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Candidate's Bankruptcy Becomes Political Issue in Redlands State Assembly Campaign

August 27, 2010

This month, our Rancho Cucamonga bankruptcy lawyers wrote about the apparent increase in political candidates who are willing to openly discuss their bankruptcies, or even make the bankruptcy experience a part of their pitches to voters. As it turns out, we have another such candidate right here in Southern California -- a challenger running for a state Assembly seat in the high desert, which includes the cities of Palmdale, Victorville and Adelanto. According to an Aug. 23 article in the Redlands Daily Facts, candidate Linda Jones, a Democrat, is under fire in some quarters because she and her husband filed for bankruptcy in February of 2010. The article notes that she lent her campaign $3,000 in March of this year and paid $2,650 in filing fees, even though she owes $5,856 in state and federal taxes for the 2008 tax year. Jones called the comparison misleading, but the article suggested that voters are generally unsympathetic to candidates with tax problems.

Jones ran against incumbent Republican Steve Knight of Palmdale in 2008 and nearly won, suggesting that this race could also be tight. The news of the bankruptcy came from the Flash Report, a conservative blog run by California GOP vice chairman Jon Fleischman. Fleischman criticized Jones for failing to pay off her back taxes before she paid a nearly identical amount to her campaign, and some Inland Empire Republicans echoed that criticism. Jack Pitney, a Claremont-McKenna College political science professor, said voters might be sympathetic about the bankruptcy itself. The region is suffering financially because of high foreclosure and unemployment rates, and some voters may emphasize with a bankruptcy. But if Jones is perceived as dodging her taxes, he said, voters may be less sympathetic. Jones said the comparison was misleading and that she was current on all of her financial obligations.

As Brea bankruptcy attorneys, we'd like to discuss taxes and bankruptcy, something that the article did not explicitly do. Federal law does allow bankruptcy filers to discharge tax debts, but only under certain circumstances. Jones does not meet one of those circumstances -- her tax debt was not incurred at least three years before her bankruptcy. Thus, regardless of what you might think of this bankruptcy, it would be incorrect to accuse Jones of evading her taxes through it. The tax debts and assets are now owned by the bankruptcy estate, a separate legal entity from the Joneses as individuals, and the taxes will be paid when the Chapter 7 liquidation process has taken place. In fact, since Fleischman posted the Joneses' bankruptcy filing online, we can see that the tax debt is the only priority claim -- meaning that the tax debts will be the first debts to be paid off through their bankruptcy. We can only assume that the campaign money came from assets that were exempted from the bankruptcy, as some assets are in every bankruptcy.

As you can see, bankruptcy accounting can be more complicated than it appears -- but filing for bankruptcy does not have to mean your career or financial independence is over. Howard Law PC helps clients throughout California understand the process of bankruptcy and decide whether it is the best choice for their own individual circumstances. With all new bankruptcy clients, we start by going over their finances to decide whether bankruptcy is really their best choice. From there, our Lakewood bankruptcy lawyers help clients decide between Chapter 7 or Chapter 13 and start the long process of ensuring that all of the relevant assets and debts are included. Throughout the process, we help our clients navigate the sometimes confusing or unfriendly court system, helping them avoid mistakes that could void their filings and protect themselves from overzealous debt collectors. We want each client to leave with a clean financial slate and the knowledge to rebuild their financial lives safely.

Howard Law offers free, confidential case evaluations, so you risk nothing by speaking to us about your situation and your options. To learn more, call us toll-free at 1-800-872-5925 or send us a message through our website.