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 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.

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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One of the most common questions asked about the bankruptcy process is, “Who will know about my bankruptcy case?” Filing bankruptcy is usually very confidential, but the Bankruptcy Code and Federal Rules of Bankruptcy Procedure dictate that notice of your bankruptcy case must be sent to certain individuals and businesses.

Bankruptcy is a legal process and is a matter of public record. Few newspapers will publish bankruptcy filings in the “public notices” section. While this was a common practice for newspapers in the past, the sheer number of bankruptcy filings makes reporting personal bankruptcies impractical. This year more than a million and a half people will file bankruptcy, and more than 5.7 million people have filed since September 30, 2005. Unless you are a public figure or your bankruptcy case is somehow newsworthy, it likely will not appear in any section of a newspaper.

You are required to submit a list of the names and addresses of every individual or business you owe when your case is filed. Everyone on that list is sent a notice of your bankruptcy case. The notice also prohibits the creditor from taking any further collection activity. The bankruptcy court will send notices only to the names on your list of creditors, to your attorney, and a notice to your address. Friends and family members are not sent notices unless you identify them on your list.

Your employer may receive notice regarding your bankruptcy in a few limited circumstances. Obviously, if you owe your employer money, your employer will be notified. A second circumstance is when you file a Chapter 13 repayment bankruptcy and wish for your employer to withhold the plan payment from your wages. Finally, there may be a reason to notify your employer, like if your employer is under a court order to garnish your wages.

Since your bankruptcy case is a matter of public record, an individual may contact the bankruptcy court to obtain information about your case. Most bankruptcy courts have an automated telephone system that will provide basic case information to the public. Some individuals are able to access the Public Access to Court Electronic Records (PACER), an electronic public access service that allows users to obtain bankruptcy case information via the Internet. PACER registration is free, but the system charges an access fee per page.

The typical bankruptcy case is quick and confidential. However, every case is different. If you have specific questions about the effects of filing bankruptcy, consult with an experienced bankruptcy attorney. Your attorney can explain the benefits of the federal bankruptcy laws and the process for discharging your debts.

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A Chapter 7 bankruptcy is sometimes called a liquidation bankruptcy.  In its simplest description, a Chapter 7 bankruptcy liquidates all of your property to pay your creditors.  Any remaining debt is discharged.  However, that description is not exactly accurate, or practical.  The truth is that most debtors who file Chapter 7 bankruptcy do not lose any property while erasing all or most of their debts.

Once your Chapter 7 bankruptcy case is filed, an impartial case trustee (sometimes called an “interim trustee” or “panel trustee”) is appointed.  The main functions of the Chapter 7 trustee are to oversee and administer your bankruptcy case.  When you file a Chapter 7 bankruptcy all of your assets are placed into a temporary “estate.”  The estate is the temporary legal owner of all property in which you have a legal or equitable interest as of the date you file bankruptcy.  The trustee examines the estate to determine whether there are assets that can be sold to pay creditors.

Most Chapter 7 cases are considered “non asset cases,” meaning that all the debtor's assets are exempt or subject to valid liens.  However, when non-exempt assets are available, the trustee may take and sell these assets to pay creditors.  The Chapter 7 trustee oversees the accounting and payment of creditors from funds obtained by liquidating non-exempt assets of the debtor. 

The Chapter 7 trustee also presides over the debtor’s meeting of creditors required by Section 341 of the Bankruptcy Code.  The Chapter 7 trustee is usually an attorney or accountant with extensive bankruptcy law and auditing experience, but is forbidden from offering legal advice to a debtor in bankruptcy.  The trustee is under a duty to investigate the debtor’s affairs, examine the debtor under oath, and submit reports to the bankruptcy court and Office of the U.S. Trustee.  At the meeting of creditors the Panel Trustee is required to ask the debtor specific questions outlined in the U.S. Bankruptcy Code, including:

Did you read the schedules before signing?

Did you list all of your assets?

Did you list all of your debts?

Are the schedules accurate?

Do you want to make any corrections to the schedules?

Do you have a domestic support obligation?

If the trustee discovers evidence of fraud during the examination of the debtor, the case may be passed to the Department of Justice for further investigation.  The trustee may also find assets through unconventional means, such as avoiding pre-bankruptcy transactions made by the debtor in an attempt to protect assets from creditors.

The best advice for dealing with the bankruptcy trustee is to plan and prepare.  Use an experienced bankruptcy attorney to prepare your bankruptcy filing accurately and honestly.  When the paperwork is in order, there are no assets to liquidate, and there are no signs of fraud, the case goes smoothly and quickly.  However, when the bankruptcy schedules are inconsistent or incomplete, you may find yourself squarely on the trustee’s radar. 

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Military service is a selfless and honorable public service.  Veterans deserve our respect and our gratitude.  Congress has passed many laws attempting to give veterans a preferred status to meet special needs that result from service to our country.  For instance, wounded veterans receive health care after discharge, and veterans often have hiring preference for jobs.

In recognition of the potential economic hardship that extended military service may impose on our reservists and national guardsmen, Congress has made a special exemption from the bankruptcy means test.  Members of the Reserves or National Guard who file bankruptcy while on active duty or within 540 days after release from active duty are excluded from all forms of means testing.  The means test is a mandatory calculation that determines whether the debtor’s income is low enough for you to file Chapter 7 bankruptcy.  

Disabled veterans are also exempted from taking the means test.  However, this exemption only applies if the indebtedness was primarily incurred during service on active duty or while performing a homeland defense activity.

Active duty servicemen and servicewomen are not excluded from the means test.  However, active duty personnel receive protection under the Servicemembers Civil Relief Act (SCRA).  The SCRA protects active duty military personnel from default judgments and evictions, and can even reduce the servicemember’s interest rates.  Active duty personnel serving in a combat zone are also excused from completing pre-bankruptcy credit counseling.

If you have served in this country’s military and are now struggling with debt, speak with an experienced bankruptcy attorney and learn how our national laws can help you in your time of need.  The bankruptcy laws broadly protect Americans overwhelmed by debt, and specifically protect certain veterans who have suffered financial hardship as a result of their service.

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The federal Bankruptcy Code provides many options for an individual to reorganize his finances.  In some cases, a Chapter 7 debtor may decide that he can no longer afford to make the monthly payments on a secured loan.  This may be a loan secured by real estate, a vehicle, or personal items.  When the monthly payment is not affordable, the debtor should consider his options.  These options may include restructuring the debt through Bankruptcy Code provisions such as re-writing the note in a reaffirmation agreement, lien-stripping, or redemption.  The debtor may also consider using a non-bankruptcy option such as refinancing.  Whatever the decision, the general rule in bankruptcy is that secured items must be paid for or returned to the secured creditor.

The best financial decision for the debtor may be to simply "walk away" from a secured debt.  Surrendering property back to a creditor is not an easy decision, but in many cases it can be a very liberating experience.  Surrendering property is usually as simple as coordinating a time between your attorney and the creditor, and then delivering the property.  Once the creditor takes possession of the property, the debt is no longer secured and is discharged at the end of the Chapter 7 bankruptcy case.  It is important to continue to safeguard the property and maintain insurance until the property transfer is completed.

The threat of surrendering the property can be a highly effective negotiating tool.  In most cases the creditor doesn't want the property, it wants the money.  Taking property is a costly expense to the creditor and the threat of surrender may open the possibility for negotiating affordable terms during reaffirmation, redemption, or cram-down.

If you have secured property you can no longer afford to keep, consider surrendering the property during a Chapter 7 bankruptcy and "walking away" from the debt.  Discuss your options with your attorney and learn how the federal Bankruptcy Code can help you restructure your finances.

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

The United States Trustee Program is a component of the Department of Justice.  The Trustee Program appoints and supervises local private trustees who administer Chapter 7 and 13 bankruptcy estates.  One of the private trustee’s chief duties in Chapter 7 cases is to liquidate the debtor’s nonexempt assets and pay creditors with the proceeds.  Similarly, in a Chapter 13 case the trustee must ensure that the debtor devotes all disposable income to debt repayment. Free Consultation 

The trustee is not your friend, the judge, or your legal counsel.  The trustee has no judicial power to make final decisions or issue orders regarding your bankruptcy case.  While the private trustee is very skilled at bankruptcy law, the trustee is forbidden from giving the debtor legal advice.   

On occasion a debtor will contact the trustee’s office with questions concerning the bankruptcy case.  This is always a bad idea and often results in a negative outcome.  Direct debtor contact is uncommon, so the trustee will identify and remember a debtor that personally contacts his or her office.  The case may have been a “routine” bankruptcy case for the trustee, but after the debtor contact the case is squarely on the trustee’s radar.  The trustee will assume there is a problem with the bankruptcy and scrutinize the case. Free Consultation 

During a lawsuit direct communication with represented litigants is generally prohibited.  Many trustees are also licensed attorneys, but may communicate directly with you while performing the duties of bankruptcy trustee.  If you call the trustee, he or she will likely speak with you.  And why not?  You may inadvertently disclose something that is better left unsaid.  What seems like an innocent and expedient communication may turn into an issue that you are unable to predict.  Free Consultation 

The bankruptcy trustee is not your friend.  If you have questions concerning your bankruptcy, discuss your issues with your attorney.  Your attorney can answer questions about your case, and is experienced in dealing with the bankruptcy trustee.  Let your attorney represent you and do not complicate your case by communicating directly with the bankruptcy trustee. Free Consultation