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.
Friday, September 10, 2010
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.
Wednesday, September 1, 2010
What If You Forget a Creditor?
Usually by the time a person visits a bankruptcy attorney he has been struggling with overwhelming debt for months if not years. Often the person’s creditors have not been paid for a considerable time. It is not surprising that occasionally a person will forget to list a creditor in the bankruptcy paperwork.
If an omitted creditor is discovered during the bankruptcy case, the law requires the debtor to file amended schedules and identify the creditor. The debtor has an obligation to ensure all creditors are identified and receive notice of the bankruptcy case. Intentionally failing to list a creditor can cause that debt to be declared non-dischargeable and survive the bankruptcy. In extreme cases the bankruptcy court may deny a discharge altogether.
Sometimes even the most diligent debtor will forget a creditor. Things get trickier if the omission is discovered after the bankruptcy case has closed. How the debtor proceeds will depend on the court and the circumstances. In many cases an omitted creditor is considered discharged as a matter of law. If an unsecured creditor did not receive notice of the bankruptcy, but none of the debtor’s assets were distributed to creditors, many bankruptcy courts say the omission did not have any practical effect. In these cases it didn’t matter that the creditor did not receive notice, the debt is discharged anyway.
Conversely, if an omitted creditor loses the opportunity to receive money through the bankruptcy, the omission matters a great deal. Under these circumstances the failure to include the creditor means the debt cannot be discharged and the debtor is stuck with paying the debt.
If you discover an omitted creditor during or after your bankruptcy case, inform your attorney immediately. You and your attorney can discuss the proper procedure for dealing with an omitted creditor.
If an omitted creditor is discovered during the bankruptcy case, the law requires the debtor to file amended schedules and identify the creditor. The debtor has an obligation to ensure all creditors are identified and receive notice of the bankruptcy case. Intentionally failing to list a creditor can cause that debt to be declared non-dischargeable and survive the bankruptcy. In extreme cases the bankruptcy court may deny a discharge altogether.
Sometimes even the most diligent debtor will forget a creditor. Things get trickier if the omission is discovered after the bankruptcy case has closed. How the debtor proceeds will depend on the court and the circumstances. In many cases an omitted creditor is considered discharged as a matter of law. If an unsecured creditor did not receive notice of the bankruptcy, but none of the debtor’s assets were distributed to creditors, many bankruptcy courts say the omission did not have any practical effect. In these cases it didn’t matter that the creditor did not receive notice, the debt is discharged anyway.
Conversely, if an omitted creditor loses the opportunity to receive money through the bankruptcy, the omission matters a great deal. Under these circumstances the failure to include the creditor means the debt cannot be discharged and the debtor is stuck with paying the debt.
If you discover an omitted creditor during or after your bankruptcy case, inform your attorney immediately. You and your attorney can discuss the proper procedure for dealing with an omitted creditor.
Monday, August 30, 2010
Don't Be On Your Own During Bankruptcy
A person who files a bankruptcy case without an attorney is called a pro se debtor. “Pro se” is Latin meaning “for oneself;” in other words, you are on your own. Being on your own during your bankruptcy may save a few upfront dollars, but can cost you plenty in the long run. There are many negative consequences that are often unexpected and sometimes disastrous.
The savings pro se debtors receive is minimal and the risk is great. Attorney fees during bankruptcy are supervised by the United States Bankruptcy Court. The federal bankruptcy law allows an attorney to collect reasonable compensation for services rendered during a bankruptcy case. Consequently, bankruptcy attorneys charge similar fees in order to stay competitive, and attorneys must disclose their fee to the bankruptcy court.
When you are represented by an experienced bankruptcy attorney you receive several benefits. Your attorney brings years of experience and knowledge in areas including the Federal Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the bankruptcy court’s local rules, federal bankruptcy case law, and state and federal exemption and collection laws. Your attorney is also familiar with the bankruptcy judge, the bankruptcy trustee, and local creditor practices.
When you are represented, you will have counsel at the Meeting of Creditors with the bankruptcy trustee. The trustee assumes that a pro se debtor has made errors in the bankruptcy, and will grill the pro se debtor and scrutinize the bankruptcy case. When you are represented, your attorney helps you answer any trustee questions, and can file motions and responses via the court’s electronic filing system. When you are on your own you must mail or personally file documents with the court and must appear before the bankruptcy judge to reaffirm a debt.
The federal law guarantees open access to the courts and permits self representation in lawsuits, including bankruptcy proceedings. However, the benefit of having an experienced bankruptcy attorney at your side far outweighs any savings proceeding on your own. Consult with an experienced attorney and discover how the federal bankruptcy laws can help you.
The savings pro se debtors receive is minimal and the risk is great. Attorney fees during bankruptcy are supervised by the United States Bankruptcy Court. The federal bankruptcy law allows an attorney to collect reasonable compensation for services rendered during a bankruptcy case. Consequently, bankruptcy attorneys charge similar fees in order to stay competitive, and attorneys must disclose their fee to the bankruptcy court.
When you are represented by an experienced bankruptcy attorney you receive several benefits. Your attorney brings years of experience and knowledge in areas including the Federal Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the bankruptcy court’s local rules, federal bankruptcy case law, and state and federal exemption and collection laws. Your attorney is also familiar with the bankruptcy judge, the bankruptcy trustee, and local creditor practices.
When you are represented, you will have counsel at the Meeting of Creditors with the bankruptcy trustee. The trustee assumes that a pro se debtor has made errors in the bankruptcy, and will grill the pro se debtor and scrutinize the bankruptcy case. When you are represented, your attorney helps you answer any trustee questions, and can file motions and responses via the court’s electronic filing system. When you are on your own you must mail or personally file documents with the court and must appear before the bankruptcy judge to reaffirm a debt.
The federal law guarantees open access to the courts and permits self representation in lawsuits, including bankruptcy proceedings. However, the benefit of having an experienced bankruptcy attorney at your side far outweighs any savings proceeding on your own. Consult with an experienced attorney and discover how the federal bankruptcy laws can help you.
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.
Thursday, August 19, 2010
Honesty in Bankruptcy is Best Policy
Several courts have stated that the bankruptcy laws are meant to give an honest debtor a fresh start, but not a head start. It is important to understand that the bankruptcy laws in this country are very forgiving, but these laws require the debtor to make reasonable efforts to repay creditors. The debtor is obligated to disclose all income and assets to the bankruptcy court. From these disclosures the bankruptcy trustee, creditors, and the court are able to determine what, if anything, the debtor can afford to repay.
The debtor has a great responsibility to truthfully disclose income and assets to the best of his or her ability. The federal bankruptcy laws will relieve the honest debtor from the stress of overwhelming debt. However, the dishonest debtor can face serious consequences.
One consequence of failing to disclose income or assets is that the debtor may be denied a discharge. Section 727 of the Bankruptcy Code is designed to protect the integrity of the process and permits the court to dismiss the debtor’s case for dishonest acts like lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee. The court may deny the dishonest or uncooperative debtor a discharge under Section 727 and the debtor will remain liable for all debts. To make matters worse, any assets turned over during the case will still be administered by the bankruptcy trustee and the debtor may lose non-exempt property to creditors.
Another more serious consequence for the dishonest debtor is the prospect of being charged with bankruptcy fraud. The Federal Bureau of Investigation ordinarily investigates allegations of bankruptcy fraud, but other federal agencies may become involved including the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program. Most bankruptcy fraud is first discovered by the bankruptcy trustee, and is often the result of whistle blowing from neighbors, creditors, or ex-souses. The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud.
In bankruptcy, honesty is the best policy. For an individual who needs relief from overwhelming debt, bankruptcy is a tremendous tool that gives real results. The promise of bankruptcy is a fresh start, but not a head start. Debtors who are dishonest during the bankruptcy process can lose the benefits of a bankruptcy discharge, and may be criminally charged with one or more federal crimes. If you need help with your debt problem, speak honestly and frankly with an experienced attorney and learn how the powerful federal bankruptcy laws can help you.
The debtor has a great responsibility to truthfully disclose income and assets to the best of his or her ability. The federal bankruptcy laws will relieve the honest debtor from the stress of overwhelming debt. However, the dishonest debtor can face serious consequences.
One consequence of failing to disclose income or assets is that the debtor may be denied a discharge. Section 727 of the Bankruptcy Code is designed to protect the integrity of the process and permits the court to dismiss the debtor’s case for dishonest acts like lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee. The court may deny the dishonest or uncooperative debtor a discharge under Section 727 and the debtor will remain liable for all debts. To make matters worse, any assets turned over during the case will still be administered by the bankruptcy trustee and the debtor may lose non-exempt property to creditors.
Another more serious consequence for the dishonest debtor is the prospect of being charged with bankruptcy fraud. The Federal Bureau of Investigation ordinarily investigates allegations of bankruptcy fraud, but other federal agencies may become involved including the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program. Most bankruptcy fraud is first discovered by the bankruptcy trustee, and is often the result of whistle blowing from neighbors, creditors, or ex-souses. The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud.
In bankruptcy, honesty is the best policy. For an individual who needs relief from overwhelming debt, bankruptcy is a tremendous tool that gives real results. The promise of bankruptcy is a fresh start, but not a head start. Debtors who are dishonest during the bankruptcy process can lose the benefits of a bankruptcy discharge, and may be criminally charged with one or more federal crimes. If you need help with your debt problem, speak honestly and frankly with an experienced attorney and learn how the powerful federal bankruptcy laws can help you.
Monday, August 16, 2010
Bankruptcy Can Help Build a Better Future
Pop quiz: What do Walt Disney, Mark Twain and Larry King have in common?
They each filed a personal bankruptcy and went on to have extraordinary success in life.
Bankruptcy is not a professional or financial death sentence. Just ask Donald Trump who has filed multiple Chapter 11 reorganization bankruptcies for his casinos. Bankruptcy is a financial tool that uses the federal law to protect the honest, but unfortunate debtor. Bankruptcy allows the debtor the opportunity to restructure finances and formulate a plan to repay or discharge debt. Bankruptcy provides the debtor a fresh start to a new financial future – one free of the pressures from debt collectors.
Here’s another question: What honor did Kim Basinger and Burt Reynolds receive after filing personal bankruptcy?
Each was nominated for an Academy Award in 1997. Basinger won an Oscar for best supporting actress for L.A. Confidential, and Reynolds was nominated for best supporting actor for Boogie Nights.
Bankruptcy can help you and your family build a more solid financial foundation. Henry Ford created another automobile company after his first company filed bankruptcy. It’s safe to say that Ford Motor Company would not exist today without the help of the federal bankruptcy laws. The same can be said for General Motors, which filed for Chapter 11 bankruptcy in 2009.
How can bankruptcy help you? The bankruptcy laws can stop a foreclosure sale, a pending lawsuit, and creditor harassment. Bankruptcy can protect your family assets and retirement accounts from creditors. Bankruptcy can eliminate debt or give you time to repay loans including delinquent car and home payments. The federal bankruptcy laws helped over a million people get relief during 2009, including celebrities Stephen Baldwin, Sinbad, and Bernie Kosar.
As Abraham Lincoln (filed bankruptcy in 1833) once said, “The best thing about the future is that it comes only one day at a time.” If you are experiencing overwhelming financial difficulty, take the first step to a better future by speaking with an experienced bankruptcy attorney today.
They each filed a personal bankruptcy and went on to have extraordinary success in life.
Bankruptcy is not a professional or financial death sentence. Just ask Donald Trump who has filed multiple Chapter 11 reorganization bankruptcies for his casinos. Bankruptcy is a financial tool that uses the federal law to protect the honest, but unfortunate debtor. Bankruptcy allows the debtor the opportunity to restructure finances and formulate a plan to repay or discharge debt. Bankruptcy provides the debtor a fresh start to a new financial future – one free of the pressures from debt collectors.
Here’s another question: What honor did Kim Basinger and Burt Reynolds receive after filing personal bankruptcy?
Each was nominated for an Academy Award in 1997. Basinger won an Oscar for best supporting actress for L.A. Confidential, and Reynolds was nominated for best supporting actor for Boogie Nights.
Bankruptcy can help you and your family build a more solid financial foundation. Henry Ford created another automobile company after his first company filed bankruptcy. It’s safe to say that Ford Motor Company would not exist today without the help of the federal bankruptcy laws. The same can be said for General Motors, which filed for Chapter 11 bankruptcy in 2009.
How can bankruptcy help you? The bankruptcy laws can stop a foreclosure sale, a pending lawsuit, and creditor harassment. Bankruptcy can protect your family assets and retirement accounts from creditors. Bankruptcy can eliminate debt or give you time to repay loans including delinquent car and home payments. The federal bankruptcy laws helped over a million people get relief during 2009, including celebrities Stephen Baldwin, Sinbad, and Bernie Kosar.
As Abraham Lincoln (filed bankruptcy in 1833) once said, “The best thing about the future is that it comes only one day at a time.” If you are experiencing overwhelming financial difficulty, take the first step to a better future by speaking with an experienced bankruptcy attorney today.
Friday, August 13, 2010
The Bankruptcy Trustee is Not Your Friend
The United States Trustee Program is a component of the Department of Justice. The Trustee Program appoints and supervises local private trustees who administer Chapter 7 and 13 bankruptcy estates. One of the private trustee’s chief duties in Chapter 7 cases is to liquidate the debtor’s nonexempt assets and pay creditors with the proceeds. Similarly, in a Chapter 13 case the trustee must ensure that the debtor devotes all disposable income to debt repayment.
The trustee is not your friend, the judge, or your legal counsel. The trustee has no judicial power to make final decisions or issue orders regarding your bankruptcy case. While the private trustee is very skilled at bankruptcy law, the trustee is forbidden from giving the debtor legal advice.
On occasion a debtor will contact the trustee’s office with questions concerning the bankruptcy case. This is always a bad idea and often results in a negative outcome. Direct debtor contact is uncommon, so the trustee will identify and remember a debtor that personally contacts his or her office. The case may have been a “routine” bankruptcy case for the trustee, but after the debtor contact the case is squarely on the trustee’s radar. The trustee will assume there is a problem with the bankruptcy and scrutinize the case.
During a lawsuit direct communication with represented litigants is generally prohibited. Many trustees are also licensed attorneys, but may communicate directly with you while performing the duties of bankruptcy trustee. If you call the trustee, he or she will likely speak with you. And why not? You may inadvertently disclose something that is better left unsaid. What seems like an innocent and expedient communication may turn into an issue that you are unable to predict.
The bankruptcy trustee is not your friend. If you have questions concerning your bankruptcy, discuss your issues with your attorney. Your attorney can answer questions about your case, and is experienced in dealing with the bankruptcy trustee. Let your attorney represent you and do not complicate your case by communicating directly with the bankruptcy trustee.
The trustee is not your friend, the judge, or your legal counsel. The trustee has no judicial power to make final decisions or issue orders regarding your bankruptcy case. While the private trustee is very skilled at bankruptcy law, the trustee is forbidden from giving the debtor legal advice.
On occasion a debtor will contact the trustee’s office with questions concerning the bankruptcy case. This is always a bad idea and often results in a negative outcome. Direct debtor contact is uncommon, so the trustee will identify and remember a debtor that personally contacts his or her office. The case may have been a “routine” bankruptcy case for the trustee, but after the debtor contact the case is squarely on the trustee’s radar. The trustee will assume there is a problem with the bankruptcy and scrutinize the case.
During a lawsuit direct communication with represented litigants is generally prohibited. Many trustees are also licensed attorneys, but may communicate directly with you while performing the duties of bankruptcy trustee. If you call the trustee, he or she will likely speak with you. And why not? You may inadvertently disclose something that is better left unsaid. What seems like an innocent and expedient communication may turn into an issue that you are unable to predict.
The bankruptcy trustee is not your friend. If you have questions concerning your bankruptcy, discuss your issues with your attorney. Your attorney can answer questions about your case, and is experienced in dealing with the bankruptcy trustee. Let your attorney represent you and do not complicate your case by communicating directly with the bankruptcy trustee.
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.
Tuesday, July 27, 2010
Five Common Bankruptcy Mistakes to Avoid
The federal bankruptcy laws promise a fresh financial start for the honest but unfortunate debtor. Bankruptcy balances the interests of the debtor to obtain his fresh start and the interests of the creditor to see that the debtor pays whatever he can afford. In some circumstances the debtor can complicate his bankruptcy case before he files.
Mistake #1: Paying an Insider Creditor
The bankruptcy laws attempt to ensure that all creditors receive fair treatment during the bankruptcy process. One concern is that the debtor will pay loans to family or friends before filing bankruptcy, and therefore deprive other creditors from receiving payment. Family, friends, business partners, and other creditors who have close relationships with the debtor are called “insider creditors” and transfers to insider creditors can be avoided by the bankruptcy trustee if the transfer occurred within one year before the bankruptcy filing. For instance, if you gave your mother $1,000 from your income tax refund as payment for a debt, and then filed bankruptcy two months later, the bankruptcy trustee can sue your mother to recover the $1,000. To make matters worse, often the debtor could have protected the cash money during the bankruptcy and paid the debt without difficulty after the case was filed.
Mistake #2: Incurring Debt After Deciding to File
Some people decide to charge up credit cards or take payday loans just before filing bankruptcy. If you have decided to file bankruptcy, do not incur additional debt. Taking loans with no intention to repay the creditor could be fraud. It could also be a criminal act.
Mistake #3: Transferring Property
Some people fear that they will lose property when they file bankruptcy. Some will give away or sell property to avoid losing it. In most cases your bankruptcy attorney can protect your property and you will not lose anything. However, once you have transferred an item it is no longer eligible for legal protections. For instance, a car worth $2,000 is likely entirely protected from turnover during your bankruptcy. If you transfer title of this vehicle to your brother before the bankruptcy, the trustee can avoid the transfer, take the car, and sell it to pay your creditors.
Mistake #4: Cashing out Retirement
Most retirement accounts are entirely protected during bankruptcy. Unfortunately, some people are unaware of these broad protections and cash out their retirement savings out of fear that it will be taken during the bankruptcy. Sometimes the money is spent to pay off loans which can create preference issues. In other cases the debtor converts an exempt asset (retirement funds) to a non-exempt asset (e.g. a paid off car).
Mistake #5: Failing to Be Honest
This is the worst mistake of all because the bankruptcy laws do not protect a dishonest debtor. Failure to truthfully list all of your assets, debts, income and expenses is grounds for dismissal of your case, or you may have to answer allegations of bankruptcy fraud (a federal crime).
If you are experiencing financial difficulty and are considering bankruptcy, discuss your case with an experienced bankruptcy attorney. Your bankruptcy attorney can advise you on the best actions to take before bankruptcy and how to avoid common mistakes. Use the federal bankruptcy laws and protect your property.
Mistake #1: Paying an Insider Creditor
The bankruptcy laws attempt to ensure that all creditors receive fair treatment during the bankruptcy process. One concern is that the debtor will pay loans to family or friends before filing bankruptcy, and therefore deprive other creditors from receiving payment. Family, friends, business partners, and other creditors who have close relationships with the debtor are called “insider creditors” and transfers to insider creditors can be avoided by the bankruptcy trustee if the transfer occurred within one year before the bankruptcy filing. For instance, if you gave your mother $1,000 from your income tax refund as payment for a debt, and then filed bankruptcy two months later, the bankruptcy trustee can sue your mother to recover the $1,000. To make matters worse, often the debtor could have protected the cash money during the bankruptcy and paid the debt without difficulty after the case was filed.
Mistake #2: Incurring Debt After Deciding to File
Some people decide to charge up credit cards or take payday loans just before filing bankruptcy. If you have decided to file bankruptcy, do not incur additional debt. Taking loans with no intention to repay the creditor could be fraud. It could also be a criminal act.
Mistake #3: Transferring Property
Some people fear that they will lose property when they file bankruptcy. Some will give away or sell property to avoid losing it. In most cases your bankruptcy attorney can protect your property and you will not lose anything. However, once you have transferred an item it is no longer eligible for legal protections. For instance, a car worth $2,000 is likely entirely protected from turnover during your bankruptcy. If you transfer title of this vehicle to your brother before the bankruptcy, the trustee can avoid the transfer, take the car, and sell it to pay your creditors.
Mistake #4: Cashing out Retirement
Most retirement accounts are entirely protected during bankruptcy. Unfortunately, some people are unaware of these broad protections and cash out their retirement savings out of fear that it will be taken during the bankruptcy. Sometimes the money is spent to pay off loans which can create preference issues. In other cases the debtor converts an exempt asset (retirement funds) to a non-exempt asset (e.g. a paid off car).
Mistake #5: Failing to Be Honest
This is the worst mistake of all because the bankruptcy laws do not protect a dishonest debtor. Failure to truthfully list all of your assets, debts, income and expenses is grounds for dismissal of your case, or you may have to answer allegations of bankruptcy fraud (a federal crime).
If you are experiencing financial difficulty and are considering bankruptcy, discuss your case with an experienced bankruptcy attorney. Your bankruptcy attorney can advise you on the best actions to take before bankruptcy and how to avoid common mistakes. Use the federal bankruptcy laws and protect your property.
Tuesday, July 20, 2010
Can Bankruptcy Stop a Rental Eviction?
A person’s financial situation is often desperate by the time a bankruptcy is filed. In some circumstances the rent is past due and the debtor is facing eviction. Fortunately, the bankruptcy laws can help many debtors stay in their homes, at least temporarily.
Generally, when you file a bankruptcy petition all collection actions are automatically stayed. The purpose of this stay is to give you some breathing room and time to sort out your financial difficulties. If you are behind on rent payments, the bankruptcy automatic stays the commencement or continuation of an eviction action. The automatic stay prohibits your landlord from any attempt to collect rents that accrued prior to the bankruptcy filing date. Your landlord may not write or call you in an effort to collect these rents, and may not start or continue a lawsuit to evict you.
The bankruptcy automatic stay will not relieve you from your obligation to pay rent after the bankruptcy filing date. If you fall behind on your rent payments after the bankruptcy is filed, your landlord may evict you regardless of the bankruptcy, but cannot seek payment of past rents. If you are not behind on rents at the time the bankruptcy case is filed, your landlord is not a creditor and will not receive notice of your bankruptcy filing. However, you must account for any rent deposit on your bankruptcy schedules.
In some circumstances a landlord may complain to the bankruptcy court that the tenant is endangering the property or using controlled substances illegally on the property. The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond. The court must hold a hearing within 10 days. If the landlord is successful in this complaint, the court will lift the automatic stay and allow the eviction process to continue.
If your landlord has obtained a judgment for possession and order of eviction before you file bankruptcy, the legal process is more complex. You must deposit one month of rent to the bankruptcy court immediately upon filing the bankruptcy petition along with a certification stating that your landlord’s judgment permits you to stay in the premises upon satisfaction of the entire judgment amount. This filing stays the eviction process for thirty days. If you wish to remain longer, the amount stated in the judgment for possession must be paid within the thirty day period.
Bankruptcy can stop an eviction and give you time to move or make arrangements to stay. If you are facing eviction from your rental home and contemplating bankruptcy, discuss your situation with an experienced bankruptcy attorney.
Generally, when you file a bankruptcy petition all collection actions are automatically stayed. The purpose of this stay is to give you some breathing room and time to sort out your financial difficulties. If you are behind on rent payments, the bankruptcy automatic stays the commencement or continuation of an eviction action. The automatic stay prohibits your landlord from any attempt to collect rents that accrued prior to the bankruptcy filing date. Your landlord may not write or call you in an effort to collect these rents, and may not start or continue a lawsuit to evict you.
The bankruptcy automatic stay will not relieve you from your obligation to pay rent after the bankruptcy filing date. If you fall behind on your rent payments after the bankruptcy is filed, your landlord may evict you regardless of the bankruptcy, but cannot seek payment of past rents. If you are not behind on rents at the time the bankruptcy case is filed, your landlord is not a creditor and will not receive notice of your bankruptcy filing. However, you must account for any rent deposit on your bankruptcy schedules.
In some circumstances a landlord may complain to the bankruptcy court that the tenant is endangering the property or using controlled substances illegally on the property. The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond. The court must hold a hearing within 10 days. If the landlord is successful in this complaint, the court will lift the automatic stay and allow the eviction process to continue.
If your landlord has obtained a judgment for possession and order of eviction before you file bankruptcy, the legal process is more complex. You must deposit one month of rent to the bankruptcy court immediately upon filing the bankruptcy petition along with a certification stating that your landlord’s judgment permits you to stay in the premises upon satisfaction of the entire judgment amount. This filing stays the eviction process for thirty days. If you wish to remain longer, the amount stated in the judgment for possession must be paid within the thirty day period.
Bankruptcy can stop an eviction and give you time to move or make arrangements to stay. If you are facing eviction from your rental home and contemplating bankruptcy, discuss your situation with an experienced bankruptcy attorney.
Thursday, July 8, 2010
Medical Treatment And Bankruptcy
It is no surprise that illness is a chief contributor to personal bankruptcy. In fact, a 2009 study released by Harvard researchers claims that 62% of all personal bankruptcies during 2007 were caused by health problems. Many individuals struggling with medical bills need relief, but worry about how a bankruptcy will affect their ability to receive medical care in the future.
Under the Emergency Medical Treatment and Active Labor Act hospitals and ambulance services are required to provide emergency healthcare to a person regardless of ability to pay. This federal law requires appropriate medical screening, necessary stabilization, and transfer to an appropriate facility for treatment of an emergency condition. In broad general terms, if you have an emergency medical condition, a hospital ER must treat you.
If you do not have an emergency medical condition, the hospital or doctor may refuse treatment to a bankruptcy debtor. It is unusual for a hospital to deny service after bankruptcy unless the patient demonstrates an inability to pay the new bill. If you have insurance or other form of guaranteed payment, the hospital will likely treat you.
Individual physicians are more likely to deny services if you have discharged their bill. Many bankruptcy debtors want to continue a relationship with their personal doctor, and consequently make payment arrangements after the bankruptcy has been filed. While the bankruptcy law requires the debtor to list every creditor, there is no prohibition against paying a debt after the bankruptcy. Paying the debt does not renew or create a new obligation and the doctor may not take action to collect a discharged debt (i.e. writing or calling to encourage payment).
If you need to include medical bills in your bankruptcy, but worry about receiving future medical care, consult with your bankruptcy attorney. In most cases there is no interruption in medical care or treatment. Know your legal rights and be informed of how your bankruptcy will affect your ability to receive medical care.
Under the Emergency Medical Treatment and Active Labor Act hospitals and ambulance services are required to provide emergency healthcare to a person regardless of ability to pay. This federal law requires appropriate medical screening, necessary stabilization, and transfer to an appropriate facility for treatment of an emergency condition. In broad general terms, if you have an emergency medical condition, a hospital ER must treat you.
If you do not have an emergency medical condition, the hospital or doctor may refuse treatment to a bankruptcy debtor. It is unusual for a hospital to deny service after bankruptcy unless the patient demonstrates an inability to pay the new bill. If you have insurance or other form of guaranteed payment, the hospital will likely treat you.
Individual physicians are more likely to deny services if you have discharged their bill. Many bankruptcy debtors want to continue a relationship with their personal doctor, and consequently make payment arrangements after the bankruptcy has been filed. While the bankruptcy law requires the debtor to list every creditor, there is no prohibition against paying a debt after the bankruptcy. Paying the debt does not renew or create a new obligation and the doctor may not take action to collect a discharged debt (i.e. writing or calling to encourage payment).
If you need to include medical bills in your bankruptcy, but worry about receiving future medical care, consult with your bankruptcy attorney. In most cases there is no interruption in medical care or treatment. Know your legal rights and be informed of how your bankruptcy will affect your ability to receive medical care.
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