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

April 15 is quickly approaching and many Americans are filing their income tax returns. A common question at this time of year is, “Will I lose my income tax refund if I file Chapter 7 bankruptcy?” The short answer is no, at least if you consult with an experienced bankruptcy attorney.

The safest situation is to file your tax return and receive your refund prior to filing bankruptcy. The bankruptcy estate is calculated as of the date that you file your case. If the tax refund money is gone on the date you file your bankruptcy, there is generally no way for the bankruptcy trustee to make a claim against the tax money.

However (it’s funny how bankruptcy law, like life, has many “howevers”), there are exceptions to the general rule. For instance, if you pay an insider creditor on an antecedent debt, the trustee can avoid the transfer. An “insider” is a basically person close to you like a friend, family member, or business associate. If you owe an insider money, and you repay the debt from your tax refund, then the trustee could ask the insider to repay the money to the bankruptcy estate. Paying an insider within a year of filing bankruptcy usually leads to problems.

You may run into a similar problem if you pay down a loan, or pay any creditor a large lump sum within 90 days of filing bankruptcy. You could also run into an equity issue by paying off a vehicle with a large tax refund. These may seem like responsible actions, but the bankruptcy laws are full of landmines. Before spending your tax money it is wise to consult with your bankruptcy attorney to avoid these sticky situations.    

Another issue that occasionally happens is when a bankruptcy debtor files a Chapter 7 case after filing a tax return, but before receiving an expected small refund. “No problem,” says the bankruptcy attorney, until the IRS adjusts the small refund into a large refund. There is “no problem” if the debtor has available exemptions to protect the refund, the debtor simply amends his schedules. But sometimes there is no way to protect all of the refund and the trustee is able to collect. That is an unfortunate situation for someone that really could use the extra money, and a case that can be avoided by waiting until the refund is received and spent.

If you are concerned about keeping your income tax refund, consult with an experienced bankruptcy attorney. Your attorney can advise you on property that is exempt (protected) and non-exempt (not protected) before you file your case and risk losing any property.

You cannot pick and choose which debts to list in your bankruptcy petition. You must list all of your debts, including credit cards and debts you owe to friends and family members.

Intentionally leaving a debt off your bankruptcy petition is against the law. When you sign a bankruptcy petition, you are certifying under penalty of perjury that all of your assets and debts are listed. During the meeting of the creditors, you will also be asked under oath if all of your debts have been listed on the petition.

Even though you have to list a particular debt, there is nothing in the law that prevents you from voluntarily repaying the debt after it has been discharged. In fact, with secured debts, such as mortgages and car loans, you can choose to reaffirm the debt in order to keep the property.

The Dallas News reports that the Dallas-Fort Worth area has seen a decrease in foreclosure filings in February, according to Foreclosure Listing Service.

Home foreclosure postings for the four-county area (Dallas, Tarrant, Collin and Denton) totaled 4,695. That’s a 20% decrease from the nearly 6,000 postings recorded in January.

This month’s number of postings also represents a 4% decrease from February of last year. In fact, it’s the lowest foreclosure total for a February sale in three years in the Dallas-Fort Worth area.

The largest decline in foreclosure filings was seen in Collin County, where postings were down 9% from a year ago. Dallas County has seen a 7% decrease, followed by a 4% decrease in Denton.

Only Tarrant County is up from last year, with a 2% increase compared to the same period in 2009.

CEO of Foreclosure Listing Service George Roddy Sr. says the decline is welcome news but cautions against jumping to any conclusions. “While this decline may be what we have been waiting to see, a change for just one month does not establish a new trend. We will just have to wait to see what happens next month.”

If you are a Texas homeowner facing foreclosure, talk to a bankruptcy attorney today to learn more about your financial options. Bankruptcy may be able to stop the foreclosure and allow you to keep your home.

The bankruptcy code describes categories of debts that are excepted from discharge in a bankruptcy case. For most of these debts, the exception to discharge applies automatically. In other cases, the creditor must file a lawsuit (called an adversarial action or adversary case) with the bankruptcy court and have the judge determine whether the debt will excepted from the discharge order. A debtor may also want the bankruptcy judge to determine whether a debt is excepted from discharge.

Debts described in sections 523(a)(2), (4) and(6) (debts incurred by fraud or malicious conduct) are not automatically excepted from discharge. A creditor or debtor must file an adversary case requesting the bankruptcy court to determine the discharge status of these types of debts. The adversary case is generally filed within 60 days after the first 341 Meeting of Creditors.  Failure to file a timely adversary case waives the right to challenge the dischargeability of the debt.

In some rare cases a creditor or the bankruptcy trustee may ask the bankruptcy court to deny the debtor a discharge. Hiding assets, lying during the bankruptcy process, failing to obey a court order, and destroying documents with the intent to defraud creditors are all actions that could result in the bankruptcy court denying the debtor a discharge. In bankruptcy, honesty is not only the best policy, it is the only policy that will get you a discharge.

If an adversary case is filed against you, do not panic. You and your bankruptcy attorney must be served notice of the adversary case and you will have time to answer the complaint. In most cases an experienced bankruptcy attorney will anticipate the adversary case and will discuss options with the client. However, some cases come “out of the blue.” In those cases there is still time to develop a strategy including negotiating a settlement with the creditor.

You know that bankruptcy can reduce your debt and give you a fresh financial start, but how do you know when it’s time to take the first step and contact a bankruptcy attorney? Here are 11 signs that it may be time for you to consider filing bankruptcy:

1. You can barely afford the minimum monthly payments on your credit cards.
2. You have taken, or are considering taking, cash advances or payday loans to meet your basic living expenses.
3. You are losing sleep over not being able to pay your bills.
4. Stress over your financial difficulties is negatively affecting your health.
5. You are living paycheck to paycheck with no reserve funds for an emergency.
6. You are afraid to answer the phone or go to your mailbox.
7. You are taking cash advances on one credit card to make payments on another one.
8. You are considering cashing out your retirement savings to pay your bills.
9. Your debt is increasing rather than decreasing every month.
10. You’re behind on your rent or mortgage payments.
11. Your car is about to be repossessed.

If the above statements describe your current financial situation, then take charge of your life and learn about your options. Contact a bankruptcy attorney today to find out if bankruptcy is the right solution for you. The sooner you act, the sooner you can get your life back.

Imagine this: you are behind on your car payments. Heck, you are behind on a lot of bills, and perhaps you have been considering bankruptcy for some time. Then one day you walk out the door for work and discover. . .

Your car has been repossessed!

Don’t despair! Bankruptcy can still help. Call an experienced bankruptcy attorney immediately because you may be able to get your vehicle returned to you.

The law in most areas (including the Sixth, Seventh, Eighth, Ninth, and Tenth Circuits) is when a debtor files a Chapter 13 bankruptcy, the creditor must immediately return a repossessed vehicle to the debtor. This is because even though the creditor has taken possession of your vehicle, you are still the legal owner. The Bankruptcy Code states that in a Chapter 13, a creditor in possession of a debtor’s asset must ordinarily relinquish the asset back to the debtor.

However, this begs the question: what if your car is sold at auction or the creditor transfers the vehicle title out of your name? If this transfer is done after the Chapter 13 bankruptcy is filed, it is typically a violation of the automatic stay and the vehicle will be returned. If the transfer is done before the Chapter 13 bankruptcy is filed, you are out of luck. You no longer have ownership of the vehicle.

If the creditor refuses to return the vehicle, or does not return the vehicle in a timely manner, most courts will sanction the creditor. Once your vehicle is returned you must provide “adequate protection” to the creditor to assure that the property will be safeguarded and that the creditor will be adequately compensated. This usually takes place by submitting a Chapter 13 plan of repayment to the bankruptcy court.

If your vehicle has been repossessed, take immediate action! Call an experienced bankruptcy attorney and discuss your options. Your attorney can help you make the right financial choice for yourself and your family.

On February 22^nd, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) will go into effect.

One of the provisions of the act that has drawn the most commentary is the requirement that credit card statements show how long it will take the cardholder to pay off their balance if they make only the minimum monthly payments – and how much doing so will truly cost them.

Under the CARD Act, each statement must show the long-term savings of paying off your balance in three years. It must also tell you the amount of monthly payment you would need to make in order to pay off the balance within that time.

The goal of the provision is to help consumers realize the financial pitfalls of only making the minimum payment each month.

For expert opinions on what effect the disclosures will have on consumers’ behavior, see this piece from the Milwaukee Journal Sentinel.

This disclosure requirement is among several other consumer-friendly rules that will go into effect as a result of the new federal law. For more on the CARD Act, including several provisions affecting interest rate increases, see this piece from credit.com entitled “Understanding the Credit Card Accountability Responsibility and Disclosure Act.”

Bankruptcy is an area of the law that is fraught with myths and misconceptions. Often people know very little about the true nature of bankruptcy and how it will affect them. It is important to understand that bankruptcy is not something to be feared. Rather, it is a tool that can be used in the appropriate circumstances to eliminate or reduce your debts and give you a fresh opportunity to rebuild your finances.

In that spirit, we’ve put together this list of 5 things that most people don’t – but should – know about bankruptcy:

1. Most people are able to keep most, if not all, of their assets: None of your property will be taken in a Chapter 13 bankruptcy because you will be repaying a portion of your debts over a set time period. In Chapter 7 bankruptcy, you are allowed to keep some of your property under what is known as “exemptions.” In Texas, you can choose between the federal exemptions statutes or the Texas state statutes. Large assets, such as the equity in your home and vehicle, are protected, and many smaller assets, such as your clothing and household furniture, are exempt up to a certain amount.

2. You may be able to stop foreclosure and keep your home: As mentioned above, a generous amount of equity in your home is exempt under Chapter 7 bankruptcy. If you are behind on your payments, a Chapter 13 bankruptcy gives you the opportunity to catch up on your missed payments through a court-approved payment plan and has the effect of stopping any foreclosure sales dates.

3. You can often rebuild your credit after only a few years: While it’s true that a Chapter 7 bankruptcy stays on your credit report for 10 years and a Chapter 13 bankruptcy stays on your credit report for 13 years, the actual effect that bankruptcy has on your credit is often much less severe. Because bankruptcy wipes out your current debts, your cash is now freed up to pay your bills on time and improve your overall crediting rating. It is also possible get credit cards, albeit at higher interest rates, after you have filed for bankruptcy. If you use your new credit wisely, you can improve your score in much less time than you probably think.

4. Most people will never know that you filed for bankruptcy: Bankruptcy filings are public record, but in reality, very few people will ever find out that you filed for bankruptcy unless you choose to tell them. The only people who will receive notification are those who are directly involved in your bankruptcy in some way, such as your creditors. Even if your employer does find out that you’ve filed for bankruptcy, it is legal for them to fire you because of it.

5. The cost of hiring a bankruptcy lawyer is far less than the cost of making a mistake in filing for bankruptcy: Filing for bankruptcy requires you to comply with both Texas state and federal laws. It also involves a large amount of paperwork and court filings. If you make a mistake in your bankruptcy filing, your case can be dismissed. Also, by hiring an attorney you can maximize your exemptions, ensuring that you keep as many of your assets as possible. There is a limit on how often you can file for bankruptcy, so it is critical that you seek the advice of an experienced attorney to be sure it is done correctly.

A lot can happen during a Chapter 13 repayment plan which generally lasts three to five years. Sometimes large debts are incurred that the debtor is unable to pay. Fortunately, a Chapter 13 debtor is able to discharge a post-petition debt, but only after certain prerequisites are met.

First, the debtor must amend the repayment plan to provide for a post-petition debt. Second, the debtor must usually obtain the approval of the bankruptcy trustee prior to incurring the debt. This is not always obtainable, especially in the case of a large medical bill. Third, the creditor must voluntarily choose to file a proof of claim. And finally, the claim must either be a tax claim, or a claim for a consumer debt necessary for the completion of the debtor’s plan.

A common situation in which post-petition debts arise in a Chapter 13 case is where the debtor needs to purchase a different automobile. Repaying a post-petition car loan through a Chapter 13 plan is easily accomplished through coordination and cooperation from the trustee, the lender, and the court. The lender agrees to be paid by the trustee, the trustee agrees to sanction the debt, and the court approves the amended plan allowing the lender to be paid through the bankruptcy plan. 

In some cases it may not be practical to include a post-petition debt in the debtor’s Chapter 13 plan. In that case, the debtor may elect to convert the Chapter 13 case to one under Chapter 7. The Bankruptcy Code states that a debt that arises after the Chapter 13 filing date, but before the debtor’s conversion to Chapter 7, is to be treated as a pre-petition debt. The Chapter 13 restrictions and requirements listed in the preceding paragraph do not apply to debts in a conversion case. 

The Bankruptcy Code contains many flexible options for reorganizing your finances and dealing with your creditors. Even when there is an unexpected event that results in a debt, your bankruptcy attorney can provide you with choices for dealing with a post-petition debt.