD overpayment will be discharged upon completion of the Chapter 13 plan. The dischargeability of your EDD overpayments are dependent on whether there was fraud involved in the accrual of the overpayment. If there was allegedly fraud involved the discharge of the EDD overpayments can be denied pursuant to 11 U.S.C. §523 if the California Employment Development Department files an adversary proceeding and proves the overpayment was due to fraud.

California’s Unemployment Insurance Code §2736 states that in the absence of fraud, misrepresentation or willful nondisclosure, EDD must mail the overpayment notification to the recipient of the unemployment benefits within 2 years after the beginning of the benefit period where the overpayment was made. If there is fraud involved California’s Code of Civil Procedure §338(d) provides for a three-year statute of limitations. The clock starts when the cause of action is discovered (or should have been discovered) by the aggrieved party (in this case, the EDD), of the facts constituting the fraud or mistake. If the EDD knew, or should have known, about the facts constituting fraud for more than three years and they did nothing about it then they can no longer go after the recipient. Statutes of limitations are set up so that the aggrieved party can pursue their rights in a timely manner. If they sleep on their rights they will lose them. It goes with the saying, “You snooze, you lose.” There are time limits set up because the longer the time passes, the harder it is to remember detailed information that may help or hinder the case, witnesses may no longer be able to remember or may no longer be present to provide testimony and records may be destroyed. Therefore it is imperative to move on your rights as soon as you know you have been wronged.

If it has been more than three years since the alleged overpayment has occurred and the EDD has not charged you with fraud then they will not be able to bring fraud up as an exception to your bankruptcy discharge should you decide to file for bankruptcy. There are several issues you may want to be aware of when discharging your EDD overpayments in bankruptcy. The first issue is the offsetting of your tax refund. If the EDD has placed a lien and forwarded information to the taxing authorities to have your refund withheld to pay back the overpayment, you want to be sure the overpayments are discharged in bankruptcy prior to your filing your tax returns. If you file your tax returns after your bankruptcy case has started but before receiving a discharge your tax refunds may still be withheld to pay the pre-petition debt (your overpayment). Before filing your tax return you should contact the taxing authorities to verify the debt has been discharged. If it has not, or even if there is a question about it, you should apply for an extension to file your taxes.

Another issue is the recoupment of the overpayment. Recoupment is when the EDD withholds your unemployment benefits to pay the overpayment that is discharged through bankruptcy. They can do this only if you are currently collecting unemployment and you try to discharge the overpayment in your bankruptcy case. The recoupment and the overpayment have to arise from the same action. If you are not on unemployment when you file your bankruptcy case and your overpayment is discharged through bankruptcy, the EDD cannot recoup those funds from you when you apply for the benefits in the future since those debts were discharged in your bankruptcy case and trying to collect on it is a discharge violation. This matter is not settled, however, so you should contact a bankruptcy attorney to discuss your situation.

Are Expenses Related to My Minor Children’s Incarceration Dischargeable in Bankruptcy?

By Ryan C. Wood

If you have a minor child who is currently or was previously incarcerated you already know that you are responsible for the expenses related to their support while they are incarcerated. But did you also know that those expenses related to the incarceration are not dischargeable in bankruptcy?

This is exactly what the Ninth Circuit Bankruptcy Appellate Panel decided in Rivera v. Orange County Probation Department (In re: Rivera), 13-1476 (BAP, 9th Cir., June 4, 2014). In this case, Maria Rivera’s son was incarcerated in Orange County for close to 2 years from 2008 to 2010. In accordance with Cal. Welf. & Inst. Code §903, the parents of the minor are liable for the reasonable costs of support while the minor is incarcerated. The costs of support are only for the actual costs incurred by the county for food and food preparation, clothing, personal supplies, and medical expenses, not the total cost of the incarceration. Additionally, the costs of support can not exceed $30 per day and the county will be reimbursed for the costs of legal representation. Additionally, the liability is only imposed on people that have the ability to pay. Orange County indicated that the total cost of incarceration for Ms. Rivera’s son was $420 per day. Orange County only tried to collect $23.90 a day from Ms. Rivera. The county represented this was for the “food and food preparation, clothing personal supplies and medical expenses” while he was incarcerated. In addition to the $23.90 per day, the County wanted $2,199 from Ms. Rivera for her son’s legal representation while he was incarcerated. The County sent Ms. Rivera multiple bills as well as court orders that require her to meet with a financial officer to determine her ability to repay the expenses but Ms. Rivera did not respond to any of the communications. She paid approximately half of the amount due to Orange County in May 2010 ($9,508.60). The remaining balance was $9,905.40. Ms. Rivera’s bankruptcy attorneys helped her file for Chapter 7 bankruptcy protection on September 12, 2011. Orange County was listed in Schedule E as a priority unsecured creditor. The Chapter 7 trustee determined it was a no asset case and Ms. Rivera received a discharge of her debt in January 2012. After the case was closed Ms. Rivera continued to receive collection notices from the County and Ms. Rivera’s bankruptcy attorney reopened her case to file a motion for an order directing Orange County to show cause why they shouldn’t be held in contempt for a violation of the discharge order. The judge decided that the debt owed to Orange County was excepted from discharge under §523(a)(5) and therefore the County did not violate the discharge order. Ms. Rivera appealed to the Bankruptcy Appellate Panel (BAP).

The judges in the BAP compared the exception to discharge before and after the BAPCPA amendments to the Bankruptcy Code. BAPCPA is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or nicknamed by some bankruptcy lawyers, BARF, for “Bankruptcy Abuse Reform Fiasco.” Prior to BAPCPA, 523(a)(5) provided that debts owed to “a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such a spouse or child” is not dischargeable in bankruptcy. Under this rule, Orange County would not be included in this exception since Orange County was not a “spouse, former spouse, or child” and therefore their debt would have been discharged along with the rest of Ms. Rivera’s debt. However, since BAPCPA was enacted, §523(a)(5) only states that the debts for a domestic support obligation are not dischargeable. §101(14A) defines “domestic support obligation” to mean debts “(A) owed to or recoverable by (i) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or (ii) a government unit; (B) in the nature of alimony, maintenance, or support (including assistance provided by a government unit) of such spouse, former spouse, or child of the debtor or such child’s parent…” The new amendments definitely include Orange County since they are a government unit that provided support to the child. The judges held that since the debt was accrued before the bankruptcy petition was filed and owed to a government unit, incurred for the support of the child, was determined by a court order before Ms. Rivera filed for bankruptcy and the debt was not assigned to a nongovernmental entity for collection, the debt was nondischargeable.

If you owe money for the expenses related to a government agency due to the support for the incarceration of your minor child, it is best that you seek the advice of an experienced bankruptcy lawyer in your jurisdiction for advice on how to proceed.

Filing a Stale Proof of Claim in a Bankruptcy Case May be Considered a Violation of the FDCPA

By Ryan C. Wood

What is considered a stale proof of claim? A stale proof of claim is one where a creditor files a proof of claim with the bankruptcy court and the underlying debt is barred from collection because it violates the statue of limitations. The statue of limitations is a law that provides a maximum period of time for someone to take action on a certain claim, whether it is collecting on a debt or filing a lawsuit against someone for certain violations. There is a maximum period of time set up because the longer the wait time, the less accurate the information will be. Evidence supporting the claim may be lost or people’s memories of the event may diminish. There is also the saying, “if you snooze, you lose.” If you sleep on your rights, or wait to long to claim them, you shouldn’t be surprised if you lost them. The statutes of limitations for different actions vary depending on the jurisdiction. You should familiarize yourself with your jurisdiction’s statute of limitation laws. The statute of limitations for a collection activity or breach of contract in California is 4 years. So if you do not collect on a debt before the 4 years is up you are barred from trying to collect on it later.

In a recent 11th Circuit Court of Appeals case, Crawford v. LVNV Funding, LLC, et al., No. 13-12389 (appealed from the US District Court for Middle District of Alabama, July 2014) the court ruled that LVNV violated the Fair Debt Collection Practices Act (“FDCPA”) by filing stale proof of claims in a Chapter 13 case. In this case, Stanley Crawford owed money to a furniture company who then sold the debt to LVNV. The last transaction occurred on October 26, 2001. Alabama’s statute of limitations is 3 years so the debt is time barred by October 2004. Mr. Crawford filed for Chapter 13 bankruptcy protection in February 2008. LVNV filed a proof of claim in the case even though the debt was deemed uncollectible. Mr. Crawford then filed an adversary proceeding against LVNV pursuant to Bankruptcy Rule 3007(b). Mr. Crawford claimed that LVNV routinely filed stale proof of claims in bankruptcy court and that the filing of these stale claims is a violation of the FDCPA. The bankruptcy judge in the case dismissed the adversary and the district court judge affirmed. Mr. Crawford then appealed this case to the appellate court where the judge ruled in Mr. Crawford’s favor.

The FDCPA was enacted to protect consumer’s rights. The FDCPA protects the consumers against debt collectors. “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. §1692e. “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Id. §1692f. The court looked at the facts in the case to determine if LVNV’s filing of a claim they know to be time-barred in bankruptcy court would be considered unconscionable, deceiving, or misleading towards the least-sophisticated consumer. See Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985). If LVNV tried to pursue a claim in state court, their case would have been dismissed because it was time-barred and those actions would violate the FDCPA. The judge in this case deemed that to be the case in bankruptcy court as well. If a proof of claim is not objected to in bankruptcy court, the claim is deemed valid and will be paid according to the plan. LVNV tried to slip the claim in the case and they were paid by the Chapter 13 trustee. A least-sophisticated consumer would not know to look and see if the claim was time barred. This was what LVNV was banking on. The court determined that LVNV’s actions a violation of the FDCPA.

Chapter 13 bankruptcy cases are complicated and it is advised you seek the advice of an experienced bankruptcy attorney to file your bankruptcy case. A bankruptcy lawyer is also the best person equipped to protect your rights and ensure the proof of claims filed with the court are not time-barred and stale.

Tuition Credits are Not a Student Loan and Dischargeable When Filing Bankruptcy

By Ryan C. Wood

You have probably heard over and over that student loans are not dischargeable in bankruptcy unless you can prove that repaying the student loans constitutes an undue hardship for you. That is still the case. 11 U.S.C. 523(8) excepts from discharge (A)(i) an education benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an education benefit, scholarship, or stipend; or (B) any other educational loan that is a qualified education loan, as defined in §221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual. This means if your student loans fall into any of the above categories the debt is not dischargeable in your bankruptcy case and you will still owe the funds after your case is closed unless you can prove undue hardship by filing an adversary proceeding.

Although the statute above may seem daunting there may be hope. In a recent case, In re: Christoff, Bankruptcy Case No. 13-10808DM, Northern District of California (2014), the court held that the debts held by Ms. Christoff were never received by her and therefore are not excepted from discharge by 11 U.S.C. §523(a)(8) and were discharged in her Chapter 7 bankruptcy case. In this case, Ms. Christoff attended the Institute of Imaginal Studies dba Meridian University (“Meridian”). She was awarded $6,000 in financial aid to pay for some of her tuition. She signed a promissory note. She did not actually receive any funds from Meridian though. Instead, what she received was a tuition credit. The terms of the note required her to pay back the funds at $350 per month after she finishes her coursework or she withdraws from Meridian along with 9% interest to be compounded monthly. She received another $5,000 in tuition credit the following year after signing a promissory note with the same terms. She withdrew from Meridian after completing all her coursework and clinical hours but before she completed her dissertation. She filed for Chapter 7 bankruptcy protection in August 2013 and Meridian filed an adversary proceeding to determine that the amount owed to Meridian was nondischargeable under 11 U.S.C. §523(a)(8) as a student loan.

The court in this case thoroughly examined student loan cases throughout the Ninth Circuit and other circuits. What is important to bankruptcy lawyers is what differentiates this current case with all other student loan cases is the fact that Ms. Christoff never received the funds from Meridian nor did Meridian receive funds from any other source. Ms. Christoff received a “credit” towards her education to be paid back at a later time. Both parties agreed that Meridian was not a governmental unit so they did not fit into §523(8)(A)(i). They also agreed that Meridian did not fit into §523(8)(B). Therefore the only avenue to except the debt from discharge is §523(8)(A)(ii). The entire case hinged on whether the funds were received as an education benefit, scholarship or stipend. The court determined that since there were no funds received in Ms. Christoff’s case, the debt did not fit into §523(8)(A)(ii) either and therefore the debt was dischargeable in her bankruptcy case.

What is interesting to note in this case as well is the fact that the court looked to one case, In re Oliver, 499 B.R. 617 (Bankr. S.D. Ind. 2013) where a university withheld a student’s transcript because she did not pay the tuition or related fees. The Oliver court indicated that to be excepted from discharge, the debt must still be a loan. Therefore if you did not borrow money to pay the tuition (i.e: you pay for it yourself without borrowing money from a governmental entity, private student loan company, from the school itself, or from any other third party) the debt does not fit into any of the above exceptions to discharge and is therefore dischargeable in a bankruptcy. This court completely agreed with the Oliver court in their analysis and conclusion. Meridian’s bankruptcy attorney appealed this case on the same day the decision came out so we may or may not have the same result later on. We will follow continue to monitor this case and will report on the outcome of the appeal.