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

Facebook is an internet social networking site that is just six years old, but it already boasts over 500 million active users.  That’s about 1 in 14 people in the world.  Facebook is a great way to stay in touch with friends and family, or even network for business.  Unfortunately, many debt collectors have discovered that Facebook can be a gold mine for personal and financial information.

The typical scenario goes like this: the “under cover” debt collection agent will make a friend request in order to gain access to the debtor’s private information and friends.  Once the friend request is accepted the agent will monitor the posts and updates of the debtor, or may contact the debtor’s friends for information.

In many cases the agent is successful in locating assets or income that can be attacked by the collection agency.  In some extreme cases collection agents have discussed the delinquent financial obligation with the debtor’s friends and family in order to cause embarrassment and coerce payment.

Is this legal?  In some cases yes, in some cases no.  In most cases the debtor has no idea that a debt collector is posing as a friend on the Facebook account.  Information you share on your social network regarding your job, your assets, and even your travel plans may be used against you to collect a debt.

The best strategy is to avoid discussing financial matters on any social networking site.  It is also a good idea to closely screen new friend requests and exclude people that you do not know from your account.  While this debt collection activity is a recent phenomenon, it is certain to continue.  Protect yourself by being cautious about the information you share on-line.

Finally, if you are experiencing a debt problem you can’t solve by yourself, discuss your options with an experienced bankruptcy attorney.  Once your bankruptcy case is filed any contact by a debt collector on a social networking site to your friends or family is a violation of the federal law and can be punished by a federal bankruptcy judge.  Don’t let debt collectors ruin your life.  The facts about bankruptcy and legally eliminate your debts.

If you are in financial trouble, you are not alone.  More than 1.5 million bankruptcy cases were filed during the fiscal year that ended June 30, 2010.  Many of these cases were joint husband and wife filings, which conservatively equates to one person filing bankruptcy in the United States every 15 seconds!

Many people who are facing financial hardship believe that they are powerless to act and that the situation is hopeless.  Bankruptcy attorneys meet these people every day and show them how to recover from overwhelming debt.  If you are facing bankruptcy, there are a few things to do that will make the process considerably easier.

First, consult with an experienced bankruptcy attorney.  The initial consultation is free, so discuss your financial situation and learn how the federal bankruptcy laws can help you and your family.  Your bankruptcy attorney can help you develop a bankruptcy strategy and explain what property is protected or at risk, and identify debts that can be discharged or that survive the bankruptcy.

Second, tighten your belt.  This is the time to be financially conservative and begin your financial recovery.  You and your attorney will construct a reasonable budget which will allow you to gain control over your finances during and after the bankruptcy case.

Third, before you make a large financial transaction, discuss the matter with your attorney.  In many cases large financial transactions can undermine your bankruptcy case.  Your bankruptcy attorney can advise you whether to pay your mortgage, car payment, credit cards, or repay a loan from a family member.

Fourth, seek out advice regarding any expensive item that cannot be protected in your bankruptcy.  Rather than lose an item to the trustee, in many cases it can be sold and the proceeds used to pay ordinary expenses.  Discuss this matter with your attorney.

Fifth, stop using credit.  Credit transactions immediately before filing bankruptcy will send up a red flag to both creditors and to the bankruptcy trustee.  These credit purchases may also be found non-dischargeable, or worse, fraudulent.

If you are in a dire financial situation, break the inertia of depression and discuss your options with an experienced bankruptcy attorney.  Early attorney involvement can mean the difference between an easy and difficult bankruptcy case.  Get the advice you need today and begin on your path to a financial fresh start.

Most retirement savings accounts are considered either exempt or not part of the bankruptcy estate and, therefore, are protected from turn-over during Chapter 7 bankruptcy. When an account is considered “not property of the bankruptcy estate” it cannot be taken by the bankruptcy trustee for distribution to creditors.

The U.S. Supreme Court has held that an employee’s interest in an employer pension plan (that qualifies under ERISA) is not property of the bankruptcy estate. The Bankruptcy Code also protects certain retirement funds during a Chapter 7 bankruptcy case. Retirement accounts classified under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code are exempt from collection (up to certain amounts). These sections cover most retirement plans and include pension plans, profit sharing plans, stock bonus plans, employee annuities, IRAs, Roth IRAs, government deferred compensation plans, plans of tax exempt organizations, and certain trusts. The laws generally exempt these accounts up to a million dollars for each debtor.

Other retirement accounts not otherwise exempt are protected if they are necessary for the support of the debtor and the debtor’s dependents. Finally, bankruptcy laws protect certain retirement accounts like 457 deferred compensation plans, 403(b) tax deferred annuities, and health insurance plans regulated by state law.

However, every case is different. This year one bankruptcy court in Texas found that an IRA that was inherited by a debtor in bankruptcy did not receive the same retirement account protection under the bankruptcy laws. In that case the court found that the IRA would only receive retirement account protection in bankruptcy if the debtor was the account holder and not merely a beneficiary.

If you are experiencing debts you cannot pay, speak to an experienced bankruptcy attorney before taking any withdrawals from your retirement account. In many cases your debts can be discharged during bankruptcy and your retirement account fully protected from creditors.

A bankruptcy case is part lawsuit, part financial audit.  The debtor is asking the bankruptcy court to order creditors to accept payments over time, or in some cases to order the discharge of a debt without any payment.  Either way, the debtor is expected to make an accounting of assets, debts, income, and expenses and conclusively prove the debtor’s present inability to repay certain financial obligations. 

The Bankruptcy Code has streamlined the process for presenting the bankruptcy case to the court.  Every individual bankruptcy case filed under Chapters 7, 11, and 13 contains schedules that quickly and efficiently describe the debtor’s financial condition.  In order to complete these schedules for your case, your attorney needs a considerable amount of information and documents.

When you consult a bankruptcy attorney you should be prepared to provide the following documents:

1. Photo ID and social security card;
2. The last six months of pay check stubs.  Sometimes this information can be obtained from your employer;
3. Last two years of income tax returns;
4. Real estate deeds and mortgage paperwork;
5. Vehicle titles along with lease or purchase agreements;
6. All loan paperwork;
7. Any appraisal paperwork for real estate or personal property;
8. Any child support or maintenance (alimony) court order;
9. Any recent credit report (you can obtain a free credit report at https://www.annualcreditreport.com/cra/index.jsp);
10. Information regarding your debts, including bills and collection letters;
11. Any important documents that impacts your income, assets, debts, or expenses.  For instance: a foreclosure notice, or a notice of an upcoming bonus;
12. Investment records;
13. Any life insurance policies with a cash surrender value;
14. Last six months of bank statements;
15. Any tax bill showing assessed value;
16. Proof of insurance on all property secured by a lien; and
17. Any documents pertaining to a legal claim or pending lawsuit, which includes lawsuits on your behalf (e.g. a personal injury or worker’s compensation claim).

Providing these documents at your initial meeting will save you and your attorney valuable time and effort in the bankruptcy case.  This information is vital to your attorney’s ability to assess your financial situation and convey it properly to your creditors and to the bankruptcy court.

Costly thy habit as thy purse can buy,

But not express'd in fancy; rich, not gaudy;

For the apparel oft proclaims the man;

- Polonius to Laertes in Hamlet

Clients commonly want to know how to dress for the meeting of creditors.  This is the first (and usually the only) time you will see the bankruptcy trustee, so it is important to make the right impression.  How you dress may mean the difference between flying under the trustee’s radar and being squarely in the crosshairs.

While the trustee is not a judge, and the meeting is intended to be “informal,” your appearance should convey respect towards this federal process.  Some clients believe that they should dress like they are very poor.  This is not recommended and will make you stand out in stark contrast to the attorneys and creditors who may attend your meeting.  Likewise, some clients over-dress for the meeting.  Wearing a suit or Sunday best attire will also attract unwanted attention and cause you to stand out apart from the other debtors.

The best advise is to dress in a business casual manner.  For men this means long pants and a collared long or short sleeved shirt.  For women long pants or skirt, and a modest top that covers the shoulders.  Jeans, t-shirts, shorts, short skirts, flip-flops, and revealing clothing are not appropriate.  Hair should be neatly trimmed and you should convey an overall clean and neat appearance. 

If you are actually poor, the trustee will recognize this fact from your bankruptcy schedules and will appreciate your respectful appearance.  If you are not poor, dressing like you are homeless will cause the trustee to wonder why you are appearing that way.  This may cause further questioning - which is never a good thing for a debtor!

Leave personal electronics and expensive jewelry at home!  Bankruptcy trustees are always looking for personal items that may be under-valued or not disclosed on the bankruptcy schedules.  Again, leave expensive phones and jewelry at home.

The vast majority of bankruptcy meetings are quick and uneventful.  Make sure you are not causing questions from the trustee by your appearance or by personal items brought to the meeting.  The goal is to have no one notice you or remember you case.  If you have further questions about how to dress for your meeting of creditors, consult with you bankruptcy attorney.

In these tough economic times, many Americans are desperate to make ends meet.  Some are becoming trapped in a destructive cycle of payday loans.  A payday loan is a short term, high interest loan that is secured by a post-dated check.  The company loans the borrower a few hundred dollars that is repaid on the borrower’s next payday.  What is meant to be a small, convenient, and short term loan to pay an immediate expense (an overdue electric bill, for instance), often results in multiple loans and an endless cycle of debt.  Unfortunately, many payday loan borrowers are unable to free themselves from this cycle and are forced to seek bankruptcy protection.

Individuals often worry that the payday loan company may file a criminal “bad check” charge if the payday loan is included in the bankruptcy.  The payday loan company wants you to believe this, and many have their customers sign a certification that the borrower is not contemplating bankruptcy. 

While there are a few exceptions, generally being unable to pay a post-dated check is not a crime.  When you wrote the check both you and the payday loan company knew there were not sufficient funds in your bank account to pay the check.  Because there was no present intent to pay, the post-dated check is not a “bad check,” only a future promise to repay the loan.

Even after your bankruptcy is filed, a post-dated check may be presented for payment.  In some cases (notably in the 6^th and 8^th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code.  However, some courts have said that the funds collected by the payday loan company is an “avoidable transfer” meaning the bankruptcy court could order the company to return the money.

If you have payday loans, consult with an experienced bankruptcy attorney.  It is important to identify any outstanding payday loan before filing bankruptcy.  Most payday loans are discharged without issue; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy.  Discuss the matter with your attorney and protect your legal rights.

There is no qualifying minimum debt limit for an individual bankruptcy.  Debtors who otherwise qualify for Chapter 7 bankruptcy can file with any amount of secured or unsecured debt.  The purpose of a Chapter 7 bankruptcy is to provide the debtor a fresh start without the burden of overwhelming debt.  In some cases this debt may be objectively very small (perhaps only a few thousand dollars), but it be relatively very large to a person on a fixed income from retirement, disability, or otherwise.

In cases where the amount of dischargeable debt is objectively small, both the bankruptcy attorney and the client should take care to consider all of the consequences of filing.  First, bankruptcy is not cheap.  There is a court filing fee, a credit counseling fee, a personal financial management course fee, and, of course, your attorney’s fees.  In some extreme cases some or all of these fees may be waived.  Second, a bankruptcy filing can significantly impair the debtor’s ability to borrow money and obtain credit, at least for the short term.  Finally, non-exempt property may be at risk.  For many poor debtors, these consequences have little, if any, affect.  Many poor debtors seek bankruptcy protection simply to rid themselves of the nuisance of debt collection.

While there is no minimum amount of debt required to file a Chapter 13 bankruptcy, the bankruptcy laws set a ceiling on the amount of secured and unsecured debt a person can have in a Chapter 13 case.  These limits as of April 1, 2010 are $1,081,400 for secured debt and $360,475 for unsecured debt.  The Chapter 13 debt limits adjust every three years.  Cases that exceed these limits are ineligible for Chapter 13 bankruptcy, but may qualify under Chapters 7 or 11.  There is currently some confusion in our courts as to how these debt limits apply in a joint husband and wife Chapter 13 case.  Some courts will separately consider debt that is individual and not joint, effectively increasing the Chapter 13 limits.

An experienced bankruptcy attorney can evaluate your case and discuss any issues surrounding your case.  Whatever the amount of your debt, if you are unable to pay, the federal bankruptcy laws can offer you substantial relief.  Speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help you.

The Bankruptcy Code provides real relief for individuals who have run out of financial options and can protect the debtor from creditor collection action even at the last minute.  By filing an emergency bankruptcy petition a debtor can stop a foreclosure or other legal action dead in its tracks.

When a debtor files a bankruptcy case all creditor collection action must cease immediately and automatically.  The bankruptcy automatic stay stops foreclosures, repossessions, garnishments, the commencement or continuation of nearly all lawsuits, and other creditor collection action dead in its tracks.  Because the effect of the automatic stay takes place immediately upon filing of the bankruptcy petition, it is not uncommon for a debtor to seek bankruptcy protection on the eve of a foreclosure, repossession, or other legal action.  A bankruptcy filing mere minutes before a foreclosure sale or lawsuit will stop the action or void the sale or judgment.

Waiting until the eleventh hour to seek out a bankruptcy attorney can be dangerous for the bankruptcy debtor.  First, the Bankruptcy Code mandates that to be eligible to file a personal bankruptcy the debtor must first complete a session with an approved credit counseling agency.  It is challenging to have an initial meeting with a bankruptcy attorney and complete this counseling on the same day you file bankruptcy.  The bankruptcy courts waive this requirement only under the most extreme emergency situations when credit counseling was not available to the debtor.  While it may seem that your case is an emergency situation, chances are that a waiver request will be denied. 

Second, your bankruptcy attorney must explore your finances with you and will require information that you may not be able to provide at the initial meeting. Your attorney needs information in order to protect your assets with legal exemptions and identify potential problems with property transfers.  Certain financial dealings may unknowingly thrust friends, family members, or business partners into your bankruptcy case.

Filing an emergency bankruptcy petition can stop creditors in their tracks, but it can also present potential problems for the debtor.  If you are considering a bankruptcy filing to protect your property, consult with an experienced attorney as early in the process as possible.  Your bankruptcy attorney can explain how the federal bankruptcy laws can help your family and identify any areas of concern. 

The goal of a Chapter 7 bankruptcy is to relieve the debtor from the burden of debts he cannot afford to pay and provide a fresh financial start.  This goal is achieved through the Chapter 7 bankruptcy discharge.  The Chapter 7 discharge is a court-ordered permanent injunction that prohibits discharged creditors from taking any collection action against the debtor.  While the discharge order is very broad, certain debts are excluded from the discharge order. 

 Below are debts that are commonly included in a Chapter 7 bankruptcy discharge:

·         Credit cards

·         Medical bills

·         Unsecured personal loans

·         Old utility bills

·         Certain income tax debts that are more than three years old

·         Payday loans

Below are debts that are commonly excluded from a Chapter 7 bankruptcy discharge:

·         Recent income tax debts

·         Domestic support obligations (child support and alimony)

·         Student loans

·         Government fines or criminal restitution

·         Any debt resulting from an intentional injury

·         Any debt resulting from a DWI

·         Any debt incurred by fraud

Debts that are excluded from the bankruptcy discharge will survive the bankruptcy and, once the bankruptcy is over, the creditor may take any legal action to collect against the debtor.  For this reason, it may be beneficial for some debtors to file Chapter 13 and use the power of the automatic stay during the pendency of the bankruptcy case to pay a non-dischargeable debt, especially in cases involving income tax debt or a child support arrearage. 

If you have bills you cannot pay, speak to an experienced attorney and discuss your options under the federal bankruptcy laws.  A Chapter 7 bankruptcy discharge can provide peace of mind and start you on a path for financial recovery.

During a Chapter 13 bankruptcy the debtor develops a plan to repay all or part of his debts through installments.  Once the bankruptcy court confirms the plan, the debtor is obligated to make payments over three to five years.  A lot can happen during those years, and sometimes a debtor is unable to pay the plan installment payments.  Fortunately the bankruptcy laws provide the Chapter 13 debtor considerable flexibility when facing changed financial circumstances.

If your inability to pay the plan installments is due to a temporary interruption in pay (lay off, change in employment, etc.) or an unexpected financial emergency (car repairs, medical expenses, etc.), you may be able to obtain a suspension of payments for a couple of months.  A suspension only delays your plan payments, so your plan will be extended to make these payments up in the future.  Since a Chapter 13 plan cannot extend past 60 months, suspending plan payments may only work for certain below-median income cases that are not initially scheduled as 60 month plans.

Modifying your Chapter 13 plan is another option, especially if your financial change is not temporary and you will continue to have difficulty paying your plan installments.  When you propose to modify the terms of your Chapter 13 plan, the bankruptcy court will scrutinize your financial records to determine what you can pay and whether creditors will receive more if your case was converted to Chapter 7 (a liquidation bankruptcy).

Since a Chapter 13 bankruptcy is a voluntary case, you can always dismiss your bankruptcy case.  If your case is dismissed prior to discharge, you will typically not be barred from re-filing and receiving a discharge in the future.  However, there are certain exceptions that may apply, and dismissal is usually a last option.  Consult with your bankruptcy attorney.

If your change of circumstances prevents you from affording any payment to creditors, you may opt for voluntary conversion to Chapter 7.  One benefit of conversion is that any debt incurred since your Chapter 13 filing date can be included in the Chapter 7 case. 

A hardship discharge is an option if your change in circumstances was beyond your control (job loss, illness, disability, etc.) and a Chapter 13 modification is not a solution.  A hardship discharge will end the Chapter 13 case prematurely and eliminate the remaining scheduled payments.  Hardship discharges are only granted for the most extreme cases.

If you find yourself unable to pay your Chapter 13 plan installments, speak with your bankruptcy attorney immediately.  While there are options for dealing with a financial change, delaying action will only make matters worse.  Speak with your attorney and be proactive in dealing with your finances.

When a debtor files a bankruptcy case, notices of the meeting of creditors is sent to all the creditors of the debtor.  The meeting of creditors is also called the trustee’s meeting and the 341 meeting (after section 341 of the bankruptcy code which compels the meeting).  This notice informs the creditor, among other things, that the debtor has filed a bankruptcy; of contact information for the debtor’s attorney and the trustee assigned to the case; and of the date, time and place of the meeting of creditors.

While notices are sent to all of your creditors the odds are that no creditor will appear at your meeting of creditors.  If a creditor does show up, it is almost always a local creditor, like a local bank seeking information regarding a secured loan, or individual creditor.  It is rare to see a representative of a national creditor at a meeting of creditors. 

The main reason that creditors do not appear at the meeting is that creditors are not allowed much time to ask questions of the debtor.  What the creditor can gain from the meeting does not justify the expense of sending a representative.  The bankruptcy trustee conducts a busy docket of bankruptcy debtors and is required to question each debtor.  Consequently, the trustee will only allow a few minutes for any creditor questions, and will not permit any “fishing expeditions” from a creditor.  A creditor who needs more time for questioning the debtor can schedule a private examination called a “section 2004 exam.”  Section 2004 exams are extremely rare.

Most individual creditors who appear at a meeting of creditors do so because they do not understand the process.  Individual creditors usually believe that their attendance is important to maintain their claim against the debtor.  The questions are generally inane, like: “Are you going to pay me?” or “You promised to pay me, right?”  The trustee cannot give legal advice to creditors, so without an attorney the individual creditor is usually left floundering.

When a creditor is represented by an attorney, the questions generally concern the debtor’s schedules of assets, liabilities, income, and expenses.  These questions may seek to uncover inconsistencies in the schedules.  Questions that go beyond the schedules may be objected to by your attorney.  The trustee will not permit the creditor to engage in a deposition of the debtor with the trustee acting as judge.

If you expect a creditor to attend your meeting of creditors, discuss the matter with your attorney.  While the ordinary bankruptcy case will not have creditors in attendance at the meeting, every case is unique.  Discussing your case with your attorney is the first step in being prepared for creditors at the meeting.

When a debtor dies during a pending bankruptcy case, the case may or may not be dismissed depending on a few factors.  The first factor is the bankruptcy chapter that controls the case.  For a Chapter 7 case, the death of the debtor does not terminate the bankruptcy.  For an individual bankruptcy case filed under Chapters 11, 12, or 13, the death of the debtor will affect the bankruptcy case, but does not necessarily terminate it.

During a Chapter 7 bankruptcy the court will continue the bankruptcy proceedings despite the death of the debtor.  The reasoning is that all of the debtor’s assets, exemptions, and debts are determined at the time the case was filed, and the trustee is now in charge of liquidating any non-exempt assets.  The participation of a debtor is not necessary.  Bankruptcy Rule 1016 directs that “the estate shall be administered and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred.”

Death of the debtor during a Chapter 11, 12 or 13 case poses different complications.  Bankruptcy Rule 1016 states that “the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death or incompetency had not occurred.”  While dismissal of the bankruptcy is common in Chapter 11, 12, or 13 cases, the trustee may seek to continue the case per Rule 1016, the case could be converted to a Chapter 7, or the executor or administrator of the decedent’s estate may petition the bankruptcy court for a hardship discharge.

Since the bankruptcy discharge will only prohibit collection against the debtor personally, the question becomes, how will the debtor’s discharge affect the heirs to the estate?  In most cases, an unsecured debt that is not a joint obligation will not pass to the decedent’s heirs.  However, a creditor could obtain a judgment against the deceased debtor’s estate and attempt to collect from any available property.  Consequently, the discharge is important to provide peace of mind and avoid any potential debt litigation or collection action.

The federal bankruptcy laws are very broad in scope and provide for benefits even under unusual circumstances, such as the death of a bankruptcy debtor.  If you are struggling with debt you cannot afford to pay, speak with an experienced attorney and discover how the bankruptcy laws can help.

While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file.  When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case.  The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative. 

Filing separately can have several advantages to a husband and wife who have separate property and debts.  It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property.  Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court. 

While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor.  In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse.  In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy. 

Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor.  The discharge does not prevent collection on any joint debt from the non-filing spouse.  Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt.  If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney. 

Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest.  Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case. 

The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse.  Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy.  If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options.  The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.