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.
 

EBay is an online auction website where people and businesses buy and sell goods. You probably already know that. What you may not know is how EBay can help you during your bankruptcy.

First, EBay can help you adequately value your household property. The bankruptcy laws require that the debtor account for all personal property and make a good faith effort to accurately provide a fair market value. EBay can help you determine a fair market value for a unique item. In the bankruptcy world, a fair market value means liquidation value, or the price you may receive at an auction. Whatever you own, no matter how unique, you can probably find someone selling it through an auction on EBay.

Second, after determining a value for your property, you need to discuss how state and federal exemption laws can protect your property during bankruptcy. Most debtors do not have difficulty retaining all of their personal property during bankruptcy. However, in some rare cases a debtor may own property that far exceeds the available personal exemptions. The bankruptcy trustee may ask you to turnover any unprotected equity.

There is nothing wrong or illegal about pre-bankruptcy financial planning, so speak with your attorney before selling or transferring any property. If your attorney advises you to sell property, EBay can help you sell an item at a fair market value prior to your bankruptcy filing. Generally, your attorney will advise you to sell your property at a public auction, and use the proceeds for necessary family expenses. Again, speak with your attorney before selling any property.

Finally, even if are able to exempt all of your personal property, you may need fast cash. Bankruptcy debtors are often cash strapped during bankruptcy, and EBay is a good way to sell personal items that are no longer wanted or needed.

If you are considering restructuring your personal finances through bankruptcy, consult with an experienced bankruptcy attorney before selling or transferring any property. Your attorney can provide legal and practical advice to help you make the best possible decisions for your financial future.

Corporate Knights, a Canada-based sustainability-focused media firm, publishes a unique list every year that predicts the world's most sustainable large corporations. Started in 2005, the Global 100 Most Sustainable Corporations in the World is a list of publicly traded companies that, based on research and analysis, are best equipped to manage the environmental, social and governance (ESG) risks and opportunities they face. The idea is to look at the company today and predict the company's future ability to thrive.

Predicting the financial future of a company is tricky business. Of the original 100 announced in 2005, ten companies on that list are now inactive. Another good example is Eastman Kodak, which appeared on the Global 100 list in 2005, 2006, 2007, 2008, and 2009. Kodak is synonymous with photography, and has a long and proud history. Kodak practically invented the amateur photography market back in 1888. Kodak is also responsible for the first digital camera in 1975 and developed cell phone photo technology. Unfortunately, in recent years Kodak has not changed fast enough to keep up with the changing marketplace. Kodak's shares once soared to an all-time high of $95 in 1997 and was a mainstay member of the Dow Jones industrial average for 74 years. In September 2011 its stock plummeted to close at $.69 a share.

Eastman Kodak is a lesson of how quickly the financial outlook of a company can change. Individuals, like companies, sometimes make bad decisions that can lead to financial trouble. Other times, circumstances happen that simply cannot be predicted. Fortunately, what looks bleak today can be better tomorrow. That is a hope that bankruptcy offers to individuals who are struggling with overwhelming debt. Bankruptcy offers the individual the "do over" opportunity to discharge or restructure debts.

If you need help reshaping your financial future, consult with an experienced attorney and discuss how the federal bankruptcy laws can help. Your attorney can offer you options for eliminating debt and making your finances sustainable for years to come.
 

 The U.S. Bankruptcy Courts have increased the fee for filing bankruptcy by $7. Effective November 1, 2011, the filing fee for Chapter 7 will increase from $299 to $306; the Chapter 13 bankruptcy filing fee will increase from $274 to $281; and the Chapter 11 filing fee will increase from $1,039 to $1,046. As part of the judiciary branch of federal government of the United States, this filing fee increase effects each one of the 90 bankruptcy districts across the country.

Filing fees are generally paid to the bankruptcy court at the time the case is filed. The filing fee may be waived under extreme circumstances, and may be paid in installments. A waiver or installment agreement must be approved by the bankruptcy court.

In addition to the basic filing fee increases, the Judicial Conference of the United States increased other fees that may apply to certain bankruptcy cases:

Certification: Formerly $9, now $11;
Exemplification: Formerly $18, now $21;
Audio Recording: Formerly $26, now $30;
Amended Bankruptcy Schedules: Formerly $26, now $30;
Record Search: Formerly $26, now $30;
Adversary Proceeding Fee: Formerly $250, now $293;
Document Filing/Indexing: Formerly $39, now $46;
Record Retrieval Fee: Formerly $45, now $53;
Returned Check Fee: Formerly $45, now $53;
Notice of Appeal Fee: Formerly $250, now $293; and
Lift/Stay Fee: Formerly $150, now $176.

Be sure to consult with your attorney to determine whether any of these additional fees apply to your individual bankruptcy case.

Filing fees are one of four different fees that a debtor must pay during the bankruptcy process. The other fees are: a credit counseling fee, paid before filing bankruptcy and is typically less than $50; attorney fees, which largely depend upon the bankruptcy chapter and the complexity of the case; and a personal financial management fee, paid after filing and is typically less than $50. The credit counseling and personal financial management requirements were instituted by Congress in 2005 as part of widespread changes to the Bankruptcy Code. Prior to the 2005 changes, the Chapter 7 filing fee was $209.

Despite the fee increase, bankruptcy remains an effective means to permanently rid yourself of burdensome debt. Many people are able to discharge all of their debts through bankruptcy. Others discharge unsecured debts, like medical bills and credit cards, while keeping their homes and vehicles. If you need debt relief, discuss your situation with an experienced attorney and learn how the federal bankruptcy laws can help.

 The ancient world has many stories of the firebird, or phoenix. The phoenix is mythical bird of great beauty that lives a very long time. At the end of its life the phoenix builds a nest and then self-combusts, burning until it and the nest are reduced to ashes. Then, from the ashes arises a new, young phoenix, ready for a fresh start.

Bankruptcy can reduce your overwhelming debts to ashes and give you a new, fresh start.

Bankruptcy is a legal process that is presided over by a federal bankruptcy court judge. When you file a bankruptcy case all collection activity must cease while you restructure your finances. Any debt that you cannot afford to pay is legally discharged and that creditor can no longer collect from you. Bankruptcy is one of the most powerful legal protections available and can provide you with a bright new financial future.

Some people worry that by filing bankruptcy they have destroyed their future. No true! In fact, bankruptcy destroys the debt that is holding you back. In 1934 the U.S. Supreme Court made it clear that bankruptcy “gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

So, what can you do with a new opportunity in life? Many debtors report that bankruptcy is the best decision they ever made. These “phoenixes” have legally eliminated or restructured their financial obligations and emerge from bankruptcy armed with a second chance. They are wiser, more experienced and determined to not repeat past mistakes. They go on to purchase homes and cars, obtain loans and credit cards, and responsibly manage their financial affairs.

Are you ready to be a bankruptcy phoenix? If so, consult with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help you. Your attorney can show you the path to a fresh start and a new opportunity in life.

 In 2005, Congress changed the Bankruptcy Code and added a means test to prevent wealthy debtors from filing Chapter 7 Bankruptcy. The means test is a calculation designed to identify debtors who can afford to pay some of their unsecured debts (for instance, credit card debt) and encourage repayment of these debts through a Chapter 13 repayment plan.

The test is composed of two parts: first, the debtor’s household income is compared to his state’s median income for a household of the same size. If the debtor’s income is less than his state’s median income, there is no other testing required. The debtor may file a Chapter 7 bankruptcy case or a Chapter 13 case that may last between three to five years of repayment.

On the other hand, if the debtor’s household income is more than his state’s median income, the debtor is required to supply more information to complete the means test. The debtor must list expenses and financial obligations to determine whether there is money to repay unsecured creditors. In the end if there is enough money to pay a significant portion of the debtor’s unsecured debt, the debtor is ineligible to file a Chapter 7 case and a Chapter 13 case must last five years. Means test information and the current median income figures for each state can be obtained from the U.S. Trustee’s website.

Most bankruptcy debtors are below their state’s median income level for their household size. Many others are able to qualify for Chapter 7 after a skilled bankruptcy attorney has examined income information and made legal and allowed adjustments to the means test calculations. A skilled bankruptcy attorney can discuss options and strategies for qualifying for Chapter 7 bankruptcy under the means test, including timing aspects, income issues, and household number.

The means test is quite complex. Anyone considering bankruptcy with a significant income should consult with an experienced bankruptcy attorney. You attorney can guide you through the means test to reach the best possible result.

 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.

 Attorneys have many obligations to their clients. Chiefly, an attorney is expected to represent a client honestly, zealously, and independently. Conflicts do not occur very often for attorneys who represent debtors in consumer bankruptcy cases. However, a conflict between an attorney and bankruptcy client can arise when the attorney is owed attorney fees.

Individual Chapter 7 bankruptcy debtors are typically required to pay three different fees before or at the time the bankruptcy case is filed: a fee for the pre-bankruptcy credit counseling class; the bankruptcy court filing fee, and attorney fees. Unlike Chapter 13 cases where attorney fees may be paid over time after the case is filed, an attorney representing a Chapter 7 debtor must receive any attorney fees before the case is filed. This is because any debt incurred before the case is filed is subject to the bankruptcy discharge. This means that any fees that you may owe your attorney can be discharged. Additionally, your bankruptcy filing prohibits all creditors from attempting to collect on a pre-bankruptcy debt. Your attorney cannot even send you a bill without violating the bankruptcy court’s orders!

While every bankruptcy attorney knows these rules, some less-scrupulous attorneys try to get around the rules through inventive strategies. One such scheme was recently exposed in a lawsuit against Clark & Washington, a large Atlanta law firm that advertises itself as “Georgia’s Largest Bankruptcy Filer.” A class action lawsuit filed by former clients alleges that the firm cashed postdated client checks written for pre-bankruptcy attorney fees after the clients’ Chapter 7 cases were filed. The petition also states that Clark & Washington attorneys did not inform their clients that the post-dated checks were dischargeable through their bankruptcy cases, and cashed the checks after the cases were filed or discharged. Even more egregiously, the class claims that Clark & Washington attorneys did this after a federal bankruptcy judge told them to stop.

The suit makes reference to a July 12 order in which U.S. Bankruptcy Judge Michael Williamson enjoined Clark & Washington from accepting postdated checks as payment of its attorney's fees for bankruptcy cases filed in Tampa, Florida. Judge Williamson said that the practice of depositing postdated checks after the filing of a bankruptcy case violates the Bankruptcy Code and creates a conflict of interest between an attorney and client.

Don’t fall prey to short-cut law firms advertising low fees and big promises. Your serious legal problem deserves serious representation from an experienced bankruptcy attorney. Call today and get the facts you need to make the right decision from an attorney who will represent you honestly, zealously, and independently.

 “When does my bankruptcy case end?” may sound like a simple question, but the answer can be very confusing. There are several different milestones that affect your bankruptcy case and cause this confusion. The most common of these events are: (1) an order of bankruptcy discharge; (2) an order to close the case; and (3) an order of dismissal.

The bankruptcy discharge generally occurs near the end of the debtor’s case. Once the discharge is entered, the automatic stay is no longer in place. The discharge injunction, which is narrower in scope, replaces the automatic stay injunction. That means you’re your creditors may collect in any way that is not prohibited by the discharge injunction. An example of this is a non-dischargeable income tax debt. Once the Chapter 7 discharge is entered, the tax collector is no longer prohibited from garnishing wages or seizing property.

The discharge order does not close the bankruptcy case. Typically an order to close a bankruptcy case follows shortly after an order of discharge, but sometimes the case will continue after the discharge order is entered. This happens when a Chapter 7 trustee keeps a bankruptcy case open to administer assets to creditors. The case closes once the estate is fully administered, the trustee files a statement that all trustee duties are completed, and all issues in the bankruptcy case are resolved.

Dismissal of the case ordinarily means that the court stopped all proceedings in the main bankruptcy case and any pending adversary proceeding. When a dismissal is entered, the debtor does not receive a discharge. A debtor can request a voluntary dismissal, or the trustee or creditor can request an involuntary dismissal. A hearing is typically required for dismissal, and the case terminates when the court enters the dismissal order.

Dismissal can have serious consequences! In some cases the debtor may be prohibited from filing another bankruptcy case for 180 days. In other cases the debtor may lose the protection of the automatic stay in a future bankruptcy case, unless permitted by the court. It is important to investigate all options with your attorney before allowing your case to be dismissed.

The Bankruptcy Code is very complex and requires the guidance of an experienced attorney. Simple questions like, "When does my bankruptcy case end?" has many "it depends" answers that are determined by the unique facts of your case. Experienced bankruptcy counsel can answer these questions for you and get you the debt relief you need.

The Wall Street Journal reports that 15,000 individuals took advantage of a recent Internal Revenue program offering limited amnesty for taxpayers with undeclared offshore accounts. The deadline for the Offshore Voluntary Disclosure Initiative (OVDI) was September 9, 2011, and far exceeded the anticipated 2,000 applicants. A similar program offered in 2009 collected $2.2 billion in taxes, interest and penalties.

Overseas accounts over $10,000 held by U.S. taxpayers must be reported to the Treasury Department. Significant penalties can be assessed against individuals who fail to report and "hide" their offshore assets. The 2009 and 2011 amnesty programs allowed qualified taxpayers to declare their accounts and escape criminal prosecution. Using figures from IRS Commissioner Doug Shulman, the WSJ article estimates the average revenue per amnesty case at more than $180,000.

Tax debt is not particular to the upper income classes. Small business owners, independent contractors, and employees can also owe the IRS through either mistake or carelessness. Fortunately, there are legal solutions for a tax debt problem. In some cases, dealing with the IRS directly can resolve a tax liability issue. Examples of this are the
an offer in compromise or an installment agreement. In other cases the IRS will simply pursue the tax debtor through garnishment of wages or future tax refunds. A federal tax debt can also result in seizure of personal assets or even jail for tax fraud. The tax man does not have a sense of humor.

Bankruptcy is a powerful shield in resolving a tax debt. The bankruptcy automatic stay will stop the IRS collection processes and allow you time to either propose a repayment plan, or discharge some or all of the tax debt. The rules for discharging personal taxes through bankruptcy are complex and require an experienced attorney's assistance.

If you owe taxes to the IRS that you cannot pay, or need time reorganize your finances and repay your debts, consult with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can shield you from the powerful IRS. The Bankruptcy Code contains several provisions that can provide the honest, but unfortunate taxpayer with needed debt relief.
 

A recent survey of 2,500 employed adults found that one-fourth used all of their income for bills and expenses, leaving nothing extra at the end of the month. This survey was conducted in early September of this year by Markco Media for the website CouponCodes4U. Even more distressing was that one-third reported that their monthly income does not pay all of their expenses each month. These people end every month in the red.

Retailers have also noticed this trend. At a May investor conference, a Wal-Mart executive said the retail giant has found customers cash-strapped just before payday. "We still see the paycheck cycle being very pronounced where the customer doesn't have a lot of money at the end of the month. They are going to smaller pack sizes; opening price point becomes more important," Wal-Mart Chief Financial Officer Charley Holley said at the Citi Global Consumer Conference.

If you are living paycheck to paycheck, or worse, you have options to improve your situation. Cutting back on expenses or taking on additional employment may help some turn their bottom line from red to black. When this isn't enough, it may be time to consider bankruptcy.

The federal bankruptcy laws can:
• stop creditor harassment instantly, including lawsuits, repossessions, foreclosure, and garnishments
• discharge unsecured debts like medical bills and credit cards
• allow you to reduce monthly payments on secured debts, especially car loans, or walk away without paying a dime
• give you time to pay priority debts like child support arrears or delinquent taxes

If you are struggling to end each month in the black, take control over your finances by consulting with an experienced bankruptcy attorney. The bankruptcy laws are very powerful and far-reaching, and have been enacted by the United States Congress to help the honest, but unfortunate debtor. Bankruptcy can give you the fresh start you need to make ends meet and plan for your future.
 

A bankruptcy client once said during an initial consultation, "I have too much month at the end of the money!" If you are in financial trouble, you don't need a wall full of fancy degrees to tell you that you're broke. What you need is help and direction to find an answer to your problem. Bankruptcy could be the answer, but how can you be sure?

Making the choice to file bankruptcy is not easy. You should start with a critical examination of your finances. It is important to have the right information, which means collecting bills, bank records, and a copy of your credit report. You are entitled to a completely free copy of your credit report each year from Experian, Trans Union, and Equifax. Simply go to https://www.annualcreditreport.com/cra/index.jsp

Blank bankruptcy schedules can actually help you organize and understand your financial situation. The bankruptcy schedules can be printed from the U.S. Courts website: http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms.aspx

Also helpful is a free calculator from the Federal Reserve that shows how long it will take to pay off credit cards: http://www.federalreserve.gov/creditcardcalculator/

Once you have clearer understanding of your finances, it is time to investigate your options. Bankruptcy is a federal legal proceeding, which means attorneys, a judge and courthouse, and a lot of rules and laws. It is very complex, even for the most skilled bankruptcy attorney. The U.S. Courts offers a series of nine short videos that gives a very good over-view of the bankruptcy process. The videos can be viewed at the U.S. Court's website: http://www.uscourts.gov/video/bankruptcybasics/bankruptcyBasics.html

Finally, it is time to speak with a bankruptcy attorney. An experienced bankruptcy attorney can analyze your finances and recommend solutions. Your attorney can answer questions you have concerning the bankruptcy process and identify any issues that may cause trouble during your case. So don’t procrastinate any longer! Take control and get the information you need to make a wise decision. 

It’s funny how perspective can shape reality. For instance, some debtors view a personal bankruptcy filing as the final step in a long road of financial failure. On the other hand, many others view bankruptcy as a first step on a road to financial stability and future success. Today let’s look at five individuals who took the latter perspective and used bankruptcy to build a better future for themselves.

Abraham Lincoln

During prosperous times in 1832, a young Abraham Lincoln bought a small general store in New Salem, Illinois with a partner. They used credit to stock the store, but despite the booming economy, the store suffered financial trouble. Creditors attacked Lincoln's assets and the sheriff seized surveying equipment and his horse. Honest Abe spent the next 17 years repaying his creditors. In 1861 Lincoln became the 16th President of the United States.

Walt Disney

Disney formed an animation company, Laugh-O-Gram Studio, in 1920 with the financial backing of a New York investor. Unfortunately, the investor went broke and Disney was no longer able to pay his employees or his debts. Laugh-O-Gram Studio filed bankruptcy and Disney moved to California. There Disney made a fresh start and formed a new production company. He started producing animated shorts staring a mouse named Mickey. Today Disney's company is worth about $76 billion.

Milton Snavely Hershey

Hershey's early attempts at candy making were more bitter than sweet. His first two caramel companies filed bankruptcy. Hershey went on to pioneer the use of milk chocolate candy. Today the Hershey Company is worth just shy of a billion dollars.

Henry John Heinz

Like Hershey, Heinz had difficulty in his early business ventures. Heinz started a company making horseradish, and in 1827 the business went bankrupt. Heinz then went into business with his brother and cousin making ketchup. Today the H.J. Heinz Company is worth over a billion dollars.

Henry Ford

Henry Ford has gone down in history as one of this country’s greatest innovators and the first businessman to master assembly line production. However, Ford wasn't always so successful in business. His first automobile manufacturing company filed bankruptcy. In June 1903, at the age of 40, he created another company and named it after himself. By July of 1903 his bank balance had dwindled to $223.65 and he was in danger of another financial collapse. Then he sold his first car. Today Ford Motor Company has a net worth of around $188 billion.

Bankruptcy did not stop these individuals from attaining stunning financial success. Neither did it stop Burt Reynolds, Donald Trump, Kim Bassinger, Larry King, Mark Twain, or P.T. Barnum – all who filed bankruptcy and went on to have great financial success. If you are struggling with personal debt and need relief, speak with an experienced attorney and see how the federal bankruptcy laws can provide you with a fresh financial start. Don't let a financial problem define your whole life. Take charge today and build a better future for yourself and your family.
 

 There is an old saying among bankruptcy attorneys, “Pigs get fat and hogs get slaughtered.” Bankruptcy attorneys know that the bankruptcy laws are intended to give an honest debtor a fresh start. There are many provisions to protect bankruptcy debtors and a fair and reasonable amount of property needed to start fresh. In most cases the debtor is able to retain equity in personal property and even real estate. On the other hand, bankruptcy courts can (and do) penalize Chapter 7 debtors who appear to be abusing the bankruptcy system.

Take for instance the interesting case of In re Vogeler. When Mr. Vogeler filed his Chapter 7 bankruptcy, he was unemployed and owed a car loan of $11,000 and $35,925 of unsecured debt. Just one month after filing, he received $90,000 in net proceeds from the Kansas lottery! The bankruptcy trustee caught wind of Mr. Vogeler’s good fortune and instructed him to not spend the lottery proceeds. Mr. Vogeler did not listen to the trustee and spent his winnings on new cars and various, non-emergency personal expenses.

The bankruptcy court decided that it would be an abuse to grant Mr. Vogeler a discharge based on the totality of his circumstances. The court pointed out that, “First, debtor entered bankruptcy with approximately $47,000 of debt. Second, a month later, debtor received more than $90,000. Debtor, without explanation, opted to spend his lottery winnings on new items rather than attempt to address the debt with which he entered bankruptcy. Debtor enjoyed his lottery winnings at a time when the automatic stay kept his then-existing creditors from executing on his good fortune. Debtor failed to satisfactorily explain the dissipation of the lottery proceeds. Debtor has been shown to have had significant ability to pay his pre-petition debts.”

The bankruptcy court denied Mr. Vogeler a discharge and said he was not an unfortunate debtor entitled to a fresh start. On the contrary, debtor was fortunate and could have repaid all of his creditors. The court denied the discharge because it would have given the debtor a “head start” instead of a “fresh start.”

Typically, a small bonus or increase to a debtor’s income after filing will not affect a Chapter 7 case. However, any post-petition increases in income should be discussed with your attorney. With help from your attorney, you can emerge from bankruptcy with your discharge and avoid being slaughtered.

 1. Bankruptcy Can Actually Improve Your Credit Score
Most "credit experts" say that filing bankruptcy is the worst thing you can do to a person’s credit score. Unfortunately, most people considering bankruptcy have already wrecked their credit scores. Bankruptcy will stop the negative reporting and allow your credit score to heal over time. Late payments are replaced by a “discharged in bankruptcy" entry on your report, and outstanding debts are reported as zero balances. In some extreme cases, a credit score may improve significantly after the bankruptcy discharge is entered.

2. The Bankruptcy Court Doesn't Report To Credit Bureaus
While one of the chief benefits of bankruptcy is a "fresh start," the bankruptcy court does not report your bankruptcy discharge to the credit bureaus. It is up to you to ensure that your credit report is accurate and up to date. The best advice is to request a completely free credit report from Transunion, Experian, and Equifax at https://www.annualcreditreport.com. Get these free reports after your discharge and dispute erroneous information contained in your files.

3. Don't Stop Paying Your Bills Just Because You Didn't Receive A Monthly Statement
The automatic stay stops all creditor collection action. None of your creditors are allowed to send your monthly statements after your bankruptcy is filed - even those you intend to continue paying. Consequently, it is up to you to keep track of those debts you need to pay, such as a car or house payment. "I didn't get a bill" is not a legal excuse for nonpayment.

4. You Are At A Disadvantage Without An Attorney
The bankruptcy court will not tell you that you are better off with an attorney. The bankruptcy laws are complicated, even for seasoned attorneys, so common sense should tell you to hire counsel. Additionally, without an attorney representing the accuracy of the bankruptcy petition and schedules, the bankruptcy trustee will scrutinize your case and will presume that you have made errors. While licensed attorneys will receive email updates concerning the case, you will receive notice through the mail and will not be able to file responses electronically. This is not only inconvenient, it will also cause you delay and additional expense.

5. You Can Keep Assets That Are Of No Value To The Bankruptcy Estate
The Chapter 7 bankruptcy trustee is charged with finding assets that can be taken and sold to pay your creditors. However, certain assets have little or no practical value. For instance, if you have a horse that is worth $300, the trustee must consider the costs involved in taking and selling the horse. That means hiring outside help and paying for expenses. The trustee could end up owing money! In these situations the bankruptcy trustee will "abandon" the estate's interest in an item that has little or no value to creditors.

In the bankruptcy world, what you don’t know CAN hurt you. Get the facts about bankruptcy from an experienced bankruptcy attorney and protect your financial interests.

 A Chapter 13 bankruptcy case will generally last three to five years. A lot can happen in that time, especially for an individual who is attempting to deal with serious financial difficulties. In some cases, a financial setback can cause a Chapter 13 debtor to be unable to pay the monthly Chapter 13 plan payments or perhaps payments to a secured creditor. Since the practical effect of the Chapter 13 plan stretches the debtor’s finances thin, a financial hiccup can be a death blow to a Chapter 13 case.

If you get behind on your plan payments, it is important to discuss your situation with your bankruptcy attorney. If you simply miss one payment to the bankruptcy trustee, you may be able to ask permission from the court to skip a plan payment. More than one missed payment will have to be paid to continue your bankruptcy. If your case is dismissed due to your inability to make your plan payments, you will generally be able to reinstate the case after paying all due plan payments, or you may choose to re-file your Chapter 13 case.

Re-filing your case can get complicated. If you get behind on post-bankruptcy payments to a secured creditor, the creditor may file a request for relief from the automatic stay. You are generally ineligible to file bankruptcy for 180 days if your case is dismissed by the court either for failure to obey a court order or via a voluntary dismissal after a motion for relief from the automatic stay has been filed.

Additionally, in 2005 Congress enacted new laws to combat “serial” filers who abuse the bankruptcy laws by filing consecutive bankruptcy cases to frustrate creditors. Essentially, if you file a bankruptcy case within one year of an earlier dismissed case, the automatic stay in the second case terminates 30 days after the filing, unless you are able to demonstrate that the second case was filed in good faith. A subsequent case filed within the same one-year period penalizes the debtor by foregoing the automatic stay entirely, until the debtor shows that this third filing was made in good faith.

If you have trouble making payments to the trustee or to a secured creditor during your Chapter 13 bankruptcy, contact your bankruptcy attorney and discuss your options. Your attorney is able to propose solutions to protect your property and help remedy your financial troubles.

 In 2005, Congress passed new laws making it more difficult for wealthy individuals to relocate and take advantage of another state’s more liberal exemption laws. In the past millionaires facing financial difficulties (and sometimes criminal charges of fraud) could relocate to another state, purchase an expensive home, and file bankruptcy while applying the state’s generous exemption laws to protect assets from creditors. In it’s zeal to close the loopholes that allowed a few wealthy people to cheat the system, Congress created a confusing and a bit nutty set of rules to determine what state’s exemption laws apply in a bankruptcy case.

First, the easy answer: if you have resided in only one state for more than 730 days, you must use that state’s exemption laws. To make things a little more complex, if you reside in Arkansas, Connecticut, District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin, you are allowed a choice between your state law exemption and a set of federal exemptions.

Second, if you have not resided in your state for at least 730 days, the exemption law that applies is the state in which you lived most of the time during the 180 days prior to the 730 days. In other words, where did you live most of the time between two and two-and-a-half years before filing? See, I told you this calculation is a bit nutty.

Finally, if the above tests can’t decide the issue, the default rule is to use the federal exemptions only. This may be the case if you have lived overseas, or if a state requires current residency or domiciliary to use its exemptions (such as the state of New York).

The Bankruptcy Code is written by the United States Congress and is interpreted by federal court judges. Consequently, it is a set of laws that are often confusing. If you are in over your head in financial difficulty, call today and get help from a seasoned professional. An experienced bankruptcy attorney can guide you through the federal bankruptcy process without stepping on a procedural land mine.

 On July 21, 2011, the United States Consumer Financial Protection Bureau (CFPB) quietly opened its doors for business. Most Americans do not know about this new agency; however the CFPB is a powerful ally for consumers and represents an important step in restoring balance between big business and the consumer. The CFPB is a federal agency tasked with the primary responsibility for regulating consumer protections in the United States.

The CFPB was born from the financial turmoil that our country has recently witnessed, and is charged with promoting "fairness and transparency for mortgages, credit cards, and other consumer financial products and services." According to the CFPB website, "The central mission of the Consumer Financial Protection Bureau is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products."

The point of the CFPB is to have a central agency serve as a watchdog over consumer financial bureaus such as banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies. The CFPB creates and enforces bank rules, conducts bank examinations, monitors and reports on financial markets, and collects and tracks consumer complaints. These tasks were previously divided among various federal agencies.

According to its new director, former Ohio attorney general Richard Cordray, the immediate concerns for the Consumer Financial Protection Bureau are mortgages, credit cards and student loans. The CFPB website at http://www.consumerfinance.gov/ provides a wealth of consumer financial information. The site also takes complaints regarding credit card companies on issues such as unfair practices such as hidden fees, interest rate changes, payment increases or other issues.

If you are in financial distress, consult with an experienced bankruptcy attorney and discuss how the law and your government can help you. There are many consumer protections available under the federal and state laws; some of the most powerful are part of the federal Bankruptcy Code. Call today and get the help you need, or schedule a consultation using  our 24 Hour bankruptcy chat.

Since changes were made to the bankruptcy laws in 2005, debtors in bankruptcy have been required to complete both a pre-bankruptcy credit counseling interview and a course in personal financial management. Some bankruptcy professionals have questioned whether these requirements have any positive impact on the debtor. One recent study suggests that they do.

University of Illinois economist Angela Lyons completed a bankruptcy study that measures the impacts of both the counseling and education requirements by tracking debtors through the entire bankruptcy process.

We looked at about 4,000 debtors across the U.S. who filed for bankruptcy,” said Lyons. “We learned that the counseling and education requirements appear to be serving their intended purpose and are likely viable mechanisms to help debtors deal with their financial situation and get the fresh start that they need.”

Lyons’ findings show that most participants in the study improved their financial behaviors after counseling, and also continued those behaviors 12 months later. She says, "From an educational perspective, the findings provide valuable insight into how the requirement is helping to improve debtors' personal financial situations, learn from their mistakes and go on to make sound financial decisions in life."

This information is consistent with what bankruptcy attorneys see every day. Many bankruptcy debtors initially resent these courses. However, most debtors report that they learn useful information and consider the time worthwhile. Both the credit counseling class and the personal financial management course can be taken either in-person, on-line, or over the telephone. The costs are generally less than $50 each. Each credit counseling agency or financial management course must be approved by the Office of the United States Trustee.

The credit counseling interview and the course in personal financial management are not only required for completing your bankruptcy case, they are also important to your future financial success. Your attorney can help you choose an approved credit counseling agency to assist with the Bankruptcy Code’s educational requirements.

People who use the bankruptcy laws most successfully are generally those with the best attitudes and the proper perspectives. As one writer asked, "Is the glass half empty, half full, or twice as large as it needs to be?" Bankruptcy can be a negative, a positive, or simply the right response to your financial problem.

The bankruptcy process can have many positive results for a person with the right perspective. Below are a few examples:

1. Bankruptcy generally discharges most or all of your unsecured debts, such as medical bills or credit card balances. Once your debt is discharged, you are no longer under a legal obligation to pay.

2. Bankruptcy immediately and automatically stops all collection action, and provides time to reorganize your finances. This "automatic stay" applies to lawsuits, foreclosures, garnishments, pending repossessions, telephone harassment, etc. In some cases a bankruptcy filing may even force a creditor to return a repossessed vehicle.

3. A bankruptcy filing also prevents a utility company from turning off your gas or electric services. If these necessary services have been cut off, the bankruptcy requires the utility company to restore service.

4. If you are behind on mortgage payments, the bankruptcy will allow you time to catch up.

5. In many cases it can fix an upside down auto loan. You may save hundreds of dollars each month in payments and keep your vehicle.

6. The protections afforded by the federal bankruptcy laws can shift the balance of power from the creditor back to you. Creditors must prove claims and seek permission from the bankruptcy court before collecting.

If you are buried in debt and need professional help, consult with an experienced bankruptcy attorney to learn your options. The federal bankruptcy laws may be exactly the right tool to correct your financial problem.
 

All bankruptcy debtors will tell their bankruptcy attorneys about cases in which they are defendants. Debtors are always anxious to stop a lawsuit and rid themselves of any dischargeable obligations.

The problem with lawsuits usually arises when the debtor is the plaintiff, or has a claim that has not yet been filed. For instance, suffering a personal injury caused by someone else and then filing bankruptcy to get rid of the medical bills.

Both a plaintiff’s lawsuit and a potential lawsuit are assets of the bankruptcy estate.

What happens to the plaintiff’s claim during bankruptcy can depend on a number of circumstances.

In some cases the bankruptcy attorney can exempt a portion or even all of the money received from winning or settling the lawsuit. In other cases the bankruptcy trustee may consider the lawsuit or potential lawsuit of little potential value to the bankruptcy estate (and your creditors), and may abandon the estate’s interest in the suit or claim.

The Bankruptcy Code requires the debtor to disclose all pending lawsuits and claims, whether as a plaintiff or a defendant. Failing to disclose a claim can cause serious headaches for both the bankruptcy attorney and the plaintiff attorney. Whether the failure to list the claim was intentional or an unintentional error, omitting a pending or potential lawsuit is the same as representing to the bankruptcy court that the debtor does not own the asset or have the right to sue. One appellate court said, that “a debtor in bankruptcy who denies owning an asset, including a chose in action or other legal claim, cannot realize on that concealed asset after the bankruptcy ends.” The legal term for this situation is “judicial estoppel,” and it can terminate your right to sue.

If you have a pending or potential lawsuit, discuss your situation with your bankruptcy attorney. Your attorney can advise you on your legal options for discharging your debts and keeping your lawsuit proceeds. Pending lawsuits is actually common, and an experienced bankruptcy attorney can guide you through the legal maze without terminating your rights.

About half-way through your bankruptcy schedules you will discover "Schedule G - Executory Contracts and Unexpired Leases." While the Bankruptcy Code does not have a specific definition of an executory contract, it is commonly understood as a contract between the bankruptcy debtor and another party in which the terms have not been completely performed. If one party fails to complete the unperformed terms, the contract would be breached.

The most common type of executory contract is a lease for real estate, a car, or for business equipment. Contracts for work not yet performed and intellectual property issues (like an author on retainer to write a book) also fall under the executory contract category. All executory contracts must be listed on Schedule G.

Once the bankruptcy case is filed, the debtor or the bankruptcy trustee can reject, affirm, assume or surrender the executory contract. For example, if a bankruptcy debtor was paid a $1,000 deposit on a $10,000 kitchen remodel job, but has not started work, the debtor has a decision to make. The debtor has the option to do the job and honor the contract, or to walk away. Likewise car leases, home rental agreements, and other executory contracts are handled in much the same manner.

If the debtor decides to continue performance (called "assuming" the contract), an assumption of the contract must signed by the debtor and other party and filed with the bankruptcy court. In a Chapter 7 case, an assumption on an executory contract must generally be filed within 60 days of the bankruptcy filing date. The debtor must also pay any past due amount due under the contract in full and show the ability to perform the outstanding contract terms. During the 60 day period, the "other party" to the executory contract is under an obligation to continue performing as if no bankruptcy had been filed.

While many executory contracts are run-of-the-mill type, some can get complex. If you have an executory contract and are considering a bankruptcy filing, discuss your situation with a seasoned bankruptcy attorney. Your attorney can offer solutions to restructure your finances and deal with your executory contract.
 

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.
 

 If you are struggling with debt, chances are you are feeling powerless. Collection agents are skilled at making you feel stressed and hopeless through embarrassing phone calls at work and home; threatening letters; and sometimes legal action. The collection companies want you to feel that your only choice to stop the harassment is to “pay up.”

Fortunately, there is another option. The federal bankruptcy law can stop creditor harassment and put you back in control over your finances. The first way the Bankruptcy Code helps is by imposing an “automatic stay” against collection action against you. The automatic stay is an injunction issued by the United States Bankruptcy Court immediately upon filing your bankruptcy case. No hearing is necessary. This stay applies to creditors whether or not they have actual knowledge of your bankruptcy filing.

The purpose of the automatic stay is to give the “debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.” See Notes of Committee on the Judiciary, Senate Report No. 95-989. The breathing spell provides time for the debtor, the bankruptcy trustee, and the bankruptcy court to get a handle on the debtor’s financial problem and work out an appropriate solution.

The automatic stay prohibits a creditor with a claim that arose before commencement of the bankruptcy case from taking many actions, including:
• contacting the debtor to request payment (stops collection calls)
• initiating or continuing a lawsuit against the debtor (stops lawsuits)
• enforcing a judgment against the debtor (stops wage garnishments)
• repossessing personal property or foreclosing on real estate (stops repossessions and foreclosure)

The automatic stay is a temporary injunction which will last until either the bankruptcy judge lifts the stay at the request of a creditor; the debtor receives a discharge; or an item of property is no longer property of the estate. Lifting the stay requires notice and a hearing. There are a few exceptions to the automatic stay, for instance: the automatic stay does not prevent criminal prosecutions. Likewise the automatic stay does not stop lawsuits to establish or modify alimony, maintenance, or support.

The automatic stay stops creditor collection action immediately, and puts you back in the driver’s seat. The automatic stay provides you time to work out a plan to either discharge or repay your debts, and can also give you leverage when negotiating with your creditors. By working with an experienced bankruptcy attorney, the automatic stay is a powerful tool to restructure your finances and provide you with peace of mind.

 Renting a house or apartment after your bankruptcy discharge can be a little intimidating. Most landlords will run a credit check during the application process, and a bankruptcy may be considered a factor in deciding whether to rent to a prospective tenant. So what can you do to increase your chances of being approved?

First, be prepared to address the issue. How your application is handled will depend on the landlord. If you are dealing with a large apartment complex owned by a distant corporation, ask the manager about the rental process and whether your bankruptcy discharge will disqualify you. The company likely has a policy regarding applicants with bankruptcy on their credit report.

On the other hand, if you are dealing with an individual landlord, you may be able to discuss the circumstances surrounding your bankruptcy filing. An individual landlord will be more flexible and perhaps willing to overlook a bankruptcy filed to discharge overwhelming debt as a result of events outside of your control, such as medical debt, job loss, etc. Demonstrating stable employment, solid references, and a good history of rental payments can go a long way in off-setting the bankruptcy on your credit report.

Finally, money talks! Providing the requested security deposit and paying your rent several months ahead will enhance your chances of being approved. Even a complex with an inflexible policy may be able to make an exception when the tenant is able to pay in advance. The bottom line is that the landlord needs to believe that you will pay your rent on time. The more assurance you can give, the more likely your rental application will be approved.

If you need to discharge overwhelming debt, but worry about how the bankruptcy will affect your credit, your career, or your living situation, consult with an experienced bankruptcy attorney and get the facts. The bankruptcy process is widely misunderstood. An experienced bankruptcy attorney can answer your questions so that you can make a wise decision regarding your debt problem.

Many bankruptcy debtors need a credit card for work. Whether it is necessary for business purchases or travel, it is common for a debtor to ask, “Can I keep one of my credit cards?”

The answer to this question depends on a few circumstances. First, is there a balance on the card? If your card balance is zero on the day that you file your bankruptcy, then the credit card company is not a “creditor” for bankruptcy purposes, and you do not have to list the card as a debt in your bankruptcy schedules. Consequently, the credit card company will not receive notice of your bankruptcy case.

Before you pay down your credit card debt, be advised that substantial payments to creditors shortly before filing bankruptcy could cause a serious problem. Large payments to a creditor within 90 days of your bankruptcy filing may be avoided by the bankruptcy trustee. The trustee could compel the turnover of money paid to your credit card company and then divide it between all unsecured creditors (after the trustee takes a cut, of course). If you are considering a bankruptcy filing, speak to an experienced bankruptcy attorney before making large payments to any creditor.

The second circumstance to consider is, will the credit card company find out about your bankruptcy filing and cancel your card? Credit card companies perform periodic credit checks of customers to minimize risk. You may be able to keep your pre-bankruptcy credit card for a time, but then discover your card has been cancelled at an inconvenient time.

Finally, what type of bankruptcy case are you filing? In a Chapter 13 case, the debtor is prohibited from incurring any new debt without the approval of the trustee and bankruptcy court. Using credit during a Chapter 13 case can land you in trouble with the court, and your case could be dismissed.

Keeping a credit card after bankruptcy is often tricky business. Fortunately, many Chapter 7 debtors receive credit card offers soon after discharge, in some cases from the same companies they recently discharged. The usual advice is to discharge all of your unsecured creditors. If you need a credit card for work, apply for a new card or open a secured credit card account.
 

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.
 

When you file either a Chapter 7 or Chapter 13 bankruptcy case, a “bankruptcy estate” is automatically created. The Bankruptcy Code defines the bankruptcy estate very broadly, and includes all of your legal or equitable interests in property. Your bankruptcy estate is the first step in determining what (if any) assets are available to pay creditors, and the administration of the bankruptcy estate is supervised by the bankruptcy trustee.

Some property is not included in the bankruptcy estate. For example:

The debtor's rights in spendthrift trusts, ERISA qualified retirement plans, and 401K plans are excluded by law from the bankruptcy estate;

Property that is not owned by the debtor, and which the debtor has no right to possess or control, is not part of the bankruptcy estate; and

A Chapter 7 debtor's wages are not part of the debtor's bankruptcy estate.

Property that is not part of a bankruptcy estate is, by definition, beyond the reach of creditors and the trustee.

Property included in the bankruptcy estate is under the supervision and legal control of the bankruptcy court and trustee. While actual possession of the property does not change hands, and you will not see any change in the day-to-day status of your ownership interest, it is important to understand that you are no longer in full control over your property. Selling or transferring property of the bankruptcy estate is prohibited without the court's permission. A tax refund that you are entitled to receive is also part of the bankruptcy estate, so speak to your attorney prior to spending any tax refund money you receive after your bankruptcy case is filed.

Property of the estate is generally protected through state or federal legal exemptions. While exempt property is still technically part of the bankruptcy estate, the legal exemption prevents creditors from collecting from exempt property. In order for a legal exemption to be effective, the property must be sufficiently identified and the appropriate legal exemption applied. Bankruptcy case law is full of examples of lazy debtors who fail to list property (including houses and cars!), and inept attorneys who fail to apply the correct exemption law. Often the bankruptcy courts have little sympathy for such carelessness and will deny the exemption, often costing the debtor thousands of dollars! The moral of the story is: fully disclose all property in your bankruptcy schedules.

In most cases the formation of a bankruptcy estate is simply a formality; the debtor generally is not aware of any change to the status of property rights. However, understanding the creation of the bankruptcy estate can prevent unnecessary complications in your bankruptcy case. The best and safest advice is to consult with your attorney before selling or transferring your property after filing bankruptcy.
 

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. 

On July 25, President Obama addressed the country asking the American public to encourage their Congressmen to raise our nation’s debt ceiling. The debt ceiling is the legal limit on the amount of money the United States can borrow. It is analogous to a credit card spending limit; however, while the limit on a personal credit card may be $5,000, the debt ceiling limit is $14 trillion. The U.S. Treasury estimates that we spend about $120 billion more than we take in each month, and this requires borrowing money each month to make up the difference. Since the United States always pays its bills, it is able to borrow money at the best interest rates. The down-side of this is that borrowed money must be repaid with interest; and the U.S. is spending a great amount of its income on paying interest on its loans. Our nation’s spending is clearly out of control.

Sound familiar?

The interest payments on monthly credit card and loan payments can quickly eat up a family’s (or nation’s) income. Take for example the interest on $30,000 in credit card debt at a 15% annual interest rate. Repaying this debt at a minimum payment rate of $600 each month, this loan would be paid off in 44 years and cost $48,913 in interest charges! The Federal Reserve has a Credit Card Repayment Calculator that you can use free of charge to estimate of how long it will take you to pay off your personal credit card balances.

Just like our national government, many Americans have fallen into a vicious cycle of debt. Instead of paying down their credit balances, they make a monthly payment, then use the available credit for food, gas and other necessities. Fortunately, individual Americans can take charge and stop this debt nightmare. The federal bankruptcy law provides a way to eliminate or repay your debt under the direct supervision and protection of a federal bankruptcy court judge.

The Bankruptcy Code offers two distinct ways to deal with out-of-control debt. First, if you cannot afford to pay back unsecured creditors (e.g. credit cards, personal loans, medical bills, etc.), a Chapter 7 bankruptcy will discharge unsecured debts without repayment. Under Chapter 7, you are able to keep and continue paying on secured debts, such as a house or car loan.

Second, if you have a higher income and are able to pay something to your unsecured creditors, Chapter 13 allows you to pay what you can afford over three to five years. Any unsecured debt remaining at the end of the bankruptcy is discharged. Chapter 13 also has useful provisions that allow a debtor to “cure” past payment on a house or car loan; can strip away an unsecured second mortgage; can “cram-down” an under-secured car loan; and a host of other financial options.

The Bankruptcy Code contains many powerful and flexible options for managing overwhelming personal debt. Whether you need time to repay your creditors, or simply need to rid yourself of the debt, bankruptcy may be the most sensible option. Consult with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help your family.
 

 There are many myths circulating regarding bankruptcy. One of the most popular myths is that a bankruptcy debtor can pick and choose which debts are included in the bankruptcy discharge. This myth is simply the result of a misunderstanding of the discharge process.

When you file bankruptcy you are required to honestly disclose all personal financial information to the best of your ability. That means listing all of your income, expenses, assets, and debts in your bankruptcy schedules. Intentionally failing to list a debt is a very serious matter and the bankruptcy court could deny your discharge if you are less than honest.

In many cases a bankruptcy debtor has a good reason for wanting to continue paying on a debt. The most common reason is to retain property used as security for a loan (e.g. a car or house loan). In bankruptcy, secured property must be paid for or returned. Fortunately, the bankruptcy code allows the debtor to continue paying the secured creditor and keep the property.

In other cases a debtor may want to continue to pay an unsecured creditor. This is normally the case when the discharge of a debt in bankruptcy will cause financial harm to a co-debtor. For instance, you may owe money to a family member that you want to repay. The bankruptcy discharges the legal obligation to pay the debt, and enjoins the creditor from seeking collection. However, while the bankruptcy prevents your family member from asking for payment, it does not prevent you from making voluntarily payments after the bankruptcy.

The same voluntary payment principle applies to medical bills, credit cards, and any other financial obligation. Voluntary payments do not alter the bankruptcy court’s discharge injunction. A discharged creditor is forever prohibited from taking any action to collect on the discharged debt, including asking for payment, sending a bill or statement, or filing a lawsuit against you.

If you need a bankruptcy attorney in Texas, but also want to continue to pay certain debts, discuss your situation with an experienced Texas bankruptcy lawyer. Your attorney can explain your obligations under the federal bankruptcy code, and can help you decide which debts you should pay.

Many clients ask, "When can I stop paying on my credit cards?" The answer seems obvious: immediately. If you are filing bankruptcy and discharging your credit card debt, you are throwing money away by continuing to pay the monthly bill. Right?

But hold on! There are good reasons to consider the consequences before stopping your credit card payments.

First, when will you file your bankruptcy case? Your first step is to work with your attorney to determine the actual date you will file. When a client is filing bankruptcy within 30 days, there are very few repercussions to consider. However, not every bankruptcy client can or should file their case immediately. Some clients may need to wait in order to qualify for Chapter 7 or lower their plan payments in a Chapter 13. Other clients may need to postpone filing to eliminate a potential preference payment issue. Every case is different.

Second, once you miss a payment you can expect collection calls. The creditor may call your home, your cell phone, or even your work phone to discuss your delinquency. These calls are at best an annoyance, and often cause additional stress. Credit card bill collectors know that the more uncomfortable you are, the greater the likelihood that you will pay them. Fortunately, once your bankruptcy case is filed, the telephone calls will stop.

Third, missed credit card payments will damage your credit. While your bankruptcy case will substantially harm your credit, missed payments additionally harm your score making it more difficult to improve your credit after bankruptcy. Some bankruptcy attorneys recommend that their clients can stop credit card payments for six months or longer - until the client is facing a legal judgment. While the bankruptcy stops any lawsuit or collection action, and discharges the credit card debt, the bankruptcy will not erase the history of non-payment.

Finally, a few clients will decide to not file bankruptcy. Clients who stop making credit card payments and later change their minds about bankruptcy are left with late payments, fees, default interest rates, and collection harassment. Be sure you are filing before you stop credit card payments!

Here is the best answer to our question: consult with an experienced bankruptcy attorney before making the decision to stop paying your credit cards. Your attorney can review your finances and uncover any problems that may delay your bankruptcy filing. In many cases the client is able to stop paying credit cards immediately and the case is filed quickly without any negative consequences to the client. However, every case is different and your case deserves the careful attention of a qualified professional. 

The Washington Post recently reported that the Obama administration is not planning another large federally funded program to relieving the troubled housing market. This news comes despite the President's acknowledgement that the billions of dollars already spent to bolster the weak housing market has not solved the problem.

The Post reports that the housing market is suffering from a glut of inventory. The article cites David Stevens, head of the Mortgage Bankers Association, who says that it would take more than nine months to sell all of the homes on the market at the current sales rate. To add to this grim news, industry statistics suggest that more than four million homeowners are having trouble paying their mortgages.

In direct opposition to promises made to the federal government, many banks have been reluctant to write down the balances of underwater mortgages. In some cases banks have misled homeowners into spending their savings with false promises of modifying their mortgages. So what can a homeowner do to take control?

The federal bankruptcy law can restore balance between the struggling homeowner and the bank. Filing a bankruptcy will immediately stop the foreclosure process, and provides time to consider available repayment options. A Chapter 13 bankruptcy case can force a creditor to accept monthly payments for mortgage arrears over a three to five year period. Additionally, an entirely unsecured junior mortgage can be stripped away and included in a discharge as an unsecured debt.

For those debtors with underwater mortgages, the bankruptcy discharge acts as a hammer during the negotiation process. If the lender refuses to negotiate, the homeowner can walk away through a Chapter 7 or 13 bankruptcy discharge with a fresh financial start. Bankruptcy debtors are also eligible to participate in loan modification programs. Finally, a Chapter 7 case provides an opportunity to negotiate a new contract between the lender and borrower in the form of a reaffirmation agreement.

If you are experiencing trouble with your home mortgage, consult with an experienced Texas  bankruptcy attorney and review your options. The federal bankruptcy law provides a distressed homeowner with options to cure a serious financial problem.
 

Discharging student loans through the federal bankruptcy court is extremely difficulty. Since 1978 Congress has increased restrictions on bankruptcy debtors seeking to discharge student loan debt. Today, nearly all student loans are dischargeable only if the debtor can prove that repaying the debt would impose an “undue hardship” on the debtor and his dependents. This standard applies to both federal student loans and private student loans, although a bill was recently introduced in Congress aimed at making it easier to discharge private student loans.

While student loans nearly always impose a hardship on a bankrupt debtor, the bankruptcy courts have interpreted the “undue hardship” standard to be an exceptionally high bar. First, the debtor must file an adversary action and have a hearing to determine whether repayment of the debt would constitute an undue hardship. At that hearing the debtor must show that: 1) the debtor cannot maintain a minimal standard of living and also repay the loan; 2) the debtor’s financial inability to repay the loan is likely to continue for a significant portion of the loan’s repayment period; and 3) the debtor has made a good faith effort to repay the loan. In one particularly harsh case out of Ohio, a bankruptcy judge told a blind debtor receiving $811 each month in social security disability that, “It remains to be seen . . . whether [the debtor] will find work or remain unemployed.” Wallace v. Educational Credit Management Corp., 2010 WL 5764771 (Bky.S.D. Ohio Dec. 1, 2010).

While discharging a student loan debt may be extremely difficult, lenders often find it equally challenging to “prove” the student loan debt during a Chapter 13 bankruptcy case. First, the lender who claims to currently own the debt may not be the original creditor on the contract. The current creditor must then prove that it has standing to collect on the loan. Second, the creditor must also demonstrate the amount owed. Financial records may be hard to produce if the loan has changed hands several times.

Even when bankruptcy cannot discharge or otherwise eliminate your student loans, it can provide some temporary relief. The automatic stay stops all collection action during the bankruptcy case and a Chapter 13 bankruptcy case provides an opportunity to make payments under court supervision. After the bankruptcy case is concluded, non-bankruptcy options are available including deferment, forbearance, loan forgiveness, and income contingent repayment plans. If you are experiencing financial difficulty and have student loans, consult with an experienced bankruptcy attorney and discover your options.
 

 Your bankruptcy filing contains financial information that is accurate as of the day your bankruptcy is filed. This information paints a complete picture of all of your assets, debts, income, and expenses. Generally, the bankruptcy court has jurisdiction over your debts as of the day your bankruptcy petition is filed, called “pre-petition debts.” But what happens if you incur debts after the bankruptcy petition is filed?

The general rule is that post-petition debts are not included in the bankruptcy case. For instance, if you file a bankruptcy case to get rid of credit card debt, but then have a medical emergency the day after filing, the post-petition medical debt is not included in the bankruptcy case. However, the debtor still has options to pay or discharge the medical debt.

First, a Chapter 7 debtor may have two options to discharge the debt: (1) dismiss the case and re-file a second Chapter 7 bankruptcy; or (2) convert the case to a Chapter 13 bankruptcy. Re-filing a bankruptcy case is never a pleasant option, and the second bankruptcy further harms a personal credit file. A Chapter 7 debtor does not have an absolute right to dismiss his case prior to discharge and must “show cause” why the court should dismiss the case.

A second, better option for a Chapter 7 debtor who needs to discharge post-petition debt is to convert the Chapter 7 case to a Chapter 13 repayment case. All debts that arise after the Chapter 7 filing and before the Chapter 13 conversion are included in the Chapter 13 case. Only one bankruptcy case is counted on your credit file, and the post-petition debt may be included in your discharge at the end of the case.

Likewise, Chapter 13 debtors may elect to convert to Chapter 7, if they otherwise qualify. Chapter 13 debtors have an absolute right to dismiss their Chapter 13 bankruptcy case prior to discharge, unlike Chapter 7 debtors. In some cases a Chapter 13 debtor may ask the bankruptcy court to include a post-petition debt in the bankruptcy case. The debtor must file the appropriate motion to include the post-petition creditor in the Chapter 13 repayment plan and file an amended plan providing for full payment of this debt. If the creditor objects to being included in the Chapter 13 repayment plan, the debt will not be added to the plan. However, the creditor is prohibited from collecting the debt until the case is concluded. If the creditor agrees and files a proof of claim, the creditor will then be allowed as part of the Chapter 13 plan.

Post-petition debts can cause a few stumbling blocks for any bankruptcy debtor. Discuss your options with your bankruptcy attorney as soon as you discover any post-petition debt. Acting timely is often a serious consideration and delay could limit your options for paying or discharging your post-petition debt through bankruptcy.

The federal Bankruptcy Code is codified in Title 11 of the United States Code. The Bankruptcy Code contains nine chapters, six of which provide rules for the filing of a bankruptcy petition. However, only four chapters can be used by individuals to file bankruptcy. Each of these four chapters relate top a specific type of bankruptcy case and the individual bankruptcy case is known by the chapter that defines it in the Bankruptcy Code: Chapter 7, Chapter 11, Chapter 12, and Chapter 13. All individual cases under the Bankruptcy Code can be filed as a single or joint married petition.

Chapter 7 is the most common type of individual bankruptcy case. Chapter 7 is sometimes called a “straight bankruptcy” or “liquidation bankruptcy.” When a Chapter 7 case is filed, the debtor is declaring an inability to pay his debts and volunteers whatever non-exempt assets that are available to pay his creditors. Statistically, only about one case in twenty pays anything to creditors in a Chapter 7. In the other 19 cases all of the debtors’ property is exempt under state or federal law, and creditors are paid nothing. The typical Chapter 7 bankruptcy case takes four to six months to complete.

Chapter 13 is a repayment bankruptcy. The debtor is a Chapter 13 case is expressing a desire to pay some or all of his debts over a three to five year period. The Chapter 13 repayment terms are approved by the bankruptcy court and supervised by the bankruptcy trustee. Creditors are paid based upon a priority hierarchy. For instance, owed child support is paid before owed taxes; and owed taxes are paid before credit card debt. The debtor does not lose property during a Chapter 13 bankruptcy. Chapter 13 provides many advantages to Chapter 7, including the opportunity to reduce monthly vehicle payments and catch-up a delinquent mortgage. A Chapter 13 debtor must have a regular income, unsecured debt of less than $360,475 and secured debts are less than $1,081,400.

Chapter 13 is most commonly used by corporations, although an individual may file a Chapter 11 bankruptcy case when the debt limits for Chapter 13 are exceeded. Chapter 11 is in many ways like a Chapter 13 case. 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.

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

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.
 

The Internal Revenue Service has enormous power to garnish a tax debtor’s wages. The IRS does not require a court order to garnish assets or wages, called an administrative levy, and can levy upon wages, bank accounts, social security payments, accounts receivables, insurance proceeds, real property, and, in some cases, a personal residence. The IRS has only a few simple requirements to meet before garnishing wages:

• The IRS must assess a tax debt and send a Demand for Payment;
• The tax debtor must neglect or refuse to pay the tax; and
• The IRS must send a Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the garnishment.

Bankruptcy can stop an IRS tax levy. Under the automatic stay provisions of the federal Bankruptcy Code, once a bankruptcy case is filed, the IRS must stop garnishing the tax debtor’s wages. The relief is immediate, whether or not the IRS knows about the bankruptcy filing. If wages are garnished after the bankruptcy case is filed, they must be returned immediately. This legal injunction continues until the bankruptcy discharge is entered, the case is dismissed, or the stay is lifted by the bankruptcy court.

Some tax debts can be discharged in bankruptcy. In general, an income tax debt may be discharged if the tax is more than three years old. Additionally, if the income tax debt is discharged, any tax penalty is also discharged. If the underlying tax debt is not discharged, in some cases the tax penalty may be discharged.

Even when a tax debt cannot be discharged, a tax debtor may find relief through the bankruptcy process. Since the IRS cannot garnish wages during the bankruptcy case, a tax debtor may delay a tax levy for up to five years by filing a Chapter 13 bankruptcy. During that time some or all of the tax debt can be repaid and no new tax penalties will accrue.

In some cases the debtor may consider filing bankruptcy and then making the IRS an Offer in Compromise for any non-dischargeable tax debt. The IRS will not consider an Offer in Compromise during a bankruptcy case. After the bankruptcy has discharged, the IRS will consider an Offer in Compromise, and, in many cases, the recent bankruptcy filing will serve as powerful evidence of the inability of the IRS to collect on the tax debt.

The federal Bankruptcy Code can protect you from IRS garnishment and can help you resolve your tax debt. Bankruptcy can provide you with time to repay your obligation, without the threat of IRS seizure or garnishment; or, in some circumstances, can permanently discharge your tax debt. Your bankruptcy attorney can explain your legal rights and the available opportunities to free yourself from your income tax burden.
 

The purpose of a Chapter 7 bankruptcy is to liquidate all of the debtor's non-exempt property to pay creditors, and to legally discharge any remaining debt the debtor is unable to pay. The creditors get whatever the law allows them to take from the debtor (usually nothing), and the debtor gets a fresh financial start, without the heavy burden of debt.

While a Chapter 7 bankruptcy case will discharge many types of debts, there are 19 categories of debts that Congress has identified as not dischargeable (called "excepted from discharge"). A complete list of the 19 categories is below:

1. Most taxes. In some cases tax debt can be discharged. For instance, if an income tax debt is more than three years old, it may be dischargeable.
2. Debts incurred through false pretenses. This category includes debts for luxury goods or services within 90 days before the bankruptcy was filed, and cash advances within 70 days before filing.
3. Unlisted debts, if the failure to list the debt prevented notice to the creditor and an opportunity to file a claim or object to the discharge of the debt.
4. Debts for fraud or embezzlement.
5. Most domestic support obligations (including alimony, spousal maintenance or child support).
6. Debts for willful and malicious injury caused by the Debtor.
7. Government fines and penalties.
8. Student loans, unless the debtor can show that repayment of the student loan poses an undue hardship on the debtor and debtor’s dependents.
9. Debts resulting from DWI.
10. Debts which were or could have been listed in a previous bankruptcy and which were not discharged.
11. Debts owed to a spouse or ex-spouse arising from a divorce or separation. In some cases these debts are dischargeable.
12. Association dues for the Debtor’s interest in her home.
13. Debts incurred to pay non-dischargeable state or local taxes.
14. Federal election law fines and penalties.
15. Property settlements owed to a former spouse or to a child.
16. Condo or homeowner’s association fees.
17. Certain fees imposed on prisoners by a court.
18. Loans on pensions.
19. Certain debts arising from securities violations or wrongful acts of a fiduciary.

Some of these debts can be discharged under certain circumstances. Some of these debts may also be eligible for discharge or reduction in a Chapter 13. If any of these categories apply to one of your debts, speak with your attorney to determine how the bankruptcy discharge will impact the debt. Your Texas bankruptcy attorney will propose options for eliminating, reducing, or paying the debt. 

The steady increase in bankruptcy filings since 2005 may have finally leveled off. According to the American Bankruptcy Institute and National Bankruptcy Research Center, fewer individual bankruptcy cases were filed during the first six months of 2011 than the same period in 2010.

“The drop in bankruptcies for the first half of the year shows the continued efforts of consumers to reduce their household debt, and the overall pull back in consumer credit,” said Samuel J. Gerdano, executive director of the American Bankruptcy Institute. The statistics show an overall 7.9% decrease: 709,303 personal bankruptcy filings this year versus 770,117 filings in 2010. More than 1.5 million personal bankruptcy cases were filed last year.

However, not all states are reporting a decrease in bankruptcy filings. Southwestern states, the hard-hit by the housing crisis, are still reporting high bankruptcy rates. Nevada remains the state with the highest number of bankruptcies per capita, although Nevada bankruptcy filings have fallen 16% this year compared to 2010. Bankruptcy filings have dropped significantly in Vermont, West Virginia, North Dakota and Washington, D.C.

So does bankruptcy actually help? Yes! Over 6.2 million personal bankruptcy cases have been filed since 2005, and many of these bankruptcies were filed as joint husband and wife cases. Our national adult population is around 250 million, so a ballpark estimate is that one adult out of 30 filed bankruptcy from January 2006 to July 2011. The national rate of repeat filers is around 10% (different sources estimate this rate at between 8% and 13%), so only one out of ten needed federal bankruptcy relief again. The rest were able to reorganize their finances and move on to a better future.

If you cannot pay your monthly expenses and need debt relief, consult with an experienced Texas bankruptcy attorney and explore your options under the federal Bankruptcy Code. The bankruptcy laws contain many powerful provisions that can assist you in reorganizing your finances, eliminating overwhelming debt, and give you financial peace of mind.
 

Much of an individual's bankruptcy case revolves around the date the case was filed, also called the petition date. On that date the debtor submits a financial snapshot of his income, expenses, assets and debts. Many aspects of a bankruptcy case depend upon the circumstances present on the petition date.

For most bankruptcy debtors, what happens after the date of the filing does not significantly impact the bankruptcy case. However, in some cases circumstances may necessitate a change. Sometimes it doesn’t make sense to continue with the original Chapter 13 bankruptcy case, especially when the debtor is unable to meet the financial obligations ordered in the Chapter 13 repayment plan. When this happens the debtor should discuss three options with bankruptcy counsel: (1) obtaining a hardship discharge; (2) conversion to Chapter 7; and (3) dismissal of the case.

A hardship discharge discharges the debtor before completion of the plan term, and may be available when income suddenly drops and is not expected to improve in the near future. The debtor must show that the income reduction was beyond his control and that the creditors have received as much as they would have if the case had been a Chapter 7 bankruptcy.

Conversion to Chapter 7 is often contemplated when the debtor is unable to pay for a home he was trying to save in the Chapter 13 case. In order to qualify for conversion to Chapter 7, the debtor cannot have received a Chapter 7 discharge within the last eight years, must meet certain income guidelines, and the conversion must be filed in good faith. A debtor converting from Chapter 13 to Chapter 7 may include any debts that arose between the Chapter 13 filing and the Chapter 7 conversion. Additionally, money paid to the Chapter 13 trustee, but not yet distributed to creditors, is returned to the debtor (minus the trustee’s expenses).

Finally, the debtor may consider the advantages of dismissal. Unlike a Chapter 7 case, a debtor has an absolute right to dismiss a Chapter 13 bankruptcy case. Because no discharge was entered in the case, the debtor may be eligible to re-file the case as either a Chapter 7 or Chapter, although some restrictions may apply.

If you have difficulty making your Chapter 13 payments, or find yourself with circumstances that have significantly changed, consult with your Texas bankruptcy attorney and discuss your options. The federal Bankruptcy Code is very flexible and contains options to assist you in your path to financial recovery. 

 Bankruptcy is a legal process to relieve the burdens of unmanageable debt. By filing a bankruptcy case an individual receives time to reorganize finances, either by repayment or discharge of debts. After a bankruptcy discharge a person is in an improved position to pay financial obligations and build a better financial future.

Businesses also benefit from the federal bankruptcy laws. In some cases a company may decide to close its doors permanently and liquidate, but in many cases a company files bankruptcy for the same reasons an individual may file: for time to restructure its finances.

Recently, the Los Angeles Dodgers filed a Chapter 11 reorganization bankruptcy case. Instead of “bleeding Dodger Blue” as Dodger Hall of Fame manager Tommy Lasorda is famous for saying, the Dodgers have been hemorrhaging red ink. The Dodgers are the tenth major sports team in North America to file for bankruptcy protection. The list includes five Major League Baseball teams, and six National Hockey League teams:

Seattle Pilots (later the Milwaukee Brewers)(MLB), 1970
Pittsburgh Penguins (NHL), 1975
Cleveland Barons (later Dallas Stars)(NHL),1978
Baltimore Orioles (MLB), 1993
LA Kings (NHL), 1995
Pittsburgh Penguins (NHL), 1998
Ottawa Senators (NHL), 2003
Buffalo Sabres (NHL), 2003
Chicago Cubs (MLB), 2009
Phoenix Coyotes (NHL), 2009
Texas Rangers (MLB), 2010
Los Angeles Dodgers (MLB), 2011

Filing bankruptcy does not prevent future success. For individuals, much like businesses, life goes on. In 1999 the Pittsburgh Penguins won the Stanley Cup, a year after filing its second bankruptcy case. The Texas Rangers played on to reach the World Series the same year the team went through bankruptcy.

Bankruptcy is not the end of the road; it is a chance to legally adjust your debts and give yourself a second chance. Notice that with the exception of the Cleveland Barons, who merged with the Minnesota North Stars in 1978, all of the teams still exist. The North Stars moved to Dallas and won a Stanley Cup in 1999.

If you are struggling with debt, consider a bankruptcy filing to give yourself a second chance and a fresh start. Call one of our Texas bankruptcy lawyers at (214)890-0711 today to learn how the federal law can help keep you in the game.

There is no denying it: the bankruptcy process is unpleasant. It is not easy to meet with an attorney, disclose detailed information about your personal finances, or file a federal bankruptcy case to discharge debts. However, bankruptcy is a legal remedy that can help an individual who desperately needs relief from an overwhelming debt burden. The bankruptcy process can turn around an unhealthy situation and put you on a course to financial well-being.

Some clients ask whether bankruptcy will destroy their credit score. Well, the short-term answer is, "Yes." In the short-run your credit score will drop and it takes time and patience to recover. Typically, one to two years of responsible post-bankruptcy credit management is required before a credit score is returned to the "average" range.

While the immediate drop of your credit score after bankruptcy is sharp, the effect on a credit score from debt negotiation can be slow and painful. Debt settlement is known by many names including “debt settlement” or “credit counseling” and includes any debt relief program in which the creditor receives less than full payment or agrees to terms different from the original credit contract. During any settlement or repayment program missed or late payments are reported to the credit bureaus until the debt is satisfied. If the debt is settled for less than full payment, your credit report will negatively reflect that the creditor settled for less than 100%. This could mean years of negative reporting before your credit can start to recover. Additionally, you may receive a tax bill for any debt amount that was settled. The IRS calls this a "forgiven debt" and considers the savings as part of your income.

On the other hand, a Chapter 7 discharge takes around four months, start to finish. At the end the debt is discharged, and your credit report will state that the debt was "discharged in bankruptcy." The federal law dictates that the report of bankruptcy is the last negative information that can be recorded on your credit file concerning a discharged debt. You can start rebuilding your credit immediately after your discharge and without the burden of unpaid debts.

If you are considering bankruptcy to relieve you of financial difficulty, speak with a qualified and experienced bankruptcy attorney. The federal bankruptcy law offers powerful protections for individuals struggling with debt. Call (214)890-0711 and learn how a Texas bankruptcy lawyer can quickly eliminate your debt.
 

Recently the U.S. Bankruptcy Court for the Central District of California, the nation's largest bankruptcy court, ruled that the federal Defense of Marriage Act violates the equal-protection clause of the U.S. Constitution. In a decision signed by 20 judges, the court found that “there is no valid governmental basis for DOMA.” The case is In re: Balas and Morales, and can be read here.

The Balas case centers on a gay male couple in California who filed a joint Chapter 13 bankruptcy case seeking federal protection from their creditors as a married couple. Gene Balas and Carlos Morales were legally married in California in 2008 and are still legally married, despite the enactment of Proposition 8 in California. The Bankruptcy Code provides that any individual and his or her spouse may file a joint bankruptcy case. However, the U.S. Trustee’s office sought dismissal of the case, citing the Defense of Marriage Act which does not recognize same sex marriages.

The Central District of California Bankruptcy Court found that there is “no valid governmental basis for DOMA,” and that the law “violates the equal protection rights of the debtors as recognized under the due process clause of the Fifth Amendment.” The Obama administration has stated that it believes the Defense of Marriage Act (DOMA) violates the Constitution, and has reportedly ordered the Justice Department and bankruptcy trustees to stop defending the DOMA in court.

While other federal judges around the country have declared DOMA unconstitutional, this 20 judge signed opinion sends a clear and powerful message. This decision may have a far-reaching impact on similar cases in Massachusetts, Connecticut and Washington, D.C., where same-sex marriage is legal.

The federal law is not always clear, and is constantly changing. If you are struggling with debt and need bankruptcy assistance, get the help you need by consulting with an experienced bankruptcy attorney. Your bankruptcy attorney can guide you through the bankruptcy process to a successful resolution. Call today and discover how the federal laws can work to your advantage. 

It is important to have a clear understanding of which bills to pay after your Chapter 7 bankruptcy case is filed. Of course, every case is different and the specifics of your case and your debts should be discussed with your attorney. However, in most Chapter 7 bankruptcy cases payments for unsecured debts are generally stopped, while payments on secured debts and household expenses are continued.

First, dischargeable unsecured debts, like medical bills and credit cards, will generally be included in your discharge. Unsecured debts are financial obligations that are not backed by property. A signature loan is unsecured, while a car loan is usually secured by the car. If you don't pay, the bank repossesses your car. Because your unsecured debts will be discharged by the bankruptcy court, there is no negative consequence to nonpayment before the discharge. Additionally, after the bankruptcy case is filed, the creditor is prohibited from reporting anything negative on your credit report other than the inclusion of the debt in your bankruptcy.

Second, utility bills and household expenses should be paid. This includes your rent, your cell phone bill, your electric bill, etc. If you are behind on these bills and need time to catch-up, speak with your attorney regarding legal options. Monthly bills that are incurred after your bankruptcy filing date are not included in the bankruptcy case.

Third, pay secured debts that you wish to keep, such as your home mortgage or a vehicle loan. Failure to make these monthly payments may result in repossession after the bankruptcy case is concluded. Again, if you have trouble making these payments, speak with your attorney.

Finally, domestic support obligations such as child support must be paid. Likewise, it is a good idea to continue any non-dischargeable court-ordered payments.

The best advice is to discuss future creditor payments with your attorney when you sign your bankruptcy case. Your attorney can identify creditors that should be paid, and those that your can stop paying. 

Preparing to file bankruptcy is about as fun as preparing for a tax audit. Fortunately, the preparation is the most difficulty part of the bankruptcy process, and the end result of your bankruptcy case is financial relief, rather than a potential tax bill. To get you started on the right track, here are four tips for preparing to file bankruptcy:

Stop Using Credit Cards
If you are considering bankruptcy, you are likely already insolvent. Using credit when you cannot repay the creditor may be fraudulent. Your credit card charges may be found nondischargeable in bankruptcy, or, at worst, you could be charged with a criminal act. The safest advice is to stop charging immediately.

Assemble Important Documents
You will need to verify your identity and social security number with the court, usually in the form of a government issued photo I.D. and a Social Security Card. Additionally, the bankruptcy trustee may want to see important legal and financial documents, such as:
Pay stubs
Business income and expense records
Income tax returns for the past two years
Retirement and investment accounts
Life insurance policies
Vehicle titles and loan paperwork
Home documents such as deeds and notes

Collect Information Regarding Your Debts
Collect your monthly bills and obtain a copy of your credit report. A free (no-strings-attached) credit report can be obtained from www.annualcreditreport.com. If you do not have paper documentation concerning a debt, write down the name and address of the creditor, and the amount owed.

Find a Bankruptcy Attorney
Bankruptcy is a powerful legal and financial tool to help the honest individual who is overwhelmed with debt. However, this federal process can be very complicated and you need the guidance of an experienced bankruptcy attorney. Your attorney can help you make decisions before and during the case, and create a plan for you to get back on your feet after bankruptcy. Your attorney understands the bankruptcy laws and procedures and can take advantage of the streamlined nature of the bankruptcy system. Debtors represented by experienced counsel can expect their cases to proceed quickly and smoothly to resolution, without surprises. Don’t go it alone! Ensure your fresh start by hiring a skilled bankruptcy attorney.

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.
 

 The federal bankruptcy process is streamlined to provide timely financial relief to deserving individuals. A Chapter 7 “erase-your-debts-and-start-fresh” bankruptcy generally takes a mere 4-5 months, start to finish. The debtor discharges burdensome unsecured debt, and may get additional relief by restructuring secured debts.

A trustee is assigned to each bankruptcy case. The trustee has hundreds of cases each month to review, and a bankruptcy judge will preside over thousands of bankruptcy court cases. Consequently, the Chapter 7 process relies heavily upon the honesty and candor of the debtor who is required to accurately account for all income, expenses, assets and debts. The vast majority of debtors are honest, but the Department of Justice (DOJ) estimates that one out of ten cases have some element of fraud attached to it. When fraud is suspected, bankruptcy trustees aggressively investigate and use the resources of the DOJ, the FBI, and the IRS.

Bankruptcy fraud carries a maximum penalty of 5 years in prison and a $250,000 fine. Those convicted on federal bankruptcy fraud charges spend an average of 31 months in prison. Still, some people never learn. . .

The Portland Division of the FBI recently issued a press release concerning a bankruptcy debtor’s guilty plea to fraud charges. Viengkham Virasak, 44, of Corvallis, Oregon, incurred debt in his family members’ names and then filed bankruptcy cases in their names. Virasak actually discharged $87,500 in debt, and then filed other bankruptcy cases when he was discovered.

In May, former baseball player Lenny Dykstra was indicted on bankruptcy fraud charges. The indictment alleges that Dykstra took and sold items from his $18 million mansion after filing for bankruptcy protection. Once an individual files Chapter 7 bankruptcy the assets of the individual become part of a “bankruptcy estate” which is the responsibility of the trustee. The trustee claims that “Dykstra stole and destroyed more than $400,000 worth of property in the estate.”

Bankruptcy fraud is serious business. Dishonest acts during bankruptcy could cause the court to deny your discharge, or you may face criminal charges. Whatever your financial situation, it is best to discuss your options with an experienced bankruptcy. The bankruptcy laws are written to help the honest, but unfortunate debtor. Your attorney can work to achieve the best legal result possible and keep you out of trouble.

An individual's lifetime is filled with highs and lows. Take for example the life of auto maker Henry Ford. Ford worked for years as an engineer for Thomas Edison's company, where he experimented with gasoline engines. At age 36 he started his first car company, the Detroit Automobile Company, which went bankrupt two years later. A few years later he formed the Henry Ford Company, but clashed with his partners and was forced out. The Henry Ford Company was renamed Cadillac. Ford then formed a partnership, the "Ford & Malcomson" company, but again ran into financial trouble. Ford reincorporated this company as the Ford Motor Company and, well, you know the rest of the story. At the height of his wealth, Henry Ford was worth almost $200 billion in today's dollars.

The federal bankruptcy law gives Americans like Henry Ford a second chance. In the 1918 U.S. Supreme Court case of Stellwagen v. Clum the Court stated:

“This purpose of the act has been again and again emphasized by the courts as being of public, as well as private, interest, in that it gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

Bankruptcy attorneys refer to this second chance opportunity as a "fresh start." It is a financial "do-over" and many Americans have taken advantage of the bankruptcy law to reorganize their finances and go on to a better future, including Mark Twain, Walt Disney, and Donald Trump. Financial distress can happen to anyone - just like Abraham Lincoln and Harry S. Truman who suffered devastating business failures before becoming our 16th and 33rd Presidents.

Bankruptcy is a legal process that allows an individual time to repay or entirely discharge overwhelming debts. It is supervised by a federal bankruptcy judge, and overseen by a trustee appointed by the U.S. Department of Justice. If you have bills you cannot afford to pay, bankruptcy may be the legal remedy you need. Discuss your fresh start options with an experienced bankruptcy attorney.  

 When a bankruptcy case is filed, information about the case is reported on the individual’s credit file. The report lists the date filed, the type of bankruptcy case (i.e. chapter 7, 11, 12 or 13), the case number, the case status, and closing date. The federal Fair Credit Reporting Act (FCRA) permits credit reporting agencies to keep this information on an individual’s credit report for up to ten years. Note that the FCRA does not mandate that reporting agencies list the bankruptcy for ten years; only that bankruptcy information must be removed from the individual’s credit report at that time.

Each credit reporting agency has its own policy regarding the length it reports a bankruptcy case as a public record. In general, Chapter 7 cases are reported for ten years and Chapter 13 cases are reported for 7 years. However, the FCRA does not distinguish between Chapter 7 and Chapter 13 cases and a bankruptcy case under either chapter may be reported for up to ten years.

The FCRA is very clear regarding when the ten year period commences. Credit reporting agencies are directed to exclude bankruptcy case information from an individual’s consumer report ten years after “the date of entry of the order for relief.” The “order of relief” is a bankruptcy term defined in Section 301 of the Bankruptcy Code as the date the bankruptcy case is filed. The day the bankruptcy case is filed is the day the ten year clock begins to run. For instance, if a case is filed on January 1, 2012, then the bankruptcy record must be removed from a credit report before January 1, 2022.

Knowing the time limitation for reporting your bankruptcy information is an important part of the “fresh start” promised by the bankruptcy laws. Filing bankruptcy does not brand an individual for life; bankruptcy relieves the individual of overwhelming debts and provides the opportunity for a second chance at a better future. If you need a financial fresh start, discuss your options with an experienced bankruptcy attorney.

Individuals are required receive credit counseling from an approved agency within 180 days before the bankruptcy filing date. This requirement was enacted in 2005 as part of the Bankruptcy Abuse Prevention and Consumer Protection Act, and is meant to encourage debtors to pursue non-bankruptcy alternatives. In reality, pre-bankruptcy credit counseling has no impact on the number of bankruptcy cases filed.

In a few limited circumstances credit counseling is not required. These circumstances are identified by the federal law as:

(1) incapacity where the person is so impaired by reason of mental illness or deficiency that the individual is incapable of making rational decisions;
(2) disability where the person is so physically impaired that the individual is unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing session; or
(3) active military duty in a military combat zone (currently Arabian Peninsula Areas, Kosovo area, and Afghanistan).

The law allows individuals to receive credit counseling after the bankruptcy filing under the following conditions:

(1) exigent circumstances exist that merit a waiver;
(2) the individual requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services during the 5-day period before filing bankruptcy; and
(3) the request and explanation is satisfactory to the court.

Note that procrastination, inability to pay for the counseling, incarceration, etc. are not part of this list. The bankruptcy court is very reluctant to approve waivers except in the most extreme circumstances. A pending lawsuit or foreclosure alone is not enough.

Only agencies approved by the Department of Justice’s U.S. Trustee Program can issue pre-bankruptcy credit counseling certificated that are accepted by the bankruptcy court. Each agency is required to provide the service free of charge if you cannot afford to pay the credit counseling fee. Otherwise, the agency will charge a fee of around $50. The session will last approximately 60 to 90 minutes and includes an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and may include a personal budget plan. This counseling session may take place in person, on the phone, or online.

Once your credit counseling session is completed, a certificate is issued which must be filed with your bankruptcy case. Failure to complete the credit counseling or file the certificate will result in the dismissal of your bankruptcy case.

Your bankruptcy attorney will recommend trusted credit counseling agencies. Discuss the credit counseling process with your attorney if you have questions. Do not overlook this mandatory credit counseling! 

The Bankruptcy Code is divided into several chapters that relate to specific bankruptcy actions. The two most common types of individual bankruptcies are found in Chapter 7 and Chapter 13 of the Bankruptcy Code. The choice of filing a case under one of these chapters depends on a number of variables and the individual’s financial circumstances.

A Chapter 7 case is sometimes described as an “erase your debts and start fresh bankruptcy.” The basic concept of a Chapter 7 case is that creditors receive whatever they are legally entitled to collect on the date the bankruptcy case is filed. Legal exemptions protect most or all of a Chapter 7 debtor’s property, so creditors generally receive nothing. Unpaid unsecured debts (e.g. credit cards, medical bills) are discharged at the end of a Chapter 7 case. The debtor must choose whether to continue paying for a secured item such as a car or house, or surrender the property and discharge the debt. A typical Chapter 7 bankruptcy case will take around four months, start to finish, and the debtor will not lose any property.

In a Chapter 13 case the debtor repays all or part of her debts in installments to creditors over three to five years. The repayment period cannot exceed five years. The debtor proposes a plan to repay creditors based on the debtor’s projected income. The plan is reviewed by creditors, who may file objections, and is approved or denied by the bankruptcy court. At the end of the repayment plan, many creditors who are not paid in full are discharged. The debtor does not lose property during a Chapter 13 bankruptcy, but must pay creditors an amount equal to what they would have received in a Chapter 7 case.

Some individuals choose to file Chapter 13 to have the opportunity to repay debts over time, like a vehicle or house payment. In some cases Chapter 13 can lower or eliminate these payments. In some rare cases individuals are disqualified from Chapter 7 because their household income allows them to pay a portion of their unsecured debts.

If you are unable to pay your creditors, discuss your options with an experienced bankruptcy attorney. The Bankruptcy Code is very flexible and efficient at reducing, restructuring, and even eliminating debts you can’t afford to pay. The bankruptcy chapters allow you and your attorney to make decisions that can lead to a better financial future for you and your family.
 

 The U.S. Treasury Department has developed an online calculator to assist homeowners in determining eligibility for assistance under the federal Home Affordable Modification Program. HAMP is a federally funded program that defines the process for borrowers who are in default, at risk of imminent default, or in foreclosure to modify their home mortgage to a more affordable monthly payment targeted at 31 percent of their monthly gross income. The HAMP calculator, found at CheckMyNPV.com, is designed to calculate the net present value (NPV) of their mortgage, and can be used by homeowners prior to applying for a HAMP modification with their lender. The NPV is a formula used to determine your eligibility for a loan modification under the HAMP Program. The Treasury Department cautions that the calculator “provides only an estimate of a servicer's NPV evaluation and is intended for use only as a guide.”

Unveiling the calculator at CheckMyNPV.com is the latest move to streamline the HAMP process. It comes on the heels of an announcement by the Treasury Department to require that servicers designate a single point-of-contact through the entire default resolution process.

If you are behind on your mortgage payments, or can’t afford your current mortgage payment, you have options! In addition to the federal bankruptcy laws, HAMP is one of several government programs that are available to homeowners in distress. In some cases, bankruptcy can provide time for the homeowner to negotiate lower payments with the lender, repay mortgage arrears, or even strip away a second or third mortgage loan.

The housing bubble has burst, but that doesn’t mean the fallout must rain down all over you and your family. Protect your home by taking advantage of the legal processes in place to refinance, modify, or discharge your home debt. Speak with an experienced bankruptcy attorney and discuss your legal options.

Recently the State of Minnesota sued one of the largest collection agencies in the U.S. alleging the company used false and unreliable mass-produced affidavits as proof in consumer debts lawsuits. The suit was filed by the Minnesota Attorney General and states that Midland Funding, LLC and Midland Credit Management “aggressively filed thousands of lawsuits against individual citizens for collection of old, purchased debt, often supporting those lawsuits with 'robo-signed' affidavits.” The Minnesota lawsuit seeks an injunction to stop the fraudulent practice, and $25,000 in fines per occurrence. The Midland companies named in the lawsuit are subsidiaries of San Diego based Encore Capital Group, Inc., a publicly traded company. Reuters reports that “through year-end, [Encore] had invested about $1.76 billion to buy 33 million accounts with a face value of $54.7 billion, or about 3 cents on the dollar.”

Minnesota Attorney General Lori Swanson stated in the complaint that Midland workers signed up to 400 affidavits a day without reading them. Business affidavits are often the only evidence used against an individual in a collection case. Earlier this year the federal government issued sanctions against 14 banking organizations for robo-signing documents used in the foreclosure process, citing a serious “pattern of misconduct and negligence.” These unreliable and often false affidavits can pervert the judicial process, in some cases causing judgments for money not owed or a foreclosure by a bank that does not hold the mortgage note.

If you are facing a lawsuit or foreclosure, speak to an experienced bankruptcy attorney and discuss your options. In some cases you may have a non-bankruptcy legal defense or the opportunity to resolve the debt without further litigation. Additionally, the bankruptcy process may be able to save your home or discharge a large collection account. Do not be the victim of the fraudulent practices of banks and collection agencies. Learn your legal rights and protect your property, income, and peace of mind!

 Joseph P. Kennedy, Sr., patriarch of the Kennedy clan, was fond of saying, “When the going gets tough, the tough get going.” If you are struggling with overwhelming debt, the kind that keeps getting tougher and tougher, isn’t it time to “get tough” and “get going” on solving your financial problems?

Taking control of financial trouble is always good advice, and bankruptcy can be a useful tool in managing debt. Last year over 1.5 million individuals took control and filed bankruptcy, according to the National Bankruptcy Research Center. In fact, a recent survey concluded that one in eight American adults has either filed or contemplated filing for bankruptcy. Findlaw.com, an internet legal site, conducted this telephone survey of 1,000 adults and found that 13% of the responses have considered bankruptcy to remedy their financial difficulties.

When you file a bankruptcy case, you shift the balance of power from creditors and bill collectors to your side. The federal bankruptcy laws stop collection activity dead in its tracks. While your bankruptcy case is pending creditors are prohibited by the federal law from taking any collection action against you, including harassing telephone calls or any legal action. Bankruptcy is an opportunity to reorganize your finances by eliminating debt, or repaying some or all of your debts over three to five years.

Bankruptcy is not only the end of many financial troubles, it is also a new beginning. Attorneys refer to the bankruptcy process as a “fresh start,” and it can mean a second chance at living your life without the suffocating pressures of debt. Many debtors are able to quickly rebuild their credit, and often qualify for competitive rate home and auto loans within two or three years after the bankruptcy discharge.

Don’t let debt be your master. Speak with an experienced bankruptcy attorney and take control over your finances. A “fresh start” bankruptcy discharge may be the legal remedy you need to shape a better financial future for your family.

 Most debts are included in a Chapter 7 bankruptcy discharge. Not only are unsecured debts like medical bills and credit cards included, but secured debts like your vehicle loan and home mortgage are also part of the Chapter 7 discharge. The Chapter 7 bankruptcy discharge eliminates your personal obligation to pay a creditor, but does not generally strip away a secured creditor’s right to collect against the loan collateral. In plain English, a secured creditor must be paid or the property securing the debt must be returned.

Many times Chapter 7 debtors want to keep property used as collateral for a loan and opt to execute a bankruptcy reaffirmation agreement. The reaffirmation agreement is a new contract between the Chapter 7 debtor and the secured creditor in which the debtor agrees to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy. The secured creditor agrees to not repossess the property. Reaffirmation agreements are only available to Chapter 7 debtors.

To reaffirm a debt the agreement must be filed with the bankruptcy court before the bankruptcy discharge is entered. The Bankruptcy Code requires that the debtor file a statement of current income and expenses that demonstrates the debtor’s ability to afford the terms of the reaffirmation agreement without creating an undue hardship for the debtor or the debtor’s family. It is important to carefully consider whether a reaffirmation agreement is right for your family. Reaffirming a debt means that the debtor remains personally liable for any subsequent default on the loan, and can be sued or have the property repossessed. When it is clear that there is not enough income to afford the debt, the bankruptcy court may not approve the agreement.

A reaffirmation agreement is a new contract and the parties are able to change the terms of the original agreement. This can mean a lower interest rate or a longer payment term to make the monthly payments more affordable. Creditors are sometimes agreeable to these changes because the alternative is a costly repossession.

Filing Chapter 7 bankruptcy does not mean that you will lose your car, house or other property. Most bankruptcy debtors keep all of their property. A reaffirmation agreement is just one way Chapter 7 debtors can keep property during bankruptcy. An experienced bankruptcy attorney can explain the legal options for discharging your debts and retaining your property.

 Many individuals report that filing bankruptcy was the best choice they ever made. The Bankruptcy Code provides powerful relief for those buried in debt. Let’s look at the top five provisions in the Bankruptcy Code

Number 5: Redemption/Cram-Down of a Vehicle
A Chapter 7 debtor may redeem a personal vehicle by paying the fair market value of the vehicle, and discharge the remaining vehicle debt. While the redemption process requires a lump sum payment, there are several companies that offer redemption loans. Additionally, Chapter 13 debtors may “cram down” a vehicle loan to the value of the vehicle. The crammed-down debt is then paid off during the Chapter 13 repayment period. While there are restrictions for both the Chapter 7 redemption and Chapter 13 cram-down processes, many debtors are able to take advantage of these powerful provisions and save thousands of dollars.

Number 4: Lien Stripping a Second Mortgage
Lien stripping a junior mortgage during Chapter 13 bankruptcy has become a very popular option for underwater homeowners. Lien stripping is authorized when the value of the home is less than the amount of the senior mortgage(s). For instance, if your home is worth $200,000 and the amount of the first mortgage is $210,000, any junior mortgage can be stripped off in Chapter 13 bankruptcy. The stripped off debt is now considered unsecured and receives the same treatment as your other unsecured creditors.

Number 3: Chapter 13 (or 11) Repayment Plan
The Chapter 13 repayment plan provides time to pay creditors over three to five years. Most Chapter 13 debtors pay little or nothing to unsecured creditors (e.g. credit cards or medical bills), while paying off mortgage arrears, vehicle payments, taxes, and other secured or nondischargeable debts. The Chapter 13 repayment plan is way to restructure your finances under the supervision and protection of the federal bankruptcy court.

Number 2: Automatic Stay / Co-Debtor Stay
The automatic stay is one of the most powerful and far-reaching provisions in the American legal system. The filing of a bankruptcy case triggers this federal legal protection that automatically stops all legal processes and collection actions. State and federal lawsuits must stop, garnishments must stop, repossessions and foreclosures must stop. This stay is an opportunity for the bankruptcy debtor to reorganize finances without the pressures of creditor collections. Non-filing co-debtors are also protected during a Chapter 13 bankruptcy which may last up to five years.

Number One: Bankruptcy Discharge
The bankruptcy discharge is a federal court order prohibiting the collection of pre-bankruptcy debts. Discharged debts are no longer legally enforceable against the debtor. The bankruptcy discharge is the foundation of bankruptcy’s “fresh start.” The discharged debtor can begin the rebuilding process free from the pressures of overwhelming debt. The bankruptcy discharge is permanent and never expires.

Bankruptcy offers many powerful protections tools to reshape your finances. Get the facts today from an experienced attorney and learn how bankruptcy can help your family build a better financial future.

 The bankruptcy discharge is an extremely powerful court injunction that prohibits creditors and collectors from attempting to collect on a discharged debt. So what is included in your Chapter 7 discharge? The typical answer is “all debts incurred prior to the bankruptcy that are not excepted from discharge,” but that answer does not really explain what debts are included in the discharge. Let’s take a look at some categories of debts and how these debts are affected by the Chapter 7 discharge:

Unsecured debts are the easiest type to discharge during a Chapter 7 bankruptcy. Unsecured debts are not backed by collateral and include signature loans, credit cards, payday loans, medical bills, utility bills, old cell phone bills, and deficiency balances from repossessed cars and foreclosed homes. Identify all of your unsecured creditors during your bankruptcy case to ensure that all of your unsecured debts are discharged.

Secured debts are also discharged during Chapter 7 bankruptcy. Common secured debts are auto loans, mortgages, and personal loans backed by collateral. While a secured debt may be discharged by the Chapter 7 case, the secured creditor may still repossess the collateral. The general rule is that secured items must be either paid or the collateral surrendered back to the secured creditor. The most common method to keep secured property is to execute a reaffirmation agreement during the bankruptcy case. In this agreement, you keep the property and remain obligated to pay the monthly bill, and the creditor agrees to not repossess the collateral. If you do not desire to keep the collateral, you may surrender the property back to the creditor and discharge the debt.

The Bankruptcy Code lists 19 categories of special status debts that are automatically excepted from the bankruptcy discharge. Some of the more common of these debts are:
• certain tax debts
• debts not identified in the bankruptcy
• alimony, maintenance, or child support
• debts for willful and malicious injury to a person or property
• government fines and penalties
• student loans
• debts caused by DWI
In some cases the debts in the above categories can be discharged. If you have a special status debt, be sure to discuss your options with your bankruptcy attorney. Additionally, a debt may be excepted from the bankruptcy discharge if the creditor can show that the debt was incurred by fraud. A creditor is required to make the fraud complaint to the court within a certain time or the debt will be discharged.

A Chapter 7 bankruptcy discharge is a powerful legal tool that provides a financial fresh start. It is important to discuss the details of the bankruptcy discharge with your attorney before you file your bankruptcy to ensure that you understand how the Chapter 7 discharge will affect all of your debts. While most debts are discharged at the end of the Chapter 7 case, knowing which survive will allow you to plan your financial future.

 An individual can become confused by certain terms used during a bankruptcy case. Today’s article will help explain some of these confusing terms in plain language:

Bankruptcy Estate – consists of all of the debtor’s legal or equitable interests in property at the time the bankruptcy case is filed.

Means Test –a calculation of the debtor’s income and expenses to determine the ability to pay creditors. A debtor who fails the Means Test is presumptively disqualified from filing a Chapter 7 bankruptcy case and must file either under Chapter 13 or 11. Sometimes passing the Means Test is a matter of a few simple adjustments.

No-Asset Case - a Chapter 7 case where there are no assets or funds to pay unsecured creditors

Nondischargeable Debt –a debt that is not included in the bankruptcy discharge, usually a type of debt identified by law (e.g. child support, certain taxes, etc.)

Petition –refers to the papers filed with the court that commences the bankruptcy case. The date the bankruptcy was filed is often called the Petition Date.

Pre-Petition / Post-Petition – identifies the time of a bankruptcy-related activity. For instance, a debt that was incurred prior to the bankruptcy filing date is a “pre-petition” debt. Income earned after the date of the bankruptcy filing is called “post-petition” income.

Preference –a debt that was paid prior to the bankruptcy when the debtor was insolvent and unable to pay other creditors. Preference payments should be avoided. Discuss any pre-bankruptcy payments with your attorney.

Proof of claim – the creditor’s claim and verification of a debt filed during a Chapter 11, 13, or Chapter 7 asset case.

Secured Debt - a secured debt is backed by a mortgage, pledge of collateral, or other lien. If the debt is not paid, the debtor has a right to collect against specific property. For instance, a car loan may pledge the car as collateral for the loan. If the borrower fails to make the payments, the lender can repossess the car. Common secured debts are auto loans, mortgages, and personal loans secured by household items.

Trustee – the individual assigned to administer the bankruptcy case. Usually an accountant or attorney, the trustee is not the bankruptcy judge.

Unsecured Debt – an unsecured debt is not secured by property. A signature loan, most credit cards, and medical bills are common types of unsecured debts.

 A common question from clients preparing to file bankruptcy is, “Do I have to list it?” “It” can be an item of property, a financial obligation, a source of income, or even a reoccurring bill. The simple answer is, “Yes!” You must list all of your assets, debts, income and expenses. The bankruptcy process expects and relies on honest disclosures from the debtor. These financial disclosures are made under oath and threat of perjury. You must disclose everything.

Disclosing ownership of an asset doesn’t mean you will lose that property. Statistically, only four percent of all Chapter 7 bankruptcy cases have an asset that is turned over to the trustee. Federal and/or state exemption laws protect most property during bankruptcy, however property exemptions are only recognized when the asset is listed and the legal exemption is properly claimed. An asset that is concealed during your bankruptcy case will not receive the full protection of the exemption laws.

Likewise, disclosing income does not mean that you will be forced into a Chapter 13 repayment case. Most debtors pass the means test without much effort. In the remaining cases, most only require small adjustments. Disclose all of your income early during the bankruptcy process, and your attorney can discuss your legal options for discharging unsecured obligations without filing a Chapter 13 repayment case.

Intentionally failing to disclose a debt means that the debt is not discharged. Unfortunately, it also means that you have committed perjury since you attested to having listed all of your debts. Perjury is a federal crime, and you may be denied a discharge. Occasionally a debtor wants to omit a creditor from the bankruptcy case. Your attorney can help you with this decision. For instance, a credit card with a zero balance is not a debt and there is no disclosure requirement. In theory, since the credit card company is not listed as a creditor, it does not receive notice of the bankruptcy, and the credit relationship is not disturbed. Realistically, the credit card company will discover the bankruptcy independently and may restrict the account.

When it comes to bankruptcy it is important to be completely honest with your attorney. Your attorney can advise you on making the best disclosure decisions while staying within the legal requirements of the bankruptcy laws. Don’t hide a financial fact! Discuss it with your attorney and protect your legal rights.

 Certain debts have been given special status by the Bankruptcy Code and are generally excluded from the debtor’s bankruptcy discharge. Child support obligations, student loans, and income tax debts are three of the most common types of debts that are not dischargeable. However, each of these debts may be eligible for discharge in bankruptcy under certain circumstances.

The rules for discharging an income tax debt can be complicated, and the debtor’s ability to discharge all or a portion of the tax debt or penalties may depend on whether the case is filed under Chapter 7 or Chapter 13 of the Bankruptcy Code. An income tax debt arises from a tax return for a particular tax year. In general, an income tax debt for a particular tax year may be discharged if the following criteria are met:

1. The due date for filing the tax return was at least three years prior to the bankruptcy filing date. This due date includes any extensions.

2. The tax return was filed at least two years prior to the bankruptcy filing. This date is the time the return was actually filed with the IRS.

3. A tax assessment was made at least 240 days prior to the bankruptcy filing. The tax assessment is usually measured from the IRS proposed assessment sent to the taxpayer.

4. The tax return was not fraudulent, and the taxpayer has not attempted to evade the tax laws. Dishonest taxpayers do not receive the benefits of the bankruptcy laws.

Taxes that do not meet the above criteria are not included in the bankruptcy discharge. This includes income tax debts from unfilled tax returns. Even if the IRS assessed a tax many years ago, if the taxpayer failed to file a return, the debt is not dischargeable.

When an income tax debt is discharged in bankruptcy, any tax penalty is also discharged. However, in some cases the tax penalty may be discharged, even when the tax debt itself is not discharged. For instance, in a Chapter 7 case tax penalties are discharged if the penalty is associated with a tax debt more than three years old. In a Chapter 13 case all unsecured tax penalties are dischargeable, and receive the same treatment as all other unsecured debts during the term of the bankruptcy repayment plan. If the debtor is repaying a tax debt through the Chapter 13 bankruptcy case, no new tax penalties will accrue.

The federal bankruptcy laws contain specific provisions for discharging income tax debt. Bankruptcy can provide you with time to repay your obligation, without the threat of IRS seizure or garnishment; or, in some circumstances, can permanently discharge your tax debt. Your bankruptcy attorney can explain your legal rights and the available opportunities to free yourself from your income tax burden.

 Individuals struggling with financial difficulty experience many forms of debt-related stress. Harassing phone calls, embarrassing collection letters, lawsuits, garnishments, foreclosure, repossession . . . financial distress can become a personal nightmare! Fortunately, there are federal laws that can help. A bankruptcy debtor receives several powerful legal protections during the course of a bankruptcy case that provide instant relief.

When an individual hires a bankruptcy attorney, the federal Fair Debtor Collection Practices Act (FDCPA) prohibits third party collectors from contacting the individual directly and must direct all communications to the attorney. The FDCPA provides immediate relief from collector harassment while preparing to file a bankruptcy case. This law applies to all third party collectors, such as collection agencies or attorneys, but does not prevent an original creditor from attempting to collect. While the FDCPA does not prevent a lawsuit, repossession, or foreclosure, the involvement of a bankruptcy attorney may delay these processes.

Debtors receive additional relief once the bankruptcy case is filed. The bankruptcy “automatic stay” becomes effective as soon as the case is filed. This stay is a temporary injunction automatically issued by the federal bankruptcy judge and prohibits all collection activity (with a few very narrow exceptions). The automatic stay is effective throughout the duration of the bankruptcy case, but can be modified or terminated by the court after a hearing. This powerful protection stops all creditors and collectors dead in their tracks, and stays court processes such as a lawsuit, garnishment, repossession, or foreclosure.

At the conclusion of nearly all consumer bankruptcy cases the court will issue a permanent injunction prohibiting creditors from collecting on pre-bankruptcy debts. This injunction is known as the “bankruptcy discharge” and relieves the debtor’s legal obligation to pay the creditor. The discharged creditor may not take any collection action against the debtor, which includes contact by phone or mail.

If you are experiencing creditor harassment, speak with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can provide immediate relief. Your attorney can help restructure your finances to shape a better financial future. Call today and get the help you need.

 Modern bankruptcy laws permit the debtor to keep certain property necessary to maintain a modest standard of living. These laws, called exemptions, protect property from collectors so that the debtor has a reasonable chance at a fresh financial start after bankruptcy. However, while these protections afford the honest debtor a fresh start, some individuals try to get a head start by transferring property in an attempt to hide it from the bankruptcy process. As you can guess, concealing assets from the federal bankruptcy court is a bad idea.

Section 548 of the Bankruptcy Code endows the bankruptcy court trustee with the power to undo a fraudulent transfer made within two years of the bankruptcy filing. Fraudulent transfers include any transfer made with the intent to hinder, delay, or defraud creditors; or transfers made while the debtor is insolvent which do not involve a fair value exchange. While the lookback period is set at two years by section 548, another section of the Bankruptcy Code (section 544) permits the trustee to apply state law to undo a fraudulent transfer. In many cases the state law lookback period is longer than two years.

There is generally no issue if you have sold property and received a fair price. However, if you have transferred property in a less than honest fashion, the transfer may be undone. For instance, if you sell your car worth $5,000 to your brother for $500, and then file bankruptcy two months later, the trustee may seize the car from your brother and sell it to pay your creditors. Likewise, deeding jointly owned real estate to a non-filing spouse prior to filing bankruptcy can create a thorny legal dilemma.

Every individual bankruptcy case must include a Statement of Financial Affairs which asks the debtor to list all property transferred within two years before the bankruptcy filing. It is important to answer this question honestly, and to discuss any recent property transfer with your bankruptcy attorney.

If you are considering bankruptcy, consult with an experienced bankruptcy attorney and discuss your legal exemptions. In many cases your attorney can legally protect your property without the need to sell or transfer. Your attorney can advise you on the best course of action to protect your property and restructure your financial obligations.

 Individuals file bankruptcy cases for many reasons. For many Chapter 13 debtors and nearly all Chapter 7 filers, the primary goal is to receive a bankruptcy discharge. The bankruptcy discharge is a court order which discharges your legal obligation to pay a creditor for a debt incurred before your bankruptcy filing. Your discharge is a permanent injunction prohibiting creditors from collecting pre-bankruptcy debts from your personally. The bankruptcy discharge is very powerful and is the cornerstone of the financial fresh start promised by the federal bankruptcy laws.

It is important to recognize that the bankruptcy court’s discharge order only discharges your legal responsibility to pay a creditor. The debt is not forgiven, eliminated, or otherwise erased. It still exists, but is no longer legally enforceable against you. The creditor is forbidden from suing you, or contacting you in any way. The discharge injunction also applies to any subsequent collection agency or attorney who purchases or is assigned the discharged debt.

While the discharged creditor cannot get its money from you, the creditor is not prevented from collecting from any other person legally responsible for the debt. For instance, if your mother co-signed for a personal loan, and the debt is discharged during your bankruptcy case, the creditor may still collect from your mother.

Likewise, a discharged creditor may be able to collect from property subject to a legal lien. For instance, if you discharge a car loan, the lien holder may repossess the vehicle after the bankruptcy case. This collection action is against the property, not against you individually.

Some debts are excluded from your bankruptcy discharge. Certain types of obligations are excluded from the discharge, like child support; and other debts, like taxes, can only be discharged under certain conditions. Debts that arise after your bankruptcy is filed are called “post-petition debts” and are not included in the discharge.

While your bankruptcy discharge is a powerful legal protection, it is important to understand the extent of the discharge order. Be sure to have your attorney identify any debt that is not discharged and your continuing financial obligation.

 A recent study shows that one in four borrowers have trouble repaying their student loans. The study was released by the Institute of Higher Education Policy, a Washington nonprofit organization, and reveals that 26 percent of borrowers who entered repayment in 2005 became delinquent within the first five years of repayment, and 15 percent of borrowers defaulted. That means 41 percent of borrowers are either delinquent or in default on their student loans during the first five years!

Student loans are generally not dischargeable in bankruptcy. However, in some extreme situations, the bankruptcy court can determine that repaying the student loan debt will create an “undue hardship” on the debtor. This standard is very difficult to meet and requires the debtor to prove that he or she is unable to pay anything towards the student loan debt and maintain a minimum standard of living, and that this condition is likely to continue. Individuals who are totally and permanently disabled, and are unable to work will sometimes meet the requirement for an “undue hardship” discharge.

If you are unable to pass the undue hardship test, there are other options. First, during a bankruptcy a student loan collector is strictly forbidden from taking collection action against you. Interest will accrue and is added to your loan balance at the conclusion of the bankruptcy case.

Second, if the student loan was delinquent, but not defaulted when you filed bankruptcy, your account will be re-aged at the end of your case. A loan is not in default until it is delinquent for 270 days. The bankruptcy stay may give you an opportunity to restructure your finances to afford your repayment terms. If the student loan was defaulted prior to the bankruptcy, the lender may offer you a loan rehabilitation program.

Third, there are repayment options after your bankruptcy case ends. One of the more popular programs is the Income Based Repayment Plan which limits your loan repayment to 15% of your income and offers loan forgiveness after 25 years of repayment (or 10 years for public service employees).

If you have student loans that you cannot afford, speak with an experienced bankruptcy attorney and explore your financial options. Your attorney can explain how the federal laws can help you eliminate, manage, or restructure your debts, including your student loans.

 Bankruptcy fraud comes in many forms. One relatively unusual practice combines bankruptcy fraud with identity theft. In one case, a couple used the names and social security numbers of their infant grandchildren to run up debt, and then filed bankruptcy. In another case, a person used a stranger’s social security number to file a bankruptcy and delay her eviction. While these acts are federal crimes which can land the offender in jail, the victim of bankruptcy fraud faces an expensive and time-consuming road to rehabilitating his or her credit.

If you have been the victim of bankruptcy fraud, your first call should be to the U.S. Bankruptcy Trustee’s Office. The U.S. Trustee will refer the case to the F.B.I., and in many cases the U.S. Trustee’s Office will assist a victim of bankruptcy fraud. Unfortunately, the procedure for removing a fraudulent bankruptcy can take time. First, the bankruptcy case must be reopened. A bankruptcy case may be reopened “to administer assets, accord relief to the debtor, or for other cause.” Rule 5010 of the Federal Rules of Bankruptcy Procedure grants standing to the victim of identity theft to file a motion to reopen the bankruptcy case.

After the bankruptcy case is reopened, the victim must ask the bankruptcy court to expunge the fraudulent bankruptcy case. The victim must allege and prove harm done by the fraudulent bankruptcy filing. This will involve allegations of harm to the victim’s credit history, as well as the harm done to creditors and to the public by the false and misleading record.

Once the bankruptcy case has been expunged from the victim’s record, there is still the matter of repairing the credit file. The Fair Credit Reporting Act requires consumer credit reporting agencies to adopt reasonable procedures for verifying and maintaining accuracy of their records. Once a bankruptcy has been expunged, the FCRA requires the credit bureau to remove that record from the credit file.

Failing to take these steps to remove a fraudulent bankruptcy filing from your record can have lasting consequences. The bankruptcy is a public record that can be found by creditors and employers, and can only be expunged by the bankruptcy court. While the bankruptcy filing may be actually fraudulent, the credit bureau can report the false record for ten years, unless it is expunged.

If you have been the victim of bankruptcy fraud, report the fraud at once to the U.S. Bankruptcy Trustee’s Office. The bankruptcy trustee will investigate the fraud, and can assist you in the procedure to file the proper motions with the bankruptcy court.

 A loan is “secured” when property is pledged by the borrower as collateral. Should the borrower fail to repay the loan, the collateral is taken by the lender and sold to repay the debt. There are two types of secured loans: (1) purchase money security interest loans; and (2) non-purchase money security interest loans.

Purchase money security interest loans (PMSI) occur when the lender loans money that the borrower uses to purchase a specific item and the lender retains a secured interest in the item. This is commonly the case with motor vehicles. The bank lends to the borrower for the specific purpose of purchasing an identified vehicle, and the bank takes a lien on the vehicle. PMSI loans cannot be discharged in bankruptcy. However, under certain circumstances a PMSI loan can be “crammed down” by the bankruptcy court so that the amount owed is equal to the value of the collateral.

Non-purchase money security interest loans (NPMSI) occur when the borrower already owns property that is used as collateral for a loan. For instance, a borrower may take a loan from a finance company and use household goods and/or jewelry as collateral for the loan. The bankruptcy laws allow the debtor to exempt (up to a certain amount) household goods and jewelry, so the NPMSI loan can be avoided to the extent that the loan impairs the legal exemption.

For example, let’s say that you take a loan from a finance company for $500 and secure it with your television worth $400. If you apply your legal household goods exemption to protect the full value of your television ($400), the finance company’s loan impairs the exemption. After the bankruptcy court grants a Motion to Avoid Lien filed by your bankruptcy attorney, the television is fully protected and the creditor is left with an unsecured loan.

The bankruptcy laws contain many powerful provisions for protecting property. If you are in debt and need legal relief, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can discharge your debts, safeguard your property, and provide the financial fresh start you need.

Three bankruptcy courts will participate in a pilot program to assist unrepresented bankruptcy filers. Courts in New Mexico, New Jersey, and Los Angeles, California were selected for the Pro Se Pathfinder Project, a computer software program that assists do-it-yourself bankruptcy filers in completing the bankruptcy petition, schedules, and forms. In an article published in the Albuquerque Journal, Norman H. Meyer Jr., clerk of the bankruptcy court for the District of New Mexico stated, “We want this to be more user friendly with a sort of Turbo Tax approach.”

The mechanics of filing the case are relatively easy and the courts attempt to make the process as accessible as possible. However, the Administrative Office of the U.S. Courts warns, “[w]hile individuals can file a bankruptcy case without an attorney or ‘pro se,’ it is extremely difficult to do it successfully.” A 2009 study by Emory University found that dismissal rates in Chapter 7 pro se cases were higher than those with representation, and that trend has increased since the new bankruptcy laws took effect in 2005.

Filing a bankruptcy case without an attorney is a tricky proposition, and the pro se debtor is ill-equipped to perform a pre-bankruptcy legal analysis of the case. This analysis includes an assessment of property, income, expenses, and debts. Often a small adjustment to one of these categories can mean a huge difference in the outcome of the case. For instance, delaying a bankruptcy filing by a few weeks or even months may mean the difference between a three to four month bankruptcy case with no payments, and a three to five year bankruptcy case costing thousands.

The paperwork filed in a typical bankruptcy runs between 30 and 40 or more pages. The information provided in this paperwork largely dictates the outcome of your bankruptcy case. Often the pro se debtor is under a tremendous amount of stress or must act quickly to file the bankruptcy to protect property from creditors. Consequently, the pro se debtor is apt to make mistakes that can impact the case.

An experienced attorney will perform a pre-bankruptcy legal analysis of your financial situation and discuss strategies to maximize the positive benefits of your bankruptcy case. Additionally, an experienced bankruptcy attorney has office processes and procedures to eliminate mistakes in your case.

If you are considering filing bankruptcy, don’t go it alone. The benefits of having experienced counsel to represent you will save you money, stress, and provide peace of mind. Your case will be handled professionally and effectively. Don’t risk losing your chance at a fresh start. Call today for a consultation.
 

 Some individuals are reluctant to use the federal bankruptcy process to legally adjust an unmanageable personal financial condition. Many of these people view bankruptcy as a personal failure, something to be avoided at all costs. In truth, bankruptcy is not a declaration of failure; it is simply the recognition of an inability to pay creditors. This may be caused by financial mismanagement; or it may result from illness, job loss, or another catastrophic event beyond your control.

The United States has historically been called as a country of second chances and opportunity. Consequently, it is not surprising that the United States is more forgiving of failure and ready to give the honest person a second chance. In 1934 the Supreme Court stated that the purpose of bankruptcy law to give the “honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort.” Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). Bankruptcy attorneys often refer to this "new opportunity" as a financial "fresh start” that is provided by the bankruptcy discharge.

Bankruptcy is not about the end of something, it is the beginning. It is a chance to restart without the burden of unmanageable debt. Bankruptcy is, what some of today’s economists call "failing forward." When a person files bankruptcy, she is using the law to restructure her finances so that her chance of future success is more likely. American humorist Will Rogers once said, "Good judgment comes from experience, and a lot of that comes from bad judgment." Obviously, a large part of "failing forward" is not repeating past mistakes, but mostly it is giving yourself, now wiser and armed with good judgment, a second chance to do better.

If you are struggling with unmanageable debt and need to legally restructure your finances, consult with an experienced bankruptcy attorney. The federal bankruptcy laws can provide a second chance at a bright financial future, and an escape from a life buried in debt.

In every consumer bankruptcy case there are three categories of fees: (1) attorney fees; (2) bankruptcy filing fees; and (3) credit counseling fees. The attorney fees are negotiated between yourself and your attorney. Attorney fees are generally paid up-front in Chapter 7 cases. In Chapter 13 cases, your attorney may require a partial payment of the attorney fees before filing your case. Attorneys may elect to be paid the remaining amount in equal monthly installments through the Chapter 13 plan.

Bankruptcy filing fees are the same throughout the country. For a Chapter 7, the filing fee is $299. For a Chapter 13, the filing fee is $274. Typically the filing fee is paid at the time of filing, although there are exceptions to this rule. In some cases the filing fee may be paid in installments, and the filing fee may be waived altogether for extremely poor debtors. Bankruptcy filing fees are the same whether a debtor files a single or joint husband and wife bankruptcy.

The Bankruptcy Code requires each consumer debtor to receive credit counseling from a nonprofit budget and credit counseling agency approved by the United States Trustee within 180 days of filing a bankruptcy. This counseling fee is around $50.00 per household and is available in-person, by telephone, or over the internet.

The Bankruptcy Code also requires that the debtor complete an "instructional course concerning personal financial management." This class is also available in-person, by telephone, or over the internet for a fee around $35.00 per filer.

If you are in need of debt relief, but are afraid that you cannot afford the legal fees, schedule a free consultation with an experienced bankruptcy attorney and discuss your financial situation. The bankruptcy process is surprisingly affordable and there are strategies that your attorney can employ to make the process more affordable for your budget. 

 The federal bankruptcy laws do not limit the number of times an individual can file for bankruptcy protection. When an individual is facing overwhelming debt and needs relief from creditors, the bankruptcy laws provide powerful protection. In some cases that protection can be a discharge of debt. In other cases, it means an opportunity to repay what is owed.

An individual may file multiple bankruptcies for many reasons. When a discharge of debt is needed, the federal law limits time between discharges. After you receive a discharge in a previous Chapter 7 bankruptcy case, you must wait 8 years before you can receive another Chapter 7 discharge; and 6 years to receive a Chapter 13 discharge. If you received a discharge in a previous Chapter 13 bankruptcy case, you must wait 4 years before you can receive a Chapter 7 discharge; and 2 years to receive another Chapter 13 discharge.

The above time periods are measured from the date the previous case was filed. For instance, if you filed a Chapter 7 bankruptcy on June 1, 2005, then on June 1, 2013 you will be eligible to file a Chapter 7 bankruptcy case and receive a discharge. However, on June 1, 2011 you are eligible to file a Chapter 13 bankruptcy and receive a discharge.

In some cases a discharge is not needed. A debtor can file a Chapter 13 bankruptcy and repay debts without receiving a discharge. In this situation there is no legal limitation between bankruptcy cases. This strategy is especially useful when faced with non-dischargeable debts that must be fully paid. The obligation is paid over time under the supervision and protection of the bankruptcy court. In some rare cases of abuse a bankruptcy court will deny the debtor relief. This may occur when a debtor has shown a history of repeated bankruptcy filings that have been dismissed.

If you have received a discharge and need the protection of the bankruptcy laws for a second time, discuss your situation with an experienced bankruptcy attorney. The bankruptcy laws are meant to help the honest, but unfortunate debtor and can help you straighten out a difficult financial dilemma.

One of the most serious questions a client may ask is, “If I file Chapter 7 bankruptcy, can I keep my vehicle?” Like many simple, straight-forward legal questions, there are no simple, straight-forward legal answers. However, while each case is different, the vast majority of bankruptcy debtors keep their vehicles during Chapter 7.

Keeping a vehicle during Chapter 7 bankruptcy starts with a simple accounting: is the fair market value of the vehicle more than the amount owed on the loan? In other words, does the debtor have equity in the vehicle? If there is no equity in the vehicle, the Chapter 7 trustee cannot take and sell it since there is no benefit to the unsecured creditors.

On the other hand, if there is vehicle equity, that equity must be protected otherwise the trustee can take and sell the vehicle to reach the unprotected equity. The vehicle’s equity may be protected by one or more legal exemptions. The total amount of exemptions available to a debtor is determined by state and/or federal law and varies from state to state, and case to case. In some cases the ownership of the vehicle may protect the vehicle’s equity, such as in cases of joint ownership with a non-filing party.

If the vehicle has unprotected, non-exempt equity, the debtor has a few options. First, instead of taking and selling the vehicle, the trustee may accept a cash payment. Generally this cash payment is less than the amount of available equity, because there are actual costs involved in selling the vehicle. Second, the debtor may consider a Chapter 13 bankruptcy. A payment equal to the amount of non-exempt equity must be paid to the debtor’s unsecured creditors during the Chapter 13 plan, but this payment is stretched over 36-60 months. Third, the debtor may choose to allow the trustee to sell the vehicle. Any claimed exemption will be paid to the debtor from the proceeds of the sale. Finally, the debtor may choose to trade or sell the vehicle prior to bankruptcy and use any proceeds for necessary household expenses.

The truth is that it is rather unusual for a debtor to have a vehicle equity issue during Chapter 7 bankruptcy. If you have a vehicle with a great deal of equity, your bankruptcy attorney can discuss your options for keeping your vehicle and protecting your equity. 

You should obtain a copy of your credit report immediately after receiving your bankruptcy discharge. Federal law entitles you to one free credit report from the “big three” credit reporting agencies, Experian, Equifax, and TransUnion, every twelve months. The easiest way to obtain your free credit report from each of these agencies is by visiting AnnualCreditReport.com.

After receiving your free credit reports, check each report for errors. First, any debt discharged by your bankruptcy should be listed as “Discharged in Bankruptcy” with a “Zero Balance.” Second, there should not be any negative activity reported after the date that you filed your bankruptcy case. This includes any new collection agency report after your filing date. Third, any debt that was reaffirmed should not be listed as “Discharged in Bankruptcy,” and should list your on-time payments. Finally, in some cases inaccurate information will be reported. For instance, a car voluntarily surrendered back to a creditor during a bankruptcy is not a “repossessed vehicle” and should not be reported as such.

Correcting any errors on your credit report is simple and easy. Each reporting agency has procedures from contesting erroneous information, either by mail or on-line. Once the credit agency has updated its records, it must issue you a free corrected report. Review this new report for errors; do not assume that the report has been correctly amended. You may need to correspond with the agency several times and supply documentation regarding your bankruptcy case. It is your responsibility to ensure that your credit report is accurate. Neither the bankruptcy court, nor your attorney, nor your creditors are responsible for sending the credit reporting agencies information regarding your bankruptcy case.

Updating and correcting your credit reports is the first step on the road to rebuilding your credit after bankruptcy. Fortunately, this step is free and takes very little effort. Be sure to correct your credit reports and then closely monitor your credit regularly for the first two years after your bankruptcy discharge. With timely payments and by carefully protecting your credit file, your credit score will increase quickly.
 

A new federal rule set to take effect on May 1, 2011, will increase protection for exempt funds in a garnished bank account. Federal law already protects many federal benefits, but it is currently the responsibility of the individual to claim these funds as exempt. Often the bank will freeze a bank account pursuant to an order and the individual must request a court hearing to release the funds.

Under this new Treasury Department rule, an electronic tag will be added to automatic deposits from government agencies. These funds include Social Security, Supplemental Security Income (“SSI”), Veteran’s Administration (“VA”) benefits, federal Railroad Retirement, federal Railroad Unemployment and Sickness benefits, federal Civil Service Retirement benefits and federal Employee Retirement System benefits. Banks are required to exempt all tagged deposits made during the previous two months and protect those deposits from garnishment. The consumer is no longer required to take any action to claim or identify exempt funds. The rule makes banks not liable to creditors for refusing to garnish the tagged funds, even if the money is co-mingled with other non-exempt money.

The National Consumer Law Center estimates that more than 1 million people each year have accounts garnished that contain exempt federal funds. Recipients are often sick or elderly and may be forced to forego needed food and medicine when an account is frozen.

This new rule applies to all federally chartered federal and state banks and credit unions. While there is no cap on the amount of protected funds, the automatic protection only applies to the previous two months. Exempt funds must be deposited electronically to receive the identifying tag. Deposits made by paper checks are still exempt, but the bank is under no obligation to identify these funds or protect them from garnishment. The rule does not apply to military retirement or state issued benefits.

There are many powerful consumer protection laws. If you have a judgment against you and are at risk of a bank or wage garnishment, consult with an experienced bankruptcy attorney and discover how the law can help. Your attorney can discuss your legal options to make the best of a bad situation.
 

Remember that time is money.
Benjamin Franklin (1748)

Several years ago Ian Walker, a professor of economics at Warwick University in England, developed a mathematical formula to show the personal cost of an activity like mowing your lawn or washing your car. The formula looks like this:

V=(W((100-t)/100))/C
V is the value per hour;
W is your hourly wage;
t is your tax rate (e.g. 15%, 20%, etc.)
C is the local cost of living, which is a baseline of 1.0. If you live in an area that is 50% more expensive than the national average, use 1.5

For a person making $20.00 per hour, and a tax rate of 25%, the value per hour is $15.00, or $.25 per minute. Spending an hour mowing your lawn is therefore a value over paying the neighbor boy $30. So let’s look at whether representing yourself in a bankruptcy case is a “value.”

A represented debtor in a Chapter 7 bankruptcy must at minimum collect financial information; spend time with counsel during the initial interview and petition signing; complete credit counseling; attend the 341 meeting; and complete a course in financial management. A pro se (Latin meaning “for himself”) bankruptcy debtor must spend time on these things as well. However, the pro se debtor has a lot to learn including applicable exemption laws, and the bankruptcy rules and procedures. Setting that “learning time” aside for the moment, let’s look at some actual administrative costs the pro se debtor must perform “for himself:”

Time spent preparing the petition. Even the simplest petition will take the pro se debtor time to read the instructions and properly prepare the schedules. Your bankruptcy attorney uses sophisticated petition preparation software and is skilled at completing these forms. 6 hours.

Most pro se debtors drive to the bankruptcy court to personally file the bankruptcy case, and must pay the filing fee with cash, a cashier’s check, or money order. Your bankruptcy attorney has access to the court’s electronic filing system and can file your case within minutes from the office. Time 2 hours.

Extra time at the 341 meeting. The trustee will schedule extra time to spend on your case. Usually, pro se cases are set at the end of the trustee’s docket, so you will have to wait extra time for your examination. 30 minutes.

Communications with the trustee. The trustee generally requires income information, bank records, tax records, vehicle titles, recorded deeds, and other information. The bankruptcy attorney will provide these documents to the trustee while a pro se debtor must prepare and send them. 2 hours.

Communications with the bankruptcy court. The clerk’s office at the bankruptcy court can assist a pro se debtor on certain procedures, but is prohibited from giving legal advice. Pro se debtors generally spend a considerable amount of time on the phone with the clerk’s office. 2 hours.

The pro se debtor’s total so far for these simple administrative activities is 12.5 hours, or $187.50. Now let’s add the time spent researching the bankruptcy laws and processes; and the time spent on correcting or amending the bankruptcy pleadings. Additionally, the bankruptcy judge requires that any pro se debtor must appear personally in court to reaffirm a debt - an appearance is not required for represented debtors. This “extra” time can easily amount to another 40 hours!

The moral of this story is: the representation provided by your experienced bankruptcy attorney is not an expense, it is a savings! By having a licensed, experienced bankruptcy attorney handling your case you will get peace of mind and your case will be handled efficiently without surprises. The actual cash savings to the pro se debtor is small at best, while the truth is that many pro se cases experience problems that result in lost property or case dismissal. Don’t be “penny wise and pound foolish.” Hire qualified counsel and get the legal relief you need.

Any claim that a debtor may have at the time a bankruptcy case is filed is considered an asset and must be disclosed to the bankruptcy court. This includes lawsuits that are currently pending in court or through an administrative process, and those that are not yet filed. Social Security Disability claims, Worker’s Compensation claims, unemployment claims, class action lawsuits, and personal injury lawsuits are all claims that must be disclosed to the bankruptcy court.

Keeping any money obtained from a legal claim (after settlement or adjudication) depends on several factors. For instance, if the bankruptcy case is a Chapter 13, the debtor does not lose any property, but must pay unsecured creditors an amount equal to the value of non-exempt property. Another factor is whether the claim or any money received from the claim is “property of the bankruptcy estate.” Some legal claims, like retroactive social security benefits, are protected by law and are excluded from the debtor’s bankruptcy case. Money from a legal claim may be protected using federal or state law exemptions. In some cases a claim is entirely exempt; in other cases a claim is protected only to a certain dollar amount.

The Bankruptcy Code states that the debtor must disclose “all legal or equitable interests” in property as of the date the bankruptcy case is filed. The debtor who fails to report an interest in a claim and later receives money is at risk of losing the entire payment. The bankruptcy judge and trustee will be very reluctant to permit a debtor to keep money that was hidden from the court, and the court is likely to disallow any claim of exemption. In some extreme cases, the trustee may complain that an omission is intentional and ask to revoke or deny a discharge on the basis of fraud!

The federal bankruptcy laws contain powerful protections for the honest debtor. It is extremely important to discuss any pending or potential claim with your bankruptcy attorney. Reporting any claim is the first step in protecting any money from turnover to creditors. Your attorney can also cooperate with any concurrent litigation to maximize your recovery.

Debt collectors can be ruthless. Persistent telephone calls at home and work, embarrassing letters in red envelopes, calls to friends and family, and even public posts to your Facebook account are all dirty tactics that debt collectors employ to harass you into paying. Fortunately, there are laws that protect you from unlawful creditor harassment.

The Fair Debt Collection Practices Act, or FDCPA, is a federal law that protects against abusive collection practices by third party collectors. Third party collectors include collection agencies and collection attorneys. The FDCPA does not apply to business debts or to original creditors. The FDCPA prohibits certain abusive practices including:

* Telephone calls before 8 a.m. or after 9 p.m. (your time);
* Requesting payment beyond what is actually owed;
* Using abusive, profane or obscene language;
* Threatening legal action which is not permitted by law (e.g. criminal action);
* Telephone calls at work after being instructed that your employer prohibits phone calls
from debt collectors;
* Contacting you directly after being instructed that you are represented by an attorney

Another federal protection is the Fair Credit Reporting Act (FCRA). The FCRA is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. The FCRA contains a dispute process for correcting inaccurate information placed on your credit report. More information about the Fair Debt Collection Practices Act and the Fair Credit Reporting Act can be found on the Federal Trade Commission’s Bureau of Consumer Protection website. The FTC is charged with enforcement of both acts.

Hiring a bankruptcy attorney provides immediate relief from creditor harassment under the FDCPA, and all collection action must cease the instant you file a bankruptcy case. This protection lasts the duration of your bankruptcy and is replaced with the bankruptcy discharge at the end of your case. A creditor who violates these bankruptcy prohibitions can face a contempt of court charge in the federal bankruptcy court.

Don’t let creditor harassment overwhelm your life. Take charge by consulting an experienced bankruptcy attorney about your debt and learn how the federal and state laws can protect your property, your income, and your peace of mind. 

 Some people wonder if hiring a bankruptcy attorney is worth the expense. Self help books and internet advice often portray the bankruptcy process as simply a matter of filling out paperwork. The truth is that bankruptcy is a mixture of state and federal statutes, case law, procedural rules, and court and creditor customs. An experienced attorney can help you navigate any legal obstacles, but there are other benefits to hiring experienced counsel to handle your case.

Once you hire an attorney, third party collectors are prohibited from contacting you directly. The Fair Debt Collections Practices Act applies to collection agencies and collection attorneys, and forbids contact with the debtor by mail, telephone, or any other means. The collector must communicate with your attorney, which gives you immediate peace of mind.

Your attorney will act as a financial advisor to help you forge a new financial future. Bankruptcy is a remedial process to cure poor financial health, and can eliminate or restructure your debt. Bankruptcy processes like reaffirmation, redemption, lien-stripping, and cram-down can be very beneficial to the debtor, but require experience. Choosing the right bankruptcy chapter, the proper exemptions, and applying the correct legal theories to your debts and property can mean the difference between getting a “fresh start” and a “false start.”

Your bankruptcy attorney will communicate with your creditors, the bankruptcy trustee, and the judge. Your attorney will attend the meeting of creditors with you, as well as any court hearings. Your attorney will be your legal representative throughout your bankruptcy.

If you are considering filing a bankruptcy case, consult with an experienced attorney and discover how to use the federal and state laws to your benefit. The federal bankruptcy process can be complex and intimidating, but an experienced attorney can guide you to a fresh financial start.

The traditional wisdom regarding bankruptcy and tax refunds is: get it and get rid of it before filing bankruptcy. The bankruptcy trustee can't take what you don't have, right?

In the law there are rarely absolutes. In some cases the trustee can demand money that you no longer have in your possession. A common example of this is a preference payment to an insider creditor (e.g. repaying a loan to your mother from your tax refund). The trustee can sue you or your creditor for the turnover of the money.

The simplest way to avoid any potential loss of your income tax refund is to discuss the situation with your bankruptcy attorney. In many cases your attorney can exempt all or a portion of your tax refund, so you can keep the cash money after you file bankruptcy. First, you are required to identify the property in your bankruptcy schedules, and then apply the applicable exemption law to protect it. Failure to list or exempt this asset may render the entire amount unprotected and lost to the bankruptcy trustee.

If your exemptions will not protect all of your income tax refund, you should consider spending the difference to benefit your family. The best guidance is to spend the money on goods or services that are reasonable and necessary. While your attorney can help you decide on specific purchases, the following categories are generally safe:

1. Household expenses such as utility bills, mortgage or rent payments, car payment,
auto insurance, and needed auto repairs/tires
2. Personal expenses such as food and clothing, dental work, and medicine
3. Priority debts like child support arrears and tax debts

Luxury good purchases like electronics, vacations, and jewelry should be avoided. Likewise gifts to family members or friends, spending sprees, and gambling should all be avoided. Any payment from your tax refund that you plan to make to a creditor should be discussed with your attorney.

Your income tax refund is your money! You can ensure that this money benefits your family by discussing your situation with your bankruptcy attorney.
 

Debtors in bankruptcy are required to disclose all household income and expenses. While the debtor’s income is often relatively easy to determine through pay stubs and bank records, calculating expenses can be more elusive. When completing your bankruptcy schedules it is important to be realistic. Often changes in the economy can significantly affect your budget. The recent spike in gas prices has impacted the budgets of American families, and changes calculations within your bankruptcy case.

The U.S. Energy Information Administration recently determined that the average price for a gallon of regular unleaded gas in the United States is $3.567. That is a change of almost $.78 from the same time last year. Many economists believe that the national average will climb to over $4.00 per gallon. In fact, in some states (notably California) gas is already over the $4.00 mark.

It is important to account for this increase in your family’s budget. If you drive 12,000 miles per year and your car averages 25 miles per gallon, you use 480 gallons of gas per year, or 40 gallons per month. At the national average price of $3.567 per gallon, you spend almost $143 per month on gas. That is already $31 more per month/per vehicle than a year ago. If gas prices climb to $4.00 per gallon, the additional cost to a two income, two car family will be approximately $97 per month more than last year.

Higher gas prices have also contributed to an increase in food prices. According to the U.S Department of Agriculture, food prices for a family of four with school-aged children averaged $1184.50 during the month of January. That's $26.20 per month more than the same time last year.

While not every budget increase will necessitate a change in your bankruptcy schedules, any significant change that occurs after you sign your bankruptcy schedules should be brought to the attention of your bankruptcy attorney. While only a small percentage of cases will be affected by increases to a debtor's expenses, it is important to keep your attorney apprised of changes in your finances during your case.
 

During a Chapter 7 bankruptcy case, all of the property in the debtor’s “possession, custody, or control” is part of the bankruptcy estate. If there is estate property that is not exempt from collection, the bankruptcy trustee may require turn-over the property to pay creditors. It is therefore extremely important to accurately identify all of the debtor’s property and its status prior to filing a bankruptcy case.

One situation that can cause headaches in bankruptcy is misrepresenting the actual balance in a checking account on the day the bankruptcy is filed. If the debtor is unable to exempt the cash balance in a bank account, the trustee may require its turn-over, even if the cash is subsequently spent.

Delays in filing a case can sometimes lead to checking account issues. For instance, the debtor believes that the case was filed the day before payday, when actually it was filed on the debtor’s payday. The bankruptcy schedules report $100 in the bank account, when actually the amount is $1,000.

Negligence can also be a factor in bank account mishaps. One common mistake is reporting the checking ledger balance instead of the actual bank balance. The United States Supreme Court held in the case of Barnhill v. Johnson, 503 U.S. 393 (1992), that the transfer of funds occurs when the bank honors a check. Therefore, if the bank balance is $2,000 and $1,900 is written in outstanding checks that have not been honored by the bank, the full $2,000 is property of the estate.

Preventing the above problems is simply a combination of good bookkeeping and good communication.  First obtain your actual bank balance, and account for any direct deposits, pay checks, and any outstanding checks.  Next discuss the situation with your bankruptcy attorney. Be careful about writing checks just prior to filing bankruptcy.  In some cases pre-filing financial transfers can cause additional issues in your bankruptcy.  It may be prudent to delay your bankruptcy filing until certain checks clear or your paycheck has been spent on necessities. 

Avoiding surprises and problems in your bankruptcy case takes cooperation between you and your attorney. Immediately inform your attorney if you have changes in your property, debts, income, or expenses after you have signed your bankruptcy petition. 

There is no requirement of citizenship in the Bankruptcy Code. Section 109(a) of the Bankruptcy Code states that "...only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor" in bankruptcy. Your legal status does not determine eligibility to file bankruptcy; however there may be complications if you are not a U.S. citizen.

First, you must be able to prove a physical residence or ownership of property within the bankruptcy court's jurisdiction. A permanent physical address is required for the bankruptcy forms. Residency is also important to qualify for state exemptions used to protect your property. Generally, a debtor must show residency within a state for at least 90 days preceding the bankruptcy filing in order to qualify for that state's exemption laws.

Second, you must prove your identity. Most bankruptcy debtors use a social security number (SSN), but an individual tax identification number (ITIN) may also be used. An ITIN is issued by the IRS to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. Whether a SSN or ITIN is used, physical verification of the number must be shown to the bankruptcy trustee.

While there is no requirement in the Bankruptcy Code that you must have either a social security number or ITIN, the bankruptcy petition requires you to sign a Statement of Social Security Number. The options on this Statement are (1) you have a social security number; (2) you have an ITIN; or (3) you don't have either. If you select option three, you may be able to use a valid passport or some other official government issued identification as proof of identity. There are bound to be consequences for the debtor that does not have a SSN or ITIN including the red flags it sends to the Department of Justice, the IRS, and INS.

Crimes of "moral turpitude" that are be disclosed within a bankruptcy filing may affect your immigration status or application for citizenship. These acts include the fraudulent use of credit cards, bad check offenses, tax evasion, fraudulent transfer of an asset, or falsifying government documents (including your bankruptcy petition.

If you have immigration issues and need to file bankruptcy, discuss your situation with an experienced attorney. The United States bankruptcy laws are very liberal and can help you get out of debt. Your attorney can work with you to resolve your debts while avoiding deportation.
 

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.
 

The Bankruptcy Code forgives many honest financial mistakes. However, it also provides creditor remedies for debts that may be less than honest. The Bankruptcy Code allows a creditor to object to the discharge of a credit card debt when there is evidence that the debtor has committed fraud.

A bank objecting to the discharge of a credit card debt on the basis of fraud will file an adversary case against the debtor. The fraud claim is usually one of two types: (1) fraud in obtaining the credit; or (2) fraud in incurring the credit.

A bank may claim that the debtor committed fraud in obtaining the credit card. If the creditor can prove that the card was obtained under false pretenses (i.e. that the application was false), the credit card debt may be declared non-dischargeable because of the fraud. False pretenses may include many things, but is usually lying about financial stability or income.

The bank may claim that a charge was made when the debtor was unable to repay, and had no intention to repay the debt. Because proving this may be difficult for the creditor, the bankruptcy law presumes that a charge is fraudulent if luxury goods are purchased, or a cash advance is taken, shortly before the bankruptcy case is filed. It is then up to the debtor to prove that the charge is not fraudulent or the charge is not included in the bankruptcy discharge.

Banks routinely check the bankruptcy debtor’s account for signs of fraud. Some red flag actions include:

• Filing bankruptcy on a new card;
• Taking a cash advance prior to filing;
• Charges for travel or vacation;
• A debt transfer from one card to another;
• Credit charges while unemployed; and
• Charges made after consulting a bankruptcy attorney.

The more time between the credit card activity and the bankruptcy filing, the less likely the charge will cause a discharge dispute. The best advice is: if you are considering bankruptcy, stop using your credit cards. Consult with your bankruptcy attorney regarding the best way to discharge your credit card debt.

A short sale is the sale of real estate for less than the balance owed on the property. Short sales are common in today's real estate market, where home prices have fallen and the home owner is no longer able to pay the mortgage loan. A short sale takes cooperation between the home owner and the lender to sell the property at a loss. Both parties must consent to the sale. A short sale can avoid a foreclosure, which can be mutually beneficial to the parties. The lender avoids the expense of a foreclosure and the home owner avoids the negative impact on personal credit.

Short sales were seldom used by homeowners prior to the mortgage crisis because a short sale results in a deficiency balance obligation to the homeowner. The home owner was sometimes sued for the difference between the amount owed on the home and the short sale price, or, more commonly was taxed by the IRS on the amount "forgiven" by the lender. Either way, a short sale created another heavy burden on the home owner.

In response to the mortgage crisis, the Mortgage Forgiveness Debt Relief Act was signed into law in 2007 which excludes from income a discharge of debt on a principle residence. Debt forgiven by a lender in connection with a foreclosure, refinance, or short sale in calendar years 2007 through 2012 is eligible for this relief. Up to $2 million is excluded ($1 million if married filing separately). This relief only applies to a principal residence, and does not include a second home, credit cards, or a car loan.

A forgiven debt is generally taxed as income to the tax payer, but that is not always the case. The most common exclusions of this tax are: (1) if the tax payer was insolvent immediately before the debt was forgiven; (2) if the debt was discharged in bankruptcy; or (3) if the debt is a qualified principal residence indebtedness until 2012.

If you are struggling with a home mortgage and need to walk away, consult with an experienced bankruptcy attorney and learn how the law can work for you. Your attorney can explain your options and together you can make the decisions for a better financial future.

Consider the following example:

 Tom and Becky Sawyer get a divorce. They have no children and Tom and Becky each have identical incomes (Tom is an aspiring riverboat captain and Becky owns a seamstress business). Tom and Becky are joint owners of a 2008 Pontiac GTO which they own outright, and they have $20,000 in joint credit card debt. Becky agrees to sign over the GTO to Tom in exchange for Tom paying the credit cards. The family court judge (Judge Thatcher, of course), orders that Tom will hold Becky harmless for any nonpayment on the credit cards. Later Tom is fired from his riverboat captain job (it wasn't his fault – honest!) and is unable to pay the credit cards. Poor Tom sold the GTO and is now considering bankruptcy to discharge his debts.

Tom and Becky's situation is fairly common and causes quite a bit of confusion in real life. First, Becky is still obligated to the credit card companies despite Judge Thatcher's decree. Briefly, this is because the credit card companies were not parties to Tom and Becky's divorce, so the legal relationship between Becky and the card companies did not change.

Second, Tom is able to discharge his debt to the card companies through either Chapter 7 or Chapter 13, but he cannot discharge Becky's obligation to pay this debt because Becky did not file bankruptcy.

Finally, while Tom can discharge his obligation to the credit card companies, there is a second obligation: Judge Thatcher's order that he hold Becky harmless if he fails to pay the credit card debt. When Tom does not pay the credit card companies, Becky can ask Judge Thatcher to enforce the hold harmless order against Tom.

Whether Tom can discharge the hold harmless order in bankruptcy depends on whether the debt and the hold harmless clause constitute a "Domestic Support Obligation" that is in the nature of “alimony, maintenance, and support.” A Domestic Support Obligation cannot be discharged, but the bankruptcy filing may stop collection actions such as wage garnishment, bank seizure, or even jail for contempt of court; and a Chapter 13 may provide time to repay support money owed to a spouse, former spouse, or child.

A debt not in the nature of “alimony, maintenance, and support” is commonly referred to as a "property settlement." If Tom's obligation to pay the credit card companies is a property settlement, then the hold harmless clause can be discharged at the end of a Chapter 13 bankruptcy, but cannot be discharged in Chapter 7.

Determining whether the debt is a "Domestic Support Obligation" or a "property settlement" depends on specific facts and requires the careful consideration of an experienced bankruptcy attorney. Call today for assistance and learn how the Federal Bankruptcy Code can help your debt problem.

Most businesses are legal entities separate from the individual owners. Microsoft, for instance,
is not the same as Bill Gates. Corporations, LLCs and the like are recognized as operating
independent from the business’s owners. When an incorporated business files bankruptcy, the
owners are not in bankruptcy, and vice-versa.

On the other hand, when the business is a sole proprietor, the owner is the same as the business.
The business is not a legal entity that is separate from the individual. In fact, the business is not
recognized as existing apart from its owner. The business income, expenses, property, and debts
all belong to the owner. Therefore, when a sole proprietor files bankruptcy, the business is also
bankrupt.

The Chapter 7 trustee who administers your bankruptcy case is under a mandate to seize control
and cease operations of your business. The main reason for this is that the business assets are
considered personal assets and part of the bankruptcy estate. Fortunately, in most cases personal
exemptions are able to protect tools and equipment used in the sole proprietor’s business.

Accounts receivable are also part of the bankruptcy estate, so it is important to provide accurate
business records to assist your attorney before your bankruptcy is filed. The trustee will want to
see all gross income received by the business, and all business expenses. Since this gross income is included in your personal gross income, business income can sometimes push the total family income over the qualifying ceiling for Chapter 7 bankruptcy. Additionally, business debt is considered personal debt, so it is generally included in the bankruptcy discharge.

Every sole proprietor bankruptcy case is different. For instance, in a case where the debtor runs
a day care from her home, there may be little or no business inventory or assets. In bankruptcy
terms, there are no business assets for the debtor’s estate. However, where the sole proprietor
runs a restaurant, there may be significant assets for the bankruptcy estate. It is important for you
to speak candidly with your attorney and discuss your sole proprietor business thoroughly. Your
attorney can effectively advise you on the best future action including whether it is permissible
to continue business operations, whether you should form a corporation or LLC, or taking some
other action to best protect your interests. If you are dealing with a personal financial difficulty,
speak with an experienced bankruptcy attorney before making any decisions regarding your sole
proprietor business.

The Bankruptcy Code is a set of federal laws first enacted by Congress in 1979. The Bankruptcy Code is divided into chapters that provide specific legal protection for debtors experiencing serious financial difficulty. Chapter 7 of the Bankruptcy Code is the most commonly filed bankruptcy. Chapter 7 is often called a “liquidation” bankruptcy and is used by individuals, partnerships, or corporations who have no hope for repairing their financial situation and repaying their creditors. During a Chapter 7 case, the debtor's property is liquidated in accordance with the rules of the Bankruptcy Code and the proceeds are used to pay creditors.

However, liquidating everything that a person owns is not practical. State and federal laws exempt certain property from creditor collection, and the truth is that only about one case in twenty-five has an asset that can be converted to cash and distributed to creditors, according to a report from the United States Trustee Program. Obviously, if you own a very expensive luxury item like a grand piano or expensive art, that property is at risk. On the other hand, if you own “Average Joe” type property necessary for day-to-day living, your property is likely protected from creditors.

The instant a Chapter 7 case is filed an “automatically stay" against creditor action is imposed. This stay arises by operation of law and requires no judicial action. Creditors may not initiate or continue lawsuits, garnish wages, or even place telephone calls demanding payment. This provides a “breathing spell” for the debtor to develop a strategy for eliminating or repaying debts. The bankruptcy clerk sends notices of the bankruptcy filing to all creditors listed in the debtor’s bankruptcy schedules.

One of the main objectives of Chapter 7 bankruptcy is to give an honest debtor a "fresh start." The bankruptcy court will issue a discharge to the Chapter 7 debtor near the end of the case  which acts as a legal injunction against the collection of debts. A discharge is only available to individual debtors, not to partnerships or corporations.

Chapter 7 is an “erase-your-debts-start-fresh” bankruptcy. Unlike Chapter 13 or Chapter 11, the debtor does not pay anything to creditors from future income. The vast majority of debtors lose nothing during the Chapter 7 process. However, there are income restrictions and some debtors may have equity issues in property. An assessment from an experienced bankruptcy attorney will inform you of your eligibility and whether Chapter 7 bankruptcy is right for you.

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The Washington Times reports that this year’s White House budget projects that the national debt will top $15 trillion in 2011, equaling the size of the entire U.S. economy. By the end of the fiscal year on September 30, the national debt is expected to be $15.476 trillion, or 102.6 percent of the U.S. Gross Domestic Product. The Obama administration also projects that the U.S. debt will jump to nearly $21 trillion in the next five years.

Clearly the budget is out of control. Does that sound painfully familiar?

While the national debt may continue to soar, you have options to regain control over your personal finances. Certain warning signs may be telling you that it is time to consult with a bankruptcy attorney, for instance:

• If your family is running in the red month after month.
• When your unsecured debt is equal to or exceeds your yearly income
• If you expect your total debt to continue to escalate year after year

Bankruptcy provides a chance to stop the financial hemorrhaging and to control your debt. A Chapter 13 bankruptcy can provide three to five years of orderly repayment of debt under court supervision. A Chapter 7 can discharge the debt for good within just a few months. Most Chapter 7 debtors pay nothing to unsecured creditors. Most homeowners who file bankruptcy are able to keep the family home, cars and other secured property.

Every individual’s case is different and the guidance of an experienced bankruptcy attorney is needed to explain your legal options. When a financial band-aid simply isn’t enough, consider using the power of the federal bankruptcy laws to protect your property and eliminate your debt. Call today and discover how you can control your debt and forge a better financial future for your family.

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Home values in the United States have plummeted 26.7 percent since peaking in 2006, according to a report released by Zillow.com. The report also sites the hardest-hit cities are Miami-Fort Lauderdale, FL; Detroit, MI; Pheonix, AZ; Riverside, CA: and Orlando, FL, each recording more than a 50% dip since 2006. Zillow estimates that 27% of all U.S. homeowners have negative equity in their property. The Zillow press release can be found here.

Some economists are predicting that the real estate market will bottom out soon and then begin a slow recovery process. Sadly, foreclosures may rise again in 2011 and reverse the negative equity statistic as people with underwater mortgages lose their homes. Nationally, about one home in every 1,000 was foreclosed on during December, 2010.

Foreclosure is a very stressful process. It is a public record and is often published in the newspaper. A foreclosure can happen rapidly and often forces the homeowner to move before ready. This can be a major disruption to family and children. Of course it impacts your credit score for years.

By filing bankruptcy, the foreclosure process can be avoided. In some cases, a Chapter 13 bankruptcy can provide the debtor time to cure an arrearage over three to five years in small payments and stop foreclosure completely. In other cases bankruptcy can strip away an entirely unsecured second mortgage, thereby freeing up money to pay the first mortgage. Lenders are also able to modify your home mortgage during bankruptcy through the federal Making Home Affordable Program.

If you are underwater and struggling to pay your home mortgage, speak with an experienced attorney and learn how the federal bankruptcy laws can help you. Whether you need to pay past-due mortgage payments, strip away a junior lien, or surrender the property and “walk away,” your bankruptcy attorney can explain the costs and benefits of each option.  Call today and get the advice that can help you build a better financial future.

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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Once a bankruptcy case is filed, a creditor is prohibited from repossessing the debtor’s vehicle. The process for a creditor to repossess a vehicle during a bankruptcy case is both lengthy and costly. First the creditor must ask permission from the court to repossess through a formal motion. The court then gives the debtor time to respond to the motion and an opportunity to oppose the motion at a hearing. The bankruptcy laws also provide several options for retaining a vehicle during bankruptcy, even when you are significantly behind on your car payments. In many cases your monthly payments can be reduced by the bankruptcy court.

If your vehicle has been recently repossessed, the bankruptcy laws can force the creditor to return your vehicle. Section 542(a) of the Bankruptcy Code states that the estate of the debtor includes "all legal and equitable interests of the debtor in property, wherever located or by whomever held, as of the commencement of the case," with a few exceptions. The United States Supreme Court has held that the scope of section 541 is broad and estate property includes a repossessed vehicle that is still in the possession of the creditor. United States v. Whiting Pools, 103 S.Ct. 2309 (1983). The Court in Whiting Pools stated that section 542(a) does not require that the debtor have the property in his possession at the commencement of the case.

State laws vary, but most are governed by the Uniform Commercial Code (UCC). The UCC gives the vehicle’s owner an opportunity to pay for the vehicle and have it returned prior its sale or transfer. Therefore, even after the vehicle is repossessed, the debtor still has property rights in the vehicle which become part of a debtor’s bankruptcy estate. If the creditor refuses to return the vehicle, the bankruptcy court may impose sanctions. Once your vehicle is returned you must provide “adequate protection” to the creditor to assure that the property will be safeguarded (insured) and that the creditor will be adequately compensated. These requirements are generally met by submitting a Chapter 13 plan of repayment to the bankruptcy court.

Filing a bankruptcy case will stop the repossession of your vehicle. If your vehicle has already been repossessed, it is important to speak to an experienced bankruptcy attorney quickly to determine your rights. You will lose your rights in the vehicle once it is sold or transferred, so time is of the essence. Call today and learn how the federal bankruptcy laws can protect your property.
 

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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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Chapter 7 is the most popular choice for bankruptcy cases in the United States. Over 70% of the 1,530,078 bankruptcy filings during 2010 were filed under Chapter 7 of the Bankruptcy Code. Chapter 7 is often called a "straight bankruptcy" or a “liquidation” bankruptcy. Most Chapter 7 bankruptcy cases are over in about 4-5 months and with the debtor discharging unsecured debts while paying nothing to creditors.

A Chapter 7 debtor may be an individual, a partnership, or a corporation or other business entity. Contrary to some beliefs, there is no minimum or maximum debt limits for a Chapter 7 bankruptcy discharge. The federal Bankruptcy Code does set a limit on the amount of maximum debt an individual can have to qualify for a Chapter 13 case: $360,475 in unsecured debt and $1,081,400 in secured debts.

The debtor's income plays a significant role in determining whether an individual debtor is eligible for Chapter 7 bankruptcy. In 2005 Congress re-wrote portions of the Bankruptcy Code and implemented a "means test" to determine if an individual or married couple is able to pay something to unsecured creditors during bankruptcy. A debtor who fails the means test is ineligible for Chapter 7 bankruptcy, but may be eligible to file Chapter 13.

An individual cannot file a chapter 7 case if a prior bankruptcy case was dismissed within the preceding 180 days due to the debtor's willful failure to appear before the court, failure to comply with orders of the court, or if the debtor dismissed a previous case after creditors sought to have the bankruptcy stay lifted to recover secured property. Individual debtors are ineligible to file under any chapter of the Bankruptcy Code unless credit counseling is completed within 180 days before filing. There are a very few exceptions to this requirement.

Finally, while a debtor may be eligible to file a Chapter 7 case and receive bankruptcy court protection, the debtor is ineligible to receive a Chapter 7 discharge if the debtor had previously filed a bankruptcy case in which a discharge was granted. The limits for obtaining a Chapter 7 discharge are 8 years between Chapter 7 cases or 6 years between a Chapter 13 case and a Chapter 7 case.

Struggling with credit card or medical bill debt can negatively affect every aspect of your life. Call Fears | Nachawati today and speak with an experienced bankruptcy attorney at 1-866-705-7584. Your attorney can help you decide on the best Chapter of the Bankruptcy Code to eliminate your debt nightmare.

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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.
 

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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.

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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!

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.

Data recently released by Standard & Poor shows that home prices have dropped roughly two percent nationwide since June. This news is a grim reminder to homeowners that real estate is dragging behind in the economic recovery. In some cities, notably Phoenix and Las Vegas, home prices are now roughly where they were in 2000, while a 27 percent advance would have been needed to keep pace with inflation.

Some analysts have speculated that the homebuyer's tax credit artificially supported the housing market, and now that this credit has ended, the impact of foreclosures and a glut of homes for sale will depress prices in many areas. However, an improving economy could offset that trend and increase demand for homes as the job market improves.

In many cases the federal bankruptcy laws can help a family deal with a home that is losing value. During a Chapter 13 bankruptcy a debtor is able to strip away an entirely unsecured second and/or third home lien. A junior lien is unsecured when the senior lien is more than the value of the home. An unsecured junior lien can be stripped and the debt discharged during a Chapter 13 bankruptcy.

A Chapter 13 bankruptcy also provides an opportunity to negotiate with the lender for a modification of the debt. In some cases the lender may reduce principle or interest and modify the existing note, making staying and paying on the home a more attractive option.

During Chapter 7 or Chapter 13, a debtor is able to walk away from a house and discharge the debt. In this way bankruptcy can be used as a financial tool to relieve the burden of a declining investment.

If you are struggling with debt and overwhelmed by a home that is depreciating in value, speak with an experienced bankruptcy attorney and discuss your options. Your bankruptcy attorney can help you devise a plan to eliminate your debt and improve your financial situation, both short term and long term.
 

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.
 

Most bankruptcy cases end with a discharge order from a federal bankruptcy judge. The discharge is a permanent injunction that prohibits pre-bankruptcy creditors from collecting against the debtor, and is a “fresh start” for the debtor. It effectively eliminates many debts and allows the debtor to start over with his or her finances.

Taking care of your finances after receiving your bankruptcy discharge is extremely important. The bankruptcy law requires that you complete a financial management course prior to your discharge which teaches basic management techniques. While this course is helpful, the first step in managing your finances after your bankruptcy is to identify any post-discharge debts.

First, what personal debt survived your bankruptcy case? Post-discharge personal debt generally falls into one of three categories: (1) debt automatically excepted from discharge; (2) debt excepted from discharge by court order; and (3) post-petition debts. Debts automatically excepted from discharge include student loans, most taxes, and child support obligations. Debts excepted from discharge by court order include debts involving fraud or other bad conduct. Post-petition debts are debts that first arise after the day you file your bankruptcy case. Post-petition debts are not included in your bankruptcy case and are not discharged.

Second, do you have property debt that survived the bankruptcy? In certain cases the personal obligation to pay a debt may be discharged, but the property lien survives. Although you owe nothing to the creditor, items secured by a property lien may be repossessed. Consult with your attorney and determine what, if any, property may be at risk of repossession after your bankruptcy.

Finally, did you agree to any new financial obligation during your bankruptcy case? Be clear about any new or changed financial obligation that you agreed to during your bankruptcy case. If you executed a reaffirmation agreement, redemption loan, or modification, make sure you understand the terms and obligations contained in that agreement.

You and your attorney should discuss the impact of your bankruptcy discharge on your debts. Be certain that you understand which obligations are discharged and which survive the bankruptcy case. Your bankruptcy attorney is happy to discuss your options for managing any debt that survives the bankruptcy discharge.

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Recently many Americans have sought bankruptcy protection as a result of the recession and housing crisis. Unfortunately, the bankruptcy laws cannot force a lender to refinance your home mortgage. However, you ay be able to modify your home mortgage during a Chapter 13 bankruptcy under the “Making Home Affordable” program. In Chapter 7, you may seek refinancing after bankruptcy.

If you seek refinancing from Fannie Mae and Freddie Mac after your Chapter 7 bankruptcy, the discharge must have been granted more than four years previously. FHA requires two years between the discharge date and a home loan. Borrowers must show a good credit history since the discharge and the ability to manage personal finances.  In some cases a borrower may obtain financing before the two year mark, if there is evidence of extenuating circumstances causing the bankruptcy.

Qualifying for refinancing is no different for individuals with bankruptcy on their credit record. The minimum credit score is currently set at 580. The borrower must show an acceptable debt to income ratio, stable employment, and a history of responsible credit management. A lender may ask the borrower for a statement explaining how the events that led to the bankruptcy are not likely to recur.

The FHA offers a “streamlined refinancing” program for qualified borrowers. Information about this program can be found at the Department of Housing and Urban Development web site: http://www.hud.gov/offices/hsg/sfh/buying/streamli.cfm

If you need to file bankruptcy, but are concerned about keeping your home, speak with an experienced bankruptcy attorney. Your attorney can discuss your options under the federal bankruptcy laws, as well as your after-bankruptcy options for refinancing. Don’t let your financial circumstances get the best of you! Know your legal rights and use the law to your advantage.

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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.

A lawsuit can cause tremendous anxiety. Many lawsuits are filed every day by creditors seeking to collect on credit card debts and medical bills. Common sense should tell you that if you owe the money, there are few legitimate defenses that will prevent a judgment. When you are served with notice of a lawsuit, you will need to defend the lawsuit. If you fail to respond to the lawsuit, fail to answer discovery requests (interrogatories, requests for admissions, production of documents, etc.), or fail to show up to court, the court may enter a judgment against you. Even if you are successful in navigating all of these procedural landmines, you may lose your case. Once the plaintiff has a judgment against you it can seize property or garnish your wages. A lawsuit will also be recorded on your credit report where it stays for seven years (or longer). Do you need a lawyer? Yes! Will it make a difference? Probably not. If you are facing a lawsuit for a bad debt, you should consider whether a personal bankruptcy can help. Once a bankruptcy petition is filed, you are under the protection of a federal judge’s court order directing creditors to stop all collection actions, including any pending litigation. This protection is called the automatic stay, because it stops creditors immediately upon filing the bankruptcy case. The automatic stay also stops wage garnishments (except for a few narrow exceptions like child support), foreclosure actions, and property seizures. Once the bankruptcy court discharges a debt or state court judgment, the creditor can no longer enforce the debt against you. While a single lawsuit may not be a good reason to file a lawsuit, it usually is a warning sign that you need help. If you have been sued, contact an experienced bankruptcy attorney and review your legal options. Bankruptcy can stop a lawsuit and discharge credit card debt, medical bills, and personal loans.

Bankruptcy is expensive. Whether you are in a repayment plan or a Chapter 7 liquidation, court fees, credit counseling fees, and attorney fees can really add up. Some bankruptcy debtors are tempted to "go it alone" and file a bankruptcy case without an attorney. However, before you file a "pro se" bankruptcy, consider how your choice will affect your case.

First, proceeding pro se (Latin meaning “for himself”) does not entitle you to special treatment during your bankruptcy case.  The court expects and requires that you file all of the bankruptcy paperwork correctly, obey all of the orders of the bankruptcy court, and follow all of the proper procedures outlined in the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, as well as in the bankruptcy court's local rules. These rules are often supplemented by case law and the procedural customs of the trustee and the judge. 

Bankruptcy attorneys have studied these laws, cases, and rules during three years in law school, and years afterwards in actual practice representing real clients in bankruptcy court. Bankruptcy debtors benefit from the knowledge and experience of experienced bankruptcy counsel.

Second, the federal and state exemption laws can be very complex. In some cases criminal laws or collection laws may be implicated. Protecting your property is one of the chief goals of the bankruptcy process, and one of the easiest to foul up. Failing to properly protect an asset during bankruptcy could result in the loss of that asset, including a home, vehicle, retirement account, or other valuable property.

Third, even if the pro se bankruptcy debtor is able to navigate the bankruptcy procedure and adequately protect her assets, can the case withstand the scrutiny of the bankruptcy trustee? Because the debtor is pro se, the trustee will spend extra time evaluating the case and closely inspecting the bankruptcy paperwork. Frankly, the trustee does not trust the pro se debtor and will assume that the debtor is concealing assets (either on purpose or by honest mistake). Pro se debtors are often placed at the end of the 341 meeting docket and receive "extra attention" from the trustee (never a good thing).

Fourth, a skilled bankruptcy attorney may be reluctant to step into the middle of a pro se case when things go wrong. The case may also degenerate to the point where dismissal or conversion may be the only options.

Bankruptcy cases are being filed in record numbers. The vast majority of bankruptcy cases are processed quickly and efficiently. On the other hand, pro se filings are always red flagged as potential problem cases and receive extra attention - and rightly so! Many of these cases have problems.  Some pro se cases result in loss of property, and others have allegations of bankruptcy fraud. Don't risk your property or your peace of mind. Hire an experienced attorney to guide you safely through the bankruptcy process.

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After filing a bankruptcy case, some debtors experience “cold feet.”  Some have difficulty facing the trustee at the 341 meeting.  Others cannot meet their Chapter 13 plan payment obligations.  Still others are tempted by the promises of a non-bankruptcy resolution, like debt consolidation.  Before you back out of your bankruptcy case, make sure that your decision will be in your best interest.

Once you abandon your bankruptcy case, the federal legal protections that prevent your creditors from collecting will expire.  Your bankruptcy case prohibits creditors from filing lawsuits, garnishing wages, and calling or otherwise harassing you over your debt.  The minute your case is dismissed you become fair game to your creditors.

Failing to complete your bankruptcy case means you will not receive the benefits of a bankruptcy discharge.  Once your bankruptcy case is completed, the court issues a bankruptcy discharge which acts as a legal injunction forever prohibiting creditors from collecting from you personally.  This protection is extremely powerful and never expires.  On the other hand, when your case is dismissed, the creditor may charge you with interest and/or penalties that you did not anticipate.

If you dismiss your case and later re-file, you will have two bankruptcy cases on your credit file.  Dismissing a bankruptcy case does not erase the first case from your record and does not lessen its impact on your credit score.

If circumstances change after you file your bankruptcy case, discuss the matter with your attorney.  Most problems can be resolved without dismissing the case.  For instance, a Chapter 13 debtor who suffers a loss of income may be able to convert the case to a Chapter 7 and receive a discharge without further repayment.  In another example, if a Chapter 7 debtor incurs unexpected medical debt, the debtor can convert the case to Chapter 13 and include the new, post-petition medical bills in the Chapter 13 case. 

The general rule in bankruptcy is, “Once filed, follow through.”  However, every case is different and presents its own challenges.  Speak with your attorney and discuss your legal options.  You and your attorney can formulate a plan that will benefit you and your family.

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Over 70% of all consumer bankruptcy cases are filed under Chapter 7 of the Bankruptcy Code. While “going along with the crowd” is not a good reason to file Chapter 7, there are good reasons to choose Chapter 7 over Chapter 13. Below are five common reasons why bankruptcy debtors choose Chapter 7:

Reason 1: File Chapter 7 when there is no good reason to file Chapter 13
Chapter 13 contains very useful and powerful tools that can save property (like a house or a car), can strip off an unsecured second mortgage, or can even keep the IRS off your back. When there are no assets at risk, and the debtor does not need on-going court protection, there may not be a good reason to file Chapter 13.

Reason 2: Chapter 7 is quicker
Most Chapter 7 bankruptcy cases will close between three to five months. Chapter 13 cases run three to five years.

Reason 3: There is no repayment plan in Chapter 7
The Chapter 13 debtor proposes a plan to repay his creditors. The debtor pays what he can to his creditors over three to five years. In a typical Chapter 7 case, unsecured creditors receive nothing and are discharged at the end of the case. Secured property is either surrendered back to the creditor, or the debtor reaffirms the debt and continues to pay just as before the bankruptcy.

Reason 4: There is not extra income to pay creditors
Chapter 7 is generally not available where the debtor’s income exceeds his state median income and demonstrates an ability to repay his creditors. When there is no extra money to pay creditors, it may make more sense to “start fresh” with a quick bankruptcy discharge.

Reason 5: It costs less to file Chapter 13
The typical Chapter 7 no-asset case is simple and straight-forward. Chapter 7 is completed within about three to four months. The typical Chapter 13 case involves assets the repayment of a debt or debts over three to five years. Consequently, attorneys charge more for Chapter 13 cases.

If you have financial problems that won’t go away, speak with an experienced attorney and consider your options under the federal Bankruptcy Code. An experienced bankruptcy attorney can explain the benefits of Chapter 7 and Chapter 13, and help you develop a plan to solve your financial dilemma.

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While the bankruptcy laws are complex and a mystery to most attorneys, filing a typical consumer bankruptcy case is a simple process for an experienced bankruptcy attorney. Preparing the usual debtor’s case for filing can be described in three easy steps: the initial interview, credit counseling, and preparing the petition and schedules.

The first step in the process is the initial interview. Most attorneys call this first meeting a "client interview," because it’s an opportunity for the attorney to ask questions about the client's finances and obtain information. During the initial interview your attorney will ask you to provide information concerning your debts, assets, income, and expenses. Any information requested by your attorney is extremely important to your case.

The initial interview is also an opportunity for you to ask questions and gain information about your attorney and the bankruptcy process. Don't be afraid to ask questions during this time! Your attorney is happy to share his experience and knowledge with you.

The second step is attending credit counseling. Since 2005, consumer bankruptcy debtors have been required to complete a session with a certified credit counselor prior to filing a bankruptcy case. This counselor must be approved by the U.S. Trustee and your attorney can provide you a list of approved counselors. Failure to complete credit counseling before filing will almost certainly result in the dismissal of the bankruptcy case.

The third and final step before filing your case is the preparation of the bankruptcy petition and schedules. The completed paperwork is usually a few dozen pages and provides the bankruptcy court with a clear picture of your finances. Once your paperwork is prepared, you will review the information and affirm its accuracy with your signature. While many television shows portray honest and cooperative individuals who freely disclose information to the courts as naïve or even self-incriminating, the debtor is expected to be honest about his or her financial condition bankruptcy. Speak with your attorney candidly and do not conceal information! This is a time to be completely honest.

Organizing and analyzing your financial information before filing is the most important part of the bankruptcy process. In the hands of an experience bankruptcy attorney, filing your bankruptcy can be a quick and simple process. When you and your attorney cooperate, most bankruptcy cases take only a few days to prepare and file, quicker when there is an emergency.

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One of the most common questions asked about the bankruptcy process is, “Who will know about my bankruptcy case?” Filing bankruptcy is usually very confidential, but the Bankruptcy Code and Federal Rules of Bankruptcy Procedure dictate that notice of your bankruptcy case must be sent to certain individuals and businesses.

Bankruptcy is a legal process and is a matter of public record. Few newspapers will publish bankruptcy filings in the “public notices” section. While this was a common practice for newspapers in the past, the sheer number of bankruptcy filings makes reporting personal bankruptcies impractical. This year more than a million and a half people will file bankruptcy, and more than 5.7 million people have filed since September 30, 2005. Unless you are a public figure or your bankruptcy case is somehow newsworthy, it likely will not appear in any section of a newspaper.

You are required to submit a list of the names and addresses of every individual or business you owe when your case is filed. Everyone on that list is sent a notice of your bankruptcy case. The notice also prohibits the creditor from taking any further collection activity. The bankruptcy court will send notices only to the names on your list of creditors, to your attorney, and a notice to your address. Friends and family members are not sent notices unless you identify them on your list.

Your employer may receive notice regarding your bankruptcy in a few limited circumstances. Obviously, if you owe your employer money, your employer will be notified. A second circumstance is when you file a Chapter 13 repayment bankruptcy and wish for your employer to withhold the plan payment from your wages. Finally, there may be a reason to notify your employer, like if your employer is under a court order to garnish your wages.

Since your bankruptcy case is a matter of public record, an individual may contact the bankruptcy court to obtain information about your case. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public. Some individuals are able to access the Public Access to Court Electronic Records (PACER), an electronic public access service that allows users to obtain bankruptcy case information via the Internet. PACER registration is free, but the system charges an access fee per page.

The typical bankruptcy case is quick and confidential. However, every case is different. If you have specific questions about the effects of filing bankruptcy, consult with an experienced bankruptcy attorney. Your attorney can explain the benefits of the federal bankruptcy laws and the process for discharging your debts.

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For a person in financial trouble, examining options can mean the difference between a fresh start and a false start. Before you decide to use a debt settlement program to resolve your debt problem, arm yourself with information and make a wise decision. Below are six reasons that the federal bankruptcy laws may be a better choice than a debt settlement program:

First, the debt settlement process can take many months or even years, and your credit is harmed each month until the debt is settled. On the other hand, negative reporting of debts discharged in bankruptcy ends on the date you filed your bankruptcy case. Discharged debts are reported as “discharged in bankruptcy” with a “zero balance.”

Second, debt settlement programs typically settle your debt for 20% to 80. Creditors in most bankruptcy cases are paid nothing.

Third, any settled debt will have tax consequences and you may have to pay the IRS. A discharged debt has a special tax exemption and there is no tax liability.

Fourth, during the debt settlement process you may be sued, even while you or your representative attempts to settle your debt.  During bankruptcy all lawsuits are prohibited without the express permission of the bankruptcy court.

Fifth, many debt settlement companies are disreputable and lack a solid financial basis. You may lose your money and get nothing in return. The bankruptcy process is authorized by the United States Constitution and its laws are written by Congress. Only licensed attorneys admitted to practice in the federal courts are able to represent bankruptcy debtors.

Finally, the debt settlement process can take more than a year. The general rule is: the longer you don’t pay, the sweeter the settlement. Creditors are reluctant to accept less than full payment unless they believe that you may file bankruptcy. The typical chapter 7 bankruptcy case takes less than six months.

If you are considering a debt settlement program, you owe it to yourself to investigate your options and speak with an experienced bankruptcy attorney. The federal bankruptcy law is a powerful tool to eliminate your debt problem and put you on the road to financial recovery.

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Redemption is a process during a Chapter 7 bankruptcy case where a debtor is able to retain a vehicle by paying the secured creditor the value of the vehicle, not the total debt that is owed. For example, if you owe $15,000 to Ford Motor Credit, but the car securing the debt is only worth $10,000, you can use the redemption process to pay only the value of the vehicle ($10,000), keep the car, and discharge the remaining unsecured debt ($5,000).

Redemption is only available to those debtors who are able to pay the entire value in one lump sum. So in our example above, after the bankruptcy court approves the redemption, Ford Motor credit must receive the entire $10,000. Payments are not allowed. While this may appear to be an insurmountable obstacle, the truth is that there are several financing sources available to you. Some finance companies specialize in providing loans to debtors in bankruptcy, including 722 Redemption Funding and Fresh Start Loan Corporation. Experienced bankruptcy attorneys are very familiar with these companies and other finance sources.

The process for obtaining a redemption auto loan is very similar to qualifying for a traditional loan. Finance companies require a loan application and assurances that you will be able to repay the loan (e.g. steady employment, reasonable debt to income ratio, good payment history, etc). The interest rate can be high for a redemption loan; however the resulting monthly payment is often lower than the original monthly payment. 

If you are interested in lowering your monthly payments through the redemption process, discuss your options with your attorney. It is important to carefully consider all of the advantages and disadvantages before making a decision to redeem a vehicle. Some of the advantages of a redemption loan are:

• Retention of the vehicle;
• Vehicle is no longer “upside down;”
• The creditor cannot repossess the vehicle;
• Usually results in a lower monthly payment.

The main disadvantage of a redemption loan is:

• High interest rate

Redemption is not the only option for keeping a vehicle after a bankruptcy. A skilled bankruptcy attorney can explain all of your options and help you obtain the best deal for you and your family. 

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 Many tough decisions are made when a family is struggling with debt.  Often debts are paid according to priority.  Those bills at the lowest priority may not get paid at all.  While this may be a good strategy under ordinary circumstances, it may back-fire when a bankruptcy is imminent.

The act of paying one creditor while ignoring another is called a preference payment by the bankruptcy laws.  The debtor preferred to pay one creditor and not others.  A preference payment is defined as a transfer of money made before a bankruptcy filing, to pay on a pre-existing debt, made while the debtor is insolvent, and gives the creditor more than it would receive from the liquidation of the debtor's assets during a Chapter 7 bankruptcy.

In deciding who should get paid first, the Bankruptcy Code divides creditors into classes and creates a hierarchy of preferences.  For instance, the Bankruptcy Code prefers that child support is paid before credit cards, and that a secured car payment is paid before a medical bill.  In many cases a pre-bankruptcy preference payment is perfectly fine; in other cases it can create trouble for the debtor and the creditor.  This is especially true when one creditor in a class receives more than other creditors in the same class, or a creditor in a lower class receives money before creditors in higher classes.

When a preference payment occurs within 90 days of the bankruptcy filing, the bankruptcy trustee can ask the court to order the preferred creditor to turn over the payment(s) for distribution according to the hierarchy of preferences.  This period is increased to one year if the creditor is an “insider” creditor.  An “insider creditor” is generally a relative, business partner, etc. who has a special relationship with the debtor.

Common preference payment scenarios include:

1.              Repaying a personal loan from a family member just before filing bankruptcy;

2.              Paying one business vender, while ignoring others.

3.              Transferring a credit card balance from one card to another.

4.              Paying off a credit card, medical bill, or personal loan just before bankruptcy.

When the trustee requests turnover of a preference payment, the creditor is faced with either complying with the request or litigating the matter in bankruptcy court.  There are legitimate preference payment defenses which largely depend on the circumstances of the payment.  However, the general practice of bankruptcy trustee is to sue first and ask questions later.

If you are struggling financially, seek out legal advice early and avoid making mistakes with preference payments.  An experienced bankruptcy attorney can help you make wise financial decisions and avoid preference payment situations.

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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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A Chapter 7 bankruptcy is sometimes called a liquidation bankruptcy.  In its simplest description, a Chapter 7 bankruptcy liquidates all of your property to pay your creditors.  Any remaining debt is discharged.  However, that description is not exactly accurate, or practical.  The truth is that most debtors who file Chapter 7 bankruptcy do not lose any property while erasing all or most of their debts.

Once your Chapter 7 bankruptcy case is filed, an impartial case trustee (sometimes called an “interim trustee” or “panel trustee”) is appointed.  The main functions of the Chapter 7 trustee are to oversee and administer your bankruptcy case.  When you file a Chapter 7 bankruptcy all of your assets are placed into a temporary “estate.”  The estate is the temporary legal owner of all property in which you have a legal or equitable interest as of the date you file bankruptcy.  The trustee examines the estate to determine whether there are assets that can be sold to pay creditors.

Most Chapter 7 cases are considered “non asset cases,” meaning that all the debtor's assets are exempt or subject to valid liens.  However, when non-exempt assets are available, the trustee may take and sell these assets to pay creditors.  The Chapter 7 trustee oversees the accounting and payment of creditors from funds obtained by liquidating non-exempt assets of the debtor. 

The Chapter 7 trustee also presides over the debtor’s meeting of creditors required by Section 341 of the Bankruptcy Code.  The Chapter 7 trustee is usually an attorney or accountant with extensive bankruptcy law and auditing experience, but is forbidden from offering legal advice to a debtor in bankruptcy.  The trustee is under a duty to investigate the debtor’s affairs, examine the debtor under oath, and submit reports to the bankruptcy court and Office of the U.S. Trustee.  At the meeting of creditors the Panel Trustee is required to ask the debtor specific questions outlined in the U.S. Bankruptcy Code, including:

Did you read the schedules before signing?

Did you list all of your assets?

Did you list all of your debts?

Are the schedules accurate?

Do you want to make any corrections to the schedules?

Do you have a domestic support obligation?

If the trustee discovers evidence of fraud during the examination of the debtor, the case may be passed to the Department of Justice for further investigation.  The trustee may also find assets through unconventional means, such as avoiding pre-bankruptcy transactions made by the debtor in an attempt to protect assets from creditors.

The best advice for dealing with the bankruptcy trustee is to plan and prepare.  Use an experienced bankruptcy attorney to prepare your bankruptcy filing accurately and honestly.  When the paperwork is in order, there are no assets to liquidate, and there are no signs of fraud, the case goes smoothly and quickly.  However, when the bankruptcy schedules are inconsistent or incomplete, you may find yourself squarely on the trustee’s radar. 

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New data from the Administrative Office of the U.S. Courts reveals that American consumers filed more than 1.5 million non-business bankruptcies during the federal government's fiscal year ending September 30.  That is 14% higher than fiscal year 2009, when around 1.3 million consumer bankruptcies were filed.

“As the issues of unemployment and economic stress weigh heavily on today’s elections, consumers continue to seek the financial shelter of bankruptcy,” said American Bankruptcy Institute Executive Director Samuel J. Gerdano. “We anticipate that there will be nearly 1.6 million consumer bankruptcy filings by year end.”  The American Bankruptcy Institute is the nation's largest association of bankruptcy professionals.

At this current pace, the number of consumer bankruptcies for 2010 would be the highest number in the past five years.  In 2005 Americans filed over two million bankruptcies cases, 630,000 of these were filed in the two week period before bankruptcy law revisions made it more difficult discharge debt.

Gerdano expects the number of bankruptcies to continue rising in the months ahead as unemployment stays near 10% and access to credit remains tight.  Personal bankruptcy filings have been climbing steadily since the recession began in 2007 which left millions of Americans unemployed or underemployed.  During the federal fiscal year 2010, Chapter 7 filings increased nearly 15% to over 1.1 million, from 989,227 in fiscal 2009.  Chapter 13 filings rose 9.2% during the year, while Chapter 11 filings fell 3.8%.

If you are struggling with debt and considering bankruptcy, you are not alone.  Bankruptcy is a legal process protected by federal law, guaranteed by the U.S. Constitution, and overseen by a federal judge and agents of the United States Justice Department.  Bankruptcy is the right way to legally resolve a debt problem that you cannot pay.  If you need legal protection from your creditors, contact an experienced bankruptcy attorney and discuss your options.

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Military service is a selfless and honorable public service.  Veterans deserve our respect and our gratitude.  Congress has passed many laws attempting to give veterans a preferred status to meet special needs that result from service to our country.  For instance, wounded veterans receive health care after discharge, and veterans often have hiring preference for jobs.

In recognition of the potential economic hardship that extended military service may impose on our reservists and national guardsmen, Congress has made a special exemption from the bankruptcy means test.  Members of the Reserves or National Guard who file bankruptcy while on active duty or within 540 days after release from active duty are excluded from all forms of means testing.  The means test is a mandatory calculation that determines whether the debtor’s income is low enough for you to file Chapter 7 bankruptcy.  

Disabled veterans are also exempted from taking the means test.  However, this exemption only applies if the indebtedness was primarily incurred during service on active duty or while performing a homeland defense activity.

Active duty servicemen and servicewomen are not excluded from the means test.  However, active duty personnel receive protection under the Servicemembers Civil Relief Act (SCRA).  The SCRA protects active duty military personnel from default judgments and evictions, and can even reduce the servicemember’s interest rates.  Active duty personnel serving in a combat zone are also excused from completing pre-bankruptcy credit counseling.

If you have served in this country’s military and are now struggling with debt, speak with an experienced bankruptcy attorney and learn how our national laws can help you in your time of need.  The bankruptcy laws broadly protect Americans overwhelmed by debt, and specifically protect certain veterans who have suffered financial hardship as a result of their service.

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Every so often a client will say, “I am hopelessly in debt, but I don’t want to ruin my credit score with bankruptcy.  It is still very good.”  This statement is just like the old joke, “I can’t be broke, I still have checks!”  A credit score is supposed to be an indicator of your financial health.  Unfortunately, many people assume that their financial health is indicated by the credit score.  Consequently, they continue to misuse credit, in many cases borrowing from credit sources to pay monthly credit obligations.  It is a vicious cycle of debt.

In today’s economy your credit score is not the only factor a lender considers when issuing credit.  Financial institutions are using new sources to profile their customers.  A recent article by Wall Street Journal writer Karen Blumenthal entitled New Ways Bankers Are Spying on You reports that banks are now examining rent and utility payments, bank deposits, as well as estimating your home’s value in order to gauge your financial health.  Blumenthal writes that in one case a bank customer was denied a credit after the lender reviewed his home loan records, determined that the value of his California home had declined, and noticed that his mortgage principal wasn't declining—giving away that he has an interest-only mortgage.

Financial good health is living within a budget, using credit responsibly, controlling debt and excess spending, working towards short and long-term financial goals, and contributing to savings and investments.  It is difficult to manage just one of these aspects when a person is overwhelmed by debt.

Fortunately, the federal bankruptcy laws provide an answer for individuals living beyond their means and buried in debt.  Bankruptcy offers a legal means to restructure or eliminate your debts while protecting your family’s assets including real estate, vehicles, or retirement accounts.  During bankruptcy creditors cannot contact you directly and the vast majority of debtors do not lose any property.

If you are drowning in debt, don’t be fooled by a high credit score.  Your financial house is built on sand and it is time to rebuild on solid ground.  Consult with an experienced bankruptcy attorney and discover how the federal law can get you back on the path to financial health.

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The bankruptcy law requires the debtor to list all of his or her assets in paperwork filed with the court.  The court requires the debtor to file a standardized form called “Schedule B” which lists all of the debtor’s property.  The instructions for completing Schedule B direct the debtor to “list all personal property of the debtor of whatever kind.”

A common question from bankruptcy debtors is, “Do I have to list property that belongs to my child?”  The answer is, “It depends.”  If the child is a minor, you likely own any property that you purchased for the child, like bedroom furniture, clothing, toys, etc, even if you gave the property as a gift.  On the other hand, if a minor child paid for an item from his or her own funds, then you would identify your relationship to the property on Schedule B.  For instance, if your 17 year old son worked a summer job to purchase a car with is own money, your disclosure would identify the car and state that it is being held for a minor child.  The court cannot take what is not yours.

Property that has been transferred to a minor or adult child with the intent to protect the asset from turn-over during the bankruptcy must be disclosed.  These transfers are often attacked as fraudulent and may be lost during the bankruptcy case.  The usual problem with this type of transaction is it is done without the guidance of an attorney.  State and/or federal exemptions that can protect the debtor’s assets may be compromised when the property is transferred immediately before filing bankruptcy.  The legal protections available to you may be lost by this transfer.

Money held in trust for your child is generally not property of the estate.  For instance, a bank account set up under the Uniform Transfers to Minors Act (UTMA) naming you as custodian is usually protected.  This type of account is irrevocable and the money belongs to your child, not to you.  However, funds you contribute to this account during a time when you are insolvent may be found to be fraudulent transfers and the Chapter 7 trustee could obtain the funds to pay your creditors.

Protecting assets belonging to a debtor’s child is usually not an area of large concern.  If you have an unusual situation and your child has an ownership interest in a valuable asset, it is important to discuss the best means to protect the asset with an experienced bankruptcy attorney.  Don’t leave the protection of your child’s asset to chance.  Get the advice you need by calling today.

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Garnishing a debtor’s wages is one of the most common and effective means a creditor has to get paid.  A garnishment is a typically a court order (in some rare cases a garnishment can come from another source), and directs the debtor’s employer to withhold a certain amount or percentage from the employee’s pay.  This amount may be limited by state or federal laws, depending on the type of debt and the income source, and the debtor may be able to assert certain “exemptions” that restricts the amount of the garnishment each pay period.  The garnishment usually comes unannounced and is delivered just before the debtor’s payday, to ensure that the creditor receives the maximum amount from the garnishment.

Certain income sources receive increased protection from garnishment like Social Security, retirement plan benefits, public assistance, workers' compensation, and unemployment or disability benefits.  However, certain debts like child support can collect from most of these income sources.

When a garnishment is taking more than you can afford to pay, it may be time to consider filing bankruptcy.  The federal bankruptcy laws will stop debt collection including garnishments.  The moment the bankruptcy case is filed a temporary injunction known as the “automatic stay” stops all creditor actions immediately and automatically – even if the creditor has no knowledge of the bankruptcy filing!  This stay continues throughout your bankruptcy case unless terminated or modified by the bankruptcy court.  For most garnishments, the debt will be discharged at the end of the bankruptcy case and the creditor can no longer collect from you.

Once you have filed your bankruptcy and the garnishment has stopped, it may be possible to have wages that were withheld from your check returned to you, provided your employer has not already sent the funds on to the court or to the creditor.  Ask your attorney whether you can have funds returned once you file your case.

If you have a wage garnishment, consider your options by consulting with an experienced bankruptcy attorney.  Your attorney can explain how the federal bankruptcy laws can stop your wage garnishment and put your wages back into your pocket.

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The traditional wisdom for debtors in bankruptcy was to protect your home and discharge unsecured debts.  In some cases, bankruptcy attorneys advised surrendering a vehicle and eliminating the monthly auto payment in order to afford the home mortgage.  Back when real estate prices were appreciating at staggering rates, that wisdom was sound advice.  It was important to protect an asset that was appreciating quickly and could be used to secure a family’s financial future.

Unfortunately, times have changed.

Over the past few years housing prices have flattened, or even depreciated.  In many areas home prices have dropped significantly.  For a debtor who is upside-down on a home loan, it usually doesn’t make sense to try to dig out of negative equity and continue to pay on a home that is a liability, not an asset.

If your mortgage is stressing your family’s budget, it may be wise to walk away.  It is important to consider surrendering your home during bankruptcy and renting rather than continuing to pay a burdensome mortgage payment, taxes, insurance, home repairs, and maintenance.  The question to answer is whether walking away will save you money in the short run and the long run.

One tool for this analysis is provided free of charge at Trulia.com.  Trulia maintains a rent vs. buy calculator that compares the cost of buying a home against the costs of renting.  Using the calculator you can determine whether keeping your home is a smart financial decision.  Trulia also publishes a Rent vs. Buy Index, which tracks whether buying a home or renting is less expensive in America's 50 largest cities, based on current market conditions.

Deciding whether to walk away from a home is often difficult, but is an important consideration for any home owner facing bankruptcy.  When a debtor surrenders property in bankruptcy there is generally no financial consequence to the debtor, and the debt is discharged by the bankruptcy court.  If you are considering surrendering your home during bankruptcy, speak with an experienced attorney and discuss the advantages and disadvantages of the process.  Your bankruptcy attorney can help you reach a decision that is right for you and your family.

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Many individuals trying to make ends meet take on extra work to pay off debt.  In some cases the added income is enough to make a difference.  In other cases the second job makes no difference, or can even make the financial situation worse.

Working a second job can often create additional unexpected expenses.  Additional travel, food, and child care costs are a few added expenses that will eat away at any increased income.  A second job can create more stress on the family when one spouse is working and the other spouse must increase his or her responsibilities at home.

For some people increasing the family's income can have a big negative consequence on a future bankruptcy.  The bankruptcy "means test" is a calculation that determines whether your income is low enough for you to file Chapter 7 bankruptcy.  The means test is designed to prevent individuals with the ability to pay creditors from filing a Chapter 7 bankruptcy.  Higher income debtors must file Chapter 13 and repay their debts over five years.

When a family that would otherwise pass the bankruptcy means test increases its income, there is a danger that the increase will push the income over the threshold and force the debtors into Chapter 13.  Additionally, the trustee may flag the case for abuse when a debtor voluntarily quits a job and decreases the family income prior to filing bankruptcy.  The debtor is demonstrating that he could afford to repay something, but has chosen to not pay creditors by quitting the second job.

If you are struggling with debt, consult with an experienced bankruptcy attorney before taking on a second job.  It is important to have an understanding of the risks involved and a clear strategy for getting out of debt.  As the saying goes, "Hope for the best, but plan for the worst."  Just make sure that your plan doesn't leave you in a worse financial position.

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Bankruptcy attorneys know that owing a debt that you cannot repay causes the debtor many headaches.  First, there are the collection calls and letters.  These collection actions are meant to harass you into paying something on the debt.  Since the creditor only has a certain number of years to collect before the statute of limitations runs, after a few years the creditor will file a lawsuit against you.  After the creditor obtains a judgment, the statute of limitations clock is reset and the creditor has more time to collect by garnishing wages, or seizing bank accounts or property.  In some cases, the creditor may have twenty years or more to collect on a debt!  During this time fees and interest can increase the balance of the debt many times over.

An unpaid debt has serious consequences to your credit report.  Any debt that is more than 90 days delinquent indicates that the individual is experiencing serious financial problems.  A debt stays on your credit report for seven years after the date of the last payment.  Even after the debt drops off your credit report, if the creditor sues you the judgment will be reported for an additional seven years.

One of the chief benefits of a bankruptcy discharge is it provides a final resolution of your unpaid financial obligations.  The bankruptcy discharge is a permanent injunction ordered by the bankruptcy court against your creditors forbidding any collection action against you, forever.  The discharge order is extremely powerful and the penalties for a creditor who violates this federal court order can be severe.

A report of your bankruptcy case will stay on your consumer credit report for ten years after the date you file bankruptcy (not from the date of your bankruptcy discharge as many believe).  While on the surface a bankruptcy stays on your credit report longer than a bad debt (ten versus seven years), the truth is that a bad debt can linger and significantly harm your credit score for much longer than ten years.  After a bankruptcy your debts are reported as “discharged in bankruptcy” with a balance of “zero.”

If you are struggling with debts you cannot afford to pay, consider filing bankruptcy sooner rather than later.  The sooner you discharge your debts, the sooner you can begin your financial recovery.  Delay in filing usually results in further harassment, lawsuits, and difficulties.  Contact an experienced attorney today and discuss your legal options for discharging your debts.

Fears & Nachawati Law Offices

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

A recent study by the University of Michigan School of Law has found that an increasing number of people over the age of 65 are filing for bankruptcy protection.  The study states that even before the financial meltdown of 2008, the percentage of older Americans filing bankruptcy had risen steadily, from 2 percent in 1991 to 4 percent in 2001 to 7 percent in 2007.

The reasons for these older people filing bankruptcy are varied, but the study found that “the dominant force appears to be overwhelming burdens related to credit cards.”  Researchers found that elder bankruptcy debtors reported 50% more in credit card debt than younger bankruptcy debtors.  Credit card interest and fees were cited as a reason for filing bankruptcy 50% more frequently.  This suggests that elder debtors rely upon their credit cards more that younger debtors.  The author of the study, law professor John Pottow, states, "These findings are both striking and ominous."

Debtors over 65 had a median credit card debt of $22,562, while younger debtors had a median of $13,615.  Nearly 60 percent of elder debtors said their financial troubles resulted from medical bills.

Financial struggles can be especially overwhelming for someone on a fixed income.  While younger debtors may be able to juggle finances, increase income, or decrease expenses in order to pay off debt, in most cases an older debtor’s fixed income pays only for the bare necessities.  There are few options to paying off high interest credit card debt.  In some extreme cases an elder debtor may forego necessary medicine, food, or utilities in order to pay monthly credit card payments.

If you have an older loved-one who is experiencing credit card debt, speak with an attorney and discover how the federal bankruptcy laws can relieve burdensome credit card bills.  Bankruptcy is powerful protection against creditor harassment, lawsuits, and income garnishments.  For most elder debtors, credit card debt can be discharged without losing any property.  Call today and protect your property and your peace of mind.

Fears & Nachawati Law Offices

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

In the wake of the “robo-notary” scandal that has prompted federal investigations into the foreclosure processes of several large banks, another “robo” scandal against consumer debtors has been resolved.  Allied Interstate Inc., a large Minnesota debt collection agency, has agreed to pay $1.75 million to settle a case filed by the Federal Trade Commission.  The FTC alleged that Allied use robo-dialers to automatically call the same people multiple times a day, and in many cases attempted to collect debts that individuals didn't owe.
 

Allied Interstate Inc. has a history of consumer complaints.  According to the Minneapolis Star Tribune, the FTC’s federal lawsuit alleged that Allied continued to use its robo-dialing software to call consumers even after it learned it was calling the wrong person or after the individual insisted the debt was not valid.  The FTC lawsuit also alleged that debt collectors spoke to neighbors, co-workers or others about a consumer's debts, and threatened legal action it didn't intend to take.  Both of these practices violate the Fair Debt Collections Practices Act, a federal law that protects consumers.

The settlement is the second largest civil penalty the FTC has ever obtained against a debt collection firm. A FTC spokesman stated that the lawsuit and resulting settlement sent a message to the collections industry that repeatedly calling consumers who dispute a debt is not tolerated.

If you are being harassed by collection firms and need assistance with your debts, consult with an attorney and learn how the federal laws can help you.  Once you have hired an attorney the federal law forbids third parties (like collection agencies or collection attorneys) from contacting you, your neighbors, or your employer.  The collector must speak with your attorney.  Furthermore, once you file a bankruptcy case, you are under the protection of the federal court and any subsequent contact or collection action is punishable by contempt of court.  Don’t put off getting help.  Contact an experienced bankruptcy attorney today.

Fears & Nachawati Law Offices

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

The federal Bankruptcy Code provides many options for an individual to reorganize his finances.  In some cases, a Chapter 7 debtor may decide that he can no longer afford to make the monthly payments on a secured loan.  This may be a loan secured by real estate, a vehicle, or personal items.  When the monthly payment is not affordable, the debtor should consider his options.  These options may include restructuring the debt through Bankruptcy Code provisions such as re-writing the note in a reaffirmation agreement, lien-stripping, or redemption.  The debtor may also consider using a non-bankruptcy option such as refinancing.  Whatever the decision, the general rule in bankruptcy is that secured items must be paid for or returned to the secured creditor.

The best financial decision for the debtor may be to simply "walk away" from a secured debt.  Surrendering property back to a creditor is not an easy decision, but in many cases it can be a very liberating experience.  Surrendering property is usually as simple as coordinating a time between your attorney and the creditor, and then delivering the property.  Once the creditor takes possession of the property, the debt is no longer secured and is discharged at the end of the Chapter 7 bankruptcy case.  It is important to continue to safeguard the property and maintain insurance until the property transfer is completed.

The threat of surrendering the property can be a highly effective negotiating tool.  In most cases the creditor doesn't want the property, it wants the money.  Taking property is a costly expense to the creditor and the threat of surrender may open the possibility for negotiating affordable terms during reaffirmation, redemption, or cram-down.

If you have secured property you can no longer afford to keep, consider surrendering the property during a Chapter 7 bankruptcy and "walking away" from the debt.  Discuss your options with your attorney and learn how the federal Bankruptcy Code can help you restructure your finances.

Fears & Nachawati Law Offices

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

For many tithing is much more than simply a donation to a church, synagogue or mosque.  When a person files bankruptcy, the issue is whether charitable donations should continue while the person is seeking a discharge of financial obligations under the federal bankruptcy laws.  Fortunately, Congress has answered this question.

After Congress passed the bankruptcy reform bill in 2005, several bankruptcy courts gave contradictory opinions as to whether a debtor in Chapter 13 bankruptcy should be allowed to continue tithing.  One bankruptcy court found that under the 2005 changes a Chapter 13 debtor could not tithe until unsecured creditors were paid.  In response to these differing opinions, Congress passed the Religious Liberty and Charitable Donation Clarification Act of 2006 which clarifies a debtor’s right to continue tithing during bankruptcy.  Under this law bankruptcy debtors are allowed to continue tithing and can include it as an expense in the proposed monthly budget submitted to the bankruptcy court.  Debtors are permitted to contribute up to fifteen percent of their yearly gross income. 

If you intend to contribute a significant amount of your income to tithing or to charitable donations, the bankruptcy trustee may require proof that you have made similar contributions in the past.  If it appears that you have suddenly started tithing on the eve of bankruptcy, the trustee may object to your newfound generosity and claim that it is a fraudulent attempt to avoid paying creditors.  On the other hand, if you have consistently donated to a church in the past, you will be allowed to continue your donations.  Finally, if the bankruptcy court confirms a plan that includes tithing or charitable contributions, you are expected to follow through.  If you find that you are unable to make the donation, contact you bankruptcy attorney immediately.

For the debtor who can demonstrate a history of charitable donations, donating and tithing during bankruptcy are protected by federal law.  Discuss your intent to tithe or make charitable donations with your bankruptcy attorney.  Your attorney can help you determine the appropriate donation level to help your religious organization and help yourself during bankruptcy.

Fears & Nachawati Law Offices

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

Bankruptcy attorneys see people from all cross-sections of our population.  Most people have a good understanding of their financial obligations and know who they owe.  Others bring in grocery store bags and boxes full of bills they have collected for months and, in some cases, years.

It is very important to identify all of your creditors when you file a bankruptcy.  The Bankruptcy Code requires that you list all of your creditors, even those you want to pay in the future.  You must also make a good-faith effort to list the amount owed to the creditor.

There are two excellent sources for discovering who you owe.  The first is the US Postal Service.  Creditors and collection agencies are very good at sending monthly bills when you owe them money.  Collect your mail for a month and you will have a good start on listing your creditors.

The second excellent source for creditor information is your credit report.  There are three main consumer credit reporting agencies:

Equifax

http://www.equifax.com/

800-685-1111

P.O. Box 740241

Atlanta, GA 30374-0241

Experian

http://www.experian.com/

888-397-3742

P.O. Box 2104

Allen, TX 75013

Trans Union

http://www.tuc.com/

800-916-8800

P.O. Box 2000

Chester, PA 19022 

Each of the above consumer credit reporting agencies are required by federal law to provide one free credit report to you every 12 months.  You can obtain an absolutely free credit report from Equifax, Trans Union, and/or Experian by visiting the following website: https://www.annualcreditreport.com/cra/index.jsp

Obtaining a copy of your credit report is a very good step in making a good-faith effort to identify all of your creditors.  However, it is important not to rely exclusively on the information contained in the credit reports.  Not all creditors report to the credit reporting agencies.  Additionally, the information contained in your reports may be inaccurate, outdated, or incomplete. 

If you are considering a bankruptcy filing, get a free copy of your credit report and seek legal assistance.  You and your bankruptcy attorney can review your credit report and assess you financial situation.  While bankruptcy isn’t the answer to all financial problems, it can provide powerful relief to people who are buried in debt.

Fears & Nachawati Law Offices

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