Discharging Bank Account Debt During Bankruptcy

A bank account debt can offer many challenges to an individual in bankruptcy. Usually a bank account debt originates from fees associated with an overdrawn account. These fees can quickly accumulate and result in a debt of hundreds of dollars. A bankruptcy will generally discharge this debt, assuming the debt was not incurred by fraud or criminal activity. However, the issue is often should you discharge your bank account debt rather than can it be discharged.

In deciding whether to discharge a bank account debt, you must determine if repayment is feasible. In cases where the debt is small, the account is still open, and you have the resources to pay the debt, repaying the debt is generally the best option. Remember to consult with your attorney before repaying any debt prior to filing bankruptcy. In many cases it is advantageous to wait until after the case is filed before repaying a debt.

If paying the bank account debt is not feasible, you may face several negative consequences. First, the bank will close your bank account. Second, over eighty percent of all banks use Chexsystems, a consumer reporting agency that provides information regarding accounts at banking institutions. Negative information may remain on your Chexsystems file for five years. To view your Chexsystems report for free, visit: https://www.consumerdebit.com/consumerinfo/us/en/chexsystems/report/index.htm

While a bankruptcy will discharge a bank account debt, factual information concerning the debt will remain on your Chexsystems report after the bankruptcy. This information is available to financial institutions and may prevent you from opening another bank account.

Fortunately, there are programs available to an individual with a derogatory Chexsystems report offered by banks, universities, and not for profit groups. One of the most popular is the “Get Checking” program offered by several groups around the country. The University of Missouri Extension offers a typical “Get Checking” program, which requires a debtor to pay all outstanding bank fees on the prior bank account and take a six-hour checking education class. The debtor then receives a certificate of completion which can be used to open a new account at a participating financial institution. If Chexsystems reports suspicion of fraud on a prior account, a certificate will not be issued and institutions are not required to open an account.

If you have an overdrawn bank account and are considering bankruptcy, discuss your financial situation with an experienced bankruptcy attorney. There are many options to deal with bank account debt, but the situation can only grow worse from procrastination. Quick action is the best cure for this type of debt.

What if I forget to list a debt on my bankruptcy petition?

Only debts that are listed on your petition will be discharged in bankruptcy. Additionally, when you file a petition for bankruptcy, you are swearing under oath that you have included all of your debts and assets. Intentionally omitting a creditor is actually perjury.

Of course, you should exercise extreme care to ensure that you list all of your debts on your bankruptcy petition. However, there can be circumstances where an individual does not know about a creditor at the time of filing.

If you accidentally leave a debt off of your bankruptcy petition, the bankruptcy court will allow you to file an amendment to your schedules. As long as the amendment is filed in a timely manner, then the creditor will be added to your bankruptcy.

Note, though, that there are time limits on how long you have to file amendments. These time limits are strict and specific. That is why you should immediately seek the advice of a qualified bankruptcy attorney to ensure that you do not lose out on any discharges to which you would otherwise be entitled.

Protecting Your Attorney Client Privilege in Bankruptcy

Most bankruptcy clients are aware of the attorney-client privilege, an evidentiary rule that protects confidential communications between an attorney and client. It encourages candid communication between clients and attorneys without fear that the discussion will be used against the client. This privilege belongs to the client and the client determines when to waive it. The privilege exists generally in every legal forum in the United States, however its application can vary. 

In a Chapter 7 bankruptcy case, a trustee is appointed to administer the case and liquidate the debtor's nonexempt assets. In performing these duties it may become important for the trustee to have certain information and the trustee may seek to have the debtor’s attorney disclose information obtained during a confidential attorney client discussion.

To compel the disclosure of this information, the trustee may invoke section 542(e) of the Bankruptcy Code which states that “[s]ubject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information. . . relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.” In opposing this disclosure, the debtor may assert the attorney-client privilege and argue that the trustee does not have the power to waive this privilege.

Bankruptcy Courts have taken three different approaches to resolving the issue of whether the trustee can waive the attorney-client privilege: (1) the trustee can waive attorney-client privilege; (2) the attorney-client privilege is absolute and cannot be waived by the trustee; and (3) whether the trustee is entitled to waive the attorney-client privilege depends upon the circumstances in the case. Bankruptcy courts using this last test generally balance the benefit to the bankruptcy estate against the potential harm to the debtor. See In re Courtney, 372 B.R. 519 (Bankr. M.D. Fla. 2007).

The bottom line is “let the client beware!” Discussions with your bankruptcy attorney, personal injury attorney, or other attorney may be subject to disclosure during your bankruptcy case. While most financial records would not be subject to the attorney-client privilege, the discussion of these records with your client may be privileged. Be warned that protecting this privileged communication may be at the discretion of the bankruptcy court.

The bankruptcy laws are constantly changing. Make sure that your fresh start is not a false start and hire an experienced and knowledgeable bankruptcy attorney who can protect your rights. 

Options When Sued Over Credit Card Debt

Receiving a lawsuit summons is a very scary thing. Whether served by a law enforcement officer, private process server, or received by mail, the idea of facing a judge and a skilled attorney is very intimidating.  Fortunately, your legal options are very clear: (1) do nothing; (2) defend the law suit; (3) negotiate a settlement; or (4) file a bankruptcy.

The first option, do nothing, is obviously a bad choice. The court will enter a judgment against you and your wages may be garnished or property seized (e.g. the contents of a bank account). Even if the debt is ultimately paid or discharged in bankruptcy, the judgment will remain on your credit report for at least seven (7) years.

The second and third options, defend the law suit and/or negotiate a settlement, are very difficult to accomplish.  Once the creditor has hired an attorney and filed a lawsuit there is very little that a person or non-attorney debt settlement firm can do to “settle” the debt.  The collection attorney will use the legal processes to its advantage and knows that an unrepresented person is generally unable to successfully defend the lawsuit.  Even the lay-person-friendly small claims process can be filled with pitfalls. Additionally, the cost of hiring an attorney and defending a lawsuit can get very expensive and the collection attorney is betting that you will not pay $3,000 to an attorney to contest a $3,000 credit card debt. The collection attorney believes (rightly) that it has the advantage and will ultimately obtain a legally enforceable judgment against you. Depending on your cardholder agreement, you may be liable for the principal, interest, penalties, court fees, and attorney fees. Why would they settle for less?

The final option, bankruptcy, is a very powerful tool. Bankruptcy immediately stops the lawsuit and prevents the entry of a judgment. Once the individual’s obligation to pay the debt is discharged by the bankruptcy court, the lawsuit must be dismissedand cannot be refilled. Filing bankruptcy prevents almost all future lawsuits from being filed and can discharge the obligation to pay most court judgments.

If you have been sued by a credit card company, discuss your situation with an experienced bankruptcy attorney. There are many options for dealing with your financial difficulty, and a bankruptcy attorney can help you select the best course of action for you and your family.

When Your Town Goes Bust

 

Lately municipal bankruptcy has been the subject of many news features as economic troubles press cities to consider their legal options. San Diego and Los Angeles are two major cities that are reportedly considering federal bankruptcy protection. 

While federal bankruptcy protection has been available to U.S. cities since the 1930’s, only a few hundred have actually filed. Chapter 9 of the Bankruptcy Code provides a financially distressed municipality the opportunity to reorganize its debts under federal protection. A “municipality” as defined in the Bankruptcy Code includes cities, counties, and special districts. This definition does not include states.

A Chapter 9 bankruptcy can only be commenced after the governing body specifically authorizes the filing. Twenty-six U.S. states have prohibited their municipalities from filing bankruptcy: Alaska, Delaware, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Mexico, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin, and Wyoming. 

Once filed the federal bankruptcy law’s automatic stay provision enjoins creditors from taking any collection action against the municipality. The automatic stay provides an opportunity for the municipality to raise new revenues, renegotiate contracts, or restructure its debt without pressure from creditors. Chapter 9 is tricky business for the bankruptcy court because the Tenth Amendment to the U.S. Constitution and section 904 of the Bankruptcy Code prevents a federal bankruptcy court from interfering with the city’s political or governmental powers. The bankruptcy judge is largely a facilitator of the restructuring process.

The essence of a Chapter 9 bankruptcy is that it gives the municipality an opportunity to reorganize and restructure its debts through an agreement with its creditors called a “Plan of Adjustment.” If a creditor cannot agree with the municipality, Chapter 9 allows the bankruptcy court to force the municipality’s Plan of Adjustment on the non-consenting creditor. The bankrupt municipality is also empowered to accept or reject contracts and leases through the Plan of Adjustment.

Chapter 9 municipal bankruptcy is a very rare and special bankruptcy case. The stigma and complexity of Chapter 9 makes it a last option for U.S. municipalities. However, if the debt problem is serious and substantial enough, the federal bankruptcy laws can protect a city of millions and give it a chance for a fresh start, just like it can protect an individual or family in financial distress.

 

Lighter side of debt

One day, the Pastor sees Matthew walking slowly out of Church. Matthew is dejected, disheveled and looks terrible. "Matthew," asked the Pastor, "what's the matter?" "Well, Pastor, my business is shot, I'm losing my house and my wife says she is going to leave me and take the kids if I don't straighten things out. I just don't know what to do." "Matthew, find the answer in the Bible," the Pastor replied. And Matthew left.

Four months later, the Pastor sees Matthew coming out of Church, only this time, he's smiling, wearing a nice suit, and lighting a cigar.

"Matthew, you look great! Did you follow my advice?" "I did. I went home that day and decided to open the Bible and to follow the advice I saw. So I opened the Bible and the first phrase I saw said: Matthew Chapter 7."

Here is a funny answering machine message:

"Sorry, Chris and Ashley aren't here right now. Please leave your name and number after the tone. If you are calling regarding an outstanding debt, please leave your message before the tone."

Finally, the video below is from Tim Clue, a very funny and talented entertainer, who gives his unique perspective on credit card debt. Many thanks to Tim for his permission to use this clip. Check out more of Tim's videos at his website.

Supreme Court Considers Law Limiting Bankruptcy Advice

Recently the Supreme Court of the United States heard oral argument concerning whether bankruptcy attorneys should be allowed to advise their clients to incur more debt before filing. Currently the law states that "debt relief agencies" are not allowed to advise clients to incur more debt in contemplation of bankruptcy. The case before the high court also questions whether attorneys are "debt relief agencies" according to the statute.

Justice Antonin Scalia said of the statute, “It’s a stupid law,” but also asked, “Where is the prohibition of stupid laws in the Constitution?”

The popular consensus is that Congress enacted this prohibition to prevent attorneys from advising their bankruptcy clients to incur debt that could be discharged in a bankruptcy. In short, that situation amounts to a fraudulent act, the debt would be determined non-dischargeable, and the attorney could be held civilly or even criminally liability.

However, the statute is not narrowly tailored to prevent this kind of abuse; it also stops bankruptcy attorneys from effectively advising honest debtors in anticipation of a bankruptcy filing. In other words, the law can prevent "bankruptcy planning." For instance, in certain circumstances it may be highly beneficial to refinance a house or car loan at a lower interest rate prior to filing bankruptcy. The current law ostensibly forbids this type of helpful advice.

The Supreme Court is now considering this case and will interpret the intent of Congress. Hopefully, the Supreme Court can make sense of "a stupid law" and bankruptcy attorneys will be able to provide full, legal, and ethical legal advice to their clients.

To receive free legal advice from a Texas bankruptcy lawyer, contact the law firm of Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.

Will bankruptcy get rid of all of my debts?

Chapter 7 bankruptcy wipes out most unsecured debts, but it does not get rid of all of your debts. If you successfully file for Chapter 7 bankruptcy, you will still be responsible for:

  • Your most recent back taxes
  • Child support
  • Alimony
  • Most student loans
  • Government fines or penalties
  • Fraudulent debt
  • Recent purchases of luxury goods of more than $550 bought within 90 days of filing for bankruptcy
  • Cash advance loans of $825 or more within 70 days of filing for bankruptcy

If you are considering filing bankruptcy, contact the Texas bankruptcy lawyers of Fears | Nachawati for free legal advice. Simply email us or phone us toll free at 1.866.705.7584.

What is a bankruptcy trustee?

A bankruptcy trustee is the individual assigned by the court to administer a bankruptcy case. Bankruptcy trustees are appointed by the United States Trustee, who is an officer of the Department of Justice.

The role of a bankruptcy trustee varies depending on whether it is a Chapter 7 or a Chapter 13 bankruptcy.

In a Chapter 7 bankruptcy case, the role of the trustee is to determine whether any of the debtor’s assets must be liquidated, review the claims of exemption and evaluate whether the debtor is entitled to a discharge.

For purposes of a Chapter 7 bankruptcy proceeding, the trustee basically acts as a representative for the debtor’s creditors. The trustee can object to exemption claims or oppose the debtor’s discharge. Those issues are then decided by the bankruptcy judge.

The trustee in a Chapter 13 bankruptcy case performs the same basic duties as a Chapter 7 trustee. The difference is that a Chapter 13 trustee has the additional responsibility of  disbursing the payments made by the debtor under their Chapter 13 repayment plan.

For free legal advice on Texas bankruptcy laws, contact the Texas bankruptcy lawyers of Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.

How do I go into bankruptcy?

A person can go into bankruptcy in one of two ways. The most common way is for the person to voluntarily file a petition for bankruptcy. The second way a person can become bankrupt is for their creditors to ask the court to issue an order declaring that the person is bankrupt. This second method, involuntary bankruptcy, is rarely used, however.

In either case, the process is administered by a Trustee in Bankruptcy. You start by completing an application and providing it to the Trustee along with several other pieces of required information and documentation.

The Trustee will then assess your situation and help you determine whether bankruptcy is the most suitable option for you. If it is, the Trustee will prepare the legal documents for you to sign. Once the legal papers are signed and filed with the Superintendent of Bankruptcy, then you are officially bankrupt.

For free legal advice about Texas bankruptcy, contact the law firm of Fears | Nachawati today. To speak with one of our experienced Texas bankruptcy lawyers, simply email us or phone us toll free at 1.866.705.7584.

Will filing for bankruptcy stop bill collectors from calling?

As soon as you file for bankruptcy, an automatic stay is put in place that prevents your creditors from collecting on your debts – which means that the harassing phone calls will stop.

The automatic stay is essentially a temporary injunction. It halts creditors from taking any further action to collect the debts you owe them for as long as your bankruptcy case is pending.

An automatic stay gives the debtor some breathing room. While the stay is in place, collectors cannot call you and all foreclosure, repossession and wage garnishment actions are stopped. The stay basically freezes the debt collection activities, giving you time to proceed with your bankruptcy filing and get your finances back in order.

Note, however, that a creditor can petition the court to be granted relief from the stay. In order to be granted this relief, the creditor must make a showing that the stay does not give them adequate protection or that their interest in a certain piece of property will be in jeopardy.

To receive free legal advice on Texas bankruptcy, including your protections under the automatic stay, contact Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584 to receive free legal assistance from a Texas bankruptcy lawyer.

What is Your Financial Attitude?

A recent study by Fidelity Investments found that many young working Americans are growing more conservative in their behavior towards financial matters and employment decisions. The Fidelity Generation Y study investigated the attitudes and behaviors of more than 1,000 employed Americans ranging from 22 years to 33 years old. The Fidelity study found:

  • Over 70 percent of Gen Y workers are very concerned about their finances with daily money management and budgeting as their biggest focus;
  • Most Gen Y individuals are using mobile technology to stay updated on their cash flow situations;
  • 41% say the economic crisis has made their generation more conservative; and
  • More show a reluctance to “job hop” with one in four indicating the intent to remain with a current employer until retirement, up from 14 percent of those surveyed in early 2008;

Fidelity Investments reports that:

“The change in the mindset of young workers has been remarkable," said Brad Kimler, executive vice president of Fidelity's Consulting Services business. "Their attitudes and views toward their employer and finances are now more conservative and reflective of their parents' generation[.]”

So what is your financial attitude? Most people who go through bankruptcy emerge with a greater understanding of their monthly finances and a resolve to manage their financial life better. Most people are more conservative and careful with their finances after bankruptcy, slowly improving their credit scores and making wise decisions that lead to home ownership, retirement savings, and financial well-being.

Congress wants the bankruptcy debtor to succeed in the future. The bankruptcy laws require a debtor to go through a credit counseling session and a class on personal financial management. Surprisingly, most bankruptcy debtors are eager to take these classes.

If you are eager for a new beginning free of overwhelming debt, consult with an experienced bankruptcy attorney and consider your options for a better financial future.

To speak with a Texas bankruptcy lawyer for free, contact Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.

Is child support dischargeable in bankruptcy?

Non-custodial parents facing mounting debts sometimes turn to bankruptcy as a way to get out from under their financial burdens. However, child support is not dischargeable in bankruptcy.

In fact, the Bankruptcy Reform Act of 1994 in part provides greater protection for debts owed to children and former spouses. These “domestic support obligations,” as they are sometimes referred to, are given high priority over other debts by the courts.

Also, if you owe back child support payments, you will still be responsible for those payments even if you successfully file for bankruptcy.

While bankruptcy will not relieve a parent of current or back child support obligations, it may still be a way to get back on track with your payments. By discharging other unsecured debts, such as credit card bills, you will free up money that can be put towards your domestic support obligations. 

To learn more about whether bankruptcy is the right option for you, contact the Texas bankruptcy lawyers of Fears | Nachawati for free legal advice. Simply email us or phone us toll free at 1.866.705.7584.

Can I buy a house after I file for bankruptcy?

Yes, you can still purchase a home after filing for bankruptcy. Bankruptcy does not create any type of legal barrier to home ownership. As long as you are otherwise creditworthy, you can buy a house after you have filed for bankruptcy.

Also, the property you acquire after you file for bankruptcy, such as a new home, is not subject to the claims of your pre-filing creditors. You can purchase a home without fear that your past creditors will try to repossess it from you in order to fulfill your old debts.

As mentioned above, the issue really boils down to whether mortgage lenders see you as creditworthy. Most everyone needs a loan in order to be able to afford to buy a house. These days, bankruptcy typically ceases to have a real effect on your credit within about two years after you file. That means that within 24 months, many people who have filed for bankruptcy will qualify for a loan on as favorable of terms as they would have had they not filed for bankruptcy.

To learn more about the legal effects of bankruptcy, contact the bankruptcy lawyers of Fears | Nachawati today for free legal advice. Simply email us or phone us toll free at 1.866.705.7584.

Can HOA Fees Be Discharged In BK?

It is not uncommon for homeowners who file for bankruptcy also have past due HOA fees or even a lien on their property. Many homeowners also complain how stubborn and inflexible the Home Owners Association (HOA) Board of Directors and the HOA attorney are with any type of payment arrangements. When you file for bankruptcy, an automatic stay will be put into place and any collection effort by the HOA needs to stop. That includes HOA liens as well.

If you file a Chapter 13 bankruptcy, all past due HOA fees will be included in your repayment plan. For those who file a Chapter 7 bankruptcy the process is a bit more complicated. The HOA fees may be turned into unsecured debt which may mean you will not have to repay most or any of the HOA past due fees.

Although most HOA liens do survive bankruptcy you can avoid losing your home through foreclosure by overzealous HOAs when you file for bankruptcy. It is advisable to consult with an attorney when dealing with HOAs as most are very aggressive and inflexible regarding HOA fees and placing a lien on your home.

For more information on stopping HOAs in their tracks through bankruptcy, contact bankruptcy law firm, Fears | Nachawati, by calling toll free at 1.866.705.7584 or emailing us.

What is a bankruptcy reaffirmation agreement?

A reaffirmation agreement is a new contract signed by you and your lender or creditor reaffirming your existing debt on a piece of personal property.  It is an agreement that states that, bankruptcy notwithstanding, you will still pay the debt that you owe to this lender.

The reason that a debtor would sign a bankruptcy reaffirmation agreement is so they can keep the piece of property on which they still owe money. The debtor will continue to repay the loan, even though it would otherwise be discharged by the bankruptcy.

Reaffirmation agreements are completely voluntary. Neither you nor your lender are required to enter into one. Also, after you sign a bankruptcy reaffirmation agreement, you have 60 days within which to revoke it, thereby relieving yourself of the debt.

In most cases, reaffirmation contracts are overseen by a bankruptcy lawyer. If the debtor does not have a bankruptcy lawyer, then the contract must be approved by the bankruptcy court judge.

To receive free legal advice from a bankruptcy lawyer, contact Fears | Nachawati today. Simply e-mail us or call us toll free at 1.866.705.7584, and you will speak directly with an experienced bankruptcy lawyer who will provide you with a free legal consultation.

Cramdown is Back in the News

Earlier this year a bill that would have given bankruptcy judges the authority to modify home mortgages was soundly defeated in the Senate after intensive lobbying by the financial industry. After the defeat Sen. Dick Durbin said of the bank lobbying effort, “Frankly, they own the place.”

Six months later, it is apparent that legislation designed to encourage home loan modification between lender and home owner is impotent. The “Home Affordable Program (HAMP)” and the 2008 HUD “Hope for Homeowners” are voluntary programs that have proven too costly and cumbersome to be effective. The Huffington Post recently characterized the situation this way:

“The Obama administration had high hopes for the law Congress passed intended to encourage mortgage modifications. The law is all carrot, however, and no stick. Cramdown is the stick. If banks think they could get hit in bankruptcy court, they're more likely to bargain.”

Rising unemployment rates and mounting home foreclosures are putting new pressures on Congress to do something. Some lawmakers are revisiting the idea of bankruptcy cramdown to encourage voluntary modification by lenders, or to enable forced modification by the bankruptcy courts. Passage of this cramdown legislation would give Federal bankruptcy judges the authority to modify bankruptcy debtors’ mortgage contracts by lengthening terms, cutting mortgage rates, or reducing loan balances. The current bankruptcy law allows modification of some contracts, but not home loans.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has announced his intent to push for legislation giving bankruptcy judges the authority to modify home mortgages. The Huffington Post reports that Frank has met with key members of the Senate Banking Committee who are ready to make a serious push at major financial regulatory reform before the year was out.

If you are behind on your mortgage and experiencing difficulty with your lender, consult an experienced bankruptcy attorney for advice. There are many options available to homeowners, and new opportunities are developing, but quick action is still vital to your chances for a positive result. Take control of your situation by learning your rights and legal options.

Contact bankruptcy law firm Fears | Nachawati toll free at 1.866.705.7584 or by e-mail at info@fnlawfirm.com for a free consultation on bankruptcy.

The Consequences of Ignoring your Debts

I recently read a newspaper advice column written by a Certified Financial Planner who suggested that, as a practical matter, there is no difference between ignoring your credit card debt and filing bankruptcy. Well, let’s look at the “practical effects” of ignoring your credit card debt:

First, ignoring credit card obligations will cause a persistent series of harassing telephone calls and letters from credit card companies, collection agencies, and finally law firms. Phone calls are systematically made to the debtor’s home and work, and sometimes to third parties including neighbors, extended family, and your employer. The agencies that collect credit card debt are experts at telephone harassment – it is one of their most important weapons.

Bankruptcy, on the other hand, stops all collection calls.

Second, your credit score will be ruined on a continuing basis. For each month that a credit card goes unpaid, the creditor will report negatively to the credit reporting bureau. Additionally, collection agencies will often further harm your credit score by “resetting” the date of last activity when the account is transferred to a new collector.

Bankruptcy stops all negative reporting. Discharged debts should be identified as “Discharged in Bankruptcy” with a zero balance. The debtor’s credit report and score can begin to recover from the date of the bankruptcy discharge.

Third, you can (and will) be sued. The typical consumer will undoubtedly lose a lawsuit over a legitimate debt. The resulting judgment may include substantial penalties, interest, court fees, and attorney fees. A judgment creditor can collect from your wages, your property, and your bank account. While there are some people who are judgment proof, they are the exception and not the norm. Most people have assets that a judgment creditor can attack.

Bankruptcy prevents all lawsuits and even stops collection actions from judgment creditors.

Many consumer advocates have likened credit card debt to an illness. Like any illness, the cure is not found in ignoring the problem, which will only make things worse. If you are sick from credit cards and are unable to pay your debts, consult with a bankruptcy attorney and find the cure!

Call Fears | Nachawati today for a free consultation regarding you options at toll free 1.866.705.7584 or by e-mail at info@fnlawfirm.com

 

Chapter 7 Bankruptcy Q&A

Often filing for a Chapter 7 bankruptcy is seen as the final step in a personal financial crisis. While this thought is understandable, it’s more realistic to view a Chapter 7 bankruptcy as the beginning of financial freedom.

Benefits of a Chapter 7 bankruptcy

Briefly, filing for Chapter 7 bankruptcy will place an automatic stay that will help protect you against:

• Liens on your paycheck or bank account
• Foreclosure of your home
• Repossession of your vehicle

The filing fees for a Chapter 7 bankruptcy

The fee to file a Chapter 7 bankruptcy in Texas is approximately $299. For more information go to: www.txnb.uscourts.gov/Clerks-Office/Filing-Fees.

Attorney fees involved in a Chapter 7 bankruptcy

When considering the fees associated with attorney fees, the big picture must be taken into account. Mistakes on a Chapter 7 bankruptcy application can end up costing you money in the long run. Furthermore, representation by a skilled bankruptcy attorney can help you deal with unethical action from overzealous creditors who may harass you or refuse to remove liens on your paycheck or other assets.

Many bankruptcy attorneys are willing to work out a reasonable payment plan so you can file for a Chapter 7 bankruptcy as soon as possible to avoid a lien on your paycheck or repossession of your vehicle.

For a free consultation to discuss your options, contact Fears | Nachawati by calling toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com
 

Chapter 7 and Buying a House

One of the biggest concerns for people contemplating filing for a Chapter 7 bankruptcy is the possible effect bankruptcy may have when purchasing a home in the future. Most people think that a Chapter 7 bankruptcy will keep lenders from approving a home loan. But in reality the opposite is true.

What is Chapter 7 bankruptcy?

When you file for Chapter 7 bankruptcy all collection efforts by creditors must stop under federal bankruptcy law. What this means is that creditors must end all liens on your paycheck, foreclosures and repossessions.

How soon after wards can I buy a home?

Most people qualify within1-2 years. Some factors that mortgage lenders will consider most important at the time you apply for a home loan will be your job, current credit status and down payment.

How to file

Consult with an experienced bankruptcy attorney in your area. A skilled bankruptcy attorney will be able to discuss fees associated with filing and handling your case.

If you want to speak with a bankruptcy attorney regarding your options, contact Fears | Nachawati toll free at 1.866.705.7584 or by e-mail at info@fnlawfirm.com for a free consultation. 

What Happens When You Walk Away From A Home Loan

Deciding to walk away from a family home is a gut-wrenching decision. Before walking away the prudent person will investigate all of the options, including returning the property to the lender (i.e. a deed-in-lieu of foreclosure), a short sale, or renting the property. Unfortunately, for some walking away is unavoidable, so it is important to know the repercussions.

The first concern is safeguarding the property. Maintaining insurance and basic utility service is important until possession (and in some cases ownership) of the house is transferred. Should you fail to safeguard the property, you may be liable to the lender for damages.

Next, once transfer of title is accomplished (usually through a foreclosure proceeding), the bank may sue you for breach of contract and damages. Sometimes the bank will wait until after it fully realizes all of its damages upon sale of the house, then it will sue for the difference between the amount it recovers and the amount you owed. This is called a deficiency balance and it is recoverable by the lender in most states.

The bank may also forgive the debt difference and issue you an IRS Form 1099C. When this happens the bank is telling the IRS that it has given you a “gift” in the amount of its loss (because you don’t have to pay it back) and you owe income tax on the “gift” amount. You have two options to avoid paying the tax debt: bankruptcy, or the insolvency exclusion in the tax code. The insolvency exclusion requires that you prove that your liabilities exceeded the value of your assets. By filing bankruptcy this type of tax debt will be discharged.

Congress has granted a reprieve from tax debts stemming from the sale of your primary residence. The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) provides that taxpayers do not owe taxes on mortgage debt that was forgiven by the lender. The law only applies to deficiencies during the 2007, 2008, and 2009 tax years.

Finally, walking away from your home will have negative consequences to your credit report. The possible negative items include 120 day late entries, foreclosure, and debt write-off. All of these items have a devastating impact on your credit report and, consequently, your credit score.

If you are contemplating walking away from your home, get the facts! Investigate your options from a qualified bankruptcy attorney. Only a bankruptcy attorney will be able to explain your options including those available under the bankruptcy laws.  Contact Fears | Nachawati for a free consultation to discuss your options by calling toll-free 1.866.705.7584 or by e-mailing info@fnlawfirm.com

 

 

Will My Bankruptcy Be Published in the Newspaper?

Bankruptcy is a legal process and a matter of public record. In the past newspapers have published local bankruptcy filings in the “public notices” section. Today this practice is not practical due to the large numbers of bankruptcy filings. Recently the American Bankruptcy Institute projected that individual bankruptcy filings nationwide would reach 1.4 million in 2009. Newspapers report news that is of interest to the community, so unless your name is Donald Trump or Burt Reynolds, your bankruptcy filing simply isn’t newsworthy.

The process of opening a case in the bankruptcy court is actually very confidential. Once you file a bankruptcy petition a notice of the filing is mailed to all of your creditors. Other than receiving notice of the bankruptcy filing from the bankruptcy court, there are only a few ways to learn of a bankruptcy case. The most common way is to contact the bankruptcy court by telephone. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public.

Another common way to learn whether an individual has filed a bankruptcy is to use the Public Access to Court Electronic Records (PACER), an electronic public access service that allows users to obtain case and docket information from Federal Appellate, District and Bankruptcy courts via the Internet. PACER registration is free, but the system charges the user $.08 per page.

Finally, some lenders subscribe to bankruptcy information services. These services harvest public records daily and sell the information for a variety of purposes. It is surprising to many debtors in bankruptcy when they receive invitations from businesses seeking to loan money or finance automobiles.

As you can see, the bankruptcy process is actually very confidential. While there are no guarantees that your friends and neighbors will not learn about your bankruptcy, chances are they will not unless you decide to tell them. However, every case is different.  If you have specific questions about the effects of filing bankruptcy, please consult with an experienced bankruptcy attorney.  Call Fears | Nachawati at toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com

 

 

Chapter 13 Co-Debtor Stay

The “Co-Debtor Stay,” also known as the “Co-Debtor Automatic Stay,” is a feature of a Chapter 13 Bankruptcy designed to protect a debtor by insulating him from indirect pressures from his creditors exerted through friends or relatives.  The Co-Debtor Stay stops all collection actions against any individual who is obligated on a consumer debt owed by the debtor. The Co-Debtor Stay continues until the Chapter 13 case has concluded.

The Co-Debtor Stay is not a direct protection intended for the co-debtor. The debtor’s Chapter 13 Bankruptcy will not discharge the co-debtor’s responsibilities to the creditor. It will, however, prevent collection action by the creditor against the co-debtor (e.g. lien perfection or even adverse notation on the co-debtor’s credit report) during the pendency of the Chapter 13 case. 

The Co-Debtor Stay does not prohibit collection on a debt incurred in the ordinary course of business by the debtor. Additionally, tax debt is generally not considered a consumer debt. It is important to note that the Co-Debtor Stay does not apply at all to Chapter 7 Bankruptcy cases.

The Co-Debtor Stay is effective immediately upon the filing of the debtor’s Chapter 13 petition and continues until the case is closed, dismissed, or converted to Chapter 7 or 11. The Bankruptcy Court can also modify or terminate the Co-Debtor Stay upon the motion of a creditor. The creditor may be successful in this type of motion if the codebtor received "consideration" for the debt (e.g. you cosigned a car loan for your brother, who actually owns the car), if the debtor’s Chapter 13 plan proposes to not pay the debt, or if the creditor's interests would be irreparably harmed by continuation of the Co-Debtor Stay.

A knowing violation of the Co-Debtor Stay is contempt of court and punishable by damages, including attorney's fees.  Any collection action taken by a creditor in violation of the co-debtor stay is void.

The Co-Debtor Stay is a powerful tool to prevent collection action in Chapter 13 Bankruptcy. If you are contemplating a bankruptcy filing and have co-debtors, consult with an experienced bankruptcy attorney. An experienced bankruptcy attorney can explain your options and work with you to find the best result.  For a free consultation with an attorney at Fears | Nachawati regarding your bankruptcy options simply call toll-free 1.866.705.7584 or e-mail info@fnlawfirm.com

 

 

How Soon Can I Buy A House After Bankruptcy?

Just because you filed bankruptcy does not mean you cannot buy a home in the future, but you will probably have to wait at least 2 years after your bankruptcy is discharged before a mortgage lender will approve you for a home loan. It is usually best to wait at least 2 years to qualify for a good interest rate and lower down payment. After the two-year waiting period is over, you should be able to get financing. You can usually achieve this as long as your debts are paid on time after the discharge of your bankruptcy.

 

Also, if you are currently facing foreclosure or too many credit card bills, it may be in your best interest to file for bankruptcy. When you file for bankruptcy, it will place an automatic stay that will suspend any collection action by creditors. Through bankruptcy you may be able to save your current home or improve your credit rating, as you will no longer be lowering it due to late payments.

 

If you are considering filing for bankruptcy contact bankruptcy law firm, Fears | Nachawati, by calling toll free 1.866.705.7584 or by e-mailing us at info@fnlawfirm.com for a free consultation.

 

Can I Apply For US Citizenship If I File For Bankruptcy?

There is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for naturalization. Filing for bankruptcy will not necessarily disqualify you from becoming a US citizen. Basically, the Department of Homeland Security list the following general requirements for naturalization as:

  • A period of continuous residence and physical presence in the United States.
  • Residence in a particular USCIS District prior to filing.
  • An ability to read, write and speak English.
  • A knowledge and understanding of U.S. history and government.
  • Good moral character.
  • Attachment to the principles of the U.S. Constitution.
  • Favorable disposition toward the United States.

Depending on the circumstances, the Department of Homeland Security, in its wide discretion, may deem filing for bankruptcy as proof of poor moral character.  Therefore, it may be wise for you to consult with an experienced bankruptcy attorney to discuss the procedures and implications of filing for bankruptcy.

  

*For more information on naturalization visit http://www.uscis.gov/portal/site/uscis/menuitem.