Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

While working on the electric light bulb Thomas Edison was asked by a reporter, “How does it feel to have failed seven hundred times?”

Edison replied, “I have not failed seven hundred times. I have not failed once. I have succeeded in proving those seven hundred ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”

As businessman Harvey Mackay says, “Failure is an attitude, not an outcome.”

When a person makes a decision to file bankruptcy, the decision is largely based on a recognition that something hasn’t worked and changes need to be made. Fortunately, the bankruptcy laws provide the tools to make those financial changes. Through bankruptcy you can have a fresh start at a new financial life without the burdens of overwhelming debt. The Supreme Court has stated many times that “[t]he principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the honest but unfortunate debtor.” Marrama v. Citizens Bank of Massachusetts. 

Does the fresh start work? Yes! A study by the Executive Office of the United States Trustee found that “[m]ost chapter 7 debtors have a substantial negative net worth at filing, but have a small positive net worth after discharge.” Bankruptcy works to put you on the right financial track with the hope for a better tomorrow.

A Chapter 7 bankruptcy releases the debtor from personal liability for certain types of debts.  Unsecured debts (usually the most burdensome type like high interest credit card debt and medical bills) are discharged by the bankruptcy case without payment. The discharge is a court-ordered injunction that prohibits your creditors from collecting from you in the future. The creditor can no longer call, write, or take any collection action against you.

If you are ready for a fresh start, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help. An experienced bankruptcy attorney can explain your legal options and help you find a way that works for a bright financial future.

Only debts that are listed on your petition will be discharged in bankruptcy. Additionally, when you file a petition for bankruptcy, you are swearing under oath that you have included all of your debts and assets. Intentionally omitting a creditor is actually perjury.

Of course, you should exercise extreme care to ensure that you list all of your debts on your bankruptcy petition. However, there can be circumstances where an individual does not know about a creditor at the time of filing.

If you accidentally leave a debt off of your bankruptcy petition, the bankruptcy court will allow you to file an amendment to your schedules. As long as the amendment is filed in a timely manner, then the creditor will be added to your bankruptcy.

Note, though, that there are time limits on how long you have to file amendments. These time limits are strict and specific. That is why you should immediately seek the advice of a qualified bankruptcy attorney to ensure that you do not lose out on any discharges to which you would otherwise be entitled.

For most, the decision to file a bankruptcy is a tough choice. It is the final step in a long journey that has included great compromise and sacrifice. A person usually experiences a sense relief when deciding to file bankruptcy, and there may be a tendency to "let go" of your debt problem. Unfortunately, in some cases people will “let go” by recklessly spending money and running up credit card balances.

It is generally not a good idea to incur any new debt before a bankruptcy filing. The Bankruptcy Code has several provisions prohibiting the debtor from loading up on debt prior to filing bankruptcy. One of the most commonly cited is a spending spree prohibition against purchasing “luxury goods or services” totaling more than $550.00 within 90 days prior to filing a bankruptcy case. Another provision makes credit card cash advances presumptively non-dischargeable if taken within 70 days prior to the bankruptcy filing.

Recently the United States Supreme Court in Milavetz, Gallop & Milavetz, P. A. v. United States reiterated that incurring new debt before bankruptcy with the intent to discharge the debt is not only prohibited, but may also amount to civil fraud or a criminal act. The high court said that bankruptcy attorneys cannot instruct or encourage debtors to take on more dischargeable debt before bankruptcy, but attorneys “remain free to talk fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” 

There are many situations where taking on additional debt is beneficial and permissible. The Supreme Court cited three of those situations in the Milavetz opinion: (1) refinancing a mortgage; (2) purchasing a reliable car; and (3) incurring “additional debt to buy groceries, pay medical bills, or make other purchases ‘reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor[.]’”

The bankruptcy process can relieve you of many financial worries. However, your path to financial recovery can be complicated without the sound advice from an experienced bankruptcy attorney. Don’t make any significant financial decisions prior to filing bankruptcy without consulting your attorney.  

Most bankruptcy clients are aware of the attorney-client privilege, an evidentiary rule that protects confidential communications between an attorney and client. It encourages candid communication between clients and attorneys without fear that the discussion will be used against the client. This privilege belongs to the client and the client determines when to waive it. The privilege exists generally in every legal forum in the United States, however its application can vary. 

In a Chapter 7 bankruptcy case, a trustee is appointed to administer the case and liquidate the debtor's nonexempt assets. In performing these duties it may become important for the trustee to have certain information and the trustee may seek to have the debtor’s attorney disclose information obtained during a confidential attorney client discussion.

To compel the disclosure of this information, the trustee may invoke section 542(e) of the Bankruptcy Code which states that “[s]ubject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information. . . relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.” In opposing this disclosure, the debtor may assert the attorney-client privilege and argue that the trustee does not have the power to waive this privilege.

Bankruptcy Courts have taken three different approaches to resolving the issue of whether the trustee can waive the attorney-client privilege: (1) the trustee can waive attorney-client privilege; (2) the attorney-client privilege is absolute and cannot be waived by the trustee; and (3) whether the trustee is entitled to waive the attorney-client privilege depends upon the circumstances in the case. Bankruptcy courts using this last test generally balance the benefit to the bankruptcy estate against the potential harm to the debtor. See In re Courtney, 372 B.R. 519 (Bankr. M.D. Fla. 2007).

The bottom line is “let the client beware!” Discussions with your bankruptcy attorney, personal injury attorney, or other attorney may be subject to disclosure during your bankruptcy case. While most financial records would not be subject to the attorney-client privilege, the discussion of these records with your client may be privileged. Be warned that protecting this privileged communication may be at the discretion of the bankruptcy court.

The bankruptcy laws are constantly changing. Make sure that your fresh start is not a false start and hire an experienced and knowledgeable bankruptcy attorney who can protect your rights. 

Consumers who file for bankruptcy tend to face a lot of the same problems, such as the loss of a job or a serious illness. For these individuals, bankruptcy is often a viable option for getting their finances back on track after a life-changing event.

Here are five of the most common financial pitfalls from which bankruptcy can help save a consumer.

1. Severe or prolonged illness

A prolonged or serious illness can lead to massive medical bills. Some families find themselves unable to get out from underneath mounting medical expenses. Bankruptcy is a legitimate way to eliminate medical-related debts.

Because medical bills are unsecured debts, they can be discharged in bankruptcy. In these cases, a Chapter 7 liquidation bankruptcy is often a viable option for eliminating your medical bills and getting your finances back under control.

2. Job loss

The poor economy has resulted in job loss and layoffs for countless individuals in Texas and across the United States. The reduction in income that comes from a job loss is one of the most common reasons for individuals filing bankruptcy.

Even if you find a new job, it can be difficult to catch up on your past overdue mortgage, car and credit card payments. Bankruptcy will stop the garnishment on your wages at your new job.

For individuals who find themselves suddenly without a job, bankruptcy may be the best solution.

3. Divorce

As a result of a divorce, debts are often apportioned between the two former spouses. One spouse may find themselves unable to repay their portion of the debt. Bankruptcy, be it Chapter 7 or Chapter 13, is one way that this individual can get back in charge of their finances.

Note that child support and alimony payments are not dischargeable debts in bankruptcy. Bankruptcy, however, can still wipe out unsecured debts incurred as a result of a divorce.

4. Massive consumer debt

Most consumers who file for Chapter 7 bankruptcy have between $50,000 and $75,000 in debt. With interest mounting on credit card debts, it can be difficult, if not impossible, for these consumers to catch up on their payments.

Rather than liquidating your retirement savings, you can consider filing for bankruptcy and have those debts discharged. Bankruptcy, in some cases, can be a matter of saving your financial future.

5. Impending foreclosure

Bankruptcy can be the solution for a homeowner who is facing imminent foreclosure. Filing for bankruptcy can put an immediate stop to a foreclosure. In many cases, due to exemptions, the homeowner will be able to keep their property.

If you are considering filing for bankruptcy in Texas for these other reasons, contact a qualified bankruptcy attorney today to receive expert advice on your options.

Bankruptcy filings are on the rise – that’s according to the American Bankruptcy Institute which pulled data from the National Bankruptcy Research Center. This past February, 111,693 consumer bankruptcies were filed, which represents a 14% increase over the 98,344 consumer bankruptcy filings in February of 2009.

The number of consumer bankruptcies filed in February was also 9% higher than the 102,254 filings in January 2010.

The director of the American Bankruptcy Institute, Samuel Gerdano, believes that the number of bankruptcies filed in 2010 could ultimately exceed 1.5 million.

Last year, there were more than 1.4 million bankruptcy filings, including both consumer and business bankruptcies. That represented a 31.9% increase over the previous year, according to a report released by the Administrative Office of the U.S. Courts (AOUSC).

Of those bankruptcies, says the AOUSC, the majority were filed by consumers rather than businesses. Overall, consumer bankruptcies in 2009 increased 32% from the 1.07 million filed in 2008.

While business bankruptcies may have totaled fewer than consumer bankruptcy filings, the overall increase was higher, with 60,837 filings equating to a 40% increase over 2008.

If you are considering filing for bankruptcy in Texas, seek the advice of a qualified bankruptcy attorney today.

Most bankruptcy clients worry about how a bankruptcy might disrupt their lives. While many of these fears are unfounded, it is important for you to know the truth about the bankruptcy process and how it may affect you after your case. One serious matter is how a bankruptcy may affect an individual’s employment.

The first concern is how a bankruptcy can affect your current job. An employer will not receive notice of your bankruptcy except under two circumstances. First, you owe a debt to your employer, the bankruptcy court will notify your employer. Second, if you file a chapter 13 debt repayment bankruptcy, and choose a voluntary wage garnishment to pay creditors, your employer will be notified. 

Additionally, section 525 of the Bankruptcy Code prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy. You cannot be fired from your current job because you filed bankruptcy.

A second concern is how a bankruptcy may affect your ability to get a job. Government employers are absolutely prohibited from denying employment to a person solely on the basis of a bankruptcy filing. As for private employers, most courts have found that the bankruptcy code does not prohibit a private employer from denying a person employment because of a bankruptcy filing.

Refusing to hire a person solely because of a bankruptcy filing seems like a very short-sighted and naïve policy. Consider that the U.S. Census Bureau estimates there are around 308 million people in the United States. From 2000 to 2009, there were over 13 million non-business bankruptcy filings (source: American Bankruptcy Institute). That is over four bankruptcy filings per one hundred people. That figure rises substantially once you take into account that the census includes many that are not in the “working” population, and that many of the non-business bankruptcy filings were joint husband and wife filings. Add to the fact that there are many legitimate and blameless reasons for filing bankruptcy, and it is no wonder that most employers do not discriminate based upon a bankruptcy filing.

If you are experiencing financial difficulty, consult with a bankruptcy attorney and explore your options. Bankruptcy is a federally guaranteed legal process that helps individuals recover from overwhelming financial hardship. Get your financial fresh start today.

When you file for bankruptcy in Texas, you are required to list all of your assets on your bankruptcy petition. What many debtors do not realize, however, is that a potential legal claim against a third party is considered an asset for purposes of bankruptcy.

A bankruptcy attorney should always ask their clients whether they have any claims against any third party that could potentially be filed in court. Essentially, your bankruptcy attorney needs to know if you have any potential lawsuits.

Why is a potential lawsuit an asset? Because, if you file the claim and win the lawsuit, then you will likely receive financial compensation – and that money is obviously another asset.

One reason that it is so important that you tell your bankruptcy attorney about any potential lawsuits is that if you fail to list the claim on your bankruptcy petition, you could forever lose your right to file a lawsuit based on that claim.

For example, if you have a potential personal injury lawsuit against a driver that caused a car accident in which you were hurt, you must list that potential lawsuit as an asset. If you don’t list it, and you later attempt to file that lawsuit, you may be found guilty of committing bankruptcy fraud. You would then be prohibited from filing the lawsuit even after your bankruptcy case has concluded.

Upon your filing for bankruptcy, a bankruptcy estate is created. All of your assets, which includes potential lawsuits, then become the property of this estate. That is, it becomes property of the bankruptcy estate unless you are able to exempt it, which means that the proceeds of the settlement would be distributed amongst your creditors. For that reason, it is always the smartest move to list and attempt to exempt an asset than to not list it at all.

As always, being completely open and honest with your bankruptcy attorney is key to filing a successful petition.

Receiving a lawsuit summons is a very scary thing. Whether served by a law enforcement officer, private process server, or received by mail, the idea of facing a judge and a skilled attorney is very intimidating.  Fortunately, your legal options are very clear: (1) do nothing; (2) defend the law suit; (3) negotiate a settlement; or (4) file a bankruptcy.

The first option, do nothing, is obviously a bad choice. The court will enter a judgment against you and your wages may be garnished or property seized (e.g. the contents of a bank account). Even if the debt is ultimately paid or discharged in bankruptcy, the judgment will remain on your credit report for at least seven (7) years.

The second and third options, defend the law suit and/or negotiate a settlement, are very difficult to accomplish.  Once the creditor has hired an attorney and filed a lawsuit there is very little that a person or non-attorney debt settlement firm can do to “settle” the debt.  The collection attorney will use the legal processes to its advantage and knows that an unrepresented person is generally unable to successfully defend the lawsuit.  Even the lay-person-friendly small claims process can be filled with pitfalls. Additionally, the cost of hiring an attorney and defending a lawsuit can get very expensive and the collection attorney is betting that you will not pay $3,000 to an attorney to contest a $3,000 credit card debt. The collection attorney believes (rightly) that it has the advantage and will ultimately obtain a legally enforceable judgment against you. Depending on your cardholder agreement, you may be liable for the principal, interest, penalties, court fees, and attorney fees. Why would they settle for less?

The final option, bankruptcy, is a very powerful tool. Bankruptcy immediately stops the lawsuit and prevents the entry of a judgment. Once the individual’s obligation to pay the debt is discharged by the bankruptcy court, the lawsuit must be dismissedand cannot be refilled. Filing bankruptcy prevents almost all future lawsuits from being filed and can discharge the obligation to pay most court judgments.

If you have been sued by a credit card company, discuss your situation with an experienced bankruptcy attorney. There are many options for dealing with your financial difficulty, and a bankruptcy attorney can help you select the best course of action for you and your family.