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Protecting Your Lawsuit During Bankruptcy

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.

Amana Couple Convicted of Bankruptcy Fraud in Pensacola, Florida

The Schuerers were convicted of Bankruptcy Fraud in Pensacola, Florida, and ordered to serve 30 months in in prison, pay a $25,000 fine and a $200 special assessment was imposed on each defendant. Also, the couple was ordered to pay the U.S. Trustee $394,984. So the moral of this story is do not "sell" your property to friends or family prior to filing bankruptcy.



CEDAR RAPIDS, Iowa - Gerald and Fay Schuerer of Amana were convicted of defrauding bankruptcy creditors out of more than $350,000 in property this week following a six-day trial in Pensacola, Fla.

Gerald Schuerer, 60, and Fay Schuerer, 58, were convicted of mail fraud and bankruptcy fraud on Monday, Nov., 8, following three hours of jury deliberations, according to the United States Attorney for the Northern District of Iowa.

The couple had formerly owned the Ox Yoke Innterstate in the Amana Colonies before running into financial trouble with a convenience store business that later closed. They had been indicted by a federal grand jury in Florida, where they had moved and filed their bankruptcy case to take advantage of the state’s more liberal bankruptcy filing laws.

Evidence presented at trial indicated the couple protected from creditors before their bankruptcy filing through sham sales to relatives with understandings that they would reacquire the assets after their bankruptcy protection was granted.

Among the assets were a vehicle, boats, jewelry, stocks and other investments worth about $380,000.

The Schuerers were released on bond pending sentencing by United States District Court Judge Casey Rogers at a date to be set later. The maximum possible sentence for the offenses would be 30 years in prison, a fine of $500,000, and six years supervised release.

The case was investigated by the Federal Bureau of Investigation with help from the Office of United States Bankruptcy Trustee in the northern districts of Iowa and Florida. It was prosecuted through efforts of the Bankruptcy Fraud Task Force of the Northern District of Iowa.

The federal government plans to seek restitution for the Schuerers’ creditors at sentencing, according to a prepared statement released by United States Attorney Stephanie Rose.

Rising Gas Prices Impact Debtors in Bankruptcy

Rising Gas Prices Impact Debtors in Bankruptcy

Debtors in bankruptcy are required to disclose all household income and expenses. While the debtor’s income is often relatively easy to determine through pay stubs and bank records, calculating expenses can be more elusive. When completing your bankruptcy schedules it is important to be realistic. Often changes in the economy can significantly affect your budget. The recent spike in gas prices has impacted the budgets of American families, and changes calculations within your bankruptcy case.

The U.S. Energy Information Administration recently determined that the average price for a gallon of regular unleaded gas in the United States is $3.567. That is a change of almost $.78 from the same time last year. Many economists believe that the national average will climb to over $4.00 per gallon. In fact, in some states (notably California) gas is already over the $4.00 mark.

It is important to account for this increase in your family’s budget. If you drive 12,000 miles per year and your car averages 25 miles per gallon, you use 480 gallons of gas per year, or 40 gallons per month. At the national average price of $3.567 per gallon, you spend almost $143 per month on gas. That is already $31 more per month/per vehicle than a year ago. If gas prices climb to $4.00 per gallon, the additional cost to a two income, two car family will be approximately $97 per month more than last year.

Higher gas prices have also contributed to an increase in food prices. According to the U.S Department of Agriculture, food prices for a family of four with school-aged children averaged $1184.50 during the month of January. That's $26.20 per month more than the same time last year.

While not every budget increase will necessitate a change in your bankruptcy schedules, any significant change that occurs after you sign your bankruptcy schedules should be brought to the attention of your bankruptcy attorney. While only a small percentage of cases will be affected by increases to a debtor's expenses, it is important to keep your attorney apprised of changes in your finances during your case.

Bankruptcy Fraud is a Federal Crime

Bankruptcy fraud is a federal felony that carries a sentence of up to five years in prison and/or a fine of up to $250,000. Some examples of bankruptcy fraud include concealing assets, intentionally filing false or incomplete forms, and providing false information while under oath. Often bankruptcy fraud is accompanied by other serious offenses like identity theft, mortgage fraud, tax fraud, or money laundering.

Bankruptcy fraud can become very complex and may involve the IRS or FBI. The penalty may involve many years of incarceration when coupled with other criminal charges. Other cases are relatively simple like a recent case in Pennsylvania:

A husband and wife were each sentenced to fifteen days in prison by U.S. Magistrate Judge J. Andrew Smyser in the Middle District of Pennsylvania after finding contempt of court for untruthful conduct in their joint bankruptcy case.

According to a press release issued by the U.S. Attorney's Office, Tammy Beecher and Wyatt Beecher filed a chapter 7 bankruptcy petition in May 2007. The filing stated that the Tammy Beecher had no income and that neither debtor operated a business within the previous six years. In fact, the Beechers owned a family business, "Fun 4 Kids Entertainment." Only after the Beecher’s were presented with a coupon for $5 off any party, and reminded by the chapter 7 trustee they signed the bankruptcy petition under penalty of perjury, did the Beecher’s admit that they owned and operated the business.

Bankruptcy fraud can be reported by ex-spouses, banks, and even your neighbors. The Executive Office of the United States Trustees (EOUST) recently launched an internet site that will allow the public to report suspected instances of bankruptcy fraud to the EOUST at http://www.usdoj.gov/ust/eo/fraud/index.htm.

The moral here is: tell your bankruptcy attorney everything. Your attorney can work with you to protect your assets and avoid criminal charges, but only if you tell all. The information you share with your attorney is shielded by attorney-client privilege, a powerful and time-honored protection. While your attorney cannot counsel or assist you in an illegal act, there are many legal options available in every case. If you are in over your head, speak with an attorney and understand your legal options.

The Perils of a DIY Bankruptcy

Federal law guarantees open access to the courts and permits self representation in lawsuits, including bankruptcy proceedings. However, the most important question is not “can you,” but “should you” represent yourself in a bankruptcy case.

Proceeding pro se (Latin meaning “for himself”) in a bankruptcy case is like navigating a mine field while blindfolded. Is it possible to be successful? Sure! Will your bankruptcy case blow up? Probably. Books and internet resources simply cannot substitute for competent legal advice. Below are a few reasons why a pro se bankruptcy is a bad idea:

Reason 1: The Federal Bankruptcy Code is complex.

Reason 2: The Federal Rules of Bankruptcy Procedure are complex (and changing as of December 1, 2009).

Reason 3: The bankruptcy court’s local rules are complex.

Reason 4: The applicability of state law to federal bankruptcy law is complex, including state exemption laws, state criminal laws, and state collection laws.

Reason 5: The bankruptcy trustee will examine your case more closely since you are not represented by counsel. The trustee will likely put you at the end of the 341 meeting docket to have extra time to review your bankruptcy case and ask questions.

Reason 6: Most skilled bankruptcy attorneys will not step into the middle of a pro se case when things go wrong.

Reason 7: Are you really qualified to answer important questions, like: “When should you file?” “What chapter should you file?”

Reason 8: Most courts will not allow a pro se bankruptcy debtor to file documents electronically through the court’s internet ECF system.

Reason 9: You can be audited by a CPA firm selected by the Department of Justice.

Reason 10: Occasionally the pro se case is such a chaotic mess that the debtor is forced to dismiss the bankruptcy and later re-file with the assistance of an attorney. That’s two bankruptcies on your credit report for the price of one!

Reason 11: If you are reaffirming a debt, you must appear in open court and answer the bankruptcy judge’s questions.

The upside of representing yourself is saving a few dollars. The downside is a considerable risk to your property, your future finances, and, in extreme cases, your liberty. Don’t risk your families’ well-being! Let an experience bankruptcy attorney guide you through your bankruptcy case.

Call the Law Office of Erich M. Niederlehner, PA prior to filing a bankruptcy not after things have gone wrong in your case. We offer free consultations and reasonable fees that can be paid over time so there is no reason not to hire an attorney to represent you in your bankruptcy filing.

If you have gambling debt, tell your attorney and don’t lie!

There is a common myth that gambling debts cannot be discharged in bankruptcy. The truth is that gambling debts usually receive the same treatment as any other unsecured debt, like credit cards or medical bills. However, under some unusual circumstances, a bankruptcy court may find that a gambling debt cannot be discharged.

Gambling debts commonly appear as credit card charges or cash advances. An important factor in the discharge of this debt is whether there was an intent to repay the debt when the charge or advance was incurred. If the debtor had no intent to repay the obligation, the credit card company may object to the discharge of this debt on the basis of fraud. Courts have generally been reluctant to listen to this objection by a creditor unless there is strong evidence of fraud. For instance, a debtor who takes out a $10,000 cash advance at the casino, even though he is recently unemployed and overwhelmed by debt, and who files bankruptcy the next day will likely have the hall-marks of fraud.

Most gambling debts in bankruptcy are not as cut and dry as the above example. If the credit card company objects, the bankruptcy court will hold a hearing. The court may look to the debtor’s past credit card transactions, any attempt to repay the obligation, and the records and testimony of the debtor to determine the existence of a fraudulent intent.

All gambling losses must be disclosed by the debtor on the Statement of Financial Affairs. This disclosure is a mandatory requirement and the intentional failure to disclose this information may result in a finding that the gambling debt cannot be discharged, or worse, the court may deny any discharge in the case as a result of the debtor’s misrepresentation. It is particularly important to disclose recent gambling losses to your attorney prior to the filing of your bankruptcy case. Recent credit card charges or cash advances can be problematic to any bankruptcy case; and especially troublesome if related to gambling debt.

Bankruptcy courts can be very forgiving to the honest, although perhaps foolhardy debtor, and very unsympathetic to the dishonest. Honesty and full disclosure is especially important in a case involving gambling debts. Discuss these debts with your bankruptcy attorney and provide all the requested documentation. The success of your bankruptcy case depends on it!

How to Value Household Property in Bankruptcy

During bankruptcy a debtor is required to reveal all assets and give an estimated value of the property. When the asset is cash money or an investment, figuring its value is easy. In other cases nailing down a value can be very elusive. This is especially true when dealing with a unique or expensive household item. So how does the bankruptcy trustee expect the debtor to come up with a value for household property?

To understand how to value household property for bankruptcy purposes, it is important to understand the bankruptcy process. One of the chief functions of the bankruptcy trustee is to uncover assets for the benefit of creditors. Federal and state laws allow the debtor to keep certain modest items of household property that are considered “necessary,” like clothing and household items, but only up to a certain dollar amount. That amount is called an “exemption,” and that property is considered “exempt” and protected from a creditor’s collection remedies. Any property that is worth more than the allowed exemption amount is subject to be liquidated, usually at auction.

So the easy answer to how household property should be valued is, “At auction prices.” Since auction prices can vary, that doesn’t really answer the question at all. Instead, what most bankruptcy trustees suggest is to set a price like you would at a yard sale. Additionally, internet resources like eBay can be helpful to determine the quick-sale market value of a unique item. Using one of these on-line resources can provide good evidence that your new-in-box Barack Obama Chia Pet is only worth $20.00.

Many used household items, like common dinner dishes or bedding, have little or no value. On the other hand, a grandfather clock, piano, or gun safe usually has some value. A bankruptcy trustee is not in the used furniture business, and will usually incur significant costs in selling a debtor’s property. Consequently, the trustee will not be interested in your household property unless you own a non-exempt item that can be sold for a substantial profit to the bankruptcy estate.

As owner of your property, you are entitled to give an opinion regarding its value. It is important not to under-value or over-value your household property, but instead give a fair and reasonable estimate. If you own an expensive household, do some research and speak to your bankruptcy attorney. There are many ways to protect property in bankruptcy and your bankruptcy attorney can help you decide on the best course of action.

How Bankruptcy is Helping Businesses Recover! - Fairhope, AL, Pensacola, FL, Fort Walton Beach, FL, & Mobile, AL

As consumers venture out shopping for gifts this holiday season, many will be surprised by the number of stores that have gone out of business since last Christmas. Many shopping favorites have closed their stores for good, including Linens N’ Things, Goody’s, Mervyns, KB Toys, Sharper Image, and Circuit City. However, many stores like Circuit City and Linens N’ Things have filed a business bankruptcy, but are still selling on-line. This kind of restructuring through a business bankruptcy is not unusual in today’s economy. Shrewd businessmen like Donald Trump know the power of the federal bankruptcy laws. In fact, Mr. Trump has seen his businesses file, and emerge from, bankruptcy several times.

According to the Wall Street Journal, business bankruptcies are up 16% from last year, and number 74,832 filings through October. For many retailers, the holiday season is a make-or-break time of and will do what they can to attract shoppers. For instance, BusinessWeek reports that Sears, Amazon.com, and Wal-Mart are invoking Black Friday deals weeks before Thanksgiving and retailers are planning to offer more holiday promotions and discounts this holiday season.

The federal bankruptcy laws have helped retailers keep their stores open. Eddie Bauer and Mrs. Fields Cookies are two well-known businesses that recently filed chapter 11 bankruptcies to reorganize finances, get a breathing spell from creditors, and continue operating. Chapter 11 of the bankruptcy code is a reorganization bankruptcy, usually used by a corporation or partnership. In a chapter 11 the debtor proposes a plan to keep its business alive and pay creditors over time. An individual can also file a chapter 11 bankruptcy, but usually opts for filing under chapter 13 or 7.

If you are struggling with bills you can’t pay, you are not alone. Many businesses and individuals are hurting during this recession period. The good news is that the federal bankruptcy laws have helped millions of individuals and businesses get back on their feet, and it can help you too! Speak with me and learn how you can get relief and a fresh start in your financial life. So go green and cut up the plastic.

With offices in Mobile, Fairhope, Pensacola & Fort Walton Beach bankruptcy attorney Erich M. Niederlehner has a location near you. Schedule your free consultation to see if bankruptcy might be right for your situation by calling 877-607-2228.

Rebuilding After Bankruptcy - Pensacola, Mobile, Fairhope & Fort Walton Beach

Congress has said that one aim of a consumer bankruptcy is to give the debtor a fresh start. Congress and the bankruptcy courts provide a specific process for eliminating debt, but offer no guidance when it comes to rebuilding your financial life after a bankruptcy. Fortunately, the rebuilding process is not difficult, but it does require some time and effort.

Immediately after your case closes (usually soon after the discharge order is issued), you should obtain a copy of your credit report. Federal law states that you are entitled to one free copy of your credit report every twelve months. The "big three" credit reporting bureaus (Experian, Equifax, and TransUnion) have established a web site for obtaining these reports free of charge: www.annualcreditreport.com

Once you have obtained one free credit report from each credit reporting bureau, review each report for errors. All of the credit bureaus have simple instructions for contesting erroneous information on your report. The debts that were discharged by your bankruptcy should be listed as "Discharged in Bankruptcy" with a "Zero Balance." These discharged debts should reflect no activity after the date of your bankruptcy filing. After the credit bureau updates its records, it will send you a new credit report. Review this new report for errors. You may need to repeat the process once or twice before your report is finally accurate. Remember, your credit report is only as good as the information the credit reporting bureau receives. It is your responsibility to ensure that it has accurate information. It is also wise to check your credit report at least twice each year to prevent fraud and erroneous reporting.

Once you have corrected your credit report, it is time to rebuild your credit score. Your credit score is a number that lenders use to estimate risk, and is made up of several aspects. Approximately 1/3 of your score is based on your payment history; 1/3 is your available credit; and 1/3 is various items like types of credit and length of credit history. Unfortunately, immediately after a bankruptcy most credit scores are terrible. The best way to rebuild a credit score is to start a new, responsible history of managing credit. Since approximately 1/3 of a credit score is based on payment history, many individuals have found that they can quickly rebuild by making on-time payments to a secured credit card or small bank loan (that may require a co-signor). On-time payments to a secured debt, such as a home mortgage or auto loan, will also improve your score.

One word of caution: avoid negative reports at all costs! A thirty day late will significantly harm your rebuilding efforts, as will a collection account or any other derogatory report. If you begin having difficulty, speak with the creditor immediately and make payment arrangements. The road to financial recovery takes persistence and some patience. However, if you follow the above steps, you will see steady improvement each month.

I would also invite you to go to our website at www.ShouldIFileForBankruptcy.com, and use our totally free credit score predictor feature. Using this new feature will allow you to obtain your current credit score, and then your projected score for a year after filing for bankruptcy.

The Law Office of Erich M. Niederlehner, PA has 4 convenient locations in Mobile, Pensacola, Fairhope and Fort Walton Beach. Please call toll free 877-607-2228 to schedule a free consultation or self schedule your own appointment online at our website.

Congress has designated us a debt relief agency. We help people file for bankruptcy under the bankruptcy code. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. Main office is in Pensacola, Florida. No attorney client relationship is established by using this website.