Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

If you are paying child support, you may be confused about the effect of a bankruptcy filing on your child support obligation. A bankruptcy filing generally protects the debtor from the collection actions by creditors, but Congress has not extended the same protections to child support issues. Under the bankruptcy laws child support is a “non dischargeable debt” which means that the obligation will survive the bankruptcy, regardless whether it is a current or past debt.

The bankruptcy automatic stay does not apply:

(1) to the establishment of a child support obligation;

(2) to the collection of child support from property that is not property of the estate; or

(3) to the withholding of income that is property of the estate for payment of a child support obligation under a judicial or administrative order or statute.

In “non-lawyer speak,” child support collection actions are generally not halted by filing bankruptcy. Additionally, filing a bankruptcy case does not stop a tax intercept for the payment of child support arrears.

Domestic support obligations, including child support obligations, receive top payment priority when funds are available to pay creditors in a Chapter 7 case.  In a Chapter 13 case, child support arrears are paid through a “repayment plan” and are paid as a first priority. Support payments due after the bankruptcy filing date must be kept current or the debtor’s plan will not be confirmed, and the bankruptcy court will not issue a discharge in a case where child support is owed.

In addition to child support, debts that are “in the nature of support” (e.g. medical expenses, educational expenses, etc.) are ineligible for discharge. The bottom line is: child support obligations must be paid. Fortunately, the bankruptcy laws offer options to make the debtor’s payment burden more bearable. However, a debtor’s child support obligation is often a difficult legal situation that requires expert guidance. If you have a child support obligation and are considering filing bankruptcy, consult with an experienced bankruptcy attorney and discuss your options.  Contact Fears | Nachawati for a free consultation at toll free 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

A chapter 13 bankruptcy is also called a “reorganization plan” or a “wage earner's plan.” A debtor who files a chapter 13 bankruptcy intends to repay all or part of her debts in installments to creditors over three to five years. The individual’s repayment plan term cannot exceed five years.

There are a number of advantages that chapter 13 affords to debtors. The most significant is the ability to stop a home foreclosure and force the creditor to accept payments for any delinquent mortgage payments. The bankruptcy automatic stay stops foreclosure proceedings immediately upon the debtor’s bankruptcy filing with the court. However, this temporary relief may be lost if the debtor fails to make the regular mortgage payments that come due after the chapter 13 filing.

Another advantage of chapter 13 bankruptcy is that a debtor may modify a secured loan and repay it over the plan term. This usually lowers the monthly payment. In certain circumstances the debtor can also “cram-down” the secured loan by stripping away the unsecured portion of a debt. For example, a debtor may owe $20,000 on a car that is only worth $10,000. Chapter 13 may allow the debtor to modify this loan and only pay the creditor the value of the car, or $10,000. There are special qualifying rules for this type of modification, so be sure to discuss your situation with your attorney.

Within 15 days of the filing of the chapter 13 bankruptcy petition, the debtor must file a proposed repayment plan with the court. The plan is also sent to the U.S. trustee and all creditors for review and opportunity to object. The plan must provide for regular fixed payments to the trustee who then distributes the funds to creditors according to the terms of the plan (which may be less than full payment on their claims). It is common for a chapter 13 plan to propose to pay secured creditors in full and nothing to unsecured creditors. This largely depends on whether there is “extra” money at the end of the month after the debtor’s secured creditors and monthly expenses are paid.

Occasionally circumstances change after confirmation of the chapter 13 plan that prevents the debtor from completing the repayment plan. The debtor may ask the court to allow the debtor to modify the plan, or to grant a “hardship discharge” and end the case early. Otherwise, at the end of the three to five year repayment period the court will discharge the debtor’s remaining debts that are not “non-dischargeable” by law. The chapter 13 bankruptcy discharge prevents those creditors from seeking payment from the debtor.   

If you are over-burdened with secured debts and are in need of relief, consult with an experienced bankruptcy attorney about your rights under chapter 13 of the bankruptcy code.

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. 

The automatic stay is the bankruptcy law’s most powerful provision and immediately stops nearly all creditor actions against a debtor.  The automatic stay is invoked upon filing the case – no hearing is necessary and no judge’s signature is required.  This powerful injunction is even effective against creditors that have no actual knowledge of the bankruptcy!

Congress has stated that the policy behind the automatic stay is to give the “debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.”  See Notes of Committee on the Judiciary, Senate Report No. 95-989.  That “breathing spell” is a welcome relief to families with overwhelming financial burdens.

The automatic stay prohibits a creditor with a claim that arose before commencement of the bankruptcy case from taking many actions, including:

• contacting the debtor to request payment (stops collection calls)
• initiating or continuing a lawsuit against the debtor (stops lawsuits)
• enforcing a judgment against the debtor (stops wage garnishments)
• repossessing personal property or foreclosing on real estate (stops repossessions and foreclosure)

The automatic stay is a temporary injunction which can be contested by a creditor and lifted by the bankruptcy court after notice and a hearing.  There are a few exceptions to the automatic stay, for instance: the automatic stay does not prevent criminal prosecutions.  Likewise the automatic stay does not stop lawsuits to establish or modify alimony, maintenance, or support.

Individuals that file for bankruptcy receive this powerful legal injunction against creditor actions.  However, the automatic stay is just one weapon in your bankruptcy attorney’s arsenal.  Your bankruptcy attorney can use the power of the bankruptcy laws to help you make the best decisions for your family’s future financial health and recovery.

Contact bankruptcy law firm Fears | Nachawati today for a free consultation to learn more about automatic stay and your rights.  Call us toll free at 1.866.705.7584 or e-mail us at info@fnlawfirm.com. 

Just as the title implies, filing for Chapter 7 is like hitting the reset button on your favorite electronic device. Everything disappears. After your Chapter 7 is discharged, you end up erasing the debt that was once there. In order to qualify for a Chapter 7 bankruptcy in the Fort Worth/Dallas region, you must:

1.      File a Chapter 7 petition.

2.      Pay your filing fee to the court clerk. There are waivers available for some applicants.

3.      Take a credit-counseling course approved by the bankruptcy court within 6 months of filing for Chapter 7.

While the initial process seems simple enough, the petition contains many forms that require a strong understanding of bankruptcy law. The court clerk cannot help you fill

out the forms. Once the forms are filled out appropriately and submitted to the bankruptcy court, an automatic stay is put in place that will immediately halt all collections efforts from creditors. This mean they will no longer be able to make harassing phone calls or place liens on your assets. In some cases, liens already in place can also be reversed.

Once your Chapter 7 bankruptcy is discharged, you are basically starting over with a clean slate. The debts are erased and you will no longer be held liable to pay them.

For more detailed information how Chapter 7 can help you start over debt free, contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or via e-mail at info@fnlawfirm.com.