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

For most, the decision to file a bankruptcy is a tough choice. It is the final step in a long journey that has included great compromise and sacrifice. A person usually experiences a sense relief when deciding to file bankruptcy, and there may be a tendency to "let go" of your debt problem. Unfortunately, in some cases people will “let go” by recklessly spending money and running up credit card balances.

It is generally not a good idea to incur any new debt before a bankruptcy filing. The Bankruptcy Code has several provisions prohibiting the debtor from loading up on debt prior to filing bankruptcy. One of the most commonly cited is a spending spree prohibition against purchasing “luxury goods or services” totaling more than $550.00 within 90 days prior to filing a bankruptcy case. Another provision makes credit card cash advances presumptively non-dischargeable if taken within 70 days prior to the bankruptcy filing.

Recently the United States Supreme Court in Milavetz, Gallop & Milavetz, P. A. v. United States reiterated that incurring new debt before bankruptcy with the intent to discharge the debt is not only prohibited, but may also amount to civil fraud or a criminal act. The high court said that bankruptcy attorneys cannot instruct or encourage debtors to take on more dischargeable debt before bankruptcy, but attorneys “remain free to talk fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” 

There are many situations where taking on additional debt is beneficial and permissible. The Supreme Court cited three of those situations in the Milavetz opinion: (1) refinancing a mortgage; (2) purchasing a reliable car; and (3) incurring “additional debt to buy groceries, pay medical bills, or make other purchases ‘reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor[.]’”

The bankruptcy process can relieve you of many financial worries. However, your path to financial recovery can be complicated without the sound advice from an experienced bankruptcy attorney. Don’t make any significant financial decisions prior to filing bankruptcy without consulting your attorney.  

Most bankruptcy clients worry about how a bankruptcy might disrupt their lives. While many of these fears are unfounded, it is important for you to know the truth about the bankruptcy process and how it may affect you after your case. One serious matter is how a bankruptcy may affect an individual’s employment.

The first concern is how a bankruptcy can affect your current job. An employer will not receive notice of your bankruptcy except under two circumstances. First, you owe a debt to your employer, the bankruptcy court will notify your employer. Second, if you file a chapter 13 debt repayment bankruptcy, and choose a voluntary wage garnishment to pay creditors, your employer will be notified. 

Additionally, section 525 of the Bankruptcy Code prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy. You cannot be fired from your current job because you filed bankruptcy.

A second concern is how a bankruptcy may affect your ability to get a job. Government employers are absolutely prohibited from denying employment to a person solely on the basis of a bankruptcy filing. As for private employers, most courts have found that the bankruptcy code does not prohibit a private employer from denying a person employment because of a bankruptcy filing.

Refusing to hire a person solely because of a bankruptcy filing seems like a very short-sighted and naïve policy. Consider that the U.S. Census Bureau estimates there are around 308 million people in the United States. From 2000 to 2009, there were over 13 million non-business bankruptcy filings (source: American Bankruptcy Institute). That is over four bankruptcy filings per one hundred people. That figure rises substantially once you take into account that the census includes many that are not in the “working” population, and that many of the non-business bankruptcy filings were joint husband and wife filings. Add to the fact that there are many legitimate and blameless reasons for filing bankruptcy, and it is no wonder that most employers do not discriminate based upon a bankruptcy filing.

If you are experiencing financial difficulty, consult with a bankruptcy attorney and explore your options. Bankruptcy is a federally guaranteed legal process that helps individuals recover from overwhelming financial hardship. Get your financial fresh start today.

People often fear the idea of filing for bankruptcy in Texas because they are operating under myths and misconceptions. The fact is, there is a lot about Texas bankruptcy that most people don’t know.

To help you make a more informed decision, Fears | Nachawati – a team of experienced Texas bankruptcy attorneys – has put together this list of five of the most surprising secrets about bankruptcy:

1. You may be able to keep most, if not all, of your property: Texas bankruptcy law allows you to choose between Texas state exemptions and federal exemptions. These exemptions allow you to keep a good deal, if not all, of your property when you file for bankruptcy. For example, in Texas, you may be able to keep your car, home, household goods, jewelry and retirement savings, among other things.

2. There is no minimum amount of debt necessary to file for bankruptcy in Texas: No law, in Texas or elsewhere, exists that dictates the amount of money you must owe in order to file for bankruptcy.  Bankruptcy laws were designed to help out individuals who are unable to pay their existing debts. Whether or not you can file for Chapter 7 bankruptcy in Texas is a matter of evaluating your debts, assets and income.

3. It is possible to get credit after bankruptcy: Because bankruptcy does negatively affect your credit for a time and does remain on your credit report for up to 10 years, many people understandably but mistakenly believe that they will never be able to obtain credit again if they file for bankruptcy in Texas. However, the reality is that you will be able to get credit within a relatively short time after you file for bankruptcy. You will, for instance, be able to get secured credit cards that will improve your credit score. You might even be able to get a mortgage within as little as two years after filing for Texas bankruptcy.

4. Your employer will not be notified of your bankruptcy: While it is true that bankruptcy records are public, there is little chance that your employer will find out about your bankruptcy. No one from the bankruptcy court will notify your employer of your bankruptcy. The only people who will know about your Texas bankruptcy are your creditors and the people that you choose to tell.

5. Your spouse is not required to file for bankruptcy with you: There is absolutely no legal requirement that you and your spouse file jointly for bankruptcy in Texas. One spouse can file for bankruptcy without the other. The effect that your bankruptcy will have on your spouse’s assets and liabilities is a question that can be answered by a qualified Texas bankruptcy attorney.

The decision whether to extend a person credit is up to each individual creditor. There is no law that dictates how long you must wait after filing for bankruptcy before you can seek a credit card or loan.

Creditors vary greatly from one another in their willingness to grant credit to a person who has recently filed for bankruptcy. While bankruptcy can remain on your credit report for up to 10 years, it is quite possible to establish good credit within a short time after filing for bankruptcy.

Obtaining and using credit is critical to your ability to improve your credit score after bankruptcy, which is why financial experts recommend that you apply for a secured credit card. With a secured credit card, you are given a line of credit equal to an amount of money you deposit with the issuing bank. You may be able to find one that converts to an unsecured credit card after 12 to 18 months of on-time payments.

Another important step you can take to rebuild your credit after bankruptcy is ensuring that your credit report is accurate. Review a copy of your credit report to ensure you’re your discharged debts are no longer listed as open and overdue.

The bottom line is that credit will be available to you even after you file for bankruptcy. You won’t have to wait until the bankruptcy disappears from your credit report before you will be able to obtain a loan or credit card.

There is no legal requirement that both spouses file for bankruptcy. If you choose to file for bankruptcy alone, in general, your spouse’s assets and liabilities will not be directly affected. Just because you are married, that does not make your spouse automatically responsible for all of your debts.

However, there are some ways that bankruptcy could potentially have an effect on your spouse. If an asset, such as a house, is owned jointly by both spouses, then the Trustee will liquidate the one-half interest owned by the spouse who is filing for bankruptcy. Also, if both you and your spouse are responsible for a debt, such as a loan, then the non-filing spouse will then be liable for the full debt.

But, as long as your spouse is not responsible for any of your debt, they will not be affected by you filing for bankruptcy. Also, your spouse’s credit rating will not be affected if you file for bankruptcy.

An experienced Texas bankruptcy attorney can help you understand what, if any, effect your bankruptcy filing will have on your spouse’s debts and assets.

The two most common types of consumer bankruptcies are Chapter 7 and Chapter 13. In a Chapter 7 all of the debtor’s property is placed into an estate which is controlled by the bankruptcy trustee. While no property physically changes hands (at least not at the beginning of the case), the trustee and bankruptcy court have broad legal power over your property. If you have money in a bank account on the day you file, your bank account and money are assets of the bankruptcy estate. You are no longer free to transfer funds or assets as they now belong to the bankruptcy estate.

Take for example that you have $5,000 sitting in your checking account on the day you file bankruptcy. That money is property of the Chapter 7 bankruptcy estate and is no longer yours to control or use. If you take the $5,000 out of the bank the day after filing to pay your mortgage payment and other bills, the Chapter 7 trustee can seek to recover those funds, either from you or from the payee.

During a Chapter 13 bankruptcy the debtor retains possession and control over his or her property, and is free to use any funds in the debtor’s bank account. An accounting is performed and the debtor’s property is classified as either exempt or non-exempt. Non-exempt property is not taken from the debtor (as is often the case in a Chapter 7), but the Chapter 13 debtor is required to pay unsecured creditors a sum equal to the amount of non-exempt equity. For instance, if there is $5,000 in the debtor’s bank account, the debtor may only be able to exempt a portion of the entire sum. The non-exempt portion must be paid to the creditors through the debtor’s Chapter 13 plan (over three to five years).

Cash in a bank account can be a problematic issue for a debtor. Avoiding these problems is the joint responsibility of the debtor and the debtor’s bankruptcy attorney. Timing is critical to minimizing your financial exposure. An experienced bankruptcy attorney can help you maximize the benefits of the bankruptcy laws and navigate around any pitfalls. 

You cannot pick and choose which debts to list in your bankruptcy petition. You must list all of your debts, including credit cards and debts you owe to friends and family members.

Intentionally leaving a debt off your bankruptcy petition is against the law. When you sign a bankruptcy petition, you are certifying under penalty of perjury that all of your assets and debts are listed. During the meeting of the creditors, you will also be asked under oath if all of your debts have been listed on the petition.

Even though you have to list a particular debt, there is nothing in the law that prevents you from voluntarily repaying the debt after it has been discharged. In fact, with secured debts, such as mortgages and car loans, you can choose to reaffirm the debt in order to keep the property.

The bankruptcy code describes categories of debts that are excepted from discharge in a bankruptcy case. For most of these debts, the exception to discharge applies automatically. In other cases, the creditor must file a lawsuit (called an adversarial action or adversary case) with the bankruptcy court and have the judge determine whether the debt will excepted from the discharge order. A debtor may also want the bankruptcy judge to determine whether a debt is excepted from discharge.

Debts described in sections 523(a)(2), (4) and(6) (debts incurred by fraud or malicious conduct) are not automatically excepted from discharge. A creditor or debtor must file an adversary case requesting the bankruptcy court to determine the discharge status of these types of debts. The adversary case is generally filed within 60 days after the first 341 Meeting of Creditors.  Failure to file a timely adversary case waives the right to challenge the dischargeability of the debt.

In some rare cases a creditor or the bankruptcy trustee may ask the bankruptcy court to deny the debtor a discharge. Hiding assets, lying during the bankruptcy process, failing to obey a court order, and destroying documents with the intent to defraud creditors are all actions that could result in the bankruptcy court denying the debtor a discharge. In bankruptcy, honesty is not only the best policy, it is the only policy that will get you a discharge.

If an adversary case is filed against you, do not panic. You and your bankruptcy attorney must be served notice of the adversary case and you will have time to answer the complaint. In most cases an experienced bankruptcy attorney will anticipate the adversary case and will discuss options with the client. However, some cases come “out of the blue.” In those cases there is still time to develop a strategy including negotiating a settlement with the creditor.

Imagine this: you are behind on your car payments. Heck, you are behind on a lot of bills, and perhaps you have been considering bankruptcy for some time. Then one day you walk out the door for work and discover. . .

Your car has been repossessed!

Don’t despair! Bankruptcy can still help. Call an experienced bankruptcy attorney immediately because you may be able to get your vehicle returned to you.

The law in most areas (including the Sixth, Seventh, Eighth, Ninth, and Tenth Circuits) is when a debtor files a Chapter 13 bankruptcy, the creditor must immediately return a repossessed vehicle to the debtor. This is because even though the creditor has taken possession of your vehicle, you are still the legal owner. The Bankruptcy Code states that in a Chapter 13, a creditor in possession of a debtor’s asset must ordinarily relinquish the asset back to the debtor.

However, this begs the question: what if your car is sold at auction or the creditor transfers the vehicle title out of your name? If this transfer is done after the Chapter 13 bankruptcy is filed, it is typically a violation of the automatic stay and the vehicle will be returned. If the transfer is done before the Chapter 13 bankruptcy is filed, you are out of luck. You no longer have ownership of the vehicle.

If the creditor refuses to return the vehicle, or does not return the vehicle in a timely manner, most courts will sanction the creditor. Once your vehicle is returned you must provide “adequate protection” to the creditor to assure that the property will be safeguarded and that the creditor will be adequately compensated. This usually takes place by submitting a Chapter 13 plan of repayment to the bankruptcy court.

If your vehicle has been repossessed, take immediate action! Call an experienced bankruptcy attorney and discuss your options. Your attorney can help you make the right financial choice for yourself and your family.

The bankruptcy discharge is generally the goal of a debtor’s bankruptcy. The bankruptcy discharge is the cornerstone of the fresh start and debt relief promised by the bankruptcy laws. The discharge is a permanent court injunction prohibiting creditors from enforcing certain obligations against the debtor. That may seem simple and straightforward enough, but the devil is in the details.

First, the bankruptcy discharge does not “erase” a debt; it simply prohibits collection against the debtor personally. Since the debt still exists, the creditor can take any legal action so long as he does not collect from the debtor personally. That means no legal action and communications with the debtor. The creditor is permitted to contact or sue a co-debtor, or repossessing property if it secures a debt. For instance, if the debtor’s car loan is discharged in bankruptcy, and the debtor does not pay for the vehicle, the car can be repossessed after the case closes. However, the creditor cannot try to collect any money from the debtor.

Second, the discharge does not apply to all debts. Some debts, like child support obligations, are not dischargeable. Other debts, like taxes owed to the government, may be discharged under certain circumstances. To avoid any confusion consult your attorney regarding the extent of your discharge. Additionally, debts that occur after the bankruptcy filing date are usually not covered by the bankruptcy discharge.

The order of discharge generally occurs at the end of the debtor’s bankruptcy case and copies of the discharge order are mailed to all of the debtor’s creditors by the bankruptcy court. The discharge order informs creditors generally that the debts owed by the debtor have been discharged and that they should not attempt any further collection. If a creditor does try to collect from the debtor personally, the debtor can complain to the bankruptcy judge and the creditor may be held in contempt of court.

The bankruptcy discharge is usually the culmination of the bankruptcy case and relieves the debtor of the burden of overwhelming debt. An experienced bankruptcy attorney can help explain the extent of the bankruptcy discharge on your debts and help clearly define your fresh start under the bankruptcy code.

On Wednesday, the Supreme Court heard arguments addressing the question as to whether lawyers can be held liable as debt collectors if they serve a foreclosure notice that may have been incorrect in its statement of the law.

At issue in this case is a notice sent to a woman named Karen Jerman. Jerman, who owned her home outright and had paid off her mortgage in full, was served a foreclosure notice by lawyers for Countrywide Home Loans.

In the notice, Jerman was told that she had to dispute the debt in writing. Jerman hired a lawyer to draft the written response. Countrywide later realized its mistake and withdrew its complaint.

Jerman filed a class action lawsuit against the Ohio law firm that represents Countrywide,  Carlisle, McNellie, Rini, Kramer & Ulrich, and against a particular associate attorney at the Carlisle firm.

In her lawsuit, Jerman claimed that the Carlisle firm violated the Fair Debt Collection Practices Act (FDCPA) by erroneously informing her that the FDCPA states that the debt would be presumed valid unless she disputed it in writing.

At issue is whether the lawyer’s mistake of law qualifies for the bona fife error defense under the Fair Debt Collection Practices Act.

The Fair Debt Collection Practices Act excuses debt collectors if they can prove that their wrongdoing was not intentional and was in good faith. If this can be proven, then the debt collector is shielded from civil liability.

Jerman v. Carlisle comes to the Supreme Court as an appeal from a ruling made by the Sixth Circuit. The appellate court ruled that, while the law firm violated the law in requiring Jerman to object to the foreclosure in writing, the law firm nonetheless qualified for the bona fide error defense.

The Supreme Court will be deciding whether a debt collector’s unintentional legal mistake falls under the FDCPA’s bona fide error defense, thereby shielding the debtor collector from civil liability for violating the FDCPA.

Ultimately, the court’s decision in this case will affect the recourse potential plaintiffs have when making complaints about unfair debt-collection practices. It could also have an effect on the debt-collection practices themselves.

Jerman v. Carlisle is also significant because it will likely settle a split in the federal courts as to whether a debtor collector’s mistake of law, as opposed to a clerical error, qualifies as a bona fide error under the FDCPA.

If the Supreme Court rules in favor of Carlisle, then a debt collector will be able to assert a mistake of law as a defense to civil liability as a “bona fide error.”

Some transfers of assets that would be perfectly legal and valid outside the context of bankruptcy are invalid when bankruptcy is involved. A bankruptcy trustee has the power to invalidate transfers that are deemed to be fraudulent conveyances.

Fraudulent conveyances, or fraudulent transfers as they are sometimes called, are an attempt on the part of the debtor to hide an asset before filing for bankruptcy by giving it to someone, such as a relative, free of charge or at an unreasonably low price.

There are two types of fraudulent conveyances: actual fraud and constructive fraud. Cases of actual fraud require proof that the debtor acted with the intent to hinder or defraud a creditor.

With constructive fraud, the debtor’s intention behind a transfer is irrelevant. A transfer will be considered constructive fraud if two conditions are met: the debtor received less than a reasonably equivalent value in exchange for their asset and the debtor was unable to pay their debts at the time the transfer was made or as a result of the transfer.

If you file for bankruptcy, any transfer of your assets that you make within 90 days of filing for bankruptcy, or within one year if a relative or business associate is involved, will be carefully scrutinized by the court.

To receive free legal advice on transferring your assets in the context of bankruptcy, contact the Texas bankruptcy lawyers of Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.