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

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

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

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

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

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

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

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.
 

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.

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.
 

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.
 

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.
 

In the 1980’s Prince sang, “Tonight I’m gonna party like it’s 1999!” Well, if you’re being financially squeezed, perhaps its time to “budget like it’s 1971!” What that means is to take a hard look at where your money is going and how you can cut expenses. Chances are you can make big cuts in discretionary spending for high tech products and services. Let’s look at how we can save money on three technologies that were not commercially available in 1971:

Cable or Satellite TV
Basic cable or satellite television services promise a reasonable monthly rate, but your bill can quickly escalate with high definition service and premium channels. Many of these channels are never watched or wanted, but you still pay for them in a subscription package. So ask yourself, can you live without watching the Golf Channel in high definition?

Internet
Basic internet services also start low, but can quickly double in price as speed increases. Many companies offer high speed internet in a bundled package that includes television and telephone. Bundled packages are often discounted for the first year of a two year contract, and jumps significantly in price during the second year. However, that is not always the case, and more companies are offering “no contract” services as a way of luring new customers. The moral here is, “Shop around!”

Cellular Phone
Basic cell phone “talk” minutes are relatively cheap, while text and data packages are more costly. One simple way to reduce your cell phone bill is to ask your carrier to conduct an audit on your account. You may be able to reduce your monthly minutes or eliminate extra features you don’t use.

The popularity of cellular phones has made the home phone almost extinct. Even those households that use a landline for fax use can reduce costs by connecting a home office fax machine to the internet and drop home phone service altogether.

Ask for a Discount
You don’t get what you don’t ask for! If you are under contract with a television, internet, or cell service, call your provider and say you are a loyal customer interested in reducing your bill. In many cases the provider will discount your bill to keep you happy (and loyal)!

Families struggling with finances can save money by taking a critical look at their expenses. If cutting costs isn’t enough, the federal bankruptcy laws can eliminate your debts. The combination of reducing spending and eliminating bills through bankruptcy can be powerful financial medicine.
 

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.
 

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.

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.
 

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.
 

There are many reasons that an individual would consider "walking away" from a home. Before abandoning your home, speak with a qualified bankruptcy attorney about the consequences. Your attorney can discuss alternatives for keeping your home such as loan modification, bankruptcy lien stripping, or Chapter 13 repayment. If surrendering your home is the best option, then a short sale, a deed in lieu of foreclosure, or even renting out your home may be better solutions than walking away. In most cases staying in your home as long as possible is the best choice. Be sure to consult with an attorney and examine all of your options before you make a decision.

If you decide to walk away from your home, be aware that you are still the legal owner. Consequently you should maintain insurance on the property until the property is transferred. Many things can happen to an empty house. Someone may be injured on the property, there may be fire or flooding, the roof may leak, or the pipes may freeze. If the lender takes out insurance on the property (“force-placed” insurance), you are not covered. Force placed insurance only covers damage to the property.

Filing bankruptcy does not mean that you no longer own the property. You may be liable for a claim or an accident that happens on the property after you file bankruptcy and before ownership is transferred. A claim that arises after you file bankruptcy is generally not dischargeable! Additionally, some condominium or homeowners association fees that occur after you file bankruptcy may not be dischargeable, and there is the possibility of tax consequences. Speak to an experienced attorney to determine whether you will be responsible for these fees and taxes.

Aside from insurance, there are other things you can do to protect yourself and the property. First, be sure that all windows and doors are locked. Second, ensure that all mail and newspaper service are forwarded or cancelled. Do not advertise that the house is vacant. Third, turn off lights and unplug appliances. Fourth, turn off air conditioning and turn down heat to a low level. Maintaining a modicum of heat is necessary to prevent walls and pipes from freezing. Fifth, remove any swing sets, trampolines, play gyms, or other items that might attract children into your yard. Finally, arrange for someone to inspect the home periodically and take care of any yard work. Failure to maintain the property may result in fines or citations from local authorities.

Document all of the activities surrounding the home including the date that you move out, and the condition of the house. Note any damage, and take digital pictures of the inside and outside of the house. Do not remove anything that is permanently attached to the property. Toilets, built-in appliances, and other fixtures are a permanent part of the property and removing these items may cause you legal headaches in the future.

Walking away from your home can lead to legal complications. Explore your options with your attorney before making a decision. Your attorney can help you reach the best decision for your family, and help manage any potential legal liability.

 There are many myths surrounding bankruptcy. Fortunately, these myths can be quickly dispelled during a free consultation with an experienced bankruptcy attorney. One of the most serious myths is that an individual with a history of bankruptcy cannot qualify for a home loan. This myth can prevent someone deep in debt from obtaining needed relief.

The truth is that while banks hate bankruptcy, they love federal guarantees. The Federal Housing Administration (FHA) is a government agency that insures certain home loans, and its policy for qualifying for a home loan is very flexible. The FHA will guarantee a home loan after a bankruptcy when:
Twenty four months have passed since the bankruptcy has been discharged;
Any outstanding tax liens have been paid or the appropriate arrangements have been made via a repayment plan on file with the IRS or Department of Revenue;
Three years have passed since a foreclosure or a deed-in-lieu has been resolved; and
All judgments have been paid.

FHA-insured home mortgages are also available to Chapter 13 debtors during bankruptcy. The debtor must (1) have completed one year of payments as required while under Chapter 13 and (2) must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow.

In addition to the above, individuals must meet the mortgage lender’s criteria. This usually means showing a stable employment history, a manageable debt to income ratio, and a good credit score. Surprisingly, most debtors are able to improve their credit scores quickly after a bankruptcy discharge. Your credit score is weighted heavily on recent events, so when you file bankruptcy your score will immediate plummets. However, the farther you are from your bankruptcy discharge, the better your score will become. Additionally, an absence of credit delinquencies and a solid history of on-time payments after your bankruptcy case will boost your credit score.

Many debtors are able to purchase a home 24 months after a bankruptcy discharge. In many cases home ownership is only possible after debts have been discharged by the federal bankruptcy court. If you are struggling with debt and want to purchase a home, speak with an experienced attorney and learn how the federal bankruptcy laws can help.

Debt settlement ads are very attractive to individuals struggling with debt. The promise is to reach an agreement you can afford to pay. The debtor agrees to pay a percentage of the debt (usually in a lump sum), and the creditor agrees to release the remaining obligation. Sounds simple, right?

Unfortunately, many times the debtor will receive a nasty surprise in the mail: an IRS Form 1099-C: “Cancellation of Debt.” You see, the U.S. Internal Revenue Service considers forgiven or canceled debt as part of your income. In fact, any creditor who agrees to accept at least $600 less than the original balance is required to file a 1099-C form with the IRS and to send debtors a canceled debt notice. If you have negotiated a debt settlement, you must report the forgiven or canceled debt as income on your federal income tax return. This usually causes a tax debt, since no money was withheld from this "income."

There is an exception to this situation. If you were insolvent at the time the debt was settled, the cancelled debt is not considered income. The IRS instructs the taxpayer to "determine your liabilities and the fair market value of your assets immediately before the cancellation of your debt to determine whether or not you are insolvent and the amount by which you are insolvent." Let's say your net assets after subtracting your liabilities amounts to $5,000. If you negotiate a debt settlement for $10,000, you must pay taxes on the first $5,000 of the cancelled debt. If your tax rate is 25%, you may Uncle Sam over a thousand dollars!

For debtors who have negotiated big savings through a debt settlement company, a large tax debt can be a slap in the face. Owing the federal government is much worse than owing a credit card company. Here are some interesting "facts" about owing the IRS:

* the IRS does not have to obtain a court judgment before garnishing your wages;
* recent tax debts are not dischargeable in bankruptcy;
* the IRS can intercept future tax refunds and even government benefits like social security to pay your income tax debt.

Congress has made sure that all debts discharged during bankruptcy are excluded from "Cancellation of Debt" income. If your debt is discharged, the debt cannot be collected from you in the future, and you owe no taxes on it. If you can afford to repay a part of a debt, a Chapter 13 bankruptcy will allow you to pay what you can afford, over three to five years, and the remaining debt is discharged without a "Cancellation of Debt" tax obligation. If you cannot afford to repay any part of the debt, a Chapter 7 can discharge the debt within a few short months.

Debt settlement often makes a bad situation worse. Before you commit to a settlement process to eliminate your debts, speak with an experienced bankruptcy attorney. You deserve to know all of the consequences before agreeing to any financial program - including any potential tax liability. Your attorney can explain the pros and cons of debt settlement and bankruptcy, and can help you decide on the best course of action.

 Foreclosure is always ugly business, but public complaints from homeowners alleging sloppy research, unethical filings, and outright lies, have made law firms that specialize in foreclosure especially villainous in the public eye. While many foreclosure firms may conduct their work with the honesty and diligence that is expected when practicing law, there are some that are less than, well, “sympathetic” to homeowners experiencing financial difficulty.

Last October the New York Times published photos of a Halloween party at the law office of Steven J. Baum. The Baum law firm handled around 40 percent of the state’s 46,572 mortgage foreclosures in 2010. The photos show an office costume party in 2010 where employees dressed up as homeless people and squatters, and decorated the office to resemble foreclosed properties.

The Baum law firm has been notoriously called a foreclosure mill by the media, and has been the subject of several complaints. Recently the firm agreed to pay a $2 million settlement in response to allegations that it had “filed misleading pleadings, affidavits, and mortgage assignments in the state and federal courts in New York.” In November Fannie Mae and Freddie Mac cut off business with the firm, and this past week it announced that the Baum law firm is closing its offices.

Certainly not every foreclosure firm is heartless. However, when the wheels of the foreclosure machine are set into motion, it is often difficult to find a person who can stop it. If you are experiencing trouble paying your mortgage, there are options:

• Home Affordable Refinance Program (HARP) is a federal program that offers homeowners a chance to refinance with their banks before they default and the home goes into foreclosure.
• Chapter 13 bankruptcy. The bankruptcy court cannot modify your first mortgage, but it can eliminate your second under certain circumstances. Chapter 13 can also provide time to negotiate a modification with your lender, or repay mortgage arrears over three to five years.
• Chapter 7 bankruptcy: If discharging unsecured debt will free up money for your mortgage payment, Chapter 7 may be the answer. You are also able to discharge your home mortgage and walk away from the house.

Don’t be pressured by foreclosure firms! You have rights and options. An experienced bankruptcy attorney can explain your legal options and help you decide on a path that is right for you and your family.

 Some unscrupulous non-attorneys take advantage of the poorest and most vulnerable by offering bankruptcy petition preparation services at a discount rate. Maybe you have seen their ads in free community newspapers. These services offer to prepare your bankruptcy petition and avoid the “high cost” of an attorney.

Sounds great, right?
Petition preparers are restricted by federal law to the level of a typing service. Preparers cannot represent you in bankruptcy court and are expressly forbidden from providing any legal advice regarding your bankruptcy case. That means a petition preparer cannot: discuss the benefits of the different bankruptcy chapters and how they apply to your case; explain certain legal exemption rights you may be entitled to in order to protect your property; or tell you what debts or assets must be included or may be omitted from your bankruptcy petition.
When you hire a petition preparer you must file your bankruptcy case yourself. Some petition preparers may try to entice you with promises of waiving the bankruptcy filing fee. The truth is that if you were able to pay a petition preparer, the court is unlikely to waive the filing fee.
While there are no special educational requirements for petition preparers, the federal law requires that they:
• Make a written disclosure of services and fees
• Charge a reasonable fee for services, usually limited by local bankruptcy law
• Not collect or process court filing fees
• File a written disclosure with the bankruptcy court regarding fees and services, including name and tax identification number
While the federal law allows preparers to type petitions, bankruptcy professionals, including judges and attorneys, despise this activity. A main objective of the bankruptcy process is to provide a deserving debtor with relief from crushing debt. In many cases, petition preparers only make matters worse. Debtors need legal counsel to receive the protections and benefits of the bankruptcy laws. Petition preparers are not attorneys and any legal advice they provide, while illegal, may also be devastatingly wrong. Many debtors relying on the assistance of petition preparers have had their cases dismissed, have lost property to creditors, or have experienced other unnecessary complication in their cases.
If you are hurting financially, discuss your situation with a bankruptcy attorney at a free consultation. Your attorney can advise you on your legal options and discuss how you can afford the different fees in bankruptcy.

Can you get evicted for declaring bankruptcy? This is a tricky question and depends on the individual facts of your case. If you file a Chapter 7 and are not behind in your rent payments, then the general answer is, “No.” Filing a bankruptcy case does not breach or terminate the lease agreement, so the landlord cannot evict simply because you seek bankruptcy protection.

In a Chapter 13 case, the bankruptcy trustee may weigh whether terminating your lease agreement would benefit your creditors. The trustee might consider terminating the agreement if you are paying a great deal more in rent than what most people in your area are paying. The purpose is to reduce your expenses and free up money to pay creditors. The trustee may seek this termination regardless of whether you’re violated your lease or are behind in rents.

If you are behind in rents prior to the bankruptcy filing, the federal laws prevent the landlord from evicting you during the bankruptcy. This protection, called the “automatic stay,” stops all collection action against you, and forces the evicting landlord to seek relief from the bankruptcy court. However, if you are endangering the rental property or using controlled substances illegally on the premises, the landlord may be able to evict during the bankruptcy. The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond. The court must hold a hearing within 10 days.

The bankruptcy automatic stay will not relieve you from your obligation to pay rent after the bankruptcy filing date. If you fall behind on your rent payments after the bankruptcy is filed, your landlord may evict you, but cannot seek payment of past rents. If you are not behind on rents at the time the bankruptcy case is filed, your landlord is not a creditor and will not receive notice of your bankruptcy filing. However, you must account for any rent deposit on your bankruptcy schedules.

If your landlord has already obtained a judgment for possession and order of eviction before you file bankruptcy, the legal process is more complex. You must deposit one month of rent with the bankruptcy court along with a statement that the judgment permits you to stay in the premises upon satisfaction of the entire judgment amount. This filing stays the eviction process for thirty days. If you wish to remain longer, the entire judgment amount must be paid within the thirty day period.

Bankruptcy can stop an eviction and give you time to move or make arrangements to stay. If you are facing eviction from your rental home and contemplating bankruptcy, discuss your situation with an experienced bankruptcy attorney. Your attorney can give you legal advice that will help your specific case.
 

Many homeowners unable to pay their monthly mortgage face several difficult decisions. The options for dealing with this issue generally boil down to the following: sell, modify the mortgage, walk away, or rent the property out. In some cases renting the property to a tenant may avoid foreclosure and allow you to generate some rental income.

For mortgage and bankruptcy purposes, investment property is treated differently than a primary residence. First, rental property is not eligible for many mortgage modification programs. Additionally, rental property does not qualify for homestead exemptions under state and federal asset protection laws. Consequently, if you have equity in your property, the Chapter 7 trustee may be able to seize the property during bankruptcy and sell it to pay your outstanding debts.

If you are considerably upside down on your property, lien stripping may be an option. The federal bankruptcy laws allow lien stripping of secured property in a Chapter 13, but this process is not available to modify the first mortgage on your primary residence. Lien stripping the first mortgage of investment property is allowed. The bankruptcy court will "cram down" the amount you owe on the loan to its fair market value. A second mortgage can be entirely stripped off if it is unsecured.

To understand how this works, consider the following example:

Value of property: $330,000
First mortgage: $360,000
Second mortgage: 40,000

The second mortgage is stripped off and becomes unsecured debt, and the first mortgage is crammed down to the value of the property, $330,000. Your monthly payment will be adjusted accordingly.

Since a Chapter 7 bankruptcy is a liquidation process, and the bankruptcy court and trustee are concerned with whether there is sufficient equity in the rental property to sell and pay creditors. Otherwise the trustee will abandon any interest in the property and you can keep it subject to paying the mortgage. There is some legal basis for a Chapter 7 bankruptcy trustee to collect rents from the tenants for six months after your bankruptcy filing. However, it is questionable whether the trustee would have any right to rents after abandonment of the property.

A Chapter 13 bankruptcy is for people who have income and restructures repayment of debts over three to five years. As long as the property is able to generate income, and so long as you are able to financially maintain the property, you will be able to keep it and the income it generates.

For more information on bankruptcy, and which bankruptcy option is best for your situation, consult with an experienced bankruptcy attorney. Your attorney is able to assess your financial situation and inform you of all your legal rights and options.
 

One of Ben Franklin’s most famous quotes goes, “"'In this world nothing can be said to be certain, except death and taxes."

U.S. taxpayers are taxed for so many transactions. One of the lesser-known taxes is the “cancellation of debt” tax. Many consumers who successfully resolve their debts for “pennies on the dollar” receive a nasty surprise at the end of the tax year. They are issued an IRS 1099-C: a “cancellation of debt” form. The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Any creditor or debt collector who agrees to accept at least $600 less than the original balance is required to file a 1099-C form with the IRS and to send debtors a canceled debt notice. Taxpayers must report the forgiven or canceled debt as “income” on their federal income tax returns.

Fortunately, there are six exceptions to the rule that you must pay tax on forgiven or canceled debt:

Exception 1: If the debt is a foreclosure that qualifies under the Mortgage Forgiveness Debt Relief Act. Under this Act a debt that is reported as canceled after a foreclosure may be excluded from income.

Exception 2: Debts canceled while the taxpayer is insolvent. Insolvent means broke. This exclusion applies to an amount beyond your total assets. For instance, if you have a canceled debt of $20,000, and you have $5,000 in assets, you must report the first $5,000 of the canceled debt as income.

Exception 3: Student loans forgiven under a federal program. Some federal programs will forgive a portion or all of a person’s student loan debt after you worked a period of time. This forgiven debt is not taxed.

Exception 4: Any forgiven interest that would have been deductible as a business debt (that does not include personal credit card interest).

Exception 5: If the canceled debt is a gift, it is not taxable. This exception generally only applies when the debt is between family or friends.

Exception 6: If the debt was discharged in bankruptcy, it is not taxed as income.

Some bankruptcy debtors receive 1099-C forms in the mail. Simply tell the IRS that you have discharged the debt in bankruptcy and owe nothing. File IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, with your income tax form.

Most bankruptcy debtors do not receive 1099-C forms. If you receive one, speak with your bankruptcy attorney to confirm that the debt was discharged. Your bankruptcy attorney can assist you in resolving the debt and avoiding problems with the IRS.
 

When a bankruptcy case is filed the individual debtor announces his or her intent to proceed under Chapter 7, 11, or 13 of the federal Bankruptcy Code. Each bankruptcy chapter has its own advantages and challenges. During some cases, the debtor’s circumstances may change and another bankruptcy chapter becomes more beneficial. In these cases the debtor may be able to convert the bankruptcy case to a different chapter.

Converting a bankruptcy case to another chapter is a very simple process. There is a filing fee and a notice that must be filed with the bankruptcy court. The debtor is required to update the bankruptcy schedules to include any changes or new information. Conversion can be beneficial to the debtor in that any debt incurred after the original bankruptcy filing date can be included in the converted case.

A converted case retains its original case number (so there are not two bankruptcy cases on your record). A different trustee is assigned to your bankruptcy case, and you are required to attend a (second) meeting of creditors. If you are converting from a Chapter 11 or 13 case to a Chapter 7, you may be entitled to a refund of plan payments, if the Chapter 13 trustee is holding money.

A case may be involuntarily converted when a Chapter 7 debtor is found to be ineligible. When the debtor has sufficient disposable income to make payments on debt through a Chapter 13 case, the trustee may ask the court to order the case dismissed or converted to a Chapter 13.

If you believe that you need to convert your case to a different bankruptcy chapter, consult with your experience attorney regarding the benefits of conversion. In many cases there are options to continue your case under its current chapter. In other cases conversion may be the best option.
 

Before starting your holiday shopping, take a moment and view some sage advice from a “consumer expert:”

http://www.nbc.com/saturday-night-live/video/dont-buy-stuff/27169/

Sure, it’s a funny video, but only because we are laughing at ourselves! Of course you shouldn’t buy stuff you can’t afford. Bad things can happen when you abuse credit, especially if you have over-extended your finances.

This holiday season layaway is making a comeback as a financing option. Layaway was very popular with holiday shoppers years ago, but its popularity diminished as credit became easier to obtain during the 1990’s. The basic idea is that you set aside an item at the store, hold it with a deposit, and make payments over time. Once you have fully paid for the item, you can take it home.

Recently New York Sen. Chuck Schumer issued a public warning that the fees that retailers are charging for layaway purchases can add up to a higher interest rate than any credit card would be allowed to charge.

"These layaway programs are nothing more than hideaways for sky-high interest rates that consumers would never tolerate with a credit card," Schumer told the AP. "The holiday season is supposed to be about giving and not taking, but these layaway programs are taking advantage of people and charging them outrageous interest rates, under the guise of making it easier and more affordable to shop."

A good example of how the typical layaway program works is at Kmart. The retailer offers an 8 week layaway plan that charges an initial $5.00 “Service Fee” for all new layaway contracts. The customer is required to put down a minimum of $15.00 to hold the item, and must make four “easy” payments over the next eight weeks. There is a $10.00 “Cancellation Fee” if you change your mind. If you can’t pay for the item or change your mind, kmart keeps $15.00 and you get nothing.

Bankruptcy debtors are especially susceptible to high interest credit schemes since credit cards are generally not available. However you decide to pay for your holiday purchases, make sure you make a wise choice. If you decide to use layaway or some other form of credit, be sure that you understand the details of the deal. That way you can make an informed decision.

“We wish you a debt-free Christmas and a fresh start New Year!”
 

Filing bankruptcy is serious business, but it’s not the end of the world. It is always good to have a positive perspective on things, and that includes the bankruptcy process. With this in mind, below are a few light hearted jokes about bankruptcy:

“If you don't pay your exorcist, you can get re-possessed.”

“Due to the slumping economy, Six Flags is filing for Chapter 11 bankruptcy protection. Ironically, when they get to bankruptcy court, they'll have to wait in a line a mile long for two hours only to realize later that this ride really isn’t all that great.”

“The courts allowed the bankruptcy proceedings for Chrysler to go forward this week. The bankruptcy was approved after the judge told Chrysler to sit in a room for a few minutes while the judge went to talk to his manager.”

“The Dodgers are so broke, when players steal bases, owner Frank McCourt asks that they please return them.”

“The Dodgers are so broke, three of their players tested positive for ramen noodles.”

“Q: What's the difference between a bankrupt attorney and a pigeon?
A: The pigeon can still make a deposit on a Mercedes.”

Maintaining a positive attitude throughout your bankruptcy will help you rebound quickly after your case ends. The federal bankruptcy laws can help you reshape your finances and get a fresh financial start. So put a smile on your face, and know that things are going to be better soon.

If you are struggling with serious debt, contact an experienced bankruptcy attorney and discover how the bankruptcy laws can help. Bankruptcy can stop creditor harassment, protect your assets, and put you on a road to recovery.
 

Recently the commissioners of Jefferson County, Alabama, voted to file the largest Chapter 9 bankruptcy in history. The New York Times reports that the county is “roughly $4 billion” in debt. Jefferson County’s financial trouble stems from poor attempts to finance the court-ordered rebuilding of its out of date sewer system. Jefferson County is Alabama’s most populous county and home to the city of Birmingham.

The size of Jefferson County’s bankruptcy debt is staggering, and surpasses the previous record for largest Chapter 9 bankruptcy set by Orange County, Calif., in December 1994. Orange County listed $1.7 billion in debt. However, Jefferson County’s debt does not set the record for most debt in a bankruptcy case. It’s not even close.

When Enron filed for Chapter 11 in 2001, the company’s total debt was $31.2 billion. Worldcom, Inc. filed bankruptcy in 2002 and listed $41 billion in debt. But the grand daddy of them all is Lehman Brothers Holdings, who in 2008 filed Chapter 11 bankruptcy listing a whopping $613 billion in debt. Of course, much of this debt can be off-set against company assets, but consider that Lehman Brothers is still trying to gain approval for a plan to repay $65 billion to creditors.

No matter the size of your debt load, the bankruptcy code can offer you relief. There are no debt limits for a Chapter 7 bankruptcy case, which discharges personal debts without repayment. The Bankruptcy Code streamlines the reorganization process for individuals, but limits Chapter 13 eligibility to total unsecured debts less than $360,475, and total secured debts less than $1,081,400. If you exceed these limits, then your individual bankruptcy case can be filed under Chapter 11.

If you have debts that you cannot afford to repay, seek out assistance from an experienced bankruptcy attorney. The federal bankruptcy laws can help you restructure your finances, discharge burdensome debt, and provide you with a fresh financial beginning.
 

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.

The first step in assessing your personal finances is to obtain a copy of your credit report. Your credit report will provide several key pieces of information that will help you develop a clear picture of your financial condition. A credit report tells you: (1) who you owe; (2) how much you owe; and (3) whether you have missed payments to creditors.

Your credit report states the name and address of your creditors. This is the same information that you are required to provide should you decide to file bankruptcy. Often a creditor statement can be vague about where to send notices or correspondence. The information on your credit report is supplied by the creditor, and is presumptively correct.

Your credit report shows the total balance of your debt and the monthly payment. This information is also provided by the creditor to the credit reporting bureau. This information may or may not be correct, but it is a good estimate if you are unsure about what you owe.

Finally, your credit report contains information about payments and missed payments. It also contains information regarding collection agencies. This information can be important in calculating an arrearage for negotiating a repayment plan, or simply for giving notice to a collector about a personal bankruptcy.

The federal Fair Credit Reporting Act (FCRA) entitles you to a free copy of your credit report from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. You are entitled to a free report every twelve months. The credit bureaus have established a central hub for accommodating consumer requests at AnnualCreditReport.com. Through this website you can order a completely free copy of your credit report from each of the three major credit reporting bureaus. You have the option to request all three reports at once or to order one report at a time.

The “free” reports provided by AnnualCreditReport.com are completely free and regulated by the federal law. There are no hidden costs or subscriptions, unlike other “free” services advertised on radio and television. You do not need a credit card to obtain your reports.

If you are overwhelmed with debts you cannot pay, contact an experienced bankruptcy attorney and discuss your options for restructuring your finances. Your bankruptcy attorney can help guide you in obtaining copies of your credit reports.
 

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.

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

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

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

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

Fewer things can throw your world upside down like having your bank account frozen. A bank garnishment or seizure is usually the result of a creditor attempting to collect after a court has issued a judgment against you. The court orders the bank to freeze your account and turn over its proceeds to the judgment creditor. The order is usually timed by the creditor's attorney to take effect just before your paycheck is deposited. Seizing a bank account is generally a creditor's first action because federal and state laws limit the amount that can be garnished directly from an employee’s paycheck. These limitations do not apply to cash money in a bank account.

Once your bank account is frozen, it is important to act quickly. You are entitled to protect some money from garnishment, but you must notify the court, the creditor, and the bank that you are asserting your legal exemption rights. Additionally, if you receive Federal benefits that are directly deposited into your bank account, the federal law will protect an amount equal to two months of these benefits. These benefits include Social Security benefits, Supplemental Security Income benefits, Veteran’s benefits, Railroad Retirement benefits, and benefits from the Office of Personnel Management. Federal benefits are exempt from garnishment, and the law places the burden on the bank to determine if the funds are protected.

Finally, a bankruptcy filing will immediately stop a garnishment and unfreeze your bank account. A debtor can often force the garnishing creditor to return money seized just prior to a bankruptcy filing. The general rule is that involuntary payments that amount to over $600 seized by a creditor in the 90 days before filing can be recovered.

If you have had your bank account seized, it is important to speak with an experienced bankruptcy attorney immediately and discuss your short term and long term options. Quick action is necessary to unfreeze your account, but it is also important to discuss your long term plan to avoid garnishments in the future. Your attorney can help you decide on a sensible plan to eliminate your debt and progress to a better financial future.

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

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

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

President Obama has announced a plan that seeks to lessen the burden of paying back student loans. The plan calls for lowering the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent for eligible borrowers. This plan goes into effect in 2012 and any remaining debt would be forgiven after 20 years. The White House said about 1.6 million borrowers could be affected. The Obama plan also allows borrowers with direct loans from the government to consolidate them at an interest rate of up to a half percentage point less. This could affect 5.8 million borrowers, according to the White House.

Currently the total outstanding student debt is $11 trillion, more than the nation's total credit card debt. Federally guaranteed student loans have made borrowing for college easy, which has had two serious consequences: first, students are graduating with unprecedented debt. 56 percent of bachelor's degree recipients at public schools graduated with debt averaging about $22,000. Second, colleges and universities are continuing to raise tuition. The average in-state tuition and fees at a four-year public college rose an additional $631 this fall, or about 8 percent. In today's tough economy, many graduates are unable to find jobs, consequently the national student loan default rate for the 2009 budget year rose to 8.8 percent.

In order to guarantee repayment of federal loans, Congress made changes to the normal consumer protections. Student loans are not discharged in bankruptcy except under the most extreme circumstances. Your tax refund, and even your paycheck, can be garnished without a court order. The government can also take some federal benefit payments (including Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income) as reimbursement for student loans. The government cannot take any amount that would leave you with benefits less than $9,000 per year or $750 per month. And, it cannot take more than 15% of your total benefit.

If you are struggling to pay student loans, speak with an experienced bankruptcy attorney and investigate options to restructure your finances. After discharging unsecured monthly bills like credit cards and medical bills, many debtors are able to make monthly payments under one of the available student loan repayment programs. Take control and use the law to your advantage!
 

 Automatic payments are a convenient way to pay your bills. An automatic payment is an arrangement for a specific amount of money to go from your bank account to the recipient’s bank account. Automatic payments are useful to pay monthly bills that do not change, like a monthly car or mortgage payment.

A direct debit is an agreement that the recipient can take money out of your account to pay your bill. You might authorize a direct debit for an electricity, phone, or credit card bill. Of course, a direct debit could be authorized for most any bill.

When you file for federal bankruptcy protection, the bankruptcy court automatically issues a temporary injunction called the automatic stay. This court order prohibits all of your creditors from taking any action to collect a debt from you. The automatic stay is very broad and applies to most creditors; even the ones that you want to continue paying.

Because of the automatic stay, creditors will routinely stop any direct debit of your bank account and refuse automatic payments. The purpose of this refusal is to remain in compliance with the court order and avoid further entanglement with the debtor’s bankruptcy case. This can be frustrating to the debtor who wants to pay a monthly mortgage payment or car loan bill.

The answer to this problem is simple: mail your payment to the creditor! Remember, the automatic stay prohibits a creditor from collecting on a debt, not accepting a voluntary payment. It is good practice to maintain good records of all payments made to secured creditors during your bankruptcy. Your check may not be cashed for weeks while your lender forwards the payment to another department now handling your loan (e.g. bankruptcy department). By sending your payment via registered mail, you will have a receipt of timely payment, regardless when the check is cashed.

The bankruptcy process provides quick and powerful relief when you have the help of an experienced guide. An experienced bankruptcy attorney knows how the laws and common practices will affect your case, and can lead you to a fresh start without complications.

 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.

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.
 

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!
 

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

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

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

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

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

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

 The holiday season is fast approaching, so it is important to start making wise financial decisions if you are considering bankruptcy. Below are three areas that individuals can create problems just before filing bankruptcy. By avoiding these activities during the holidays, you can avoid trouble and make all your seasons bright!

First, avoid overspending. Financial problems can create mental and emotional stress which is only heightened during the holidays. For some this stress can become overwhelming and cause depression. Thoughts like, “Well, I’m going down anyway, so what does it matter?” can lead to an impulsive spending spree that makes matters worse in the long run. That spending spree may mean that you don’t have money to pay the electric bill or buy gas to get to work. Instead of overspending, give the gift of time with family and friends enjoying low-cost activities, or pamper yourself with a good book or rent a video to reduce stress.

Second, avoid using credit. Credit card spending immediately before bankruptcy is often not dischargeable, especially if the charges are for non-essential items. Likewise, cash advances from credit cards are often non-dischargeable. Use of any credit just before filing bankruptcy will be scrutinized by the creditor and possibly the bankruptcy trustee. Credit from credit card use, cash advances, payday loans, or any other source may land you in trouble, including criminal trouble, if you are insolvent when you take the loan and have no intention to repay the debt.

Finally, be careful about giving gifts to friends and family members. The holiday season is a time for giving, and normally being generous would be encouraged. Unfortunately, transfers of cash or property to friends or family can create problems in a subsequent bankruptcy case. Some common examples of high dollar property transfers that may cause a red flag include: transfer of title to a vehicle; gifts of jewelry, guns, or household items; and repaying personal loans to friends or family. Once the property is transferred, you can no longer protect it with bankruptcy exemptions, and the bankruptcy trustee may compel the turnover of the property for the benefit of your creditors.

Surviving the holiday season while preparing to file bankruptcy is stressful, but some find it strangely liberating. Once you decide to file, you may experience a sense of relief, knowing that your case is being handled by an experienced bankruptcy attorney and you are now on your way to solving your debt problems. The best advice is to seek the counsel of your attorney before making any transfer of property, using credit, or making any significant financial decision. This holiday season take the focus off of your debt, and put it on the people that you care about, including yourself!

 Massachusetts Attorney General Martha Coakley has announced that her office is preparing to file lawsuits against big banks that engaged in unlawful foreclosures. Massachusetts is the latest state to proceed with litigation, despite on-going negotiations between big banks and state and federal representatives to resolve allegations of unlawful foreclosure practices.
 

Banks are accused of cutting corners and unlawfully rushing through foreclosure paperwork. Federal and state officials recently met with representatives of several large U.S. banks to discuss an agreement that would resolve class action lawsuits in the federal courts and provide relief to struggling homeowners across the country. Discussions with some of the nation’s largest mortgage servicing agencies, including Bank of America Corp, JPMorgan Chase & Co., Wells Fargo, Citigroup, and Ally Financial, have been taking place for over one year. States are becoming impatient.

“I have lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures,” Coakley said in a statement. She also said that her office has “begun preparing for litigation.” The announcement from Massachusetts comes on the heels of California’s withdrawal from negotiations, stating that the deal under discussion would not provide enough relief to homeowners.

If you are facing a foreclosure situation, it is important to discuss your rights and explore your options with an experienced attorney. The foreclosure process is a mixture of state laws and contract rights, and understanding the situation is your first step in resolving it to your benefit.

The federal bankruptcy law can be used to stop a foreclosure and give you an opportunity to repay a mortgage arrearage over three to five years, strip off an unsecured junior mortgage debt, or just simply give you time to walk away from your home. Filing bankruptcy will stop the foreclosure immediately and put you under the protection of the federal law.

Get help today by calling an experienced bankruptcy attorney. Bankruptcy can help you reclaim control over your debt situation and build a better financial future.

 The Washington Post recently reported that a Southern California debt collection firm has been shut down by the Federal Trade Commission for violating debtor harassment laws. What makes this story especially newsworthy is the outrageous accusations against the collection company, including threats against a family pet and digging up a corpse!

The FTC halted operations and froze the assets of a debt collection business that operated under a variety of names. The company’s owners are charged with violating the Federal Trade Commission Act and Fair Debt Collection Practices Act. The FTC alleges that a collector for the company unlawfully threatened a woman who owed money on her daughter’s funeral bill. She was told that they were going to dig up the body and hang her from a tree if she didn’t pay. She was also told that they would take her dog and eat it.

Federal laws protect consumers from these types of outrageous threats. The Fair Debt Collection Practices Act, or FDCPA, is one federal law that protects against abusive collection practices by third party collectors. Third party collectors include collection agencies and collection attorneys. The FDCPA does not apply to business debts or to original creditors. The FDCPA prohibits certain abusive practices including:

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

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

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

 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.

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

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

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

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

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

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

 Every time you use your debit card to pay for purchases, the merchant must pay a "swipe fee" to the card issuing bank. The old formula averaged about 1.14 percent of the purchase price, and netted U.S. banks billions in fees. As of October 1, 2011, these fees have been dramatically cut by a new law contained in the Dodd-Frank Act. Now swipe fees are capped five percent of the transaction and a maximum of 21 cents. Some analysts predict that this will cost the biggest U.S. banks annual revenue of $8 billion.

So when was the last time big banks lost money without a fight?

Bloomberg and other news agencies are reporting that Bank of America is planning a $5 monthly fee for debit card use. Instead of getting their money from merchants, Bank of America will get it from its customers. The fee will apply any month in which the debit card is used for a purchase, and will not apply to withdrawals from a cash machine. The fee will be assessed whether the customer makes one purchase or ten. In other words, that $10 purchase could now cost you $15.

The $5 monthly usage charge would take effect early next year, and customers would be notified at least 30 days in advance of the change, said Betty Reiss, a spokeswoman for Bank of America. "If they don't use the debit card during the month to make a purchase, they won't incur the fee," Reiss said.

Bloomberg reports that Wells Fargo is also testing a $3 monthly debit card fee in some markets. "We will continue to see more debit card fees in the months ahead," said Greg McBride, senior financial analyst at Bankrate.com.

Predictably, the Bank of America debit card fee will not apply to wealthy accountholders with premium accounts. There are many bank fees that are directed at lower income families, including monthly or annual checking account fees, overdraft fees, overdrawn account penalties, and checking account advance fees. These fees account for billions each year in revenue and take money from the pockets of lower income people.

If you are struggling with debt and have too much month left at the end of your money, speak with an experienced bankruptcy attorney and discuss your options. Don’t continue to have your income drained by bank fees! Take control over your finances and build a better financial future today.

 In “the old days” (before 2005) a bankruptcy debtor with a mortgage problem could file a Chapter 7 bankruptcy and discharge all of his unsecured debts, then immediately turn around and file a Chapter 13 to deal with real estate debt. Bankruptcy attorneys referred to this as a “Chapter 20” (Chapter 7 plus Chapter 13). The 2005 amendments to the Bankruptcy Code sought to kill this practice; however one recent case may bring Chapter 20 back to life.

The Bankruptcy Appellate Panel for the federal Eighth Circuit Court of Appeals has ruled in favor of a debtor who filed a Chapter 13 bankruptcy to strip away a wholly unsecured second mortgage, even though he was not eligible for a discharge in the Chapter 13 case. In this case, In re Fisette, No. 11-6012 (8th Cir. BAP Aug. 29, 2011), the debtor filed his Chapter 13 case soon after receiving a discharge in a previous Chapter 7 case. The Bankruptcy Code requires that a debtor wait six years after a Chapter 7 case to be eligible for a Chapter 13 discharge, so the debtor was not eligible for a Chapter 13 discharge. After filing Chapter 7, Fisette continued to make payments on his home without formally reaffirming his personal obligation on any of his three mortgages. By 2010 he was behind on his mortgage payments. Since the total amount owed on his first mortgage was more that his house was worth, Fisette decided to ask the bankruptcy court to strip away the second and third mortgages.

The Eighth Circuit BAP allowed Fisette to strip away the junior mortgages. Since Fisette had previously been discharged of his personal obligation on the junior mortgages during his Chapter 7 case, the bank had no recourse against Fisette or his property. This is the first time a federal appellate court has allowed lien stripping in a “Chapter 20” case since 2005.

Bankruptcy law can be extremely complex and is constantly changing. If you need the help and protection of the federal bankruptcy courts, get assistance from an experienced bankruptcy attorney. Your attorney can explain your rights and your options, and help you decide on the right course for you and your family.

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

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

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

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

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

One of the most beneficial provisions of the federal Bankruptcy Code is the automatic stay which stops all creditor action once the case is filed. Creditors can no longer commence or continue lawsuits, foreclose or repossess property, make harassing telephone calls, or garnish wages. For the individual who is having wages garnished, the automatic stay is welcome relief.

When a bankruptcy case is filed, the individual is under the authority and protection of the United States Bankruptcy Court. The automatic stay is just what it sounds like: a cessation of all collection activity immediately upon filing the case. This stay is “automatic” because it does not require a separate motion or a hearing. The stay is effective against any creditor, whether or not there is actual notice.

For wage garnishments, the automatic stay imposes an affirmative obligation for the creditor to put an end to the garnishment immediately. Failure to take this action could result in sanctions by the bankruptcy court. Typically, the debtor’s attorney will notify the garnishing creditor of the bankruptcy filing and, in turn, the creditor will release the garnishment through notice to the state court and the debtor’s employer. An exception to this general rule is a child support or other domestic support order, which is not affected by the automatic stay.

Money that has been collected and is being held by an employer will be returned to the debtor after the bankruptcy filing. In addition, if a creditor has taken over $600 from a paycheck or bank account within the 90 days before the bankruptcy filing, the bankruptcy trustee or the debtor can recovered the garnished funds from the creditor.

If your wages are being garnished, contact an experienced attorney and discuss how a bankruptcy filing can stop the garnishment. Bankruptcy can provide immediate and lasting relief to individuals struggling with overwhelming debt. Call today and start down a path to financial recovery.
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Abraham Lincoln

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

Walt Disney

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

Milton Snavely Hershey

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

Henry John Heinz

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

Henry Ford

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Equity is a very important term when discussing your personal assets. Generally, equity is the difference between the market value of an item and the amount of the claims against it. For instance, if your car is worth $5,000, and your auto loan balance is $3,000, then you have $2,000 in vehicle equity. If you own the vehicle jointly with your mother, you have $1,000 in vehicle equity.

Equity is a common issue during bankruptcy, since the debtor is allowed to keep certain modest possessions. Once the amount of equity in an item of property is determined, the debtor can apply legal exemptions against the equity to protect the asset from the bankruptcy trustee and creditors.

When calculating equity, it is vital to not over-value the asset. For some items there are resources, such as the NADA Price Guide for automobiles. For other items you may need to do some investigation. Ebay is a good resource for collectibles. For real estate it may be necessary to speak to a realtor or conduct an appraisal to discover the market value.

Many bankruptcy debtors over-value furniture and jewelry. Most furniture and jewelry immediately depreciates a great deal after purchase. A used sofa may have cost you $700 at the furniture store, but the market value is only what you would get from a yard sale or through Craigslist. Probably not anywhere near what you originally paid.

After determining the market value, the second step in figuring equity is to subtract any claims against the property. The most common type of claim is called a purchase money security interest (PMSI), a fancy term that means you used a lender’s money to buy the item and used the item as security for the loan. This is usually the case with a car loan or a home mortgage, but many other credit purchases could be considered PMSI. A non purchase money security interest (NPMSI) is a loan secured by property you already own. Some finance companies use furniture or other property owned by the borrower to secure personal loans. Finally, a tax lien against real estate or even personal property may affect your equity, as can some legal judgments.

Once your equity is calculated, the next step is to apply legal exemptions to the equity. Most debtors are able to protect all of their equity using legal exemptions. If there is unprotected equity, the trustee must make a decision whether the amount of equity available is worth his time and will actually benefit creditors. Statistically bankruptcy trustees only take property or assets from debtors in about one out of every twenty five Chapter 7 cases.

It is very important to accurately calculate the amount of equity in your property. Discuss all of your property, its market value, and your legal claims with your attorney. Your attorney can then advise you on the best way to protect the property from creditors.
 

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

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

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

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

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

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

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

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

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

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

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

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

Wor*ry*wart - noun: a person who is inclined to worry unduly.

Some clients are content to turn over their financial problems to a bankruptcy attorney and experience immediate peace of mind. Others cannot stop worrying until the case is discharged and closed. Everyone is different. Fortunately, most bankruptcy cases are very predictable. Before the case is filed your bankruptcy attorney should explain the process and prepare you for certain events that will occur.

Your attorney is in constant contact with the bankruptcy court and receives electronic notices concerning your case. In most cases, a bankruptcy debtor represented by an attorney will not receive correspondence through the mail from creditors, the bankruptcy trustee, or from the bankruptcy court. Instead, your attorney is required to keep you informed concerning the status of your bankruptcy case, and you will be contacted concerning important changes to your bankruptcy case. Notices such as the date of your Meeting of Creditors, or your discharge, will be sent to you along with other important information.

For the worrywart, the federal bankruptcy courts provide access to case information via the Public Access to Court Electronic Records, or PACER system. Through PACER, anyone can obtain information about a bankruptcy proceeding, including access to all documents and docket entries associated with the case. However, this information comes at a price. PACER charges $.08 per page. Some people have unknowingly racked up a substantial bill by constantly checking PACER for changes to a bankruptcy case.

If you choose to sign up for a PACER account to monitor your case, the general rule of thumb is to check your case only about once a week because bankruptcy cases generally move in a slow and orderly pace. Additionally, avoid clicking on every link, especially choosing to view large documents such as your petition and schedules (which could be 30-40 pages!). Instead, by choosing the docket report option you will see a synopsis of your case and it should cost less than a dollar per view.

Client access to PACER is not necessary for the typical bankruptcy case. You will receive important notices and information directly from your attorney and the streamlined nature of the bankruptcy process will quickly move your case to completion. Other the other hand, if you are a chronic worrier, an occasional check of your case on PACER may be just what the doctor ordered to provide you with peace of mind.
 

Clients are often pleased to learn about one of the bankruptcy law's most powerful protections: the automatic stay. When a bankruptcy case is filed, the debtor receives immediate protection from creditor collection actions. This relief is known as the “automatic stay” because it immediately stops lawsuits, telephone harassment, and other attempts to collect on a debt. The automatic stay continues throughout the bankruptcy case until either the stay is modified by the court or the case ends.

But what about co-signors?

Most co-signors are considered "jointly and severally liable" for the debt. That means that each party is liable up to the full amount of the debt. If you file bankruptcy, your co-signor is typically on the hook for 100% of the outstanding debt. Contrary to a popular misunderstanding, the bankruptcy discharge does not "erase" a financial obligation. The discharge is a legal injunction that prohibits your creditors from enforcing your debts against you individually. The debt still exists, and can be collected from others who are not protected by the bankruptcy laws.

Filing a Chapter 7 bankruptcy case will not stop a creditor from collecting against a co-signor or co-debtor. However, a Chapter 13 bankruptcy case contains a protection known as the “Co-Debtor Stay.” This protection is meant to protect a debtor by insulating him from indirect pressures from his creditors exerted through friends or relatives. The Co-Debtor Stay stops all collection actions against any individual who is obligated on a consumer debt owed by the debtor. This protection continues until the Chapter 13 case has concluded, or the Co-debtor Stay is modified or lifted by the bankruptcy court. Typically, the Co-Debtor Stay will last the duration of the debtor's Chapter 13 bankruptcy case, or three to five years.

There are limits to the Co-Debtor Stay. The Co-Debtor Stay only prohibits collection on personal debts, not business obligations. Additionally, if your co-signor actually received the benefit of the debt, and your Chapter 13 plan proposes not to pay the debt, the creditor can seek to lift the stay. This is often the case when the bankruptcy debtor co-signed a loan so that a friend or family member could purchase a car. Of course, if the creditor is receiving timely payments on the loan, there is usually no issue or impact to the co-signor.

If you need bankruptcy relief, but are worried that your co-signors will be harmed, discuss the issue with an experienced bankruptcy attorney. Your attorney can recommend several options to consider when dealing with co-signors.
 

 Years ago, few attorneys specialized in any particular area of the law. These "general practitioners" handled criminal cases, family law matters, real estate disputes, and a host of other complex legal matters. Today law schools teach aspiring attorneys the general principles in many different legal disciplines, and the bar exam tests the basic knowledge of these subjects. However, the idea of the "general practitioner" is outdated. In today's world, a complex legal matter such as a bankruptcy case is best handled by an attorney that has specialized knowledge and experience.

Bankruptcy law is an area of the law that many attorneys avoid - and for good reason! Bankruptcy law is a complex amalgamation of federal and state laws, court rules, case precedent, and customs. While the federal Bankruptcy Code is intended to be applied uniformly across the country, bankruptcy judges in different districts have interpreted and applied the provisions of the Bankruptcy Code differently. For this reason it is often important to know how the views and opinions of the bankruptcy court judge assigned to your case. Additionally, your bankruptcy attorney is familiar with the negotiation practices of your creditors and can anticipate an outcome before your case is filed.

An experienced bankruptcy attorney is able to review your case and identify any potential problems. For instance, it may be advantageous to wait a month or longer to file your case. Perhaps you have a preferential transfer, or your income is too high because of a bonus you received five months ago. Your bankruptcy attorney knows which questions to ask and how to avoid problems in your case. As the saying goes, "there is no substitute for experience."

An attorney who practices primarily bankruptcy is also able to move quickly and efficiently through the stages of your case. Bankruptcy courts are streamlined to provide quick relief to deserving debtors, and your bankruptcy attorney has customized the processes in the legal office to maximize efficiency. This not only saves you time, but also money. 

Using your family attorney or cousin who just passed the bar may sound appealing, or may even save a few dollars up front, but the costs may quickly mount up when you experience problems in your case. When you think about it, hiring a bankruptcy attorney for a bankruptcy case is a no brainer. The bankruptcy attorney works every day in the bankruptcy law and can handle your case quickly, efficiently, and without surprises. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chapter 13 is most commonly used by corporations, although an individual may file a Chapter 11 bankruptcy case when the debt limits for Chapter 13 are exceeded. Chapter 11 is in many ways like a Chapter 13 case. The bankruptcy trustee cannot take property from a Chapter 11 debtor. The debtor proposes a plan to repay debts; creditors vote whether to accept the plan; and ultimately the bankruptcy court orders a reorganization plan which binds all parties to the terms of the plan.

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

The Bankruptcy Code offers four powerful types of bankruptcy cases to individuals. If you are struggling with debt, speak to an experienced bankruptcy attorney and discover how the Bankruptcy Code can help you reorganize or eliminate your debt headache.
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 During World War II American servicemen were cautioned against careless talk that might reveal information useful to the enemy. One popular saying was, “Loose lips sink ships.” Today, debt collectors are using a variety of information sources to locate income and assets. A similar warning may be applied to bankruptcy debtors: “Loose lips may sink your bankruptcy.”

For some time debt collectors have used social media sites to discover information about a debtor. One popular method is through Facebook, which boasts more than 500 million active users. Some collectors make a friend request in order to gain access to the debtor’s private information and friends. Once the friend request is accepted, the collector will monitor the Facebook page for information concerning income and assets.

While Facebook is a fun way to keep in touch with your friends and discuss what is currently happening in your life, it can also create problems when you reveal too much. For instance, pictures of your home (including furnishings), yourself wearing jewelry, or photos of Christmas or birthday presents could reveal assets that were not listed in your bankruptcy schedules, or perhaps were erroneously under-valued. Additionally, discussion about jobs or even hobbies may reveal un-reported or under-reported income.

Not only are debt collectors looking for this information, but the bankruptcy trustee, private creditors, or perhaps an angry ex-spouse or ex-business partner may also be interested. In most cases debtors adequately account for income and assets, and the information obtained on an individual’s Facebook page is negligible. But why take the chance? The best advice is to heed this advice: “Loose lips may sink your bankruptcy.” Be careful what you disclose publicly – especially over the internet.

If you are struggling with debt, discuss your financial situation with a bankruptcy attorney. A licensed bankruptcy attorney will keep your financial information confidential and give you legal advice that will lead to a financial fresh start.

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. 

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. 

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

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

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

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

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

In theory debt settlement is simple: the debtor negotiates with the creditor to reduce a debt to an amount that is regarded as payment in full. It sounds honest enough: the debtor cannot afford to repay a debt, so the creditor agrees to accept a reduction. The creditor is paid something and the debtor avoids bankruptcy.

In practice debt settlement is a nasty game of chicken. The debt settlement company advises the debtor to stop making monthly payments to the creditor. In response, the creditor pressures the debtor to pay through harassing telephone calls, damage to the debtor’s credit report, mounting interest and fees, and perhaps legal action. The resolution comes when one side blinks: either the creditor is convinced that it better take a settlement or risk discharge in bankruptcy; or the debtor realizes that his or her credit is ruined and actually files bankruptcy.

Debt settlement is big business, but many debt settlement companies have caused big trouble for their clients. Take for example Debt Relief USA. This company, like many debt settlement companies, advised its customers to stop paying its creditors and instead deposit money into a Debt Relief USA settlement account. This money, held by Debt Relief USA, was to be used as settle funds for the individual’s debts. Customers were assessed fees for services including burdensome “administration fees” and monthly “maintenance fees” that further damaged its customers’ financial situations. When a debt was settled, the Debt Relief USA charged a 13 percent “negotiation fee.”

In 2009 Debt Relief USA filed a Chapter 11 bankruptcy and claimed that it owed its clients $5 million from these settlement accounts. In December 2010, the bankruptcy court approved a $3.7 million disbursement to Debt Relief USA’s clients. The case was also converted to Chapter 7 and Debt Relief USA is no longer conducting business.

Bankruptcy attorneys regularly see the damage caused by debt settlement companies. In some cases money is not returned to debt settlement customers, or the company itself files bankruptcy, or the individual’s credit is destroyed. Before agreeing to any debt relief program, discuss your financial situation an experienced bankruptcy attorney. There are powerful federal laws that can protect you from overwhelming debt, and a bankruptcy attorney can review your legal options without risking your cash.
 

 Call it poetic justice, or even karma. . .

During the past few years Bank of America has been at the subject of harsh criticism for business practices that range from the mean-spirited (such as doubling credit card interest rates without notice, up to 28% for cardholders in good standing), to irresponsible (such as foreclosing on the wrong homes), to even fraudulent (such as the recent robo-signing scandal involving mortgage documents). Bank of America is the nation’s largest servicer of mortgage loans, and the second largest mortgage loan originator. You’d think good record keeping would be important to such a large company, but apparently mistakes abound at Bank of America.

Take for example the case involving Florida couple Warren and Maureen Nyerges. In 2009 the couple moved from chilly Cleveland, Ohio, to warm Naples, Florida. They purchased a foreclosed home from Bank of America and paid $165,000 cash. However, in February 16, 2010, Bank of America filed a Complaint to Foreclose on Mortgage against them, claiming the Nyerges owed almost $141,000 in unpaid mortgage debt.

Warren Nyerges, 46, a former sheriff’s deputy in Ohio, spent months trying to dismiss the suit and clear up Bank of America’s error. In April of 2010, the lawsuit was dropped, and in December the Nyerges were awarded $2,534 in attorney fees. The bank did not respond to the repeated requests to pay the court judgment. Warren called the bank, sent certified letters, called the bank’s attorney, but nothing worked. Then, in January, he hired an attorney to pursue the case. The attorney sent letters and made phone call, and still Bank of America failed to respond or pay the judgment.

On June 3, the attorney for the Nyerges, accompanied by Collier County deputy sheriffs and a moving company, arrived at a local branch of Bank of America and presented the bank manager with a writ of execution to seize assets: either pay up or the movers will start taking things. An hour later checks were cut to satisfy the court judgment.

This may seem to be an extreme example of one case that has fallen through the cracks, but the truth is that banks make errors regularly. In Utah and Nevada courts issued foreclosure injunctions against Bank of America for improper practices. Other banks have also had their share of problem in producing mortgage documents and verifying that the bank is the rightful holder of the mortgage.

If you are facing foreclosure, don’t get steamrolled by the bank! You have legal options to negotiate a lower payment or possibly strip away a junior mortgage. Call today and discover how the federal and state laws can help you save your home and protect your rights.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Remember that time is money.
Benjamin Franklin (1748)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In the early days of this country it was common for debtors to be imprisoned until their debt was paid. Popular history records that the last debtors’ prison was closed in the 19th century and the practice of incarcerating a person on account of a debt was abolished. However, the prohibition against debtors’ prison has always had its loopholes; the most well-known examples are tax evasion and child support delinquency. In one case a former corporate lawyer, H. Beatty Chadwick, was imprisoned for more than 14 years for failing to turn over money related to a divorce case. The judge who released him decided that after 14 years Mr. Chadwick either could not or would not pay.

Since the start of the recession more debtors are being arrested for not paying debts. The Washington Post reports that “more than a third of all U.S. states allow borrowers who can't or won't pay to be jailed.” This process generally occurs after an individual fails to show up to court, but sometimes results from failing to make court-ordered payments to a creditor. In one case the Post reports that a 26 year old woman was arrested for failing to show up to a court hearing over a $1,159.87 credit card debt. When she posted a $500 bond, that money was turned over to the creditor.

While many state judges appear to be using the power of their office to influence debtors to pay their creditors, these judges cannot circumvent the power of the federal bankruptcy laws. When a debtor files bankruptcy, all debts owed prior to the date of the bankruptcy fall under the jurisdiction of the federal bankruptcy judge. All state court proceedings must automatically stop, including the execution of a state court contempt of court warrant to coerce payment. This automatic stay is a very powerful protection and gives the debtor a chance to propose a plan to either discharge the debt or repay it over time.

If you are threatened with a lawsuit, don’t ignore it. Speak with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can protect your income, your property, and even your freedom.
 

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

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

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

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

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

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

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

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

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

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

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

Beginning in the 1970’s, many college graduates chose to discharge their student loan debt immediately after graduation. As a result, Congress tightened the restrictions on discharging government-backed student loan debt, and by 1998 federal student loans were not dischargeable except under circumstances of undue hardship. Today the standard is whether repayment of the student loan “would impose an undue hardship on the debtor and the debtor’s dependents.”

“Undue hardship” seems like an easy hurdle to clear. If you are broke, the choice may be buying food or paying on the student loan, right? Unfortunately, courts have taken a very narrow and hard-line approach in construing the undue hardship standard. Consequently, it is very difficult to discharge student loans in bankruptcy. A good example of this is found in the recent case of Wallace v. Educational Credit Management Corp., 2010 WL 5764771 (Bky.S.D. Ohio Dec. 1, 2010).

The bankruptcy debtor in Wallace graduated with bachelor’s degree in sociology and over $30,000 in student loan debt. Wallace was able to work one year making a little over $12,000 before being forced to quit working due to complications from diabetes. Over the next few years he lost one eye, and had a kidney and pancreas removed. By 2008, he was legally blind and receiving $811 each month in social security disability. His monthly expenses were determined to be $790.

Wallace and his attorney filed an adversary case in the bankruptcy court seeking to discharge the student loan debt under the undue hardship standard. The Bankruptcy Court for the Southern District of Ohio looked at three factors (known as the Brunner test) in reaching its decision:

1. whether Wallace could maintain a “minimal” standard of living if forced to repay the student loan debt;
2. whether additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the student loan repayment period; and
3. whether Wallace made a good faith effort to repay the student loans.

The Ohio Bankruptcy Court decided that while the first prong of the Brunner test was met, Wallace “failed to demonstrate that his state of affairs is likely to persist for a significant portion of the repayment period of the Loan.” The Bankruptcy Court ordered Wallace to pay $20 per month, but stayed final judgment on the issue until 2012 and would review the case. In a bit of ironic prose, the court stated that “It remains to be seen into which group Wallace will land, whether he will find work or remain unemployed.”

As you can see from the Wallace case, student loans are very difficult to discharge. If you believe you can meet the undue hardship test, discuss your with an experienced bankruptcy attorney. While not impossible, discharging student loans is a very high bar to clear.
 

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

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

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

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

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

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

Most credit unions and some banks use “Loanliner” documents. These agreements are standard loan documents developed by CUNA Mutual Group and sold to financial institutions. Over 70% of all credit unions use Loanliner documents for their lending transactions. Included in standard Loanliner lending agreements is a provision in which the borrower agrees that all other loans with the lender are cross-collateralized.

Cross-what?

Cross-collateralization is basically the use of collateral from one loan to secure other loans. The cross-collateralization clause from a recent Loanliner agreement reads: “the security interest also secures any other loans, including any credit card loan, you have now or receive in the future from us and any other amounts you owe us for any reason now or in the future.” Credit unions are fond of using this clause in vehicle loan agreements to secure all other credit union debts with the vehicle. This often causes surprises (and anger) when an unsuspecting credit union member tries to trade-in his car and discovers that the debt on the vehicle includes a personal loan, a line of credit, and credit card balances.

There are a few options if you are faced with a cross-collateralized auto loan. First, you can file a Chapter 13 and cram-down the loan to match your vehicle's value. Any remaining debt is discharged at the end of the Chapter 13 case. During a Chapter 13 case, you can pay a cram-down over three to five years.

During a Chapter 7 case, your attorney can simply ask the credit union to draft a reaffirmation agreement for the vehicle without regard to other debts. You are basically asking the credit union to voluntarily strip off the cross-collateralized loans. If the credit union refuses your request, you have two options: (1) surrender the vehicle and discharge all debts to the credit union; or (2) redeem the vehicle. Redemption is a process exclusive to a Chapter 7 bankruptcy case where the debtor keeps a vehicle by paying the value of the vehicle, not the total debt that is owed. While similar to a Chapter 13 cram-down, redemption differs in that the payment to the secured creditor must be a lump sum. Payments are not permitted.

If you have an auto loan through your local credit union, review the loan paperwork with your attorney for a cross-collateralization clause. Your bankruptcy attorney can discuss your options with you and help arrive at the best financial decision for your family.
 

Many debtors with serious financial problems also own vehicles that are underwater. Fortunately, the federal Bankruptcy Code offers several options for the debtor to consider. One of the most sensible for many debtors is a Chapter 13 cram-down of the vehicle loan. A cram-down is simply the reduction of the amount that is owed to the fair market value of the vehicle. The debt is "crammed down" to what the vehicle is worth.

The basic rules of a cram-down are pretty straightforward:
1. A vehicle cram-down is only available in a Chapter 13 case (different options exist in other bankruptcy chapters);
2. The vehicle must be for personal use;
3. The debt must have been incurred more than 910 days (about 2 ½ years) before filing the bankruptcy petition ; and
4. The loan must be more than the fair market value of the vehicle.

A cram-down is accomplished through a court order and confirmed Chapter 13 bankruptcy plan. The bankruptcy court will receive evidence of the amount owed and the value of the vehicle. Once the court approves the cram-down, the amount of the secured claim will be the same as the value of the vehicle. The remaining balance will be ordered as unsecured, and will likely be discharged at the end of your bankruptcy case.

The new secured balance is paid to the Chapter 13 trustee who pays the creditor. The balance also includes a new court ordered interest rate. The approved rate of interest is directed by the United States Supreme Court in Till v. SCS Credit Corp, and commonly called the Till rate. The Till rate is often less than the debtor’s original interest rate, and lowers the monthly payment.

While the federal bankruptcy laws are meant to be uniform across the country, the sweeping changes to the Bankruptcy Code in 2005 left many questions that are still being resolved by different circuits. For instance, recently the Ninth Circuit in the case of In re Penrod broke from the rest of the country and decided that the amount of negative equity in a trade-in that was rolled into a new vehicle loan could be stripped off, even when the loan is less than 910 days old. This case highlights the different interpretations of the new bankruptcy laws and why it is critical to retain experienced counsel for your case.

If you are considering bankruptcy and own a vehicle that is underwater, speak with an experienced bankruptcy attorney and discuss your options. Your attorney can explain the several options for keeping or surrendering a vehicle during bankruptcy, and help you decide the best course of action for your family.

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

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

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

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

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

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

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

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

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

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

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

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

Consider the following example:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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In February we celebrate President’s Day, so now is a good time to reflect on some of the financial hardships a few of our Presidents endured and overcame. For many of these unfortunate Presidents, bankruptcy was not an available option. Fortunately, today’s federal bankruptcy laws make it easy to discharge honest debt and provide a fresh financial start.

Thomas Jefferson

Famous for founding the University of Virginia, drafting the Declaration of Independence, and serving as third President of the United States, Thomas Jefferson lived most of his life as a wealthy estate owner in Virginia. Unfortunately, Jefferson had a habit of living beyond his means and choosing poor investments. At the time of his death in 1826, Jefferson was found to be $107,000 in debt (between $1 and $2 million in today’s dollars). His family was forced to sell much of his property including Jefferson’s beloved Monticello.

Abraham Lincoln

A face that can be seen on Mount Rushmore along with Thomas Jefferson’s is our 16^th President, Abraham Lincoln. Before Lincoln was President, he experienced serious financial trouble as a failed shopkeeper in Salem, Illinois. Lincoln and a partner purchased a small general store on credit. The business failed and when his partner died, Honest Abe became liable for a $1,000 debt. His horse and surveying equipment was taken and sold, and Lincoln spent the next 17 years repaying creditors.

Ulysses S. Grant

In a scheme that seems like it was taken from today’s headlines, our 18^th President lost $150,000 when Grant’s partner in a Wall Street investment bank swindled him. Grant liquidated all of his assets and transferred all of his personal possessions to repay his debt. Later that same year Grant signed a book deal that netted his family over $400,000 !

William McKinley

While serving as Ohio's governor during the depression of 1893, McKinley found himself $130,000 in the red after a friend defaulted on bank notes McKinley endorsed. McKinley’s friends raised the money to bail him out, and four years later McKinley became our 25^th President.

Harry S. Truman

By the time Harry S. Truman became a U.S. Senator, he had lost a future inheritance in a failed zinc mining operation, and was financially ruined when his Kansas City clothing store went bankrupt in the 1920’s. He continued to pay debts throughout his early career in Congress. Due to Truman’s sad financial state, Congress doubled the presidential salary. Truman and his wife were the first two official recipients of Medicare when Lyndon Johnson signed the program into law.

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

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

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

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

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

After a court enters a money judgment against you, the judgment creditor can proceed to collect. Many experienced creditors like to start the post-judgment collection process by attacking your bank account. In this way the creditor can attempt to seize a lump sum payment before settling in to collect from your wages.

A bank account garnishment begins with the court directing the bank to freeze your bank account and turn over funds to the sheriff. Once your account is frozen, any outstanding check will be refused payment (unless the amount of the judgment is less than the amount on deposit at your bank, then the bank can only partially freeze your account). A garnished bank account can cause many problems for the debtor, especially when executed just after payday.

Bank account garnishments are almost always a surprise. The judgment creditor or collecting agent (often the sheriff of your county) must notify you and the bank, but typically the bank is first notified to freeze your account, then you are notified by regular mail. This prevents any possibility that you can withdraw funds before the garnishment takes your money.

There are defenses to a bank garnishment. You may claim that all or a part of the deposited funds are exempt under state or federal law. The notice of garnishment is often accompanied by a list of possible exemptions and notice procedures. For instance, Social Security payments are generally exempt from garnishment. However, once a Social Security payment is deposited into your account and co-mingled with other funds, the question becomes “what part of the account balance is Social Security (and exempt) and what part is not?” A hearing is required to determine this answer and the burden is on you to prove that the funds in the account are exempt from creditor collection.

Filing bankruptcy stops the commencement or continuation of a bank garnishment. Bankruptcy stops collection actions and will discharge most judgments. If there is a judgment against you and you fear a future bank account garnishment, speak with an experienced attorney and discuss how the federal bankruptcy laws can stop a judgment creditor cold.
 

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Credit Card APRs have risen over 20% during the past two years to an all-time high of nearly 15%, according to information CreditCards.com collects from 100 of the nation’s top credit card companies. While the best interest non-introductory rates are a reasonable 7 to 13%, people with bad credit can expect to get stuck with an APR of 24% or higher.

The Credit CARD Act of 2009 stopped card companies from raising interest rates without prior notice and curtailed other abusive practices. The credit card industry has responded by increasing interest rates for future charges and on new customer accounts. Beverly Harzog of Credit.com was quoted by CNNMoney as saying, “Rates are going up because card issuers know that once you get a card they can't raise the rates, so they're raising rates on the front end to ensure they get the revenue from that interest.”

So what are your best options if you have poor credit? First, stay away from cards that charge high fees commonly labeled Acceptance Fee, Participation Fee, or Annual Fee. In some cases a credit card with a $250.00 credit limit may already have $175.00 in fees charged against it!

Instead, take a look at secured credit cards. These cards are available to anyone, including recently discharged bankruptcy debtors. To obtain a secured credit card you must first provide a cash collateral deposit to the bank that becomes your credit line. For example, if you deposit $500 into the account, your credit line is up to $500. If you fail to make monthly payments or honor the terms of the credit agreement, the bank simply closes your account, offsets what it is owed against the deposit, and returns the remaining money to you.

In many cases a secured credit card is reported to the three largest credit reporting bureaus (Equifax, Transunion, and Experian), so the cardholder can improve a credit score significantly with payments over time. Some banks will reward its secured cardholders who pay on time with unsecured increases to the credit line. Bankrate.com maintains a list of banks that issue secured credit cards. Be sure to investigate and compare the fees and interest rates charged by these companies before opening an account.

If you are struggle with paying your bills each month, get out of the vicious cycle of debt by using the federal bankruptcy laws. The bankruptcy discharge can be your ticket to financial stability and savings for the future. Call today and discover how bankruptcy can help you.

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

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

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

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

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The federal bankruptcy system is built on trust. The Supreme Court of the United States has consistently held that bankruptcy provides a fresh start for the honest, but unfortunate debtor. However, a dishonest debtor can face significant obstacles and make his financial and legal situation worse.

The bankruptcy laws are meant to give an honest debtor a fresh start, but not a head start. The debtor is expected to make a reasonable and good faith effort to repay his creditors. The debtor must provide honest and accurate information regarding his income, expenses, assets, and debts to the bankruptcy court. The information is reviewed by creditors and the bankruptcy trustee and is a snapshot of the debtor’s financial status on the day the bankruptcy was filed.

The law does not expect bankruptcy debtors to go without food, or clothing, or to stop paying the family car payment in order to pay a credit card bill. On the other hand, the debtor is expected to pay if the money can be reasonably had from extra monthly income or by selling an unnecessary item of property.

Even with the large benefit that bankruptcy can provide, some debtors still try to “game” the system. Failing to honestly and accurately disclose income or assets can result in a denial of bankruptcy discharge. In some cases the bankruptcy court may dismiss the debtor’s case for dishonest acts like lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee. If the debtor’s case is dismissed or a discharge is denied, the debtor will remain liable for all debts.
 

If a discharge is denied, any assets turned over during the case will still be administered by the bankruptcy trustee and the debtor may lose non-exempt property to creditors.

Perhaps the most serious consequence to the dishonest debtor is a federal criminal charge for bankruptcy fraud. Dishonest acts during bankruptcy may be referred to the Federal Bureau of Investigation for investigation. Other federal agencies may become involved like the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program. The Department of Justice Trustee Program maintains a website and toll-free number for the general public to report suspected bankruptcy fraud.

The old saying goes, “pigs get fat, hogs get slaughtered.” Don’t be hoggish during bankruptcy and report your financial information honestly and accurately. An experienced bankruptcy attorney can evaluate your financial situation and advise you in the most beneficial and legal way to protect your family’s income and assets during bankruptcy. Call today and discover how the powerful federal bankruptcy laws can help you.
 

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Some people think that you lose everything when you file bankruptcy. That is simply false. In fact, you do not lose anything if you file a repayment plan Chapter 13 bankruptcy. During Chapter 13 you pay your unsecured creditors (e.g. medical bills and credit cards) what you are able over three to five years, and the remaining balance is discharged.

A Chapter 7 bankruptcy is a liquidation bankruptcy and your property may be at risk to be takenand sold to pay creditors. However, the bankruptcy laws provide three ways to protect your property during bankruptcy: (1) when the property is not part of the bankruptcy estate; (2) when there is no equity in the property; or (3) when the property is exempt under state or federal law.

Some property cannot be taken from you because you do not own it. For instance, if you drive your mother’s car, it cannot be taken and sold during your bankruptcy. Property that is owned by another person and is in your possession must be disclosed in your bankruptcy schedules.

Secured property, like a home or vehicle, that is “upside-down” in value (not worth more than what is owed) cannot be taken during a Chapter 7 bankruptcy. There is nothing left after paying the secured creditor. For instance, if you owe $10,000 on your car, and it is worth $8,000, your car cannot be taken and sold during the bankruptcy.

Typical bankruptcy debtors own clothing, furniture, household goods, jewelry, and other personal items. While individually these items are not worth much, collectively they may be worth thousands of dollars. State and/or federal laws allow bankruptcy debtors to keep items reasonably necessary for day-to-day living through the use of exemptions. However, many exemptions are capped by a dollar amount to prevent abuse. For instance, while a $1,000 family piano may be exempt under state law, a $100,000 Steinway grand piano is not. Modest equity in vehicles, clothing, reasonable jewelry, retirement accounts, some savings, and even home equity are commonly exempt and protected during bankruptcy.

If you need the benefits of a bankruptcy discharge, but are worried that you will lose everything you own, speak with an experienced bankruptcy attorney and get the facts. Over 90% of Chapter 7 bankruptcy debtors keep everything, so call today and discuss your situation.
 

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Your bankruptcy discharge prohibits certain creditors from collecting from you personally after your bankruptcy case. So what happens when a creditor contacts you after your discharge? The answer depends on the situation and first involves answering three questions: (1) “Was the debt discharged in bankruptcy?” (2) “Is the collection directed at the discharged debtor?” and (3) Was the creditor notified of the discharge?”

Discharged debts are no longer legally enforceable against the debtor. The discharge injunction is a court order from a federal bankruptcy judge prohibiting creditors from filing lawsuits, sending collection notices, or making collection phone calls. Substantial sanctions may be imposed on a creditor that violates this order. However, some debts are not discharged. It is important to discuss your discharge with your bankruptcy attorney and understand which debts are included in the discharge and which are not. For instance, taxes, student loans, and family support obligations  may not be subject to the discharge. In other cases a debt may be excepted from discharge by the court.

Your discharge only protects you from collection efforts. It does not protect a co-debtor who did not also file bankruptcy, and, as a general rule, it does not protect property that is subject to a lien. Therefore, it is important to understand how your property is affected by the bankruptcy discharge and whether a creditor can seize, repossess, or foreclose on the property after your bankruptcy.

As a practical matter, if a collector does not know about your bankruptcy discharge, the bankruptcy court is not likely to impose sanctions against it. Often a collection attempt can be resolved by informing the collector of the discharge and either providing a copy of the discharge or referring the collector to your attorney. Buying and selling debt is big business, and debts often get passed from collector to collector – even uncollectible debts like those discharged in bankruptcy!

Your bankruptcy discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector. Don’t let creditor harassment disturb your peace of mind. If the answer to the above three questions is “Yes, Yes, Yes,” the collector has violated the bankruptcy court’s discharge order. Contact your attorney and discuss the best course of action to stop the harassment.
 

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Many corporations that file Chapter 11 bankruptcy will present a “prepackaged” bankruptcy case to the bankruptcy court.  A prepackaged bankruptcy is a cooperative effort between the company, its shareholders and its creditors to develop a plan to restructure the company that will take effect once the bankruptcy case is filed.  The idea is to shorten and simplify the bankruptcy process and save everyone concerned money and time.

Can a prepackaged bankruptcy work for you?

Most often unsecured creditors are discharged at the end of a Chapter 7 or 13 bankruptcy cases, so there is usually no benefit to working with an unsecured creditor prior to bankruptcy.  However, there may be an incentive to coordinate with a secured creditor before the bankruptcy is filed.  This may be especially true when dealing with smaller companies, local banks, or individual lien holders who may be apt to misinterpret your intention.  In other cases, there may be a large benefit to be gained by coordinating with the creditor prior to bankruptcy.  For instance, some homeowners have been able to modify a first mortgage to bring payments current, and then file bankruptcy to strip off a second mortgage.  The result is a lower plan payment and/or a shorter plan term.

As a general rule you should not volunteer information to your creditors as it may cause otherwise avoidable problems.  Some lenders may accelerate the collection processes if they believe a bankruptcy is imminent, especially in the case of delinquent auto payments.  Once you have filed bankruptcy, the creditor must obtain permission from the bankruptcy court to repossess, foreclose or collect.

If you are struggling with bills you cannot pay, discuss your situation with an experienced bankruptcy attorney.  Your attorney can guide you through the pre-bankruptcy process and advise you on the best course of action to achieve the most benefit.  Every situation is different, so consult your attorney.

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Chapter 7 is an erase-your-debts-start-fresh bankruptcy.  A debtor in Chapter 7 is unable to pay his creditors over time, so he offers to liquidate his assets. The basic idea is that all of the debtor's property is taken and sold to pay creditors.  Any debt that cannot be paid from the debtor's property is legally discharged.  The debtor has paid all he can.

However, it's not practical to take everything a person owns.  Consequently the federal bankruptcy laws balance the rights of the creditors to receive payment against the need of the debtor to remain able to provide food, clothing, and shelter for his family.  The bankruptcy laws allow the debtor to keep reasonable and modest amounts of furniture, clothing, jewelry, and, in most cases, a home and car.

Keeping a vehicle after filing Chapter 7 depends on three questions.  First, "Is the vehicle worth more than you owe?"  Vehicle equity must be protected with exemptions.  The bankruptcy laws allow a Chapter 7 debtor to keep a modest amount of equity in a vehicle, and other exemptions may be available to protect larger amounts of equity.  In basic terms, if you have a new Cadillac, and its paid for (meaning a large amount of equity), the car will be taken and sold to pay creditors.

Second, "Is the vehicle worth less than you owe?"  In some cases the debtor’s vehicle loan is a great deal more than the vehicle is worth.  In those cases the bankruptcy laws allow the debtor to pay the amount the vehicle is worth and discharge the difference.  This process is called "redemption" and the fair market value of the vehicle must be paid to the creditor in one lump sum.  Additional financing is often required to obtain the lump sum payment, although the money can come from any source.

Since a loan secured by a vehicle must be paid or the vehicle returned, the final question is, "Are you able to continue making payments?"  If you are unable or unwilling to make the monthly payment, the vehicle may be surrendered back to the creditor, and you owe nothing.  If you want to continue making payments on the auto loan, you should discuss a reaffirmation agreement with your attorney.  Generally, a reaffirmation agreement is filed with the bankruptcy court and continues the loan obligations of the lender and borrower.

If you are interested in keeping your vehicle after a Chapter 7 bankruptcy case, speak to your bankruptcy attorney and discuss your options of surrender, reaffirmation, or redemption.  Your attorney can explain the benefits of each process and map out a plan to keep your vehicle before you ever file your case.

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Realizing that you can no longer pay for your home means that you have difficult decisions to make.  While modification and even lien stripping in bankruptcy may be options for some, if you truly cannot afford to keep your home, you must decide on the best way to walk away.

Do Nothing

If you do not pay your mortgage payment, the lien holder will foreclose on your property.  Although not paying your mortgage payment and the resulting foreclosure will significantly harm your credit rating, the home finance industry is presently in such turmoil that it may be months to more than a year before the lien holder forecloses on your property.  During this time you live rent free and can save for the future.  Note that if you do not maintain insurance and do not pay real estate taxes, the foreclosure timeline will likely accelerate.  Also note that under the Mortgage Forgiveness Debt Relief Act, which extends through 2012, income normally attributable by the IRS in connection with a foreclosure is not taxable, although you may be liable for a deficiency balance when the home is sold for less than you owe.  A foreclosure is listed as a public record on your credit report and the late payments are also reported.

Deed in Lieu of Foreclosure

Some financial “experts” have advised distressed homeowners to “just walk away.”  Walking away from a home is easier said than done, since you still own the home and are legally responsible for the property in a variety of ways.  One way to legally “walk away” is to transfer title of the property via a Deed in Lieu of Foreclosure.  Now the lien holder owns the property, which may sound pretty good until the property is sold for less than you owe, triggering a deficiency balance.  You may also end up owing taxes on the difference. 

Short Sale

A Short Sale is a sale for less than what is owed by the seller.  A lender will sometimes agree to allow the property to be sold for less than you owe if it is clear that you are unable to continue paying for the property and the home is upside-down.  In many cases the Short Sale deficiency is forgiven by the lien holder, but that will depend on the lender and on state law.  A Short Sale is identified as a settlement on your credit report and will hurt your score, although not as much as foreclosure or bankruptcy.

Bankruptcy

A bankruptcy is a legal discharge of your debt.  It is the cleanest and most powerful option to “walk away” from the home with no contract or tax obligation.  A bankruptcy uses the power of federal law to stop further negative credit reporting and collection attempts.  In the end your credit report identifies the loan as “Discharged in Bankruptcy” with a “Zero Balance.”  The bankruptcy record will stay on your credit report for up to ten years, but by surrendering the property you will avoid a foreclosure on your record.

If you need to walk away from your home and are weighing your options, consult with an experienced bankruptcy attorney and learn how the federal bankruptcy laws can help.  Bankruptcy can provide you time to move without foreclosure and without owing money in connection with the home.

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Once you have received a Chapter 7 discharge and your bankruptcy case has closed, the financial recovery can begin. Good financial habits should become part of your daily life, like living within a budget, paying cash instead of credit for purchases, and contributing to your future with retirement funds and cash savings. But what happens if you need a car loan shortly after completing a Chapter 7 bankruptcy case?

Obtaining an auto loan after a Chapter 7 bankruptcy requires some work and patience. A good first step is to contact the finance manager at a large auto dealer in your community. Large dealerships have special relationships with local banks and credit unions and are more likely to find you financing. You will have a better chance at finding financing through a large auto dealer rather than a small auto dealer or even a local bank.

Primarily, the lender wants assurances that the loan will be repaid. The easy answer is to obtain a co-signor or guarantor with good credit. If you fail to pay the auto loan, the loan company can try to collect from you, your co-signor, or both. In some cases, an auto finance company will not approve a loan which includes a borrower with a recent bankruptcy – despite the assurances of a co-signor. That is not the case for every lender, so do not get discouraged if you are denied.

If you are unable to obtain a co-signor, in many cases a large down-payment may persuade a lender to take a chance with you. Cash on the table also means that the dealership has a greater incentive to make the deal happen. Ordinarily a 20% down payment is a minimum amount to get this type of result.

Large dealerships may also provide financing or other in-house opportunities for buyers with damaged credit. Some lenders may offer high interest rate loan programs that will step down the interest rate with timely payments. Large dealers also have access to promotions and special financing from the manufacturer.

Be wise and careful when using credit! Because the large dealership is under a great incentive to sell new vehicles, recently discharged debtors are often offered new vehicle financing. This may mean buying a car you don’t want at a price you can’t afford. Be careful in this situation and do not be blinded by the offer of credit and the thought of a new car.

 "If I had that kind of money, I wouldn't have to file bankruptcy!"

All bankruptcy attorneys hear that frustrated statement from time to time. Some individuals wait until they are dead broke before contacting a bankruptcy attorney for help. By that time there is little or no money to pay bills, let alone court fees, credit counseling fees, and attorney fees. The article today is about helpful advice on how to get the money for your attorney without creating more difficulty for yourself.

One popular choice for many debtors is a loan from a family member. If you borrow money from a relative to pay the bankruptcy fees, you must identify that relative as a creditor on your bankruptcy schedules. In most cases this debt will be discharged along with other unsecured creditors. Despite the bankruptcy discharge, you are not prohibited from repaying the debt if you feel a moral obligation to do so.

On the other hand, if your relative gives you the money as a gift, it does not need to be disclosed. However, the money must be included as income on the Means Test. In only a small number of cases would this situation cause problem with the Means Test.

Selling property is another option to pay the bankruptcy fees. There is nothing wrong with selling property for fair market value prior to a bankruptcy. Selling a non-exempt asset (one that you may lose to the trustee) makes good financial sense. You must disclose the sale in your bankruptcy schedules and account for the proceeds.

Some debtors cash out investments or take money from a retirement account. These choices may carry tax consequences and are also normally counted as income on the Means Test. Other debtors use income tax refund money. It makes sense to use non exempt cash money to pay bankruptcy fees rather than see it lost to the bankruptcy trustee.

Some clients are able to save money from their paychecks after they decide to file bankruptcy. Generally, once you decide to file bankruptcy, you should stop paying credit cards and other unsecured, dischargeable debts. Secured debts that will survive the bankruptcy should be paid along with utility bills and non-dischargeable debts.

Using a credit card to pay your attorney can create difficulties in your bankruptcy case. Credit card charges within 90 days of the bankruptcy filing are presumptively nondischargeable. Likewise payday loans taken immediately before the bankruptcy will have to be repaid.

As you can see, an experienced bankruptcy attorney can offer many suggestions on how to raise the money to pay the bankruptcy fees. Discuss your financial situation before you sell, borrow, or charge anything. Good advice from a knowledgeable source can save you from headaches down the road.

Recently the United States Supreme Court resolved an ambiguity in the bankruptcy law that had the federal circuits split. The case, Ransom v. FIA Card Services, decided whether an above-median Chapter 13 debtor can take a $496 vehicle ownership deduction on the Bankruptcy Means Test when the debtor owns the vehicle free and clear. The Means Test calculates projected disposable income and presumptively determines the amount a Chapter 13 debtor must repay to unsecured creditors.

Some federal courts previously allowed the debtor to deduct this ownership expense even when there is no lien or payment on the vehicle. The Supreme Court's ruling reverses this practice and resolves a split in the federal circuits.

This decision places some debtors in a difficult dilemma: whether to encumber their vehicle with a lien and loan payment prior to bankruptcy, or pay unsecured creditors over the course of the bankruptcy. For instance, a debtor who fails to qualify for the $496/mo vehicle ownership deduction may result in a payment of an extra $29,760 over a five year repayment plan. In other cases losing the vehicle ownership deduction may mean the difference between being eligible to file Chapter 7 and being forced to file Chapter 13.

If you own a vehicle outright and are experiencing financial trouble, speak with an experienced bankruptcy attorney and discuss your options. Do not get a title loan prior to filing bankruptcy without consulting your attorney as doing so may result in a bad faith objection from the bankruptcy trustee. Your attorney can explain your options and advise you as to your best course of action.

Calendar year 2010 saw personal bankruptcy filing rates rise to the highest level in five years, according to information collected by the American Bankruptcy Institute, an association of attorneys and other bankruptcy professionals. There were 1,530,078 personal bankruptcy cases filed during 2010, a 9% increase from 2009. While the total numbers of bankruptcy filings continue to climb, the 9% increase from 2009 is actually the lowest rate increase in the last four years.

Nationwide, 1 out of 150 people filed bankruptcy in 2010. Nevada, with its unemployment rate at 14%, has the highest per capital filing rate averaging 1 bankruptcy filer out of every 67 residents. After Nevada, Georgia and Tennessee have the highest filing rates per capita, about 50% more than the national average. Alaska, South Carolina, Texas, North Dakota, South Dakota, and Vermont have the lowest filing rates.

A few states saw sharp increases in the number of personal bankruptcy filings. Hawaii experienced 29% more filings in 2010 over the previous year. California, Utah, and Arizona each had increases of 24%. The net increase in those states (about 62,000) was greater than the net increase in all other 46 states and the District of Columbia combined (around 60,000). The data indicates that while the southeastern states are filing bankruptcy cases at a slower pace, the southwest is experiencing further economic distress evidenced by its increased bankruptcy filing rates.

The raw bankruptcy data also shows a strong preference for Chapter 7 bankruptcy cases. Consumers filed Chapter 13 cases only 28% of the time during 2010. Information provided by the National Bankruptcy Research Center suggests that a higher percentage of Chapter 13 filings appears closely tied to high rates of auto loan delinquencies. Southeastern states have the highest percentage of auto loan delinquencies and corresponding high percentages of Chapter 13 filings.

If you are in financial trouble and need bankruptcy relief, you are not alone! The federal bankruptcy laws can help protect your income, assets, and retirement accounts, while stopping lawsuits, garnishments and repossessions. Speak with an experienced bankruptcy attorney and begin your path to a Fresh Start today!

For over a year some national banks have been offering "checking advances" to their cash-strapped customers.  A Checking advance is a short term loan between $100 and $500 which must be repaid within 30 days.  Typically the bank will take all direct deposits made into the borrower's bank account until the loan is paid.

Critics have described this practice as a thinly disguised “payday loan,” since the loan is intended to provide cash to the borrower until his or her next payday and direct deposit.  With fees of 20% per $20.00 borrowed, the effective annual percentage rate is 130% when the loan is repaid on the thirtieth day.  U.S. Bank, Fifth Third Bank and Wells Fargo are three banks that offer this service to account holders.

The checking advance repayment terms can have unexpected consequences for the borrower.  For instance, taking a checking advance two days before your direct deposit payday means that you have paid the bank between $10 and $50 for a two day loan.  The loan period is simply until the next direct deposit, or the expiration of thirty days.  At the end of thirty days the bank will withdraw the funds from your account, usually without notice.  This withdrawal may cause an overdraft of your account and additional fees.  Unlike payday loans, checking advance customers are unable to control and post-pone payment of the loan until the end of the loan period.  Some banking customers find themselves forced to take a series of advances until they are able to afford to repay the loan.

Bankruptcy can discharge checking advance loans as well as payday loans.  These short term loans can cause significant damage to a families’ budget and cost hundreds of dollars in fees.  It is usually advisable for clients who wish to discharge a bank’s checking advance to open up another account at a different bank.  This will avoid any complications if the bank attempts to take money out of your account to repay the loan.

If you need to get out from under checking advance loans, payday loans, or other high interest loans, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can provide you with relief.  Your bankruptcy attorney can explain the best way to discharge these loans and set you on a course for a better financial future.

There are many situations when a person needs credit during an open bankruptcy case.  Refinancing a home mortgage, redeeming an automobile, or simply applying for a new credit card are circumstances when a debtor needs to obtain credit during bankruptcy.  Fortunately, the bankruptcy process allows the debtor to obtain the credit he or she needs while concurrently pursuing a bankruptcy discharge.

When a debtor applies for credit during an open bankruptcy case, the application not only affects the debtor and the creditor, but also concerns the trustee and the bankruptcy court judge.  The creditor is concerned that the bankruptcy will interfere with the extension of credit, and the bankruptcy trustee and judge are concerned how the extension of credit will affect the bankruptcy case.

For Chapter 7 cases, the reach of the bankruptcy court is limited to those assets that you owned and debts that you owed on the date that you filed bankruptcy.  The judge does not have jurisdiction on post-petition matters.  While the bankruptcy court does have jurisdiction to approve or reject a reaffirmation agreement for a pre-petition debt, the court cannot forbid a post- petition extension of credit.

For Chapter 13 cases, the court has continuing jurisdiction over your finances during the bankruptcy case.  A Chapter 13 debtor is required to commit all of his or her disposable income to repay creditors.  Any new credit must be approved by the bankruptcy judge since a new payment obligation may impact the Chapter 13 repayment plan. 

Automobile credit is often a concern for bankruptcy debtors.  Obtaining a vehicle during Chapter 13 bankruptcy will generally require that the debtor show that the vehicle purchase is “necessary to the completion of the Chapter 13 bankruptcy plan.”  In plain language, you need the car to get to work to make the money to pay the creditors in the plan.  When a vehicle purchase is reasonable and necessary, the courts are generally willing to approve the purchase on credit.

If you have filed or are considering filing bankruptcy and are in need of credit, speak with an experienced bankruptcy attorney and discuss your situation.  Your attorney can offer advice and recommendations for obtaining both a bankruptcy discharge and the credit you need.

Any bankruptcy analysis includes an investigation into the debtor’s individual tax status.  The date that you file bankruptcy can have an important impact on how your tax refund or tax debt is affected.

When a Chapter 13 debtor expects to owe taxes

If you expect to owe taxes for tax year 2010, now may be a good time to file your bankruptcy.  A tax debt is not owed until the end of the tax year.  If your tax year ended on December 31, 2010, your 2011 Chapter 13 bankruptcy case will include the 2010 tax debt as a pre-petition debt.

When a Chapter 7 debtor expects to owe taxes

A recent tax debt is non-dischargeable – which means that your bankruptcy case will not eliminate the tax debt.  If you owe taxes, speak with your attorney regarding your best strategy for dealing with this debt.  You will have some temporary relief during the bankruptcy as the IRS is prohibited from collecting.  After your bankruptcy case ends, there are IRS programs that allow repayment over time or even forgiveness of the debt.

Older tax debts may be dischargeable under certain circumstances and should be discussed with an experienced bankruptcy attorney. 

When a Chapter 13 or 7 debtor expects to receive an income tax refund

Speak with your bankruptcy attorney about your refund.  The general rule is, before you file bankruptcy: file your taxes ASAP, receive the refund ASAP, and spend the money appropriately ASAP.  Your bankruptcy attorney can instruct you as to how much cash money you can have at the time of your filing and what bills or debts you are allowed to pay from your tax refund.

Every year debtors spend their refund money without first consulting with an attorney and every year it creates problems.  In some cases paying a debt may delay your bankruptcy filing.  In other cases a payment may cause a turn-over issue.  These are problems that can be easily avoided if you consult with an attorney before spending your tax refund.

If you need to file Chapter 7 bankruptcy and cannot wait until you receive your income tax refund, there may be options to keep your refund.  You may be able to use personal exemptions to protect your anticipated refund.  Your attorney can also discuss other legal options for avoiding turn-over of the refund, including applying the amount to your future taxes.  See In re Graves, No. 08-1462 (10th Cir.2010.

In many respects this is the best time of year to speak with a bankruptcy attorney.  Your attorney is in the best position right now to discuss your options for filing bankruptcy and avoid any unnecessary tax problems.

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

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

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

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

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

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

A bankruptcy proof of claim is an allegation against the debtor of a debt that arose on or before the date of the bankruptcy filing. It is an allegation because the bankruptcy debtor may contest this allegation. The bankruptcy court accepts the creditor’s proof of claim as true until the debtor files an objection and disputes it.

In cases where there is no distribution of money to creditors (called a “no asset case”), filing a proof of claim is not necessary. Consequently, claims are not filed in most Chapter 7 cases. In Chapter 13 cases, when creditors expect to be paid, the proof of claim is a prerequisite to payment from the trustee.

A proof of claim can be filed by a creditor, the debtor, or the bankruptcy trustee. If an unsecured creditor fails to file a proof of claim, the claim is not allowed and the trustee will not pay the creditor. This can be problematic to the debtor in certain cases and may necessitate the debtor filing a proof of claim so that the creditor can be paid. Failure to file a proof of claim does not impact a secured creditor’s lien against collateral.

The bankruptcy court uses a standard proof of claim form. In most cases this form is mailed to creditors during Chapter 13 cases or Chapter 7 asset cases. A proof of claim should include a copy of any supporting documentation (a promissory note or other loan paperwork), as well as evidence of perfection of a secured claim. A creditor must file the proof of claim prior to the claims deadline (bar date). This date is set by the bankruptcy court, but cannot exceed ninety days after the first date set for the Meeting of Creditors.

A debtor may object to a proof of claim. Common objections include:
* Not timely filed;
* Incorrect claim amount;
* Improper claim;
* Debt paid in full;
* Failure to attach adequate supporting documentation.

If you are considering filing a Chapter 13 bankruptcy, expect to have your creditors file claims. Each proof of claim should be reviewed by you and your attorney to ensure that the claim is accurate. Failure to timely object to the proof of claim may substantially impact your case.
 

The National Retail Federation reports that gift cards are the most-requested holiday gift for the fourth consecutive year and expects gift card spending will reach nearly $25 billion this year. A recent survey found that 77.3 percent of holiday shoppers intend to buy at least one gift card. So chances are you received one as a gift, but do you know there are federal rules that govern these cards?

As of August 22, 2010, provisions of the Federal Credit CARD Act took effect and impose many new regulations on gift card issuers. These new regulations contain some powerful protections, and also a few surprises:

First, gift cards purchased on or after August 22 must hold their value for five years. The five year period restarts for each new dollar reloaded onto the card. Be aware: the card itself may expire, but not your money! If your gift card expires before five years and there's still money left on it, contact the issuing company have your balance transferred to a new card. Companies are required to do this for free.

Second, the issuing company cannot charge an “inactivity fee” on your gift card until the card has not been used for 12 months. Previously some cards charged inactivity fees of $2.50 each month until the card balance reached zero.

Third, information concerning gift card fees, expiration date, and the company’s toll-free phone number or website must be printed on the card.

Fourth, while the Credit CARD Act contains many strong consumer protections from unscrupulous companies, it does not apply to universal prepaid gift cards. These cards typically have a major credit card company logo (e.g. Visa or MasterCard) printed on the front and can be used at any retailer.  These cards may still expire and assess fees.

Fifth, federal and state laws don’t protect consumers who have gift cards to businesses that declare bankruptcy. In the past some consumers have lost money on their gift cards when the issuing store filed for bankruptcy protection. For example, when The Sharper Image filed bankruptcy in February of 2008, they stopped accepting gift cards from customers. While technically you can file a claim in bankruptcy court for the value of your gift card, the chances of receiving payment is slim.

The best advice for dealing with a gift card is: use it quickly. Delay in use risks losing money through inactivity fees or bankruptcy. Gift cards are not savings devices, they are meant to permit you to purchase a gift for yourself. Use the card and enjoy your purchase.

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

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

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

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

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

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

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

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

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

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

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

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When a Chapter 7 or 13 bankruptcy petition is filed, the bankruptcy court issues an injunction forbidding any collection action against the debtor. This protection is called the “automatic stay” because once the case is filed the injunction happens immediately and automatically. The automatic stay prohibits telephone harassment, lawsuits, garnishments, and even letters attempting to collect on a debt. The stay typically continues until the case is dismissed, the debtor receives a discharged, or the bankruptcy court otherwise amends the order.

In some cases a creditor may want to amend the automatic stay and proceed with collection against the debtor. To accomplish this, the creditor must file a “Motion to Lift Stay” with the bankruptcy court. This motion is filed routinely when the debtor is not making the monthly payment on secured property (e.g. a house or car). The creditor will seek leave from the court to lift the stay and either foreclose or repossess the collateral.

To succeed in a Motion to Lift Stay, the creditor must show that it has good cause for the request. Generally lack of payments since the bankruptcy filing will constitute good cause. Additionally, good cause may exist if the debtor has failed to keep insurance on the collateral.

Defending a Motion to Lift Stay usually boils down to making payments. Once the debtor is current on the monthly payments the creditor’s motion is generally denied. The debtor may also challenge the creditor’s standing. This may occur when a mortgage is at issue that changed hands several times. If the creditor cannot prove to the court that it is the current holder of the promissory note, the bankruptcy court will not consider the creditor’s motion. Finally, the debtor may negotiate a resolution of the issue with the creditor. The debtor pays something and makes additional promises for future payments, and the creditor withdraws the motion.

If you intend to retain secured property after your bankruptcy filing, consult with your attorney and discuss your payment obligations. The general rule is that “secured property must be paid for or returned.” Making payments after bankruptcy can avoid a Motion to Lift Stay on your property.

Occasionally an individual or couple cannot qualify for a Chapter 13 repayment bankruptcy and must file under Chapter 13. The procedure for proposing a Chapter 11 plan of reorganization is dictated by the Bankruptcy Code and is in many ways similar to a Chapter 13 bankruptcy. The Chapter 11 bankruptcy debtor may file a plan of reorganization during the first 120-day period after the case is filed, and the debtor has 180 days after the entry of the order for relief to obtain creditor acceptance of its plan. After that period a creditor may file a proposed plan with the court. A bankruptcy trustee, if one is appointed, will also file its own plan, or a recommendation for conversion or dismissal of the case.

The Bankruptcy Code lists mandatory and discretionary provisions of a Chapter 11 plan, including the designation of classes of claims and interests. Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders. These classes will vote on the acceptance or rejection of the proposed plan(s).

Before confirmation of a plan of reorganization can be granted, the court must be satisfied that the plan is in compliance with all the requirements for confirmation stated in the Bankruptcy Code. In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan is in compliance with the Bankruptcy Code. In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney. An experienced bankruptcy attorney can guide you through the Chapter 11 process, and help you reach the best possible financial outcome.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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