Bankruptcy attorneys see people from all cross-sections of our population. Most people have a good understanding of their financial obligations and know who they owe. Others bring in grocery store bags and boxes full of bills they have collected for months and, in some cases, years.
It is very important to identify all of your creditors when you file a bankruptcy. The Bankruptcy Code requires that you list all of your creditors, even those you want to pay in the future. You must also make a good-faith effort to list the amount owed to the creditor.
There are two excellent sources for discovering who you owe. The first is the US Postal Service. Creditors and collection agencies are very good at sending monthly bills when you owe them money. Collect your mail for a month and you will have a good start on listing your creditors.
The second excellent source for creditor information is your credit report. There are three main consumer credit reporting agencies:
Equifax
http://www.equifax.com
800-685-1111
P.O. Box 740241
Atlanta, GA 30374-0241
Experian
http://www.experian.com
888-397-3742
P.O. Box 2104
Allen, TX 75013
Trans Union
http://www.tuc.com
800-916-8800
P.O. Box 2000
Chester, PA 19022
Each of the above consumer credit reporting agencies are required by federal law to provide one free credit report to you every 12 months. You can obtain an absolutely free credit report from Equifax, Trans Union, and/or Experian by visiting the following website: https://www.annualcreditreport.com/cra/index.jsp
Obtaining a copy of your credit report is a very good step in making a good-faith effort to identify all of your creditors. However, it is important not to rely exclusively on the information contained in the credit reports. Not all creditors report to the credit reporting agencies. Additionally, the information contained in your reports may be inaccurate, outdated, or incomplete.
If you are considering a bankruptcy filing, get a free copy of your credit report and seek legal assistance. You and your bankruptcy attorney can review your credit report and assess you financial situation. While bankruptcy isn’t the answer to all financial problems, it can provide powerful relief to people who are buried in debt.
Showing posts with label bankruptcy code. Show all posts
Showing posts with label bankruptcy code. Show all posts
Tuesday, November 30, 2010
Friday, November 5, 2010
Lien Stripping an Auto Loan in Chapter 13
Chapter 13 of the Bankruptcy Code contains many useful provisions that are not available to Chapter 7 debtors. One of the most useful is the ability to cram-down an over-secured auto loan to the actual market value of the vehicle, and pay the auto loan over the duration of the Chapter 13 bankruptcy plan.
The Bankruptcy Code recognizes that a lien is only secured to the extent of the value of the property. If the amount of the lien is more than the value of the property, the debt is separated into two parts: secured and unsecured. During a Chapter 13, the amount of the loan that exceeds the value of the vehicle can be stripped away.
For instance, if your vehicle is worth $10,000, but the secured auto loan balance is $13,000, the bankruptcy will separate the auto loan into a secured debt of $10,000 and an unsecured debt of $3,000. The secured portion must be paid in full during the Chapter 13 case, and the unsecured $3,000 amount will be paid along with other unsecured creditors (usually pennies on the dollar, if anything).
Another potential benefit to the Chapter 13 debtor is that the contract terms can be modified during the Chapter 13 repayment period. In some cases the repayment period can be lengthened or contract interest rate can be lowered by the bankruptcy court. Changing the contractual terms can make a significant difference in the ability of the debtor to repay the debt.
If you are struggling with debts you cannot pay and own a vehicle that is worth less than you owe, you may be eligible to reduce your principle and your monthly payment on your vehicle loan. Speak with an experienced bankruptcy attorney and discuss how a Chapter 13 bankruptcy can help you reduce your debt and make your finances work for you and your family.
The Bankruptcy Code recognizes that a lien is only secured to the extent of the value of the property. If the amount of the lien is more than the value of the property, the debt is separated into two parts: secured and unsecured. During a Chapter 13, the amount of the loan that exceeds the value of the vehicle can be stripped away.
For instance, if your vehicle is worth $10,000, but the secured auto loan balance is $13,000, the bankruptcy will separate the auto loan into a secured debt of $10,000 and an unsecured debt of $3,000. The secured portion must be paid in full during the Chapter 13 case, and the unsecured $3,000 amount will be paid along with other unsecured creditors (usually pennies on the dollar, if anything).
Another potential benefit to the Chapter 13 debtor is that the contract terms can be modified during the Chapter 13 repayment period. In some cases the repayment period can be lengthened or contract interest rate can be lowered by the bankruptcy court. Changing the contractual terms can make a significant difference in the ability of the debtor to repay the debt.
If you are struggling with debts you cannot pay and own a vehicle that is worth less than you owe, you may be eligible to reduce your principle and your monthly payment on your vehicle loan. Speak with an experienced bankruptcy attorney and discuss how a Chapter 13 bankruptcy can help you reduce your debt and make your finances work for you and your family.
Friday, October 29, 2010
Discharging Payday Loans in Bankruptcy
In these tough economic times, many Americans are desperate to make ends meet. Some are becoming trapped in a destructive cycle of payday loans. A payday loan is a short term, high interest loan that is secured by a post-dated check. The company loans the borrower a few hundred dollars that is repaid on the borrower’s next payday. What is meant to be a small, convenient, and short term loan to pay an immediate expense (an overdue electric bill, for instance), often results in multiple loans and an endless cycle of debt. Unfortunately, many payday loan borrowers are unable to free themselves from this cycle and are forced to seek bankruptcy protection.
Individuals often worry that the payday loan company may file a criminal “bad check” charge if the payday loan is included in the bankruptcy. The payday loan company wants you to believe this, and many have their customers sign a certification that the borrower is not contemplating bankruptcy.
While there are a few exceptions, generally being unable to pay a post-dated check is not a crime. When you wrote the check both you and the payday loan company knew there were not sufficient funds in your bank account to pay the check. Because there was no present intent to pay, the post-dated check is not a “bad check,” only a future promise to repay the loan.
Even after your bankruptcy is filed, a post-dated check may be presented for payment. In some cases (notably in the 6th and 8th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code. However, some courts have said that the funds collected by the payday loan company is an “avoidable transfer” meaning the bankruptcy court could order the company to return the money.
If you have payday loans, consult with an experienced bankruptcy attorney. It is important to identify any outstanding payday loan before filing bankruptcy. Most payday loans are discharged without issue; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy. Discuss the matter with your attorney and protect your legal rights.
Individuals often worry that the payday loan company may file a criminal “bad check” charge if the payday loan is included in the bankruptcy. The payday loan company wants you to believe this, and many have their customers sign a certification that the borrower is not contemplating bankruptcy.
While there are a few exceptions, generally being unable to pay a post-dated check is not a crime. When you wrote the check both you and the payday loan company knew there were not sufficient funds in your bank account to pay the check. Because there was no present intent to pay, the post-dated check is not a “bad check,” only a future promise to repay the loan.
Even after your bankruptcy is filed, a post-dated check may be presented for payment. In some cases (notably in the 6th and 8th Circuit Court of Appeals) courts have stated that the presentment of the post-dated check does not violate the automatic stay provisions of the bankruptcy code. However, some courts have said that the funds collected by the payday loan company is an “avoidable transfer” meaning the bankruptcy court could order the company to return the money.
If you have payday loans, consult with an experienced bankruptcy attorney. It is important to identify any outstanding payday loan before filing bankruptcy. Most payday loans are discharged without issue; however, payday loan companies are becoming increasingly more knowledgeable and aggressive towards debtors in bankruptcy. Discuss the matter with your attorney and protect your legal rights.
Wednesday, October 20, 2010
Saved By the Bell: The Emergency Bankruptcy Petition
The Bankruptcy Code provides real relief for individuals who have run out of financial options and can protect the debtor from creditor collection action even at the last minute. By filing an emergency bankruptcy petition a debtor can stop a foreclosure or other legal action dead in its tracks.
When a debtor files a bankruptcy case all creditor collection action must cease immediately and automatically. The bankruptcy automatic stay stops foreclosures, repossessions, garnishments, the commencement or continuation of nearly all lawsuits, and other creditor collection action dead in its tracks. Because the effect of the automatic stay takes place immediately upon filing of the bankruptcy petition, it is not uncommon for a debtor to seek bankruptcy protection on the eve of a foreclosure, repossession, or other legal action. A bankruptcy filing mere minutes before a foreclosure sale or lawsuit will stop the action or void the sale or judgment.
Waiting until the eleventh hour to seek out a bankruptcy attorney can be dangerous for the bankruptcy debtor. First, the Bankruptcy Code mandates that to be eligible to file a personal bankruptcy the debtor must first complete a session with an approved credit counseling agency. It is challenging to have an initial meeting with a bankruptcy attorney and complete this counseling on the same day you file bankruptcy. The bankruptcy courts waive this requirement only under the most extreme emergency situations when credit counseling was not available to the debtor. While it may seem that your case is an emergency situation, chances are that a waiver request will be denied.
Second, your bankruptcy attorney must explore your finances with you and will require information that you may not be able to provide at the initial meeting. Your attorney needs information in order to protect your assets with legal exemptions and identify potential problems with property transfers. Certain financial dealings may unknowingly thrust friends, family members, or business partners into your bankruptcy case.
Filing an emergency bankruptcy petition can stop creditors in their tracks, but it can also present potential problems for the debtor. If you are considering a bankruptcy filing to protect your property, consult with an experienced attorney as early in the process as possible. Your bankruptcy attorney can explain how the federal bankruptcy laws can help your family and identify any areas of concern.
When a debtor files a bankruptcy case all creditor collection action must cease immediately and automatically. The bankruptcy automatic stay stops foreclosures, repossessions, garnishments, the commencement or continuation of nearly all lawsuits, and other creditor collection action dead in its tracks. Because the effect of the automatic stay takes place immediately upon filing of the bankruptcy petition, it is not uncommon for a debtor to seek bankruptcy protection on the eve of a foreclosure, repossession, or other legal action. A bankruptcy filing mere minutes before a foreclosure sale or lawsuit will stop the action or void the sale or judgment.
Waiting until the eleventh hour to seek out a bankruptcy attorney can be dangerous for the bankruptcy debtor. First, the Bankruptcy Code mandates that to be eligible to file a personal bankruptcy the debtor must first complete a session with an approved credit counseling agency. It is challenging to have an initial meeting with a bankruptcy attorney and complete this counseling on the same day you file bankruptcy. The bankruptcy courts waive this requirement only under the most extreme emergency situations when credit counseling was not available to the debtor. While it may seem that your case is an emergency situation, chances are that a waiver request will be denied.
Second, your bankruptcy attorney must explore your finances with you and will require information that you may not be able to provide at the initial meeting. Your attorney needs information in order to protect your assets with legal exemptions and identify potential problems with property transfers. Certain financial dealings may unknowingly thrust friends, family members, or business partners into your bankruptcy case.
Filing an emergency bankruptcy petition can stop creditors in their tracks, but it can also present potential problems for the debtor. If you are considering a bankruptcy filing to protect your property, consult with an experienced attorney as early in the process as possible. Your bankruptcy attorney can explain how the federal bankruptcy laws can help your family and identify any areas of concern.
Thursday, September 16, 2010
Can One Spouse File Bankruptcy Alone?
While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file. When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case. The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative.
Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.
While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.
Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.
Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.
The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.
Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.
While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.
Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.
Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.
The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.
Can One Spouse File Bankruptcy Alone?
While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file. When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case. The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative.
Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.
While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.
Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.
Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.
The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.
Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.
While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.
Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.
Property may be protected during the property through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.
The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.
Friday, September 10, 2010
Discoveries While Completing Expense Statement
The Bankruptcy Code requires the individual debtor to file a petition and a series of financial reports with the bankruptcy court. Among these reports is a statement of income identified as “Schedule J.” For many debtors, it may be the first time, or a first time in a long time, that the families’ monthly expenses have been written down and examined. Usually there are surprising discoveries while completing this schedule.
Several monthly expense items are easily determined. Fixed monthly expenses like your mortgage or rent, auto loan payments, day care, insurance premiums, and cell phone bills are easy to identify. Fixed monthly expenses are predictable and do not generally fluctuate from month to month.
Unlike fixed expenses, variable expenses change from month to month. A good example of a variable expense is an electric bill or transportation expense which may be higher during certain times of the year. It is a good idea to average variable expenses over six months or a year to obtain a more accurate estimate of this monthly expense.
Annual expenses are often overlooked. Some annual expenses are quickly ascertained, like home owner’s association dues or personal property taxes. Other expenses are much harder to estimate like out of pocket medical expenses. Again, a yearly average is recommended to find this expense.
Discretionary spending may be the most difficult category to determine. This category includes expenses like food, entertainment expenses and clothing purchases. Bankruptcy debtors often underestimate discretionary spending and the debtor should either take a critical examination of their lifestyle and spending, or keep receipts for a month to accurately estimate this category.
It is very important to accurately identify your monthly expenses on Schedule J. In a Chapter 7 the bankruptcy court may use schedules I (monthly income) and J (monthly expenses) when considering whether you have sufficient income to afford the monthly payment proposed in a reaffirmation agreement. In a Chapter 13, the debtor must show on Schedules I and J that there is sufficient income to pay creditors or the plan will not be confirmed.
Completing your bankruptcy schedules is not a mindless check-the-box process. The federal bankruptcy laws require you to accurately and completely disclose financial information to the court. Not only must you make your best effort to provide truthful information, but it is in your best interest to use these forms to paint a picture of your financial situation that will help you get the relief that you need. Carelessness and inaccuracies will cause delays and problems in your case.
If are buried in debt, consult with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help. Your attorney will work with you to complete the bankruptcy petition and schedules carefully and accurately to get you the relief you need.
Several monthly expense items are easily determined. Fixed monthly expenses like your mortgage or rent, auto loan payments, day care, insurance premiums, and cell phone bills are easy to identify. Fixed monthly expenses are predictable and do not generally fluctuate from month to month.
Unlike fixed expenses, variable expenses change from month to month. A good example of a variable expense is an electric bill or transportation expense which may be higher during certain times of the year. It is a good idea to average variable expenses over six months or a year to obtain a more accurate estimate of this monthly expense.
Annual expenses are often overlooked. Some annual expenses are quickly ascertained, like home owner’s association dues or personal property taxes. Other expenses are much harder to estimate like out of pocket medical expenses. Again, a yearly average is recommended to find this expense.
Discretionary spending may be the most difficult category to determine. This category includes expenses like food, entertainment expenses and clothing purchases. Bankruptcy debtors often underestimate discretionary spending and the debtor should either take a critical examination of their lifestyle and spending, or keep receipts for a month to accurately estimate this category.
It is very important to accurately identify your monthly expenses on Schedule J. In a Chapter 7 the bankruptcy court may use schedules I (monthly income) and J (monthly expenses) when considering whether you have sufficient income to afford the monthly payment proposed in a reaffirmation agreement. In a Chapter 13, the debtor must show on Schedules I and J that there is sufficient income to pay creditors or the plan will not be confirmed.
Completing your bankruptcy schedules is not a mindless check-the-box process. The federal bankruptcy laws require you to accurately and completely disclose financial information to the court. Not only must you make your best effort to provide truthful information, but it is in your best interest to use these forms to paint a picture of your financial situation that will help you get the relief that you need. Carelessness and inaccuracies will cause delays and problems in your case.
If are buried in debt, consult with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help. Your attorney will work with you to complete the bankruptcy petition and schedules carefully and accurately to get you the relief you need.
Wednesday, September 8, 2010
Chapter 11 Individual Bankruptcy
When a large corporate bankruptcy hits the news chances are the company has filed for Chapter 11 bankruptcy protection. The title of Chapter 11 of the Bankruptcy Code is “Reorganization” and while companies like General Motors or Washington Mutual make headlines, individuals are also eligible to file under Chapter 11.
In some cases, Chapter 11 may be the only option for an individual to file bankruptcy. Eligibility for Chapter 7 is dictated by a “means test” that determines the debtor’s ability to repay debts. Those who are able to repay their creditors may consider Chapter 13, but debt limits may disqualify the debtor from Chapter 13. The debt limits for Chapter 13 are currently $360,475 for unsecured debt and $1,081,400 for secured debt.
An individual debtor who files for Chapter 11 bankruptcy protection will follow many of the same (or similar) procedures that apply to Chapter 13 cases. The debtor must file a petition and schedules of assets, liabilities, income and expenses; a plan to pay creditors; and attend a meeting with a bankruptcy trustee. The debtor is required to commit all disposable income to repaying debts for five years. Disposable income in Chapter 11 is determined differently than in a Chapter 13 case. The bankruptcy court compares the Chapter 11 debtor’s monthly income against the reasonable monthly expenses. The result may be different than the disposable income amount determined in a Chapter 13 case.
Creditors are classified as secured creditors, unsecured creditors entitled to priority, and general unsecured creditors. The debtor’s plan is submitted to creditors for approval and the creditors are entitled to vote to accept or reject the plan. If the creditors reject the proposed treatment by the plan, the bankruptcy judge can still approve the plan, provided that creditors receive as much during the plan as they would receive if the debtor’s assets were liquidated. Ordinarily a Chapter 11 debtor will receive a discharge after completing all plan payments.
A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney. If you are considering a bankruptcy filing, consult with an experienced attorney and discover your legal options.
In some cases, Chapter 11 may be the only option for an individual to file bankruptcy. Eligibility for Chapter 7 is dictated by a “means test” that determines the debtor’s ability to repay debts. Those who are able to repay their creditors may consider Chapter 13, but debt limits may disqualify the debtor from Chapter 13. The debt limits for Chapter 13 are currently $360,475 for unsecured debt and $1,081,400 for secured debt.
An individual debtor who files for Chapter 11 bankruptcy protection will follow many of the same (or similar) procedures that apply to Chapter 13 cases. The debtor must file a petition and schedules of assets, liabilities, income and expenses; a plan to pay creditors; and attend a meeting with a bankruptcy trustee. The debtor is required to commit all disposable income to repaying debts for five years. Disposable income in Chapter 11 is determined differently than in a Chapter 13 case. The bankruptcy court compares the Chapter 11 debtor’s monthly income against the reasonable monthly expenses. The result may be different than the disposable income amount determined in a Chapter 13 case.
Creditors are classified as secured creditors, unsecured creditors entitled to priority, and general unsecured creditors. The debtor’s plan is submitted to creditors for approval and the creditors are entitled to vote to accept or reject the plan. If the creditors reject the proposed treatment by the plan, the bankruptcy judge can still approve the plan, provided that creditors receive as much during the plan as they would receive if the debtor’s assets were liquidated. Ordinarily a Chapter 11 debtor will receive a discharge after completing all plan payments.
A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney. If you are considering a bankruptcy filing, consult with an experienced attorney and discover your legal options.
Tuesday, August 24, 2010
The effects of debt can affect your credit, your health, and even your job. Calls to your work from debt collectors can interfere with your job performance. Requesting payday advances from your employer can cost you a raise or promotion. In some extreme cases your debt problem can even get you fired.
The Cleveland Plain Dealer recently reported that 39 Defense Finance and Accounting Service employees will lose their jobs as a result of their bad credit ratings. In each case the employee mismanaged finances and failed to meet standards the government requires of employees who have access to sensitive information like Social Security numbers. While you may not have a government job that requires a security clearance, if your debt issues are affecting your job, it is time to get help.
Government and many private employers hold the opinion that excessive indebtedness increases the temptation to commit unethical or illegal acts in order to obtain funds to pay off debts. Private employers that are especially sensitive to their employees’ debt include banks and other financial institutions, retail stores, and any business where the employee might handle cash on a routine basis.
The federal bankruptcy laws can help you solve your debt problem without losing your job. Section 525 of the Bankruptcy Code prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy. The federal law clearly forbids an employer from firing you on account of your bankruptcy.
Many employers view bankruptcy as a resolution of a debt problem through a government approved process, which may positively reflect on the employee as an indication of financial responsibility. Eliminating your debts through bankruptcy may also decrease financial pressures and lessen the risk of unethical or illegal acts.
If your debts are affecting your job, consult with a bankruptcy attorney and explore your options. Bankruptcy is a federally guaranteed legal process that helps individuals recover from overwhelming financial hardship. Protect yourself and your job by getting the help and relief you need.
The Cleveland Plain Dealer recently reported that 39 Defense Finance and Accounting Service employees will lose their jobs as a result of their bad credit ratings. In each case the employee mismanaged finances and failed to meet standards the government requires of employees who have access to sensitive information like Social Security numbers. While you may not have a government job that requires a security clearance, if your debt issues are affecting your job, it is time to get help.
Government and many private employers hold the opinion that excessive indebtedness increases the temptation to commit unethical or illegal acts in order to obtain funds to pay off debts. Private employers that are especially sensitive to their employees’ debt include banks and other financial institutions, retail stores, and any business where the employee might handle cash on a routine basis.
The federal bankruptcy laws can help you solve your debt problem without losing your job. Section 525 of the Bankruptcy Code prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy. The federal law clearly forbids an employer from firing you on account of your bankruptcy.
Many employers view bankruptcy as a resolution of a debt problem through a government approved process, which may positively reflect on the employee as an indication of financial responsibility. Eliminating your debts through bankruptcy may also decrease financial pressures and lessen the risk of unethical or illegal acts.
If your debts are affecting your job, consult with a bankruptcy attorney and explore your options. Bankruptcy is a federally guaranteed legal process that helps individuals recover from overwhelming financial hardship. Protect yourself and your job by getting the help and relief you need.
Monday, August 2, 2010
Lien Avoidance in Bankruptcy
Your bankruptcy attorney has many powerful to help you keep property while eliminating debt. One tool is lien avoidance, which is available to both Chapter 7 and Chapter 13 debtors. The general rule in bankruptcy is that debts secured by a lien must be paid or the property must be surrendered to the creditor. However, under certain circumstances, a lien can be legally avoided without losing the property.
The Bankruptcy Code identifies two different types of liens that may be avoided during bankruptcy: (1) a judicial lien; and (2) a non-possessory, non-purchase money security interest in household goods or tools of the trade. Furthermore, to qualify for avoidance the debtor must be able to apply a bankruptcy exemption (a legal allowance to the debtor to protect property from creditors) to the property securing the debt.
Clear as mud, right?
Let's make it a little clearer: first, judicial liens are judgments and garnishments caused by a court order or judicial process. If your property is subject to a debt imposed by a court order, it may be possible to avoid the lien during bankruptcy. Statutory liens, like tax liens, are not avoidable in Chapter 7, but may be avoidable in Chapter 13.
Second, a non-possessory, non-purchase money security interest is simply a lien that you gave a creditor against property that you owned prior to incurring the debt and did not acquire using money from the creditor. A typical example is a personal bank loan secured by your television and/or other household items.
Finally, to qualify for lien avoidance, the debtor must be able to apply a legal exemption to the property. For instance, if you own a television worth $500 used as collateral for a $1,000 personal loan, you may be able to apply a legal exemption to protect the television and avoid the lien against it. Once the lien is avoided, the status of the debt changes from secured to unsecured and is likely discharged at the end of the bankruptcy case.
Additionally, if the legal exemption does not protect all of the value of the property, the lien may be reduced to the extent the lien secures the property. Using the above example, if the television is worth $500, but the debtor is only able to exempt $250 of its value, the creditor's lien would be reduced in value from $1,000 to $250 (the amount of non-exempt equity in the television).
To avoid a lien the debtor's attorney files a motion with the bankruptcy court alleging that the creditor's lien is impairing the debtor's exemption. Typically these motions are uncontested and are granted without hearing.
It is important that you provide your bankruptcy attorney with documentation for all of your loans. Your attorney can avoid certain liens during the bankruptcy that will safeguard your property after your bankruptcy discharge.
The Bankruptcy Code identifies two different types of liens that may be avoided during bankruptcy: (1) a judicial lien; and (2) a non-possessory, non-purchase money security interest in household goods or tools of the trade. Furthermore, to qualify for avoidance the debtor must be able to apply a bankruptcy exemption (a legal allowance to the debtor to protect property from creditors) to the property securing the debt.
Clear as mud, right?
Let's make it a little clearer: first, judicial liens are judgments and garnishments caused by a court order or judicial process. If your property is subject to a debt imposed by a court order, it may be possible to avoid the lien during bankruptcy. Statutory liens, like tax liens, are not avoidable in Chapter 7, but may be avoidable in Chapter 13.
Second, a non-possessory, non-purchase money security interest is simply a lien that you gave a creditor against property that you owned prior to incurring the debt and did not acquire using money from the creditor. A typical example is a personal bank loan secured by your television and/or other household items.
Finally, to qualify for lien avoidance, the debtor must be able to apply a legal exemption to the property. For instance, if you own a television worth $500 used as collateral for a $1,000 personal loan, you may be able to apply a legal exemption to protect the television and avoid the lien against it. Once the lien is avoided, the status of the debt changes from secured to unsecured and is likely discharged at the end of the bankruptcy case.
Additionally, if the legal exemption does not protect all of the value of the property, the lien may be reduced to the extent the lien secures the property. Using the above example, if the television is worth $500, but the debtor is only able to exempt $250 of its value, the creditor's lien would be reduced in value from $1,000 to $250 (the amount of non-exempt equity in the television).
To avoid a lien the debtor's attorney files a motion with the bankruptcy court alleging that the creditor's lien is impairing the debtor's exemption. Typically these motions are uncontested and are granted without hearing.
It is important that you provide your bankruptcy attorney with documentation for all of your loans. Your attorney can avoid certain liens during the bankruptcy that will safeguard your property after your bankruptcy discharge.
Monday, June 14, 2010
Keeping A Credit Card During Bankruptcy
A credit card is a safe and convenient way to pay for life’s necessities. In some cases a credit card is required to purchase goods or services. Debit cards are often a poor substitute for a credit card as bank holds can tie up your account for days.
If you want to keep a credit card during your bankruptcy, there are a few things to know. First, the Bankruptcy Code requires that you list all of your creditors and debts owed on the date of the bankruptcy filing. Consequently, if a credit card has a zero balance on the date that you file bankruptcy, it does not need to be listed and the credit card company does not receive notice.
Second, the use of credit during a chapter 13 bankruptcy is prohibited without prior authorization from the trustee and bankruptcy court. Usually credit approval is contingent upon a written agreement or statement from the credit card company. Chapter 7 debtors do not have this restriction.
Third, a payment on a credit card within 90 days before your bankruptcy filing may be considered a preference payment. The bankruptcy trustee may seek a court order compelling the credit card company to turn over any pre-filing payments.
Fourth, credit card companies conduct regular checks of their cardholders’ credit and your bankruptcy filing may result in the card issuer closing your account, reducing your credit line, or increasing your interest rate. These actions may also occur if you choose to reaffirm your debt with the credit card company. After reaffirming the debt the card may be cancelled and you are stuck with a non-discharged credit card balance.
Fifth, intentional failure to list a credit card with a balance can result in dismissal of your bankruptcy case. The bankruptcy court expects you to be entirely truthful concerning who you owe, regardless of your intention to pay the debt.
Sixth, consider obtaining credit after your bankruptcy discharge. Many debtors are offered unsecured credit cards shortly after their bankruptcy discharge. Many creditors consider a recently discharged debtor a good credit risk because the debtor is unable to receive another bankruptcy discharge for several years, and likely has a good debt-to-income ratio. Many post-discharge credit card offers carry high interest rates and fees, so choose wisely.
Secured credit cards are another credit option after bankruptcy. A secured credit card requires a security deposit placed with the credit card company who then issues a credit line secured by the deposit. Many banks and credit unions offer their customers secured credit cards at reasonable interest rates.
If you are interested in keeping a credit card during bankruptcy, consult with your bankruptcy attorney. Your attorney can discuss your options and help you decide on the best way to maintain a credit card account during and after your bankruptcy.
If you want to keep a credit card during your bankruptcy, there are a few things to know. First, the Bankruptcy Code requires that you list all of your creditors and debts owed on the date of the bankruptcy filing. Consequently, if a credit card has a zero balance on the date that you file bankruptcy, it does not need to be listed and the credit card company does not receive notice.
Second, the use of credit during a chapter 13 bankruptcy is prohibited without prior authorization from the trustee and bankruptcy court. Usually credit approval is contingent upon a written agreement or statement from the credit card company. Chapter 7 debtors do not have this restriction.
Third, a payment on a credit card within 90 days before your bankruptcy filing may be considered a preference payment. The bankruptcy trustee may seek a court order compelling the credit card company to turn over any pre-filing payments.
Fourth, credit card companies conduct regular checks of their cardholders’ credit and your bankruptcy filing may result in the card issuer closing your account, reducing your credit line, or increasing your interest rate. These actions may also occur if you choose to reaffirm your debt with the credit card company. After reaffirming the debt the card may be cancelled and you are stuck with a non-discharged credit card balance.
Fifth, intentional failure to list a credit card with a balance can result in dismissal of your bankruptcy case. The bankruptcy court expects you to be entirely truthful concerning who you owe, regardless of your intention to pay the debt.
Sixth, consider obtaining credit after your bankruptcy discharge. Many debtors are offered unsecured credit cards shortly after their bankruptcy discharge. Many creditors consider a recently discharged debtor a good credit risk because the debtor is unable to receive another bankruptcy discharge for several years, and likely has a good debt-to-income ratio. Many post-discharge credit card offers carry high interest rates and fees, so choose wisely.
Secured credit cards are another credit option after bankruptcy. A secured credit card requires a security deposit placed with the credit card company who then issues a credit line secured by the deposit. Many banks and credit unions offer their customers secured credit cards at reasonable interest rates.
If you are interested in keeping a credit card during bankruptcy, consult with your bankruptcy attorney. Your attorney can discuss your options and help you decide on the best way to maintain a credit card account during and after your bankruptcy.
Saturday, May 15, 2010
Statement of Intention
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.
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.
Tuesday, April 6, 2010
Debtors Must Cooperate With the Bankruptcy Trustee
When a consumer bankruptcy case is filed, a trustee is appointed to oversee and administer the case. The trustee does not represent the interests of the debtor and cannot give legal advice, which is the role of your bankruptcy attorney. However, it is important to cooperate with the trustee and any request for information.
The issue of a debtor’s duty to cooperate with the trustee was recently litigated in the case of In re Royce Homes, LP. 2009 WL 3052439 (Bkrtcy. S.D.Tex.). In that Chapter 7 case the trustee requested financial documents and information from a corporate debtor. In response to the request the debtor provided access to “storage facilities containing stacks of documents and old computer servers, most of which are wholly unresponsive to the Trustee's request.” The trustee filed a motion asking the bankruptcy court to compel the debtor’s cooperation.
In deciding the matter the court cited several sections of the bankruptcy code and rules which require debtors to cooperate with the trustee. Notably section 521(a)(3) requires the Debtor to “cooperate with the trustee as necessary to enable the trustee to perform the trustee's duties under this title.” The court ordered the debtor to provide the specific information that the trustee had requested, rather than simply dumping documents or permitting access to records. The court emphasized the debtor’s duty to cooperate by stating, “It is well settled that a [trustee] should not be required to drag information from a reluctant and uncooperative debtor. Because of the extraordinary relief offered under the Bankruptcy Code delay and avoidance tactics are inconsistent with, and offensive to, its purpose and spirit.”
Cooperation with the trustee is an important part of the bankruptcy process. Failure to cooperate or to testify truthfully could result in a discharge, or worse. Your bankruptcy attorney can help guide you through this process of disclosure with the trustee and protect your interests.
The issue of a debtor’s duty to cooperate with the trustee was recently litigated in the case of In re Royce Homes, LP. 2009 WL 3052439 (Bkrtcy. S.D.Tex.). In that Chapter 7 case the trustee requested financial documents and information from a corporate debtor. In response to the request the debtor provided access to “storage facilities containing stacks of documents and old computer servers, most of which are wholly unresponsive to the Trustee's request.” The trustee filed a motion asking the bankruptcy court to compel the debtor’s cooperation.
In deciding the matter the court cited several sections of the bankruptcy code and rules which require debtors to cooperate with the trustee. Notably section 521(a)(3) requires the Debtor to “cooperate with the trustee as necessary to enable the trustee to perform the trustee's duties under this title.” The court ordered the debtor to provide the specific information that the trustee had requested, rather than simply dumping documents or permitting access to records. The court emphasized the debtor’s duty to cooperate by stating, “It is well settled that a [trustee] should not be required to drag information from a reluctant and uncooperative debtor. Because of the extraordinary relief offered under the Bankruptcy Code delay and avoidance tactics are inconsistent with, and offensive to, its purpose and spirit.”
Cooperation with the trustee is an important part of the bankruptcy process. Failure to cooperate or to testify truthfully could result in a discharge, or worse. Your bankruptcy attorney can help guide you through this process of disclosure with the trustee and protect your interests.
Friday, April 2, 2010
Changes in Law Make Bankruptcy More Accessible
Effective April 1, 2010, certain dollar limits contained in the Bankruptcy Code will be increased. A full comparison of the current and changed amounts can be found by following this link. These most meaningful changes to consumer bankruptcy cases are:
• An increase of the eligibility limit for Chapter 13 from $336, 900 to $360,475 in unsecured debt, and from $1,010,650 to
$1,081,400 in secured debt;
• The federal homestead exemption increases from $136,875 to $146,450; and
• The presumption of fraud for luxury items purchased with a credit card within 90 days of a bankruptcy filing increases from $550 to $600; and the presumption of fraud for credit card cash advances within 70 days of filing increases from $825 to $875.
Many other dollar amount increases will take effect on April 1, 2010, including increases to protected educational accounts, increasing restrictions to the bankruptcy trustee’s powers under certain circumstances, and increased protection for retirement accounts. In all, these increases will make the bankruptcy attorney’s job of protecting the consumer debtor a little easier, and make the bankruptcy process more accessible. Please note that these changes will only affect bankruptcy cases filed on or after April 1, 2010.
If you and your family struggle each month to pay bills, consult with an experienced bankruptcy attorney and discuss your financial options. There are many repayment and “walk-away” options available under the Bankruptcy Code. Get the facts and don’t let debt ruin your life.
• An increase of the eligibility limit for Chapter 13 from $336, 900 to $360,475 in unsecured debt, and from $1,010,650 to
$1,081,400 in secured debt;
• The federal homestead exemption increases from $136,875 to $146,450; and
• The presumption of fraud for luxury items purchased with a credit card within 90 days of a bankruptcy filing increases from $550 to $600; and the presumption of fraud for credit card cash advances within 70 days of filing increases from $825 to $875.
Many other dollar amount increases will take effect on April 1, 2010, including increases to protected educational accounts, increasing restrictions to the bankruptcy trustee’s powers under certain circumstances, and increased protection for retirement accounts. In all, these increases will make the bankruptcy attorney’s job of protecting the consumer debtor a little easier, and make the bankruptcy process more accessible. Please note that these changes will only affect bankruptcy cases filed on or after April 1, 2010.
If you and your family struggle each month to pay bills, consult with an experienced bankruptcy attorney and discuss your financial options. There are many repayment and “walk-away” options available under the Bankruptcy Code. Get the facts and don’t let debt ruin your life.
Changes in Law Make Bankruptcy More Accessible
Effective April 1, 2010, certain dollar limits contained in the Bankruptcy Code will be increased. A full comparison of the current and changed amounts can be found by following this link. These most meaningful changes to consumer bankruptcy cases are:
• An increase of the eligibility limit for Chapter 13 from $336, 900 to $360,475 in unsecured debt, and from $1,010,650 to
$1,081,400 in secured debt;
• The federal homestead exemption increases from $136,875 to $146,450; and
• The presumption of fraud for luxury items purchased with a credit card within 90 days of a bankruptcy filing increases from $550 to $600; and the presumption of fraud for credit card cash advances within 70 days of filing increases from $825 to $875.
Many other dollar amount increases will take effect on April 1, 2010, including increases to protected educational accounts, increasing restrictions to the bankruptcy trustee’s powers under certain circumstances, and increased protection for retirement accounts. In all, these increases will make the bankruptcy attorney’s job of protecting the consumer debtor a little easier, and make the bankruptcy process more accessible. Please note that these changes will only affect bankruptcy cases filed on or after April 1, 2010.
If you and your family struggle each month to pay bills, consult with an experienced bankruptcy attorney and discuss your financial options. There are many repayment and “walk-away” options available under the Bankruptcy Code. Get the facts and don’t let debt ruin your life.
• An increase of the eligibility limit for Chapter 13 from $336, 900 to $360,475 in unsecured debt, and from $1,010,650 to
$1,081,400 in secured debt;
• The federal homestead exemption increases from $136,875 to $146,450; and
• The presumption of fraud for luxury items purchased with a credit card within 90 days of a bankruptcy filing increases from $550 to $600; and the presumption of fraud for credit card cash advances within 70 days of filing increases from $825 to $875.
Many other dollar amount increases will take effect on April 1, 2010, including increases to protected educational accounts, increasing restrictions to the bankruptcy trustee’s powers under certain circumstances, and increased protection for retirement accounts. In all, these increases will make the bankruptcy attorney’s job of protecting the consumer debtor a little easier, and make the bankruptcy process more accessible. Please note that these changes will only affect bankruptcy cases filed on or after April 1, 2010.
If you and your family struggle each month to pay bills, consult with an experienced bankruptcy attorney and discuss your financial options. There are many repayment and “walk-away” options available under the Bankruptcy Code. Get the facts and don’t let debt ruin your life.
Tuesday, March 30, 2010
Can a Discharged Debt Be Repaid?
The Bankruptcy Code provides, “Nothing contained in. . . this section prevents a debtor from voluntarily repaying any debt.” 11 U.S.C. § 524(f). You are free to make voluntary payments on all or part of your discharged debts. These payments do not invalidate the discharge order and do not create a new legal obligation. The creditor is still prohibited from contacting you in any way and cannot take any collection action against you, including sending you a bill or even encouraging your continued payments. In this case the term “voluntary” means free from creditor influence or inducement.
Any payments you make on a discharged debt are the result of a moral obligation as the legal obligation to pay the debt has been discharged by the bankruptcy court. In a Chapter 7 case, you are free to pay whomever you want. “Debtors who file under [Chapter 7] can dispose of their post-petition earnings as they choose, including voluntary repayment of debts otherwise dischargeable in bankruptcy.” In re Hellums, 772 F.2d 379, 381 (7th Cir. 1985).
If you are interested in making voluntary repayments after your discharge, discuss the matter with your bankruptcy attorney. While there are generally few down-sides to voluntary repayment, your bankruptcy attorney can discuss the pros and cons with you and help you reach the right decision for you and your family.
Any payments you make on a discharged debt are the result of a moral obligation as the legal obligation to pay the debt has been discharged by the bankruptcy court. In a Chapter 7 case, you are free to pay whomever you want. “Debtors who file under [Chapter 7] can dispose of their post-petition earnings as they choose, including voluntary repayment of debts otherwise dischargeable in bankruptcy.” In re Hellums, 772 F.2d 379, 381 (7th Cir. 1985).
If you are interested in making voluntary repayments after your discharge, discuss the matter with your bankruptcy attorney. While there are generally few down-sides to voluntary repayment, your bankruptcy attorney can discuss the pros and cons with you and help you reach the right decision for you and your family.
Friday, March 26, 2010
A Fresh Start to a Bright Financial Future
While working on the electric light bulb Thomas Edison was asked by a reporter, “How does it feel to have failed seven hundred times?”
Edison replied, “I have not failed seven hundred times. I have not failed once. I have succeeded in proving those seven hundred ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”
As businessman Harvey Mackay says, “Failure is an attitude, not an outcome.”
When a person makes a decision to file bankruptcy, the decision is largely based on a recognition that something hasn’t worked and changes need to be made. Fortunately, the bankruptcy laws provide the tools to make those financial changes. Through bankruptcy you can have a fresh start at a new financial life without the burdens of overwhelming debt. The Supreme Court has stated many times that “[t]he principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the honest but unfortunate debtor.” Marrama v. Citizens Bank of Massachusetts.
Does the fresh start work? Yes! A study by the Executive Office of the United States Trustee found that “[m]ost chapter 7 debtors have a substantial negative net worth at filing, but have a small positive net worth after discharge.” Bankruptcy works to put you on the right financial track with the hope for a better tomorrow.
A Chapter 7 bankruptcy releases the debtor from personal liability for certain types of debts. Unsecured debts (usually the most burdensome type like high interest credit card debt and medical bills) are discharged by the bankruptcy case without payment. The discharge is a court-ordered injunction that prohibits your creditors from collecting from you in the future. The creditor can no longer call, write, or take any collection action against you.
If you are ready for a fresh start, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help. An experienced bankruptcy attorney can explain your legal options and help you find a way that works for a bright financial future.
Edison replied, “I have not failed seven hundred times. I have not failed once. I have succeeded in proving those seven hundred ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”
As businessman Harvey Mackay says, “Failure is an attitude, not an outcome.”
When a person makes a decision to file bankruptcy, the decision is largely based on a recognition that something hasn’t worked and changes need to be made. Fortunately, the bankruptcy laws provide the tools to make those financial changes. Through bankruptcy you can have a fresh start at a new financial life without the burdens of overwhelming debt. The Supreme Court has stated many times that “[t]he principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the honest but unfortunate debtor.” Marrama v. Citizens Bank of Massachusetts.
Does the fresh start work? Yes! A study by the Executive Office of the United States Trustee found that “[m]ost chapter 7 debtors have a substantial negative net worth at filing, but have a small positive net worth after discharge.” Bankruptcy works to put you on the right financial track with the hope for a better tomorrow.
A Chapter 7 bankruptcy releases the debtor from personal liability for certain types of debts. Unsecured debts (usually the most burdensome type like high interest credit card debt and medical bills) are discharged by the bankruptcy case without payment. The discharge is a court-ordered injunction that prohibits your creditors from collecting from you in the future. The creditor can no longer call, write, or take any collection action against you.
If you are ready for a fresh start, speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help. An experienced bankruptcy attorney can explain your legal options and help you find a way that works for a bright financial future.
Wednesday, March 24, 2010
Loading Up on Debt Prior to Bankruptcy
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.
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.
Loading Up on Debt Prior to Bankruptcy
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.
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.
Monday, March 22, 2010
Protecting Your Attorney Client Privilege in Bankruptcy
Most bankruptcy clients are aware of the attorney-client privilege, an evidentiary rule that protects confidential communications between an attorney and client. It encourages candid communication between clients and attorneys without fear that the discussion will be used against the client. This privilege belongs to the client and the client determines when to waive it. The privilege exists generally in every legal forum in the United States, however its application can vary.
In a Chapter 7 bankruptcy case, a trustee is appointed to administer the case and liquidate the debtor's nonexempt assets. In performing these duties it may become important for the trustee to have certain information and the trustee may seek to have the debtor’s attorney disclose information obtained during a confidential attorney client discussion.
To compel the disclosure of this information, the trustee may invoke section 542(e) of the Bankruptcy Code which states that “[s]ubject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information. . . relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.” In opposing this disclosure, the debtor may assert the attorney-client privilege and argue that the trustee does not have the power to waive this privilege.
Bankruptcy Courts have taken three different approaches to resolving the issue of whether the trustee can waive the attorney-client privilege: (1) the trustee can waive attorney-client privilege; (2) the attorney-client privilege is absolute and cannot be waived by the trustee; and (3) whether the trustee is entitled to waive the attorney-client privilege depends upon the circumstances in the case. Bankruptcy courts using this last test generally balance the benefit to the bankruptcy estate against the potential harm to the debtor. See In re Courtney, 372 B.R. 519 (Bankr. M.D. Fla. 2007).
The bottom line is “let the client beware!” Discussions with your bankruptcy attorney, personal injury attorney, or other attorney may be subject to disclosure during your bankruptcy case. While most financial records would not be subject to the attorney-client privilege, the discussion of these records with your client may be privileged. Be warned that protecting this privileged communication may be at the discretion of the bankruptcy court.
The bankruptcy laws are constantly changing. Make sure that your fresh start is not a false start and hire an experienced and knowledgeable bankruptcy attorney who can protect your rights.
In a Chapter 7 bankruptcy case, a trustee is appointed to administer the case and liquidate the debtor's nonexempt assets. In performing these duties it may become important for the trustee to have certain information and the trustee may seek to have the debtor’s attorney disclose information obtained during a confidential attorney client discussion.
To compel the disclosure of this information, the trustee may invoke section 542(e) of the Bankruptcy Code which states that “[s]ubject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information. . . relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.” In opposing this disclosure, the debtor may assert the attorney-client privilege and argue that the trustee does not have the power to waive this privilege.
Bankruptcy Courts have taken three different approaches to resolving the issue of whether the trustee can waive the attorney-client privilege: (1) the trustee can waive attorney-client privilege; (2) the attorney-client privilege is absolute and cannot be waived by the trustee; and (3) whether the trustee is entitled to waive the attorney-client privilege depends upon the circumstances in the case. Bankruptcy courts using this last test generally balance the benefit to the bankruptcy estate against the potential harm to the debtor. See In re Courtney, 372 B.R. 519 (Bankr. M.D. Fla. 2007).
The bottom line is “let the client beware!” Discussions with your bankruptcy attorney, personal injury attorney, or other attorney may be subject to disclosure during your bankruptcy case. While most financial records would not be subject to the attorney-client privilege, the discussion of these records with your client may be privileged. Be warned that protecting this privileged communication may be at the discretion of the bankruptcy court.
The bankruptcy laws are constantly changing. Make sure that your fresh start is not a false start and hire an experienced and knowledgeable bankruptcy attorney who can protect your rights.
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