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

When a bankruptcy debtor inherits money from someone who dies within 180 days of the date the debtor filed bankruptcy that money becomes part of the debtor’s bankruptcy estate.  The inherited money that becomes part of the bankruptcy estate is used to pay your creditors.  This is true even if you have received a discharge and your Chapter 7 bankruptcy case has closed.  Free Consultation  

For instance, if you file a Chapter 7 bankruptcy on April 1, and your great aunt dies on September 28 (within 180 days of the bankruptcy filing date), any money you receive from your great aunt’s estate must be turned over to the bankruptcy trustee.  It does not matter when you receive the money or when your case was discharged.  You might receive the inheritance years later, and it must be turned over to the bankruptcy trustee for payment to creditors.  You may be charged with bankruptcy fraud (a federal crime) if you fail to inform the trustee of your inheritance or turn over the money. Free Consultation 

If the trustee receives inherited money, your case will be reopened and a bankruptcy estate is formed.  Notices to creditors are sent and the trustee will distribute the funds to creditors.  In some cases you will be able to keep some of the money, and in other cases some of the funds may be returned.  Free Consultation  

Inherited property is treated the same as cash.  If you receive a car or a family heirloom, the property must be turned over to the trustee.  In some cases you may be able to exempt inherited property or the trustee may consider the value of the inheritance too small or burdensome to liquidate and distribute. Free Consultation 

If you are considering bankruptcy and are aware of a significant chance of someone leaving you inheritance money, speak with your attorney.  There are options to avoid turnover including rewriting the will to cut you out, or setting up a spendthrift trust.  A spendthrift trust cannot be reached by creditors.  Consult with an attorney to properly create a spendthrift trust or rewrite a will.  There is nothing illegal or immoral about estate planning and your loved one may prefer leaving money to you rather than your creditors. Free Consultation

Just because a relative is older and living on a fixed income does not mean that he or she is also debt-free.  Many older Americans struggle each month to pay unsecured debts from very modest incomes.  The most common forms of unsecured debts are credit cards and medical expenses, and for many of our elderly even a small unsecure debt can be a big financial complication.  Some face the difficult decision to cut back on food, prescription medicine, or home utilities in order to make minimum payments on these debts. 

Many of our elderly try to avoid bankruptcy because they believe that they can pay their obligations with minimum monthly payments.  The unfortunate truth is that it takes many years to pay off even a small high interest debt with minimum monthly payments.  In the meantime a changed interest rate and annual fees can cause that minimum payment to increase.  Additionally, forgotten payments can lead to creditor harassment or lawsuits which can result in a real estate judgment lien and/or an asset seizure. 

Discussing personal bankruptcy with an older loved one can be difficult.  In many cases there is great concern over losing property or income.  The federal bankruptcy laws have changed significantly over the past fifty years and offer great protections for the elderly.  For instance, retirement income and social security are protected from creditor garnishment during bankruptcy.  In most cases all of the bankruptcy debtor’s property is exempt from turnover; however your bankruptcy attorney can discuss any property that may be at risk.  The bankruptcy laws offer many options for retaining property and discharging debts.  After the typical case the unsecured debts are discharged and there is more money available to pay necessary living expenses. 

Another common concern is the embarrassment of bankruptcy.  A personal bankruptcy can is usually a very private legal process.  Friends and family are not contacted and bankruptcy cases are not published in the newspaper. Only creditors and co-debtors receive notice of a personal bankruptcy.  

If an older relative is struggling with debt, discuss the situation with an experienced bankruptcy attorney.  The federal bankruptcy laws contain many protections that shield the assets and incomes of the elderly while discharging burdensome creditors.  Don’t let the stress of credit cards and medical bills tarnish your loved one’s golden years.

A person’s financial situation is often desperate by the time a bankruptcy is filed.  In some circumstances the rent is past due and the debtor is facing eviction.  Fortunately, the bankruptcy laws can help many debtors stay in their homes, at least temporarily. 

Generally, when you file a bankruptcy petition all collection actions are automatically stayed.  The purpose of this stay is to give you some breathing room and time to sort out your financial difficulties.  If you are behind on rent payments, the bankruptcy automatic stays the commencement or continuation of an eviction action.  The automatic stay prohibits your landlord from any attempt to collect rents that accrued prior to the bankruptcy filing date.  Your landlord may not write or call you in an effort to collect these rents, and may not start or continue a lawsuit to evict you.

The bankruptcy automatic stay will not relieve you from your obligation to pay rent after the bankruptcy filing date.  If you fall behind on your rent payments after the bankruptcy is filed, your landlord may evict you regardless of the bankruptcy, but cannot seek payment of past rents.  If you are not behind on rents at the time the bankruptcy case is filed, your landlord is not a creditor and will not receive notice of your bankruptcy filing.  However, you must account for any rent deposit on your bankruptcy schedules. 

In some circumstances a landlord may complain to the bankruptcy court that the tenant is endangering the property or using controlled substances illegally on the property.  The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond.  The court must hold a hearing within 10 days.  If the landlord is successful in this complaint, the court will lift the automatic stay and allow the eviction process to continue. 

If your landlord has obtained a judgment for possession and order of eviction before you file bankruptcy, the legal process is more complex.  You must deposit one month of rent to the bankruptcy court immediately upon filing the bankruptcy petition along with a certification stating that your landlord’s judgment permits you to stay in the premises upon satisfaction of the entire judgment amount.  This filing stays the eviction process for thirty days.  If you wish to remain longer, the amount stated in the judgment for possession must be paid within the thirty day period. 

Bankruptcy can stop an eviction and give you time to move or make arrangements to stay.  If you are facing eviction from your rental home and contemplating bankruptcy, discuss your situation with an experienced bankruptcy attorney.

It is no surprise that illness is a chief contributor to personal bankruptcy.  In fact, a 2009 study released by Harvard researchers claims that 62% of all personal bankruptcies during 2007 were caused by health problems. Many individuals struggling with medical bills need relief, but worry about how a bankruptcy will affect their ability to receive medical care in the future. 

Under the Emergency Medical Treatment and Active Labor Act hospitals and ambulance services are required to provide emergency healthcare to a person regardless of ability to pay.  This federal law requires appropriate medical screening, necessary stabilization, and transfer to an appropriate facility for treatment of an emergency condition.  In broad general terms, if you have an emergency medical condition, a hospital ER must treat you. 

If you do not have an emergency medical condition, the hospital or doctor may refuse treatment to a bankruptcy debtor.  It is unusual for a hospital to deny service after bankruptcy unless the patient demonstrates an inability to pay the new bill.  If you have insurance or other form of guaranteed payment, the hospital will likely treat you. 

Individual physicians are more likely to deny services if you have discharged their bill.  Many bankruptcy debtors want to continue a relationship with their personal doctor, and consequently make payment arrangements after the bankruptcy has been filed. While the bankruptcy law requires the debtor to list every creditor, there is no prohibition against paying a debt after the bankruptcy.  Paying the debt does not renew or create a new obligation and the doctor may not take action to collect a discharged debt (i.e. writing or calling to encourage payment). 

If you need to include medical bills in your bankruptcy, but worry about receiving future medical care, consult with your bankruptcy attorney.  In most cases there is no interruption in medical care or treatment.  Know your legal rights and be informed of how your bankruptcy will affect your ability to receive medical care.

There are a surprising number of options for a debtor to retain possession of a vehicle during bankruptcy.  Choosing the best option depends on several factors including your ability to pay and the condition of your vehicle.  In some cases the best financial option is to surrender your vehicle back to the bank and purchase a different one.   

Years ago it was unheard of for a debtor in an active bankruptcy to obtain an auto loan.  Several years ago two companies, 722 Redemption Funding, and Fresh Start Loan Corporation, began making auto loans to debtors in bankruptcy, and now many banks have lending programs for debtors.  The attitude towards bankruptcy has changed and many debtors are evaluated more on their future ability to pay the loan rather than their past financial trouble. 

Obtaining an auto loan during bankruptcy is a matter of showing stable income, a good debt-to-income ratio, and some assurance that your current financial trouble is unusual and not likely to reoccur.  All lenders require a loan application and the criteria for approval can vary significantly.  Some lenders will not approve a loan if you have had a prior repossession.  Other lenders want a substantial down payment.  New auto loans often want the bankruptcy discharged before approving the loan.  In all cases your vehicle choice will be restricted to a newer vehicle with low miles. 

During a Chapter 7 bankruptcy the debtor and the lender are free to negotiate terms outside of the bankruptcy case.  The loan is not a part of the case and is not affected by the bankruptcy discharge.  For Chapter 13 debtors, any new indebtedness must be approved by the trustee and the court.  In most cases the Chapter 13 debtor can obtain approval after a showing of need and ability to pay. 

If you are considering bankruptcy and need to buy a different vehicle, consult with an experienced attorney.  There are many different options during bankruptcy for retaining, refinancing, or purchasing a different vehicle.  Call today and get the information you need to drive your financial future.  

Almost all debtors in bankruptcy are honest people who have experienced great financial difficulty.  One of the most common questions asked by debtors is, “Do I need to list a creditor I intend to repay?” 

The answer to this question is very simple: “Yes!”  You must list all of your debts and each of your creditors, even those you intend to repay.  There are two ways to repay a debt after bankruptcy.  The first is by voluntary payment.  The second is with a reaffirmation agreement. 

Voluntary payments made after your bankruptcy discharge neither create a new legal obligation nor invalidate the discharge order.  Any payment you make on a discharged debt is the result of a moral obligation since the legal obligation to pay the debt has been discharged by the bankruptcy court.  The creditor is still prohibited from contacting you or trying to collect on the debt. 

A reaffirmation agreement is a new contract between you and your creditor.  It is fully enforceable after the bankruptcy, so if you default on the obligation the creditor can sue you and repossess any property securing the agreement.  Reaffirmation agreements are commonly used to continue auto and home loans.  The debtor agrees to continue the legal obligation to pay the loan, and the lender agrees to not repossess the collateral.   

Reaffirmation agreements are only available to Chapter 7 debtors and the agreement must be executed before the bankruptcy discharge is entered.  The debtor can revoke the agreement with 60 days after the agreement is signed.  The Bankruptcy Code requires that the debtor demonstrate that the paying a reaffirmed debt will not create an undue hardship for the debtor or the debtor's family.  While a reaffirmation agreement can be used for credit card agreements and other unsecured loans, bankruptcy courts are reluctant to approve these agreements without exceptional circumstances. 

You are free to continue to pay a debt after your bankruptcy.  Congress specified in the Bankruptcy Code that “Nothing contained in. . . this section prevents a debtor from voluntarily repaying any debt.”  There are several legal options for repaying a debt after bankruptcy, as well as several avenues for debt restructuring.  Discuss your specific situation with your bankruptcy attorney and discover your options.  

Many people mistakenly believe that the bankruptcy court will take everything they own and sell it to pay creditors.  Some of their descriptions of bankruptcy conjure up images of a poor unfortunate walking the streets wearing a wooden barrel with no property or money to his name. 

Well, you can stop worrying about barrel chafing because there are many legal protections that allow you to keep household property during bankruptcy.  These protections are generally limited to “common sense” amounts and typically apply to clothing, household furniture, musical instruments, books, electronics, appliances, etc.   

One stated goal of bankruptcy is to give the debtor a “fresh start,” so Congress and state legislators attempt to balance the requirement of the debtor to have basic necessities against your creditors’ interests in receiving payment for your debts.  The idea is to permit the debtor the things he needs for day-to-day living while prohibiting the debtor from living a lavish lifestyle at the expense of his creditors.  For instance, if you have a Steinway grand piano worth $50,000 in your living room, it will likely be taken and sold to pay creditors.  If you have a family piano worth $2,000, you can likely keep it. 

The truth is that only around four percent of Chapter 7 bankruptcy cases are “asset cases,” meaning the bankruptcy trustee receives money or an asset from the debtor.  In the vast majority of these “asset cases” the debtor loses a car or real estate in which he has too much equity.  It is very rare to see a debtor lose any household item during a Chapter 7 bankruptcy.  Debtors in Chapter 13 keep their property. 

Determining whether a household item is at risk is a simple arithmetic calculation.  First, start with the liquidation value of the item.  Often this value can be determined by looking at yard sales or internet auction sites like Ebay.  Next subtract the applicable state or federal exemption amount for that item.  Any remaining sum is unprotected equity.  Your bankruptcy attorney can discuss your options for protecting and keeping items with unprotected equity. 

It is important to correctly describe, value and apply the proper exemptions to household items in your bankruptcy schedules.  Once you have provided an adequate description and value of your household items, your attorney can apply the proper exemptions and protect your property from turn-over to the bankruptcy trustee.  Discuss any high-dollar household item with your attorney to ensure that you obtain full legal protection for your property.

Many students are unable to attend college without federal financial aid.  Fortunately, a bankruptcy filing does not affect a student’s ability to obtain need-based financial aid.  For most students that means Pell Grants and Stafford Loans, both subsidized and unsubsidized.   Your credit is not considered in determining your financial need to receive Pell Grants and Stafford Loans and your bankruptcy filing does not disqualify you from receiving need-based financial aid.  Pell Grants and Stafford Loans are the two most common forms of financial aid to undergraduate college students. 

      Stafford Loans during a Chapter 13 bankruptcy presents a problem for the student.  You will need permission from the bankruptcy trustee and bankruptcy court to incur additional debt.  These requests are handled on a case-by-case basis, so consult with your bankruptcy attorney if you want to take loans to attend school during a Chapter 13 bankruptcy. 

      Credit-based financial aid is a different story.  This type of financial aid includes student loans from private lenders such as Sallie Mae.  Applying for credit-based loans is the same as applying for an unsecured personal loan.  Your credit history is considered and your bankruptcy will play a part in the decision to give you the loan. 

      Your credit is also considered if you are a parent applying for a parent loan like the PLUS (Parental Loan for Undergraduate Students) Loan and the Graduate PLUS (a loan for Graduate students) Loan.  These federally guaranteed parent loans are credit based and federal regulations state that a parent with a bankruptcy within the past five years is automatically disqualified from obtaining a PLUS Loan for his or her child, unless there were extenuating circumstances or the borrower obtains a creditworthy endorser. However, if you are denied a PLUS Loan, your child qualifies for increased unsubsidized Stafford loan limits.  Stafford loans remain in forbearance while the student attends school, while a PLUS Loan is subject to immediate repayment. 

      If you are a student or parent who needs money for school after a bankruptcy, speak with your student financial aid advisor and your bankruptcy attorney.  Bankruptcy can help eliminate your personal debt and free money for college, or college loan repayment.

Although bankruptcy filings are climbing back to the all-time high of 2 million reached in 2005, there is a growing concern that many Americans in need of bankruptcy protection are not filing.  A recent article in USA Today quotes Katherine Porter, associate professor of law at the University of Iowa who says, “[T]he filing rate doesn’t even begin to count the depth of financial pain.” 

Are you hurting financially?  Bankruptcy can help ease that pain. 

Bankruptcy is a federal legal process for declaring an inability to pay your creditors.  When you file bankruptcy you get immediate relief.  The bankruptcy court imposes an “automatic stay” prohibiting creditors from taking collection action against you while the bankruptcy case is pending.  The automatic stay is very powerful and stops lawsuits, wage garnishments, and even foreclosures.  Its purpose is to give the debtor some breathing room and an opportunity to decide how to resolve an overwhelming debt problem. 

There are typically two different types of bankruptcy cases: chapter 7 and chapter 13.  In chapter 7 you eliminate debt without payment while chapter 13 is a repayment plan over three to five years.  At the end of a bankruptcy case the court enters an order discharging eligible debts and permanently prohibits creditors from taking collection action against you. 

In some cases certain debts are not discharged.  The most common types are family support obligations, student loans, and taxes.  However, bankruptcy offers significant relief by discharging other debts and freeing up money to pay the non-discharged debt.  Chapter 13 can also be helpful by allowing payment of the non-dischargeable debt under the supervision of the bankruptcy court and without fear of lawsuits, wage garnishments, or other nasty creditor action. 

The bankruptcy process is very efficient.  For most chapter 7 debtors the case will last a few months and requires one meeting with the bankruptcy trustee.  The cost of bankruptcy is very reasonable compared to the relief that is given. 

During a Chapter 13 bankruptcy you pay your creditors in accordance with your ability to pay.  Some creditors receive 100% of the debt, and others may receive a small sum or nothing at all.  The Bankruptcy Code establishes a priority of debt repayment. 

Administrative claims must be paid 100% and include your filing fee, the trustee’s compensation (3% to 10% of each monthly payment), and your attorney’s fees.  Other debts must be paid 100% during the debtor’s bankruptcy including alimony and child support, most tax debts, and mortgage arrears if you intend to keep you home. 

The lowest category of debt repayment is unsecured creditors.  The amount paid to unsecured creditors (e.g. medical bills, credit cards, and unsecured personal loans) is determined by several factors including (1) the amount of your nonexempt assets; (2) your disposable income; and (3) the length of your plan. 

The length of your plan and amount of your disposable income are largely determined by the Bankruptcy Means Test.  The Means Test was the subject of a recent United States Supreme Court case: Hamilton, Chapter 13 Trustee v. Lanning.  The issue in Hamilton is how a bankruptcy court calculates your ability to pay creditors during the bankruptcy case. 

The 2005 changes to the Bankruptcy Code included a requirement that Chapter 13 debtors commit all "projected disposable income" to the repayment plan.  Confusion arose over whether Congress meant to determine this amount through a mechanical approach, by averaging the debtor's income for the past six months, or whether the determination is “forward looking” and should consider the debtor’s future ability to pay. 

Justice Samuel Alito, writing for an 8-1 majority, said the “forward looking” approach is correct.  The forward-looking approach starts with the debtor's average monthly disposable income for the past six months multiplied by the number of months in a debtor's plan.  This figure is ordinarily the debtor's projected disposable income.  However, in some cases, the Court has authority to review the debtor's actual and present monthly income in order to calculate the debtor’s ability to pay debts during the plan period. 

The Hamilton case will have great impact on Chapter 13 bankruptcy cases and places the power to determine a fair and affordable Chapter 13 payment plan in the hands of the bankruptcy court judges.  If you are in need of bankruptcy relief, but fear that you will be forced to pay a monthly sum you can’t afford, get the facts from an experienced bankruptcy attorney.  Bankruptcy is not a debtor’s prison and has helped millions get a fresh financial start. 

Generally, in order to discharge a tax debt during bankruptcy, the tax debt must meet all four of the following criteria: (1) the tax must be income taxes or “gross receipt taxes;” (2) the tax must be over three tax years old; (3) your tax return must have been filed on time; and (4) the tax debt must not be amended or challenged by the IRS as inaccurate. 

There are four different types of tax debts that are automatically excluded from your bankruptcy discharge: 

1. unpaid taxes due within three years of the bankruptcy filing;
2. unpaid taxes for returns filed late, but within two years of the bankruptcy filing;
3. unpaid taxes for tax years when the debtor did not file a return; and
4. unpaid taxes due when the debtor filed a fraudulent return or tried to evade the tax obligation.

If you have any question whether your tax debt can be discharged during your bankruptcy, consult with your attorney.  Some tax penalties can also be discharged, so be sure to discuss exactly what portion of your tax debt will be discharged, and what portion will survive.

Tax liens can be stripped off during a Chapter 13 bankruptcy to the extent that the lien is more than the equity in property.  Tax liens cannot be stripped or otherwise avoided in Chapter 7. However if the tax is dischargeable in a Chapter 7, the bankruptcy court should determine the extent of the tax lien against your property.

Property taxes are treated differently after bankruptcy.  Your personal obligation to pay property taxes can be discharged if the tax was last payable without penalty more than one year before you file bankruptcy.  However, property taxes are secured with a lien which will generally survive the discharge.  If you keep the property, you must pay the tax debt after the bankruptcy.  If the property is surrendered during the bankruptcy, you will owe nothing. 

The intersection of tax and bankruptcy is a complicated area of the law.  It is important to address any tax issues early in your case and have a clear understanding of how you and your attorney will deal with your tax debt during your bankruptcy.

For many, walking away from a home loan is the right decision.  The recent economic downturn has left many homeowners owing substantially more than their home is worth and it may take many years of payments simply to break even.  In other cases homeowners have suffered a job loss, a reduction in pay, or other financial change that makes their present home unaffordable. 

The down-side to walking away from a home is that the debt still remains.  The mortgage company will take your home through foreclosure and sell it, sometimes at a steep discount, and you will be liable for the deficiency balance.  The mortgage company may try to collect or it may assign your debt to a collection company.  Harassing phone calls, threatening letters, and finally a lawsuit are inevitable.  Often the lawsuit is filed years later and just before the statute of limitations expires.  By then you may have rebuilt your credit and be in a much better financial situation.  The effect of this lawsuit can be devastating. 

Bankruptcy law can help you walk away and discharge your obligation to pay any balance on a home loan once and for all.  The instant you file bankruptcy you are under the protection of the United States Bankruptcy Court and creditors are prohibited from taking any collection action against you.  The bankruptcy filing immediately stops any foreclosure or repossession action, and any lawsuit.  This protection, called the automatic stay, extends through the duration of your bankruptcy case.  A creditor must seek permission from the bankruptcy court in order to start or continue the foreclosure process while you are under bankruptcy protection.  The filing of a bankruptcy case generally forestalls the foreclosure process for months and gives you the opportunity to walk away on your own terms. 

At the conclusion of your bankruptcy case you will receive an order of discharge from the bankruptcy judge.  This order permanently prohibits all discharge creditors from taking collection action against you.  However, once the bankruptcy case is closed, the mortgage company can commence foreclosure proceedings to take possession of your home, but cannot collect money from you personally. 

If you are considering walking away from your home, speak with an experienced bankruptcy attorney and learn how bankruptcy can help mitigate your financial exposure.  An experience bankruptcy attorney can explain your options and help you decide on a path that makes the most financial sense for your family.

Filing bankruptcy is a difficult decision, but sometimes life dictates choices to us.  Financial disaster can blind-side any of us, like a job loss or medical catastrophe.  Whatever the reason, individuals occasionally need the protections of the federal bankruptcy laws a second time. 

An individual can ordinarily file a bankruptcy case at anytime, however there may be restrictions on the relief that is available.  The most common restriction is the eligibility to receive a bankruptcy discharge.  To receive a Chapter 7 discharge, you must file your case eight (8) years after your previous Chapter 7 case was filed, or six (6) years after your Chapter 13 case was filed.  To receive a Chapter 13 discharge, you must file your case four (4) years after your previous Chapter 7 case was filed, or two (2) years after your Chapter 13 case was filed. 

In some cases, receiving a bankruptcy discharge may not be important to the debtor.  For instance, if a debtor has a non-dischargeable debt like child support or taxes that must be paid, bankruptcy can offer an organized process for payment while the debtor retains some control. 

Another less common restriction concerns the automatic stay.  If your bankruptcy case is dismissed within the past year, the bankruptcy court assumes that your second bankruptcy is filed in bad faith. The automatic stay will only apply for 30 days after your second filing. A hearing is required to extend the automatic stay and you must convince the court that you have filed in “good faith.”  If you file two or more cases within the past years, you must petition the bankruptcy court for a stay – it is not automatic for any period of time. 

Finally, you are not eligible to file at all if your case was dismissed by the bankruptcy court within 180 days due to a willful failure to obey an order of the bankruptcy court, or if your case was voluntarily dismissed after a creditor sought to lift the automatic stay to enforce a lien against your property. 

Filing a second bankruptcy is not uncommon.  Congress has established a few additional rules to deter abusive serial filers, but bankruptcy protection is available for the honest yet unfortunate debtor.  If you need assistance with filing a second bankruptcy case, contact an experienced bankruptcy attorney and get the relief you need.