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

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. 

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.
 

Costly thy habit as thy purse can buy,

But not express'd in fancy; rich, not gaudy;

For the apparel oft proclaims the man;

- Polonius to Laertes in Hamlet

Clients commonly want to know how to dress for the meeting of creditors.  This is the first (and usually the only) time you will see the bankruptcy trustee, so it is important to make the right impression.  How you dress may mean the difference between flying under the trustee’s radar and being squarely in the crosshairs.

While the trustee is not a judge, and the meeting is intended to be “informal,” your appearance should convey respect towards this federal process.  Some clients believe that they should dress like they are very poor.  This is not recommended and will make you stand out in stark contrast to the attorneys and creditors who may attend your meeting.  Likewise, some clients over-dress for the meeting.  Wearing a suit or Sunday best attire will also attract unwanted attention and cause you to stand out apart from the other debtors.

The best advise is to dress in a business casual manner.  For men this means long pants and a collared long or short sleeved shirt.  For women long pants or skirt, and a modest top that covers the shoulders.  Jeans, t-shirts, shorts, short skirts, flip-flops, and revealing clothing are not appropriate.  Hair should be neatly trimmed and you should convey an overall clean and neat appearance. 

If you are actually poor, the trustee will recognize this fact from your bankruptcy schedules and will appreciate your respectful appearance.  If you are not poor, dressing like you are homeless will cause the trustee to wonder why you are appearing that way.  This may cause further questioning - which is never a good thing for a debtor!

Leave personal electronics and expensive jewelry at home!  Bankruptcy trustees are always looking for personal items that may be under-valued or not disclosed on the bankruptcy schedules.  Again, leave expensive phones and jewelry at home.

The vast majority of bankruptcy meetings are quick and uneventful.  Make sure you are not causing questions from the trustee by your appearance or by personal items brought to the meeting.  The goal is to have no one notice you or remember you case.  If you have further questions about how to dress for your meeting of creditors, consult with you bankruptcy attorney.

There is an old saying in the bankruptcy world, “Pigs get fat, hogs get slaughtered.”  It means the honest, but unfortunate bankruptcy debtor will keep enough property to live comfortably and then some.  On the other hand, when the debtor conceals assets, hides income, or attempts to keep more than legally entitled, the bankruptcy process may serve up the hoggish debtor on a silver platter. 

We may be witnessing a good old fashioned hog roast in the media.  Teresa Giudice, star of the Bravo television show The Real Housewives of New Jersey, is embroiled in a fight with a New Jersey bankruptcy trustee.  Teresa and her husband Joe filed for Chapter 7 protection in late October, 2009, but have yet to receive a discharge from the bankruptcy court.   

On June 30, trustee John W. Sywilok filed an adversary complaint seeking to deny the Giudice’s bankruptcy discharge.  The trustee alleges that the Guidices “concealed documents, records and papers from which the Defendant's financial condition or business transactions could be ascertained.”  The trustee also complains that the Guidices failed to disclose financial or ownership interests in several businesses, including a pizza parlor and a Laundromat, as well as a book written prior to the bankruptcy.   

Recently the trustee produced documents showing that the Giudices when on a $60,000 shopping spree before and after filing bankruptcy.  During court testimony reported by the New York Post, Sywilok claimed that over $45,000 worth of furniture was purchased, and $11,000 of that just two days before filing bankruptcy.  

The trouble the Giudices face with the bankruptcy court is very real and very serious.  If the court determines that assets or income were intentionally concealed, the debtors may be denied a discharge.  An auction of assets has been ordered by the bankruptcy court, so a denial of discharge will mean that the Giudices lose their property, creditors will receive the proceeds of the auction (including a substantial payment to the trustee as compensation), and any remaining debt will survive the Chapter 7 case.  Consequently, the Giudices may face additional state court litigation on their debts and garnishment of future earnings.  If the case is egregious enough, the bankruptcy court may refer the case to the Department of Justice to investigate possible bankruptcy fraud, a federal criminal act.   

Regardless of the outcome, the Giudice case is an excellent example of how not to act before and during your bankruptcy case.  If you need relief from your debts and are willing to deal honestly and fairly with the trustee and your creditors, bankruptcy can discharge your debts and give you a fresh financial start.  Consult with an experienced bankruptcy attorney today and discover how the federal bankruptcy laws can help you and your family.

The Bankruptcy Code requires every debtor to appear and submit to a bankruptcy examination under oath at a meeting with the debtor's creditors.  This meeting is presided over by the bankruptcy trustee and is an opportunity for creditors and the trustee to determine if assets have improperly been disposed of or concealed or if there are grounds for objection to discharge.  At this meeting the trustee must inform the Chapter 7 debtor of the consequences of bankruptcy, the availability of relief under other chapters of the Bankruptcy Code, and the effect of receiving a discharge of debts and of reaffirming a debt. Free Consultation 

The Meeting of Creditors (also called the "Trustee's Meeting," the "Creditors’ Meeting," or the 341 Meeting (after section 341 of the bankruptcy code which requires the meeting) is held between 20 and 40 days after your bankruptcy is filed.  The bankruptcy court schedules the meeting and mails notices to all of your creditors.  However, the bankruptcy judge is prohibited from attending the meeting.  Since there is no judge, the Meeting of Creditors is not a judicial proceeding.  Free Consultation  

The bankruptcy trustee is required examine you under oath and investigate your financial affairs.  The trustee then submits a report to the bankruptcy court and Office of the U.S. Trustee.  The trustee is also required to ask specific questions, including: 

Did you read your schedules before signing them?

Did you list all of your assets?

Did you list all of your debts?

Are your schedules accurate or do you need to make any corrections?

Do you have a domestic support obligation? 

The trustee may also have specific questions concerning your schedules which may involve your assets, income, expenses, debts, or financial transactions.  Your attorney will be present with you to assist you during this examination.  The trustee may also require that you provide information or documents before, during or after the meeting including bank statements, pay stubs, tax returns, vehicle titles, and land ownership and debt documents.  Finally, you are required to provide proof of identity including social security number and a government issued photo I.D. Free Consultation 

Despite the name, the Meeting of Creditors is generally a meeting that no creditors attend.  For most national creditors like Ford Motor Credit or Capital One it is not cost-effective to attend these meetings.  Because the trustee conducts dozens of these meetings on the same day, any creditor questions are limited to only a few minutes.  If the creditor needs additional time, it can ask the bankruptcy court to order the debtor to appear for a further examination between just the creditor and the debtor at a later date. Free Consultation 

Many bankruptcy debtors are very nervous going into the Meeting of Creditors, but soon realize that it is just a procedural formality.  Your bankruptcy attorney will assist you during your meeting, and can answer any questions concerning the Meeting of Creditors or the bankruptcy process. Free Consultation

The Bankruptcy Code directs the Chapter 7 debtor to file a statement of intention with the bankruptcy court within 30 days after the petition filing, or on or before the 341 Meeting of Creditors, whichever is earlier.  A statement of intention advises the court, the bankruptcy trustee, and your creditors of how the debtor intends to treat secured collateral, like a car or home, in the bankruptcy. 

The Bankruptcy Code also requires that the Chapter 7 debtor perform on that intention within 45 days after filing the statement.  The Bankruptcy Code allows the debtor to choose one of the following: (1) surrender the collateral back to the creditor and discharge any personal liability; (2) reaffirm the debt and retain the collateral in exchange for continued personal liability on the original debt; or (3) redeem the collateral by paying the current fair market value in a lump sum. 

Prior to the overhaul of the Bankruptcy Code in 2005, a Chapter 7 statement of intention had little relevance. Now the statement of intention can mean the difference between keeping and losing an automobile or other secured property.   

Failure to timely file or perform on a statement of intention causes the automatic stay to be lifted and the property is longer a part of the bankruptcy case.  In some cases, a purchase agreement may contain an ipso facto clause which creates a default on the loan by filing bankruptcy.  The Bankruptcy Code expressly nullifies ipso facto clauses, but only for property of the bankruptcy estate.  Most courts find that ipso facto clauses are enforceable under state law when property is no longer a part of the bankruptcy estate.   

Let me restate this situation in plain English: if you file bankruptcy and do not file or timely perform on a statement of intention, the property is no longer protected by the bankruptcy and can be repossessed by the creditor, even though you are current on the loan.  This situation recently was discussed in a Ninth Circuit Court of Appeals case, Dumont v. Ford Motor Credit Company. 

If you have an auto loan or other secured item you want to keep, discuss your options with an experienced bankruptcy attorney.  Your attorney can help you reach the right decision for you and your family.