We're getting into tax season, and it should be remembered that, in addition to the 1099's that are issued for persons paid money, certain creditors have an affirmative duty to issue a 1099-C for compromised indebtedness. This applies to any cancelled debt over $600. Multiple cancellations of a debt are not to be aggregated for purposes of determining whether the $600 is met, unless, of course, the reason that each debt is less than $600 is to avoid triggering the 1099-C filing requirement (you didn't think the IRS would let you get away with this glaring loop hole, did you?).
As a result, any financial institution or other organization "whose significant trade or business is the lending of money," such as a finance company, credit card company, and the like (whether or not affiliated with a financial institution) must file a 1099-C for cancelled debt. The degree of business necessary so as to be considered "significant" has been defined as when money is lent on a "regular and continuing basis."
Thus, for example, if you are in the finance business and a debt is negotiated from an original balance of $10,000 down to $4,000, then the creditor must issue a 1099-C for the portion that has been written down -- $6,000.
There are different rules for secured property (i.e. collateralized personal property or mortgaged real property) that is abandoned by the debtor in exchange for the cancellation (such as a "deed in lieu of foreclosure"). This filing requirement appears to be for everyone, not just financial institutions and those who are in the business of lending money. Thus, if you "acquire an interest in property that is security for the debt," (or if you merely have reason to know that the property has been abandoned) in full or partial satisfaction of such debt, then you need to file a 1099-A or merely fill out boxes 5 & 7 of the 1099-C. According to the IRS, the proper filing of the 1099-C will meet this requirement. This can be a nasty surprise for the debtor who gets one of these, but the rules are the rules!
Saturday, March 15, 2008
Monday, October 22, 2007
The Bizarro Legislature
At first, I thought it was spam. I received a communication from Tarrant County asking for my client's social security number and driver's license number, and demanded that same be "placed on every initial pleading", and that I should amend that pleading post haste, for failing to do so was "punishable by contempt".
Being no fool, I filed this away with those emails asking me to log into PayPal with my username and password from their email link, and those seeking to "confirm" my identity information for "status purposes" from various different banks or for Nigerian princes and their heirs. With the number of individuals I have helped clear their credit reports of filings for the wrong "John Smith" and those who have had their credit assaulted by identity theft, I heartily laughed it away. I didn't even need to check Snopes on this one.
However, I was concerned that someone had hacked into Tarrant County's website, so I thought I should at least check it out. What I discovered actually just plain floored me.
Now, I'm not someone that immediately is critical of all things legislative. I believe the legislature, and our government structure as designed by the founders, is a pretty decent design all things considered. But when you see something like SB 699 come out of the 80th Legislature, it makes even the optimist wonder if that glass is really half empty.
One the one hand, you have the overwhelming political pressure to deal with identity theft. In a do nothing legislative session, the legislature, in a bipartisan manner, passed such ID Theft legislation as SB 222 (allowing consumers to freeze their credit reports if victims of ID theft), HB 2002 (providing consequences to check verification companies for activities post notice of ID theft), HB 649 (providing penalties for using child's ID for fraud), HB 887 (providing a seven year statute of limitations on ID fraud), HB 3093 (requiring zip code authorization for credit card usage), and HB 1237 (relating to personal information, gasp, of lawyers). Clearly, identity theft was on people's minds. And deservedly so, as over 20,000 Texans reported being victims in 2003, and Texas ranked fourth in the nation, per capita, in identity theft victimization.
But that's until the Title Company lobby apparently got involved. With all this protection of private citizen data, title companies have apparently had difficulty getting releases of judgment liens from the right parties, and have had difficulty insuring that the right "John Smith" was the judgment defendant in whatever case left that unsatisfied judgment. But rather than just dealing with this issue in terms of title insurance, in what appears to be a very little thought out bill, the Texas Senate, on a bill introduced by Republican State Senator (and holder of a BBA in Real Estate and Insurance) John J. Carona, requires, and I quote,
Now after wiping the "wha?" off my face, I began to realize the breadth of this particular little change that went 7-0 out of committee and passed the Senate 30-0. In trying to fix a minor problem, it has now created some major ones. Here, in an era where we are struggling to defend ourselves against the onslaught of identity thieves, our own legislature is requiring that I list the last three digits of the social security number of my client and any defendant against which we receive judgment into the public record.
In researching for this blog entry, I realized just how many banks and other institutions default to "last four digits of SSN" as their PIN codes, how many security codes are set to this number, and how, with a simple search tool like Westlaw, Lexis or AutoTrack, one could get the first five numbers, and then in the court pleadings get the final three, leaving only ONE digit for theives to have to guess to try to nail this down. This is utterly idiotic in this day and age.
In researching further, I looked for some indication, somewhere, that this was at the very least controversial and that privacy experts were up in arms about this; so far, nothing. The only people testifying at the Senate hearing on this gem were clerks and title company representatives. No privacy groups, no AARP.
"Yes, Ms. Imbeingstalked, we know that you are being harassed by that crazy man, but please provide to us identifying information for your stalker or you may go to jail before he does."
My educated guess is that as this little fun provision will be amended, but the problem is that the leg only works every two years, meaning courts (and attorneys) will be dealing with this legislative gem for some time unless there are clarifications or local rules explaining the limitations of this. Either way, it is very insightful to see just how powerful the business lobby is, just how easy it is for such idiotic legislation to get passed, and just how empty that glass really is right now.
I don't doubt that title companies, in an effort to ensure that John and Jane Q. Public can close on their loan (and/or sell their house without abstracts clouding the title), had nothing but the best intentions. But there is such a better way to deal with identity problems in abstracts of judgment. And the model is very much like what the private sector does with credit reports: if their is an objection to the lien by the person against whom the lien is being asserted by the title company, there should be a validation process. If that validation process cannot be completed, and the lien is not asserted by the lien claimant of record within a period of time (say 30 days), then the lien is by statute released. This will force lien claimants to file updates to their addresses, file address information for asset portfolio managers, and so on. And it doesn't require the public filing of Social Security Numbers or Driver's Licenses in EVERY civil filing in the State of Texas.
Being no fool, I filed this away with those emails asking me to log into PayPal with my username and password from their email link, and those seeking to "confirm" my identity information for "status purposes" from various different banks or for Nigerian princes and their heirs. With the number of individuals I have helped clear their credit reports of filings for the wrong "John Smith" and those who have had their credit assaulted by identity theft, I heartily laughed it away. I didn't even need to check Snopes on this one.
However, I was concerned that someone had hacked into Tarrant County's website, so I thought I should at least check it out. What I discovered actually just plain floored me.
Now, I'm not someone that immediately is critical of all things legislative. I believe the legislature, and our government structure as designed by the founders, is a pretty decent design all things considered. But when you see something like SB 699 come out of the 80th Legislature, it makes even the optimist wonder if that glass is really half empty.
One the one hand, you have the overwhelming political pressure to deal with identity theft. In a do nothing legislative session, the legislature, in a bipartisan manner, passed such ID Theft legislation as SB 222 (allowing consumers to freeze their credit reports if victims of ID theft), HB 2002 (providing consequences to check verification companies for activities post notice of ID theft), HB 649 (providing penalties for using child's ID for fraud), HB 887 (providing a seven year statute of limitations on ID fraud), HB 3093 (requiring zip code authorization for credit card usage), and HB 1237 (relating to personal information, gasp, of lawyers). Clearly, identity theft was on people's minds. And deservedly so, as over 20,000 Texans reported being victims in 2003, and Texas ranked fourth in the nation, per capita, in identity theft victimization.
But that's until the Title Company lobby apparently got involved. With all this protection of private citizen data, title companies have apparently had difficulty getting releases of judgment liens from the right parties, and have had difficulty insuring that the right "John Smith" was the judgment defendant in whatever case left that unsatisfied judgment. But rather than just dealing with this issue in terms of title insurance, in what appears to be a very little thought out bill, the Texas Senate, on a bill introduced by Republican State Senator (and holder of a BBA in Real Estate and Insurance) John J. Carona, requires, and I quote,
SB 699 (emphasis added, but almost unnecessary. It emphasizes itself).(a) In a civil action filed in a district court, county court, or statutory county court, each party or the party's attorney shall include in its initial pleading:
(1) the last three numbers of the party's driver's
license number, if the party has been issued a driver's license; and(2) the last three numbers of the party's social security number, if the party has been issued a social security
number.(b) A court may, on its own motion or the motion of a party, order that an initial pleading be amended to contain the information listed under Subsection (a) if the court determines that the pleading does not contain that information. A court may find a party in contempt if the party does not amend the pleading as ordered by the court under this subsection.
Now after wiping the "wha?" off my face, I began to realize the breadth of this particular little change that went 7-0 out of committee and passed the Senate 30-0. In trying to fix a minor problem, it has now created some major ones. Here, in an era where we are struggling to defend ourselves against the onslaught of identity thieves, our own legislature is requiring that I list the last three digits of the social security number of my client and any defendant against which we receive judgment into the public record.
In researching for this blog entry, I realized just how many banks and other institutions default to "last four digits of SSN" as their PIN codes, how many security codes are set to this number, and how, with a simple search tool like Westlaw, Lexis or AutoTrack, one could get the first five numbers, and then in the court pleadings get the final three, leaving only ONE digit for theives to have to guess to try to nail this down. This is utterly idiotic in this day and age.
In researching further, I looked for some indication, somewhere, that this was at the very least controversial and that privacy experts were up in arms about this; so far, nothing. The only people testifying at the Senate hearing on this gem were clerks and title company representatives. No privacy groups, no AARP.
"Yes, Ms. Imbeingstalked, we know that you are being harassed by that crazy man, but please provide to us identifying information for your stalker or you may go to jail before he does."
My educated guess is that as this little fun provision will be amended, but the problem is that the leg only works every two years, meaning courts (and attorneys) will be dealing with this legislative gem for some time unless there are clarifications or local rules explaining the limitations of this. Either way, it is very insightful to see just how powerful the business lobby is, just how easy it is for such idiotic legislation to get passed, and just how empty that glass really is right now.
I don't doubt that title companies, in an effort to ensure that John and Jane Q. Public can close on their loan (and/or sell their house without abstracts clouding the title), had nothing but the best intentions. But there is such a better way to deal with identity problems in abstracts of judgment. And the model is very much like what the private sector does with credit reports: if their is an objection to the lien by the person against whom the lien is being asserted by the title company, there should be a validation process. If that validation process cannot be completed, and the lien is not asserted by the lien claimant of record within a period of time (say 30 days), then the lien is by statute released. This will force lien claimants to file updates to their addresses, file address information for asset portfolio managers, and so on. And it doesn't require the public filing of Social Security Numbers or Driver's Licenses in EVERY civil filing in the State of Texas.
Friday, September 14, 2007
Texas Justice Court Jurisdiction
The Legislature decided to increase the amount in controversy jurisdictional limits of the Justice and Small Claims Courts to $10,000 (from its previous limit of $5,000) in SB 618. Also, the law, which went into effect on September 1, 2007, clarifies that a corporation need not be represented by an attorney in justice or small claims courts.
Friday, August 31, 2007
The Collection Purgatory
A case out of the Ninth District Court of Appeals, Wilcox v. Marriott, states that abstracts of judgment filed before the 1/1/2000 change in the homestead exemption (raising the exemption from one acre to ten acres) do create a lien on property greater than one acre, but executions would have to issue before 1/1/2000 in order to seize the property. So, in essense, the creditor has a valid lien on that land greater than one acre, but it can't do anything with it unless they served a writ prior to 1/1/2000. Thanks to Lisa Fancher of Fritz, Byrne, Head & Harrison for the submission.
Texas Local Rules
Another decent site for practitioners that collect in various counties in Texas. TexasLocalRules.com is a great site to find some of the local rules in one place.
Friday, August 24, 2007
Texas Appraisal District Web Site
It always has been a pain to Google certain categories of web sites. It's good to see a site that eliminates some of this pain for repetitive searching of appraisal districts. Check out TexasCAD.com ...One place, easy launch site for Texas Appraisal District search sites. We liked it so much, we placed an advertisement. Check it out.
Monday, August 13, 2007
Texas Exemptions and Life Insurance
New case out of the Fifth Circuit states that whole life insurance policy proceeds, if the policy is surrendered for cash prior to death, are not exempt under Texas law. See case here. Basically, exemption for insurance proceeds are only for the beneficiary. In this case, the owner of the policy is not the "beneficiary" of the policy, he is the "owner" of the policy, and the cash in is paid to him not as "insured", which would be exempt, or as "beneficiary", which would also be exempt, but as "owner".
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