Will Filing Bankruptcy Affect my Job?

One of the most common questions that new clients asked their bankruptcy attorneys is whether bankruptcy will affect their job. In almost every case, especially in regards to your current job, bankruptcy does not affect your employment. Section 525 of the bankruptcy code specifically prohibits discriminatory treatment of persons who are in or who have been in bankruptcy, but there are some limits. The primary limitations are based on whether the bankruptcy is related to a CURRENT or FUTURE employee and whether the employer is a GOVERNMENTAL AGENCY or a PRIVATE ORGANIZATION.

Governmental employees are protected from bankruptcy discrimination much more thoroughly than those working for private employers. Bankruptcy law prevents governmental agencies from discriminating against both CURRENT employees and applicants for FUTURE employment. They cannot deny employment, terminate employment, or discriminate with respect to employment individuals who are either currently in a bankruptcy or have been in bankruptcy. The law even protects someone whose spouse or family member was in bankruptcy. Governmental agencies cannot deny, revoke, suspend or even refuse to renew a license, permit, charter or franchise to a person, or against a person who was or is in bankruptcy.

Additionally, governmental agencies that operate student loan or grant programs may not deny loans or discriminate against those in bankruptcy. Private agencies who offer loans guaranteed, or insured pursuant to a student loan program are also prohibited from denial or discrimination.

Current employees of private companies are protected from termination and discrimination due to bankruptcy in the same manner as governmental employees.  However, private employers may use credit checks and background checks to find out about any financial problems (including bankruptcy) that a potential employee may have, and they may use this information as a hiring factor. Employers must obtain permission from the job applicant to perform such credit or background checks, but failure to give consent can be a reason to refuse employment as well.

Some chapter 13 Trustees require Trustee payments to be withheld directly from Debtors’ pay. In these instances, the employer’s payroll department will be aware that an employee has a bankruptcy case pending. However, strict privacy protections generally prevent employers from making such personal financial information available to an employee’s immediate supervisor without a valid reason.

In general, discriminatory treatment against persons in bankruptcy is rare, but any such concerns should be discussed with a bankruptcy professional prior to filing. If you are considering filing for bankruptcy and have questions about the process, contact the experienced bankruptcy attorneys at Fears | Nachawati Law Firm here, or call our office at 1.866.705.7584 for a free consultation.

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.
 

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).


 

What Debts Should You Reaffirm?

Let’s say you’ve decided to declare Chapter 7 bankruptcy. As a general rule, you’ve decided to shed your debts and start with a clean slate. Of course, you’ve also decided to sacrifice many of your assets in order to pay your creditors as much as possible.

 

As with all rules, there are exceptions. And one of the biggest exceptions to the general rule of shedding your debts in Chapter 7 bankruptcy is whether to reaffirm certain, particularly valuable debts. Reaffirming your car debt, for instance, may ensure that you keep your car – a particularly valuable asset for your post-bankruptcy financial future.

 

Reaffirming your car loan isn’t just about keeping your car. It’s about ensuring that you have any car after your bankruptcy. Although a Chapter 7 bankruptcy can serve many valuable strategic ends, it comes with costs. Most notably, you may have to go months – and even years – without meaningful access to credit. Reaffirming certain debts, such as your car loan, may let you hold on to assets that you might not otherwise have.

 

Do you have questions about the strategic nuances of your personal bankruptcy? Hope is not a plan; if you’re in need of a meaningful plan for personal financial restructuring, the attorneys at the Dallas law firm of Fears Nachawati can answer all of your pressing, important questions. Contact us today for your free consultation. We’re ready to help.

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.
 

Liens in Chapter 7 Bankruptcy

A common saying in Chapter 7 bankruptcy is “secured items must be paid for or returned.” This general rule applies to items that are secured and perfected with a lien. In truth, there are several ways to deal with a secured item in Chapter 7 bankruptcy.

What is a Lien?
A lien is created when a borrower pledges collateral to guarantee payment of a debt. Simply, if the borrower does not pay, the creditor can take and sell the collateral to try to recoup losses. The most familiar type of lien is a car loan scenario. The creditor loans the borrower money to purchase the car, then takes a lien against the car. If the borrower defaults on the car loan, the creditor repossesses the car.

A lien only applies to the pledged collateral and is separate from the personal obligation to pay the debt. That is why when the creditor repossesses the car, the debt is not satisfied. Attorneys call the personal obligation to pay a debt an “in personam” obligation, and the lien on property an “in rem” attachment.

How Chapter 7 Affects Liens
Chapter 7 bankruptcy discharges a debtor’s in personam obligation on the debt. A discharged debt is unenforceable against the debtor; however the in rem lien remains. After discharge a creditor may repossess collateral, but cannot seek payment from the debtor.

Keeping Collateral in Chapter 7
Chapter 7 offers three options to keep collateral: reaffirmation, redemption, and lien avoidance. In reaffirmation, the debtor agrees that the personal obligation to pay the debt will continue after bankruptcy and the creditor agrees to not repossess the collateral. A debtor may choose to redeem personal property and pay the creditor the fair market value in exchange for releasing the lien. Most courts require the debtor to pay the redemption in a lump sum. A debtor may also avoid a lien on household items, if the debtor owned the items when the lien was created and is able to exempt the property in bankruptcy.

Ride through, a fourth possibility, may also exist as an option. Ride through refers to a debtor continuing to pay the original note without reaffirming the personal obligation. The debt is discharged, but the creditor cannot repossess because the debtor is current with his or her payments. This option only exists when state law prohibits repossession without a default or other breach of contract. A lien without an enforceable debt is called a non-recourse debt, because the creditor has no recourse against the debtor after default.

Perfecting a Lien
In bankruptcy, a secured debt is only “secure” if the lien is perfected, usually by recording the lien with an appropriate local or state records office. Failing to do this will cause the lien to fail in bankruptcy. A common situation is a car loan with a family member: mom loans the money for the car, but does not record a lien against the property. A security agreement (e.g. promissory note) alone is insufficient. Without perfecting the lien the property is unsecured.

It is important to identify and review all of your secured loans prior to filing bankruptcy. Providing your attorney with security agreements and loan contracts are a good first step, but be sure to confirm liens at state offices.
 

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.

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.

My Discharge Was Denied! Now What?

Dismissal of your bankruptcy case is different from a denial of discharge. A dismissal is the court ending your case. Usually a case is dismissed when the debtor fails to do something he/she must do, such as attend the creditors' meeting. A denial of a discharge is very different and does not dismiss the case; it is a specific order that denies the debtor a discharge of any and all debts in the entire case.

There are many reasons that a bankruptcy court may deny your Chapter 7 discharge, but there is one common denominator: you have done something very wrong during the bankruptcy process. Section 727(a) of the Bankruptcy Code lists reasons that you can be denied a discharge, including:
• transfer or concealment of property with intent to hinder, delay, or defraud creditors;
• destruction or concealment of books or records; perjury and other fraudulent acts;
• failure to account for the loss of assets; and
• violation of a court order.

The court order denying your discharge does not dismiss or terminate your bankruptcy case. The Chapter 7 trustee will continue to liquidate any of your non-exempt assets, but you lose your opportunity to discharge your debts.

A denial of discharge can have lasting consequences. When you are denied a discharge, section 523(a)(10) of the Bankruptcy Code denies a discharge in future Chapter 7 cases of any debt that was or could have been scheduled in your prior bankruptcy. In plain English: if you are denied a discharge in your first bankruptcy, all those debts can never be part of a discharge in a future Chapter 7 case.

However, it is possible to discharge those debts in a Chapter 13 case. Section 1328 does not enumerate the disqualifying provisions of 523(a)(10) among the list of exceptions to a Chapter 13 discharge. If you need bankruptcy relief and have been previously denied a discharge, speak with an experienced attorney to review your bankruptcy options.
 

Can I Discharge My Personal Property Taxes in Chapter 7 Bankruptcy?

Discharging a personal property tax during bankruptcy is like reading a flow chart with a number of “if this, then that” directions. The first question to ask is whether the personal property tax debt was an obligation which was assessed, or otherwise incurred, before the date of the bankruptcy filing. This is called a “pre-petition” tax debt and falls under the jurisdiction of the bankruptcy court. Tax obligations that arise after the filing of the bankruptcy case are generally outside the federal bankruptcy court’s jurisdiction, but taxes that arise during a bankruptcy case are treated as administrative claims. Confused? Read on!

The second question to answer is when the debt was incurred. Section §507(a)(8)(B) of the Bankruptcy Code grants priority status to a tax debt that is (1) a tax on property; (2) incurred prior to the commencement of the case; and (3) is last payable without penalty less than one year before the case filing. Priority tax debts are not discharged through Chapter 7 bankruptcy (see 11 U.S.C.§§523(a)(1) and 727(b)). A tax debt failing to meet these criteria is treated as a general unsecured claim (unless otherwise secured by operation of state law) as is generally dischargeable.

To illustrate this confusing Bankruptcy Code requirement, assume that the law of the state where a debtor resides states that personal property taxes are incurred on whatever taxable personal property the debtor owns on January 1 of each year. Also, assume that the debtor’s taxes are due on January 1 the following year and must be paid by January 31 or penalties are imposed.

Suppose our debtor files for Chapter 7 bankruptcy protection on January 30, 2013. Any personal property taxes owed for 2012 is obviously a priority debt and is not discharged. Additionally, any personal property tax owed for 2011 is not discharged, because the 2011 tax debt was (1) a tax on property; (2) incurred prior to the commencement of the bankruptcy case; and (3) last payable without penalty on January 31, 2012, less than one year before the case began. If the debtor had waited until February 1, 2013 to file his case, the 2011 property tax would be dischargeable.

Confused? You should be! Many experienced bankruptcy attorneys struggle with discharging tax debt. If you owe taxes to the state or federal government, discuss your situation with an experienced bankruptcy attorney. Your attorney will examine your situation and determine which of your tax debts are dischargeable and whether Chapter 7 or Chapter 13 of the Bankruptcy Code is more advantageous to your circumstances.

 

Timeline Chapter 7

Chapter 7 Bankruptcy Timeline

A no-asset Chapter 7 bankruptcy case is streamlined to take as little time as possible. The typical case is over in about three to four months. To keep the case moving along, the federal law has imposed certain deadlines on a Chapter 7 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

Seven Days Prior to the 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)

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.

45 Days after the First Setting of the 341 Meeting - You must file your Financial Management Course certificate with the court. Fed. Rule 1007(b)(7)(c)

60 Days after the First Setting of the 341 Meeting – Reaffirmation agreements between you and your creditor(s) must be filed with the bankruptcy court. 11U.S.C. §524(c)

60 Days after the First Setting of the 341 Meeting – The Court enters an order discharging individual Debtors after all requirements are met, but no sooner than the last day to object to the Debtor’s Discharge. This is usually 60 days after the 1st setting of the 341 Meeting of Creditors unless a motion is filed with the court to extend that time. The actual date to file objections to the discharge will be stated on the 341 Meeting of Creditors Notice. 11 U.S.C. §727, Fed. Rule 4004.
 

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.

 

What to Consider When Considering Bankruptcy for Your Small Business

Small business restructurings are often as relatively costly as they are emotionally painful. Clearly, large corporate bankruptcies, like the recent American Airlines restructuring, carry legal and consulting fees in the millions of dollars. However, given the size of American Airlines assets and its potential for future revenue, these fees are just a few small drops in a huge bucket. For a small business, the costs of bankruptcy can swamp revenue and doom the opportunity to bounce back.

 

For many small businesses, the price of Chapter 11 is too high. Legal and consulting fees can extend into the tens and hundreds of thousands of dollars. Without significant financial resources, often in the form of outside equity or creditor financing, small businesses can’t survive the long haul that is Chapter 11.

 

Chapter 13, the cheaper form of small business restructuring, presents many challenges for managers, owners, and stockholders. With your business assets under the supervision of a bankruptcy court, your decisions may be scrutinized. During the restructuring period, your staff would be required to submit monthly reports to the bankruptcy trustee. In general, the fruits of any business upside would go to your past creditors, not to you and your team. Additionally, your business would have to keep up with plan payments.

 

If Chapter 13 is too risky or expensive, then Chapter 7 may be your only option. Liquidation isn’t fun, but it may be the only way for you to bounce back. With your business debts clear, when the time comes, a Chapter 7 liquidation will free you to try again.

 

Want to know more about your legal options? The attorneys at Fears Nachawati understand how to advise you of your options and execute on the decisions you make. Contact us today for your free consultation. We’re ready to give you the help you need. 

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.

Denial of Discharge in Chapter 7

In Chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to a Chapter 7 discharge can be filed by a creditor, by the trustee, or by the U.S. Trustee. The bankruptcy court sets a deadline for objecting to issuing a discharge order in the debtor’s case. To object to the debtor's discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts an “adversary proceeding,” which is a case-within-a-case. If the issue of the debtor's right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection.

Under Section 727(a) of the U.S. Bankruptcy Code, the court may deny a Chapter 7 discharge if you:
One - Intentionally transferred, removed, destroyed, mutilated, or concealed (or allow someone else to transfer, remove, destroy, mutilate or conceal) property within one year of the filing of your case or property after the filing of the case;
Two - Concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which your financial condition or business transactions might be ascertained (unless such act or failure to act was justified under all of the circumstances of the case);
Three - Knowingly and fraudulently made a false oath (in other words, that you lied);
Four - Given, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act;
Five - Withheld recorded information, including books, documents, records, and papers, relating to your property or financial affairs;
Six - Failed to explain satisfactorily any loss of assets or deficiency of assets; or
Seven - Refused to obey any lawful order of the court, other than an order to respond to a material question or to testify.

Additionally, a bankruptcy court cannot grant a Chapter 7 discharge to: an entity that is not an individual; a debtor who failed to complete the mandatory class on financial management; or to a debtor who received a Chapter 7 discharge within the past eight years or a Chapter 13 discharge within the past six years (although there are special exceptions when dealing with a prior Chapter 13 case). Finally, under Section 523(a)(10) of the U.S. Bankruptcy Code, you can’t get a discharge if you were denied a discharge in a prior Chapter 7.

Denial of your Chapter 7 discharge doesn’t stop the bankruptcy case. The Chapter 7 trustee will continue to gather and liquidate any non-exempt assets, but the debtor does not receive the benefits of the Chapter 7 discharge. The debtor may not ever discharge any of these debts through bankruptcy, and immediately loses the protection of the automatic stay. Essentially, a denial of discharge becomes an asset grab for the trustee and your creditors.

Failing to act honestly in bankruptcy has very serious consequences. Sometimes even an honest mistake can land you in deep trouble. Get the help of an experienced attorney for your case.
 

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. 

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.

What If I Get Money After Filing Chapter 7 Bankruptcy?

The basic rule in a Chapter 7 bankruptcy is, whatever money you are entitled to receive on the day that you file your case is property of the bankruptcy estate. Even if the money is not yet in your possession, if you are legally entitled to receive it, you must list the property in your bankruptcy schedules. Money that you are legally entitled to receive may include: money owed to you; bonuses that are contractually guaranteed; insurance proceeds from a pre-bankruptcy claim; and tax refunds. It may also include inheritance money.

Tax refunds are the most common type of money received after filing bankruptcy. Your attorney will discuss your expected income tax refund with you before you file your case. Even if it is not tax season (after January 1), you could still lose a portion of your income tax refund to the trustee. As the tax year progresses and income taxes are withheld from your wages, you may be entitled to receive some of that money as a refund. Generally, the bankruptcy trustee makes a simple calculation to determine the percentage you are owed based on the date you filed your case. For instance, if you file your case on October 31, that is ten out of twelve months of the year. On the date that you file bankruptcy, you are legally entitled to 10/12 of your income tax refund (all other things being equal, of course).

Even if you are legally entitled to receive money on the day you file your bankruptcy, you may get to keep all or some of it. First, you can use any available legal exemptions to protect cash money. Federal and state laws allow debtors to keep certain property to assist in their “fresh start,” including cash money. Second, even if you cannot exempt all of your cash entitlement, the remaining amount may be so small that it is not worth the bankruptcy trustee’s time to collect and distribute it. In that case, the trustee will declare the property de minimis (Latin for “very small value”) and “abandon” the property back to the debtor.

The bankruptcy law has carved out a special exception for inheritance money that you are not presently entitled to receive on the day you file. If you inherit money within six months after your case is filed, that money is property of the bankruptcy estate – even if your case has been closed by the bankruptcy court. If you learn that you are to receive an inheritance, contact your attorney immediately. The time period is 180 days from the day you file your case to the day your relative passes. When you actually receive the money does not matter.

If you are entitled to receive money, but need to file bankruptcy, discuss your situation with your bankruptcy attorney. There are several options available to protect cash money. You may use legal exemptions, or you may wait to file your case until after the money is received and spent responsibly on necessary expenses. Your attorney can guide you in the right direction to protect as much as possible.
 

Debt Consolidation or Personal Bankruptcy?

If you’re facing the financial effects of unemployment, an illness, divorce, or mismanagement, you may be considering a serious, life-altering financial decision, such as debt consolidation, Chapter 7, or Chapter 13 bankruptcy. Before you make any decisions, you may want to consider speaking to a dedicated professional at Fears Nachawati.

 

Debt consolidation may be the right decision in some circumstances. In effect, a debtor will take out a large loan in order to pay down or pay off several other smaller loans. When does this strategy make sense? If you can trade high-interest, short-term loan, such as credit card debt, for a long-term, lower-interest loan, you may pay less in monthly payments for the same amount of debt.

 

Of course, debt consolidation may just treat the symptoms, not the problem, and leave debtors worse off than before. For instance, if overspending is causing you to experience monthly shortfalls, debt consolidation may just delay the inevitable. Moreover, if you trade unsecured debt for secured debt, then your ultimate personal bankruptcy could be worth a lot less as you lose the ability to take advantage of valuable exemption.

 

Personal bankruptcy isn’t much fun – and it isn’t the right decision for everyone – but it is a solution for some debtors. If you’re considering debt consolidation, you may also want to talk to our professionals so that you can learn about all of your options and the comparative advantages of each strategy. Talk to us today for your free consultation.

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.

Can a Creditor Object to Your Chapter 7 Bankruptcy Filing?

It may come as a surprise, but you don’t have an absolute right to a Chapter 7 bankruptcy discharge. A creditor, your trustee, or the United States trustee each has the right to file an objection to a consumer debtor’s Chapter 7 discharge. In fact, all they have to do to begin an adversary proceeding is file a complaint outlining the basis of their objection to your bankruptcy.

 

Of course, objections can come as the result of outright, intentional, unmitigated fraud, however, many small errors can be just as deadly to your petition. For instance, failing to include a tax document among your disclosures, failure to take a credit counseling course required by federal law, or failing to account for a lost asset can all scuttle your bankruptcy. Some mistakes may be innocent, but the consequences will be severe.

 

Successfully navigating all of the challenges associated with your personal bankruptcy can be a demanding feat. Fortunately for you, the attorneys at the Dallas law firm of Fears Nachawati know how to handle to particular difficulties associated with your bankruptcy. Whether you’re considering Chapter 7 or Chapter 13, our team knows how to advise you, what questions to ask, and what steps to take.

 

As the nit-picky potential objections to a Chapter 7 discharge suggest, the devil is in the details when it comes to bankruptcy. When a debtor can receive a second discharge, whether your discharge may be revoked post-petition, and what options exist relating to repayment of a discharged debt are all just a few of the issues our firm can address.

 

Your free consultation is just a phone call or email away. If you’ve got questions about bankruptcy and how to prepare for your financial future, talk to our professionals today.

 

How to Lose Everything and Go to Jail

Ex-baseball player Lenny Dykstra was recently sentenced by a federal court for bankruptcy fraud. Dykstra, once a star player for the New York Mets and Philadelphia Phillies, was ordered confined for six months in federal prison, to pay $200,000 in restitution, and ordered to perform 500 hours of community service.

Dykstra, 49 years old, filed for Chapter 11 bankruptcy protection. He listed $50,000 in assets and $10 to $50 million in debts. His case was later converted to a Chapter 7 liquidation.

In June 2010, the Chapter 7 bankruptcy trustee charged that Dykstra had lied under oath, had improperly hidden and sold assets, and had repeatedly acted in a “fraudulent and deceitful manner” during his bankruptcy case. After an investigation, Dykstra was charged with embezzling from the bankruptcy estate by selling or destroying more than $400,000 worth of items from his $18.5 million mansion without permission of a bankruptcy trustee. Dykstra subsequently plead guilty to the charge.

Bankruptcy is not a time for concealing or avoiding the truth. It is a time for brutal honesty. The federal bankruptcy law allows the honest debtor a fresh start, an opportunity to begin again without the burdens of debt. The relief is very powerful and very real. Many successful people have used the federal bankruptcy laws in the past to make their lives better in the future.

On the other hand, dishonest debtors make their situations much worse. Along with his jail sentence, restitution, and community service, Dykstra faces a complete denial of discharge. He lost everything, went to jail, and may be stuck with all of his debts.

Dykstra’s story may be public and chaotic, but it is not that unusual. Some debtors try to use the bankruptcy system to shield assets from creditors while they hide property for their own benefit. Concealing assets and lying during your bankruptcy case is a federal crime that is investigated by the FBI and usually the IRS. The results of these investigations are sent to the Department of Justice and to the federal bankruptcy court judge. In other words, it is not a good idea to monkey around during bankruptcy!

When facing bankruptcy, discuss your situation honestly and completely with your attorney. Your experienced bankruptcy attorney will present options to protect your assets and discharge or reduce your debts in a legal way without risk of bankruptcy fraud.
 

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. 

Chapter 7 Redemption

Suppose that you are buried in credit card and medical bills, upside down on your car loan, and behind in your car payments. You have considered bankruptcy, but you don't want to go through a three to five year Chapter 13 repayment plan, and you need to keep your car to get to work. What can you do?

There are many bankruptcy strategies to assist honest debtors obtain a fresh start. One tactic is found in section 722 of the Bankruptcy Code: Redemption. Redemption is only available to Chapter 7 filers. It allows the debtor to redeem secured collateral for an amount equal to the secured portion of the loan. In other words, if you have a car worth $7,500, and owe the lender $17,000, the secured portion of the loan is $7,500 and the unsecured portion is $9,500. You can redeem the car for $7,500 and the remaining $9,500 is subject to discharge at the end of your case.

The secured portion of property is determined by its “replacement value” - the price a retail merchant would charge for property of that kind, considering the age and condition of the property at the time you redeem it. If you and the lender disagree on the replacement value of the property, the court may hold a “valuation” hearing and decide the question for you.

The down side of redemption is that you must pay the secured portion to the lender immediately after the court approves your motion for redemption. Not surprisingly, several lending sources are available for financing a redemption. Your bankruptcy attorney is familiar with these lenders and can discuss options and terms with you. Once the redemption sum is paid, the lender no londer has a secured claim against the property.

Only property that meets the following qualifications can be redeemed in a Chapter 7 bankruptcy:

1. The debt is a consumer debt, meaning the item is used for personal or household purposes. Business property cannot be redeemed.
2. The debt is secured by personal property, not real estate.
3. The property is tangible, not investments, stocks and bonds, and intellectual property rights.
4. The property is exempt or the trustee has abandoned it because it has little or no equity.

Speak with an experienced bankruptcy attorney if you need to take advantage of the Bankruptcy Code’s redemption provision. In many cases redemption can save you thousands of dollars in debt and reduce your monthly loan payment.
 

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. 

Middle Class Bankruptcy

Who declares bankruptcy? Of the roughly 1,000,000 Americans who file a bankruptcy petition every year, the large majority of debtors are from solidly middle class backgrounds. In fact, some may not even be financially insolvent. Of course, at the moment of bankruptcy, their personal balance sheet and bank statement may look bleak, but debtors rarely come from an impoverished background – and they generally return to some level of prosperity after their bankruptcy.

 

Why do debtors declare bankruptcy? Most often, Americans file for Chapter 7 or Chapter 13 protection because their high-interest debt payments seriously threaten to overwhelm their monthly income. In many circumstances, major life events – family deaths, job losses, medical events, or business failures – wipe out an individual’s personal equity, require a rapid increase in debt, and precipitate a balance sheet imbalance that ultimately results in insolvency and bankruptcy.

 

What’s better: Chapter 7 or Chapter 13? A straight liquidation, codified in Chapter 7 of the Bankruptcy Code, offers distinct advantages over a payment plan, provided for in Chapter 13 of the Code, in some cases. However, for debtors who are prohibited from filing Chapter 7 or who are looking to hold onto particular assets, Chapter 13 may be the preferred approach. Ultimately, a liquidation or a restructuring of debt is a choice that depends on the needs of the debtor. Advice of counsel is important to make this decision.

 

Ready to talk about whether personal bankruptcy is right for you and your family? The professionals at Fears Nachawati have the experience and expertise to advise you well. You can trust that our years of practice will help you move from insolvency to a new financial future. For your free consultation, talk to us 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.

Chapter 7: Get It Right the First Time

Americans have a right to declare bankruptcy. Article I, Section 8 of the Constitution provides Congress with the power to enact “uniform Laws on the subject of Bankruptcies.” The right to declare bankruptcy provides Americans with important individual and community benefits, such as the ability to shed overly burdensome debt or the freedom to start a business without fear that a failed commercial endeavor will destroy their personal financial life.

 

Bankruptcy is also a privilege, however. In order to protect creditors from a debtor’s inaccurate, misleading, untimely, or unfair claims, federal and state laws provide a number of limitations on how a debtor can declare bankruptcy. For instance, creditors are benefited by the fact that only some kinds of debt are dischargeable, some types of debt receive greater protection, and federal courts and executive branch officials police the bankruptcy process, guarding against debtor abuse.

 

One of the most important limitations on a debtor’s ability to declare bankruptcy is a rule that prohibits individuals from declaring bankruptcy on multiple occasions during a specified period of time. Specifically, a Chapter 7 debtor cannot receive a second discharge of debt if he or she filed within eight years prior to a previous Chapter 7 discharge or, generally speaking, within six years of a Chapter 13 discharge.

 

What does this mean for you? It means that when considering their bankruptcy options, Chapter 7 debtors need to “get it right the first time.” Which debts you declare, which ones you assume, when you declare, and what kind of plan you have for your financial life after your bankruptcy are important considerations.

 

The attorneys at Fears Nachawati can help you sort through these challenging bankruptcy issues. With years of experience and dedicated expertise, we know how to advise you. Contact us today for your free consultation and to understand the best way to move forward. We’re ready to give you the help you need.

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.

 

What Are Your Exemptions Under Texas Law?

Are you at the end of your financial rope? Thousands of Texans file for personal bankruptcy every month. The reason why is understandable. In the last several years, wages have been stagnate in many professions, unemployment has remained high, costs continue to rise, and home prices continue to remain stuck in neutral.

 

Consumer bankruptcy, whether a Chapter 7 liquidation or a Chapter 11 restructuring, is a necessary solution for many debtors. Of course either of these debt-shedding strategies have their drawbacks, but they offer a fresh start for individuals and for families.

 

In Texas, bankruptcy can be particularly beneficial for debtors. Not only are the Texas homestead exemptions generous, Texas debtors may keep relatively large amounts of their personal property, insurance benefits, pension benefits, and tools of the trade. For many debtors, the property exempt from the reach of creditors is crucial for restarting their financial lives.

 

If you’re struggling to make ends meet, you need to know not only about your bankruptcy options, but also about what assets Texas law will and won’t let you protect if you file. You may be pleasantly surprised at how much of your personal items you can keep. To find out what you need to know about your financial options, talk to the professionals at Fears Nachawati today.

Rich Dad, Poor Dad, Bankrupt Dad

Robert Kiyosaki, author of the book, "Rich Dad, Poor Dad" filed for corporate bankruptcy for one of his companies, Rich Global LLC. Kiyosaki’s best selling book was the first in a profitable line of self-help financial books including "Retire Young, Retire Rich," and "Midas Touch," co-authored with real estate mogul Donald Trump (who has previously filed corporate bankruptcies).

Rich Global, LLC’s largest creditor is Learning Annex, which received a $23.7 million judgment in New York. The basis of the lawsuit was that Rich Global, LLC failed to pay Learning Annex a percentage of profits from Kiyosaki’s speaking engagements.

Kiyosaki’s company filed for Chapter 7 bankruptcy protection on August 20 in a Wyoming bankruptcy court. In a Chapter 7 business bankruptcy, no debts are discharged. The company ceases to do business, and business assets are liquidated by the bankruptcy trustee to pay creditors. An LLC (Limited Liability Company) shields the personal assets of the individual owners. Consequently, Kiyosaki will pay nothing from his personal wealth, but Rich Global, LLC will lose all of its assets, reportedly a $1.8 million dollars.

A Chapter 7 business bankruptcy is the last option for a company. Chapter 11 is a business reorganization that will restructure debt and provide a company time to repay its debts. However, sometimes the amount of debt is too great for the business to repay, and Chapter 7 can liquidate the business assets in an orderly fashion. Chapter 7 cannot wipe out personal liability for business debts, and there is no “co-debtor stay” to prevent a creditor from collecting from a personal guarantor.

If your business is weighed down by crushing debt, speak to an experienced attorney and discuss bankruptcy options for your business. In many cases a company can reorganize under Chapter 11 and continue its business while under the protection and supervision of the federal court.
 

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.

What Are the Tax Effects of Your Bankruptcy?

Have you filed for personal Chapter 7 bankruptcy? If the answer is yes, you may have a lot of questions about how the bankruptcy process works and whether you’ve done all that you should to make sure that your filings are complete.

 

It’s often said that there are two certainties in life: death and taxes. While bankruptcy can be a kind of financial death, in some cases the taxes from your estate may live on after your bankruptcy filing. If you’re trying to re-build your financial life, you should be certain whether you’ve paid all of the taxes associated with your income.

 

For instance, did you know that the bankruptcy estate of an individual Chapter 7 estate is a separate taxable entity that must file its own tax return? In some cases, in fact, an individual Chapter 7 debtor may ultimately file two tax returns in the year in which he declares personal bankruptcy. In these situations, the first tax return is for pre-petition income and liabilities; the second return is for the debtor’s post-petition tax obligations.

 

Likewise, it’s important for you to understand where tax obligations fall within the hierarchy of liens against the estate. While administrative expenses and certain other claims take a higher precedence than tax obligations, other monies – such as payments to certain creditors or to the residuary –  are susceptible to taxation. Before you think you’re trip through bankruptcy is complete, make sure that you’re all square with the Internal Revenue Service (IRS). Failure to do so may cause more headache than you’d like!

 

Do you have questions about the tax effects of your bankruptcy? The attorneys at the Dallas firm of Fears Nachawati are prepared to help you sort through this nuanced and challenging area of bankruptcy. With years of experience in this important area of the law, we’re ready to advise you. For your free consultation, call or email 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.

Successful at Coaching, Unlucky in Business

University of Arkansas head football coach John L. Smith filed for bankruptcy earlier this month, revealing he had acquired $25.7 million in debt during the last several years. Smith’s bankruptcy has made national headlines because of the amount of his personal debt and the prominence of the debtor. However, the reality is that in a number of important ways, Smith’s bankruptcy is very much a run-of-the-mill Chapter 7 liquidation.

 

According to Smith’s bankruptcy filings, Smith accumulated a considerable amount of unsecured debt, particularly in relationship with the amount of money he earned as a football coach. While Smith’s contract with the University of Arkansas – $850,000 over 10 months – clearly makes him a high-income earner, even this salary isn’t enough to feasibly support his level of debt.

 

How could a debtor with millions in unsecured debt reflect many Chapter 7 debtors? First, Smith’s debt originated primarily from a series of Kentucky-based real estate transactions that were premised on the assumption that the land would increase in value. When property values tanked, equity holders like Smith became obligated for the debt.

 

Second, Smith isn’t a professional failure. The opposite is true, in fact. Smith’s success at the University of Louisville earned him the position of head coach at one of the most storied and prominent football schools in nation’s premier college football conference. As Smith himself admitted recently, his skills on the gridiron didn’t translate to business.

 

The painful truth for many debtors and their families is that bankruptcy court dockets in Arkansas, Texas, and throughout the country are filled with Chapter 7 debtors who are talented, intelligent, experienced, and successful professionals. They just made commercial and financial mistakes. And frequently, those mistakes took the form of real estate that looked promising, but ultimately plummeted in value.

 

Ready to talk to the attorneys at Fears Nachawati who can help you chart a course through the choppy waters of personal bankruptcy? With years of experience and dedicated expertise, we know how to protect you and your family from hard-nosed creditors. Start your journey toward solvency today by contacting our professionals.

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.

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 to Protect Excess Equity in Bankruptcy

Equity in a Chapter 7 bankruptcy case is the difference between the value of the item, minus all liens against it, minus all legal exemptions available to protect it. For most debtors the equity value for their property is negative, which means there is nothing for the bankruptcy trustee to sell to pay unsecured creditors. If you are one of the few Chapter 7 debtors that may have positive equity in property, read on.

Positive equity in property (called non-exempt equity) will send up a red flag during your bankruptcy case, but that does not mean that you will lose property to the trustee. The trustee must justify the expense of taking and selling your property in a commercially reasonable manner (which usually means at auction). If the amount of non-exempt equity is too small (called “de minimis”), the trustee will abandon his or her interest in the property and you get to keep it.

Protecting equity in property is usually a matter of shuffling your legal exemptions. However, sometimes that is not enough to protect the property and your attorney will discuss your options before you file your case. There are two popular pre-bankruptcy options for eliminating non-exempt equity: selling the property or obtaining a lien.

There is nothing wrong with selling property prior to filing bankruptcy. This is especially wise if the property is at-risk to be taken and sold to pay unsecured creditors. By selling the property, you will convert the equity into cash without risk of losing it to the bankruptcy trustee. If you are considering selling property prior to filing bankruptcy, discuss the matter with your attorney to avoid complications with the trustee.

The second option is more complex and is usually reserved for motor vehicles. Attaching a lien to a vehicle is a matter of executing a promissory note (an I.O.U.), and filing notice of the secured interest with the state department of motor vehicles. Anyone can become a lien holder, including a close relative. That person will have the right to repossess your vehicle should you fail to honor the payment agreement contained within the promissory note. After the non-exempt equity is eliminated, the trustee cannot take and sell your vehicle.

Every bankruptcy case is unique and requires an experienced bankruptcy attorney to guide you to your best “fresh start” result. Statistically, only one in twenty Chapter 7 bankruptcy cases has any non-exempt equity, and many of these situations can be avoided with simple (and legal!) pre-bankruptcy planning. If you need bankruptcy relief, speak with an experienced attorney and discuss your pre-bankruptcy options.

 

 

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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

Reuters.com 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 4closurefraud.org. "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 Creditslips.org, 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.

Wait
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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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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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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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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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 RealtyTrac.com. 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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Bankruptcy's Means Test

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

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

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

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

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

Clients Must Pay Chapter 7 Attorney Fees Up Front

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

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

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

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

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

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.
 

Chapter 7 Debtors Should Beware Hoggish Behavior

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

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

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

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

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

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.
 

Debts Excluded From Chapter 7 Discharge

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

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

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

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

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. 

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.
 

Who Do I Pay After Filing Chapter 7 Bankruptcy?

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

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

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

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

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

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

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. Findlaw.com, an internet legal site, conducted this telephone survey of 1,000 adults and found that 13% of the responses have considered bankruptcy to remedy their financial difficulties.

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

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

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

Chapter 7 Reaffirmation Agreement

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

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

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

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

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

What Can You Discharge in a Chapter 7 Bankruptcy?

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

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

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

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

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

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. 

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.

Can I Keep My Vehicle During Chapter 7 Bankruptcy?

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

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

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

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

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

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 AnnualCreditReport.com.

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

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

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

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

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

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

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

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

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

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

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

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

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