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

The decision whether to extend a person credit is up to each individual creditor. There is no law that dictates how long you must wait after filing for bankruptcy before you can seek a credit card or loan.

Creditors vary greatly from one another in their willingness to grant credit to a person who has recently filed for bankruptcy. While bankruptcy can remain on your credit report for up to 10 years, it is quite possible to establish good credit within a short time after filing for bankruptcy.

Obtaining and using credit is critical to your ability to improve your credit score after bankruptcy, which is why financial experts recommend that you apply for a secured credit card. With a secured credit card, you are given a line of credit equal to an amount of money you deposit with the issuing bank. You may be able to find one that converts to an unsecured credit card after 12 to 18 months of on-time payments.

Another important step you can take to rebuild your credit after bankruptcy is ensuring that your credit report is accurate. Review a copy of your credit report to ensure you’re your discharged debts are no longer listed as open and overdue.

The bottom line is that credit will be available to you even after you file for bankruptcy. You won’t have to wait until the bankruptcy disappears from your credit report before you will be able to obtain a loan or credit card.

When Congress passed the Fair Debt Collections Practices Act (“FDCPA”) it stated that its purpose is “to eliminate abusive debt collection practices by debt collectors[.]” Congress cited the need for consumer protection because of the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.  Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

Abusive debt collection practices are just bad news.

On February 22, 2010, the United States Supreme Court declined to hear an appeal from the Fifth Circuit U.S. Court of Appeals on a FDCPA case: Kay v. Gonzales, U.S., No. 09-542. In that case the Plaintiff, Jose Gonzalez, received a letter from the Kay Law Firm. The letter, written on law firm letterhead and unsigned, told Gonzalez, “Please be advised that your account, as referenced above, is being handled by this office.” On the back of the letter was this statement: “At this point in time, no attorney with this firm has personally reviewed the particular circumstances of your account.” Gonzalez sued the Kay Law Firm for violating the FDCPA which prohibits debt collectors from falsely representing or implying that the debt collector is an attorney or that the communication is from an attorney. 

The federal district court found that the disclaimer was sufficient to notify Gonzalez that the collection matter was not being handled by an attorney and the Gonzalez’s case was dismissed. On appeal the Fifth Circuit Court of Appeals found that the letter’s disclaimer on the back was mixed in with “legalese” which may not be sufficient to notify the consumer of the attorney’s non-involvement in the case. The Fifth Circuit reversed the district court dismissal and remanded the case for trial. Gonzalez v. Kay, No. 08-20544 (5^th Cir., 2009). Now that the Supreme Court has denied the Kay Law Firm’s appeal, Mr. Gonzalez will have his day in court.

The Fifth Circuit in its opinion cites the Seventh Circuit Court of Appeals for why it is important to protect against this type of deceptive collection practice:

“An unsophisticated consumer, getting a letter from an ‘attorney,’ knows the price of poker has just gone up. And that clearly is the reason why the dunning campaign escalates from the collection agency, which might not strike fear in the heart of the consumer, to the attorney, who is better positioned to get the debtor’s knees knocking.” 

Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996).

If you receive a collection letter from a law firm, speak to an experienced bankruptcy attorney and learn your rights. Bankruptcy attorneys are trained in matters of debt defense and can help explain your rights under the FDCPA and the federal bankruptcy laws. Don’t let an unscrupulous debt collector get your “knees knocking.”

There is no legal requirement that both spouses file for bankruptcy. If you choose to file for bankruptcy alone, in general, your spouse’s assets and liabilities will not be directly affected. Just because you are married, that does not make your spouse automatically responsible for all of your debts.

However, there are some ways that bankruptcy could potentially have an effect on your spouse. If an asset, such as a house, is owned jointly by both spouses, then the Trustee will liquidate the one-half interest owned by the spouse who is filing for bankruptcy. Also, if both you and your spouse are responsible for a debt, such as a loan, then the non-filing spouse will then be liable for the full debt.

But, as long as your spouse is not responsible for any of your debt, they will not be affected by you filing for bankruptcy. Also, your spouse’s credit rating will not be affected if you file for bankruptcy.

An experienced Texas bankruptcy attorney can help you understand what, if any, effect your bankruptcy filing will have on your spouse’s debts and assets.

While many attorneys advertise their qualifications on their web sites, NO ONE should hire legal counsel based solely upon the results of an online search. However, information you obtain from the internet can be useful in narrowing your search, provided you know what to look for in a prospective bankruptcy attorney. 

First, is the attorney licensed to practice in your area? Usually the attorney’s biography will state his or her bar admissions. Each of the 94 federal judicial districts has a bankruptcy court, and these courts are defined by geographic jurisdictions. More information concerning federal court geographic boundaries can be found here.

An attorney who is not a member of the bar where you reside will have to petition the court for admission pro hac vice (“for this event only”). An attorney who is not active in a court may not have useful information regarding the bankruptcy judge, the trustee, local customs and rules, or contacts to make your case go smoothly.

Second, how long has the attorney been practicing bankruptcy law? The federal bankruptcy laws are complex and attorneys spend years learning how to successfully navigate a case from start to finish. Don’t be a test case or a learning experience for a new attorney.  

Third, does the attorney belong to any professional associations? The National Association of Consumer Bankruptcy Attorneys and the American Bankruptcy Institute are two outstanding resources for attorneys to keep current on changes in the bankruptcy law. Member attorneys also receive training and information that is beneficial to their clients.

An experienced bankruptcy attorney is easy to find, if you know the tell-tale signs. Use these signs to narrow your search, and then interview your candidates either by phone or in-person. Your choice of a bankruptcy attorney is a serious matter and should be carefully considered, so get to know your attorney’s qualifications before your make a hiring decision.

Here are six common mistakes that debtors make when they are considering filing for bankruptcy – mistakes that can lead to additional debt and even to having your bankruptcy petition dismissed.

Avoid the following mistakes to ensure that your bankruptcy petition is successful and that as much debt as possible is discharged:

1. Running up credit card bills once you’ve decided to file for bankruptcy: Some debtors mistakenly believe that they can charge as much to their credit cards as they want since their debts are going to be eliminated in bankruptcy. The fact is, however, certain debts you incur within 90 days before filing for bankruptcy are non-dischargeable – which means you’re left with the bill and you won’t get the clean slate you were hoping for.

 2. Transferring property out of your name: Often consumers mistakenly believe that they can protect assets such as their home or car by giving it to a family member before they file for bankruptcy. Under the law, a bankruptcy trustee has the authority to reverse transfers of property if those transfers were made in an attempt to hide assets from creditors. Undertaking these transfers is typically unnecessary anyway because property exemptions allow debtors to keep much of their property after filing for bankruptcy.

3. Repaying family members:Under bankruptcy law, you cannot treat one creditor more favorably than another, and that includes family members.Payments that you make to family members within one year of filing for bankruptcy may actually be reclaimed by the bankruptcy trustee and then distributed proportionately amongst your creditors.

4. Liquidating your retirement account: In general, retirement accounts are considered exempt property in bankruptcy filings. By cashing out your retirement accounts, you could lose your security for the future while still being left with considerable debts.

5. Using an equity line of credit to pay off debt: Under bankruptcy law, you typically have the ability to claim an exemption for equity in your home, which means that you retain that equity even after you go through bankruptcy. If you convert your equity into debt before filing for bankruptcy, however, you may be left with new debt that will be non-dischargeable, meaning you will still be responsible for paying it off even after your other debts have been wiped out.

6. Failing to be completely honest with your bankruptcy attorney: Unless your bankruptcy attorney has complete and accurate information about your debts and assets, they cannot properly file your bankruptcy petition. By withholding information from your bankruptcy attorney, you are taking the chance of having your bankruptcy petition dismissed as well as losing out on assets you may otherwise have been able to keep. Attempting to hide an asset can even result in criminal charges.

Remember, your bankruptcy attorney is there to help you, not judge you – there is no reason why you can’t be completely open and honest with your bankruptcy attorney throughout the entire process.

Bankruptcy law has its own confusing language. It is a good idea to have a basic understanding of bankruptcy terms before your initial consultation with a bankruptcy attorney. While most bankruptcy attorneys are very skilled at explaining the bankruptcy process and its impact to their clients in plain language, sometimes technical terms can sneak into the conversation. Below is a very general explanation of the most common bankruptcy terms:

Automatic stay – a court injunction that stops all collection action against the debtor. The automatic stay is effective immediately upon filing the bankruptcy

Bankruptcy estate – the debtor’s legal and equitable interest in property at the time the bankruptcy case is filed

Chapter – a section of the bankruptcy code. Some chapters are general and apply to all cases; other chapters apply only to specific bankruptcy cases.

Debtor – an individual who files a bankruptcy petition

Discharge – a court permanent injunction prohibiting the collection action against the debtor personally for any debt discharged in the bankruptcy

Equity – the value of a debtor's interest in property after subtracting monetary liens

Exemptions – legal protections that shields property from creditor collection

Means test – a calculation of the debtor’s income and expenses meant to determine the debtor’s ability to pay creditors

No-asset case – a Chapter 7 case where there are no assets available to satisfy any portion of the creditors' unsecured claims

Nondischargeable debt – a debt that cannot be absolved through bankruptcy and the debtor remains personally liable after the bankruptcy case has closed.

Petition – the papers filed by the debtor that commences the bankruptcy.

Plan – the debtor’s description of repayment of debt during a Chapter 13 bankruptcy

Preference – a debt that was paid prior to the bankruptcy when the debtor was insolvent and unable to pay other creditors

Proof of claim – the creditor’s claim and verification of a debt

Reaffirmation agreement – an agreement between the debtor and creditor that entitles the debtor to retain property in exchange for continued personal liability to pay a debt (common examples are a car or house loan)

Schedules – the detailed description of the property, debts, income and expenses of the debtor

Secured creditor – a creditor holding a lien against property of the debtor’s as security for payment of a debt

341 meeting – a mandatory meeting that the debtor must attend with the trustee. The debtor’s creditors are invited to the 341 meeting and are allowed to ask questions.

Trustee – an individual appointed to oversee the debtor’s bankruptcy case. This is not the bankruptcy judge.

The two most common types of consumer bankruptcies are Chapter 7 and Chapter 13. In a Chapter 7 all of the debtor’s property is placed into an estate which is controlled by the bankruptcy trustee. While no property physically changes hands (at least not at the beginning of the case), the trustee and bankruptcy court have broad legal power over your property. If you have money in a bank account on the day you file, your bank account and money are assets of the bankruptcy estate. You are no longer free to transfer funds or assets as they now belong to the bankruptcy estate.

Take for example that you have $5,000 sitting in your checking account on the day you file bankruptcy. That money is property of the Chapter 7 bankruptcy estate and is no longer yours to control or use. If you take the $5,000 out of the bank the day after filing to pay your mortgage payment and other bills, the Chapter 7 trustee can seek to recover those funds, either from you or from the payee.

During a Chapter 13 bankruptcy the debtor retains possession and control over his or her property, and is free to use any funds in the debtor’s bank account. An accounting is performed and the debtor’s property is classified as either exempt or non-exempt. Non-exempt property is not taken from the debtor (as is often the case in a Chapter 7), but the Chapter 13 debtor is required to pay unsecured creditors a sum equal to the amount of non-exempt equity. For instance, if there is $5,000 in the debtor’s bank account, the debtor may only be able to exempt a portion of the entire sum. The non-exempt portion must be paid to the creditors through the debtor’s Chapter 13 plan (over three to five years).

Cash in a bank account can be a problematic issue for a debtor. Avoiding these problems is the joint responsibility of the debtor and the debtor’s bankruptcy attorney. Timing is critical to minimizing your financial exposure. An experienced bankruptcy attorney can help you maximize the benefits of the bankruptcy laws and navigate around any pitfalls. 

Lately municipal bankruptcy has been the subject of many news features as economic troubles press cities to consider their legal options. San Diego and Los Angeles are two major cities that are reportedly considering federal bankruptcy protection. 

While federal bankruptcy protection has been available to U.S. cities since the 1930’s, only a few hundred have actually filed. Chapter 9 of the Bankruptcy Code provides a financially distressed municipality the opportunity to reorganize its debts under federal protection. A “municipality” as defined in the Bankruptcy Code includes cities, counties, and special districts. This definition does not include states.

A Chapter 9 bankruptcy can only be commenced after the governing body specifically authorizes the filing. Twenty-six U.S. states have prohibited their municipalities from filing bankruptcy: Alaska, Delaware, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Mexico, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin, and Wyoming. 

Once filed the federal bankruptcy law’s automatic stay provision enjoins creditors from taking any collection action against the municipality. The automatic stay provides an opportunity for the municipality to raise new revenues, renegotiate contracts, or restructure its debt without pressure from creditors. Chapter 9 is tricky business for the bankruptcy court because the Tenth Amendment to the U.S. Constitution and section 904 of the Bankruptcy Code prevents a federal bankruptcy court from interfering with the city’s political or governmental powers. The bankruptcy judge is largely a facilitator of the restructuring process.

The essence of a Chapter 9 bankruptcy is that it gives the municipality an opportunity to reorganize and restructure its debts through an agreement with its creditors called a “Plan of Adjustment.” If a creditor cannot agree with the municipality, Chapter 9 allows the bankruptcy court to force the municipality’s Plan of Adjustment on the non-consenting creditor. The bankrupt municipality is also empowered to accept or reject contracts and leases through the Plan of Adjustment.

Chapter 9 municipal bankruptcy is a very rare and special bankruptcy case. The stigma and complexity of Chapter 9 makes it a last option for U.S. municipalities. However, if the debt problem is serious and substantial enough, the federal bankruptcy laws can protect a city of millions and give it a chance for a fresh start, just like it can protect an individual or family in financial distress.

Bankruptcy can have a serious impact on an ex-spouse. That is because a family court will often assign payment of a joint debt to one party only. In many cases the obligated party lacks the resources to pay the debt in full or to refinance it. Therefore the ex-spouse remains legally obligated to the creditor. This is often the case with automobile debt and credit cards with large balances.

A court-ordered debt to a former spouse is given special consideration by the bankruptcy laws. In a Chapter 7 bankruptcy case these debts are generally non-dischargeable. An order directing payment to a third party (e.g. a mortgage payment) is also generally non-dischargeable if the payment is effectively a form of spousal support. Even an obligation to pay your ex-spouse's attorney fees in connection with the divorce proceeding is generally non-dischargeable.

While past due support obligations are also non-dischargeable debts in a Chapter 13 bankruptcy, debts not in the nature of support (e.g. a division of marital property) can be discharged. The ex-spouse must contest the debtor's characterization of the obligation and convince the bankruptcy court that the debt is a support obligation in order to save it from discharge. If the court determines the debt is a support obligation, it must be paid by the debtor through the Chapter 13 bankruptcy.

Whether the family court-ordered obligation arises from a property division or from a support obligation, the ex-spouse will likely suffer harm from the debtor's bankruptcy filing. The sad truth is that any non-payment of a joint monthly obligation will harm the ex-spouse's credit report and there is little that can be done to remedy it. If the debt is discharged through the debtor's Chapter 13 bankruptcy, the creditor may elect to pursue the ex-spouse and there will be no recourse against the debtor.

Regardless whether you or your ex-spouse owes a court-ordered joint obligation, if bankruptcy is in the future, you should seek professional help. It is important to evaluate the impact the bankruptcy will have on the debt and determine a course of action that will best protect you. Timing can be very critical, so consult with an experienced bankruptcy attorney early.

A Chapter 13 bankruptcy is a repayment plan that lasts three to five years. During that time the debtor is required to devote all disposable income to the repayment of debt. Most bankruptcy trustees and courts consider tax refunds part of the debtor’s disposable income that is over-withheld and should be paid into the Chapter 13 plan. However, instead of reducing the amount payable under the debtor’s plan, tax refund money is paid to unsecured creditors that would otherwise not be paid. If the debtor is paying a 100% repayment plan, the trustee will not request turnover of any tax refunds.

Some courts have approved a provision in the Chapter 13 plan that requires the Internal Revenue Service to forward any tax refund to the trustee’s office. However, at least one bankruptcy court has found this practice to be unlawful. In United States v. Carroll, No. 2:09-cv-13505 (E.D.Mich. Jan. 20, 2010), the bankruptcy court concluded that the IRS was not a party to the debtor’s chapter 13 case and did not have an opportunity to object to the plan. Additionally, as a part of the United States government the IRS possesses sovereign immunity that it did not waive.

Keeping your money and avoiding an income tax turnover may be as simple as adjusting your paycheck withholding. By speaking to a tax professional you may be able to predict your tax liability and put more money in your pocket each payday. However, be careful to avoid a situation where you do not withhold enough taxes and end up with a large tax bill at the end of the year.

If your tax refund is largely due to an Earned Income Tax Credit (EITC), the IRS allows tax payers to request an advance payment of the EITC. Information regarding this advance payment program can be found on the IRS website.   If you qualify, your employer will add additional money to your take-home pay each paycheck.

If you want to avoiding surprises during your Chapter 13 bankruptcy, seek out and hire an experienced bankruptcy attorney. An experienced bankruptcy attorney can discuss your financial situation with you and help you keep your hard-earned money for your family.

The length of a bankruptcy case depends primarily on which type of bankruptcy you file: Chapter 7 or Chapter 13.

The average Chapter 7 bankruptcy case takes between 3 and 6 months before the debtor receives their bankruptcy discharge. Because a discharge of debts is the goal of a Chapter 7 bankruptcy, the bankruptcy case, from the debtor’s perspective, is essentially over once the discharge is obtained.

Note that even though it takes 3 to 6 months to obtain a discharge, an automatic stay that protects you from further debt collection efforts goes into place immediately after you file for bankruptcy.

By their nature, Chapter 13 bankruptcies take longer than Chapter 7 bankruptcies. A Chapter 13 bankruptcy is a repayment plan. Under the repayment plan, the debtor is given a set amount of time – between 3 and 5 years – to repay the reduced debts. Once the repayment plan is successfully completed, the debtor’s remaining debts can be discharged.

One of the most common questions asked by bankruptcy clients is, “Can I go to jail if I can’t pay my debts?” The general answer is no, there are no debtors’ prisons. The federal judicial system abolished debtors' prisons in 1833, and most states did the same during the 1830s and 1840s.

But that’s not exactly the whole story. A person can be jailed by a court for non-payment of many debts including unpaid taxes, court-ordered debts or fines, and non-support issues such as criminal non-support or owed child support. Additionally, a court can imprison a person to coerce compliance. Just ask H. Beatty Chadwick, the Pennsylvania lawyer who spent 14 years in jail for failing to comply with a court order.

Chadwick, now 73, was ordered to retrieve $2.5 million from an off-shore account and place it into a court-controlled account until his divorce was settled. He told the court that the money had been lost in a bad business deal, but the court did not believe him. Chadwick was ordered to jail for contempt of court until he produced the $2.5 million. Fourteen years later, in July of 2009, Chadwick was released when the last in a long series of judges (several who are now deceased) ruled that his continued imprisonment would be punitive instead of coercive. In other words, after 14 years it was obvious either Chadwick would not or could not pay up.

While debtors’ prisons are illegal, the threat of imprisonment still remains for some debt issues. It is important that anyone with serious debt problems to seek competent legal advice. It is equally important to provide honest information and documents to your attorney.  

In order to be confirmed, a Chapter 13 repayment plan must meet the Best Interest Test.

The Best Interest Test is found in Section 1325(a)(4) of the bankruptcy code. It requires that your unsecured creditors receive at least as much under the Chapter 13 repayment plan as they would have under a Chapter 7 liquidation. Essentially, the goal is to make sure that your creditors are no worse off under Chapter 13 bankruptcy than they would have been under a Chapter 7 bankruptcy.

To understand how the Best Interest Test works, you must first understand how a Chapter 7 liquidation works. In a Chapter 7 bankruptcy, your nonexempt property is liquidated and sold. The proceeds from the sale are used to pay back as much of your debt as possible.

When you file for Chapter 13 bankruptcy, a hypothetical Chapter 7 liquidation is performed to determine how much your creditors would have received. The amount they receive under your Chapter 13 repayment plan must be at least equal to this amount.

Quite often a debtor is determined to have no assets, so the unsecured creditors would have received nothing under a Chapter 7 liquidation. Of course, this does not actually mean that the debtor has no assets at all. Rather, it means that the assets the debtor does have are all protected from liquidation through exemptions.

In these cases, it is proper for the debtor’s unsecured creditors to receive nothing under the Chapter 13 repayment plan, and the plan will be approved provided that it is offered in good faith and passes the disposable income test.

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.”

If you are facing mounting credit card debt, a bankruptcy attorney can explain your legal options and help you decide if bankruptcy is the right option for your financial situation.

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.