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 unscrupulous non-attorneys take advantage of the poorest and most vulnerable by offering bankruptcy petition preparation services at a discount rate. Maybe you have seen their ads in free community newspapers. These services offer to prepare your bankruptcy petition and avoid the “high cost” of an attorney.

Sounds great, right?
Petition preparers are restricted by federal law to the level of a typing service. Preparers cannot represent you in bankruptcy court and are expressly forbidden from providing any legal advice regarding your bankruptcy case. That means a petition preparer cannot: discuss the benefits of the different bankruptcy chapters and how they apply to your case; explain certain legal exemption rights you may be entitled to in order to protect your property; or tell you what debts or assets must be included or may be omitted from your bankruptcy petition.
When you hire a petition preparer you must file your bankruptcy case yourself. Some petition preparers may try to entice you with promises of waiving the bankruptcy filing fee. The truth is that if you were able to pay a petition preparer, the court is unlikely to waive the filing fee.
While there are no special educational requirements for petition preparers, the federal law requires that they:
• Make a written disclosure of services and fees
• Charge a reasonable fee for services, usually limited by local bankruptcy law
• Not collect or process court filing fees
• File a written disclosure with the bankruptcy court regarding fees and services, including name and tax identification number
While the federal law allows preparers to type petitions, bankruptcy professionals, including judges and attorneys, despise this activity. A main objective of the bankruptcy process is to provide a deserving debtor with relief from crushing debt. In many cases, petition preparers only make matters worse. Debtors need legal counsel to receive the protections and benefits of the bankruptcy laws. Petition preparers are not attorneys and any legal advice they provide, while illegal, may also be devastatingly wrong. Many debtors relying on the assistance of petition preparers have had their cases dismissed, have lost property to creditors, or have experienced other unnecessary complication in their cases.
If you are hurting financially, discuss your situation with a bankruptcy attorney at a free consultation. Your attorney can advise you on your legal options and discuss how you can afford the different fees in bankruptcy.

When a bankruptcy case is filed the individual debtor announces his or her intent to proceed under Chapter 7, 11, or 13 of the federal Bankruptcy Code. Each bankruptcy chapter has its own advantages and challenges. During some cases, the debtor’s circumstances may change and another bankruptcy chapter becomes more beneficial. In these cases the debtor may be able to convert the bankruptcy case to a different chapter.

Converting a bankruptcy case to another chapter is a very simple process. There is a filing fee and a notice that must be filed with the bankruptcy court. The debtor is required to update the bankruptcy schedules to include any changes or new information. Conversion can be beneficial to the debtor in that any debt incurred after the original bankruptcy filing date can be included in the converted case.

A converted case retains its original case number (so there are not two bankruptcy cases on your record). A different trustee is assigned to your bankruptcy case, and you are required to attend a (second) meeting of creditors. If you are converting from a Chapter 11 or 13 case to a Chapter 7, you may be entitled to a refund of plan payments, if the Chapter 13 trustee is holding money.

A case may be involuntarily converted when a Chapter 7 debtor is found to be ineligible. When the debtor has sufficient disposable income to make payments on debt through a Chapter 13 case, the trustee may ask the court to order the case dismissed or converted to a Chapter 13.

If you believe that you need to convert your case to a different bankruptcy chapter, consult with your experience attorney regarding the benefits of conversion. In many cases there are options to continue your case under its current chapter. In other cases conversion may be the best option.
 

 Every time you use your debit card to pay for purchases, the merchant must pay a "swipe fee" to the card issuing bank. The old formula averaged about 1.14 percent of the purchase price, and netted U.S. banks billions in fees. As of October 1, 2011, these fees have been dramatically cut by a new law contained in the Dodd-Frank Act. Now swipe fees are capped five percent of the transaction and a maximum of 21 cents. Some analysts predict that this will cost the biggest U.S. banks annual revenue of $8 billion.

So when was the last time big banks lost money without a fight?

Bloomberg and other news agencies are reporting that Bank of America is planning a $5 monthly fee for debit card use. Instead of getting their money from merchants, Bank of America will get it from its customers. The fee will apply any month in which the debit card is used for a purchase, and will not apply to withdrawals from a cash machine. The fee will be assessed whether the customer makes one purchase or ten. In other words, that $10 purchase could now cost you $15.

The $5 monthly usage charge would take effect early next year, and customers would be notified at least 30 days in advance of the change, said Betty Reiss, a spokeswoman for Bank of America. "If they don't use the debit card during the month to make a purchase, they won't incur the fee," Reiss said.

Bloomberg reports that Wells Fargo is also testing a $3 monthly debit card fee in some markets. "We will continue to see more debit card fees in the months ahead," said Greg McBride, senior financial analyst at Bankrate.com.

Predictably, the Bank of America debit card fee will not apply to wealthy accountholders with premium accounts. There are many bank fees that are directed at lower income families, including monthly or annual checking account fees, overdraft fees, overdrawn account penalties, and checking account advance fees. These fees account for billions each year in revenue and take money from the pockets of lower income people.

If you are struggling with debt and have too much month left at the end of your money, speak with an experienced bankruptcy attorney and discuss your options. Don’t continue to have your income drained by bank fees! Take control over your finances and build a better financial future today.

 In “the old days” (before 2005) a bankruptcy debtor with a mortgage problem could file a Chapter 7 bankruptcy and discharge all of his unsecured debts, then immediately turn around and file a Chapter 13 to deal with real estate debt. Bankruptcy attorneys referred to this as a “Chapter 20” (Chapter 7 plus Chapter 13). The 2005 amendments to the Bankruptcy Code sought to kill this practice; however one recent case may bring Chapter 20 back to life.

The Bankruptcy Appellate Panel for the federal Eighth Circuit Court of Appeals has ruled in favor of a debtor who filed a Chapter 13 bankruptcy to strip away a wholly unsecured second mortgage, even though he was not eligible for a discharge in the Chapter 13 case. In this case, In re Fisette, No. 11-6012 (8th Cir. BAP Aug. 29, 2011), the debtor filed his Chapter 13 case soon after receiving a discharge in a previous Chapter 7 case. The Bankruptcy Code requires that a debtor wait six years after a Chapter 7 case to be eligible for a Chapter 13 discharge, so the debtor was not eligible for a Chapter 13 discharge. After filing Chapter 7, Fisette continued to make payments on his home without formally reaffirming his personal obligation on any of his three mortgages. By 2010 he was behind on his mortgage payments. Since the total amount owed on his first mortgage was more that his house was worth, Fisette decided to ask the bankruptcy court to strip away the second and third mortgages.

The Eighth Circuit BAP allowed Fisette to strip away the junior mortgages. Since Fisette had previously been discharged of his personal obligation on the junior mortgages during his Chapter 7 case, the bank had no recourse against Fisette or his property. This is the first time a federal appellate court has allowed lien stripping in a “Chapter 20” case since 2005.

Bankruptcy law can be extremely complex and is constantly changing. If you need the help and protection of the federal bankruptcy courts, get assistance from an experienced bankruptcy attorney. Your attorney can explain your rights and your options, and help you decide on the right course for you and your family.

Equity is a very important term when discussing your personal assets. Generally, equity is the difference between the market value of an item and the amount of the claims against it. For instance, if your car is worth $5,000, and your auto loan balance is $3,000, then you have $2,000 in vehicle equity. If you own the vehicle jointly with your mother, you have $1,000 in vehicle equity.

Equity is a common issue during bankruptcy, since the debtor is allowed to keep certain modest possessions. Once the amount of equity in an item of property is determined, the debtor can apply legal exemptions against the equity to protect the asset from the bankruptcy trustee and creditors.

When calculating equity, it is vital to not over-value the asset. For some items there are resources, such as the NADA Price Guide for automobiles. For other items you may need to do some investigation. Ebay is a good resource for collectibles. For real estate it may be necessary to speak to a realtor or conduct an appraisal to discover the market value.

Many bankruptcy debtors over-value furniture and jewelry. Most furniture and jewelry immediately depreciates a great deal after purchase. A used sofa may have cost you $700 at the furniture store, but the market value is only what you would get from a yard sale or through Craigslist. Probably not anywhere near what you originally paid.

After determining the market value, the second step in figuring equity is to subtract any claims against the property. The most common type of claim is called a purchase money security interest (PMSI), a fancy term that means you used a lender’s money to buy the item and used the item as security for the loan. This is usually the case with a car loan or a home mortgage, but many other credit purchases could be considered PMSI. A non purchase money security interest (NPMSI) is a loan secured by property you already own. Some finance companies use furniture or other property owned by the borrower to secure personal loans. Finally, a tax lien against real estate or even personal property may affect your equity, as can some legal judgments.

Once your equity is calculated, the next step is to apply legal exemptions to the equity. Most debtors are able to protect all of their equity using legal exemptions. If there is unprotected equity, the trustee must make a decision whether the amount of equity available is worth his time and will actually benefit creditors. Statistically bankruptcy trustees only take property or assets from debtors in about one out of every twenty five Chapter 7 cases.

It is very important to accurately calculate the amount of equity in your property. Discuss all of your property, its market value, and your legal claims with your attorney. Your attorney can then advise you on the best way to protect the property from creditors.
 

Wor*ry*wart - noun: a person who is inclined to worry unduly.

Some clients are content to turn over their financial problems to a bankruptcy attorney and experience immediate peace of mind. Others cannot stop worrying until the case is discharged and closed. Everyone is different. Fortunately, most bankruptcy cases are very predictable. Before the case is filed your bankruptcy attorney should explain the process and prepare you for certain events that will occur.

Your attorney is in constant contact with the bankruptcy court and receives electronic notices concerning your case. In most cases, a bankruptcy debtor represented by an attorney will not receive correspondence through the mail from creditors, the bankruptcy trustee, or from the bankruptcy court. Instead, your attorney is required to keep you informed concerning the status of your bankruptcy case, and you will be contacted concerning important changes to your bankruptcy case. Notices such as the date of your Meeting of Creditors, or your discharge, will be sent to you along with other important information.

For the worrywart, the federal bankruptcy courts provide access to case information via the Public Access to Court Electronic Records, or PACER system. Through PACER, anyone can obtain information about a bankruptcy proceeding, including access to all documents and docket entries associated with the case. However, this information comes at a price. PACER charges $.08 per page. Some people have unknowingly racked up a substantial bill by constantly checking PACER for changes to a bankruptcy case.

If you choose to sign up for a PACER account to monitor your case, the general rule of thumb is to check your case only about once a week because bankruptcy cases generally move in a slow and orderly pace. Additionally, avoid clicking on every link, especially choosing to view large documents such as your petition and schedules (which could be 30-40 pages!). Instead, by choosing the docket report option you will see a synopsis of your case and it should cost less than a dollar per view.

Client access to PACER is not necessary for the typical bankruptcy case. You will receive important notices and information directly from your attorney and the streamlined nature of the bankruptcy process will quickly move your case to completion. Other the other hand, if you are a chronic worrier, an occasional check of your case on PACER may be just what the doctor ordered to provide you with peace of mind.
 

Clients are often pleased to learn about one of the bankruptcy law's most powerful protections: the automatic stay. When a bankruptcy case is filed, the debtor receives immediate protection from creditor collection actions. This relief is known as the “automatic stay” because it immediately stops lawsuits, telephone harassment, and other attempts to collect on a debt. The automatic stay continues throughout the bankruptcy case until either the stay is modified by the court or the case ends.

But what about co-signors?

Most co-signors are considered "jointly and severally liable" for the debt. That means that each party is liable up to the full amount of the debt. If you file bankruptcy, your co-signor is typically on the hook for 100% of the outstanding debt. Contrary to a popular misunderstanding, the bankruptcy discharge does not "erase" a financial obligation. The discharge is a legal injunction that prohibits your creditors from enforcing your debts against you individually. The debt still exists, and can be collected from others who are not protected by the bankruptcy laws.

Filing a Chapter 7 bankruptcy case will not stop a creditor from collecting against a co-signor or co-debtor. However, a Chapter 13 bankruptcy case contains a protection known as the “Co-Debtor Stay.” This protection is meant to protect a debtor by insulating him from indirect pressures from his creditors exerted through friends or relatives. The Co-Debtor Stay stops all collection actions against any individual who is obligated on a consumer debt owed by the debtor. This protection continues until the Chapter 13 case has concluded, or the Co-debtor Stay is modified or lifted by the bankruptcy court. Typically, the Co-Debtor Stay will last the duration of the debtor's Chapter 13 bankruptcy case, or three to five years.

There are limits to the Co-Debtor Stay. The Co-Debtor Stay only prohibits collection on personal debts, not business obligations. Additionally, if your co-signor actually received the benefit of the debt, and your Chapter 13 plan proposes not to pay the debt, the creditor can seek to lift the stay. This is often the case when the bankruptcy debtor co-signed a loan so that a friend or family member could purchase a car. Of course, if the creditor is receiving timely payments on the loan, there is usually no issue or impact to the co-signor.

If you need bankruptcy relief, but are worried that your co-signors will be harmed, discuss the issue with an experienced bankruptcy attorney. Your attorney can recommend several options to consider when dealing with co-signors.
 

 Years ago, few attorneys specialized in any particular area of the law. These "general practitioners" handled criminal cases, family law matters, real estate disputes, and a host of other complex legal matters. Today law schools teach aspiring attorneys the general principles in many different legal disciplines, and the bar exam tests the basic knowledge of these subjects. However, the idea of the "general practitioner" is outdated. In today's world, a complex legal matter such as a bankruptcy case is best handled by an attorney that has specialized knowledge and experience.

Bankruptcy law is an area of the law that many attorneys avoid - and for good reason! Bankruptcy law is a complex amalgamation of federal and state laws, court rules, case precedent, and customs. While the federal Bankruptcy Code is intended to be applied uniformly across the country, bankruptcy judges in different districts have interpreted and applied the provisions of the Bankruptcy Code differently. For this reason it is often important to know how the views and opinions of the bankruptcy court judge assigned to your case. Additionally, your bankruptcy attorney is familiar with the negotiation practices of your creditors and can anticipate an outcome before your case is filed.

An experienced bankruptcy attorney is able to review your case and identify any potential problems. For instance, it may be advantageous to wait a month or longer to file your case. Perhaps you have a preferential transfer, or your income is too high because of a bonus you received five months ago. Your bankruptcy attorney knows which questions to ask and how to avoid problems in your case. As the saying goes, "there is no substitute for experience."

An attorney who practices primarily bankruptcy is also able to move quickly and efficiently through the stages of your case. Bankruptcy courts are streamlined to provide quick relief to deserving debtors, and your bankruptcy attorney has customized the processes in the legal office to maximize efficiency. This not only saves you time, but also money. 

Using your family attorney or cousin who just passed the bar may sound appealing, or may even save a few dollars up front, but the costs may quickly mount up when you experience problems in your case. When you think about it, hiring a bankruptcy attorney for a bankruptcy case is a no brainer. The bankruptcy attorney works every day in the bankruptcy law and can handle your case quickly, efficiently, and without surprises. 

In theory debt settlement is simple: the debtor negotiates with the creditor to reduce a debt to an amount that is regarded as payment in full. It sounds honest enough: the debtor cannot afford to repay a debt, so the creditor agrees to accept a reduction. The creditor is paid something and the debtor avoids bankruptcy.

In practice debt settlement is a nasty game of chicken. The debt settlement company advises the debtor to stop making monthly payments to the creditor. In response, the creditor pressures the debtor to pay through harassing telephone calls, damage to the debtor’s credit report, mounting interest and fees, and perhaps legal action. The resolution comes when one side blinks: either the creditor is convinced that it better take a settlement or risk discharge in bankruptcy; or the debtor realizes that his or her credit is ruined and actually files bankruptcy.

Debt settlement is big business, but many debt settlement companies have caused big trouble for their clients. Take for example Debt Relief USA. This company, like many debt settlement companies, advised its customers to stop paying its creditors and instead deposit money into a Debt Relief USA settlement account. This money, held by Debt Relief USA, was to be used as settle funds for the individual’s debts. Customers were assessed fees for services including burdensome “administration fees” and monthly “maintenance fees” that further damaged its customers’ financial situations. When a debt was settled, the Debt Relief USA charged a 13 percent “negotiation fee.”

In 2009 Debt Relief USA filed a Chapter 11 bankruptcy and claimed that it owed its clients $5 million from these settlement accounts. In December 2010, the bankruptcy court approved a $3.7 million disbursement to Debt Relief USA’s clients. The case was also converted to Chapter 7 and Debt Relief USA is no longer conducting business.

Bankruptcy attorneys regularly see the damage caused by debt settlement companies. In some cases money is not returned to debt settlement customers, or the company itself files bankruptcy, or the individual’s credit is destroyed. Before agreeing to any debt relief program, discuss your financial situation an experienced bankruptcy attorney. There are powerful federal laws that can protect you from overwhelming debt, and a bankruptcy attorney can review your legal options without risking your cash.
 

Most credit unions and some banks use “Loanliner” documents. These agreements are standard loan documents developed by CUNA Mutual Group and sold to financial institutions. Over 70% of all credit unions use Loanliner documents for their lending transactions. Included in standard Loanliner lending agreements is a provision in which the borrower agrees that all other loans with the lender are cross-collateralized.

Cross-what?

Cross-collateralization is basically the use of collateral from one loan to secure other loans. The cross-collateralization clause from a recent Loanliner agreement reads: “the security interest also secures any other loans, including any credit card loan, you have now or receive in the future from us and any other amounts you owe us for any reason now or in the future.” Credit unions are fond of using this clause in vehicle loan agreements to secure all other credit union debts with the vehicle. This often causes surprises (and anger) when an unsuspecting credit union member tries to trade-in his car and discovers that the debt on the vehicle includes a personal loan, a line of credit, and credit card balances.

There are a few options if you are faced with a cross-collateralized auto loan. First, you can file a Chapter 13 and cram-down the loan to match your vehicle's value. Any remaining debt is discharged at the end of the Chapter 13 case. During a Chapter 13 case, you can pay a cram-down over three to five years.

During a Chapter 7 case, your attorney can simply ask the credit union to draft a reaffirmation agreement for the vehicle without regard to other debts. You are basically asking the credit union to voluntarily strip off the cross-collateralized loans. If the credit union refuses your request, you have two options: (1) surrender the vehicle and discharge all debts to the credit union; or (2) redeem the vehicle. Redemption is a process exclusive to a Chapter 7 bankruptcy case where the debtor keeps a vehicle by paying the value of the vehicle, not the total debt that is owed. While similar to a Chapter 13 cram-down, redemption differs in that the payment to the secured creditor must be a lump sum. Payments are not permitted.

If you have an auto loan through your local credit union, review the loan paperwork with your attorney for a cross-collateralization clause. Your bankruptcy attorney can discuss your options with you and help arrive at the best financial decision for your family.
 

After a court enters a money judgment against you, the judgment creditor can proceed to collect. Many experienced creditors like to start the post-judgment collection process by attacking your bank account. In this way the creditor can attempt to seize a lump sum payment before settling in to collect from your wages.

A bank account garnishment begins with the court directing the bank to freeze your bank account and turn over funds to the sheriff. Once your account is frozen, any outstanding check will be refused payment (unless the amount of the judgment is less than the amount on deposit at your bank, then the bank can only partially freeze your account). A garnished bank account can cause many problems for the debtor, especially when executed just after payday.

Bank account garnishments are almost always a surprise. The judgment creditor or collecting agent (often the sheriff of your county) must notify you and the bank, but typically the bank is first notified to freeze your account, then you are notified by regular mail. This prevents any possibility that you can withdraw funds before the garnishment takes your money.

There are defenses to a bank garnishment. You may claim that all or a part of the deposited funds are exempt under state or federal law. The notice of garnishment is often accompanied by a list of possible exemptions and notice procedures. For instance, Social Security payments are generally exempt from garnishment. However, once a Social Security payment is deposited into your account and co-mingled with other funds, the question becomes “what part of the account balance is Social Security (and exempt) and what part is not?” A hearing is required to determine this answer and the burden is on you to prove that the funds in the account are exempt from creditor collection.

Filing bankruptcy stops the commencement or continuation of a bank garnishment. Bankruptcy stops collection actions and will discharge most judgments. If there is a judgment against you and you fear a future bank account garnishment, speak with an experienced attorney and discuss how the federal bankruptcy laws can stop a judgment creditor cold.
 

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The federal bankruptcy system is built on trust. The Supreme Court of the United States has consistently held that bankruptcy provides a fresh start for the honest, but unfortunate debtor. However, a dishonest debtor can face significant obstacles and make his financial and legal situation worse.

The bankruptcy laws are meant to give an honest debtor a fresh start, but not a head start. The debtor is expected to make a reasonable and good faith effort to repay his creditors. The debtor must provide honest and accurate information regarding his income, expenses, assets, and debts to the bankruptcy court. The information is reviewed by creditors and the bankruptcy trustee and is a snapshot of the debtor’s financial status on the day the bankruptcy was filed.

The law does not expect bankruptcy debtors to go without food, or clothing, or to stop paying the family car payment in order to pay a credit card bill. On the other hand, the debtor is expected to pay if the money can be reasonably had from extra monthly income or by selling an unnecessary item of property.

Even with the large benefit that bankruptcy can provide, some debtors still try to “game” the system. Failing to honestly and accurately disclose income or assets can result in a denial of bankruptcy discharge. In some cases the bankruptcy court may dismiss the debtor’s case for dishonest acts like lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee. If the debtor’s case is dismissed or a discharge is denied, the debtor will remain liable for all debts.
 

If a discharge is denied, any assets turned over during the case will still be administered by the bankruptcy trustee and the debtor may lose non-exempt property to creditors.

Perhaps the most serious consequence to the dishonest debtor is a federal criminal charge for bankruptcy fraud. Dishonest acts during bankruptcy may be referred to the Federal Bureau of Investigation for investigation. Other federal agencies may become involved like the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program. The Department of Justice Trustee Program maintains a website and toll-free number for the general public to report suspected bankruptcy fraud.

The old saying goes, “pigs get fat, hogs get slaughtered.” Don’t be hoggish during bankruptcy and report your financial information honestly and accurately. An experienced bankruptcy attorney can evaluate your financial situation and advise you in the most beneficial and legal way to protect your family’s income and assets during bankruptcy. Call today and discover how the powerful federal bankruptcy laws can help you.
 

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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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 "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!

A bankruptcy proof of claim is an allegation against the debtor of a debt that arose on or before the date of the bankruptcy filing. It is an allegation because the bankruptcy debtor may contest this allegation. The bankruptcy court accepts the creditor’s proof of claim as true until the debtor files an objection and disputes it.

In cases where there is no distribution of money to creditors (called a “no asset case”), filing a proof of claim is not necessary. Consequently, claims are not filed in most Chapter 7 cases. In Chapter 13 cases, when creditors expect to be paid, the proof of claim is a prerequisite to payment from the trustee.

A proof of claim can be filed by a creditor, the debtor, or the bankruptcy trustee. If an unsecured creditor fails to file a proof of claim, the claim is not allowed and the trustee will not pay the creditor. This can be problematic to the debtor in certain cases and may necessitate the debtor filing a proof of claim so that the creditor can be paid. Failure to file a proof of claim does not impact a secured creditor’s lien against collateral.

The bankruptcy court uses a standard proof of claim form. In most cases this form is mailed to creditors during Chapter 13 cases or Chapter 7 asset cases. A proof of claim should include a copy of any supporting documentation (a promissory note or other loan paperwork), as well as evidence of perfection of a secured claim. A creditor must file the proof of claim prior to the claims deadline (bar date). This date is set by the bankruptcy court, but cannot exceed ninety days after the first date set for the Meeting of Creditors.

A debtor may object to a proof of claim. Common objections include:
* Not timely filed;
* Incorrect claim amount;
* Improper claim;
* Debt paid in full;
* Failure to attach adequate supporting documentation.

If you are considering filing a Chapter 13 bankruptcy, expect to have your creditors file claims. Each proof of claim should be reviewed by you and your attorney to ensure that the claim is accurate. Failure to timely object to the proof of claim may substantially impact your case.
 

When a Chapter 7 or 13 bankruptcy petition is filed, the bankruptcy court issues an injunction forbidding any collection action against the debtor. This protection is called the “automatic stay” because once the case is filed the injunction happens immediately and automatically. The automatic stay prohibits telephone harassment, lawsuits, garnishments, and even letters attempting to collect on a debt. The stay typically continues until the case is dismissed, the debtor receives a discharged, or the bankruptcy court otherwise amends the order.

In some cases a creditor may want to amend the automatic stay and proceed with collection against the debtor. To accomplish this, the creditor must file a “Motion to Lift Stay” with the bankruptcy court. This motion is filed routinely when the debtor is not making the monthly payment on secured property (e.g. a house or car). The creditor will seek leave from the court to lift the stay and either foreclose or repossess the collateral.

To succeed in a Motion to Lift Stay, the creditor must show that it has good cause for the request. Generally lack of payments since the bankruptcy filing will constitute good cause. Additionally, good cause may exist if the debtor has failed to keep insurance on the collateral.

Defending a Motion to Lift Stay usually boils down to making payments. Once the debtor is current on the monthly payments the creditor’s motion is generally denied. The debtor may also challenge the creditor’s standing. This may occur when a mortgage is at issue that changed hands several times. If the creditor cannot prove to the court that it is the current holder of the promissory note, the bankruptcy court will not consider the creditor’s motion. Finally, the debtor may negotiate a resolution of the issue with the creditor. The debtor pays something and makes additional promises for future payments, and the creditor withdraws the motion.

If you intend to retain secured property after your bankruptcy filing, consult with your attorney and discuss your payment obligations. The general rule is that “secured property must be paid for or returned.” Making payments after bankruptcy can avoid a Motion to Lift Stay on your property.

Occasionally an individual or couple cannot qualify for a Chapter 13 repayment bankruptcy and must file under Chapter 13. The procedure for proposing a Chapter 11 plan of reorganization is dictated by the Bankruptcy Code and is in many ways similar to a Chapter 13 bankruptcy. The Chapter 11 bankruptcy debtor may file a plan of reorganization during the first 120-day period after the case is filed, and the debtor has 180 days after the entry of the order for relief to obtain creditor acceptance of its plan. After that period a creditor may file a proposed plan with the court. A bankruptcy trustee, if one is appointed, will also file its own plan, or a recommendation for conversion or dismissal of the case.

The Bankruptcy Code lists mandatory and discretionary provisions of a Chapter 11 plan, including the designation of classes of claims and interests. Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders. These classes will vote on the acceptance or rejection of the proposed plan(s).

Before confirmation of a plan of reorganization can be granted, the court must be satisfied that the plan is in compliance with all the requirements for confirmation stated in the Bankruptcy Code. In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan is in compliance with the Bankruptcy Code. In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney. An experienced bankruptcy attorney can guide you through the Chapter 11 process, and help you reach the best possible financial outcome.

There are some strange myths concerning bankruptcy.  Many of these myths are told by well-meaning, but uninformed financial “experts.”  Today’s post will look at six common myths.

Taxes cannot be discharged in bankruptcy

This myth is based in some truth.  Tax debt is especially hard to discharge, and in some cases the debtor may not discharge tax debt.  The truth is that discharging tax debt often depends on how long you have had the tax debt and what has happened in the meantime.  It is important to speak with an experienced bankruptcy attorney about your circumstances and get competent legal advice.

You lose everything in a Chapter 7 bankruptcy

Everything?  Really?  The truth is that only four percent of all Chapter 7 cases are asset cases.  In the remaining 96% the debtor loses nothing.  Additionally, secured property like a car or home may be reaffirmed and the debtor retains the property and continues to pay the debt.

You can lose your job if you file bankruptcy

The federal law prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy.  It is illegal for your employer to fire you because you filed bankruptcy.

You can’t get credit after a bankruptcy

A bankruptcy discharges unsecured debt and reorganizes your finances.  Bankruptcy can make it easier for you to pay your bills.  Many debtors are able to purchase cars and obtain credit within months after the bankruptcy discharge.  Many others are able to buy a home two years after the discharge.

You can only file bankruptcy once

While the Bankruptcy Code attempts to prevent multiple and abusive filings, bankruptcy is always available to those who need it.  There are time restrictions that may prevent a second discharge, for instance, an individual debtor who received a chapter 7 bankruptcy discharge to file another Chapter 7 after eight years.  However, that debtor is eligible for a Chapter 13 after four years.

If you have a job you can’t file bankruptcy

The truth is that Chapter 13 bankruptcy is called a “wage earner’s” bankruptcy and the debtor must have an income stream to qualify.  Many families with multiple incomes are eligible to file bankruptcy.

Don’t be misled by bankruptcy myths.  Get the facts from an experienced bankruptcy attorney and ensure the law is working for you.

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When a small business encounters tough times, it is not uncommon for the business owner to do what is necessary to keep the business alive.  The obligation to keep the business going for family and employees is strong, and can often result in the business owner making decisions that create personal financial hardship.

Small business owners are required to withhold taxes from their employees' paychecks and pay the Internal Revenue Service (IRS).  Employment taxes consist of two parts: (1) the employer's portion, and (2) the employee's portion.  The employee's portion is withheld from the employee's wages by the employer, and consists of a 6.2% Social Security tax and a 1.45% Medicare tax.  The employee's portion is held in trust by the employer until it is remitted to the IRS.  The employer portion of the tax is paid directly to the IRS.  This obligation is comprised of a matching contribution of 6.2% as Social Security tax and 1.45% as Medicare tax. 

When an employer cannot pay the IRS, things can go south very quickly.  The IRS can close a business for failure to pay employee taxes, and can attempt to collect personally from each owner or manager responsible for withholding and paying the tax (known as a “responsible person”).  The IRS can collect 100% of the debt from each of the responsible persons until the debt is paid.  Usually this results in owners and officers pointing out each other’s personal assets in a “get him not me” effort to avoid payment.  This can be very nasty business.

The federal bankruptcy laws can help manage this impossible situation.  While in some cases an individual can file bankruptcy and discharge the employer's portion of the tax debt, the employee's portion is not dischargeable.  However, bankruptcy allows the debtor to propose a plan to repay non-dischargeable payroll taxes, often without stopping business operations.

If you are a small business owner with an employer payroll tax problem, consult with an experienced bankruptcy attorney and discuss your options.  The federal bankruptcy laws may be able to provide the time and opportunity to repay your tax debt and continue your business.

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The Bankruptcy Code authorizes six different types of bankruptcies, but only four can be used by individuals.  Each type of individual bankruptcy case is known by the chapter that defines it in the Bankruptcy Code: Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

A Chapter 7 case is the most common type of individual bankruptcy case.  Chapter 7 is available to individuals, to married couples, and to a spouse who files separately.  Chapter 7 is an erase-your-debts-start-fresh bankruptcy case.  It is formally known as a "liquidation" proceeding, because (in theory) everything the debtor owns is taken and sold to pay creditors.  However, it is not very practical to take everything a person owns, and many state and federal laws protect the debtor's property to the extent that only about one case in twenty pays anything to creditors in a Chapter 7.  An average Chapter 7 case will take four to six months to complete.

A Chapter 11 case is called a "reorganization" proceeding, and is commonly used by corporations.  Individuals file Chapter 11 because their debts exceed the limits for Chapter 13 bankruptcy.  The bankruptcy trustee cannot take property from a Chapter 11 debtor.  The debtor proposes a plan to repay debts, creditors vote whether to accept the plan, and ultimately the bankruptcy court orders a reorganization plan which binds all parties to the terms of the plan.

A Chapter 12 bankruptcy case is only available to family farmers who wish to reorganize their finances.  Many provisions in Chapter 12 are similar to a Chapter 13.

In a Chapter 13 case the debtor pays what he can afford each month under a court-ordered repayment plan.  Creditors are grouped together in debt priorities and paid according to the availability of monthly income.  Creditors are paid between zero and 100% over three to five years.  Chapter 13 is only available for individuals who have a regular income (Chapter 13 is also called a "Wage Earner's Plan"), unsecured debt of less than $336,900, and secured debt of less than $1,010,650.  The bankruptcy trustee cannot take property from the Chapter 13 debtor.  Chapter 13 provides many advantages to Chapter 7, including the opportunity to reduce monthly vehicle payments and catch-up a delinquent mortgage.

The Bankruptcy Code offers four powerful types of bankruptcy cases to individuals.  If you are struggling with debt, speak to an experienced bankruptcy attorney and discover how the Bankruptcy Code can help you reorganize or eliminate your debt headache.

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews ‎  |  fnlawfirm.com  |  Directions

When a large corporate bankruptcy hits the news chances are the company has filed for Chapter 11 bankruptcy protection.  The title of Chapter 11 of the Bankruptcy Code is “Reorganization” and while companies like General Motors or Washington Mutual make headlines, individuals are also eligible to file under Chapter 11. 

In some cases, Chapter 11 may be the only option for an individual to file bankruptcy.  Eligibility for Chapter 7 is dictated by a “means test” that determines the debtor’s ability to repay debts.  Those who are able to repay their creditors may consider Chapter 13, but debt limits may disqualify the debtor from Chapter 13.  The debt limits for Chapter 13 are currently $360,475 for unsecured debt and $1,081,400 for secured debt. 

An individual debtor who files for Chapter 11 bankruptcy protection will follow many of the same (or similar) procedures that apply to Chapter 13 cases.  The debtor must file a petition and schedules of assets, liabilities, income and expenses; a plan to pay creditors; and attend a meeting with a bankruptcy trustee.  The debtor is required to commit all disposable income to repaying debts for five years.  Disposable income in Chapter 11 is determined differently than in a Chapter 13 case.  The bankruptcy court compares the Chapter 11 debtor’s monthly income against the reasonable monthly expenses. The result may be different than the disposable income amount determined in a Chapter 13 case. 

Creditors are classified as secured creditors, unsecured creditors entitled to priority, and general unsecured creditors.  The debtor’s plan is submitted to creditors for approval and the creditors are entitled to vote to accept or reject the plan.  If the creditors reject the proposed treatment by the plan, the bankruptcy judge can still approve the plan, provided that creditors receive as much during the plan as they would receive if the debtor’s assets were liquidated.  Ordinarily a Chapter 11 debtor will receive a discharge after completing all plan payments. 

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney.  If you are considering a bankruptcy filing, consult with an experienced attorney and discover your legal options.
 

Pop quiz: What do Walt Disney, Mark Twain and Larry King have in common? 

1. They each filed a personal bankruptcy and went on to have extraordinary success in life.

Bankruptcy is not a professional or financial death sentence.  Just ask Donald Trump who has filed multiple Chapter 11 reorganization bankruptcies for his casinos.  Bankruptcy is a financial tool that uses the federal law to protect the honest, but unfortunate debtor.  Bankruptcy allows the debtor the opportunity to restructure finances and formulate a plan to repay or discharge debt.  Bankruptcy provides the debtor a fresh start to a new financial future – one free of the pressures from debt collectors. Free Consultation 

Here’s another question: What honor did Kim Basinger and Burt Reynolds receive after filing personal bankruptcy? 

1. Each was nominated for an Academy Award in 1997.  Basinger won an Oscar for best supporting actress for L.A. Confidential, and Reynolds was nominated for best supporting actor for Boogie Nights.

Bankruptcy can help you and your family build a more solid financial foundation.  Henry Ford created another automobile company after his first company filed bankruptcy.  It’s safe to say that Ford Motor Company would not exist today without the help of the federal bankruptcy laws.  The same can be said for General Motors, which filed for Chapter 11 bankruptcy in 2009. Free Consultation 

How can bankruptcy help you?  The bankruptcy laws can stop a foreclosure sale, a pending lawsuit, and creditor harassment.  Bankruptcy can protect your family assets and retirement accounts from creditors.  Bankruptcy can eliminate debt or give you time to repay loans including delinquent car and home payments.  The federal bankruptcy laws helped over a million people get relief during 2009, including celebrities Stephen Baldwin, Sinbad, and Bernie Kosar. Free Consultation 

As Abraham Lincoln (filed bankruptcy in 1833) once said, “The best thing about the future is that it comes only one day at a time.”  If you are experiencing overwhelming financial difficulty, take the first step to a better future by speaking with an experienced bankruptcy attorney today.

When President Barack Obama was campaigning for the presidency he promised reforms to the process of bankruptcy. For example, he called for a change in the bankruptcy code to allow modification of the terms of loans on the debtor’s primary residence. This means that hopefully one day soon the bankruptcy court will be able to adjust your home loan to a fair and reasonable payment. But while all of this is being played out, many people are still losing their homes.

One of the key factors in saving your home is being able to stay in your home as long as possible so that you can re-negotiate your mortgage with your lender. If you live in Austin, Texas, one of the best ways to get some control over your home loan (and the rest of your finances) is to file for bankruptcy. When you file for bankruptcy, your home cannot be foreclosed on or sold. This can definitely help you get your financial situation together while the government is trying to get theirs!

If you are in danger of losing your home, filing for bankruptcy can be a very powerful tool as it can give you the time and resources to renegotiate your mortgage with your lender while saving your home. For a free bankruptcy consultation contact bankruptcy law firm, Fears | Nachawati via toll free at 1- (866) 705-7584 or via e-mail at info@fnlawfirm.com.

NEW YORK, Feb 5 (Reuters) - U.S. regional retailer Fortunoff filed for Chapter 11 bankruptcy protection on Thursday and said it will try to sell the business, but if it cannot it will close its doors.

The company, which sells jewelry, dinnerware and furniture in New York, New Jersey, Pennsylvania and Connecticut, began suffering a "severe liquidity crisis" in January as it was trying to sell the company, according to court documents.

Dismal sales over the 2008 holiday season, weak consumer spending on high-end furniture and jewelry, the costs of expanding its jewelry line in Lord & Taylor stores and reduced borrowing capacity all hurt operations, it said.

The prolonged economic recession has taken a major toll on a broad range of U.S. retailers as consumers scale back spending.

Other companies that have filed for bankruptcy in recent months include electronic retailer Circuit City (CCTYQ.PK) and regional department store Gottschalks (GOTTQ.PK).

"Most of us thought that we would see more retailers filing by now," said Jerry Mozian, national segment leader for restructuring at turnaround firm Tatum. "January is one of the typical months that retailers file and then you put on top of that the backdrop of a very terrible economy."

A possible buyer may be able to pick up Fortunoff at an attractive price, but that is unlikely because it is unclear how long the recession will last, Mozian said. "I would not be surprised if it just turns out to be a liquidation."

Fortunoff, which began as a neighborhood venture in Brooklyn in 1922, was bought out of bankruptcy by private equity firm NRDC Equity Partners for $110 million, including $30 million in debt. NRDC said at the time that the company was worth $439 million and that it planned to double its size over five years, in part through expansion in the Lord & Taylor stores the private equity firm also owns.

It began talking to possible buyers, investors and partners at the end of 2008, including private equity firms and companies called liquidators that manage the closing of operations, it said.

It also began talks with its lenders and financial adviser Zolfo Cooper on the details of an auction-type sale but then decided to file for Chapter 11 and continue that process through the court.

In the filing, the company listed both assets and liabilities within a range of $100 million to $500 million. Fortunoff said it has 20 stores open, four of which carry its full line of merchandise. It has closed its New York City jewelry store.

It said it had net operating losses of $42 million on revenue of $260 million during the nine months ending Nov. 30.

 If you are feeling the crunch of unemployment and do not seem to have enough money to pay your bills bankruptcy may be an option for you.  For a free bankruptcy consultation contact Fears | Nachawati Law Firm, Phone (866) 705-7584. 

Fears | Nachawati Law Firm has offices located throughout Texas in: Dallas / Fort Worth / Houston / San Antonio / and Austin.

Today, WallStreet was devastated following reports that Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy early Monday morning and said it will slowly wind down its operations after being in business for 158 years. At $639 billion, Lehman's is the largest bankruptcy filing in U.S. history--easily surpassing the Enron and WorldCom collapses combined. Lehman filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court of the Southern District of New York. The company's broker-dealer subsidiary and other parts of Lehman were not in the bankruptcy filing. Shares of Lehman were down 90% to around 40 cents a share. According to the details of the bankruptcy filing, Lehman held consolidated assets totaling $639 billion and total liabilities of $613 billion. The largest creditor to Lehman Brothers is Citigroup (C: 15.34, -2.62, -14.58%), which has $139 billion in bond debt, followed by The Bank of New York Mellon (BK: 38.35, -1.60, -4.00%), which had a combined $17 billion in bond debts with Lehman. In other liabilities, Japanese bank AOZORA loaned Lehman $463 million, while Lehman also has an outstanding bank loan with Mizuho Corporate Bank worth $289 million.  For questions regarding bankruptcy, call the Fears | Nachawati Law Firm, Phone (214) 890-0711, 4925 Greenville Avenue, Suite 715, Dallas, Texas 75206.