Lien Stripping in Chapter 13 Bankruptcy

 Section 506(a) of the Bankruptcy Code separates the debtor’s obligations into two general categories or “claims”: secured claims and unsecured claims. Secured claims are obligations in which payment is guaranteed (or “backed” or “secured” or “collateralized”) by property. Section 506(a)(1) provides that a secured creditor's claim is “a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim.” Consequently, when the value of the property is less than the amount of the secured claim, Section 506(a) allows the obligation to be divided into a secured claim and an unsecured claim.

For instance, suppose the debtor finances a car for $40,000. It’s commonly said that a car depreciates the minute it drives off the lot, so let’s say the car is now worth $35,000 and no payment has been made. In bankruptcy, this car loan would have a secured claim of $35,000 (the value of the collateral) and an unsecured claim of $5,000.

The most notable prohibition against reducing the amount owed on a secured obligation is found in Section 1322(b). This provision, often called the “anti-modification provision,” prohibits a Chapter 13 debtor from modifying the rights of a secured claim when the claim is secured only by the debtor’s principal residence. The U.S. Supreme Court in the case of Nobelman v. American Savings Bank, 508 U.S. 324 (1993), decided that 1322(b) means that a claim against the debtor’s primary residence cannot be bifurcated into secured and unsecured claims. However, most bankruptcy courts have distinguished the ruling in Nobleman to allow a junior mortgage to be stripped away if the value of the senior claims are more than the value of the debtor’s home.

To understand how lien stripping works, consider the following “negative equity” example of a debtor’s home:

Value of home:           $330,000

First mortgage:            $360,000

Second mortgage:       $40,000

Amount of equity       -$70,000

Most courts allow the $40,000 second mortgage to be stripped off and reclassified as an unsecured debt because the amount owed on the first mortgage is more than the value of the home. In other words, the second mortgage is not actually secured by anything because the amount owed on the first mortgage “eats up” all of the home’s equity. There is no equity left to secure the second mortgage. If the second mortgage was partially secured, even by one dollar, the second mortgage could not be lien stripped according to Nobelman.

If you are considering filing for bankruptcy please call the experienced attorneys at Fears | Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to

Surrender Property During Bankruptcy

If you need to walk away from real estate, a boat, a car, or other expensive personal property, it is a good idea to speak with a bankruptcy attorney. The federal bankruptcy laws may allow you to walk away from the debt without owing additional money on the property.

Deficiency Balance
Surrendering property before bankruptcy can create a new debt, called a deficiency balance. Essentially, a deficiency balance is the amount owed on a loan after the property is sold. Returned property is often sold at auction, which commonly brings less than the property’s real value; so you are left owing the remaining balance.

In many cases, a deficiency balance can be avoided by surrendering the property during bankruptcy. Most courts will allow you to surrender certain property back to your creditor in full satisfaction of the outstanding debt. That means that the creditor takes the property back, but has no further claim against you. This has little value during a Chapter 7 bankruptcy, but can mean a great deal you file a Chapter 13. By waiting to surrender the property during the Chapter 13 case, the creditor has no unsecured claim to add to your monthly plan payment.

Surrendering property in full satisfaction of a debt is a complicated bankruptcy issue and there is disagreement among the circuit courts as to its applicability. If you are considering walking away from property, speak with a knowledgeable bankruptcy attorney in your area to discuss your options.

Tax Liability
When a creditor “forgives” a debt, the creditor is required to issue an IRS Cancellation of Debt Form 1099-C. This form is sent to the IRS and to the debtor. The IRS includes the amount of the cancelled or forgiven debt as income, unless the debt is protected by the Mortgage Debt Relief Act of 2007, the debtor is insolvent at the time of the cancellation, or some other exception applies. If the debt is not accepted, the tax debt owed to the IRS can be very difficult, if not impossible, to discharge. While the Tax Code provides several exceptions to a tax levied by a cancelled or forgiven debt, it is never good to be on the radar screen at the IRS.

A debt that is surrendered during bankruptcy is not taxed as income. The federal law specifically excludes all debts discharged during bankruptcy from income. As a result, it is always better to file bankruptcy before a creditor forgives or cancels a debt and issues a 1099-C.

If you are considering bankruptcy, the experienced bankruptcy attorneys at the Fears | Nachawati Law Firm can navigate you through the sometimes confusing process bankruptcy entails; and can help you re-establish financial freedom from overwhelming debt. For a free consultation, contact our office at 1.866.705.7584.



Converting from Chapter 13 to Chapter 7

You have the right to convert your Chapter 13 case to one under Chapter 7, the only restriction is that the debtor cannot convert if a Chapter 7 discharge was issued to the debtor within the previous eight years. Converting the case is a simple procedure, but you must still jump through many of the same hoops as a newly-filed Chapter 7 case.

In order to proceed with your Chapter 7 case, you must qualify as a Chapter 7 debtor. For most that means passing the bankruptcy means test. However, bankruptcy courts are split on the issue whether you must pass the means test when you convert your Chapter 13 case to a Chapter 7 case. The majority of bankruptcy courts find that a presumption of abuse under Section 707(b) applies equally to Chapter 7 cases and to cases converted from Chapter 13 to Chapter 7. A minority of courts do not apply this section to converted cases.

You must also file new bankruptcy paperwork called “conversion schedules.” In most courts the bankruptcy paperwork you filed during your Chapter 13 case becomes a part of your converted Chapter 7 case. When you convert, you must update any changes and amend your forms. Any new debts that arose after the initial bankruptcy filing can be added to your case and possibly discharged. You are also required to file a Statement of Intention, which is your intention to either reaffirm, redeem, or surrender secured property.

You may review your exemptions, which a majority of courts hold are determined on the date of conversion. Your assets may have increased or decreased in value; or been surrendered, lost, or transferred. It is therefore important to perform another accounting, file amended schedules, and apply your legal exemptions.

Converting your case from Chapter 13 to Chapter 7 is a second chance at a fresh start. Make the most of this opportunity by consulting and cooperating with your bankruptcy attorney.

Calculating Your Chapter 13 Payments

Chapter 13 bankruptcy law and procedure appears to be a complicated mess to the outsider. The heart and soul of Chapter 13 is the repayment plan, but obtaining a confirmed plan can sometimes get technically difficult. Confirming a Chapter 13 plan essentially boils down to examining six “tests” outlined in the Bankruptcy Code:
1. Administrative claims
2. Priority claims
3. Secured Creditor claims
4. Best efforts of the debtor test
5. Best interest of creditors test
6. Feasibility

Administrative Claims
Administrative claims are paid 100% during the Chapter 13 case. Common administrative claims include court fees, trustee fees (3% to 10% of each monthly payment), and attorney fees.

Priority Claims
Priority claims are paid 100% during the Chapter 13 case. Priority claims include:
• certain recent taxes
• domestic support obligations such as alimony and child support
• salaries, wages, or commissions owed to employees
• certain customs duties and penalties owed to the government
• claims arising from death or injury caused by operation of a vehicle while intoxicated, and
• contributions owed to employee benefit plans.

Secured Creditor Claims
For secured property that is retained, any arrearage is paid 100% during the Chapter 13 case. In other words, if you fell behind a few payments on your house or car, you must pay that amount during the bankruptcy. You must also pay any future payment that comes due during the case or the creditor can ask the court for permission to repossess or foreclose on the property. In some cases the terms of a secured debt can be modified by the bankruptcy court and paid in full during the case.

Best Efforts of the Debtor Test
This test means what it says: the debtor must make his best effort to repay unsecured creditors. The bankruptcy law looks to your disposable income and to the applicable commitment period as calculated and determined by the bankruptcy means test. The debtor and bankruptcy trustee sometimes disagree on the means test calculations, which can result in a payment to unsecured creditors between 0% and 100% of the total debt.

Best Interest of Creditors Test
Under this test you must pay your unsecured creditors in a Chapter 13 case as much money as they would receive if you filed a Chapter 7 bankruptcy. This calculation includes equity in non-exempt property and the money the trustee can recover from any preference payments or fraudulent transfers of property, minus the cost of liquidation and the trustee fees and expenses. For instance, if you have a car worth $10,000, you owe $2,000, and you have a $2,000 in available exemptions, then you must pay your unsecured creditors $6,000 during your case for the non-exempt equity in your car.

Your plan payment must be feasible, meaning it must be both practical and affordable.

Chapter 13 is a powerful tool for restructuring your finances in a way that you can afford. The tests contained in the Bankruptcy Code form the framework for balancing the rights of both you and your creditors. In most cases your payments in Chapter 13 bankruptcy are significantly less that your payments before bankruptcy. An experienced bankruptcy attorney can analyze your situation and tell you exactly how much you have to pay during your Chapter 13 case.

Elderly Debtors Win in Fourth Circuit Appeals

The first of July was a red-letter day for senior citizens considering whether to file for Chapter 13 bankruptcy. The Fourth Circuit Court of Appeals held in Ranta v. Gorman (In re Ranta), No. 12-2017 (July 1, 2013) that debtors who file for Chapter 13 bankruptcy are not required to list their Social Security income as part of their projected disposable income for purposes of the Chapter 13 means test.


In general, the Chapter 13 means test requires that debtors who wish to file Chapter 13 bankruptcy must make payments for 5 years – 60 months – unless their average gross income is less than the median income for similar households in the state. In the event that their average gross income is less than the median household income, they may make payments on a plan for only 3 years – 36 months.


For debtors, a shorter payment plan under Chapter 13 is better than a longer one. In fact, Chapter 13 debtors who fall below the median household income figure stand to save thousands of dollars and, literally, years of frustration, anxiety and stress. Thus, one of the critical questions in a Chapter 13 filing is whether a debtor’s projected disposable income exceeds the median household income for his or her state. This question, in turn, is dependent upon simple arithmetic: namely, adding up a debtor’s projected income.


Enter the Ranta decision. By excluding Social Security income as part of the projected disposable income calculus, the Fourth Circuit made it easier for Chapter 13 debtors to qualify under the Chapter 13 means test and, consequently, enter a 36 month plan rather than a 60 month one.


Want to find out more about Chapter 13 bankruptcy and the case law that may make easier – or more difficult – for you to successfully restructure your personal finances. The dedicated and experienced attorneys at the Dallas law firm of Fears Nachawati may be able to help you. For your free consultation, contact us today.

Property of Bankruptcy Estate After Conversion From Chapter 13 to Chapter 7

Converting from a Chapter 13 case to a Chapter 7 is not procedurally difficult. Most courts simply require a filed motion and a small conversion fee. A debtor may convert to Chapter 7 from Chapter 13 as a matter of right. See 11 U.S.C. §1307(a). But converting the case triggers many questions and the answers may be case-specific.

The bankruptcy court will schedule a Chapter 7 meeting of creditors and impose new deadlines. The debtor is required to file a Statement of Intention within thirty days of conversion and file amended Schedules reflecting unpaid debts incurred after filing of the petition. See Rule 1019(1)(B) and 1019(5)(B), Federal Rules of Bankruptcy Procedure. Filing new schedules is a “second-chance” opportunity for the debtor to eliminate debts that arose after the date of the bankruptcy filing, but before the date of the conversion. These debts are treated as if they arose prior to the initial petition and are subject to the bankruptcy automatic stay and to discharge. 11 U.S.C. §348(d). However, conversion of the debtor’s case does not re-impose an automatic stay when the creditor has already received relief.

Accounting for the debtor’s Chapter 7 bankruptcy estate can sometimes be difficult. The Bankruptcy Code states that the Chapter 7 estate consists of the property belonging to the Chapter 13 estate at the time of the initial bankruptcy filing that remains in the possession or control of the Debtor. 11 U.S.C. §348(f)(1)(A). However, if the court finds that the debtor converted the case in bad faith, the Chapter 7 estate property is determined upon the date of conversion. 11 U.S.C. §348(f)(2).

A recent Bankruptcy Appellate Panel case out of the 9th Circuit denied a Chapter 7 trustee’s motion to compel turnover of a tax refund. In the case of In re Salazar, 465 B.R. 875 (9th Cir BAP 2012), the debtors were owed an income tax refund when they filed their Chapter 13 bankruptcy (and admitted it was part of the Chapter 13 estate), received the refund and spent the money on ordinary and necessary expenses; and then converted the case to a Chapter 7. The BAP agreed with the lower bankruptcy court that the debtors spent the tax refund money in good faith to pay ordinary and necessary living expenses during the period from the petition date to the conversion date. Consequently, the spent tax refund was not property of the bankruptcy estate on the conversion date. See also In re Grein, 435 B.R. 695, 699 (Bankr.D.Colo.2010); Bogdanov v. Laflamme (In re Laflamme), 397 B.R. 194 (Bankr.D.N.H.2008).


Bonus Checks During Chapter 13 Bankruptcy

Bonus checks are something most employees look forward to receiving. For a debtor in a Chapter 13 bankruptcy, a bonus check can be a source of anxiety and frustration. Whether the debtor can keep the bonus check depends on several factors. Let’s take a look at what happens when a debtor receives a bonus check during a Chapter 13 bankruptcy case.

The first question to address is whether your bonus check is a one time event, or a regular occurrence. If your bonus check is regular and consistent, it should have been factored in to your pre-confirmation income figures. As such, it is already accounted for by the bankruptcy court by either increased monthly plan payments, or turnover to the trustee when your receive it.

If your bonus is not regular and consistent, and therefore not already provided for in your bankruptcy plan, then you must refer to your bankruptcy plan when you receive your bonus. Your Chapter 13 plan is a court order binding and directing you and your creditors during your bankruptcy case. Once your plan is confirmed, it is controlling. Your plan may direct you to turn over any extra income to the trustee for distribution to creditors, unless your plan already provides a 100% payout to creditors.

Your plan may be silent as to irregular bonuses. In that case, the bankruptcy trustee will likely discover the bonus income through your yearly tax return, and could request an upward modification of your plan payments to include the bonus income. The adjustment is not automatic and requires the order of the bankruptcy court. Any increase in income, including a part time job, regular overtime, or raise at work, may form the basis for an increase in your plan payment.

If you receive regular bonuses or commissions at work, discuss your income situation with an experienced bankruptcy attorney. Your attorney can advise you as to your obligations to your bankruptcy case and whether you will be able to keep your bonus during your Chapter 13 bankruptcy case.

Your Credit after Bankruptcy

Although declaring personal bankruptcy has many advantages, one of the principle disadvantages is that it can be difficult to access credit in the weeks, months and even years after your Chapter 7 or Chapter 13 filing. Fortunately, by taking timely, prudent action, you can minimize your interest payments and maximize your credit score.


There are many steps you can take. And the best one may be to work out a post-bankruptcy financial plan with the professionals at the law firm of Fears Nachawati. Still, here are three suggestions you may consider.


First, review your credit score, credit history and claims against your credit. Make sure that the listed debts are numerically accurate. Also, be sure to check that they are appropriately characterized. Debts that were included in bankruptcy should be labeled as such – as should debts that are not included in bankruptcy.


Second, write a budget and live within your means. It’s a lot easier to say than to do, but making the hard choices now will make your life much easier in the near future. Once your financial life has stabilized, you’ll feel a lot more comfortable using credit instruments – like credit cards – when the time comes.


Finally, think seriously about when you should reacquire credit – and for what purpose. It’s important not only to steer clear of a bad relationship with credit cards, but also to establish a good one. Future lenders will want to see that you can handle the challenges of credit. At some point, you may want to contract for a limited amount of debt that serves a particular purpose, such as your weekly tank of gas.


The team of professionals can help you plan for your future – both in bankruptcy and beyond. Contact our attorneys today for your free consultation.

Timing is Everything in Bankruptcy

There are many decisions to consider when contemplating bankruptcy. Will you file under Chapter 7 or Chapter 13? Will you file alone or with your spouse? Will you reaffirm secured debts or “walk away?” But the most important decision is when to file your bankruptcy. The timing of your bankruptcy filing will determine many aspects of your case.

Your bankruptcy estate is determined on the date you file your case. All property owned and debts owed on the date you file must be listed in your bankruptcy schedules. A great example of how bankruptcy timing can affect your case is during tax season. If you file your case before you receive your income tax refund, your refund is property of the bankruptcy estate. If you file after you receive your refund, but before you spend the money in your bank account, the money is property of the bankruptcy estate. If you file after you receive your tax refund and after the money is spent, there is nothing left for the bankruptcy estate. Timing is everything!

The Bankruptcy Code places time limitations on the debtor for obtaining certain relief. An example of this is the restriction on vehicle cram down in a Chapter 13 bankruptcy case. Suppose you have a car that is worth $6,000, but you owe $12,000 on it. In a Chapter 13 case you may cram down the car loan to its fair market value. In other words, you only pay $6,000 for your $6,000 car. The Bankruptcy Code restricts vehicle cram down to vehicles purchased more than 910 days (2-1/2 years) before the bankruptcy filing date. Waiting to file bankruptcy could save you thousands!

The timing of your bankruptcy filing can make a difference to the Bankruptcy Means Test. This test requires the debtor to calculate income from all sources for the last full six months. This income is averaged and then analyzed to determine disposable income – money you may have to pay to unsecured creditors. Consider the case of a debtor who receives a one-time $12,000 employment bonus in May, then needs to file bankruptcy in November. The “look back” period for calculating income is the last full six months, or October, September, August, July, June, and May. Including May in the calculation artificially inflates the average monthly income by $2,000 per month! If the debtor waits until December 1 to file, May (and the bonus) are not considered by the Means Test. Timing is everything!

If you are experiencing serious financial trouble, speak with an experienced bankruptcy attorney. Your attorney is skilled at identifying timing issues in bankruptcy and will give you options to avoid complications in your case.

Is Student Debt Causing You Undue Hardship?

Indebtedness arising out of your time in college or graduate school can be some of the most difficult form of debt to discharge in bankruptcy – but it’s not impossible. Moreover, for debtors struggling under the weight of student loans, bankruptcy may also be an effective strategy for clearing out non-student debt, such as home loans, car loans, credit card debt, and short-term bank loans.


In general, bankruptcy courts require a debtor with student debt to demonstrate that the debt “will impose an undue hardship on you and your dependents,” in order to discharge the student debt in bankruptcy. As is often the case with the legal standards, every word in a rule is important, and the standard for the discharge of student debt is no different. Your student debt must be more than a hardship. It must be an undue hardship. Likewise, that hardship must not only impact you, but your spouse or children, your dependents, as well. Not surprisingly, many debtors carrying student debt face hardships, but few face the kind of particular hardship that the rule requires. Still, if you face hardship as a result of your student debt, it may be worthwhile to speak to the attorneys at Fears Nachawati.


Many debtors who carry student debt also have non-student debt, too. Even if your student debt is currently non-dischargeable, eliminating portions of your non-student may make it considerably easier for you to manage your personal finances. For some debtors, Chapter 13 restructuring of their personal balance sheet is best; for others, Chapter 7 liquidation – a completely fresh start – is preferable. Find out what course of action is best for you by talking to the professionals at Fears Nachawati today.


With years of experience and dedicated expertise, we can quickly assess your financial and legal needs and give you the direction and comfort you want and need.

Adjust Withholding During Chapter 13

When you withhold too much during the tax year, the IRS will return your money in the form of a tax refund after your tax return is filed and processed. What happens to this tax refund during a Chapter 13 bankruptcy case depends on the policy of the Chapter 13 trustee.

Many Chapter 13 trustees consider your income tax refund "disposable income." Without getting bogged down with a lengthy discussion of what "disposable income" means in a Chapter 13 case, suffice it to say that a Chapter 13 debtor is expected to repay all debts that he or she can reasonably afford. A trustee may consider your income tax refund as “extra money” that is not needed for your family's welfare during the year. Consequently, this money should go to repay your debts.

Money is obviously tight during a Chapter 13 repayment plan, and most debtors can ill afford to lose their income tax refunds. This is why it is important to consult with a tax expert and adjust your withholding. Withholding too little may create a heavy tax burden at the end of the year that could cause your bankruptcy to fail. Withhold too much, and your money may be taken by the Chapter 13 trustee. Consequently, having your tax withholding reviewed periodically by a tax expert will avoid these two extremes, keep the money in your pocket, and avoid IRS tax debt. Small withholding adjustments can pay big dividends.

Successfully navigating through a Chapter 13 case requires the care and attention of an experience bankruptcy attorney. If you are dealing with financial hardship, discuss your situation with experienced legal counsel. Your attorney can offer options, including those found in the federal Bankruptcy Code. Bankruptcy offers permanent relief for discharging and restructuring your debts, and presenting you with a fresh financial beginning.

The Unintended Benefits of Bankruptcy

Bankruptcy was originally intended for debtors who had experienced financial hardship. In modern practice, however, this important legal right has become much more than a shield in the face of oppressive personal finances. In some situations, it can be used as an effective sword, too, freeing up needed financial resources to underwrite important life choices and changes.


Litigation can be costly. Like a job loss or a medical procedure, the high costs of fighting a court battle can be so high that the only way to free up enough available income is to declare personal bankruptcy. It isn’t the right move for everyone – or even necessary an available action for some – but for many, filing for Chapter 7 or Chapter 13 is an effective way to move forward.


In addition to the benefits of shedding debt, filing bankruptcy empowers a debtor with the automatic stay. By compelling all other legal actions to stop, a bankruptcy’s automatic stay momentarily prevents litigation from moving forward. This can let you maintain your lifestyle a little longer and, more importantly, can open up opportunities for negotiation and collaboration between you and your creditors.


Don’t let civil or criminal litigation result in you winning the courtroom battle but losing the financial war. Bankruptcy may expand your options during this difficult period and buy you a little more of your most precious asset: time. To find out how the bankruptcy professionals at the law firm of Fears Nachawati may be able to help you, contact our team of dedicated attorneys today. With years of experience, we’re ready to help you.

Ensure All Owed Taxes Are Included in Your Chapter 13 Bankruptcy

Chapter 13 is a powerful legal mechanism to stop IRS harassment and allow you to pay owed taxes over three to five years. For some debtors this type of relief is a long time coming, and often is an on-going problem. However, only tax debts that the debtor owes on the day the bankruptcy is filed are included in the debtor’s Chapter 13 bankruptcy case. A suspected tax debt that the debtor may owe at the end of the year is considered a post-petition debt that is not included in the bankruptcy case.

Fortunately, your attorney has a solution for a debtor who needs to file in the middle of the year and suspects that he owes for the current year: file a partial year tax return before filing the Chapter 13 bankruptcy case. Tax debts are ordinarily only legally recognized at the end of the tax year, or December 31, but the tax code allows a taxpayer to file a partial year return and thereby create a legally recognizable tax debt before the end of the year. Once the tax debt is legally recognized, you can include this debt in the Chapter 13 bankruptcy and pay it alongside tax debts from previous years.

Avoiding future tax debts is a cooperative effort between you, your bankruptcy attorney, and your accountant. A Chapter 13 bankruptcy debtor is required to adjust his or her budget to stay current with any ongoing tax obligations. Consequently, you should not owe a substantial amount for any future tax year, including the remaining portion of the current year.

If you are struggling with debt you cannot pay, including tax debt, speak with an experienced attorney and discuss how the federal bankruptcy laws can help. Bankruptcy can reign in your out of control tax debt and get the IRS monkey off your back for good!

Asset Sale May Be Helpful in Chapter 13 Case

If your liabilities exceed your assets, filing personal bankruptcy may be the right strategic move for your personal balance sheet. And if your monthly debt payments exceed your available monthly income, bankruptcy may be the only realistic option for protecting your family’s financial and legal interests.


If Chapter 13 bankruptcy is the right direction for you – or if it’s your only choice – it’s important to recognize that the law may require you to sell some of your assets. In this circumstance, it may be important for your legal counsel to help you maximize the value of the assets you put on the action block. Even on a relative basis, the proceeds from these sales may reduce the amount that you’re required to pay your Chapter 13 plan.


When thinking about when to file for personal bankruptcy, consider your timing. Some assets, such as real estate, can experience significant fluctuations in value in the span of just a few months or years. By delaying – or expediting – a sale of assets in bankruptcy, you may be able to increase the value of your estate and, as a result, reduce a portion of the obligations you’ll carry into your plan.


Want to find out more about how a timely, well-considered asset sale may improve your ability to manage your future during bankruptcy? The attorneys at the law firm of Fears Nachawati may be able to help answer your questions. Talk to us today for your free consultation.

Bankruptcy Dollar Amounts Increase

Section 104 of the Bankruptcy Code authorizes adjustments of certain dollar amounts every three years to account for inflation. The effective date of the most recent changes was April 1, 2013 and increased bankruptcy dollar amounts by 6.3%. The next adjustment will occur on April 1, 2016. These increases affect many aspects of bankruptcy, including property exemptions; means test calculations; and fraudulent transfers.

Here are some of the changes:

Federal Exemptions
• The federal bankruptcy homestead exemption amount increased from $21,625 to $22,975.
• The federal motor vehicle exemption amount increased from $3,450 to $3,675.
• All other federal exemption amounts increased.

Chapter 13 Bankruptcy Eligibility
The debt limit for eligibility to file Chapter 13 bankruptcy increased. To qualify for Chapter 13, a debtor must have secured debts less than $1,149, 525 (previously it was $1,081,400) and unsecured debts less than $383,175 (previously it was $360,475).

Credit Card and Cash Advance Limits
To prevent debtors from charging up credit cards on a pre-bankruptcy spending spree, Congress established limits on credit card charges and cash advanced. These limits have increased. Now if you charge more than $650 in luxury goods within 90 days of your bankruptcy filing, or taken out more than $925 in cash advances within 70 days of your bankruptcy filing, those charges are presumed to be non-dischargeable. Both of these limits were increased by $50 from their former amounts.

Means Test Threshold
The means test is the gatekeeper for Chapter 7 eligibility. A case is “presumed abusive” if, after applying statutorily allowed deductions, too much income remains. The amount that determines “too much” income has increased from $11,725 to $12,475 in one case and $7,025 to $7,425 in another.

No two bankruptcy cases are identical. For many bankruptcy cases, the process is part law, part accounting, and part creativity. Applying the bankruptcy laws creatively to your financial situation is the recipe for a successful bankruptcy outcome. If you are struggling with debt, make sure that your attorney is experienced, knowledgeable about the law, and will zealously represent you during the bankruptcy process.


Basic Types of Chapter 13 Plans

Each local bankruptcy court uses a model plan and allows Chapter 13 debtors to choose how they will treat unsecured creditors (like credit cards and medical bills) during their bankruptcy cases. There are a few basic types that are in common use across the country:

100% Dividend Plan – In a 100% dividend plan the debtor has sufficient income to pay 100% of his unsecured debts over the plan term. In a 100% dividend plan, the bankruptcy case may end sooner than five years.

0% Dividend Plan - A 0% dividend plan means that no unsecured creditor is paid by the trustee. All plan payments are paid to secured or priority creditors, and to administrative expenses such as bankruptcy trustee fees or unpaid attorney fees. Unpaid unsecured creditors are discharged at the conclusion of a 0% Dividend Plan

Disposable Income Plan – In a Disposable Income Plan, unsecured creditors receive a pro-rata share of a monthly payment that is determined primarily by the Chapter 13 means test and the debtor’s current income and expenses. Generally, after deducting payments to secured creditors, any priority claims, administrative claims, and the debtor’s reasonable living expenses, whatever is left goes to unsecured creditors. How long the debtor pays this monthly amount depends on whether the means test requires a 36 or 60 month repayment period. The exact amount a creditor receives in this type of plan depends on the total amount of the debt and the number of allowed claims. Any unpaid unsecured debts at the end of a Chapter 13 Disposable Income Plan are discharged.

Liquidation Analysis Plan – A Chapter 13 Liquidation Analysis Plan is used when the debtor does not have enough exemptions to protect his property from turn-over in a Chapter 7 case. Unlike a Chapter 7 case, the debtor keeps his property in Chapter 13, but must pay the amount of non-exempt equity in the debtor’s property to unsecured creditors. This amount is divided into equal payments over the plan period.

If the debtor has both extra disposable income and non-exempt equity, and the disposable income is sufficient to pay the value of the non-exempt assets, then no amount must be added to the disposable income plan. However, if the value of the non-exempt assets is more than the amount available under the disposable income test, then the debtor must pay an amount equal to the Liquidation Analysis Plan.

Base Plan - A Base Plan is a repayment plan proposed by the debtor that deviates in some way from one of the plans mentioned above. A Base Plan is calculated by multiplying the number of months in the base by the monthly plan payment. To illustrate, let’s suppose, that a debtor, let’s call him Bo, has a modest delivery driver income, but owns outright an orange 1969 Dodge Charger. The Charger is nice, but has some cosmetic blemishes (Bo lives in a rural area and likes to drive it fast with his brother Luke). Bo and his attorney have reasonably valued it at $20,000. After negotiating with the trustee, they agree that Bo’s monthly payment is $575 over 36 months under the Liquidation Analysis Plan. Well, that’s just a little bit more than Bo’s budget will allow. Bo’s attorney proposes a more affordable Base Plan over 48 months at $431.25 per month.

The type of plan used in your Chapter 13 bankruptcy case is largely determined for you after examining your circumstances. In some cases deviating from a default plan may make more financial sense to the debtor. A skilled bankruptcy attorney can guide you to the type of plan that is most beneficial to your bankruptcy success.

Chapter 13 Bankruptcy Timeline

A Chapter 13 is a repayment bankruptcy case that takes three to five years. To keep the case moving along, the federal law has imposed certain deadlines on a Chapter 13 case for the debtor, the trustee, and the bankruptcy court to follow:

Day of Filing - The bankruptcy court issues a case number. Use this case number when notifying creditors with pending legal or collection action of your bankruptcy filing. If you have not filed all of the required bankruptcy schedules, the court will issue a show cause order to dismiss your case. You are required to file the necessary schedules by the court’s deadline, usually 14 days from the date of filing. 11U.S.C. §521

30 Days After Case Filing - Commence plan payments to the Chapter 13 Trustee.

7 Days Prior to 341 Meeting - Tax returns for the most recent tax year must be sent to the bankruptcy trustee. These documents are usually sent to the trustee on the date that you file your case. 11U.S.C. §521(e)(2)(A)

1 Day Prior to 341 Meeting - Tax returns for the prior 4 tax years filed with the IRS and state must be sent to the bankruptcy trustee. These documents are usually sent to the trustee on the date that you file your case. 11 U.S.C. §1308

21 to 60 Days After Filing - Your 341 meeting of creditors will be held. You are required to attend this meeting and all of your creditors will receive notice of this meeting and may attend (although it is rare that any actually show up). 11U.S.C. §341, 11 U.S.C. §343, Fed. Rule 2003.

(Generally) 21 Days after the First Setting of the 341 Meeting – Creditor objections must be filed so the debtor’s plan can be confirmed without further notice or hearing absent timely objections. Determined by local rule.

90 Days after the First Setting of the 341 Meeting - Creditor’s bar date for proof of
claim filings. 11 U.S.C. §502, Fed. Rule 3002

180 Days after the First Setting of the 341 Meeting -Governmental bar date for proof of claim filings. Fed. Rule 3002

(Generally) 45 Days after the First Setting of the 341 Meeting - You must file your Financial Management Course certificate with the court. 11U.S.C. §1328; Determined by Local Rule.

Three to Five Years after Case Filing – Discharge Order entered by the court. 11U.S.C. §1328. Additional filing requirements may be imposed on the debtor or trustee by local rule, such as motions and notices.

Switching Chapters During Bankruptcy

When a voluntary bankruptcy case is filed, the debtor announces his or her intent to proceed under a specific chapter of the Bankruptcy Code. There are three chapters the debtor may choose from: 7, 11, or 13. Chapter 7 is a “liquidation” bankruptcy and the debtor receives a discharge in around 4-5 months. Generally no creditors are paid during a Chapter 7 case. Chapter 11 and 13 are reorganization and repayment cases, and creditors are repaid in accordance with the debtor’s financial ability.

In some rare instances, something occurs during the debtor’s bankruptcy that changes the legal and financial landscape of the case. Suppose the debtor files a Chapter 13 bankruptcy, but then suffers a no-fault injury with medical bills and is unable to work. Consequently, the debtor no longer has the ability to pay the Chapter 13 monthly payments. When the trustee does not receive payment, the case is in danger of dismissal. What can be done?

The bankruptcy code permits a debtor to convert the case from one chapter to another. In the scenario above, the debtor could choose to convert the case to a Chapter 7 and obtain a quick discharge. As an added benefit of conversion, any debt that arose after the original bankruptcy filing date, but before the date of conversion, is included in the newly converted Chapter 7 case. This means the medical bills can be included and discharged.

Conversion works the same way from Chapter 7 to Chapter 13. For instance, suppose the debtor honestly underestimated the value of an asset. The debtor has a one-time right to convert his case from Chapter 7 to 13, as long as the case has not been previously converted. However, this right may be denied if a court finds that the conversion is due to bad faith or abuse of the bankruptcy process.

If you are struggling with your Chapter 13 payments and your circumstances have changed, discuss your situation with your bankruptcy attorney. The federal bankruptcy laws are very flexible in the hands of a skilled and experienced attorney, and are designed to get honest, but unfortunate debtors the relief they deserve.


Why Are You Thinking about Bankruptcy?

Americans consider filing for personal bankruptcy for a wide variety of reasons.


For some, their month-to-month costs already exceed their income and, as a result, they have been confronted with creditor state law claims, such as garnishment of their wages, repossession of property, like an automobile, or even foreclosure on a home. Where this is the case, bankruptcy may provide not only a longer-term solution to their financial predicament, but also an immediate reprieve, courtesy of the Bankruptcy Code’s powerful automatic stay provision.


For others, their income may exceed their operating costs, but their overall debt burden far exceeds their assets. Moving the mountain of debt they face may take years, even decades, and for some debtors, the prospective of managing this process is just too much to bear. Divorce, medical costs, or a legal verdict may have caused the immediate and profound spike in their personal debt level.


Recognizing why you’re thinking about bankruptcy and what you hope to gain from this life-changing legal procedure is important if you are to achieve a successful outcome. No approach to personal bankruptcy is easy. Chapter 7 takes place quickly, over just a few months, but the amount of change a debtor experiences is considerable. Likewise, Chapter 13 imposes less dramatic change to your day-to-day life, but typically occurs over a period of between three and five years. Living with your finances under bankruptcy court supervision for that long can be trying to any debtor – and their family.


What’s the right way forward for you and your loved ones? The attorneys at the Dallas law firm of Fears Nachawati can help you answer this and many other important questions. Before you make any major decisions with respect to your finances, talk to our dedicated professionals. The consultation is free and the advice could prove very helpful.

Can Bankruptcy Halt Your Foreclosure?

The short answer to this important question is usually, “Yes, but not always.”


Many Americans qualify to file bankruptcy under Chapter 13 of the Bankruptcy Code. For these debtors, Chapter 13 provides them with the opportunity to make up past mortgage payments on a court-supervised repayment plan that more closely matches your financial means with your financial obligations.


For those debtors who earn too much income for Chapter 13, Chapter 7 bankruptcy can sometimes provide a way to keep your house. First, the provision of the Bankruptcy Code known as the automatic stay will stall the foreclosure proceedings. Second, if a debtor only has unsecured debt or if he or she can find a way during the bankruptcy proceeding to catch up on the secured lender’s claims, then the house may stay in his or her possession.


Unfortunately, for debtors who make too much money for Chapter 13 and who have outstanding secured debt against their home, Chapter 7 may only delay, but not ultimately prevent a creditor’s successful foreclosure proceeding. Where this is the case, you should take care to ask if bankruptcy really is right for you and you may also want to explore whether a private workout may better accomplish your financial objectives.


Want to know more about the differences between Chapter 7, Chapter 13, and a private workout, as well as which one may be right for you? The dedicated and experienced attorneys at Fears Nachawati know how to answer these important questions and many more. To get started, talk to our team today. Your consultation is free. 

Will a Private Workout Work for You?

If you’re facing financial distress, you may be considering whether you should file personal bankruptcy or attempt a private workout with your creditors. In some cases, a private workout isn’t possible because your creditors simply refuse to negotiate with you. In other situations, a personal bankruptcy isn’t an option because you’ve already filed within the seven-year period following a prior bankruptcy discharge.


Notwithstanding these considerations, more often than not, debtors have a choice. If this is a choice you’re facing, it may be wise to speak with the dedicated bankruptcy and insolvency lawyers at Fears Nachawati. With years of experience advising clients just like you and your family, we know how to address your fears, ease your concerns, and advise you of your legal and financial interests.


A private workout has advantages. Compared to a personal bankruptcy, a private workout can take place quickly and without the hassle and expense of litigation. Similarly, because the parties can speak to one another more directly and define their own needs, a debtor and his creditors may consider options that may not be available otherwise.


Of course, a Chapter 13 or Chapter 7 bankruptcy has its advantages, too. By availing himself of the Bankruptcy Code, a debtor may operate within its protections. Interest on pre-petition debts will stop accruing. The automatic stay will prevent collection efforts by harassing institutions. State law exemptions, such as Texas’s generous homestead exemption, may allow a debtor to shelter valuable assets from creditors.


Each situation is unique. Your legal affairs deserve the personal attention and experienced qualifications that our team provides. Contact our professionals today to learn how we can help you as your move toward financial solvency and certainty.

What are the Advantages of Chapter 13?

Chapter 13 bankruptcy isn’t for everyone. For many debtors, added fees for the U.S. trustee and the cloud of uncertainty associated with the three-to-five year payment period discourage some debtors. Moreover, many others do not even qualify under the Chapter 13 means test. In short, they make too much money to declare Chapter 13.


For millions of Americans, however, Chapter 13 is an available and reasonable option. Chapter 13 gives debtors the chance to consolidate their various outstanding debts into one, easy monthly payment. Additionally, Chapter 13 debtors can keep their property. Many debtors have real and personal property that is personally invaluable. Chapter 13 dramatically increases the likelihood that they can hold on to these near-and-dear assets.


For debtors who complete the Chapter 13 marathon and cross the finish line, Chapter 13 provides a clean slate. Specifically, unsecured debts which remain unpaid at the end of the applicable three or five-year period are eliminated, leaving many debtors with considerably greater disposable income in the years ahead.


Bankruptcy isn’t right for everyone, and Chapter 13, a particular kind of bankruptcy, may not be the best option for you and your family. On the other hand, for those debtors who may benefit from Chapter 13, the financial, emotional, and personal benefits can be enormous. Want to find out if this strategy is right for you? Contact the dedicated professionals at Fears Nachawati today. We’re here to help you.

Do You Have a Break the Glass Plan?

During the height of the 2008 financial crisis, policymakers at the Treasury Department and the U.S. Federal Reserve Bank created a “break the glass” plan. For use only in an emergency, the break the glass called for an extraordinary set of policies designed to right the U.S. financial ship, should the need arise. As it happened, the need arose.


Do you have a “break the glass” plan for your own personal balance sheet? If not, it may be time to visit with the bankruptcy professionals and dedicated attorneys at Fears Nachawati. With years of experience in this important area of law, we can help define the issues you may face and discuss contingency plans that work best for you.


Personal financial crises are like national and global financial crises in that they happen at unpredictable times and in unpredictable ways. You can’t predict when a crunch may come, but you can prepare for it. That’s what a “break the glass” plan is all about.


What might be the components of your plan? For many debtors, a three-step process makes the most sense.


First, you should know what a so-called “workout” between your creditors and you might look like. This may include modifying your debts, extending payment periods, or altering the interest rate.


Second, you should know what triggering events in your life might prompt you to declare Chapter 7 or Chapter 13 bankruptcy. Timing and asset allocation can have a meaningful impact on your bankruptcy’s bottom line, so preparation is critical.


Finally, you should have a post-bankruptcy plan, too. Living in the wake of a personal bankruptcy can be tough at times. Being forewarned is to be forearmed.


Ready to find out more? Talk to our professionals today. We’re ready to help you and the consultation is free. 

To Keep or Not to Keep Your House

If you’re facing financial trouble, you’re probably asking yourself one question above all others: should we sell our house?


A residence is typically the most valuable asset an individual or family owns. Not surprisingly, it’s also frequently the asset against which the most amount of debt is leveraged. Residential mortgage debt often extends into the range of hundreds of thousands – if not millions – of dollars. It can be the source of an incredible amount of personal and financial stress.


If you qualify under the Chapter 13 means test, your bankruptcy attorney may be asking himself one question above all others: should the ownership of this house determine whether this debtor enters Chapter 7 or Chapter 13 bankruptcy?


A Chapter 13 bankruptcy is the personal equivalent of a corporate restructuring under Chapter 11. Under Chapter 13, a debtor may elongate his debt repayment schedule, retain levered assets, and force his creditors to bet with him on his future. Under a Chapter 7 liquidation, however, a debtor loses more of their assets immediately.


How much do you value your residence? This question may be central to your upcoming financial planning if you’re a distressed debtor. To find out the answers to your questions, including how you should approach the timing and strategy of your debt relief options, talk to the bankruptcy professionals at Fears Nachawati today.

Plan Your Timing, Prepare for Your Needs

The effectiveness of your bankruptcy may turn on your timing and your needs. With this in mind, it’s important to prepare carefully and time your filing accordingly.


Sometimes, a consumer debtors needs to act quickly. If you’re facing the possibility of a home foreclosure, apartment eviction, or car repossession, filing immediately will activate the Bankruptcy Code’s powerful automatic stay provision. As a result, pending legal actions – such as foreclosures, evictions, or repossessions – will stop in their tracks.


On the other hand, a consumer debtor sometimes needs to act deliberately. In general, there’s only one shot in the bankruptcy gun. You need to hit your target the first time. Additionally, the Bankruptcy Code’s look-back provision may make you unwind certain monetary transfers that took place in the months preceding bankruptcy. In some cases, waiting just a matter of days or weeks can save you thousands of dollars.


Finally, it’s important to speak with bankruptcy and financial professionals to understand more clearly what your financial future will look like after bankruptcy. If you undergo a Chapter 13 restructuring, you may have to pay a portion of your monthly earnings to your creditors. Living within this budget can constrain your lifestyle in new ways. You’ll want to prepare for that change before it comes.


Ready to speak with the dedicated professionals and skilled attorneys at Fears Nachawati. Our Dallas-area practice is ready to serve your needs and prepare you for your bankruptcy filing. For your free consultation, talk to us today.

Can I Keep My Apartment during Bankruptcy?

Whether you can keep your apartment during your bankruptcy is an important question for many debtors. If possible, this is a question you may consider asking – and answering – before you file your bankruptcy petition.


If you are current on your rent payments, your Chapter 7 or Chapter 13 bankruptcy will largely not effect your rental arrangement. While you must continue to make payments and your rental deposit may be subject to a trustee action, your landlord won’t be one of your creditors and, therefore, won’t have an interest in your bankruptcy.


On the other hand, if you’ve fallen behind in your rent payments, your landlord will likely be one of creditors for purposes of your Chapter 7 or Chapter 13 bankruptcy. As a result, you may fall into a risky and conflictual legal grey area.


If you file your bankruptcy petition before your landlord files an eviction action, it’ll probably be easier for you to stay in your apartment. On the other hand, if your landlord beat you to the punch and has filed an eviction action before you’ve filed for bankruptcy, it’ll probably be harder for you to stay in your apartment.


In either case, persuasive arguments from the landlord’s legal counsel may sway the bankruptcy judge to lift the automatic stay to your bankruptcy proceeding just as compelling arguments from debtor’s counsel may convince the bankruptcy judge to stay the state court eviction action.


The bottom line: the well-trained, dedicated attorneys at Fears Nachawati can advise you as to the facts in your particular case and can fight for your right to remain in your apartment. To get started on your bankruptcy case, talk to our professionals today.

Do You Have Questions about Your Bankruptcy?

In many situations in life and in the law, knowing the questions can be more important than knowing the answers. When considering bankruptcy or going through the process, questions can keep you focused on your next steps and on sticking with your plan.


Don’t be afraid to ask your bankruptcy-related questions to a qualified professional or dedicated attorney at Fears Nachawati. Want to know whether your spouse has to file bankruptcy along with you? (A: Not necessarily.) Interested in finding out whether you can discharge your parking tickets, traffic citations, or property taxes in bankruptcy? (A: Nope.) Worried that you won’t be able to access credit after your bankruptcy? (A: You might be surprised.) For all of these questions and more, the attorneys at Fears Nachawati can give you the help you need.


Chapter 7 and Chapter 13 are confusing, even for many lawyers. What kind of debt you hold, who holds it, and what it was used to purchase are all features of your bankruptcy that can have profound – and unintuitive – effects upon your personal finances. Doing-it-yourself is a risky strategy that will likely result in you missing out on good opportunities and may even put your bankruptcy discharge at risk.


Ready to talk to professionals who know the answers to your questions and are prepared to guide you through the process of declaring personal bankruptcy? Our team is ready to fight for you. To learn how we can help, contact us today.

Protect Your Health During Bankruptcy

When money gets tight, a person must make hard choices. In some cases that means reducing or eliminating services that the person really needs, like health insurance or contributions to a health savings account. This begs the question whether a debtor in Chapter 13 bankruptcy can claim an expense for health insurance when has not been paying for it.

The answer to this question is found in Section 707(b) of the bankruptcy Code (actually 707(b)(2)(A)(ii)(1)), which states that the debtor’s monthly expenses “shall include reasonably necessary health insurance, disability insurance and health savings account expenses…” This means that the debtor can deduct the costs of health insurance that he ought to have but does not currently have. There is magic in describing health expenses as “reasonably necessary” because it frees this section from expenses deductions prescribed by IRS standards. It also makes it unnecessary to show a payment history of such expenses.

Even if the debtor doesn’t currently have health insurance, disability insurance, and a health savings account, he can deduct the “reasonably necessary” costs when calculating the disposable income available to pay his unsecured creditors. There is even a box to check on line 34 of B-22A of the means test to indicate that the debtor isn’t currently paying those items.

Since a Chapter 13 bankruptcy case lasts from three to five years, it is important to budget for health insurance, disability insurance and a health savings account. This not only immediately reduces the amount you pay creditors each month, it also protects your future should you have an illness.

If you are financially strapped and considering bankruptcy, speak with an experienced bankruptcy attorney and learn how the bankruptcy laws make it possible to repay, reduce, or eliminate your debts while providing a decent living for you and your family. Let the federal law work for you!

Chapter 13 May Let You Save Your House

Most Americans don’t simply own a house. They live in their home. Years of birthdays, holidays, anniversaries, and little joys and tragedies have made their residence something far more meaningful than what economists would merely call part of the “housing stock.”


In the face of difficult financial circumstances, you may be facing a tough choice: do you let the bank foreclose on your home or do you declare Chapter 13 bankruptcy? When you’re facing this choice, it’s important to make a timely decision – and the right decision for you and your loved ones. Fortunately, the attorneys at the Dallas law firm of Fears Nachawati can help you make the right decision on the right timeline.


Chapter 13 is an imperfect solution, but for many debtors it is a solution. By agreeing to pay arrearages over the period of your repayment plan, you can take the time you need to get current on your mortgage. You may ultimately pay a little more as a result, but you’ll get to keep the home that’s become so meaningful to you.


Chapter 13 can also let you shed excessive debt loads that have built up on your house. Second and third mortgages, such as home equity lines of credit, may exceed the value of your house. If this describes your situation, your “secured” lender may actually be unsecured. These differences aren’t merely semantic. By “lien stripping” your home, you can significantly reduce your debt burden and make ultimate repayment a real possibility.


These legal options are complex. Trying to do-it-yourself can be time-consuming and, potentially, a fool’s errand. The professionals at our firm can help you answer your questions and get you started on the right foot down your path to Chapter 13. 

Hardship Discharge in Chapter 13 Bankruptcy

A Chapter 13 bankruptcy lasts three to five years. During that time all of the debtor’s disposable income is used to repay creditors. At the end of the case, the remaining debts are discharged and the debtor receives a financial “fresh start .”

But what if circumstances change? For some, the answer is a Chapter 13 hardship discharge. A hardship discharge is granted by the bankruptcy court to a debtor unable to complete her Chapter 13 repayment plan, and will end the case before the plan termination date.

A Chapter 13 hardship discharge is a special order from the bankruptcy judge, so you and your attorney must file an application for this discharge. To obtain the hardship discharge the debtor must first show an inability to continue making the scheduled Chapter 13 plan payments. In other words, something has happened to you financially that reduced your income or ability to pay your creditors.

The change in finances must be beyond the debtor’s control. For instance, if you voluntarily quit your job to go back to school, you are not eligible for a hardship discharge. The change must be serious and on-going. The debtor must also show how the situation is not likely to change, and modification of the repayment plan is not practical or feasible.

Finally, the debtor must demonstrate that if the court approves the hardship discharge, creditors will receive at least as much as they would have received during a Chapter 7 case. Hardship discharges are only granted for the most extreme cases. The Bankruptcy Code also limits the scope of the hardship discharge to that of a Chapter 7 discharge, so some debts may not get discharged if the case ends early.

If you experience a serious financial setback and cannot no longer afford your Chapter 13 payments, discuss the possibility of a hardship discharge with your bankruptcy attorney. In some cases a hardship discharge is available and preferable to modification, conversion, or dismissal. Your attorney can explain these options and help you decide on the best course of action.

Is Chapter 13 Right for Your Family?

Consumer debtors often have a choice when considering how to shed their excessive and burdensome financial debts through bankruptcy: liquidation or restructuring. Liquidation, also known as Chapter 7, is available to everyone. It’s fast, definitive, relatively easy. However, it has one particularly large flaw: debtors generally lose a lot of property.


A financial restructuring, generally referred to as Chapter 13, is not available to everyone. It’s slow, carries more risk, and extends out over many years, up to five. On the other hand, it has one particularly large advantage: debtors keep considerably more of their property, including a home, car, and other leveraged assets.


Chapter 13 includes something that Chapter 7 simply doesn’t: time. By extending obligations into the future, debtors have the ability to apply future income to past and present obligations. In turn, this gives creditors the chance to divide a large pie. Likewise, the debtor can spread the costs of debt repayment over a longer period of time rather than facing an immediate, sharp cut.


Successfully pursuing a Chapter 13 restructuring requires a solid plan that you execute over many years. Debtors should be organized and prepared for a long road. Nevertheless, with the right legal advice and a good strategy, Chapter 13 can let you keep what some of what you most value and shed the debt you most despise.


Ready to find out if a Chapter 13 restructuring is available to you and right for your family? The attorneys at the Dallas law firm of Fears Nachawati can help you answer this important question. Talk to us today for your free consultation. 

Does the Timing of a Filing Matter?

More than you might realize, the timing of when you file for personal bankruptcy can have an impact on your ability to successfully restructure your personal finances. Although many debtors are better off filing sooner rather than later, that isn’t always the case. In fact, some debtors might be best advised to hold out a few weeks or months in order to take advantage of particular bankruptcy rules.


Why should you rush to the courthouse? Many reasons may influence this decision, but one of the most important is the protection of the automatic stay. If creditors are harassing you at home or at work, you may want to avoid the embarrassment – and the state legal actions – associated with their debt collection efforts.


Likewise, if you have made decisions that will decrease your available exemptions, such as preparing to sell a rural residence to move into the city, you may be better advised to file before the move so that you can take advantage of certain bankruptcy provisions.


On the other hand, you may wish to walk slowly to the courthouse. Creditors and the bankruptcy trustee may only examine so far into your past transactions. Last year’s Christmas gifts may be characterized as an inappropriate asset transfer if you file on December 20th of this year. However, if you file on January 2, 2013, those gifts may be beyond the applicable window.


Should you move quickly or slowly? Or is timing not really a factor in your Chapter 7 or Chapter 13 bankruptcy? The attorneys at the Dallas law firm of Fears Nachawati can help you answer this important question. Talk to our experts and dedicated professionals today. 

Bankruptcy a Good Step for Underwater Homeowners?

What do 11,000,000 Americans have in common? They represent the more than 20 percent of all homeowners who owe more against their residence than the home is actually worth. For many, this life investment has become a millstone around their necks.


When is the right time to declare bankruptcy and surrender this underwater asset? It’s a tough choice for many people. Hope that a meaningful recovery is just around the corner or that a bounce in home prices will restore their solvency causes many homeowners to continue to make payments against their mortgage. Sadly, however, many Americans forgo necessary expenditures, including health care, to pay for the debt on their home.


America’s economic recovery after the financial crash of 2008 has been infamously anemic. Just as housing was at the center of the crisis, it remains at the center of the slow recovery, too. Many homeowners keep hoping that the good times will return, despite the fact that experience suggests that many would be wise to recognize their losses, endure the frustration of bankruptcy and re-start their financial lives fresh.


Do you want to find out how Chapter 7 or Chapter 13 bankruptcy might help your family recover more quickly after the financial pain caused by 2008 and the years that followed? The attorneys at the Dallas firm of Fears Nachawati are prepared to answer your questions. With years of experience and dedicated expertise, we’re ready to help you.

Small Business Owners May Face Bankruptcy Dilemma

For most workers, filing for personal bankruptcy is a stressful decision, but it’s fairly straightforward. If a debtor qualifies under the Chapter 13 means test and determines that restructuring his debts allows him to keep more of his assets or more of the assets he wants, then he moves forward under Chapter 13. On the other hand, if his monthly income or overall debt level exceeds Chapter 13 or if he decides that the speed of Chapter 7 is more valuable than its costs, then he moves forward with a straight liquidation.


For some small business owners, bankruptcy can be that simple – but that’s not always the case. If the business in question is a sole proprietorship, the Bankruptcy Code considers these debts to be personal, not business. Alternatively, if the debts are entirely the obligation of a partnership or corporation, Chapter 11, not Chapter 13, will apply. When the owner of the debt isn’t at issue, small business owners may get off easy.


Unfortunately, however, today’s tight lending environment requires many small business owners to be personally liable for their partnership or corporation’s debts. Like a parent who assures to pay the debts of a child, a small business owner’s surety for the business’s debts can add a complicated wrinkle in the event of a business’s downturn. Ultimately, the small business owner may have to simultaneously take his business and his own family through separate bankruptcy proceedings.


Chapter 11 and Chapter 13 can be difficult to navigate. Travelling through both of them at the same time is particularly challenging. If you’re a small business owner, you may want a little guidance. Fortunately, the attorneys at the law firm of Fears Nachawati are here to help you. With years of experience and dedicated expertise, we know how to advise you. Talk to our professionals today for your free consultation. Let us help you.

Burdened by Student Debt?

Have you recently graduated from college or graduate school with thousands of dollars in personal debt? You’re not alone. While personal bankruptcy may not be a direct solution to your school-related financial problems, it may be more help than you might first think.


Technically, Section 523 (a)(8) of the Bankruptcy Code permits debtors to discharge student loans if that debt would impose an undue hardship on the debtor and the debtor’s dependents. However, bankruptcy courts interpret the phrase “undue hardship” narrowly. In lay terms, undue hardship means that the bankruptcy judge should be weeping over the dire straights that the former student now finds himself as a result of the education debt. Absent pretty extreme circumstances, the debtor will not meet the undue hardship requirement, and in turn, the court will not discharge the student debt.


The high bar associated with the discharge of student debt is the bad news. The good news is that personal bankruptcy can clear out a lot of other types of debt, leaving you with a more manageable overall debt load, even if student debt remains. If you have indebtedness in the form of car loans, a second mortgage, or high interest credit card bills, Chapter 7 or Chapter 13 bankruptcy may be the right way forward.


Ready to find out whether personal bankruptcy is right for you and your family? The professionals at the law firm of Fears Nachawati may be able to help you. With years of experience taking debtors through out-of-court settlements, liquidation, and restructuring, we know how to guide you during these difficult times. Talk to our professionals today to learn what tactics we can use to help you.

Bankruptcy: A Tactic, Not a Strategy

There are some important differences between a strategy and a tactic. In simple terms, a tactic is the way you intend to execute your plan. A strategy is your plan.


Many people who are struggling to make ends meet assume that bankruptcy is a strategy to get them out of hot water. While it’s true that bankruptcy can provide a little breathing space and will stop creditors from harassing you, bankruptcy is really a tactic to accomplish your financial goals. Bankruptcy is not an end in itself. It’s a means to successfully move from where you are to where you want to be.


Just as bankruptcy is best understood as a tactic rather than a strategy, whether you should pursue a Chapter 7 or Chapter 13 bankruptcy is a question best answered by your longer-term strategic goals. For instance, if you need financial breathing space, a Chapter 13 may be the better option. With a plan of reorganization lasting up to five years, a Chapter 13 reorganization give you time to get your financial house in order.


On the other hand, if you qualify for a Chapter 7 and need a relatively quick discharge of some one-time-only debts, a Chapter 7 straight liquidation may be right for you. In general, a Chapter 7 bankruptcy is less expensive, considerably less time consuming, and much less stressful.


What’s the right direction for you? It’s important to research your options, but spending some time with a qualified bankruptcy professional is a great way to tailor your tactical options to your longer-term financial strategy. Experience counts. Experience and expertise is what you’ll find with the bankruptcy attorneys at Fears Nachawati. For your free consultation, talk to our professionals today. We’re here to help clients like you.


Are Social Security Benefits At Risk In Bankruptcy?

The Tenth Circuit Court of Appeals recently held that Social Security benefits are not part of a debtor’s “projected disposable income” for determining monthly payments in a Chapter 13 repayment plan. The case, In re Cranmer, No. 12-4002 (10th Cir. Oct. 24, 2012), involved a Chapter 13 debtor who committed only a part of his $1,940.00 monthly Social Security benefit to repaying his creditors. He also excluded the entire Social Security sum when figuring his total monthly disposable income through the means test Form B22C.

In plain English, the debtor claimed that he could choose to use his Social Security benefit to repay some creditors, like a house or car payment, but the bankruptcy trustee could not force him to pay other debts (like medical or credit cards) with the Social Security benefit. The Tenth Circuit agreed, citing that the Bankruptcy Code excludes Social Security benefits from the debtor’s disposable income and projected disposable income calculations.

Social Security benefits are generally protected during bankruptcy. Social Security checks are not subject to garnishment or seizure from non-government creditors. Consequently, Social Security income does not drive up a retiree’s gross income for purposes of the bankruptcy means test, and the trustee (who stands in the creditor’s shoes during bankruptcy) cannot compel the debtor to pay creditors out of Social Security income. This strategy is a great benefit to many older Americans who need bankruptcy relief without committing all of their retirement income to debt repayment.

If you receive Social Security benefits and need debt relief, speak with an experienced attorney about your bankruptcy options. You could be eligible to discharge many burdensome bills, retain your home or cars, while keeping all or most of your retirement income.

The Big Decision: Chapter 7 v. Chapter 13

For Americans who are considering whether to file for personal bankruptcy, there are many decisions. For instance, you may have asked yourself whether you should hire an attorney, when you should file, or how long it might take you and your family to recover financially, professionally, or emotionally from your bankruptcy filing.


In a personal bankruptcy, there are a lot of questions. However, few questions are more important or challenging for a debtor than whether you should file for Chapter 7 or Chapter 13 bankruptcy. If you find yourself at this crossroads, it may be time to speak with one of the dedicated bankruptcy professionals at the law firm of Fears Nachawati.


Chapter 7 bankruptcy, also known as liquidation bankruptcy, is helpful for debtors who primarily hold unsecured debt, such as credit card expenses, and who don’t have a lot of leveraged assets, such as a home or car. Also, Chapter 7 debtors must pass a statutory “means test” in order to qualify for liquidation bankruptcy. For young workers who are just starting out in life or for an older family that was unexpectedly slammed by medical expenses, Chapter 7 relief may be right for you.


By contrast, Chapter 13 bankruptcy is a kind of restructuring of debts in which personal debtors pay their creditors for a longer period of time – sometimes as long as five years – but are allowed to keep certain assets that they would lose in a Chapter 7 bankruptcy. For higher income debtors who do not qualify for Chapter 7 under the means test and for asset-rich, cash-poor, overleveraged debtors, Chapter 13 may be the best approach.


Do you fall somewhere in between Chapter 7 and Chapter 13? Worried that you don’t know which one is right for you and your family? Your free consultation is just a phone call or email away. With years of experience and dedicated expertise, our attorneys are ready to give you the financial and bankruptcy advice you need. Talk to us today.

Pay Your Bills During Bankruptcy

One common myth is that you can stop paying your bills after filing bankruptcy. This is a gross generalization, and it likely springs from constructive legal advice from a seasoned attorney. You see, in a Chapter 7 bankruptcy case, an erase-your-debts-and-start-fresh bankruptcy, debtors are often advised to stop payments on unsecured debts, like credit cards and medical bills. Unsecured debts are discharged at the end of a Chapter 7 bankruptcy case, and paying these debts is just throwing good money away that could be used to help your family get back on its feet. Likewise, it is pointless to continue to pay secured creditors if the debt will be discharged in a Chapter 7 case and the property will be returned to the creditor. While these Chapter 7 situations are common, the application of this “stop payments” advice is narrow.

For instance, if you are keeping your house or car in a Chapter 7 case, you must continue to pay the debt after filing bankruptcy. If you fall behind on payments that come due after the bankruptcy case is filed, your creditor may foreclose or repossess after your case closes. You will receive no protection form the bankruptcy court.

If your case is a Chapter 13, you must continue your payments to secured creditors that arise after your bankruptcy is filed. If you fail to make your "post-petition" house payments, the mortgage company could ask the bankruptcy court for permission to foreclose. Equally important are insurance payments. If you fail to keep your secured property insured, the creditor may ask the court for permission to foreclose or repossess. The same is true for post-petition rent payments to a landlord.

Paying your post-petition debts can mean the difference between a successful bankruptcy and an “epic fail.” Some debtors have fallen into the trap of reorganizing their pre-bankruptcy debts, only to lose property because they failed to meet their post-bankruptcy financial obligations.

If you are struggling with debt, speak to an experienced bankruptcy attorney and develop a comprehensive strategy to eliminate unwanted debts and restructure your finances for a better future. Your attorney will explain the federal bankruptcy laws and how you can get a fresh start.


Pro Se Debtor, Fool for a Client

There’s an old expression in the legal community: a person who represents himself in court has a fool for a client. In most situations, a non-lawyer who represents himself in a Chapter 7 or Chapter 13 bankruptcy (i.e. a pro se debtor) exposes himself to legal and financial risks he doesn’t understand. While there are many potential adverse outcomes associated with self-representation, the most significant is that the pro se debtor will lose his chance to shed consumer debts through bankruptcy.


Unfortunately, there’s been a dramatic rise in the number of pro se debtors in recent years. In 2005, Congress passed major bankruptcy reform legislation, known as BAPCPA, which has had the effect of making bankruptcies more complicated and costly for consumer debtors. Specifically, Chapter 7 debtors now face more paperwork, tighter deadlines, and more arduous procedural requirements. In general, this has driven up the cost of hiring experienced counsel and, in turn, caused more debtors to self-represent. Since the passage of BAPCPA, the number of debtors filing pro se has jumped more than 150 percent, according to data from the Consumer Bankruptcy Project (CBP).


Consumer bankruptcy is a minefield of technicalities and requirements. And, like a minefield, disturbing just one mine can have catastrophic results. If you’re thinking about filing for personal bankruptcy, you should also consider finding a qualified, dedicated attorney who has experience in handling consumer bankruptcies. You need someone who can guide you through the minefield.


The attorneys at the Dallas law firm are prepared to help you work your way through each stage of the bankruptcy process: from preparing to file, to living post-petition, and to adjusting to life after your discharge. Talk to our professionals today to find out what your next steps should be. We’re ready to help you.

Do You Qualify under the Chapter 7 Means Test?

If you or your family are struggling under the weight of insupportable financial obligations, you may need to consider your options under the Bankruptcy Code. While the Code offers consumer debtors two options for bankruptcy – known as Chapter 7 and Chapter 13 – only certain debtors qualify for Chapter 7.


Which is better: Chapter 7 or Chapter 13? In many ways, Chapter 7, also known as a straight bankruptcy, is easier to manage. In general, your non-exempt assets are liquidated, used to pay off your outstanding debts, and your remaining obligations discharged. While the initial shock of losing some cherished possessions is disquieting for some debtors, many appreciate the cut-and-dried cleanliness of a straight bankruptcy.


Chapter 13, also known as a wage earner plan, lets you pay off a portion of your debts in a court-approved, trustee-supervised process that frequently protects your assets, even non-exempt possessions. However, a Chapter 13 restructuring of your debts can extend not only your debt payments, but your financial and personal stress for up to 5 years.


How do you determine whether a Chapter 7 or Chapter 13 bankruptcy is right for you? The first question is whether you qualify for Chapter 7. Your qualifications are determined by a process known as the means test, a standard articulated under the Bankruptcy Code. In general, a bankruptcy court will compare your income to the average income in your county. If you income is less than the average, you may declare Chapter 7. If not, Chapter 13 may be your only option.


Ready to find out the answer to all of your bankruptcy and financial restructuring questions? The attorneys at Fears Nachawati are prepared to give you the advice and perspective you need. Contact our professionals today.

10 Easy Ways To Ensure Chapter 13 Success

Chapter 13 bankruptcy is a three to five year debt repayment plan. It is a short term fix to ensure long term prosperity. When you emerge from Chapter 13 bankruptcy you will be in a better financial position. However, neither your attorney, nor the bankruptcy court, nor the bankruptcy process can produce miracles. The lion's share of the responsibility for change and long term success is on you. If you and your family follow the ten directions listed below, you will be on the path to recovery and financial health.

1. "Stay the course." You and your attorney have developed a realistic family budget. It is your responsibility to stick with it. Now is a good time to change your spending habits and become financially conservative.
2. Notify your attorney of any change (or potential change) in your income. The sooner your attorney knows about the financial change, the better your chances of a successful outcome. You and your attorney can discuss your options when there is a job loss, reduction of income, etc.
3. Make all plan payments on time. A voluntary wage deduction that sends your plan payment to the trustee every month has a greater chance of success.
4. Pay any post-petition debt on time every month, including mortgage or car payments. Scheduling bank debts ensures on-time payment.
5. Avoid bank overdrafts. Bank fees can quickly bust a budget.
6. Avoid gambling.
7. Do not apply for credit during your Chapter 13 case until you have discussed the matter with your attorney. Chapter 13 debtors are prohibited from using credit without prior permission.
8. Maintain insurance on your house and car.
9. Notify your attorney if you change addresses or telephone numbers. Your attorney must be in contact with you during your case to inform you of any requests from the trustee (such as providing income tax returns).
10. Open mail from your attorney, the bankruptcy trustee, creditors, or the bankruptcy court.

Remember, you and your attorney are partners in your bankruptcy case. Your attorney will guide you through the process, but it is up to you to manage your finances responsibly. Chapter 13 bankruptcy can provide a fresh financial start and a better financial future. Contact an experienced bankruptcy attorney to discuss your personal financial situation and learn how the federal bankruptcy laws can help you.

What If I Lose My Job During Bankruptcy?

A Chapter 13 bankruptcy case is commonly called a “wage earner’s” bankruptcy. That is because the debtor must have a regular income to pay the monthly Chapter 13 plan payment. Losing your job could affect your ability to pay your post-petition payments, like your home mortgage or car loan, or may cause you to miss plan payments.

If your income interruption is brief, and you only miss one or two plan payments, the bankruptcy trustee will work with you to catch up. The trustee may allow you to extend your payments (if available) or simply give you time to pay. The bankruptcy court could also modify your payments according to your new income.

You must also make arrangements to make up any missed post-petition payments that are not included in your monthly plan payment. If you do not pay your monthly house or car payment, the creditor could ask the court for relief from the bankruptcy stay. In some cases it may make sense to surrender a vehicle or even real estate that you cannot afford to keep. Your attorney can review these options with you to successfully restructure your bankruptcy plan.

If the loss of income continues, you may be forced to consider converting your case from a Chapter 13 to a Chapter 7. In Chapter 7 you can eliminate your responsibility for most of your debts through a discharge. In some cases your can also keep property through a reaffirmation agreement with your creditor.

A job loss is a stressful situation and may significantly impact your bankruptcy case. Keep your attorney informed of any changes that occur in your finances. Your attorney can recommend changes to your plan that are in your best interest.


Passing Bankruptcy Means Test

The bankruptcy means test was implemented in 2005 with the purpose to weed out Chapter 7 debtors who could afford to repay debts in Chapter 13. Someone who files Chapter 7, but can afford to repay debts in a Chapter 13 is said to be “abusing” the system. The means test is a burden shifting device that presumes either an ability or inability to afford a repayment plan. Since the means test only makes a presumption based upon historical evidence (the past six months), the ultimate result may be different.

In order to qualify for a Chapter 7 bankruptcy, the debtor must essentially pass two income tests. The first is the income presumption created by the means test. The debtor's income is averaged over the past six months (not including social security income). If the debtor’s income is higher than the state median income, the Chapter 7 debtor is presumed to be abusing the system. A second analysis is made of the debtor's "present day" income. For instance, a debtor who was unemployed for six months prior to the bankruptcy filing may "pass" the means test. However, if this debtor is recently employed with a $150,000 a year job, the Chapter 7 case can still be dismissed for abuse. The means test creates a presumption that the debtor cannot afford to repay debts in a Chapter 13 bankruptcy. However, in actuality the debtor can afford to repay debts because of his present income.
Conversely, a debtor could "fail" the means test because of a high income over the previous six months. However, the debtor's present income may have suddenly decreased, or the six month average may be artificially inflated because of a one time bonus or other income windfall. The means test result shows the debtor can afford to repay debts during Chapter 13, but the present income qualifies the debtor for Chapter 7. Evidence of current income is presented to the bankruptcy trustee that rebuts the presumption that the debtor can repay during Chapter 13.

"Passing" or "failing" the bankruptcy means test is often a matter of selecting the proper legal entitlements and making the right financial calculations. It is also a matter of looking critically at your present financial condition. Your bankruptcy attorney will help you identify your true past and present incomes and assist you in deciding which bankruptcy chapter best serves your short and long term needs.

The "Absolute" Right to Dismiss a Bankruptcy Case

Very rarely does it make sense to dismiss a bankruptcy case. A bankruptcy debtor has several options when financial circumstances change, including converting the case to another chapter. For instance, if a large medical bill is incurred after a Chapter 7 case is filed, the debtor could petition the bankruptcy court to convert the case to a Chapter 13 and include the medical bill.

Sometimes it makes more sense to dismiss the bankruptcy case altogether.

A bankruptcy debtor cannot ordinarily dismiss a Chapter 7 case. Once the debtor has attended the trustee’s meeting (also called the “341 meeting of creditors”), the case generally proceeds to discharge. If a debtor “forgets” about an asset, or is surprised by a large income tax refund, the trustee can compel the debtor the debtor to turn over the asset to pay creditors. The debtor cannot simply dismiss the case and keep the money.

On the other hand, a Chapter 13 debtor is generally able to dismiss the bankruptcy case almost as a matter of right, as long as there is no “bad faith” involved in the dismissal.

An example of a “bad faith” situation can be found the case of In Re Kotche, filed in the US Bankruptcy Court in Maryland. The trustee in that case objected the confirmation of the debtor’s Chapter 13 plan and asked the court bankruptcy judge to convert the case to Chapter 7. In response the debtor asked the court to dismiss the case. The issue in the case was the value of the debtor’s jewelry, which she listed at $50. However, the debtor’s ex-husband testified included a diamond wedding ring set with a separately purchased center-diamond stone of 3.64 karats, a tennis bracelet, two diamond bracelets, a diamond necklace, a watch, and a cocktail ring. Kotche also failed to list a baby grand piano. Oops!

The bankruptcy court found that Kotche had not been complete or forthright in her bankruptcy paperwork, and found that her motion to dismiss was brought in bad faith. In other words, she was dishonest and wanted out of bankruptcy when she was discovered. The bankruptcy court said that Kotche could not be kept in Chapter 13 against her will, but that she did not have an absolute right to have her case dismissed:

“There is no indication that Section 1307(b) is intended to provide the dishonest debtor a right to misuse the protections of a bankruptcy case and then escape with impunity. Such result would permit abusive practices and render null and void any judicial power to prevent or protect against such fraudulent practices…”

Bankruptcy is meant to provide the “honest but unfortunate debtor” with a fresh financial start. Kotche wanted a “head start” by keeping her expensive assets and discharging her debts. The bankruptcy court refused her motion to dismiss and converted the case to Chapter 7.

When a financial change occurs in your bankruptcy case, discuss the matter immediately with your attorney. Dismissal of your case should only be considered as a last option. You and your counselor will review your options and determine a course of action that is in your best interest.

How Chapter 13 Bankruptcy Can Help

Chapter 13 is known by several different names: reorganization plan, wage earner's plan, and repayment plan. Whatever the name, filing a Chapter 13 bankruptcy indicates an intention to repay creditors over three to five years. The debtor makes a monthly payment to a bankruptcy trustee, who in turn pays the creditors.

Save your home
Many debtors file Chapter 13 to stop the home foreclosure process. The moment the bankruptcy is filed a foreclosure action must stop. The debtor is given an opportunity to propose a plan to pay the delinquent mortgage payments over three to five years. During this repayment period the debtor must also pay any mortgage payments due after the bankruptcy is filed (called post-petition payments). Failure to make post-petition payments can result in losing the bankruptcy protection and the bank may resume the foreclosure action.

The Chapter 13 debtor can ask the bankruptcy court to modify and reduce a secured loan to the value of the security. This process, commonly called a “cram-down,” is done when the amount of the secured loan is significantly more than the value of the property. The resulting benefit is a lower monthly payment.

For example, say the debtor owes $20,000 on a car loan, but the car is worth only $10,000. The loan can be “crammed-down” to an allowed secured debt in the amount of $10,000 only. The debtor pays only the $10,000 during the Chapter 13 bankruptcy and the remaining unsecured portion is discharged at the end of the case. Every situation is different, so be sure to discuss your options with your bankruptcy attorney.

Repayment of non-dischargeable obligations
Sometimes a Chapter 13 is used to repay debts that cannot be otherwise discharged. Tax debt and child support debts are two common debts that get paid under the supervision of the bankruptcy courts.

What you expect during a Chapter 13 bankruptcy
Once the debtor files a bankruptcy, the bankruptcy court automatically issues an injunction prohibiting creditors from collecting from the debtor. This “automatic stay” also stops foreclosure, lawsuits, and garnishments. Within 15 days of the filing the debtor must file a proposed repayment plan with the court. The plan is sent to the U.S. trustee and to all creditors for review. The plan must provide for regular fixed payments to the trustee who then distributes the funds to creditors according to the terms of the plan (which may be less than full payment on their claims). It is common for a chapter 13 plan to propose to pay secured creditors in full and nothing to unsecured creditors. This largely depends on whether there is “extra” money at the end of the month after the debtor’s secured creditors and monthly expenses are paid.

If you need assistance from the federal bankruptcy laws, contact an experienced bankruptcy attorney to review your options. The bankruptcy code offers powerful relief to deserving people in bad financial situations.

A Financial Emergency During Chapter 13

A Chapter 13 bankruptcy case is a repayment plan over three to five years. The idea is that the debtor pays all he or she can afford to creditors, and any unsecured debt that is unpaid at the end is discharged. Consequently, there is very little money available in case of a financial emergency.

If you have a financial emergency and are unable to pay your Chapter 13 payment, speak with your bankruptcy attorney immediately. Your attorney may be able to extend your plan or waive a payment. However, your plan may not extend past 60 months. If the financial emergency is short-term, the trustee may also allow you time to “catch up” your payments.

If you are experiencing a long-term financial change, you should discuss modifying your repayment plan. Your attorney must propose a new plan and modified payments to the court along with evidence of a change in financial circumstances. A modification is generally successful if you are repaying debts that are not required to be paid during your bankruptcy case.

A serious financial change that makes repayment impossible may qualify you for a hardship discharge. A hardship discharge may be granted before the end of your case when modification is not practical. Hardship discharges end the bankruptcy case, but there are limitations on discharging some debts prematurely.

Conversion to Chapter 7 may be an option if you can no longer afford monthly payments to unsecured creditors. If you convert from Chapter 13 to a Chapter 7, any debt incurred since your Chapter 13 filing date can be included in the Chapter 7 case. For example, if you are repaying debts in Chapter 13 and have a medical emergency that prevents you from working and leaves you with new medical bills, you may convert to Chapter 7 and discharge the medical debts.

Finally, it may make sense to dismiss the current bankruptcy and re-file at a later time. This is a last option because it creates two bankruptcy cases on your credit report, but it may be necessary to save a home from foreclosure or to manage other debts. A second bankruptcy that is filed within a year after dismissal comes with some restrictions, including a limit on the bankruptcy automatic stay.

Some financial change occurs in nearly every Chapter 13 case. The key to managing change is to communicate early with your bankruptcy attorney. The federal bankruptcy laws are flexible to accommodate financial changes, and your attorney can discuss your options with you.

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Qualifying For Bankruptcy

Some people believe that they do not "qualify" for bankruptcy relief. Often the reasons for disqualification are strange: for instance, "I make too much money," or "I don't make enough money," or "I only have medical debt." In some cases there is a bit of truth to these excuses, but many of the reasons are pure hogwash.

The federal bankruptcy laws exist to give an honest debtor relief from overwhelming financial obligations. There are two basic types of personal bankruptcy, codified in the Bankruptcy Code under Chapter 7 and Chapter 13. "Qualifying" to file under one of these chapters depends upon your circumstances.

Chapter 7 is a straight bankruptcy. The idea is to eliminate your debts quickly and give you a fresh financial start. To qualify for a Chapter 7 bankruptcy, the debtor must demonstrate that there is not sufficient income to pay back a substantial portion of all unsecured debts over the next three to five years. The debtor must take a financial means test to show that he or she is unable to pay creditors.

There is no minimum or maximum debt limit in a Chapter 7 case. Most debts are discharged during Chapter 7, but some debts may be excluded, including child support debts, tax debts, and criminal restitution.

A Chapter 13 is a repayment bankruptcy. The Chapter 13 debtor submits a repayment plan to the bankruptcy court offering to repay some or all of his creditors over three to five years. Naturally, the debtor must show that he or she has sufficient income to complete the repayment plan. While there is no minimum amount of debt required to file a Chapter 13 case, the Bankruptcy Code limits Chapter 13 cases to debtors with unsecured debts less than $360,475 and secured debts under $1,081,400.

When a debtor is able to repay some debts, but does not qualify for Chapter 13 bankruptcy, the debtor may elect to file a Chapter 11 bankruptcy case. Chapter 11 is most often used for corporations like General Motors, but individuals can also file Chapter 11. There are no minimum or maximum debt limits in a Chapter 11 case.

If a debtor has previously filed a bankruptcy case, the debtor may be ineligible for certain bankruptcy relief for a period of time. For instance, you are not permitted to file another bankruptcy case for 180 days if your bankruptcy case was voluntarily dismissed after a creditor requested relief from stay, or your case was dismissed for failure to obey a court order. Additionally, 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.

Very few people do not “qualify” for bankruptcy. If you are hurting financially and need help, the federal bankruptcy laws offer many different forms of relief. Call an experienced bankruptcy attorney and learn how the law can eliminate or restructure your financial situation to get you out of debt.

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Bankruptcy Can Help Distressed Homeowners recently published a story predicting an increase in home foreclosures in 2012. Banks slowed their foreclosure processes in 2011 due to the "robo-signing" scandal, but this past February five major banks settled a major lawsuit with 49 U.S. states. Now there are signs that foreclosures are ramping up again. One mortgage servicing provider recently reported "foreclosure starts" had increased 28 percent in January.

The Reuters article quoted RealtyTrac CEO Brandon Moore as saying that the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed." This new wave of foreclosures targets middle class homeowners hit hard by tough economic times. "The subprime stuff is long gone," said Michael Redman of "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."

Current data estimates around 13 million Americans are unemployed and millions more are under-employed making it difficult to pay a monthly mortgage. To make matters worse, many homeowners are struggling with homes that are "underwater" - the market value of the home is worth less than the amount owed.

The federal bankruptcy process can help a homeowner manage a distressed home situation. First, the Bankruptcy Code allows the debtor to strip away junior mortgages that are entirely unsecure. For instance, if your home is worth $200,000, and you owe $200,000 or more on your first mortgage, any junior mortgage or judicial lien can be stripped off during a Chapter 13 bankruptcy. This process is especially useful to homeowners struggling with HELOC loans.

Second, a Chapter 13 bankruptcy can provide the homeowner with time to catch up past-due mortgage payments or property taxes. During a Chapter 13 bankruptcy the debtor is allowed up to five years to pay off mortgage arrears while the bank is prohibited from foreclosing. Finally, if you are unable to keep your home, a Chapter 7 bankruptcy will allow you time to surrender your home back to the lender on your terms.

Bankruptcy is a legal shield that can protect you during tough financial times. If you are facing foreclosure, speak with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help you.

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Discharge Your Debts and Keep Your 401(k)

Have you ever heard the phrase “throwing good money after bad?” It means spending money on something that has little chance of success. When you get into financial trouble, the sensible thing is to fight to work your way out of trouble. Unfortunately, many people fail to recognize that point when it no longer makes good sense to continue throwing money at a problem. Some will eat through savings and retirement accounts hoping to delay the problem long enough for something good to happen. In the end the savings and retirement accounts are gone, and the debt is still there.

Bankruptcy is a legal process than can reorganize your finances and eliminate your overwhelming debt. In bankruptcy most retirement funds are protected, so if you’re facing a debt that you cannot pay, consider filing bankruptcy instead of draining your retirement accounts.

Whether a retirement account is protected first depends on if the account is “property of the bankruptcy estate.”. The U.S. Supreme Court in the case Paterson v. Shumate, 504 US 753 (1992), stated that retirement plans that contain an “anti-alienation clause” are not property of the bankruptcy estate pursuant to 11 USC § 541(c)(2). An “anti-alienation clause” prevents creditors (and the bankruptcy trustee) from seizing your retirement funds. Nearly all ERISA retirement plans and 401(k) accounts have an “anti-alienation clause.”

If your account does not have an “anti-alienation clause,” it may be exempt from creditor collection. Examples of retirement accounts that are exempt during bankruptcy include Roth IRAs, up to $1,171,650.00; and qualifying plans under sections 401, 403, 408, 414, 457, and 507(a) of the Internal Revenue Code. Other plans not listed above can be exempt during bankruptcy. In some cases the law on exempting retirement accounts is complicated and is changing rapidly. Consult your attorney for specific advice on your retirement account.

If you are overwhelmed by a debt problem that will not go away, speak with an experienced bankruptcy attorney before cashing out your retirement accounts. In many cases your debt can be discharged or paid over three to five years, and you can keep your retirement accounts. So consider bankruptcy to throw out the bad debt and keep your good money!


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Discharging Debts Involving Willful Injury

One of the main purposes of bankruptcy is to provide a second chance and a fresh start to deserving people. This is generally accomplished by discharging of debts that the debtor cannot afford to pay. However, sometimes the benefit of the discharge is outweighed by other considerations. In these cases the debt may be found not dischargeable in bankruptcy.

When the debtor has committed a willful and malicious injury to another person, the Bankruptcy Code does not allow the discharge of a debt associated with the injury. These injuries are known as "intentional torts," and include personal injury lawsuits where the debtor acted intentionally as opposed to negligently or recklessly. The 1998 U.S. Supreme Court case of Kawaahuau v. Geiger stated that for bankruptcy purposes, the term "willful" refers to the injury rather than to the act. The debtor must act with the willful intent to cause the injury, rather than willfully acting that results in an injury. If the debtor did not act willfully to cause an injury, the debt is dischargeable.

Willful damage to property is also excepted from a Chapter 7 discharge, but is dischargeable in a Chapter 13 bankruptcy case. Certain injuries caused by operating a vehicle under the influence of alcohol are also non-dischargeable. In order for the debt to be excepted from the bankruptcy discharge, the injured party must file an "adversary proceeding" within 60 days after your first scheduled meeting of creditors under section 341. If the adversary case is not filed within that period, the debt is included in the discharge. The bankruptcy judge will conduct a hearing to determine if the injury was caused willfully.

If you have committed an intentional tort and cannot afford to pay the debt, speak with an experienced bankruptcy attorney and discuss your options. In some cases bankruptcy can discharge the debt, or can provide you time to pay the debt under court supervision over three to five years. Bankruptcy can also shield your assets and wages for a time while you repay what you can afford.

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Top 5 Questions About Chapter 13 Bankruptcy

The chief distinguishing characteristic of a Chapter 13 bankruptcy is its repayment plan. Unlike a Chapter 7 bankruptcy case, the Chapter 13 debtor submits a proposal to the court to repay creditors over three to five years. There is no repayment plan in a Chapter 7 bankruptcy case. Because of the repayment plan, Chapter 13 cases are generally more complicated than Chapter 7 bankruptcies, but the debtor’s relief can be more powerful. With this in mind, here are the top five questions clients ask when considering Chapter 13 bankruptcy:

Will I lose any property?
No. The Chapter 13 trustee will not take property from you. The law allows you to keep and “exempt” a certain amount of property during your bankruptcy case. If you have property in excess of the legal exemption amounts, you are required to pay unsecured creditors an amount equal to the non-exempt equity during your repayment period.

How can I keep my car if I owe more than its worth?
If your vehicle loan was made more than 2-1/2 years before your bankruptcy is filed, you can “cram down” your loan to the fair market value of the vehicle. For instance, if you owe $15,000, but your car is only worth $9,000, the bankruptcy court will separate the debt into a secured amount of $9,000, and an unsecured debt in the amount of $6,000. You must pay the secured debt in order to keep your vehicle, but the remaining unsecured debt will be paid at the same rate as other unsecured creditors (like credit cards and medical bills). Usually this payment is nothing or a few cents on the dollar. At the end of the case most unsecured debts are discharged.

My house is in foreclosure. Can I keep it?
If you are behind on mortgage payments, a Chapter 13 bankruptcy will allow you to “catch up” the arrears over three to five years. Additionally, while you are not able to “cram down” a mortgage on your home, if you have a junior (second or third mortgage, or tax or judgment lien) that is entirely unsecured, Chapter 13 may afford a significant benefit. The bankruptcy judge can strip off the lien and the junior debt becomes an unsecured debt, payable at the same rate as other unsecured creditors.

How much is my monthly payment?
Your monthly payment will largely depend on your ability to pay your creditors. The bankruptcy law requires that you pay priority creditors first. Priority creditors include domestic support obligations and most taxes. Any secured property you want to keep is paid next. Finally, any “extra” income (called “disposable” income) must be paid to unsecured creditors.

What if my income changes during the repayment period?
Immediately report any changes in income to your attorney. If there is a substantial increase, your monthly payments will likely increase. Similarly, if your income is reduced, your monthly payment may decrease. If you are unable to complete your plan because of a reduction in income, you may qualify for early discharge, or your plan can be modified.

Chapter 13 is a very flexible legal tool for restructuring personal finances. Your attorney can explain how the federal bankruptcy code can provide relief from overwhelming debt and help you on your way to a bright financial future.

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Personal Financial Management Requirement In Bankruptcy

In 2005, Congress enacted broad changes to the federal bankruptcy code. Among these changes was the new requirement that an individual debtor must complete a course in personal financial management before a bankruptcy discharge can be ordered in the case. The hope was that by mandating a little financial education, the individual would be able to make better financial choices and have a better chance at future economic success.

So does the personal financial management class help? That question was examined in a recent article posted on, a bankruptcy blog written by attorneys, for attorneys. During a study conducted in 2007, debtors were asked "1) would what they learned in the financial education class have helped them avoid bankruptcy originally, and 2) would help them avoid financial trouble in the future." 33% responded that the course information could have helped them avoid filing, and 72% said the information would help them in the future.

The negatives of the personal financial management course are that it costs the debtor time and money (although the course only lasts an hour or two and typically costs around $50). Failure to complete the class can result in a denial of discharge (a very heavy penalty). The truth that bankruptcy practitioners know, and that the 2007 study data confirms, is that most people are forced to file bankruptcy through no fault of their own. There is no class that can teach you how to avoid a work layoff or large unexpected medical bill. No course that shows you how to pay your bills when you don't have enough money

On the other hand, the personal financial management course teaches budgeting and money management. These skills can make it easier to make ends meet and help provide a more solid financial footing after bankruptcy.

If you need to file bankruptcy, your attorney can help guide you through the process and give you a fresh financial start. Building a better financial future requires the budgeting and money management skills you will learn during your personal financial management course. Your attorney will provide you with court approved providers for this course, and help get you enrolled.

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Transportation During Chapter 7 Bankruptcy

For most people having reliable transportation is a necessity. A vehicle is required to get to work, school, or to an appointment at the doctor. Most of us can't imagine doing without a personal vehicle. Filing bankruptcy doesn't mean you have to give up having a car, truck, or motorcycle.

The first question is whether you have equity in the vehicle you own. Equity is simply the difference between the amount you owe and what your vehicle is worth. If you owe more than your vehicle is worth, you have "negative equity," which is really no equity at all. The bankruptcy laws allow you to keep a reasonable amount of vehicle equity. If this amount is not enough to fully protect the vehicle, you may use other legal exemptions to protect your vehicle equity. Finally, if you have more vehicle equity than you can legally protect, you can purchase the equity from the Chapter 7 trustee.

The second consideration is your lender. There are three options for dealing with vehicle loans in Chapter 7 bankruptcy: reaffirmation, redemption, and surrender (a controversial "fourth option" is available in some states and circumstances. Speak with your attorney to see if your situation qualifies).

If you wish to continue the monthly payment, you can execute a reaffirmation agreement. This is a contract that states that the debt you owe the lender will survive the bankruptcy and the lender agrees to not repossess the vehicle. In some cases you can use a reaffirmation agreement to rewrite the original agreement. This can be useful if you have missed a few payments or need to reduce your interest rate.

If your vehicle is substantially "upside down," you may want to consider a redemption. In a redemption, the debtor pays the lender the fair market value of the vehicle. The payment is made in a lump sum which usually requires another loan at a high interest rate. However, for a car that is worth thousands less than what is owed, the new monthly payment could be hundreds less - even with the high interest rate.

The final option is surrender. Sometimes just walking away from a lemon or a bad deal is the best choice. In a Chapter 7 bankruptcy, you simply turn over the car to the lender and owe nothing. There is no prohibition against buying a different vehicle during or after your bankruptcy case. If you need to purchase a different vehicle, speak with your bankruptcy attorney.

The United States bankruptcy laws contain powerful provisions for protecting property and reducing debt. There are many options available in Chapter 7 or Chapter 13 cases. Consult with an experienced bankruptcy attorney and explore your options under the federal law.

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Chapter 7 Bankruptcy Timeline

The most common type of bankruptcy case is the Chapter 7 no asset case. In this case the debtor does not lose any property and unsecured creditors (e.g. credit card companies and medical bills) receive nothing. A Chapter 7 no-asset bankruptcy is usually a “quick and easy” process. The following timeline describes the process:

Meet Your Attorney
Your attorney will listen to your concerns, identify legal issues concerning your debts, and recommend legal solutions. While bankruptcy is not always the best option to solve a financial problem, it is a powerful tool that should be considered. Your attorney will also ask you to provide financial documentation such as tax returns, titles and deeds, and paystubs. Your attorney will take this information and draft a bankruptcy petition.

Credit Counseling
Before you can file bankruptcy you must meet receive credit counseling from an approved credit counseling agency. Your attorney will recommend an agency that is approved.

Sign and File Your Bankruptcy
Once the petition is drafted, you will meet with your attorney to review and sign your bankruptcy petition and schedules. You must verify the contents of your bankruptcy filing under penalty of perjury, so it is important to carefully review this document. You must also pay your court filing fee (currently $306).

Attend Financial Management Class
After your case is filed you will attend a course in personal financial management from an approved agency. This course must be completed before the court can enter a discharge, so you might as well get it out of the way as soon as possible.

Section 341 Meeting of Creditors with Trustee
The bankruptcy court will send out notices of your Meeting of Creditors. Your meeting will take place between 30 and 45 days after your case is filed. While creditors do not typically attend this meeting, you will answer questions under oath from the Chapter 7 Trustee about your debts and property.

Trustee's Report
The Chapter 7 Trustee's report is due to the bankruptcy court within 10 days after your Meeting of Creditors has concluded. This report states that the Trustee has completed a review of the case and that there are no assets to administer.

Creditors have 60 days after the date first set for the Meeting of Creditors to file an objection in your case. Objections are rare, especially in Chapter 7 no asset cases.

Discharge and Conclusion
If no objection is filed and all other requirements are satisfied, the bankruptcy court will enter an order discharging your debts, and soon thereafter it will close your case.

Every bankruptcy case is different and some cases do not follow the timeline described above. An experienced bankruptcy attorney will conduct an investigation of your finances and can give you a very good indication of what to expect during your bankruptcy, including how long it will take.

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Discharging Social Security Overpayments

Many common events trigger a decrease in monthly Social Security benefits, including a change in the number of people in your home, or an increase in income. The Social Security Administration (SSA) requires that you report changes within 10 days after the month the change occurred. If the SSA does not get your reported change in time, you may receive an overpayment. Over time these overpayments can amount to a debt you cannot afford to repay.

When an overpayment is discovered by the SSA it will request that you send payment within 30 days. You are entitled to request a waiver and, if the waiver is denied, you may ask for a hearing with an Administrative Law Judge. The SSA will look at whether you acted honestly in making its decision to waive the overpayment.

If the waiver process fails, you may consider a bankruptcy. Social Security overpayments are treated like any other unsecured debt in bankruptcy. The debt can be discharged at the end of a Chapter 7 or Chapter 13 case. However, the SSA may file a timely objection to the discharge of the debt. The most common reason for objecting to the discharge is that you committed fraud by keeping additional benefits when you knew you were not entitled to them. If the SSA is successful in proving fraud, the debt will be excluded from the discharge.

In a fraud case the issue generally boils down to one question, "Did you know you were not entitled to keep the extra money from the SSA?" These cases are seldom cut and dry because of the SSA's complex rules, especially when dealing with return to work issues. The SSA seldom files objections in bankruptcy cases, but each case is different.

Social Security overpayments are serious business and require a serious response. If you fail to take action, the SSA will begin taking money from your monthly check 60 days after you receive notice of the overpayment. Your best response is to consult with an experienced attorney. Your attorney can help you weigh your legal options and develop a plan to deal with this debt.

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Chapter 13 Wage Deduction

The Chapter 13 bankruptcy trustee encourages debtors to make monthly plan payments using a wage deduction order. At the debtor’s request, the bankruptcy court will send an order to the employer to withhold money from the employee’s paycheck and send it to the trustee. Cases using wage deduction have fewer instances of default.

Many debtors don’t use wage deduction because they want to avoid informing their employer about the bankruptcy case. But does this make sense?

Bad credit can get you fired. Failure to manage your personal finances could lead to your termination, especially if you work for a bank and other financial institution, a retail store, or a business where you handle cash on a routine basis. Collection calls at work can get you fired. Mistakes and time off work can get you fired.

On the other hand, the federal bankruptcy laws prohibit government and private employers from firing you on the basis of your bankruptcy filing. By informing your employer that you have filed bankruptcy, you have put the employer on notice that you are dealing with your financial problems in a responsible and legal manner. In order to terminate you during your bankruptcy case, your employer must find a reason unrelated to your bankruptcy and personal finances. Consequently, most employers do not want to risk violating the federal law.

Finally, which is worse: to inform your employer of your bankruptcy through a wage deduction order, or for your employer to discover your financial problems through some other channel? Most employers (and people) respect honestly and forthrightness. Some employers conduct periodic credit checks on their employees, so your bankruptcy will be eventually discovered. This is especially the case with government work involving national security or the Federal Deposit Insurance Corporation.

Of course, every situation is different and you should discuss your situation with an experienced bankruptcy attorney. Your attorney can help you decide if a wage deduction order is right for you. 

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Should I Tell My Creditors That I'm Filing Bankruptcy?

Creditor harassment is a common reason people visit bankruptcy attorneys. Collection calls can be a source of frustration and embarrassment. So once you have decided to file bankruptcy, should you tell your creditors?

The answer to this question depends on a number of things. First, have you hired an attorney? Once you retain bankruptcy counsel, you can inform your creditors, “Don’t talk to me; call my attorney!” The Fair Debt Collections Practices Act (FDCPA) prohibits third party collectors (collection agencies, attorneys, etc.) from speaking with you once they know you are represented by an attorney concerning the debt. Hiring a bankruptcy attorney can provide immediate relief and peace of mind to many who have been harassed by creditors. Ignoring the FDCPA and continuing to harass you can cause serious trouble for the collector.

The second issue is, “Can telling the creditor that you are filing harm you?” Hiring an attorney and intending to file bankruptcy are not the same as actually filing your bankruptcy case. Until you file you are not under federal bankruptcy protection, and a secured creditor may try to repossess property. For instance, if you are several payments behind on your car loan, the lender may decide to quickly repossess your vehicle to avoid complication and delay by the bankruptcy. You may get your vehicle back after you file a Chapter 13 case, but it may take a few days or longer. You will not get your vehicle returned if you file Chapter 7. Once you file your bankruptcy case, the creditor may not repossess property without the bankruptcy court’s permission.

Finally, creditors hear “I’m filing bankruptcy” every day. Are you able to file your case quickly, or will it take awhile? An original creditor (i.e. the one who loaned you money or extended credit) is not subject to the FDCPA. If you do not follow through quickly with your threat to file bankruptcy, the creditor may soon renew and increase its efforts.

Your bankruptcy attorney is in the best position to instruct you whether to tell your creditors that you intend to file bankruptcy. For many, the answer is “Yes,” but there are special circumstances when it is best to avoid disclosing a pending bankruptcy action. Consult with your attorney and get the advice you need.

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Will I Lose My Anticipated Income Tax Refund In Chapter 13 Bankruptcy?

Chapter 13 is a repayment bankruptcy. You pay your creditors whatever you can afford over three to five years (three years for lower income earners, five years for higher wage earners). You are required to commit your disposable income to the repayment plan during the repayment period. You are also required to pay as much to unsecured creditors as they would receive in a Chapter 7 liquidation bankruptcy.

An expected income tax refund is property of the bankruptcy estate. Many debtors are able to protect all or a portion of their income tax refunds by applying legal exemptions to the expected refund. After applying all of your available exemptions, the remaining unprotected amount is often little or nothing.

If you cannot protect your tax refund with exemptions, you are required to pay the non-exempt amount in your monthly plan payments. This is because your unsecured creditors would get this money if you filed a Chapter 7 bankruptcy.

Even if you have a non-exempt tax refund, your bankruptcy attorney may be able to save your refund under certain circumstances. One trick to apply the non-exempt portion of your expected income tax refund to next year’s taxes. The IRS will keep your tax overpayment and use it for taxes you may owe in the future. The Tenth Circuit case of Weinman v. Graves, 609 F.3d 1153 (10th Cir. 2010) holds that the bankruptcy trustee cannot force the IRS to turnover a tax refund that is held to pay future taxes. The election to apply the refund to your future tax liability is irrevocable under section 6513(d) of the Internal Revenue Code. Consequently, your interest in the refund when you file bankruptcy is limited to what is left after the IRS applies the money to next year’s tax liability.

This trick is common in Chapter 7 cases, but can be used in Chapter 13 cases as well to avoid increasing your monthly plan payment. Working closely with your bankruptcy attorney and a skilled CPA will maximize the amount of money you get to keep. If you are expecting a large income tax refund, but need to file Chapter 13, speak with an experienced bankruptcy attorney and discuss your options. Your attorney can explain how the federal laws can protect your assets and discharge your debts.


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Stopping a Tax Offset for a Defaulted Federal Student Loan

Stopping a Tax Offset for a Defaulted Federal Student Loan

Federal student loans are guaranteed by the US government and administered by the Department of Education. When a borrower defaults on the loan, the Department of Education may refer the loan to the Department of the Treasury for collection. The Treasury issues your tax refund check, which can be offset to pay your defaulted student loans. The Treasury will offset your entire refund, even if it includes money owed to your non-obligated spouse or an earned income tax credit.

So what can you do to stop this nightmare?

First, the Department of Education is required to send you notice of the offset. You are entitled to a hearing and an opportunity to present evidence when challenging the debt. If you make a timely request for a hearing, the collection process must stop. So it is in your best interest to review the loan documentation and request a hearing if there are mistakes. During that time you should also contact the Department of Education, negotiate a repayment schedule, and request that all garnishments and seizures cease.

Second, you should check with the Internal Revenue Service and see whether your tax refund will be offset. The number to the IRS Offset Hotline is 800-304-3107.

Third, if you filed a joint income tax return, your spouse may be eligible to reclaim his or her portion of your joint refund. Your spouse must file an "injured spouse" claim form (IRS Form 8379) with the Internal Revenue Service. Questions regarding the amount your spouse will receive can be answered by the IRS by calling 800-829-1040.

Fourth, you may be able to stop the collection process if you can show evidence of financial hardship. You must contact the Department of Education and submit documentation to support your claim. The Department of Education will consider your claim and may agree to modify the withholding action.

Finally, bankruptcy may stop an offset of your income tax refund. The bankruptcy laws on this matter are complex and require the attention of an experienced attorney. In general, the bankruptcy code allows a creditor to offset money owed to the debtor against a pre-bankruptcy debt. The offset must involve the same parties to the credit and the debt. If the creditor wants to perform an offset during the bankruptcy (for instance, during a Chapter 13 bankruptcy), it must first ask the bankruptcy court for relief from the automatic stay.

If you have defaulted on your student loans, you may be able to stop an IRS offset of your income tax refund. It is important to discuss the specifics of your situation with an experienced bankruptcy attorney. Your attorney can recommend the best course of action to protect your assets and income.

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Top Five Don'ts Before Filing Bankruptcy

Many people start financial planning when the decision is made to file bankruptcy. Financial planning is good, but doing it yourself can be disastrous. In particular, there are five activities that can cause serious problems in your bankruptcy case, so today’s article is a list of the top five activities to avoid before you file bankruptcy.

5. Don’t use credit cards. In bankruptcy, as in life, honesty is the best policy. Using credit when you have no intention on repaying is fraud and you can be charged with a crime! The bankruptcy code gives the credit card company legal advantages when credit is used just prior to filing bankruptcy. The result is often that you have to repay credit you use just before filing bankruptcy. Consult with your bankruptcy attorney before you use a credit card convenience check, transfer a credit card balance, take a cash advance, or go on a spending spree.

4. Don’t transfer property. Transfers just before bankruptcy must be identified and the bankruptcy trustee will take a special interest in your case. The bankruptcy trustee always assumes the worst and will look on any transfer with suspicion. Illegal transfers can be voided by the trustee and you may lose your right to protect the property. For instance, let’s say you sold your car worth $3,000 to your adult daughter for $1. Since this is not an arm’s length and fair transaction, the trustee can avoid the transfer, and force your daughter to turn over the car to the trustee. Since you did not own the car when you filed, you are not entitled to protect the vehicle with your legal exemptions. The trustee will now sell the car to pay your creditors and you lost a $3,000 asset. If you want to sell or transfer property, speak with your bankruptcy attorney. Your attorney can show you the right way to transfer the property without causing a legal mess.

3. Don't repay loans to friends or family. Money used to repay a loan to a friend or family member within a year of your bankruptcy filing can be avoided by the bankruptcy trustee. The trustee can sue your friend or family member for the money.

2. Don't pay more than $600 to one creditor. Like payments to friends or family members, payments that exceed $600 to any one creditor within 90 days of the bankruptcy filing can be avoided. Speak with your bankruptcy attorney before paying creditors.

1. Don't cash out retirement plans or 401k's. Retirement plans are often fully protected by bankruptcy laws, so do not touch these accounts until after you file bankruptcy. Once the money is moved it is more difficult to protect and you may lose your retirement funds.

The bankruptcy code contains many traps for the unwary. A bankruptcy professional can help you avoid these common traps. Don’t wait to speak with a bankruptcy attorney and discuss your financial situation. Get experienced advice on how to obtain the help you need.

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Dismissing Your Bankruptcy Case

The most common goal in bankruptcy is the discharge; however the discharge is not every debtor’s goal. For some, the goal of bankruptcy may be to use the automatic stay to postpone a legal action, like a foreclosure or a lawsuit, while the debtor negotiates a settlement. For others, it may mean buying time to refinance a debt. When the objective is met, these debtors want to dismiss the bankruptcy case. The bankruptcy code contains special provisions for dismissing a bankruptcy case.

A Chapter 7 debtor is not able to dismiss the case without the permission of the bankruptcy judge. If the case does not contain assets (a “no asset case”), approval is easy to obtain. On the other hand, if the case is an asset case and creditors will receive money, the trustee will likely object to the dismissal and request permission to distribute the asset proceeds to your creditors. This is important for a Chapter 7 debtor who receives a large sum of money like an unexpected inheritance. The debtor cannot just say “forget it” and walk away from the bankruptcy case and keep the money.

A Chapter 13 debtor has an absolute right to dismiss the bankruptcy case. The theory behind this is that a debtor should be able to stop the bankruptcy and repay creditors on his or her own terms. The bankruptcy court will still look at whether the debtor is acting in good faith. If the debtor is not acting in good faith, the case may be converted involuntarily to a Chapter 7.

While the discharge remains the crown jewel of the bankruptcy process, it is not the only reason to consider a personal bankruptcy. An experienced bankruptcy attorney can discuss the advantages of the federal bankruptcy code and how it can help you and your situation. Your bankruptcy attorney can work with you to plan your strategy to eliminate debt and reorganize your finances.

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Advantages of Chapter 13 Bankruptcy

The most common types of personal bankruptcy are Chapter 7 and Chapter 13 bankruptcy. A Chapter 7 bankruptcy is an “erase-your-debts-and-start-fresh” bankruptcy. The Chapter 7 case typically takes around four to five months and unsecured debts are discharged. On the other hand, Chapter 13 cases last three to five years and all disposable income is paid to unsecured creditors. So why would any reasonable person choose Chapter 13 over Chapter 7? There are several differences between Chapter 13 and Chapter 7 which offer special advantages under the right circumstances.

The most significant advantage, and perhaps the main reason many debtors choose Chapter 13, is the opportunity to save a home from foreclosure. Chapter 13 allows the debtor to cure overdue mortgage payments over the life of the repayment plan (three to five years). During a Chapter 13 bankruptcy, the debtor may also take advantage of any home loan modification program that he or she is otherwise qualified to receive. Finally, a home that has a second or third mortgage that is completely unsecured may qualify for lien stripping in Chapter 13. Once the junior mortgage is stripped off, the debt is paid at the same rate as other unsecured debts and the remaining balance is discharged at the end of the bankruptcy case.

Another advantage is the ability to “cram-down” a motor vehicle loan to the fair market value of the vehicle. The loan principal of the qualifying vehicle loan is reduced and the payment is stretched over the life of the repayment plan. High interest may also be crammed down to the trustee’s interest rate, which could mean a significant savings in monthly payments.

During a Chapter 13 bankruptcy case, any co-debtor or co-signor is protected from creditor collector and harassment. This provision protects a co-debtor from harm while the debt is repaid in bankruptcy.

Chapter 13 also acts like a court ordered consolidation loan. The bankruptcy court judge orders the creditors to accept payments during bankruptcy, whether they like it or not! The debtor has no direct contact with the creditors during the case. If the creditor has an issue with how its debt is treated in bankruptcy, the creditor must take it up with the judge.

Chapter 13 can be a powerful legal tool for some debtors, but it is not for everyone. The federal bankruptcy code contains many provisions that are specifically suited to help individuals recover during financial crisis. The protection is broad and the relief is very real. If you are struggling financially, speak with an experienced bankruptcy attorney and learn how the bankruptcy laws can help you.

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Distressed Homeowner Fraud Scheme Uncovered

There is an old saying, "A drowning man will grab even the edge of a sword." For a homeowner drowning in debt, any assistance may seem beneficial. Unfortunately, there are scam artists that use a desperate situation to make a few quick bucks.

Case in point is an Austin, Texas, man who recently pled guilty to operating a foreclosure-rescue scam. Frederic Alan Gladle, 53, admitted that for four years he defrauded homeowners that netted him more than $1.6 million in fees. According to court documents, Gladle used different aliases and the stolen the identity of at least one person to set up a mobile phone number.

Gladle, who played linebacker on the University of Southern California’s 1978 national football championship team and is married to the 1984 Playboy Playmate of the Year, charged distressed homeowners fees in exchange for fraudulently postponing foreclosure sales. He faces two to seven years in prison.

In a statement released by the U.S. Department of Justice, "Gladle admitted that he recruited homeowners whose properties were in danger of imminent foreclosure and falsely promised to delay the foreclosures for up to six months, in exchange for a fee of approximately $750 per month. Gladle, directly or through salespersons, directed homeowners to sign deeds granting fractional interest in their properties to debtors in bankruptcy proceedings whose names Gladle found by searching bankruptcy records. The debtors were unaware that their names and bankruptcy cases were being used by Gladle in his scheme. Gladle then sent the unsuspecting debtors’ bankruptcy petitions, and the deeds that transferred fractional interests to the debtors, to the homeowners’ lenders to stop foreclosure proceedings."

The involvement of the federal bankruptcy process immediately stopped the foreclosure on the homeowner's property and forced lenders to seek permission to proceed from the bankruptcy courts.

“This is the latest example of heartless criminal activity by an individual who sought to capitalize on the misfortune of those affected by hard economic times,” said Steven Martinez, assistant director of the FBI’s Los Angeles field office. “Mr. Gladle defrauded victims trying to save their homes, further exploited those in debt by stealing their identities, and wreaked havoc on both banks and the bankruptcy courts by manipulating the system.”

If you are facing foreclosure, speak with an experienced bankruptcy attorney and discuss your legal options. You may be eligible for home loan modification, including a principal and/or interest reduction; repayment or second mortgage lien stripping through Chapter 13 bankruptcy; or debt elimination under Chapter 7. Your attorney can explain your options and help you decide on a course of action that is best for your family without making matters worse, or involve you in illegal activity.

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Bankruptcy Rate Falls During 2011

Fewer personal bankruptcy cases were filed during 2011 according to a report by the National Bankruptcy Research Center. In 2011 about 1.3 million consumer bankruptcy cases were filed throughout the United States, or about one out of every 175 Americans. That is a decrease from 2010 when slightly less than 1.5 million cases were filed, or one out of 150 Americans, filed bankruptcy.

Chapter 13 filings fell 8 percent from 2010 totals, and Chapter 7 filings dropped 13 percent. 2011 marked the first time the number of personal bankruptcy cases had fallen since 2006. Nevada remains at the top spot for the nation’s highest per capita filing rate at 8.98 bankruptcy cases per 1,000 residents. That is a drop from Nevada’s 11.1 filing rate in 2010.

“The decline in total filings reflects the retrenchment in consumer spending associated with a down U.S. economy,” said American Bankruptcy Institute Executive Director Samuel J. Gerdano. “As consumers continue to deleverage their debt and access to credit remains tight, bankruptcy filings will continue to decrease.” The American Bankruptcy Institute is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency.

While national bankruptcy statistics may be interesting, your financial situation is not a statistic. Your case is unique and deserves a skilled attorney committed to guide you through the maze of the federal bankruptcy laws. You may need a Chapter 7 “straight bankruptcy” that can discharge unsecured debts and get you quickly back on the road to recovery. Or your situation may require a Chapter 13 repayment plan to save your family home and right your sinking financial ship.

If you are struggling with debts you cannot pay, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help you. Each year over a million people chose bankruptcy relief because it works! Bankruptcy can eliminate your debt burden and put you on the path to a fresh financial start.

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When a Creditor Violates the Bankruptcy Discharge

The bankruptcy discharge is a court ordered permanent injunction prohibiting certain creditors from taking collection action against the debtor. A debt discharged by your bankruptcy cannot be collected from you. Unfortunately, some creditors refuse to take “No” for an answer. If you are contacted regarding a discharged debt, here’s what to do:

Inform the creditor of your bankruptcy discharge
When a debt is discharged in bankruptcy it does not simply vanish. The debt still exists; it is just not “collectible.” This debt may be sold or transferred to another collector, and the new collector may not know about your bankruptcy discharge. This is not to say that ignorance is a defense to violating the court order! However, informing the collector of your bankruptcy discharge is usually enough to stop all collection activities.

The collector may ask you for information about your case, including your case number, bankruptcy chapter (Chapter 7 or Chapter 13), and the date of the discharge. These are reasonable requests if meant to update their records so you are not bothered in the future. If you do not have this information, simply refer the collector to your bankruptcy attorney.

Ask for sanctions
In some cases the creditor knows about the bankruptcy discharge and still tries to collect. Whether its action results from ignorance or arrogance, the bankruptcy court takes a very dim view of creditors that intentionally violate its discharge order. When a court order is violated it is punished by contempt of court. The bankruptcy court can sanction the violator (called the “contemnor”) and assess a fine, award actual damages, and order the contemnor to pay the debtor’s attorney fees.

The federal bankruptcy laws offer very powerful protection. Getting the full benefit of your bankruptcy case requires a skilled and experienced attorney. Your attorney can use the bankruptcy laws to give you a fresh start that is free of creditor harassment.

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Credit Card Debt Is On The Rise

A recent survey indicates a disturbing trend in the spending habits of the American consumer. After two years of moderate credit card use, new figures from Card Hub show that credit card use has significantly increased during the past year. Consumers are on track to end 2011 with a $64 billion increase in credit card debt.

Americans are also paying off credit card debt at a slower pace. During the first quarter of each year credit card debt usually declines, mostly due to annual bonuses and tax refund checks. In 2009 and 2010, consumers paid down more in the first quarter than they charged in new debt through the end of the third quarter. This year consumers kept the cash and kept charging throughout the year. Even more disturbing is that this year's third quarter credit card debt total was 154 percent more than in the same period last year.

Carrying large credit card debt can create serious financial problems. According to the Federal Reserve's credit card repayment calculator, a $5,000 debt at a 15% interest rate will take 7 years to pay off at $100 per month. During this time you will pay an extra $2,896 in interest charges!

If credit card fees are eating up your paycheck, it may be time to consider bankruptcy. During Chapter 13 bankruptcy you are able to structure an affordable repayment plan to pay credit card debt. Whatever you are not able to pay will be discharged after three to five years of repayment.

If you cannot afford to repay anything towards your credit card debt, Chapter 7 may be the answer. A Chapter 7, also called a "straight bankruptcy," lasts about five months and nothing is paid to your credit cards. Most bankruptcy debtors are able to keep everything they own while discharging debts they cannot afford to pay.

When credit card debt has taken over your finances, consult with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can help. Don't let credit card debt hold your paycheck hostage! Bankruptcy offers powerful protection from creditors and can discharge overwhelming debts.

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American Airlines Files A "Business Bankruptcy"

The United States Bankruptcy Code is comprised of several different chapters. Some chapters deal with administrative matters. Other chapters provide specific guidance on how a case must proceed. Chapter 13, a repayment bankruptcy, is reserved for debtors who are “natural persons,” as opposed to businesses or corporations. Businesses and individuals can file Chapter 7, a liquidation bankruptcy, but only individuals can receive a Chapter 7 discharge. When businesses need to restructure, they turn to Chapter 11, commonly called the “business bankruptcy.”

Recently the parent company of American Airlines filed for Chapter 11 bankruptcy protection. Chapter 11 is a business reorganization, not a liquidation, and has been used by several other airline companies (including Delta and United) to rewrite union contracts and reduce debt. American Airlines will continue to operate during the bankruptcy and travelers will see very little change – at least during the early phases of the bankruptcy.

American Airlines has declared bankruptcy because it needs protection from creditors to continue to operate while it reorganizes its finances. According to an article in the Wall Street Journal, AMR reports that it has $29.6 billion in debt and $24.7 billion in assets. On the day it filed for bankruptcy, AMR requested permission from a New York bankruptcy court judge to pay for fuel, labor, and other critical expenses to keep American flying. During Chapter 11 bankruptcy, all major financial decisions must be approved through the bankruptcy court.

Attorney Harvey Miller, who represents AMR, offered a great piece of bankruptcy advice for struggling businesses. At the AMR bankruptcy hearing, Miller said that debtors should not “wait too long. Don't wait until the course is irreversible. That is what American Airlines is doing today.”

If your business is fighting to stay alive, consult with an attorney and discuss how the federal bankruptcy law can help. Chapter 11 can stop creditor action while your business develops a plan for reorganization. Every debtor’s situation is different, and an experienced bankruptcy attorney can explain the process and benefits of Chapter 11 for your company.

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How EBay Can Help Your Bankruptcy

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.


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What Happens to a Discharged Debt?

Bankruptcy attorneys are good at hyping the bankruptcy discharge. Terms like “Erase Your Debts!” and “Start Fresh!” abound in consumer bankruptcy advertising. You may know that at the end of your bankruptcy case the court will enter an order discharging certain debts. But what exactly happens to debts that are discharged?

The bankruptcy discharge does not “erase” or “eliminate” the debt. The discharge is a permanent order injunction against certain creditors. The discharge forbids all action to collect the debt from the discharged debtor. This injunction applies to the original creditor, any collection agency or subsequent creditor, and to any attorney or other representative who may attempt to collect the debt.

The discharge injunction prohibits collection action against the discharged debtor. For instance, if a credit card debt is included in your discharge, then the creditor is barred from attempting to collect on the debt from you, personally. The debt still exists, but the creditor cannot take any legal action against you to collect.

A creditor may still have options to collect on a discharged debt. The bankruptcy discharge only applies to the individual debtor, so any co-debtor (who has not also filed bankruptcy) is fair game. In most cases, a co-debtor will be 100% liable for the entire remaining debt. The creditor cannot sue you for payment, but it can sue your co-debtor. Your co-debtor is also prevented from suing you for payment.

A creditor may also seek to collect from any property that was used as collateral for the discharged debt. Often property that was not acquired through financing (called “non-purchase money security”) can be protected, but the general rule in bankruptcy is that secured property must be paid for or returned. After the bankruptcy case is closed, a secured lender can repossess collateral that secures a discharged debt without violating the bankruptcy discharge injunction. Repossession after bankruptcy is actually very rare. There are several ways to protect property (especially a vehicle) during and after bankruptcy, including redemption, a Chapter 13 cram-down, or reaffirmation. If you have secured property you would like to keep, discuss your options with your attorney.

Many debts that are “forgiven” or “charged-off” can be taxed against the debtor. The IRS sees the forgiven debt as taxable income. Fortunately, the federal law contains an exception to this rule for debts discharged by bankruptcy. Discharged debts are not taxable as income by the IRS.

Since the debt still exists after the bankruptcy case, the discharged debtor may choose to make voluntary payments. The discharge injunction only applies to the creditor, and there is nothing that prohibits voluntary payments. Voluntary payments do not “revive” the debt, and it does not negate or suspend the discharge. The creditor is forever and always barred from contacting the debtor regarding the debt, and cannot call or even send reminder notices to pay.

If you have bills that you cannot afford to pay, contact an experienced attorney and discuss your options under the federal Bankruptcy Code. Bankruptcy is a powerful defense that can shield you from the negative effects of overwhelming debt.


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Chapter 13 and The HOA

Purchasing a home is for many the realization of the American Dream. Over the past few decades the Home Owners Association has become the double-edged sword of the American Dream. On the one hand, HOAs are great. They help ensure high property values by making sure that everyone maintains their home and do not create eyesores. On the other hand they can be beasts of burden, with many often wondering if they are worth the added yearly, quarterly or monthly expense. Regardless of their value to you HOAs have become increasingly powerful. So powerful that falling behind on your HOA fees in some cases is tantamount to falling behind on your mortgage or taxes, allowing the HOA to attach a lien to your property and foreclose on your home.

Chapter 13 can help. Firstly, when a debtor files Chapter 13 an HOA is legally prohibited from attempting to collect all included debts. This means that any collection attempts for HOA fees owed prior to the minute the debtor filed must cease. Secondly, Chapter 13 takes an accounting of all debts owed and prioritizes them. Some debts, such as attorneys fees, are considered top priority debts and are placed at the top of the list. Other debts, such as HOA fees, mortgage and credit card debts are placed in a general pot to be worked out in a monthly repayment agreement.

Chapter 13 is helpful because it allows many debtors to renegotiate unfavorable terms and get better interest rates, particularly on credit card debt and in some instances, a mortgage. This not only helps with the amount owed to that particular company, but it also frees up money for the debtor to pay other items. There are a great many benefits to filing Chapter 13. Consult our firm today to see if this may be helpful for you. 

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U.S. Bankruptcy Courts Increase Cost of Going Broke

 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.

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Ensure Your Fresh Start Is Not A False Start

Even in today’s specialized legal world, there are still some “general practice” attorneys who work in many different areas of the law. A general practice attorney may represent clients in family law like divorces with little or no property, minor criminal issues, small land disputes, small probate estates, low dollar personal injury cases, and the like. While a general practice attorney can successfully represent clients in many legal matters, some areas of the law require a more specialized knowledge.

From the outside, a bankruptcy case seems like a simple process. You attend a couple education classes, there are standardized forms that are filled out, you pay a filing fee, and finally go to a meeting with the bankruptcy trustee. Simple, right? In some cases it is that easy, but don’t let bankruptcy’s streamlined process fool you.

Bankruptcy is a mixture of state and federal statutes, case law, procedural rules, and court and creditor customs. General practice attorneys are just not as familiar with these various rules and practices. An experienced bankruptcy attorney is also able to identify problem areas, like preferential payments to creditors or equity issues, which could have serious consequences to your bankruptcy case. Even the timing when a bankruptcy is filed can have consequences to your case. For instance, bankruptcy debtors lose their tax refund checks each year because they filed either too early or too late.

Hiring an experienced bankruptcy attorney ensures that your case will be filed correctly; that any potential trouble areas in your case will be identified and discussed before your case is filed; that you will be informed of how your case is progressing; and that you will be represented in all communications with creditors and the bankruptcy trustee. Hiring an experienced bankruptcy attorney gives you peace of mind knowing that your case is being handled correctly and competently.

Hiring experienced counsel to represent you has one more benefit – reputation. The local bankruptcy trustee and judge are familiar with your bankruptcy attorney. They have confidence that your petition and schedules are drafted correctly and that the attorney is representing the client ethically and competently. That confidence is not present with the general practice attorney. The trustee and judge are skeptical that the paperwork is correct and wonder what has been “overlooked.” Consequently, the case is scrutinized more than average.

If you are looking for an attorney to represent you in your bankruptcy case, hire someone who has devoted his or her practice to bankruptcy law. Your property and future financial success is too important to risk. Hire an experienced bankruptcy attorney and ensure that your fresh start is not a false start.

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Filing Bankruptcy After Job Loss

Many American families rely on two incomes to pay the monthly bills and set a little aside as savings. When one income is unexpectedly reduced or eliminated, the family is thrust immediately into a crisis mode. Often there is not enough money to pay all of the family bills, so touch choices must be made.

The first thing to do is to be realistic and not overreact. It is important to use savings wisely during this time and to safeguard retirement. Spending these funds to maintain your lifestyle is not good financial management, and will have long-term consequences. In most cases a substantial amount of cash and all of your retirement funds can be protected if you need to file bankruptcy. Likewise, most assets are protected during bankruptcy, so it is not necessary to sell assets to pay creditors.

Second, prioritize your spending. This may mean eliminating or reducing certain “luxuries” like premium tv channels or inflated cell phone plans. Creditors must be prioritized also. For instance, it may be more important to pay the car payment instead of a medical bill. If you file a Chapter 13 bankruptcy, your secured creditors receive a higher priority than unsecured creditors. That means your home mortgage and car payment are paid before credit cards and medical bills. You keep the house and car while unsecured creditors receive little or nothing.

Third, understand the consequences of late payment and default. There may not be enough money to pay all of your creditors, so what happens if you don’t pay a bill? In some cases filing bankruptcy will actually help your credit over the long haul. Bankruptcy stops all creditor action, including negative reporting to the credit bureau. By filing bankruptcy you can avoid additional negative reports like late payments, default, charge-offs, repossession or foreclosure.

Whether to file bankruptcy after a job loss depends on a number of circumstances. The best advice is to consult an experienced bankruptcy attorney and discuss your financial options. Bankruptcy can help you reorganize your finances when there is not enough money to pay all creditors. Your attorney can help you prioritize your spending and protect your assets.

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Report Indicates That Foreclosures May Soon Increase

September foreclosure filings fell 38% from one year ago, according to information released by This may seem like good news, but there is reason to believe that the foreclosure rate may soon increase.

First, the foreclosure process came under attack during the past year prompting many banks to slow or temporarily stop foreclosure proceedings. Banks and mortgage servicers have taken corrective actions over the past twelve months, and there is no evidence that previous sloppy practices are continuing. On the contrary, there is evidence that banks are being more cautious in dealing with foreclosures. The time the average foreclosure takes has increased to 336 days, up 18 days from the previous quarter.

Second, while the number of foreclosures is down for the year, the number of September foreclosure filings increased 6% from August. “This marginal increase in overall foreclosure activity was fueled by a 14% jump in new default notices, indicating that lenders are cautiously throwing more wood into the foreclosure fireplace after spending months spent trying to clear the chimney of sloppily filed foreclosures,” says RealtyTrac Chief Executive James Saccacio.
“While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," Saccacio said in a statement.
If you find yourself unable to pay your mortgage and facing foreclosure, get professional help. An experienced bankruptcy attorney can provide you with options to catch up payments over three to five years, modify your existing mortgage, strip away an entirely unsecured junior lien, or even walk away from your house and the debt on your own terms.

Once a bankruptcy case is filed, the federal law stops all collection action – even foreclosure! Bankruptcy gives you a “breathing spell” to organize your finances and propose a plan to restructure your debt. In many cases debtors are able to save their homes while discharging thousands of dollars in unsecured debts, including credit cards, personal loans, and medical bills.

Don’t be another statistic! Get the information you need to make a sound financial decision regarding your home. Call an experienced attorney today and learn how the federal bankruptcy laws can help you!

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Chapter 13 Bankruptcy Primer

 A Chapter 13 bankruptcy case is primarily used to repay all or some of a person’s debts. It is also known as a debt adjustment case, or a “wage earner's plan.” Chapter 13 can stop a foreclosure or repossession and allow the individual time to make payments over three to five years, often even over the objection of a creditor.

If you are behind on a mortgage or car loan and is unable to catch up, Chapter 13 bankruptcy will give you time to restructure your debts and sometimes change the interest rates on your loans. Some upside-down vehicle loans can be “crammed down,” meaning the obligation is reduced to the value of the vehicle, and then paid over three to five years. Second or third mortgage debts can also be stripped off, if the amount of the first mortgage is equal to or more than the value of the home.

Chapter 13 differentiates between three types of debts: first, priority debts, including most taxes and child support, must be paid in full. Second, secured debts, debts secured by collateral, must be paid with interest over the life of the plan, or surrendered back to the creditor. Finally, unsecured debts, like credit cards and medical bills, are paid in accordance with your financial ability. This may be as much as 100% or as little as 0%.

The main feature of a Chapter 13 bankruptcy is the repayment plan, which must be approved by the bankruptcy court. A Chapter 13 plan will propose a monthly payment to pay all or some creditors over three to five years. Once the bankruptcy court approves a Chapter 13 plan (called “confirmed” in bankruptcy lingo), the court will direct you to pay the bankruptcy trustee, who keeps a percentage as a fee and pays out the rest to the creditors in accordance with the plan.

There are monetary limits to the amount of unsecured and secured debts you can have in a Chapter 13, currently set at $360,475 in unsecured debts and $1,081,400 in secured debts. Debtor’s who exceed these limits are not eligible for Chapter 13 relief and should consider a Chapter 11 reorganization bankruptcy.

If you have a home or auto debt that you cannot afford, speak to an experienced bankruptcy attorney before a foreclosure or repossession. Your attorney can discuss your bankruptcy options and can give you the tools to decide whether it is feasible to keep your property, restructure your debts, or simply “walk away” and discharge your financial obligations.

Chapter 20 Bankruptcy Makes Its Return

 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.

More Americans Living Paycheck to Paycheck

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.

Tax Returns After Filing Chapter 13 Bankruptcy

A Chapter 13 bankruptcy case lasts between three to five years. That is three to five New Years, three to five Fourth of July fireworks, and three to five Superbowls. It is also three to five Tax Days (usually April 15). Tax Day is an important concern for anyone in Chapter 13 bankruptcy, and the debtor ignores the importance of this day at his own peril.

During a Chapter 13 bankruptcy the debtor is required to commit all disposable income to repay creditors. Basically, the bankruptcy debtor pays what he or she can afford to pay over the repayment plan period. A debtor who receives a large tax refund is essentially telling the bankruptcy court that this money was not needed, since the debtor elected to allow the U.S. government to hold onto it (interest free!) during the tax year. This income tax refund is disposable income, and the trustee may ask for it!

In theory, avoiding this problem is a simple matter of adjusting your tax withholding. Instead of getting (or losing!) a fat income tax refund in April, you receive a small net increase in income each paycheck.

The difficulty in adjusting your withholding is that the solution could be worse than the problem. If you withhold too little, you could create a tax deficit that you may have trouble paying. Under the current version of the Bankruptcy Code, adding new tax debt could also create a situation where your bankruptcy case may be dismissed. At any rate, a sizeable tax debt you are unable to pay will cause a serious complication for you and your attorney.

If you are contemplating a Chapter 13 bankruptcy filing, discuss your withholding status with your attorney. Your attorney can instruct you whether it is important to adjust your withholding, or to consult with a tax professional to project your tax liability. Ideally, your income tax return will show little or no return, or little or no tax debt.

Can You Re-File a Chapter 13 Bankruptcy After Dismissal?

 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.

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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.

What Exemption Laws Apply To Your Case?

 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.

Different Types of Individual Bankruptcy Cases

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.

How Bankruptcy Can Stop A Tax Garnishment

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.

Life Happens: Bankruptcy Conversion or Dismissal During Chapter 13

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. 

Banks Are Not Playing Fair During Home Loan Modification

National banks that took federal bail-out money also agreed to participate in government home modification programs. These banks have created in-house loan negotiators to assist in home-loan modifications, which may reduce loan principle or interest to adjust the loan to an affordable rate. Many American homeowners have applied for these programs, but few have been approved. In many cases the empty promise of home loan modification leaves the homeowner in a worse position than when he started.

It has become clear that these banks are simply not playing fair. Several lawsuits have been filed against national banks alleging fraud. A federal lawsuit was recently filed by the State of Nevada Attorney General against Bank of America, the nation's largest home loan servicer, alleging deceptive practices. Additionally, a class-action lawsuit against Bank of America is pending in Massachusetts federal court. These suits claim that Bank of America deceived consumers into depleting their savings by making mortgage payments based on false hopes they'd be eligible to modify their home mortgages. The lawsuits allege that BOA accepted $25 billion from the U.S. government in 2008 as part of the Troubled Asset Relief Program (TARP), but has failed to participate in programs such as the Home Affordable Modification Program (HAMP) aimed to minimize foreclosures.


If you are in need of a home modification, review your options with an experienced bankruptcy attorney. Many bankruptcy debtors are able to strip away a second or third mortgage, or pay past-due payment over three to five years. Bankruptcy debtors can also apply for government programs such as HAMP during the bankruptcy case, while under the protection and supervision of a federal bankruptcy court judge.

Taking Your Bankruptcy Medicine

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.

Keeping Your Vehicle During Chapter 13 Bankruptcy

While some Americans are able to get by without a personal vehicle, having reliable
transportation is necessary to most. Whether it is a means to get to work, or to school, or
to take the kids to soccer practice, a vehicle can be an important part of daily life. It is no
wonder that one of the first questions bankruptcy clients ask is, “Can I keep my vehicle
during bankruptcy?”

Keeping your vehicle during a Chapter 13 bankruptcy case starts with a few questions.
First, when did you purchase your vehicle? If your purchase was within 910 days of your
bankruptcy filing, the Bankruptcy Code requires that you pay the entire value of the loan,
usually within the three to five year payment period of bankruptcy case. If the vehicle
was purchased more than 910 days before the bankruptcy filing, the court will adjust the
monthly payment based on how much the vehicle is worth.

The second issue is: what is the contract interest rate? In a Chapter 13 case the interest
rate can be adjusted to a maximum allowed interest rate, called the “Till rate” so named
after the U.S. Supreme Court case, Till v. SCS Credit Corp., 541 U.S. 465 (2004). The
Till rate is adjusted twice a year by the bankruptcy court, and has recently been around
5%. Vehicle debt for many Chapter 13 debtors is paid at the Till rate over the course of
the bankruptcy case.

The final issue is: how much is owed? For vehicle purchases more than 910 days prior to
filing the bankruptcy case, the vehicle debt may be “crammed down” to the present value
of the vehicle. In other words, if you purchased a car more than two and a half years ago,
and you owe more than its worth, your car loan will be adjusted to the vehicle’s value
and the debt will be amortized over the Chapter 13 payment period at the Till rate. That is
generally a substantial savings!

The federal law contains several strategies for keeping a vehicle during bankruptcy. If
you need to discharge your debts in bankruptcy, speak with an experienced bankruptcy
to discuss your options to retain your vehicle. In many cases bankruptcy debtors
pay less for monthly vehicle payments after filing bankruptcy. Get the facts today and get
control over your financial future by calling (214)890-0711 & speaking with a Texas bankruptcy lawyer.

Debt Collectors Cry Foul

The New York Times has written a story about the debt collection industry and its poor telephone collectors who, not surprisingly, get no respect. The article states that one debt collector, Lesllie Rogers, uses a pseudonym because she has “been routinely insulted, pummeled with obscenities, crudely propositioned and threatened with violence by the people she calls.”

Really? The collectors feel threatened by the debtors?

The Fair Debt Collections Practices Act (FDCPA) is a federal law that protects the debtor from abusive collection practices, such as:
Telephone contact before 8:00 a.m. to 9:00 p.m. local time;
Telephone harassment such as constant telephone calls or repeated telephone conversations with the intent to annoy, abuse, or harass;
Telephone contact at the debtor’s job after being informed that such contact is unacceptable or prohibited by the employer;
Contacting a debtor known to be represented by an attorney;
Contact after a debtor has made a request for validation of the debt;
Threatening arrest that is not lawfully permitted;
Using abusive or profane language towards the debtor;
Discussing the nature of a debt with a third party; and
Contact by embarrassing media, such as a postcard or telegram.

The FDCPA applies to third parties, such as collection agencies and attorneys, and carries a penalty of up to $1,000 and attorney fees. The FDCPA also prohibits “any false, deceptive, or misleading representation or means in connection with the collection of any debt,’ including “The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” So, does the use of a pseudonym used by Lesllie Rogers and other debt collectors violate the federal law? Does the FDCPA allow such falsehoods during the process of collecting a debt?

The FDCPA is a federal law that protects consumers. There are several laws that can help protect your property, your liberty, and even your sanity from bill collectors. If you are experiencing financial trouble, speak with an experienced bankruptcy attorney and discover the federal and state laws that protect your rights. 

Beware Of Debt Settlement Company Promises

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.

What Is The Difference Between Chapter 7 and Chapter 13?

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 Tough File Bankruptcy

 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., 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.

Bankruptcy's Instant Relief

 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.

Understanding Your Bankruptcy Discharge

 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.

Managing Student Loans During Bankruptcy

 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.

Help! A Fraudulent Bankruptcy Was Filed in My Name!

 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.

Secured Loans in Bankruptcy

 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.


Pro Se Filers Get Electronic Assistance

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.

Bankruptcy Can Provide A Second Chance At Financial Success

 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.

Bankruptcy Fees

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. 

Your Chapter 13 Repayment Plan

The central feature of a Chapter 13 bankruptcy is the repayment plan. The Chapter 13 plan is a proposal by the debtor to repay certain debts in installments over three to five years. A plan must be filed within 14 days after the bankruptcy petition is filed, and a copy or summary of the plan is mailed to all creditors. Creditors or the bankruptcy trustee may object to the debtor’s plan which may require modification. Ultimately the repayment plan must be “confirmed” by the bankruptcy court.

Many Chapter 13 plans make no payments to unsecured creditors. The amount paid to unsecured creditors is largely guided by the outcome of the bankruptcy means test, which makes an initial presumption of the debtor’s ability to pay unsecured creditors over three to five years. The Chapter 13 Plan must provide payment of at least as much for unsecured creditors as they would have received had the debtor filed a Chapter 7 liquidation bankruptcy. Any priority claims must be paid in full and include a plan for paying secured debts during the plan term. Long term debts, like a mortgage payment or student loans, do not need to be paid off during the plan term, but the plan may provide for the cure of a defaulted note.

Plan payments are made to the Chapter 13 Trustee, who receives a fee for distributing the debtor’s monthly payment to creditors. The debtor’s first plan payment is due 30 days after the case is filed, however the Chapter 13 Plan may not be confirmed by the bankruptcy court until a later date. If a debtor fails to commence making plan payments to the trustee, a motion to dismiss the case will be filed. In most cases is recommended that the debtor execute a voluntary wage withholding to pay the Chapter 13 Trustee, although there is no requirement to do so.

If you are considering a Chapter 13 bankruptcy, it is important to discuss your repayment plan with your attorney. While it is possible to amend a repayment plan when your financial circumstances change, you and your attorney should propose a Chapter 13 plan that is both affordable and realistic. The success of your Chapter 13 case depends upon your ability to follow through with your plan. 

How Often Can I File Bankruptcy?

 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.

I Have My Bankruptcy Discharge. Now What?

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

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.

New Federal Protection for Exempt Bank Funds

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.

The Costs of Representing Yourself in a Bankruptcy Case

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 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.

Protecting Your Lawsuit During Bankruptcy

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.


Protecting Your Income Tax Refund

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.

Rising Gas Prices Impact Debtors in Bankruptcy

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.

Be Accurate About Your Bank Balance When Filing Bankruptcy

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. 

Chapter 13 Vehicle Cram Down

Many debtors with serious financial problems also own vehicles that are underwater. Fortunately, the federal Bankruptcy Code offers several options for the debtor to consider. One of the most sensible for many debtors is a Chapter 13 cram-down