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

Many clients are intimidated when meeting a bankruptcy attorney for the first time. They fear that they will be asked judgmental questions and have to justify their financial distress. They fear that they will not be able to answer the attorney’s questions and somehow not qualify for bankruptcy and the relief they desperately need.

Nothing could be further from the truth.

The first thing you will discover when meeting your bankruptcy attorney is that your attorney is a good listener. You are the world’s foremost expert concerning your own finances, and your attorney is there to learn about your case from you.

The second thing you will discover is your attorney’s compassion. Bankruptcy attorneys really do care about their clients. Bankruptcy is one of the few areas of the law where the legal process is designed to have a positive result for the client. The goal of your bankruptcy attorney is to ensure that you are in a better financial position at the end of the case than you were at the beginning. Bankruptcy lawyers are caring individuals that have an active interest in your future success.

The third thing you will notice is how your attorney is able to quickly summarize what seems like an overwhelming problem into simple concepts. Your attorney will break down your finances into four categories: assets, debts, income, and expenses. From there you and your attorney can discuss what must be done to improve your financial situation.

Finally, you will be impressed with the clarity your attorney has for repairing your financial problem. A skilled bankruptcy attorney spends years studying, training, and gaining practical experience just so your case can be resolved quickly and efficiently. Bankruptcy law is all about paths to recovery and your attorney will guide you along a path that is best for you.

When you first meet your bankruptcy attorney, discuss your case openly and honestly. You will find that your attorney is dedicated to helping you attain a financial fresh start and improve your family’s finances.

When you file for bankruptcy in Texas, you are required to list all of your assets on your bankruptcy petition. What many debtors do not realize, however, is that a potential legal claim against a third party is considered an asset for purposes of bankruptcy.

A bankruptcy attorney should always ask their clients whether they have any claims against any third party that could potentially be filed in court. Essentially, your bankruptcy attorney needs to know if you have any potential lawsuits.

Why is a potential lawsuit an asset? Because, if you file the claim and win the lawsuit, then you will likely receive financial compensation – and that money is obviously another asset.

One reason that it is so important that you tell your bankruptcy attorney about any potential lawsuits is that if you fail to list the claim on your bankruptcy petition, you could forever lose your right to file a lawsuit based on that claim.

For example, if you have a potential personal injury lawsuit against a driver that caused a car accident in which you were hurt, you must list that potential lawsuit as an asset. If you don’t list it, and you later attempt to file that lawsuit, you may be found guilty of committing bankruptcy fraud. You would then be prohibited from filing the lawsuit even after your bankruptcy case has concluded.

Upon your filing for bankruptcy, a bankruptcy estate is created. All of your assets, which includes potential lawsuits, then become the property of this estate. That is, it becomes property of the bankruptcy estate unless you are able to exempt it, which means that the proceeds of the settlement would be distributed amongst your creditors. For that reason, it is always the smartest move to list and attempt to exempt an asset than to not list it at all.

As always, being completely open and honest with your bankruptcy attorney is key to filing a successful petition.

When Congress passed the Fair Debt Collections Practices Act (“FDCPA”) it stated that its purpose is “to eliminate abusive debt collection practices by debt collectors[.]” Congress cited the need for consumer protection because of the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.  Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

Abusive debt collection practices are just bad news.

On February 22, 2010, the United States Supreme Court declined to hear an appeal from the Fifth Circuit U.S. Court of Appeals on a FDCPA case: Kay v. Gonzales, U.S., No. 09-542. In that case the Plaintiff, Jose Gonzalez, received a letter from the Kay Law Firm. The letter, written on law firm letterhead and unsigned, told Gonzalez, “Please be advised that your account, as referenced above, is being handled by this office.” On the back of the letter was this statement: “At this point in time, no attorney with this firm has personally reviewed the particular circumstances of your account.” Gonzalez sued the Kay Law Firm for violating the FDCPA which prohibits debt collectors from falsely representing or implying that the debt collector is an attorney or that the communication is from an attorney. 

The federal district court found that the disclaimer was sufficient to notify Gonzalez that the collection matter was not being handled by an attorney and the Gonzalez’s case was dismissed. On appeal the Fifth Circuit Court of Appeals found that the letter’s disclaimer on the back was mixed in with “legalese” which may not be sufficient to notify the consumer of the attorney’s non-involvement in the case. The Fifth Circuit reversed the district court dismissal and remanded the case for trial. Gonzalez v. Kay, No. 08-20544 (5^th Cir., 2009). Now that the Supreme Court has denied the Kay Law Firm’s appeal, Mr. Gonzalez will have his day in court.

The Fifth Circuit in its opinion cites the Seventh Circuit Court of Appeals for why it is important to protect against this type of deceptive collection practice:

“An unsophisticated consumer, getting a letter from an ‘attorney,’ knows the price of poker has just gone up. And that clearly is the reason why the dunning campaign escalates from the collection agency, which might not strike fear in the heart of the consumer, to the attorney, who is better positioned to get the debtor’s knees knocking.” 

Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996).

If you receive a collection letter from a law firm, speak to an experienced bankruptcy attorney and learn your rights. Bankruptcy attorneys are trained in matters of debt defense and can help explain your rights under the FDCPA and the federal bankruptcy laws. Don’t let an unscrupulous debt collector get your “knees knocking.”

The length of a bankruptcy case depends primarily on which type of bankruptcy you file: Chapter 7 or Chapter 13.

The average Chapter 7 bankruptcy case takes between 3 and 6 months before the debtor receives their bankruptcy discharge. Because a discharge of debts is the goal of a Chapter 7 bankruptcy, the bankruptcy case, from the debtor’s perspective, is essentially over once the discharge is obtained.

Note that even though it takes 3 to 6 months to obtain a discharge, an automatic stay that protects you from further debt collection efforts goes into place immediately after you file for bankruptcy.

By their nature, Chapter 13 bankruptcies take longer than Chapter 7 bankruptcies. A Chapter 13 bankruptcy is a repayment plan. Under the repayment plan, the debtor is given a set amount of time – between 3 and 5 years – to repay the reduced debts. Once the repayment plan is successfully completed, the debtor’s remaining debts can be discharged.

In order to file for bankruptcy, you must first get credit counseling from a government-approved agency.

To get started, visit the U.S. Trustee Program website for a list of approved credit counseling providers.

It’s a mistake, however, to simply pick a counselor off the list at random. To be sure that you get the best counseling for your time and money, there are some questions you should ask before selecting a credit counselor.

Call several of the agencies provided on the list and ask them the following questions in order to make a wise decision about your credit counseling:

• What are your fees?
• What if I am unable to afford your fees?
• What services do you provide?
• Can you assist me in creating a plan for avoiding financial pitfalls in the future?
• What qualifications do your counselors hold?
• What type of training and accreditations do your counselors have?
• How do you protect my information to ensure that it is kept confidential?
• Do your employees receive additional pay if they get me to sign up for certain services or pay a fee?

A reputable credit counseling agency will have no problem answering these questions. If you have any questions about the bankruptcy process, you can contact the Texas bankruptcy attorneys of Fears | Nachawati for free legal assistance.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 added two new requirements to the bankruptcy filing process: pre-bankruptcy counseling and post-filing debtor education.

In order to successfully file for bankruptcy, you must receive credit counseling from a government-approved agency within 180 days of filing.

The pre-bankruptcy counseling session will cover three main topics: an evaluation of your individual financial situation, an explanation of bankruptcy alternatives and a personal budget plan.

These counseling sessions typically last hour to an hour and a half. The session does not have to be in person. Online counseling and sessions conducted by phone are also accepted. Pre-bankruptcy counseling sessions cost around $50, but you can request a fee waiver if you cannot afford to pay.

Once you complete the session, you will receive a certificate that serves as proof. It is critical that you receive your counseling from an organization that is approved by the judicial district in which you are filing for bankruptcy.

The second requirement, post-filing debtor education, includes information on managing your money, creating a budget and using credit wisely, among other topics. As with pre-bankruptcy counseling, debtor education can take place in person, online or over the phone.

Debtor education courses typically last about two hours, and the fee ranges from $50 to $100. However, as with pre-bankruptcy counseling, a fee waiver can be sought by those who cannot afford to pay the fee.

After you complete the debtor education course, you will receive a certificate that serves as proof; this certificate is separate and distinct from the certificate provided for completing the pre-bankruptcy counseling session.

A qualified Texas bankruptcy attorney can answer all of your questions about pre-bankruptcy counseling and post-filing debtor education, as well as explain all of your legal options.

When you file for bankruptcy, an automatic stay is put in place that stops all debt collection proceedings against you. Under bankruptcy laws, wage garnishment is considered a collection proceeding. Therefore, when you file for bankruptcy, all wage garnishments against you will stop – including IRS wage garnishments.

If your wages are being garnished and you are considering filing for bankruptcy, contact the attorneys of Fears | Nachawati today for free legal advice. To receive free legal assistance from a Texas bankruptcy lawyer, email us or phone us toll free at 1.866.705.7584.

There are specific limits set on how often an individual can file for bankruptcy. For Chapter 7 bankruptcy, you have to wait eight years after a previous Chapter 7 filing before filing again and six years after a previous Chapter 13 filing.

For Chapter 13 bankruptcy, you must wait two years after a previous Chapter 13 filing before you can file again and four years after a previous Chapter 7 filing.

The case of In re Bourguignon, Ch. 7 Case No. 09-00766-TLM (Bankr. D. Idaho Sep. 23, 2009) provides yet another unfortunate example of the importance of obtaining sound advice before filing a bankruptcy case. On March 10, 2009, Christian and Tarra Bourguignon opened a 529 college savings plan for their daughter. The couple contributed $14,500 into the plan and the girl's grandmother put in another $40,000.

Approximately two weeks after opening the 529 account Christian and Tarra Bourguignon filed for chapter 7 bankruptcy.

The bankruptcy trustee claimed that the entire 529 account was property of the estate and subject to turnover to pay the Bourguignon’s creditors. The debtors proposed several reasons that the college savings funds are protected. The court first dispensed with a preliminary argument from the debtors that section 541(c)(2) of the bankruptcy code protects the entire account as a qualifying trust. The bankruptcy court found that Christian Bourguignon is the owner of the account, and "the College Account does not contain the requisite anti-alienation and anti-assignment provisions required under nonbankruptcy law and recognized by § 541(c)(2)."

The bankruptcy court next turned to the debtors' main argument: that the funds are excluded under Section 541(b)(6) because they were deposited within 365 days of the bankruptcy filing date. The bankruptcy court found that funds deposited in a 529 account are fully protected if deposited more than 720 days before the filing date; are protected up to $5,475 if deposited between 365 and 720 days; and are not protected at all if deposited within 365 days of the bankruptcy filing. The court also stated that the source of the funds (in this case the child's grandmother) did not matter, and ordered the debtors to turn over the entire college savings account ($54,500 plus interest) to the trustee for payment to creditors.

There are three important lessons to be learned from this case:

• First, grandparents and other relatives should be careful when contributing to college savings plans if there is a risk of the account owner filing a Chapter 7 within two years of the contribution;
• Second, if you are experiencing financial difficulty, it is important to discuss any significant transfer of money with a qualified professional; and
• Third, it is important to discuss all of the aspects of your finances with an experienced bankruptcy attorney prior to filing your case.

To receive free legal advice on bankruptcy, contact Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584 to speak with an experienced Texas bankruptcy attorney.

A study released October 28, 2009, by the Pew Charitable Trust found that that 100% of credit cards offered online by the twelve leading U.S. banks engage in practices that the Federal Reserve has defined as “unfair or deceptive.” The study examined the terms of almost 400 credit cards advertised by banks and credit unions in July 2009 and December 2008.

The federal Credit Card Accountability Responsibility and Disclosure (CARD) Act, which is being implemented in stages, requires banks to eliminate unfair and deceptive practices such as “universal default” or raising rates based on a missed payment to another lender. Some of the new regulations are already in effect; others are scheduled to begin Feb. 22, 2010.

Even though the Federal Reserve lowered the federal funds rate to near zero to encourage lending by banks, the study found that credit card rates have actually increased over the past year. Bank of America had the largest percentage increase, rising from 14.99% to 18.24% for its highest rate card. Ironically, it appears that this increase in interest rates has been in some part caused by the passage of the CARD Act, which bars rate increases without a 45-day notification. To reduce risk under this the CARD Act, banks have raised rates before this part of the Act takes effect in February.

The study concluded that these rising rates makes credit cards a potentially dangerous part of most Americans’ financial lives. If credit card debt has become a danger to your financial well-being, you should consult with a qualified bankruptcy attorney and discover the cure. Don’t rely on Congress or the beneficence of the credit card industry to make your debt disappear. Take matters into your own hand, and discharge these unscrupulous lenders from your life once and for all.

For families in financial difficulty, sometimes paying for even the most basic things is a struggle. Fortunately, the bankruptcy code protects debtors from the disconnection of necessary utilities like water, electricity or gas services. Specifically, a utility company may not alter, refuse, or discontinue service to an existing customer solely because either (1) the customer filed for bankruptcy protection; or (2) the customer failed to pay a pre-petition debt to the utility.

However, this protection is limited. Within 20 days after the bankruptcy filing the debtor must give the utility company "adequate assurance of future payment." This assurance is usually in the form of a new security deposit. The law allows the utility company to keep any previous security deposit and apply that deposit to your prior bill. The amount of the new security deposit is negotiated between the parties, but can be decided by the bankruptcy court if no agreement is reached. If the debtor does not provide "adequate assurance of future payment" within the 20 day time period, the utility provider may discontinue services.

A few years ago the Fifth Circuit Court of Appeals decided that a cable television provider is not a utility service for purposes of the bankruptcy code. In issuing its decision, the Court said:

“This section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility.”

By analogy internet and cell phone services would not be considered utilities by the bankruptcy courts.

If your family is overwhelmed by debt and facing a utility disconnection, consider bankruptcy as a way to "keep the lights on" and provide some relief. An experienced bankruptcy attorney can explain how the bankruptcy code can prevent a utility disconnection and stop all creditor collection action.  Call Fears | Nachawati today for a free consultation by dialing toll free 1-866-705-7584 or e-mail us at info@fnlawfirm.com. 

Debt relief ads seem to be everywhere: on television, on the radio, and in newspapers and magazines.  These companies use different terms to describe their services like counseling, consolidation, negotiation, mediation, settlement, reduction, relief, elimination, and so many others.  They all make promises – some more bold than others.  A few of these companies are legitimate.  I want to discuss the majority of these companies that are not legitimate and how to identify debt relief scams.

There are several simple warning signs to identify debt relief scams.  One warning sign is when the company requires a large up-front fee.  The company may even disguise that fee by calling it a “first payment.” Many consumers are surprised when that “first payment” is paid to the debt company and not paid to creditors.  That can also result in a thirty day delinquency on a credit report – just the kind of damage the consumer was trying to avoid!

Another warning sign is if the company makes promises that your credit score will not be affected by their program.  The truth is that there is not a legitimate debt relief program available that can guarantee that your credit report will not be adversely affected.  Any time a debt is not paid according to the terms of the original contract, the creditor is entitled to report adversely.  The creditor may fail to report, or may agree to not report at all, but there is no way to prevent a creditor from reporting truthful information to a credit bureau.

Finally, if the company claims that it can protect you from lawsuits or creditor harassment, run away!  The Fair Debt Collections Practices Act (FDCPA) provides that third party collectors (e.g. collection agencies) cannot contact a debtor directly once an attorney is representing the debtor.  However, the FDCPA does not apply to original creditors (e.g. a credit card company), and it does not apply to non-attorney debt relief companies.  If your creditor wants to sue you over a delinquent debt, only a bankruptcy filing can prevent it.  Additionally, the debt relief company cannot represent you in court – only a licensed attorney can do that!

You can protect yourself from these scams by consulting an attorney.  Only an attorney can explain your legal rights and help you choose the best course of action to resolve your debt problems.  For more information on how to protect yourself contact Fears | Nachawati toll free at 1.866.705-7584 or by e-mailing info@fnlawfirm.com. 

While it is true that bankruptcy can be a good option to remove bad debts or save your home, it should not be entered into lightly. Following are the pros and cons when deciding to file for bankruptcy:

• Filing bankruptcy means that your bankruptcy is listed on your credit report and remains there for 10 years on a chapter 7 and usually 7 years on a chapter 13. However, this does not mean that you have to wait to 7-10 years to get good credit again. Many bankruptcy clients have been able to get a mortgage from a bank to purchase a house about 2 years after the bankruptcy.

·         Another downside of filing bankruptcy is the cost involved. While bankruptcy does cost money, it can also save you thousands or even your home once debts are discharged or repayment plans proposed through bankruptcy. The fees paid to the court and a bankruptcy attorney are much less significant than if you had to pay your creditors or lose your home.

Each financial situation is different. Consult a competent bankruptcy attorney who represents debtors to find out what is in your best interest. For a free bankruptcy consultation contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or via e-mail at info@fnlawfirm.com.