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

Some people think that you lose everything when you file bankruptcy. That is simply false. In fact, you do not lose anything if you file a repayment plan Chapter 13 bankruptcy. During Chapter 13 you pay your unsecured creditors (e.g. medical bills and credit cards) what you are able over three to five years, and the remaining balance is discharged.

A Chapter 7 bankruptcy is a liquidation bankruptcy and your property may be at risk to be takenand sold to pay creditors. However, the bankruptcy laws provide three ways to protect your property during bankruptcy: (1) when the property is not part of the bankruptcy estate; (2) when there is no equity in the property; or (3) when the property is exempt under state or federal law.

Some property cannot be taken from you because you do not own it. For instance, if you drive your mother’s car, it cannot be taken and sold during your bankruptcy. Property that is owned by another person and is in your possession must be disclosed in your bankruptcy schedules.

Secured property, like a home or vehicle, that is “upside-down” in value (not worth more than what is owed) cannot be taken during a Chapter 7 bankruptcy. There is nothing left after paying the secured creditor. For instance, if you owe $10,000 on your car, and it is worth $8,000, your car cannot be taken and sold during the bankruptcy.

Typical bankruptcy debtors own clothing, furniture, household goods, jewelry, and other personal items. While individually these items are not worth much, collectively they may be worth thousands of dollars. State and/or federal laws allow bankruptcy debtors to keep items reasonably necessary for day-to-day living through the use of exemptions. However, many exemptions are capped by a dollar amount to prevent abuse. For instance, while a $1,000 family piano may be exempt under state law, a $100,000 Steinway grand piano is not. Modest equity in vehicles, clothing, reasonable jewelry, retirement accounts, some savings, and even home equity are commonly exempt and protected during bankruptcy.

If you need the benefits of a bankruptcy discharge, but are worried that you will lose everything you own, speak with an experienced bankruptcy attorney and get the facts. Over 90% of Chapter 7 bankruptcy debtors keep everything, so call today and discuss your situation.
 

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Your bankruptcy discharge prohibits certain creditors from collecting from you personally after your bankruptcy case. So what happens when a creditor contacts you after your discharge? The answer depends on the situation and first involves answering three questions: (1) “Was the debt discharged in bankruptcy?” (2) “Is the collection directed at the discharged debtor?” and (3) Was the creditor notified of the discharge?”

Discharged debts are no longer legally enforceable against the debtor. The discharge injunction is a court order from a federal bankruptcy judge prohibiting creditors from filing lawsuits, sending collection notices, or making collection phone calls. Substantial sanctions may be imposed on a creditor that violates this order. However, some debts are not discharged. It is important to discuss your discharge with your bankruptcy attorney and understand which debts are included in the discharge and which are not. For instance, taxes, student loans, and family support obligations  may not be subject to the discharge. In other cases a debt may be excepted from discharge by the court.

Your discharge only protects you from collection efforts. It does not protect a co-debtor who did not also file bankruptcy, and, as a general rule, it does not protect property that is subject to a lien. Therefore, it is important to understand how your property is affected by the bankruptcy discharge and whether a creditor can seize, repossess, or foreclose on the property after your bankruptcy.

As a practical matter, if a collector does not know about your bankruptcy discharge, the bankruptcy court is not likely to impose sanctions against it. Often a collection attempt can be resolved by informing the collector of the discharge and either providing a copy of the discharge or referring the collector to your attorney. Buying and selling debt is big business, and debts often get passed from collector to collector – even uncollectible debts like those discharged in bankruptcy!

Your bankruptcy discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector. Don’t let creditor harassment disturb your peace of mind. If the answer to the above three questions is “Yes, Yes, Yes,” the collector has violated the bankruptcy court’s discharge order. Contact your attorney and discuss the best course of action to stop the harassment.
 

Fears & Nachawati Bankruptcy Law Office

4925 Greenville Ave Suite 715, Dallas, TX 75206 (214) 890-0711
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Many corporations that file Chapter 11 bankruptcy will present a “prepackaged” bankruptcy case to the bankruptcy court.  A prepackaged bankruptcy is a cooperative effort between the company, its shareholders and its creditors to develop a plan to restructure the company that will take effect once the bankruptcy case is filed.  The idea is to shorten and simplify the bankruptcy process and save everyone concerned money and time.

Can a prepackaged bankruptcy work for you?

Most often unsecured creditors are discharged at the end of a Chapter 7 or 13 bankruptcy cases, so there is usually no benefit to working with an unsecured creditor prior to bankruptcy.  However, there may be an incentive to coordinate with a secured creditor before the bankruptcy is filed.  This may be especially true when dealing with smaller companies, local banks, or individual lien holders who may be apt to misinterpret your intention.  In other cases, there may be a large benefit to be gained by coordinating with the creditor prior to bankruptcy.  For instance, some homeowners have been able to modify a first mortgage to bring payments current, and then file bankruptcy to strip off a second mortgage.  The result is a lower plan payment and/or a shorter plan term.

As a general rule you should not volunteer information to your creditors as it may cause otherwise avoidable problems.  Some lenders may accelerate the collection processes if they believe a bankruptcy is imminent, especially in the case of delinquent auto payments.  Once you have filed bankruptcy, the creditor must obtain permission from the bankruptcy court to repossess, foreclose or collect.

If you are struggling with bills you cannot pay, discuss your situation with an experienced bankruptcy attorney.  Your attorney can guide you through the pre-bankruptcy process and advise you on the best course of action to achieve the most benefit.  Every situation is different, so consult your attorney.

Fears & Nachawati Bankruptcy Law Offices

4925 Greenville Ave Suite 715, Dallas, TX 75206 (214) 890-0711
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Chapter 7 is an erase-your-debts-start-fresh bankruptcy.  A debtor in Chapter 7 is unable to pay his creditors over time, so he offers to liquidate his assets. The basic idea is that all of the debtor's property is taken and sold to pay creditors.  Any debt that cannot be paid from the debtor's property is legally discharged.  The debtor has paid all he can.

However, it's not practical to take everything a person owns.  Consequently the federal bankruptcy laws balance the rights of the creditors to receive payment against the need of the debtor to remain able to provide food, clothing, and shelter for his family.  The bankruptcy laws allow the debtor to keep reasonable and modest amounts of furniture, clothing, jewelry, and, in most cases, a home and car.

Keeping a vehicle after filing Chapter 7 depends on three questions.  First, "Is the vehicle worth more than you owe?"  Vehicle equity must be protected with exemptions.  The bankruptcy laws allow a Chapter 7 debtor to keep a modest amount of equity in a vehicle, and other exemptions may be available to protect larger amounts of equity.  In basic terms, if you have a new Cadillac, and its paid for (meaning a large amount of equity), the car will be taken and sold to pay creditors.

Second, "Is the vehicle worth less than you owe?"  In some cases the debtor’s vehicle loan is a great deal more than the vehicle is worth.  In those cases the bankruptcy laws allow the debtor to pay the amount the vehicle is worth and discharge the difference.  This process is called "redemption" and the fair market value of the vehicle must be paid to the creditor in one lump sum.  Additional financing is often required to obtain the lump sum payment, although the money can come from any source.

Since a loan secured by a vehicle must be paid or the vehicle returned, the final question is, "Are you able to continue making payments?"  If you are unable or unwilling to make the monthly payment, the vehicle may be surrendered back to the creditor, and you owe nothing.  If you want to continue making payments on the auto loan, you should discuss a reaffirmation agreement with your attorney.  Generally, a reaffirmation agreement is filed with the bankruptcy court and continues the loan obligations of the lender and borrower.

If you are interested in keeping your vehicle after a Chapter 7 bankruptcy case, speak to your bankruptcy attorney and discuss your options of surrender, reaffirmation, or redemption.  Your attorney can explain the benefits of each process and map out a plan to keep your vehicle before you ever file your case.

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Realizing that you can no longer pay for your home means that you have difficult decisions to make.  While modification and even lien stripping in bankruptcy may be options for some, if you truly cannot afford to keep your home, you must decide on the best way to walk away.

Do Nothing

If you do not pay your mortgage payment, the lien holder will foreclose on your property.  Although not paying your mortgage payment and the resulting foreclosure will significantly harm your credit rating, the home finance industry is presently in such turmoil that it may be months to more than a year before the lien holder forecloses on your property.  During this time you live rent free and can save for the future.  Note that if you do not maintain insurance and do not pay real estate taxes, the foreclosure timeline will likely accelerate.  Also note that under the Mortgage Forgiveness Debt Relief Act, which extends through 2012, income normally attributable by the IRS in connection with a foreclosure is not taxable, although you may be liable for a deficiency balance when the home is sold for less than you owe.  A foreclosure is listed as a public record on your credit report and the late payments are also reported.

Deed in Lieu of Foreclosure

Some financial “experts” have advised distressed homeowners to “just walk away.”  Walking away from a home is easier said than done, since you still own the home and are legally responsible for the property in a variety of ways.  One way to legally “walk away” is to transfer title of the property via a Deed in Lieu of Foreclosure.  Now the lien holder owns the property, which may sound pretty good until the property is sold for less than you owe, triggering a deficiency balance.  You may also end up owing taxes on the difference. 

Short Sale

A Short Sale is a sale for less than what is owed by the seller.  A lender will sometimes agree to allow the property to be sold for less than you owe if it is clear that you are unable to continue paying for the property and the home is upside-down.  In many cases the Short Sale deficiency is forgiven by the lien holder, but that will depend on the lender and on state law.  A Short Sale is identified as a settlement on your credit report and will hurt your score, although not as much as foreclosure or bankruptcy.

Bankruptcy

A bankruptcy is a legal discharge of your debt.  It is the cleanest and most powerful option to “walk away” from the home with no contract or tax obligation.  A bankruptcy uses the power of federal law to stop further negative credit reporting and collection attempts.  In the end your credit report identifies the loan as “Discharged in Bankruptcy” with a “Zero Balance.”  The bankruptcy record will stay on your credit report for up to ten years, but by surrendering the property you will avoid a foreclosure on your record.

If you need to walk away from your home and are weighing your options, consult with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can help.  Bankruptcy can provide you time to move without foreclosure and without owing money in connection with the home.

Fears & Nachawati Bankruptcy Law Offices

4925 Greenville Ave Suite 715, Dallas, TX 75206 (214) 890-0711
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Once you have received a Chapter 7 discharge and your bankruptcy case has closed, the financial recovery can begin. Good financial habits should become part of your daily life, like living within a budget, paying cash instead of credit for purchases, and contributing to your future with retirement funds and cash savings. But what happens if you need a car loan shortly after completing a Chapter 7 bankruptcy case?

Obtaining an auto loan after a Chapter 7 bankruptcy requires some work and patience. A good first step is to contact the finance manager at a large auto dealer in your community. Large dealerships have special relationships with local banks and credit unions and are more likely to find you financing. You will have a better chance at finding financing through a large auto dealer rather than a small auto dealer or even a local bank.

Primarily, the lender wants assurances that the loan will be repaid. The easy answer is to obtain a co-signor or guarantor with good credit. If you fail to pay the auto loan, the loan company can try to collect from you, your co-signor, or both. In some cases, an auto finance company will not approve a loan which includes a borrower with a recent bankruptcy – despite the assurances of a co-signor. That is not the case for every lender, so do not get discouraged if you are denied.

If you are unable to obtain a co-signor, in many cases a large down-payment may persuade a lender to take a chance with you. Cash on the table also means that the dealership has a greater incentive to make the deal happen. Ordinarily a 20% down payment is a minimum amount to get this type of result.

Large dealerships may also provide financing or other in-house opportunities for buyers with damaged credit. Some lenders may offer high interest rate loan programs that will step down the interest rate with timely payments. Large dealers also have access to promotions and special financing from the manufacturer.

Be wise and careful when using credit! Because the large dealership is under a great incentive to sell new vehicles, recently discharged debtors are often offered new vehicle financing. This may mean buying a car you don’t want at a price you can’t afford. Be careful in this situation and do not be blinded by the offer of credit and the thought of a new car.

 "If I had that kind of money, I wouldn't have to file bankruptcy!"

All bankruptcy attorneys hear that frustrated statement from time to time. Some individuals wait until they are dead broke before contacting a bankruptcy attorney for help. By that time there is little or no money to pay bills, let alone court fees, credit counseling fees, and attorney fees. The article today is about helpful advice on how to get the money for your attorney without creating more difficulty for yourself.

One popular choice for many debtors is a loan from a family member. If you borrow money from a relative to pay the bankruptcy fees, you must identify that relative as a creditor on your bankruptcy schedules. In most cases this debt will be discharged along with other unsecured creditors. Despite the bankruptcy discharge, you are not prohibited from repaying the debt if you feel a moral obligation to do so.

On the other hand, if your relative gives you the money as a gift, it does not need to be disclosed. However, the money must be included as income on the Means Test. In only a small number of cases would this situation cause problem with the Means Test.

Selling property is another option to pay the bankruptcy fees. There is nothing wrong with selling property for fair market value prior to a bankruptcy. Selling a non-exempt asset (one that you may lose to the trustee) makes good financial sense. You must disclose the sale in your bankruptcy schedules and account for the proceeds.

Some debtors cash out investments or take money from a retirement account. These choices may carry tax consequences and are also normally counted as income on the Means Test. Other debtors use income tax refund money. It makes sense to use non exempt cash money to pay bankruptcy fees rather than see it lost to the bankruptcy trustee.

Some clients are able to save money from their paychecks after they decide to file bankruptcy. Generally, once you decide to file bankruptcy, you should stop paying credit cards and other unsecured, dischargeable debts. Secured debts that will survive the bankruptcy should be paid along with utility bills and non-dischargeable debts.

Using a credit card to pay your attorney can create difficulties in your bankruptcy case. Credit card charges within 90 days of the bankruptcy filing are presumptively nondischargeable. Likewise payday loans taken immediately before the bankruptcy will have to be repaid.

As you can see, an experienced bankruptcy attorney can offer many suggestions on how to raise the money to pay the bankruptcy fees. Discuss your financial situation before you sell, borrow, or charge anything. Good advice from a knowledgeable source can save you from headaches down the road.

Recently the United States Supreme Court resolved an ambiguity in the bankruptcy law that had the federal circuits split. The case, Ransom v. FIA Card Services, decided whether an above-median Chapter 13 debtor can take a $496 vehicle ownership deduction on the Bankruptcy Means Test when the debtor owns the vehicle free and clear. The Means Test calculates projected disposable income and presumptively determines the amount a Chapter 13 debtor must repay to unsecured creditors.

Some federal courts previously allowed the debtor to deduct this ownership expense even when there is no lien or payment on the vehicle. The Supreme Court's ruling reverses this practice and resolves a split in the federal circuits.

This decision places some debtors in a difficult dilemma: whether to encumber their vehicle with a lien and loan payment prior to bankruptcy, or pay unsecured creditors over the course of the bankruptcy. For instance, a debtor who fails to qualify for the $496/mo vehicle ownership deduction may result in a payment of an extra $29,760 over a five year repayment plan. In other cases losing the vehicle ownership deduction may mean the difference between being eligible to file Chapter 7 and being forced to file Chapter 13.

If you own a vehicle outright and are experiencing financial trouble, speak with an experienced bankruptcy attorney and discuss your options. Do not get a title loan prior to filing bankruptcy without consulting your attorney as doing so may result in a bad faith objection from the bankruptcy trustee. Your attorney can explain your options and advise you as to your best course of action.

Calendar year 2010 saw personal bankruptcy filing rates rise to the highest level in five years, according to information collected by the American Bankruptcy Institute, an association of attorneys and other bankruptcy professionals. There were 1,530,078 personal bankruptcy cases filed during 2010, a 9% increase from 2009. While the total numbers of bankruptcy filings continue to climb, the 9% increase from 2009 is actually the lowest rate increase in the last four years.

Nationwide, 1 out of 150 people filed bankruptcy in 2010. Nevada, with its unemployment rate at 14%, has the highest per capital filing rate averaging 1 bankruptcy filer out of every 67 residents. After Nevada, Georgia and Tennessee have the highest filing rates per capita, about 50% more than the national average. Alaska, South Carolina, Texas, North Dakota, South Dakota, and Vermont have the lowest filing rates.

A few states saw sharp increases in the number of personal bankruptcy filings. Hawaii experienced 29% more filings in 2010 over the previous year. California, Utah, and Arizona each had increases of 24%. The net increase in those states (about 62,000) was greater than the net increase in all other 46 states and the District of Columbia combined (around 60,000). The data indicates that while the southeastern states are filing bankruptcy cases at a slower pace, the southwest is experiencing further economic distress evidenced by its increased bankruptcy filing rates.

The raw bankruptcy data also shows a strong preference for Chapter 7 bankruptcy cases. Consumers filed Chapter 13 cases only 28% of the time during 2010. Information provided by the National Bankruptcy Research Center suggests that a higher percentage of Chapter 13 filings appears closely tied to high rates of auto loan delinquencies. Southeastern states have the highest percentage of auto loan delinquencies and corresponding high percentages of Chapter 13 filings.

If you are in financial trouble and need bankruptcy relief, you are not alone! The federal bankruptcy laws can help protect your income, assets, and retirement accounts, while stopping lawsuits, garnishments and repossessions. Speak with an experienced bankruptcy attorney and begin your path to a Fresh Start today!

For over a year some national banks have been offering "checking advances" to their cash-strapped customers.  A Checking advance is a short term loan between $100 and $500 which must be repaid within 30 days.  Typically the bank will take all direct deposits made into the borrower's bank account until the loan is paid.

Critics have described this practice as a thinly disguised “payday loan,” since the loan is intended to provide cash to the borrower until his or her next payday and direct deposit.  With fees of 20% per $20.00 borrowed, the effective annual percentage rate is 130% when the loan is repaid on the thirtieth day.  U.S. Bank, Fifth Third Bank and Wells Fargo are three banks that offer this service to account holders.

The checking advance repayment terms can have unexpected consequences for the borrower.  For instance, taking a checking advance two days before your direct deposit payday means that you have paid the bank between $10 and $50 for a two day loan.  The loan period is simply until the next direct deposit, or the expiration of thirty days.  At the end of thirty days the bank will withdraw the funds from your account, usually without notice.  This withdrawal may cause an overdraft of your account and additional fees.  Unlike payday loans, checking advance customers are unable to control and post-pone payment of the loan until the end of the loan period.  Some banking customers find themselves forced to take a series of advances until they are able to afford to repay the loan.

Bankruptcy can discharge checking advance loans as well as payday loans.  These short term loans can cause significant damage to a families’ budget and cost hundreds of dollars in fees.  It is usually advisable for clients who wish to discharge a bank’s checking advance to open up another account at a different bank.  This will avoid any complications if the bank attempts to take money out of your account to repay the loan.

If you need to get out from under checking advance loans, payday loans, or other high interest loans, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can provide you with relief.  Your bankruptcy attorney can explain the best way to discharge these loans and set you on a course for a better financial future.

There are many situations when a person needs credit during an open bankruptcy case.  Refinancing a home mortgage, redeeming an automobile, or simply applying for a new credit card are circumstances when a debtor needs to obtain credit during bankruptcy.  Fortunately, the bankruptcy process allows the debtor to obtain the credit he or she needs while concurrently pursuing a bankruptcy discharge.

When a debtor applies for credit during an open bankruptcy case, the application not only affects the debtor and the creditor, but also concerns the trustee and the bankruptcy court judge.  The creditor is concerned that the bankruptcy will interfere with the extension of credit, and the bankruptcy trustee and judge are concerned how the extension of credit will affect the bankruptcy case.

For Chapter 7 cases, the reach of the bankruptcy court is limited to those assets that you owned and debts that you owed on the date that you filed bankruptcy.  The judge does not have jurisdiction on post-petition matters.  While the bankruptcy court does have jurisdiction to approve or reject a reaffirmation agreement for a pre-petition debt, the court cannot forbid a post- petition extension of credit.

For Chapter 13 cases, the court has continuing jurisdiction over your finances during the bankruptcy case.  A Chapter 13 debtor is required to commit all of his or her disposable income to repay creditors.  Any new credit must be approved by the bankruptcy judge since a new payment obligation may impact the Chapter 13 repayment plan. 

Automobile credit is often a concern for bankruptcy debtors.  Obtaining a vehicle during Chapter 13 bankruptcy will generally require that the debtor show that the vehicle purchase is “necessary to the completion of the Chapter 13 bankruptcy plan.”  In plain language, you need the car to get to work to make the money to pay the creditors in the plan.  When a vehicle purchase is reasonable and necessary, the courts are generally willing to approve the purchase on credit.

If you have filed or are considering filing bankruptcy and are in need of credit, speak with an experienced bankruptcy attorney and discuss your situation.  Your attorney can offer advice and recommendations for obtaining both a bankruptcy discharge and the credit you need.

Any bankruptcy analysis includes an investigation into the debtor’s individual tax status.  The date that you file bankruptcy can have an important impact on how your tax refund or tax debt is affected.

When a Chapter 13 debtor expects to owe taxes

If you expect to owe taxes for tax year 2010, now may be a good time to file your bankruptcy.  A tax debt is not owed until the end of the tax year.  If your tax year ended on December 31, 2010, your 2011 Chapter 13 bankruptcy case will include the 2010 tax debt as a pre-petition debt.

When a Chapter 7 debtor expects to owe taxes

A recent tax debt is non-dischargeable – which means that your bankruptcy case will not eliminate the tax debt.  If you owe taxes, speak with your attorney regarding your best strategy for dealing with this debt.  You will have some temporary relief during the bankruptcy as the IRS is prohibited from collecting.  After your bankruptcy case ends, there are IRS programs that allow repayment over time or even forgiveness of the debt.

Older tax debts may be dischargeable under certain circumstances and should be discussed with an experienced bankruptcy attorney. 

When a Chapter 13 or 7 debtor expects to receive an income tax refund

Speak with your bankruptcy attorney about your refund.  The general rule is, before you file bankruptcy: file your taxes ASAP, receive the refund ASAP, and spend the money appropriately ASAP.  Your bankruptcy attorney can instruct you as to how much cash money you can have at the time of your filing and what bills or debts you are allowed to pay from your tax refund.

Every year debtors spend their refund money without first consulting with an attorney and every year it creates problems.  In some cases paying a debt may delay your bankruptcy filing.  In other cases a payment may cause a turn-over issue.  These are problems that can be easily avoided if you consult with an attorney before spending your tax refund.

If you need to file Chapter 7 bankruptcy and cannot wait until you receive your income tax refund, there may be options to keep your refund.  You may be able to use personal exemptions to protect your anticipated refund.  Your attorney can also discuss other legal options for avoiding turn-over of the refund, including applying the amount to your future taxes.  See In re Graves, No. 08-1462 (10th Cir.2010.

In many respects this is the best time of year to speak with a bankruptcy attorney.  Your attorney is in the best position right now to discuss your options for filing bankruptcy and avoid any unnecessary tax problems.