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

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.
 

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.
 

 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. 

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.
 

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.

When a small business encounters tough times, it is not uncommon for the business owner to do what is necessary to keep the business alive.  The obligation to keep the business going for family and employees is strong, and can often result in the business owner making decisions that create personal financial hardship.

Small business owners are required to withhold taxes from their employees' paychecks and pay the Internal Revenue Service (IRS).  Employment taxes consist of two parts: (1) the employer's portion, and (2) the employee's portion.  The employee's portion is withheld from the employee's wages by the employer, and consists of a 6.2% Social Security tax and a 1.45% Medicare tax.  The employee's portion is held in trust by the employer until it is remitted to the IRS.  The employer portion of the tax is paid directly to the IRS.  This obligation is comprised of a matching contribution of 6.2% as Social Security tax and 1.45% as Medicare tax. 

When an employer cannot pay the IRS, things can go south very quickly.  The IRS can close a business for failure to pay employee taxes, and can attempt to collect personally from each owner or manager responsible for withholding and paying the tax (known as a “responsible person”).  The IRS can collect 100% of the debt from each of the responsible persons until the debt is paid.  Usually this results in owners and officers pointing out each other’s personal assets in a “get him not me” effort to avoid payment.  This can be very nasty business.

The federal bankruptcy laws can help manage this impossible situation.  While in some cases an individual can file bankruptcy and discharge the employer's portion of the tax debt, the employee's portion is not dischargeable.  However, bankruptcy allows the debtor to propose a plan to repay non-dischargeable payroll taxes, often without stopping business operations.

If you are a small business owner with an employer payroll tax problem, consult with an experienced bankruptcy attorney and discuss your options.  The federal bankruptcy laws may be able to provide the time and opportunity to repay your tax debt and continue your business.

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews ‎  |  fnlawfirm.com  |  Directions

Recently allegations have been made against several prominent mortgage lenders claiming the use of flawed and in some cases fraudulent documents during the foreclosure process.  In one GMAC Mortgage has been accused of using a “notary-mill” to crank out upwards of 10,000 foreclosure documents each month without reviewing the documents.  Similar accusations have been leveled at Bank of America.  In states that use judicial foreclosure, this activity amounts to a fraud upon the court and is illegal.

JPMorgan Chase, Ally Bank's GMAC Mortgage and PNC Financial have all suspended foreclosures in states that require a judge’s order.  Bank of America has suspended all foreclosures in all 50 states.  State attorney generals across the nation have joined an investigation into these foreclosure practices.  In Congress, Nancy Pelosi and Christopher Dodd, have called for a federal investigation, and U.S. Attorney General Eric Holder said he is looking into the matter. 

Potentially millions of foreclosures across the United States are subject to challenge.  In some cases courts are denying the lender’s foreclosure suit because it cannot produce clear title.  A recent lawsuit in federal court in Louisville alleges that banks participating in MERS (a mortgage document clearing house) conspired to produce false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures.  Similar class actions have been filed against MERS in Florida and New York.

As a result of this mortgage document fiasco, one title insurance company, Old Republic National Title Insurance, has announced that it will no longer write new insurance policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.  Homeowners who have purchased foreclosed homes may not have clear title and may face difficulty in selling their homes in the future.

If you are facing foreclosure, consult with an experienced bankruptcy attorney and discuss your options.  There are many options for homeowners who are unable to make their mortgage payments.  Your bankruptcy attorney can discuss your options and protect your legal rights.

Fears & Nachawati Law Offices

4925 Greenville Ave Suite 715, Office 1, Dallas, TX 75206 (214) 890-0711  Google Reviews ‎  |  fnlawfirm.com  |  Directions

Examining your options is important for anyone experiencing debt problems.  If you are considering bankruptcy or debt settlement to resolve your financial difficulties, investigate the consequences of each process before making your decision.  Below is some information about debt settlement companies and bankruptcy that you may not know: Free Consultation 

Debt Settlement:  The debt settlement process will harm your credit for years.  Creditors will report your delinquent account until it is paid.  Your report may identify settled accounts as paid less than 100%, which also adversely affects your credit score. 

Bankruptcy:  Any debt included in a bankruptcy appears on your credit report as discharged with a zero balance from the date you filed your bankruptcy case.  Bankruptcy stops adverse reporting so your credit report can improve.  Free Consultation 

Debt Settlement:  The typical debt settlement account will resolve your debt with a lump sum payment of between 20% and 80% of the debt.

Bankruptcy:  In most bankruptcy cases you pay nothing to unsecured creditors. 

Debt Settlement:  Any settled debt will have tax consequences and you may have to pay the IRS. 

Bankruptcy:  There is no tax liability for a debt discharged in bankruptcy. 

Debt Settlement:  You may be sued while you or your representative is attempting to settle your debt.

Bankruptcy:  All lawsuits are prohibited during your bankruptcy case. 

Debt Settlement: Some debt settlement companies are disreputable and the process is even illegal in some states.

Bankruptcy:  The bankruptcy process is authorized by the United States Constitution and its laws are written by Congress.  Only licensed attorneys admitted to practice in the federal courts are able to represent bankruptcy debtors. 

Debt Settlement:  The debt settlement process can take more than a year.  The general rule is: the longer you don’t pay, the better the settlement.  Creditors are reluctant to accept less than full payment unless they believe that you may file bankruptcy. Free Consultation

Bankruptcy:  The typical chapter 7 bankruptcy case takes less than six months. 

If you are struggling with debt, investigate your options and speak with an experienced bankruptcy attorney.  The federal bankruptcy law is a powerful tool to eliminate your debt problem and put you on the road to financial recovery.

During a Chapter 13 bankruptcy you pay your creditors in accordance with your ability to pay.  Some creditors receive 100% of the debt, and others may receive a small sum or nothing at all.  The Bankruptcy Code establishes a priority of debt repayment. 

Administrative claims must be paid 100% and include your filing fee, the trustee’s compensation (3% to 10% of each monthly payment), and your attorney’s fees.  Other debts must be paid 100% during the debtor’s bankruptcy including alimony and child support, most tax debts, and mortgage arrears if you intend to keep you home. 

The lowest category of debt repayment is unsecured creditors.  The amount paid to unsecured creditors (e.g. medical bills, credit cards, and unsecured personal loans) is determined by several factors including (1) the amount of your nonexempt assets; (2) your disposable income; and (3) the length of your plan. 

The length of your plan and amount of your disposable income are largely determined by the Bankruptcy Means Test.  The Means Test was the subject of a recent United States Supreme Court case: Hamilton, Chapter 13 Trustee v. Lanning.  The issue in Hamilton is how a bankruptcy court calculates your ability to pay creditors during the bankruptcy case. 

The 2005 changes to the Bankruptcy Code included a requirement that Chapter 13 debtors commit all "projected disposable income" to the repayment plan.  Confusion arose over whether Congress meant to determine this amount through a mechanical approach, by averaging the debtor's income for the past six months, or whether the determination is “forward looking” and should consider the debtor’s future ability to pay. 

Justice Samuel Alito, writing for an 8-1 majority, said the “forward looking” approach is correct.  The forward-looking approach starts with the debtor's average monthly disposable income for the past six months multiplied by the number of months in a debtor's plan.  This figure is ordinarily the debtor's projected disposable income.  However, in some cases, the Court has authority to review the debtor's actual and present monthly income in order to calculate the debtor’s ability to pay debts during the plan period. 

The Hamilton case will have great impact on Chapter 13 bankruptcy cases and places the power to determine a fair and affordable Chapter 13 payment plan in the hands of the bankruptcy court judges.  If you are in need of bankruptcy relief, but fear that you will be forced to pay a monthly sum you can’t afford, get the facts from an experienced bankruptcy attorney.  Bankruptcy is not a debtor’s prison and has helped millions get a fresh financial start. 

In a Chapter 13 bankruptcy case the debtor proposes a plan to pay back creditors.  That plan is composed of monthly payments to satisfy all or part of the creditors' claims over three to five years.  Monthly payments are made to the Chapter 13 Trustee, who then pays your creditors. 

There is often confusion over when the first plan payment due. Section 1326 of the Bankruptcy Code directs that the first payment must be made within 30 days after filing the bankruptcy case, even if the debtor’s bankruptcy plan has not yet been approved by the court.  Often the first meeting with the Trustee (also known as the "341 meeting" or "meeting of creditors") is scheduled more than 30 days after the filing date, so the Trustee expects your first payment before that meeting.  The Trustee will hold all payments until the plan is approved by the Bankruptcy Court (called "confirmation"), and then make distributions to creditors. 

It is critical that you make this initial payment within thirty days after filing.  It is especially important to monitor the status of this first payment when you have instructed your employer to pay the Trustee from your wages.  It is your responsibility to ensure that this first payment is made, and neither the Trustee nor the Bankruptcy Court gives much latitude to a debtor who misses the first deadline in the case. 

Filing bankruptcy is a very personal process. Many clients worry that their friends and neighbors will learn about their bankruptcy. A common question is, “Who will know about my bankruptcy?”

First, personal bankruptcy cases are generally not reported in the local newspaper. Unless you are a celebrity or public figure, your bankruptcy is not newsworthy. More than 1.4 million consumer filings were recorded last year, so many larger newspapers would have to publish thousands of bankruptcies in their papers each month. It is not cost-effective for a newspaper to search through the bankruptcy court records to find individuals who filed in their distribution area and use valuable print space to report on personal bankruptcy cases.

Second, the bankruptcy laws require notices of the bankruptcy filing to go out to the following:

1. Everyone you owe money (called “creditors”);
2. The bankruptcy trustee;
3. Co-signors and co-debtors; and
4. You and your attorney.

Under special circumstances other notices are sent, for instance if you owe taxes, or if you want to terminate a lease or contract. Family, neighbors, friends, your employer, your bank, etc. will generally not receive notice of your bankruptcy. A common exception to this general rule is when the debtor causes a voluntary wage withholding to pay chapter 13 plan payments.

Third, while bankruptcy court proceedings and trustee meetings are open to the public, it is unusual for the press or members of the public to attend. Most of these meetings are very brief and can even be a little boring.

Finally, other than receiving notice of the bankruptcy filing from the bankruptcy court, there are only a few ways to learn of a bankruptcy case. The most common way is to contact the bankruptcy court directly. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public.

Filing a bankruptcy petition is generally a private and confidential process. While there are no guarantees that your friends and neighbors will not learn about your bankruptcy, chances are they will not unless you decide to tell them. However, every case is different. If you have specific questions about the effects of filing bankruptcy, consult with an experienced bankruptcy attorney.

Bankruptcy is a powerful tool for eliminating personal debt. It is important to know what bankruptcy can do for you, and what it cannot.

What Bankruptcy Can Do:

Bankruptcy can eliminate your personal obligation on many unsecured debts. For many debtors this is the most important benefit of bankruptcy. Most credit cards and medical bills can be discharged during bankruptcy and you will never worry about them again.

Bankruptcy can stop creditor collection activities and harassment. When a bankruptcy is filed, all collection activity must stop. After a debt is discharged at the end of your bankruptcy case, the creditor is prohibited from contacting you to collect on that debt.

Bankruptcy can stop a foreclosure or repossession. In a Chapter 7 bankruptcy the debtor is given time to negotiate an agreement with the creditor, or prepare to walk-away from the debt and surrender a home or vehicle. In a Chapter 13, the debtor can also surrender property back to the creditor, or force the creditor to accept payments to cure an arrearage and resume monthly payments.

Bankruptcy can protect personal assets. Ordinary household goods, certain equity in vehicles or a family home, and retirement accounts are all protected during a bankruptcy. Statistically only 1 in 20 debtors lose anything, and your bankruptcy attorney can advise you of any property that is at risk in advance of the filing.

Bankruptcy can strip away certain liens. Many loans that are secured with an item you previously owned (called a Non-Purchase-Money Security Interest) can be stripped away during bankruptcy. Under certain circumstances a second mortgage can be stripped and made an unsecured debt (and eligible for discharged).

What Bankruptcy Cannot Do:

Bankruptcy cannot allow you to keep secured property without payment. While there are exceptions, generally if you do not pay for a secured property (e.g. car or house), the property must be returned to the secured creditor.

Bankruptcy cannot eliminate certain types of debts. The Bankruptcy Code lists debts that cannot be discharged such as student loans, certain taxes, and child support obligations. However, every situation is different and many of these “non-dischargeable debts” can be discharged under certain circumstances. Your bankruptcy attorney can discuss your individual situation and options for eliminating your debts.

The goal of the federal bankruptcy laws is to give the debtor a fresh start on a new financial future. There are many powerful legal options available in bankruptcy to eliminate or reduce overwhelming debt. An experienced bankruptcy attorney can explain your options and guide you to your fresh start.