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

Deciding to walk away from a family home is a gut-wrenching decision. Before walking away the prudent person will investigate all of the options, including returning the property to the lender (i.e. a deed-in-lieu of foreclosure), a short sale, or renting the property. Unfortunately, for some walking away is unavoidable, so it is important to know the repercussions.

The first concern is safeguarding the property. Maintaining insurance and basic utility service is important until possession (and in some cases ownership) of the house is transferred. Should you fail to safeguard the property, you may be liable to the lender for damages.

Next, once transfer of title is accomplished (usually through a foreclosure proceeding), the bank may sue you for breach of contract and damages. Sometimes the bank will wait until after it fully realizes all of its damages upon sale of the house, then it will sue for the difference between the amount it recovers and the amount you owed. This is called a deficiency balance and it is recoverable by the lender in most states.

The bank may also forgive the debt difference and issue you an IRS Form 1099C. When this happens the bank is telling the IRS that it has given you a “gift” in the amount of its loss (because you don’t have to pay it back) and you owe income tax on the “gift” amount. You have two options to avoid paying the tax debt: bankruptcy, or the insolvency exclusion in the tax code. The insolvency exclusion requires that you prove that your liabilities exceeded the value of your assets. By filing bankruptcy this type of tax debt will be discharged.

Congress has granted a reprieve from tax debts stemming from the sale of your primary residence. The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) provides that taxpayers do not owe taxes on mortgage debt that was forgiven by the lender. The law only applies to deficiencies during the 2007, 2008, and 2009 tax years.

Finally, walking away from your home will have negative consequences to your credit report. The possible negative items include 120 day late entries, foreclosure, and debt write-off. All of these items have a devastating impact on your credit report and, consequently, your credit score.

If you are contemplating walking away from your home, get the facts! Investigate your options from a qualified bankruptcy attorney. Only a bankruptcy attorney will be able to explain your options including those available under the bankruptcy laws.  Contact Fears | Nachawati for a free consultation to discuss your options by calling toll-free 1.866.705.7584 or by e-mailing info@fnlawfirm.com. 

Recently the House of Representatives Judiciary Subcommittee on Commercial and Administrative Law held a hearing to initiate legislation to change provisions of the federal bankruptcy law that give student loan lenders an advantage over other consumer loans. Current bankruptcy law provides that student loans are generally not dischargeable under any chapter of the bankruptcy code unless the debtor can show that repayment of the loan creates an "undue hardship." Unfortunately, Congress did not define "undue hardship" in the bankruptcy code, so this interpretation has been left to the individual bankruptcy court judges.

During the Committee hearing Rafael I. Pardo, an associate professor at the Seattle University School of Law who has studied the discharge of student loans in bankruptcy, challenged Congress “to clarify the undue hardship standard.” Many courts view "undue hardship" as a high bar that is only met by a showing of exceptional circumstances (like physical or mental disabilities, or poor or no future earning potential) that result in an inability to both repay the student loans and provide a minimum standard of living for the debtor and the debtor’s family. This is a very difficult burden for most debtors to meet, and consequently bars the discharge of student loans in most cases - even while other consumer debts like auto loans, credit cards, medical debts, mortgages, and even taxes are discharged in the debtor’s bankruptcy.

Consumer bankruptcy attorney Brett Weiss, who testified on behalf of the National Association of Consumer Bankruptcy Attorneys and the National Consumer Law Center, called the situation "unfair" when other consumer loans are forgiven in bankruptcy proceedings while student loans are not. As a result of these hearings, Rep. Steve Cohen (D-Tenn.) announced his plans to file legislation to “give private student loan borrowers more equitable treatment during the bankruptcy process.”

For the time being it remains extremely difficult to discharge student loans. However, there are other non-bankruptcy programs for debtors unable to repay their loans. In some cases debtors may qualify for reduced payments, deferment, forgiveness or cancellation. Chapter 13 bankruptcy can also provide a way to cure defaulted student loans, or pay them off during the bankruptcy. If you have student loan debt, discuss your situation and options with a qualified bankruptcy attorney.

Contact bankruptcy law firm Fears | Nachawati for a free consultation to discuss your options by calling toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com.

Bankruptcy is a legal process and a matter of public record. In the past newspapers have published local bankruptcy filings in the “public notices” section. Today this practice is not practical due to the large numbers of bankruptcy filings. Recently the American Bankruptcy Institute projected that individual bankruptcy filings nationwide would reach 1.4 million in 2009. Newspapers report news that is of interest to the community, so unless your name is Donald Trump or Burt Reynolds, your bankruptcy filing simply isn’t newsworthy.

The process of opening a case in the bankruptcy court is actually very confidential. Once you file a bankruptcy petition a notice of the filing is mailed to all of your creditors. Other than receiving notice of the bankruptcy filing from the bankruptcy court, there are only a few ways to learn of a bankruptcy case. The most common way is to contact the bankruptcy court by telephone. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public.

Another common way to learn whether an individual has filed a bankruptcy is to use the Public Access to Court Electronic Records (PACER), an electronic public access service that allows users to obtain case and docket information from Federal Appellate, District and Bankruptcy courts via the Internet. PACER registration is free, but the system charges the user $.08 per page.

Finally, some lenders subscribe to bankruptcy information services. These services harvest public records daily and sell the information for a variety of purposes. It is surprising to many debtors in bankruptcy when they receive invitations from businesses seeking to loan money or finance automobiles.

As you can see, the bankruptcy process is actually very confidential. While there are no guarantees that your friends and neighbors will not learn about your bankruptcy, chances are they will not unless you decide to tell them. However, every case is different.  If you have specific questions about the effects of filing bankruptcy, please consult with an experienced bankruptcy attorney.  Call Fears | Nachawati at toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

A family’s retirement fund represents years of hard work and sacrifice. When severe financial trouble plagues a household, losing the family nest egg is a serious concern. Fortunately, Congress has provided substantial protections in the bankruptcy laws that safeguard retirement accounts during financial crisis.

It is important to recognize that in a Chapter 13 bankruptcy assets (including retirement funds) are not taken from the debtor.  Most Chapter 13 plans are funded from earned income, and retirement funds are used only with the voluntary consent of the debtor. During a Chapter 7 bankruptcy case retirement funds are generally safe as they are either exempt or not part of the bankruptcy estate.

Congress has declared that certain retirement funds are exempt from creditors during a Chapter 7 bankruptcy case. These funds include retirement accounts classified under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code. These sections cover most retirement plans and include pension plans, profit sharing plans, stock bonus plans, employee annuities, IRAs, Roth IRAs, government deferred compensation plans, plans of tax exempt organizations, and certain trusts.  The laws exempt these funds to over a million dollars for each debtor.

The bankruptcy laws further protect retirement accounts by providing that retirement funds not otherwise exempt are protected if they are necessary for the support of the debtor and the debtor’s dependents. The bankruptcy laws also protect certain retirement accounts subject to title 1 of ERISA, 457 deferred compensation plans, 403(b) tax deferred annuities, and health insurance plans regulated by state law.

The federal bankruptcy laws provide many ways to protect your retirement accounts during bankruptcy. The key is to identify the type of account and the corresponding protection prior to filing the bankruptcy case. As always, consult with an experienced bankruptcy attorney prior to taking any action to either move retirement funds, make contributions, or take withdrawals as these actions may impair your attorney’s ability to protect your retirement account.

Contact Fears | Nachawati today for a free consultation to discuss bankruptcy and protecting your retirement accounts.  Call us toll free at 1.866.705.7584 or by e-mail at info@fnlawfirm.com. 

If you are paying child support, you may be confused about the effect of a bankruptcy filing on your child support obligation. A bankruptcy filing generally protects the debtor from the collection actions by creditors, but Congress has not extended the same protections to child support issues. Under the bankruptcy laws child support is a “non dischargeable debt” which means that the obligation will survive the bankruptcy, regardless whether it is a current or past debt.

The bankruptcy automatic stay does not apply:

(1) to the establishment of a child support obligation;

(2) to the collection of child support from property that is not property of the estate; or

(3) to the withholding of income that is property of the estate for payment of a child support obligation under a judicial or administrative order or statute.

In “non-lawyer speak,” child support collection actions are generally not halted by filing bankruptcy. Additionally, filing a bankruptcy case does not stop a tax intercept for the payment of child support arrears.

Domestic support obligations, including child support obligations, receive top payment priority when funds are available to pay creditors in a Chapter 7 case.  In a Chapter 13 case, child support arrears are paid through a “repayment plan” and are paid as a first priority. Support payments due after the bankruptcy filing date must be kept current or the debtor’s plan will not be confirmed, and the bankruptcy court will not issue a discharge in a case where child support is owed.

In addition to child support, debts that are “in the nature of support” (e.g. medical expenses, educational expenses, etc.) are ineligible for discharge. The bottom line is: child support obligations must be paid. Fortunately, the bankruptcy laws offer options to make the debtor’s payment burden more bearable. However, a debtor’s child support obligation is often a difficult legal situation that requires expert guidance. If you have a child support obligation and are considering filing bankruptcy, consult with an experienced bankruptcy attorney and discuss your options.  Contact Fears | Nachawati for a free consultation at toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

“Will filing bankruptcy ruin my credit?” This is a common question asked by individuals contemplating a bankruptcy filing. Usually this question is answered by asking another question, “If you are considering bankruptcy, isn’t your credit already ruined?”

Individuals in serious financial crisis generally wait too long before seeking assistance. A recent survey by the Consumer Bankruptcy Project, a continuing study of consumer bankruptcy filings, found that over 40 percent of individuals said they struggled with financial difficulty for more than two years before filing bankruptcy.

If you are facing a serious financial crisis, it is in your best interest to educate yourself and to identify your financial options. Waiting can only exacerbate the situation. Sometimes individuals try to “save the sinking ship” by taking on more debt (e.g. a home equity loan) to solve their debt crisis. Others empty their retirement accounts to pay down short-term debt. These tactics are short-term solutions and will rob your family of its future financial health. Even sadder is that many individuals discover that their quick fix solutions did not solve their financial problems – only now they are facing bankruptcy with no equity in their home, or without a retirement account.

A bankruptcy filing will stay on your credit report for ten years and may have a detrimental impact on your ability to borrow money (at least in the short run). However, bankruptcy will also lighten your debt load significantly and give you a second chance to arrange your finances in a way that is manageable for years to come.  If you are facing serious financial difficulties, speak to an experienced bankruptcy attorney before taking a quick fix route just to save your credit score. Don’t be “penny wise and pound foolish.”

Contact Fears | Nachawati today for a free consultation regarding you financial situation.  Call our toll free number at 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

An article provided by Bankrate.com found here lists out 4 common financial mistakes that people can make during the recession and solutions to prevent the same mistakes from happening again.  The 4 common financial mistakes are listed below and follow the article link above to find out how to avoid these costly errors. 

1.  I didn't have emergency reserves.

2.  I panicked when the market collapsed.

3.  I greedily overinvested in a 'sure' thing.

4.  I didn't read the fine print on my loan.

If you believe you have made some costly mistakes that have put you in a financial bind that you cannot escape then you may want to speak with an attorney that can provide you with options.  Call bankruptcy law firm Fears | Nachawati for a free consultation by simply dialing toll free 1.866.705.7584 or by e-mail at info@fnlawfirm.com. 

A chapter 13 bankruptcy is also called a “reorganization plan” or a “wage earner's plan.” A debtor who files a chapter 13 bankruptcy intends to repay all or part of her debts in installments to creditors over three to five years. The individual’s repayment plan term cannot exceed five years.

There are a number of advantages that chapter 13 affords to debtors. The most significant is the ability to stop a home foreclosure and force the creditor to accept payments for any delinquent mortgage payments. The bankruptcy automatic stay stops foreclosure proceedings immediately upon the debtor’s bankruptcy filing with the court. However, this temporary relief may be lost if the debtor fails to make the regular mortgage payments that come due after the chapter 13 filing.

Another advantage of chapter 13 bankruptcy is that a debtor may modify a secured loan and repay it over the plan term. This usually lowers the monthly payment. In certain circumstances the debtor can also “cram-down” the secured loan by stripping away the unsecured portion of a debt. For example, a debtor may owe $20,000 on a car that is only worth $10,000. Chapter 13 may allow the debtor to modify this loan and only pay the creditor the value of the car, or $10,000. There are special qualifying rules for this type of modification, so be sure to discuss your situation with your attorney.

Within 15 days of the filing of the chapter 13 bankruptcy petition, the debtor must file a proposed repayment plan with the court. The plan is also sent to the U.S. trustee and all creditors for review and opportunity to object. The plan must provide for regular fixed payments to the trustee who then distributes the funds to creditors according to the terms of the plan (which may be less than full payment on their claims). It is common for a chapter 13 plan to propose to pay secured creditors in full and nothing to unsecured creditors. This largely depends on whether there is “extra” money at the end of the month after the debtor’s secured creditors and monthly expenses are paid.

Occasionally circumstances change after confirmation of the chapter 13 plan that prevents the debtor from completing the repayment plan. The debtor may ask the court to allow the debtor to modify the plan, or to grant a “hardship discharge” and end the case early. Otherwise, at the end of the three to five year repayment period the court will discharge the debtor’s remaining debts that are not “non-dischargeable” by law. The chapter 13 bankruptcy discharge prevents those creditors from seeking payment from the debtor.   

If you are over-burdened with secured debts and are in need of relief, consult with an experienced bankruptcy attorney about your rights under chapter 13 of the bankruptcy code.

The Means Test is a formula designed to identify debtors that can afford to pay some of their unsecured debts (for instance, credit card debt) and encourage repayment of these debts through a Chapter 13 repayment plan. Debtors that “fail” the Means Test are disqualified from filing Chapter 7 bankruptcy.

The Means Test is actually two tests. The first part of determines whether your current monthly income is less than your state’s median income for a household of your size. The current state median income figures can be found at the U.S. Trustee’s website: http://www.usdoj.gov/ust/eo/bapcpa/meanstesting.htm

If your family’s income is less than your state’s median income for a family of your size, you PASS the Means Test. There is no other testing and you can proceed with a Chapter 7 bankruptcy.

If your family’s income is more than your state’s median income, you must complete the Means Test worksheet to calculate if you have (or should have) money to repay unsecured creditors. In the end if you are able to pay a significant portion of your unsecured debt, you will FAIL the Means Test and cannot file a Chapter 7 bankruptcy.

The truth is that very few debtors fail the Means Test. Many debtors earn significant incomes and still qualify for Chapter 7 bankruptcy. Debtors with large monthly secured debt payments (e.g. house, car) often pass the Means Test as there is no extra money at the end of the month to pay unsecured creditors.

If you are contemplating a bankruptcy filing, it is in your best interest to consult with an experienced bankruptcy attorney as soon as practical. The Means Test is a new and complex feature of the bankruptcy laws, and, consequently, its application and interpretation varies from jurisdiction to jurisdiction. By examining your case early, a skilled bankruptcy attorney can identify whether you are able to pass the Means Test now or in the future.  To speak with a skilled bankruptcy attorney simply call Fears | Nachawati toll free at 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

The “Co-Debtor Stay,” also known as the “Co-Debtor Automatic Stay,” is a feature of a Chapter 13 Bankruptcy designed to protect a debtor by insulating him from indirect pressures from his creditors exerted through friends or relatives.  The Co-Debtor Stay stops all collection actions against any individual who is obligated on a consumer debt owed by the debtor. The Co-Debtor Stay continues until the Chapter 13 case has concluded.

The Co-Debtor Stay is not a direct protection intended for the co-debtor. The debtor’s Chapter 13 Bankruptcy will not discharge the co-debtor’s responsibilities to the creditor. It will, however, prevent collection action by the creditor against the co-debtor (e.g. lien perfection or even adverse notation on the co-debtor’s credit report) during the pendency of the Chapter 13 case. 

The Co-Debtor Stay does not prohibit collection on a debt incurred in the ordinary course of business by the debtor. Additionally, tax debt is generally not considered a consumer debt. It is important to note that the Co-Debtor Stay does not apply at all to Chapter 7 Bankruptcy cases.

The Co-Debtor Stay is effective immediately upon the filing of the debtor’s Chapter 13 petition and continues until the case is closed, dismissed, or converted to Chapter 7 or 11. The Bankruptcy Court can also modify or terminate the Co-Debtor Stay upon the motion of a creditor. The creditor may be successful in this type of motion if the codebtor received "consideration" for the debt (e.g. you cosigned a car loan for your brother, who actually owns the car), if the debtor’s Chapter 13 plan proposes to not pay the debt, or if the creditor's interests would be irreparably harmed by continuation of the Co-Debtor Stay.

A knowing violation of the Co-Debtor Stay is contempt of court and punishable by damages, including attorney's fees.  Any collection action taken by a creditor in violation of the co-debtor stay is void.

The Co-Debtor Stay is a powerful tool to prevent collection action in Chapter 13 Bankruptcy. If you are contemplating a bankruptcy filing and have co-debtors, consult with an experienced bankruptcy attorney. An experienced bankruptcy attorney can explain your options and work with you to find the best result.  For a free consultation with an attorney at Fears | Nachawati regarding your bankruptcy options simply call toll-free 1.866.705.7584 or e-mail info@fnlawfirm.com. 

The principal theory of consumer bankruptcy in America is that it provides a “fresh start” to debtors. A prime example of this policy is found in the 1918 Supreme Court case of Stellwagen v. Clum in which the Court stated:

“This purpose of the act has been again and again emphasized by the courts as being of public, as well as private, interest, in that it gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

The idea of giving a poor, but honest debtor a “fresh start” is not a modern concept. The Bible also contains debt forgiveness laws:

“At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the Lord's release.” Deuteronomy 15:1-2.

Under modern bankruptcy law a debtor is entitled to a Chapter 7 bankruptcy discharge once every eight years. However, this is not a clean slate. A Chapter 7 bankruptcy can stay on your credit report up to 10 years, and you may encounter other obstacles after filing bankruptcy (e.g. obtaining credit). Several bankruptcy courts have described the Chapter 7 discharge as giving honest but unfortunate debtor a fresh start, not a head start.

Bankruptcy is a safety net when you are at the end of your rope. The Chapter 7 discharge provides a second chance and a new beginning free of creditor harassment. If you are burdened with debt, consult with an experienced bankruptcy attorney and discover how a fresh start under the law can help you.

As a general rule, credit card debt is among the easiest type of debt to discharge during a Chapter 7 or Chapter 13 Bankruptcy. However, in some cases credit card companies will dispute the discharge of credit card debt by filing an adversarial proceeding against the debtor in the bankruptcy court. The creditor may claim that all or a portion of the debt is non-dischargeable. Debts that are declared non-dischargeable may have to be paid during the bankruptcy, or may survive the bankruptcy altogether.

A credit card company may claim that the debtor committed fraud in obtaining or using the credit card. If the creditor can prove that the card was obtained under false pretenses (i.e. that the application was false), the credit card debt may be declared non-dischargeable because of the fraud.

A credit card company may also claim that charges were placed on the credit card when the debtor had no intention to repay the debt. Additionally, a presumption of fraud arises where luxury goods and services are purchased or cash advances are taken shortly before the filing of a bankruptcy case. 

Credit card companies are entitled to notice of a debtor’s bankruptcy case, and these companies monitor bankruptcy cases for signs of fraud. Certain actions send up a red flag including:

·                     Filing bankruptcy on a new card;

·                     Taking a cash advance prior to filing;

·                     Charges for travel or vacation;

·                     A debt transfer from one card to another;

·                     Credit charges while unemployed; and

·                     Charges made after consulting a bankruptcy attorney.

The more time between the credit card activity and the bankruptcy filing, the less likely the charge will cause a discharge dispute. The best advice is: if you are considering bankruptcy, stop using your credit cards. Consult with your bankruptcy attorney regarding the best way to discharge your credit card debt.  Contact Fears | Nachawati for a free consulation by calling toll-free 1.866.705.7584 or by e-mailing info@fnlawfirm.com. 

Payday loan companies prey on individuals experiencing financial difficulties. These lenders offer a short-term loan of a few hundred dollars that will be repaid on the borrower’s next payday. To obtain the loan the borrower usually writes the lender a post-dated check. Often the payday loan lender will require a certification that the borrower is not contemplating bankruptcy, and, sometimes, that the borrower will not file bankruptcy.

While the borrower may initially intend to use payday loans to fix a short-term financial problem, often payday loans start an endless cycle of debt. Payday loan companies charge high interest rates over short periods and rely on the borrower’s inability to satisfy the loan, and is consequently forced to renew it. Unfortunately, this cycle of debt often leads the borrower to file bankruptcy.

Many individuals worry that they will face criminal trouble for passing a bad check when they cannot cover their post-dated check. With a few narrow exceptions, being unable to pay the payday loan check is not a criminal act.  However, your post-dated check may still be presented for payment, resulting in significant bank fees. In some cases (notably in the 6^th and 8^th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code. However, these courts have said that the funds collected by the payday loan company may be an “avoidable transfer.”

While an agreement to not file bankruptcy is generally considered void because it violates public policy, a representation to the payday loan lender that the borrower is not contemplating bankruptcy is a serious matter. A borrower that takes a payday loan with the intention of discharging it through bankruptcy, and with no intention on repaying the loan, may have committed fraud and even a criminal act!

Proper handling of an outstanding payday loan is an important consideration before filing bankruptcy. Most payday loans are discharged through bankruptcy without problem; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy. If you have an outstanding payday loan, consult with your attorney and protect your legal rights.

The first part of a new federal regulation concerning consumer credit cards is now in effect.  The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (or Credit C.A.R.D. Act) has been billed as increasing protections to consumers and curtailing abusive practices by credit card companies.  These new regulations include: requiring more notice to cardholders prior to an interest rate increase; requiring that people under 21 must have a job or a co-signor in order to get a credit card; and eliminating an abusive practice known as “Universal Default.”

Unfortunately, the Credit C.A.R.D. Act is also having some unintended consequences.  The credit card industry is responding to these increased consumer protections by reducing credit lines and canceling many cardholder accounts without advance notice.  Card companies maintain that they are taking these steps in an attempt to “tighten up” and control their financial risk.  Under the present law the card company must notify you of a card cancellation “within a reasonable time” and many consumers are being surprised by a card cancellation at the register.

Additionally, while the practice of “Universal Default” (raising interest rates on all cards when you default on one card) will soon be against the law, the credit card industry is implementing a new policy to restrict your spending limit or close your account in the presence of negative credit items on your credit report.  In other words, if you default on one card, your cards may be canceled.

Card companies are also exploring new ways to exploit their customers.  CITI has announced that it will institute a $30 annual fee on certain accounts.  Other companies like American Express have increased their fee schedules for late payments, and, in some cases, increased interest rates prior to the new law taking effect.  American Express is not alone. A survey by Pew Charitable Trusts found that interest rates on credit cards have increased an average of two percent since last December.

Fortunately, consumers who find themselves victimized by credit card companies have a powerful tool to fight back: the United States Bankruptcy Code.  The bankruptcy laws protect consumers from the crushing debt that card companies enjoy placing on the average American.  If you are experiencing financial distress from the abusive practices of the credit card industry, consult an experienced bankruptcy attorney and discuss your options. Call us for a free consultation by dialing toll free 1.866.705.7584 or e-mailing info@fnlawfirm.com. 

A Chapter 7 bankruptcy discharge releases an individual from personal liability for most debts and prevents creditors from taking collection action against the debtor.  In other words, the bankruptcy discharge is a legal injunction prohibiting the creditor from collecting against you personally.  There are a few circumstances in which a debt may “survive” the bankruptcy and be enforceable against the debtor.  The most common is a voluntary process known as “reaffirmation.”

A reaffirmation is an agreement that continues the debtor’s obligation on a debt, even though the debt would otherwise be discharged in the bankruptcy.  Usually these agreements concern property with a lien attached (e.g. a car) and the creditor agrees to not repossess the property as long as the debtor continues to pay the debt.

The decision to reaffirm a debt should not be made lightly.  A reaffirmation agreement must be made in writing before the discharge is entered.  It must be filed with the bankruptcy court and the debtor must include a statement of current income and expenses that demonstrates sufficient income to repay the debt.  The debtor’s attorney certifies that the debtor has been advised of the legal effect and consequences of the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependents.

Sometimes a reaffirmation agreement is not in the debtor’s best interest.  For instance, many co-signed unsecured loans that the debtor perceives a moral obligation to repay can be paid without a reaffirmation agreement (and without a subsequent legal obligation).  As you can see, reaffirmation agreements can be complicated and should be carefully considered.  Fortunately, the bankruptcy laws provide many options and tools for solving difficult financial problems. 

If you are considering a reaffirmation agreement to continue paying on a debt, seek the advice of an experienced bankruptcy attorney.  Contact Fears | Nachawati for a free consultation to discuss your options by calling toll free 1.866.705.7584 or by e-mailing info@fnlawfirm.com. 

Clients have many questions during the initial appointment with a bankruptcy attorney.  The most common concerns are losing property, and rebuilding credit after the bankruptcy case is over.  Occasionally someone will ask a straight-forward question: “Will filing a bankruptcy ruin my life?”  This powerful and important question deserves a straight-forward answer:

No!

The bankruptcy laws are widely misunderstood by the average American.  The purpose of bankruptcy is to put overwhelming financial difficulties behind and give an honest person a fresh start.  Many Americans have taken advantage of a fresh start to improve their lives and have made tremendous contributions to our society.  Perhaps the best way to illustrate the power of bankruptcy’s fresh start is to look at some famous examples:

Actor Burt Reynolds filed for bankruptcy in 1996 after his divorce from Loni Anderson. He listed more than $10 million in debt, and his dinner theater in Jupiter, Florida, was foreclosed on and his ranch was sold.  Never one to quit, Reynolds continues to act in movies and television.  Burt Reynolds was nominated for an Academy Award for Best Supporting Actor for his performance in the 1997 film Boogie Nights and won a Golden Globe Award for the movie.

Named as one of Time Magazine's "100: The Most Important People of the Century," business titan Henry Ford didn't always have the Midas touch.  By 1901 Ford had unsuccessfully managed his first automobile company into bankruptcy.  Two years later he founded Ford Motor Company.

Walt Disney may have had vision, but he needed a second chance to make the Happiest Place on Earth a reality.  After his first film company failed, Disney filed bankruptcy in 1923.  Five years later Disney introduced the world to Mickey Mouse and the Disney empire was born.

In 1875 a young businessman saw his horseradish company go bankrupt.  Undeterred, the young man formed a new company in Pittsburgh, PA with his brother and cousin making ketchup.  That company was a success for H.J. Heinz and in 2007 the H.J. Heinz Company had over $10 billion in revenue.

Other famous people who have used the bankruptcy laws to help them recover from financial difficulty include: singer Willie Nelson, talk show host Larry King, actress Kim Basinger, and even billionaire Donald Trump!

Don’t let financial difficulty stand in the way of your dreams!  Bankruptcy will not ruin your life; it is a tool to help you build a better future for yourself and your family.