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

A bankruptcy discharge is an order from the United States Bankruptcy Court.  The discharge is a court injunction prohibiting any attempt to collect on a discharged debt.  Creditors are strictly prohibited from contacting the debtor by mail, phone, or otherwise; filing or continuing a lawsuit; attaching wages or other property; or taking any other action to collect a discharged debt.  A creditor that violates this order is subject to contempt of court and may have to pay damages and attorney's fees. 

A creditor that contacts you in an effort to collect a discharged debt is in violation of the bankruptcy court’s discharge injunction.  Usually such contact is a mistake and the creditor is unaware of your bankruptcy discharge.  While claiming ignorance is not a valid excuse for violating the bankruptcy court order, informing the creditor that you have filed bankruptcy and received a discharge of the debt is often enough to stop future collection actions.  The creditor may want to know certain information about the bankruptcy (case number, date of discharge, chapter, etc.) to update their records and stop further collection efforts.  You can answer these questions or simply refer the creditor to your attorney. 

It is good practice to document any post-discharge collection action by creditors.  While these collection attempts are often mistakes, a main purpose of the bankruptcy discharge is to allow you to live your life free from creditor harassment.  The bankruptcy discharge applies to the debt and enjoins any collection of the debt.  Consequently, the discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector. 

Your bankruptcy discharge is legal protection against creditor harassment concerning discharged debts.  If you are repeatedly contacted by a creditor after your bankruptcy discharge, document the creditor contact and report it to your attorney.  The law is on your side and will protect your right to a fresh start free of creditor harassment.

A credit card is a safe and convenient way to pay for life’s necessities. In some cases a credit card is required to purchase goods or services. Debit cards are often a poor substitute for a credit card as bank holds can tie up your account for days.

If you want to keep a credit card during your bankruptcy, there are a few things to know. First, the Bankruptcy Code requires that you list all of your creditors and debts owed on the date of the bankruptcy filing. Consequently, if a credit card has a zero balance on the date that you file bankruptcy, it does not need to be listed and the credit card company does not receive notice.

Second, the use of credit during a chapter 13 bankruptcy is prohibited without prior authorization from the trustee and bankruptcy court. Usually credit approval is contingent upon a written agreement or statement from the credit card company. Chapter 7 debtors do not have this restriction.

Third, a payment on a credit card within 90 days before your bankruptcy filing may be considered a preference payment. The bankruptcy trustee may seek a court order compelling the credit card company to turn over any pre-filing payments.

Fourth, credit card companies conduct regular checks of their cardholders’ credit and your bankruptcy filing may result in the card issuer closing your account, reducing your credit line, or increasing your interest rate. These actions may also occur if you choose to reaffirm your debt with the credit card company. After reaffirming the debt the card may be cancelled and you are stuck with a non-discharged credit card balance.

Fifth, intentional failure to list a credit card with a balance can result in dismissal of your bankruptcy case. The bankruptcy court expects you to be entirely truthful concerning who you owe, regardless of your intention to pay the debt.

Sixth, consider obtaining credit after your bankruptcy discharge. Many debtors are offered unsecured credit cards shortly after their bankruptcy discharge. Many creditors consider a recently discharged debtor a good credit risk because the debtor is unable to receive another bankruptcy discharge for several years, and likely has a good debt-to-income ratio. Many post-discharge credit card offers carry high interest rates and fees, so choose wisely.

Secured credit cards are another credit option after bankruptcy. A secured credit card requires a security deposit placed with the credit card company who then issues a credit line secured by the deposit. Many banks and credit unions offer their customers secured credit cards at reasonable interest rates.

If you are interested in keeping a credit card during bankruptcy, consult with your bankruptcy attorney. Your attorney can discuss your options and help you decide on the best way to maintain a credit card account during and after your bankruptcy.
 

In a Chapter 13 bankruptcy case the debtor proposes a plan to pay back creditors.  That plan is composed of monthly payments to satisfy all or part of the creditors' claims over three to five years.  Monthly payments are made to the Chapter 13 Trustee, who then pays your creditors. 

There is often confusion over when the first plan payment due. Section 1326 of the Bankruptcy Code directs that the first payment must be made within 30 days after filing the bankruptcy case, even if the debtor’s bankruptcy plan has not yet been approved by the court.  Often the first meeting with the Trustee (also known as the "341 meeting" or "meeting of creditors") is scheduled more than 30 days after the filing date, so the Trustee expects your first payment before that meeting.  The Trustee will hold all payments until the plan is approved by the Bankruptcy Court (called "confirmation"), and then make distributions to creditors. 

It is critical that you make this initial payment within thirty days after filing.  It is especially important to monitor the status of this first payment when you have instructed your employer to pay the Trustee from your wages.  It is your responsibility to ensure that this first payment is made, and neither the Trustee nor the Bankruptcy Court gives much latitude to a debtor who misses the first deadline in the case. 

Filing bankruptcy is a very personal process. Many clients worry that their friends and neighbors will learn about their bankruptcy. A common question is, “Who will know about my bankruptcy?”

First, personal bankruptcy cases are generally not reported in the local newspaper. Unless you are a celebrity or public figure, your bankruptcy is not newsworthy. More than 1.4 million consumer filings were recorded last year, so many larger newspapers would have to publish thousands of bankruptcies in their papers each month. It is not cost-effective for a newspaper to search through the bankruptcy court records to find individuals who filed in their distribution area and use valuable print space to report on personal bankruptcy cases.

Second, the bankruptcy laws require notices of the bankruptcy filing to go out to the following:

1. Everyone you owe money (called “creditors”);
2. The bankruptcy trustee;
3. Co-signors and co-debtors; and
4. You and your attorney.

Under special circumstances other notices are sent, for instance if you owe taxes, or if you want to terminate a lease or contract. Family, neighbors, friends, your employer, your bank, etc. will generally not receive notice of your bankruptcy. A common exception to this general rule is when the debtor causes a voluntary wage withholding to pay chapter 13 plan payments.

Third, while bankruptcy court proceedings and trustee meetings are open to the public, it is unusual for the press or members of the public to attend. Most of these meetings are very brief and can even be a little boring.

Finally, 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 directly. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public.

Filing a bankruptcy petition is generally a private and confidential process. 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, consult with an experienced bankruptcy attorney.

Bankruptcy is a powerful tool for eliminating personal debt. It is important to know what bankruptcy can do for you, and what it cannot.

What Bankruptcy Can Do:

Bankruptcy can eliminate your personal obligation on many unsecured debts. For many debtors this is the most important benefit of bankruptcy. Most credit cards and medical bills can be discharged during bankruptcy and you will never worry about them again.

Bankruptcy can stop creditor collection activities and harassment. When a bankruptcy is filed, all collection activity must stop. After a debt is discharged at the end of your bankruptcy case, the creditor is prohibited from contacting you to collect on that debt.

Bankruptcy can stop a foreclosure or repossession. In a Chapter 7 bankruptcy the debtor is given time to negotiate an agreement with the creditor, or prepare to walk-away from the debt and surrender a home or vehicle. In a Chapter 13, the debtor can also surrender property back to the creditor, or force the creditor to accept payments to cure an arrearage and resume monthly payments.

Bankruptcy can protect personal assets. Ordinary household goods, certain equity in vehicles or a family home, and retirement accounts are all protected during a bankruptcy. Statistically only 1 in 20 debtors lose anything, and your bankruptcy attorney can advise you of any property that is at risk in advance of the filing.

Bankruptcy can strip away certain liens. Many loans that are secured with an item you previously owned (called a Non-Purchase-Money Security Interest) can be stripped away during bankruptcy. Under certain circumstances a second mortgage can be stripped and made an unsecured debt (and eligible for discharged).

What Bankruptcy Cannot Do:

Bankruptcy cannot allow you to keep secured property without payment. While there are exceptions, generally if you do not pay for a secured property (e.g. car or house), the property must be returned to the secured creditor.

Bankruptcy cannot eliminate certain types of debts. The Bankruptcy Code lists debts that cannot be discharged such as student loans, certain taxes, and child support obligations. However, every situation is different and many of these “non-dischargeable debts” can be discharged under certain circumstances. Your bankruptcy attorney can discuss your individual situation and options for eliminating your debts.

The goal of the federal bankruptcy laws is to give the debtor a fresh start on a new financial future. There are many powerful legal options available in bankruptcy to eliminate or reduce overwhelming debt. An experienced bankruptcy attorney can explain your options and guide you to your fresh start.

Each year many Americans find themselves facing bankruptcy through no fault of their own. The American Journal of Medicine reported in 2009 that medical bills contributed to more that 60 percent of U.S. personal bankruptcies. A catastrophic medical condition can wipe out savings, assets, and even cause loss of income.

The study conducted by researchers from Harvard Law School, Harvard Medical School and Ohio University found that more than 75 percent of these bankrupt filers had some form of health insurance, two-thirds were homeowners, and three-fifths had gone to college. Many of the debtors were average middle-class families who saw their lives tossed upside-down after a serious illness.

"Our findings are frightening. Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy," said lead author Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School.

While medical expenses can lead to bankruptcy, the federal law requires the debtor to include all debts in a bankruptcy case, including auto loans, mortgages, and credit cards. A “medical bankruptcy,” when the debtor only discharges medical debt, is a myth. The bankruptcy laws do not allow the debtor to pick and choose which debts are included and which are excluded. Debts are treated fairly and equally in bankruptcy, and the debt classes are structured to avoid preferential treatment of one creditor over another within the same class.

For example, a hospital and a credit card company are generally classified as unsecured creditors and will receive the same treatment during the bankruptcy. If there are no assets available to pay these debts, both debts are discharged at the end of the case. However, while a debt may be discharged and no longer legally enforceable, the debtor may always voluntarily repay the creditor.

If your family is faced with high medical expenses, consult with an experienced bankruptcy attorney and discover your options. The federal bankruptcy laws can discharge your medical bills and provide a fresh start on a better financial future.

Deciding whether to file bankruptcy can be difficult. There is no “bright line” test that signals when a bankruptcy is appropriate to solve a debt problem. For many debtors, it is not one issue, but a combination of debts that makes bankruptcy the right choice.

Below are common debt patterns that attorneys see from their bankruptcy clients. If you are experiencing one or more of these debt problems, a bankruptcy filing can improve your financial situation:

* Your wages are garnished or your bank account is attached
* You are unable to make even minimum payments to your creditors, or you struggle to make minimum payments each month
* Collectors harass you at home and at work
* You pick and choose what creditors to pay on-time
* You are caught up in a cycle of payday loans
* You are paying off large unsecured debts (e.g. credit cards, medical bills, etc.)
* You are at risk for repossession or foreclosure
* You are being sued for a debt
* The IRS is threatening collection action

Whether to file bankruptcy is a decision that is unique to your personal situation. If you are struggling with debt, a bankruptcy filing stops collection action and provides breathing room so you can decide how to move forward with your finances. The bankruptcy laws offer the choice of repayment or the outright discharge of most debts under the supervision of a federal court. In most cases there is no payment to unsecured creditors and the debtor does not lose any property.

If you are experiencing a persistent debt problem, bankruptcy may be the right choice for you. Discuss your situation with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can eliminate your financial burdens. Get started on a brighter financial future today!

In 2004 and 2005, the banking industry spent millions lobbying for tougher bankruptcy laws. Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. collectively spent $25 million during that period. The big banks' efforts paid off in a major overhaul of the Bankruptcy Code in 2005 making it more difficult for struggling families to discharge credit card debt. However, the banks did not foresee the current housing crisis, and new research suggests that the 2005 changes to the Bankruptcy Code may have caused mortgage default rates to rise.

A paper published by the National Bureau of Economic Research states that the 2005 changes “raised the cost of filing and reduced the amount of debt that is discharged" thereby making it more difficult for debtors "to shift funds from paying other debts to paying their mortgages[.]" In other words, before the 2005 changes, many debtors struggling with a mortgage arrears and credit card debt could file bankruptcy, discharge the credit card debt, and free-up money to pay the mortgage. The new bankruptcy provisions make this process more difficult. As a result, fewer debtors are able to afford to save their homes through the bankruptcy process.

Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank said, "Be careful what you wish for. [The banks] wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures."
If you are facing overwhelming debt and want to keep your home, there are many alternatives available to you. An experienced bankruptcy attorney can review your finances and explain your legal options for discharging or repaying your debts. Bankruptcy is not the only option for saving a home from foreclosure, and many cases are successfully resolved using a combination of bankruptcy and non-bankruptcy methods. Get the facts today and solve your debt dilemma!

The Bankruptcy Code directs the Chapter 7 debtor to file a statement of intention with the bankruptcy court within 30 days after the petition filing, or on or before the 341 Meeting of Creditors, whichever is earlier.  A statement of intention advises the court, the bankruptcy trustee, and your creditors of how the debtor intends to treat secured collateral, like a car or home, in the bankruptcy. 

The Bankruptcy Code also requires that the Chapter 7 debtor perform on that intention within 45 days after filing the statement.  The Bankruptcy Code allows the debtor to choose one of the following: (1) surrender the collateral back to the creditor and discharge any personal liability; (2) reaffirm the debt and retain the collateral in exchange for continued personal liability on the original debt; or (3) redeem the collateral by paying the current fair market value in a lump sum. 

Prior to the overhaul of the Bankruptcy Code in 2005, a Chapter 7 statement of intention had little relevance. Now the statement of intention can mean the difference between keeping and losing an automobile or other secured property.   

Failure to timely file or perform on a statement of intention causes the automatic stay to be lifted and the property is longer a part of the bankruptcy case.  In some cases, a purchase agreement may contain an ipso facto clause which creates a default on the loan by filing bankruptcy.  The Bankruptcy Code expressly nullifies ipso facto clauses, but only for property of the bankruptcy estate.  Most courts find that ipso facto clauses are enforceable under state law when property is no longer a part of the bankruptcy estate.   

Let me restate this situation in plain English: if you file bankruptcy and do not file or timely perform on a statement of intention, the property is no longer protected by the bankruptcy and can be repossessed by the creditor, even though you are current on the loan.  This situation recently was discussed in a Ninth Circuit Court of Appeals case, Dumont v. Ford Motor Credit Company. 

If you have an auto loan or other secured item you want to keep, discuss your options with an experienced bankruptcy attorney.  Your attorney can help you reach the right decision for you and your family.

Bankruptcy is a federal legal process for declaring an inability of an individual or organization to pay its creditors. The United States Constitution authorizes the bankruptcy laws and federal laws govern all bankruptcy cases.

One stated purpose of the federal bankruptcy laws is to give the debtor a financial "fresh start." At the end of most cases the bankruptcy judge will discharge certain debts and release the debtor from personal liability.

The bankruptcy laws are meant to give the honest debtor a fresh start, but not a head start. Therefore, Congress has identified certain debts that cannot be discharged in a bankruptcy. Many debts that would ordinarily qualify for discharge may be determined as non-dischargeable if a debtor has committed a crime or fraud in acquiring the debt. Other debts are deemed generally non-dischargeable based on public policy reasons (like taxes or child support).

Generally, the following are non-dischargeable debts:

1. child support or alimony obligations, and debts considered in the nature of support;
2. student loans, unless repayment would cause you undue hardship;
3. criminal fines or restitution;
4. debts listed in a prior bankruptcy where debtor was denied a discharge;
5. recent income taxes less than three years past due; and
6. auto accident claims involving intoxication.

Additionally, there are circumstances which may make a debt non-dischargeable:

1. debts incurred on the basis of fraud;
2. debts from willful or malicious injury to another or another's property;
3. recent purchases with credit cards;
4. debts from larceny (theft), breach of trust or embezzlement; and
5. most federal, state and local taxes and any money borrowed on a credit card to pay those taxes.

All of the categories of non-dischargeable debts in bankruptcy have specific rules and exceptions and each situation has its own challenges. If you have a debt that may fall into a non-dischargeable category, discuss your situation with a qualified bankruptcy attorney and learn your options. Your attorney can provide options for managing, repaying, or discharging the debt.

Around the country courts are questioning the standing of MERS to assert legal rights in
foreclosure or bankruptcy proceedings. Many courts are finding that Mortgage Electronic
Registration System, or “MERS,” is not a legal mortgage holder for lenders, investors
and their loan servicers, and are invalidating bankruptcy claims or foreclosure processes.

On its website MERS describes itself:

MERS is an innovative process that simplifies the way mortgage
ownership and servicing rights are originated, sold and tracked. Created by
the real estate finance industry, MERS eliminates the need to prepare and
record assignments when trading residential and commercial mortgage
loans.

Since the mortgage bubble burst, MERS has come under increasing attack in state and
federal courts. Some courts (most notably in Kansas, Florida, and New York) have found
that MERS does not have standing to assert mortgage rights because it is a mere nominee,
and not a mortgage assignee (an assignment of a mortgage without the debt transfers
nothing. 55 Am. Jur. 2d, Mortgages § 1002). Additionally, MERS routinely skips legally
required processes when a mortgage is transferred.

MERS is not the beneficiary of a Deed of Trust, and has no ownership or possession of a
promissory note. Therefore, many courts are finding noncompliance with state laws.
Recently one bankruptcy court in the State of New York invalidated a bankruptcy claim
by MERS when the company could not show how it had standing in the case.

Many bankruptcy attorneys are demanding proof of assignment and documents
establishing a paper trail for their client’s mortgage. In many cases MERS is unable to
provide this information; much like collection companies often cannot prove a debt.
Original documents, recorded deeds, payment history, and executed assignments seem to
be inconsequential matters to the MERS powerhouse. Fortunately, MERS is now under
attack and accused of not following legal processes. It will be very interesting to see how
the state and federal appellate courts address the MERS debacle.

If you are dealing with an uncooperative mortgage company and need assistance saving
your home, speak with an experienced bankruptcy attorney and discuss your options.
There are many legal options available and your bankruptcy attorney can help you
determine the best choice for your family.

Nevada, Tennessee, and Georgia are the highest per capita states for bankruptcy filings according recently released data concerning the first quarter of 2010. Records from the Automated Access to Court Electronic Records show there were 378,990 total bankruptcies in the first quarter of 2010, up from 325,815 in the first quarter of 2009.

In Nevada residents filed 10.3 bankruptcies per 1,000 residents for the first quarter of 2010. Tennessee and Georgia filed 8.0 and 7.8 respectively. Alaska is the state with the lowest per capita filing with 1.5 filings per 1,000 residents. According to these statistics the average Nevadan is almost seven times more likely to file bankruptcy than the average Alaskan.

Below is a list of the state’s bankruptcy filings per capita:

1. Nevada 10.3
2. Tennessee 8.0
3. Georgia 7.8
4. Michigan 7.4
5. Alabama 7.1
6. Indiana 7.0
7. California 6.4
8. Illinois 6.4
9. Kentucky 6.1
10. Ohio 5.9
11. Colorado 5.9
12. Utah 5.8
13. Arizona 5.6
14. Arkansas 5.6
15. Florida 5.6
16. Wisconsin 5.3
17. Rhode Island 5.2
18. Missouri 5.1
19. Delaware 5.1
20. Mississippi 5.0
21. Maryland 5.0
22. Washington 4.9
23. Oregon 4.8
24. Virginia 4.7
25. New Jersey 4.5
26. New Hampshire 4.5
27. Idaho 4.4
28. Nebraska 4.3
29. Minnesota 4.2
30. Louisiana 3.9
31. Oklahoma 3.8
32. West Virginia 3.7
33. Kansas 3.6
34. Massachusetts 3.5
35. New Mexico 3.3
36. Iowa 3.3
37. Connecticut 3.2
38. Pennsylvania 3.0
39. Maine 2.9
40. Vermont 2.9
41. Hawaii 2.9
42. North Carolina 2.8
43. Montana 2.7
44. New York 2.7
45. Wyoming 2.5
46. Texas 2.2
47. South Dakota 2.2
48. North Dakota 2.2
49. District of Columbia 2.1
50. South Carolina 2.1
51. Alaska 1.5

If you are considering a personal bankruptcy, you are not alone! In this tough economy, many families file bankruptcy to relieve them from the pressures of overwhelming debt and to begin their fresh start to a brighter financial future. Have your case evaluated today from an experienced attorney and discover how the federal bankruptcy laws can help you.
 

In some cases a debtor has no money, no job, and no assets. Lawyers commonly refer to this situation as being “judgment proof.” Any attempts to collect on a debt will be futile. As the saying goes, “You can’t get blood out of a turnip.”

While an entirely insolvent and judgment proof individual may avoid creditor collection, many people without money, jobs, or assets receive periodic federal benefits like Social Security. The federal law prohibits most creditors from garnishing federal benefits making the individual “legally” judgment proof.

Debt collectors will occasionally circumvent the federal prohibition by seizing the debtor’s bank account through a state court order. After a judge orders the seizure of a bank account to satisfy a judgment it is the debtor’s obligation to prove that the funds are federally protected. This generally requires hiring an attorney and holding a hearing in the state court. For more information, visit the Federal Trade Commission website for a free publication about bank seizure of federal benefits.

To close this legal loophole, the Obama administration has recently proposed rules to protect federal benefits from creditor garnishment. These proposed rules require banks to determine whether federal benefits have been directly deposited into a customer’s account within the past 60 days, and to determine the amount, before collecting funds pursuant to a court order. More than 80 percent of Social Security recipients receive their monthly benefits via direct deposit.

Many federal benefits are protected during bankruptcy. For a legally judgment proof debtor, a bankruptcy will end creditor harassment, prevent a bank account seizure, and discharge the debt for good. A bankruptcy can provide peace of mind.

If you receive federal benefits and have outstanding debts, consult with an experienced bankruptcy attorney. Your attorney can advise you on the best course of action to resolve the debt and protect your federal benefits.