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Category Archives: Non-Dischargeable Debts

523(a)(2), 9011, 9th Circuit, Appellate Decisions, Non-Dischargeable Debts

Case Report: Weinstein, Pinson & Riley v. Nelson 14-56103

A strike against abusive debt collectors in Bankruptcy Court.

Authority:  9th Circuit Court of Appeals.

Why relevant:  A 9011 motion may be well taken where even one of the causes of action is without merit.

Relevant Code Section:  523(a)(2)

Note: Not Published

In this matter, Weinstein, Pinson & Riley (formally Weinstein & Riley) sued another Debtor yet again with insufficient evidence to back up their claim and were sanctioned under F.R.B.P. 9011 for meritless litigation.  Weinstein is a national law firm, renowned for filing claims against Debtors under 11 U.S.C. 523(a)(2) without a sufficient basis for alleging fraud.  Their goals are to scare the Debtors into some form of settlement by taking advantage of individual Debtors who have insufficient resources to defend themselves.  In this matter which comes out of the 9th Circuit court of appeals, the appellate court upheld a lower court ruling finding Weinstein to have filed their complaint without a sufficient legal basis even though at least one of their causes of action did have merit.

11 U.S.C. 523(a)(2) concerns debts incurred through fraud. Weinstein often sues for debts to be determined as non-dischargeable under 11 U.S.C. 523(a)(2)(c)(1) on the basis that debts incurred within the 90 days pre-petition that are incurred for the purchase of luxury goods or services with knowledge of the Debtor’s intent to discharge the debts prior to Bankruptcy should likewise be considered non-dischargeable.

In our experience, Weinstein can be scared off by an aggressive defense.  As a defending party, if the Debtor can cause Weinstein sufficient grief such that they do not want to continue litigation, they often dismiss the matter.  Further, our recommendation is to always proceed to trial.  Most Bankruptcy Judges are unfriendly to Weinstein’s tactics and the majority of Debtors will find themselves in a receptive court if they put forward a good, honest and solid defense regarding the nature of the claimed non-dischargeable debts.

Non-Dischargeable Debts, Tax Debts, Uncategorized

Payroll Taxes: Don’t Take the Government’s Candy!

By Anerio Altman

Don’t take money from the Government.

They are big, they are powerful, and they are very possessive.

If you take their money, they become very angry.

One type of fund that an employer may wrongfully withhold from the government, and for which the employer will not discharge in Bankruptcy, are Payroll Taxes that the employer was supposed to collect on behalf of the U.S. Government from the employer’s employees.

The non-dischargeability of these taxes arises under Federal Law.  All things in Bankruptcy Practice are based on the U.S. Code.  (Bankruptcy Attorneys are not a horribly imaginative bunch so everything we do is based on the U.S. Code.)  The Non-Dischargeability originates from 11 U.S.C. 523(a)(1).  Everything under the code section of 11 U.S.C. 523 et seq. lists non-dischargeable debts in Bankruptcy.

11 U.S.C. 523(a)(1)  cross-references 11 U.S.C. 507(a)(8)(c) which specifically mentions as a non-dischargeable debt:  “(C) a tax required to be collected or withheld and for which the debtor is liable in whatever capacity;”

(If that isn’t self-explanatory as to why that clause applies to payroll taxes, stop reading now and call our law office at (949) 218-2002;  You are obviously a legal danger to yourself and others.)

The Government wrote the Bankruptcy Code.  In writing the Bankruptcy Code, the Government made it very clear that taxes that are owed to the Government, that you were never supposed to touch as an employer, are still owed after your file your Bankruptcy. Keep in mind that income taxes, taxes you yourself owe as an employer on your own income may be discharged under certain conditions.  If you owe income taxes as the business owner, they can be addressed in Bankruptcy.  (But see an attorney….and for goodness sake don’t rely on this blogpost for a full legal explanation!)

Conversely, payroll taxes are taxes that the government requires an individual to deduct from the salary of their employees when the employees are paid.  The employer was supposed to hold onto them on behalf of the government. So if you “lose” these funds for some reason, the government becomes particularly distraught…and may want to talk to you. stan_smith_american_dadThey just want to talk.

If you’ve been naughty, and “lost” these funds as an employer, you can propose a Chapter 13 plan or Chapter 11 plan to payback the “lost” payroll taxes over the life of the plan. But they aren’t going away just because you would like them to.