Texas Bankruptcy Blog

Beware Cut Rate Bankruptcy Advice

Bryan Fears — Wed, 16 May 2012 07:42:59 -0600

Our elders always told us, “You get what you pay for,” but as we get older we learn that this advice isn’t always true. Sometimes you get more than you bargain for, and sometimes less. So how can you know if you are getting the best bankruptcy legal services for your money? The answer is actually simpler than you think. Below is a discussion of three little pigs attorneys who charged three different bankruptcy rates: the expensive rate, the market rate, and the discount rate.

The Expensive Bankruptcy Attorney
A consumer bankruptcy attorney who charges higher fees is telling you an important detail about his or her legal services. The expensive attorney does not need your business. The expensive attorney is often very experienced in consumer bankruptcy cases, but has committed his or her time to some other type of work. This is often true of bankruptcy attorneys who work for creditors, like banks and credit card companies. Sometimes Chapter 7 bankruptcy trustees represent bankruptcy clients, but most of their time is spent on trustee work. Sometimes bankruptcy is just a “side business” that the attorney can “take or leave.” Obviously the expensive attorney’s main focus is on something other than representing you.

The Discount Bankruptcy Attorney
The discount bankruptcy attorney needs your business either because he or she has started a new bankruptcy practice or because business is slow. A new bankruptcy practitioner is obviously a dangerous gamble. This attorney does not have the experience with the bankruptcy code, the local rules, the bankruptcy court judges and trustees, or the local creditors to reach the best outcome for the bankruptcy client. Practicing in the bankruptcy profession is not just a matter of knowing “what to do,” but the best result often depends on knowing “how to do it.” New bankruptcy attorneys simply do not know the “how to” of the bankruptcy practice.

A slow bankruptcy practice should also be a warning sign. Ask yourself, “Why is this firm offering a discount rate?” Is this attorney not getting referrals from other attorneys? No recommendations from previous clients? Why not? There may be reasons for the discount rate that could affect your case.

The Market Rate Bankruptcy Attorney
Successful consumer bankruptcy attorneys know what their competitors charge and will not over charge or under charge their clients. The market rate bankruptcy attorney knows the value of his or her services, and will confidently represent you in bankruptcy court. Most bankruptcy fees are simple and the process at a market rate attorney’s office is very efficient. This attorney can quickly identify issues with your case, recommend a course of action, and will zealously represent you. The market rate bankruptcy attorney has open lines of communication with the bankruptcy trustees and creditors, and can work quickly to achieve the best possible result.

Just like Goldilocks discovered, market rate bankruptcy services is just right! Your best option is an experienced bankruptcy attorney that charges a fair price.

Bankruptcy Is Not Absolute

Bryan Fears — Fri, 11 May 2012 10:21:57 -0600

The bankruptcy discharge is one of the most broad and powerful provisions in U.S. law. Discharged debts cannot ever be collected from the debtor. However, there are limits to the bankruptcy discharge and it is only meant to help honest debtors. The federal bankruptcy code excepts certain "bad actor" debts from discharge, like criminal fines, debts from willful and malicious conduct, debts from drunk driving, etc.

The case of Nicolai v. Larsen, decided recently by the 7th circuit Court of Appeals, is an excellent example of how the bankruptcy code may limit the discharge when the debtor is dishonest. In this case Larsen was awarded $3.4 million by a Wisconsin court as a result of injuries Nicolai caused while attempting to murder his wife. Nicolai tried to discharge this debt during bankruptcy. The 7th Circuit Court of Appeals found that the debt was based on Nicolai's bad acts of battery, false imprisonment and intentional infliction of emotional distress. Under section 523(a)(6)of the bankruptcy code, debts arising from “willful and malicious injury by the debtor to another entity or to the property of another entity” are not dischargeable, the 7th Circuit denied Nicolai his request to discharge the $3.4 million debt. The court said:

"We imagine that all courts would agree that a willful and malicious injury, precluding discharge in bankruptcy of the debt created by the injury, is one that the injurer inflicted knowing he had no legal justification and either desiring to inflict the injury or knowing it was highly likely to result from his act. To allow him to shirk liability by discharging his judgment debt in those circumstances would undermine the deterrent efficacy of tort law without serving any policy that might be thought to inform bankruptcy law property of another entity.”

The bankruptcy code does not automatically except a debt for "willful and malicious injury" from the order of discharge. Instead, a creditor has a duty to affirmatively object to the discharge of the debt. If the creditor fails to file a timely objection, the debt is included in the discharge and the creditor may not collect from the debtor.

If you have caused a willful injury to another person and need financial help, speak with an experienced bankruptcy attorney. Your attorney can explain your legal rights and discuss your bankruptcy options. The bankruptcy code is flexible to permit repayment, discharge, or time to restructure your finances.

What Is "Bankruptcy Protection?"

Bryan Fears — Wed, 09 May 2012 15:42:13 -0600

When a company or celebrity files bankruptcy it is a news-worthy event. The media often states that the company or person has "filed for bankruptcy protection." But what exactly does this mean?

The federal bankruptcy laws are written to allow the debtor time to reorganize his or her finances. Reorganization would not be possible if creditors are allowed to continue collection actions like repossession, foreclosure, or lawsuits. Consequently, when a debtor files a bankruptcy case, the federal law immediately and automatically stops all collection activity. This provision, called the "automatic stay," gives the debtor "breathing space" to work with legal counsel, the bankruptcy trustee, creditors, and the court to propose a plan to either repay or discharge debts.

The automatic stay is technically a temporary injunction, issued by the federal bankruptcy judge, and directed at creditors that forbids collection action without prior permission from the court. The automatic stay prohibits creditor contact with the debtor in an effort to collect on a debt, which means collection letters, phone calls, emails, and other harassment must immediately cease. Lawsuits and garnishments must also stop once the bankruptcy case is filed. A violation of the automatic stay is punishable by contempt and enforced by the bankruptcy court.

The automatic stay continues until either the debtor receives a discharge, the case closes, or the stay order is modified. Once the debtor receives a discharge, a new injunction takes the place of the automatic stay, commonly called the "discharge injunction." The discharge injunction is permanent and does not expire. It prohibits the creditor from collecting from the debtor, which includes lawsuits, garnishments, collection letters, etc.

The automatic stay and the discharge injunction apply to original creditors and third party collectors like collection agencies and attorneys. However, while violation of these orders does not depend on knowledge of the bankruptcy, court punishment usually does. The first thing to do when a violation occurs is to notify the collector of the bankruptcy order and contact your attorney. Knowing violations of a court order will have serious consequences for the collector and any wrongful repossession, garnishment, or seizure will be undone by the court's authority.

Bankruptcy protection is very powerful. The automatic stay umbrella will immediately shield you from creditor harassment while you restructure your finances, and the discharge injunction will give you peace of mind to enjoy your fresh start. For more information on how you can benefit from bankruptcy protection, contact an experienced bankruptcy attorney.

Options For Secured Property In Chapter 7 Bankruptcy

Bryan Fears — Mon, 07 May 2012 08:53:31 -0600

During your Chapter 7 bankruptcy, you may hear the trustee or your own attorney say, "Secured property must be paid for or returned." If you have a debt that is secured by a lien on property, you must make arrangements to pay the creditor or surrender the property. That is the general rule, but its not always the case.

A lien is an interest given to a creditor that secures future payment of a debt. If you fail to make your payments as agreed, the collateral pledged as security for the loan can be repossessed (or foreclosed in the case of a home loan). A lien will generally survive a Chapter 7 bankruptcy case, hence the "pay or return" statement. For instance, you cannot discharge a loan secured by a car and keep the car. You have three options concerning secured debts on Chapter 7 bankruptcy:

Reaffirmation - if you want to keep the secured property and continue paying the loan, you can reaffirm the debt and continue the relationship with the creditor. The debt and lien survive the bankruptcy by mutual agreement between the debtor and creditor.

Redemption - secured property can be redeemed for its fair market value during Chapter 7 bankruptcy. Redemption does not apply to home mortgages.

Surrender - If you cannot afford to keep and continue paying on a secured item, you can surrender the property back to the creditor and "walk away" owing nothing.

A fourth option, called "ride through," may be available under certain circumstances. "Ride through" occurs when the debtor discharges the debt, but the creditor is unable to enforce its lien because of a lack of breach of contract or some other state law impediment. Finally, if you have pledged household property that you own to secure payment of a personal loan, you may be able to strip off the lien and keep your property.

Your bankruptcy attorney will evaluate your secured property and recommend a course of action. While each case is different, the Chapter 7 debtor generally keeps all of his or her property. The bankruptcy laws are flexible to discharge burdensome debt and allow you to keep your home and family vehicles. Speak with an experienced attorney concerning the specifics of your case.

Discharging Credit Cards Through Chapter 7 Bankruptcy

Bryan Fears — Fri, 04 May 2012 08:46:46 -0600

A Chapter 7 bankruptcy case can discharge many financial obligations, including credit card debts. A Chapter 7 discharge means that the credit card company is permanently prohibited from trying to collect from you. The debt is unenforceable against you, and you are not required to pay income taxes on the discharged debt.

Credit cards are classified as "unsecured debts," the lowest category of debts during bankruptcy. Other common unsecured debts are medical bills and signature loans. The payment of an unsecured debt is not guaranteed by a pledge of property (e.g. a car loan). Consequently, when an unsecured debt is discharged in a Chapter 7 bankruptcy, the creditor typically receives nothing.

Discharging a credit card debt in a Chapter 7 bankruptcy case comes down to one simple rule: was the debt incurred honestly? The Chapter 7 bankruptcy laws favor discharging credit card debt and giving the honest debtor a fresh start. However, the law balances the scale by withholding the discharge when the debtor is less than honest.

First, a credit card that is not listed in your Chapter 7 bankruptcy case is often excluded from your discharge. This is especially true if you continue to use the card during or after filing bankruptcy. The additional charges made after filing bankruptcy cannot be discharged, and becomes good evidence of an intent to conceal the credit card from the court and the bankruptcy filing from the creditor.

Second, if you go on a spending spree with our credit card immediately before filing bankruptcy, those charges are presumed non-dischargeable. This rule includes "luxury purchases" of more than $600 made within 90 days of the bankruptcy, as well as charges made on your card that you have no intention of repaying. The best advice is to stop using your credit card before you file bankruptcy.

Third, if you take cash advances totalling $875 within 70 days prior to filing bankruptcy, the debt is presumed non-dischargeable.

Fourth, a false statement to the credit card company on your application could be used to deny discharge of the debt. While credit card companies seldom use this tactic, if there is plain evidence of fraud (e.g. your yearly income was $20,000, but you claimed it was $200,000), the credit card company may file an adversarial action during your case and seek to deny your discharge.

Discharging credit card debt is usually a simple matter in a Chapter 7 bankruptcy case. It is very important to answer your attorney's questions honestly and fully in order to receive the best advice. Your attorney can often avoid problems when they are revealed in advance, and can get you the relief you need.

What Happens If Your Co-Signer Files Bankruptcy?

Bryan Fears — Wed, 02 May 2012 08:55:04 -0600

Many bankruptcy questions are complicated and the right answer depends on the facts of the individual's case. One challenging issue that frequently arises is how a debtor's bankruptcy filing will impact a co-signer. Below is some general information on bankruptcy and co-signers:

Basics
A co-signed debt generally makes each signer 100% responsible. If a default occurs, the creditor can legally collect from one or all of the co-signers until the debt is paid.

The Automatic Stay
When a debtor files bankruptcy, the bankruptcy court automatically issues an injunction against all creditors prohibiting any collection attempts. This stay only applies to the debtor, personally, and does not stop the creditor from collecting from property or from other people. However, if the debtor has filed a Chapter 13 bankruptcy case, the automatic stay extends to co-signers and stops collection action (e.g. lawsuits, telephone harassment, repossession, etc.) against them as well. This protection does not apply to Chapter 7 cases.

The Bankruptcy Discharge
A bankruptcy discharge does not "erase" a debt, it makes the debt legally unenforceable against the debtor. The creditor is unable to collect from the discharged debtor, but can proceed to collect 100% of the debt from the remaining non-discharged signers. Co-signers are prohibited from suing the debtor on a discharged debt.

Secured Property
When a co-signed debt is secured by collateral, whether the property is protected by the bankruptcy court depends on whether the property is "owned" by the debtor and whether he or she intends to keep it. If the property is in the hands of the non-bankrupt co-signer, like a vehicle, the property is not protected by a Chapter 7 or Chapter 13 bankruptcy. Additionally, if the debtor abandons and surrenders interest in the property, the bankruptcy protection is extinguished and the creditor may legally repossess.

Other Issues
* A creditor could consider a bankruptcy filing a breach of contract on a co-signed debt and place the debt in default status. Whether this is permitted depends on state law.
* Some co-signed debts may not be discharged during the debtor's bankruptcy. Common examples are student loans and taxes. Consult your attorney for more information on non-dischargeable debts.
* The debtor's bankruptcy could affect the co-signer's credit rating, especially if payments are not made.

Protecting the co-signer's interests during a bankruptcy case can be tricky business. If your co-signer has filed bankruptcy, speak with an experienced bankruptcy attorney and discuss your legal rights. Your bankruptcy attorney can help you understand the bankruptcy process and how it will affect you.

Who Files For Bankruptcy?

Bryan Fears — Mon, 30 Apr 2012 08:45:04 -0600

Financial difficulty crosses all socio-economic lines. Its not just "poor" people that file for bankruptcy relief, sometimes "rich" people file also. Recently former NFL player Warren Sapp filed Chapter 7 bankruptcy in South Florida. Despite earning an estimated $40 million during his career, and a monthly income in excess of $100,000, he now seeks protection from more than $6 million in debts.

Each year celebrities and athletes file bankruptcy, but rarely does a federal judge need the protection of the federal bankruptcy laws. The Wall Street Journal has reported that Judge Otis Wright II of California’s Central District has filed for Chapter 7 bankruptcy. Chapter 7 is an "erase-your-debts-and-start-fresh" bankruptcy. Creditors during a Chapter 7 bankruptcy generally receive little or nothing through the liquidation of the debtor's assets.

Judge Wright's bankruptcy petition and schedules show that he has assets of $833,426 and liabilities of $895,292, including more than $70,000 in credit card debt. Federal judges make about $174,000 per year. The Chapter 7 bankruptcy trustee plans to put Wright’s California home in Los Angeles County on the market to pay his creditors. The asking price is about $1.2 million with a debt of about $800,000.

Prior to filing bankruptcy Judge Wright and his wife drained his retirement funds to creditors. While his efforts to try and pay creditors were admirable, retirement funds are generally protected during bankruptcy. Your bankruptcy attorney will often advise against cashing out retirement funds to pay debts that may be paid or discharged during the bankruptcy case.

Bankruptcy is a federal legal process to reorganize your finances and free you from oppressive debt. The bankruptcy laws are flexible to help those who need a fresh start - despite fame or fortune. If you need this type of help, speak with an experienced bankruptcy attorney.

Know Your Rights When Dealing With Old Debts

Bryan Fears — Fri, 27 Apr 2012 07:52:18 -0600

A debt you cannot afford to repay can make your life miserable. Fortunately, there are legal solutions to an overwhelming debt problem. One remedy is the statute of limitations. This law discourages unreasonable delay by limiting the time a creditor has to bring a lawsuit against you. The creditor cannot simply harass you forever and must file a lawsuit within a number of years or be forever legally barred. A time-barred debt cannot be legally enforced by the creditor or a subsequent collector.

Whether an old debt is time-barred depends on a number of factors. First, different time limitations can apply to written contracts, oral contracts, or even to credit cards. Consult with your attorney to determine whether your debt is time-barred. Second, the time when the limitation clock starts, or tolls, can sometimes be difficult to ascertain. Generally, the clock starts on the day you last made a payment on the debt. For instance, if the statute of limitations is five years, the debt would be time-barred if the creditor does not file its lawsuit within five years after your last payment. If you make a payment within the tolling period, the clock resets for another five year period.

A debt collector is allowed to contact you concerning a time-barred debt. The collector does not have to volunteer that the debt is time-barred, but is required by law to answer truthfully if you ask if the debt is beyond the statute of limitations. You can also dispute a debt that you believe is time-barred by sending the collector a letter within 30 days of receiving a written notice of the debt. Tell the collector that you dispute the debt, that you believe that it is time-barred, and ask for verification of the debt. A collector must stop trying to collect until you receive verification.

The statute of limitations is a defense to be used by a defendant in a lawsuit. On the other hand, discharging the debt in bankruptcy will stop a lawsuit on the debt from ever being filed. A bankruptcy discharge is a permanent legal injunction directed at the creditor and all subsequent collectors prohibiting any attempt at collecting the debt. That includes telephone contacts, letters, lawsuits, or garnishments.

If you have an old debt that has recently reappeared, speak with an experienced bankruptcy attorney and discuss your legal rights. The debt may be time-barred, or another legal defense may exist. You may also consider bankruptcy to stop any further harassment or collection.

Kansas Bankruptcy Court Protects Earned Income Tax Credit

Bryan Fears — Wed, 25 Apr 2012 09:21:23 -0600

A Kansas Bankruptrcy Court has upheld the constitutionality of a Kansas law protecting a Chapter 7 debtor's Earned Income Tax Credit (EITC) during bankruptcy. This law was challenged by the bankruptcy trustee who argued that the Kansas legislature could not write a law that only applied to bankruptcy proceedings. Bankruptcy is a federal process and its laws are written by the U.S. Congress.

The Kansas law created a new bankruptcy exemption for Kansas debtors. It allows bankruptcy debtors to protect their EITC money, a tax credit designed to assist low- and moderate-income families. However, the this exemption only protects EITC money during bankruptcy and does not apply outside of bankruptcy.

The Chapter 7 bankruptcy trustee challenged the constitutionality of the law by stating that it violates the Uniformity Clause. See In re Westby, No. 11-40986, 2012 Bankr. LEXIS 1428, (Bankr. Kan. April 4, 2012). There is currently a split of opinion in the federal courts whether state exemptions that only apply to bankruptcy proceedings are constitutional. The Kansas Bankruptcy Court in Westby found that Kansas’ EITC bankruptcy exemption did not violate the Uniformity Clause or any other constitutional provision. These cases could open the door for more debtor bankruptcy protections at the state level.

The full opinion can be found on the Kansas Bankruptcy Court website: http://www.ksb.uscourts.gov/images/ksb_opinions/JMK_11-40986-45.pdf

The federal bankruptcy process is a complex combination of federal and state laws. Navigating this process alone is like walking through a minefield while blindfolded. An experienced bankruptcy attorney can guide you through this complicated process, protect your rights and property, and get you a fresh financial start.

How Do I Get Information On My Bankruptcy Case?

Bryan Fears — Mon, 23 Apr 2012 10:45:19 -0600

A bankruptcy case is a public record and all documents filed in the case are kept at the bankruptcy court. The documents are maintained digitally and are available via a federal court database called PACER (which stands for Public Access to Court Electronic Records). Through PACER you can access your complete case file and review documents, pleadings, and court orders filed in the case, including your bankruptcy petition and schedules.

The general public can access the PACER website at pacer.gov and view and print documents. The government charges 10 cents per page with a cap of $3 per document. If you accrue less than $15 in fees during a quarter on your PACER account, you are not charged anything. This is especially useful to a bankruptcy debtor who may need a copy of his or her discharge order.

You can obtain immediate PACER access by registering your account and providing credit card information. If you do not have a credit card, your PACER login and password will be mailed to you.

A second option for immediate PACER access without a credit card is through Inforuptcy.com, a third party site that allows users to search for a case or a document through its portal. Registered users can search the Inforuptcy database for free, and if the document is available, the HTML text can be viewed free. PDFs are offered for 50% off PACER’s 10 cents per page. If the document is not in the Inforuptcy database, you can download it from PACER through the site. Inforuptcy gives new users a $5 credit before they are asked for credit-card information.

While your bankruptcy attorney will keep you informed on developments in your bankruptcy case, some debtor like to be more "hands on." PACER access is simple and can provide you with immediate information on your bankruptcy case. PACER is also useful to find discharge information and documents after your case closes. If you need information regarding your case or accessing PACER, speak with your bankruptcy attorney.

The High Cost Of Bankruptcy Fraud

Bryan Fears — Fri, 20 Apr 2012 08:03:09 -0600

The federal bankruptcy system largely relies on the honesty of the debtor. The bankruptcy trustee assigned to an individual's case rarely investigates assets, visits homes, or appraises property. You and your attorney sign statements, under oath, that disclose your assets and property, which is generally taken as truthful.

Lying during the bankruptcy process can carry a very high price. Just ask Thad Corey Theall who was recently convicted by a federal jury in Lafayette, La., of perjury charges relating to the concealment of bankruptcy assets. Mr. Theall, 52, was sentenced to 27 months in federal prison for failing to disclose an asset of $50,000 from the sale of real estate. To make matters worse, Mr. Theall also failed to tell the trustee about this sale during his meeting with the bankruptcy trustee.

In addition to his federal criminal conviction, Mr. Theall was ordered to pay $50,000 back to the bankruptcy estate, was prohibited from filing bankruptcy for three years, was denied a bankruptcy discharge, and was barred him for life from attempting to discharge those debts in another bankruptcy. His wife, a joint debtor in the bankruptcy case, is scheduled to be sentenced in May, 2012.

The case was investigated by the Federal Bureau of Investigation, and prosecuted by the U.S. Attorney's Office. U. S. Attorney Stephanie Finley stated: “In these difficult economic times, many Americans turn to bankruptcy as a last ditch effort to keep their heads above water. This defendant attempted to manipulate the system so that he could continue to indulge the lifestyle he had become accustomed to, even if that meant hiding assets and lying to the court. The system just can’t work that way because the community will lose faith in the system. Bankruptcy is a serious matter, and those who take it lightly or use it in a way to cheat their creditors should know that my office will continue to prosecute anyone who conceals assets from the court.”

Bankruptcy offers many legal protections for honest debtors. If you need to keep property, discuss your situation fully and honestly with your bankruptcy attorney. Your attorney will provide you with options for keeping your property without landing you in trouble with the law.

Are You Judgment Proof? Consider Bankruptcy!

Bryan Fears — Wed, 18 Apr 2012 07:53:11 -0600

When you are faced with a debt that you cannot pay, you have three options: (1) do nothing; (2) negotiate with the creditor; or (3) file bankruptcy. In cases of unemployment or a fixed income, option two, negotiate, is no option at all. There is simply no extra money to pay the debt and nothing to sell. When there is no income that is legally collectible and all assets are legally exempt from collection, the debtor is commonly called "judgment proof." If you or your attorney think you are "judgment proof," be sure that you fully understand what that term means before "doing nothing."

In collection law the term "judgment proof" is actually a misnomer. The term refers to the difficulty a creditor has in collecting on a judgment, not in obtaining the judgment. If you are "judgment proof," you can still be sued for a debt and a court can still issue a judgment against you.

It is important to protect your rights any time you are involved in a lawsuit. The court may order you to appear in court, and you must comply or risk being held in contempt for violating the court's order. The creditor may also attempt to seize personal assets or money from your bank account - usually without any notice. You must inform the creditor and the court that you are asserting your legal exemption rights to protect your property. The creditor may challenge these exemptions in court, in which case you must litigate the matter or risk losing your protections.

A judgment is good for many years, and can be renewed. The creditor can attempt to collect from you at any time, especially if your financial circumstances change. If the debt is truly uncollectible, the creditor may "charge off" the debt and report it to the IRS. The cancelled debt is now taxed as your income and you must inform the IRS of your insolvency.

Most "judgment proof" debtors have no idea of the inconvenience that a lawsuit can cause, not to mention the harassment before and after a lawsuit. A Chapter 7 bankruptcy can discharge your debts. The bankruptcy automatic stay immediately stops all collection action, including lawsuits and telephone harassment. Once discharged, the debt is not considered income by the IRS, and it is permanently uncollectible. The creditor can never sue you or contact you regarding the debt.

If you have debts that you cannot pay, speak with an experienced bankruptcy attorney and find out how the federal law can protect you and your property. Bankruptcy can provide permanent peace of mind, and a chance at a fresh financial start free from creditor harassment.

Purpose of Bankruptcy

Bryan Fears — Mon, 16 Apr 2012 07:50:28 -0600

Bankruptcy is a federal legal process that can help you eliminate or restructure overwhelming financial obligations. The federal Bankruptcy Code is written by Congress and the bankruptcy laws are interpreted by the federal courts. The Supreme Court of the United States of America has interpreted various provisions of the Bankruptcy Code during the past 100+ years.
So what does the Supreme Court have to say about the purpose of bankruptcy?
• “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor’.” Marrama v. Citizens Bank of Massachusetts, 127 S.Ct. 1105 (2007).
• “The central purpose of the [Bankruptcy] Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy ‘a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Grogan v. Garner, 111 S.Ct. 654 (1991)
• “One of the primary purposes of the Bankruptcy Act is to ‘relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes’. This purpose of the act has been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor…, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.” Local Loan Co. v. Hunt, 54 S.Ct. 695 (1934).
• “It is the purpose of the bankrupt act…to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.” Williams v. U.S. Fidelity & Guaranty Co., 35 S.Ct. 289(1915), citing Wetmore v. Markoe, 196 U.S. 68 (1904); Zavelo v. Reeves, 227 U.S. 625 (1913); and Burlingham v. Crouse, 228 U.S. 459 (1913).
The Supreme Court has consistently stated that the bankruptcy laws exist to help the individual get a fresh financial start. Bankruptcy can legally and permanently eliminate debts you cannot pay and restructure your finances for a fresh financial start. Call today and speak with an experienced bankruptcy attorney to learn how bankruptcy can help you.

Qualifying For Bankruptcy

Bryan Fears — Fri, 13 Apr 2012 08:18:56 -0600

Some people believe that they do not "qualify" for bankruptcy relief. Often the reasons for disqualification are strange: for instance, "I make too much money," or "I don't make enough money," or "I only have medical debt." In some cases there is a bit of truth to these excuses, but many of the reasons are pure hogwash.

The federal bankruptcy laws exist to give an honest debtor relief from overwhelming financial obligations. There are two basic types of personal bankruptcy, codified in the Bankruptcy Code under Chapter 7 and Chapter 13. "Qualifying" to file under one of these chapters depends upon your circumstances.

Chapter 7 is a straight bankruptcy. The idea is to eliminate your debts quickly and give you a fresh financial start. To qualify for a Chapter 7 bankruptcy, the debtor must demonstrate that there is not sufficient income to pay back a substantial portion of all unsecured debts over the next three to five years. The debtor must take a financial means test to show that he or she is unable to pay creditors.

There is no minimum or maximum debt limit in a Chapter 7 case. Most debts are discharged during Chapter 7, but some debts may be excluded, including child support debts, tax debts, and criminal restitution.

A Chapter 13 is a repayment bankruptcy. The Chapter 13 debtor submits a repayment plan to the bankruptcy court offering to repay some or all of his creditors over three to five years. Naturally, the debtor must show that he or she has sufficient income to complete the repayment plan. While there is no minimum amount of debt required to file a Chapter 13 case, the Bankruptcy Code limits Chapter 13 cases to debtors with unsecured debts less than $360,475 and secured debts under $1,081,400.

When a debtor is able to repay some debts, but does not qualify for Chapter 13 bankruptcy, the debtor may elect to file a Chapter 11 bankruptcy case. Chapter 11 is most often used for corporations like General Motors, but individuals can also file Chapter 11. There are no minimum or maximum debt limits in a Chapter 11 case.

If a debtor has previously filed a bankruptcy case, the debtor may be ineligible for certain bankruptcy relief for a period of time. For instance, you are not permitted to file another bankruptcy case for 180 days if your bankruptcy case was voluntarily dismissed after a creditor requested relief from stay, or your case was dismissed for failure to obey a court order. Additionally, after you receive a discharge in a previous Chapter 7 bankruptcy case, you must wait 8 years before you can receive another Chapter 7 discharge; and 6 years to receive a Chapter 13 discharge. If you received a discharge in a previous Chapter 13 bankruptcy case, you must wait 4 years before you can receive a Chapter 7 discharge; and 2 years to receive another Chapter 13 discharge.

Very few people do not “qualify” for bankruptcy. If you are hurting financially and need help, the federal bankruptcy laws offer many different forms of relief. Call an experienced bankruptcy attorney and learn how the law can eliminate or restructure your financial situation to get you out of debt.

Bankruptcy Can Help Distressed Homeowners

Bryan Fears — Mon, 09 Apr 2012 07:48:14 -0600

Reuters.com recently published a story predicting an increase in home foreclosures in 2012. Banks slowed their foreclosure processes in 2011 due to the "robo-signing" scandal, but this past February five major banks settled a major lawsuit with 49 U.S. states. Now there are signs that foreclosures are ramping up again. One mortgage servicing provider recently reported "foreclosure starts" had increased 28 percent in January.

The Reuters article quoted RealtyTrac CEO Brandon Moore as saying that the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed." This new wave of foreclosures targets middle class homeowners hit hard by tough economic times. "The subprime stuff is long gone," said Michael Redman of 4closurefraud.org. "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."

Current data estimates around 13 million Americans are unemployed and millions more are under-employed making it difficult to pay a monthly mortgage. To make matters worse, many homeowners are struggling with homes that are "underwater" - the market value of the home is worth less than the amount owed.

The federal bankruptcy process can help a homeowner manage a distressed home situation. First, the Bankruptcy Code allows the debtor to strip away junior mortgages that are entirely unsecure. For instance, if your home is worth $200,000, and you owe $200,000 or more on your first mortgage, any junior mortgage or judicial lien can be stripped off during a Chapter 13 bankruptcy. This process is especially useful to homeowners struggling with HELOC loans.

Second, a Chapter 13 bankruptcy can provide the homeowner with time to catch up past-due mortgage payments or property taxes. During a Chapter 13 bankruptcy the debtor is allowed up to five years to pay off mortgage arrears while the bank is prohibited from foreclosing. Finally, if you are unable to keep your home, a Chapter 7 bankruptcy will allow you time to surrender your home back to the lender on your terms.

Bankruptcy is a legal shield that can protect you during tough financial times. If you are facing foreclosure, speak with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help you.

Getting Out From Under A Co-Signed Student Loan

Bryan Fears — Fri, 06 Apr 2012 08:20:18 -0600

Private student loans are not guaranteed by the government. Since the 2005 bankruptcy amendments, private student loans are also not dischargeable in bankruptcy without showing how repaying the student loan will cause an "undue hardship" on the debtor. So how does a bankruptcy debtor get rid of an obligation for a co-signed private student loan?

When you co-sign for a student loan you agree to become "jointly and severally" indebted on the loan. If the borrower fails to pay the loan, you can be held 100% liable. Since private student loans are not backed by the government, the interest rate is often very high and collection efforts are very aggressive.

Many lenders, such as Sallie Mae, offer a co-signer release after the borrower establishes a successful payment history and meets credit criteria. Basically, once the borrower has shown a responsible credit history after graduation, the lender will release the co-signer. In the case of Sallie Mae, the borrower can apply to release the co-signer after making 12 consecutive monthly on-time principal and interest payments. The lender will also review the borrower's other credit obligations and income before releasing the co-signer.

Section 523(a)(8) of the federal Bannkruptcy Code establishes the undue hardship requirement for discharging student loans. Some courts have said that this section does not apply to co-signers of student loan debt. Additionally, Congress recently introduced legislation to permit the discharge of private student loans, so it may be possible to discharge the co-signer's obligation in the near future.

If you are the co-signer of a student loan debt and need bankruptcy relief, speak with an experienced attorney and discuss your situation. Regardless whether you are able to discharge the obligation, bankruptcy can afford temporary relief through the automatic stay. During your bankruptcy case you are able to avoid payment or establish a repayment schedule to pay the student loan debt. Talk to your bankruptcy attorney and see how the federal law can help you.

What Happens To Life Insurance During Bankruptcy?

Bryan Fears — Wed, 04 Apr 2012 07:53:15 -0600

Bankruptcy impacts all aspects of your finances. In many cases, the debtor's assets will include an insurance policy. What happens to the policy will depend on a number of factors.

The first factor is whether the insurance is a term life or whole life policy. Since a term life insurance policy does not mature until death, the policy does not have a cash value. It is not an asset of the bankruptcy estate. Any monthly premium must be listed in your bankruptcy schedules and the bankruptcy trustee may object to excessive payments for term life insurance.

A whole life insurance policy has a cash surrender value and is therefore a personal asset. Protecting your whole life insurance policy is accomplished by using personal exemptions. While in some cases the entire amount of the cash surrender value can be protected, in other cases only a portion is exempt. Your attorney can advise you on whether your whole life insurance policy is at risk and how to protect it from your creditors and the bankruptcy trustee.

If you receive proceeds from a life insurance policy during your bankruptcy, those proceeds become part of your bankruptcy estate. In fact, the bankruptcy laws state that life insurance proceeds that you become entitled to within 180 days of the date your bankruptcy is filed is property of your bankruptcy estate and can be used to pay your creditors. This 180 day rule applies regardless whether you have already received a discharge and your case has closed. Consequently, it is important to discuss any expected life insurance proceeds with your attorney.

It is your attorney's responsibility to protect life insurance assets. However, in order to protect this asset you must disclose the asset. Failure to inform the bankruptcy court of the asset could result in the denial or revocation of your discharge and the asset can be taken from you to pay your creditors. Don't risk concealing assets! Tell your attorney about your life insurance and get the full benefit of the bankruptcy laws.

What The Automatic Stay Can Do For You

Bryan Fears — Fri, 30 Mar 2012 09:54:06 -0600

When a bankruptcy case is filed, all of the debtor's assets, debts, income, and other financial aspects are placed under the jurisdiction of the United States Bankruptcy Court. The Bankruptcy Code imposes a temporary injunction against creditor collection immediately and automatically the moment the case is filed. This injunction is commonly refered to as the "automatic stay" and stops lawsuits, foreclosures, garnishments, and all collection activity during the case.

In all bankruptcy cases the automatic stay stops the commencement or continuation of a collection action against the debtor or the debtor's property. A Chapter 13 bankruptcy extends this protection to co debtors who are liable with the debtor on a consumer debt. This is to prevent indirect harassment of the debtor during the Chapter 13 repayment period.

The automatic stay applies to creditors and their representatives, like collection agents and attorneys. The stay prohibits:

* The commencement or continuation of a lawsuit
* Collection calls, letters, emails, etc.
* Repossession
* Foreclosure sales
* Wage garnishment or bank levies

The automatic stay will continue throughout the case until either the bankruptcy judge orders the stay modified; the debtor receives a discharge; or the item of property is no longer part of the bankruptcy estate. Consequently, the automatic stay injunction is only temporary and will eventually expire. If a debt is discharged, the bankruptcy court's discharge order creates a permanent injunction against collection.

Because of the enormous power and broad reach of the automatic stay, Congress has carved out a few exceptions. The automatic stay does not stop the following:

* Criminal proceedings
* A legal action to create or modify a family support order (like for child support)
* An attempt to collect against property not part of the bankruptcy estate
* A tax audit, demand for tax returns or assessment of tax. However, the collection of any pre-bankruptcy tax debt is still stayed during the case.

A creditor who willingly violates the automatic stay can be found in contempt of the court's order. The court may penalize the creditor and award actual damages, punitive damages, and attorney fees. Violations of the automatic stay often occur early in the bankruptcy case when the creditor is not aware of the bankruptcy filing. It is therefore important to immediately notify your creditors of your bankruptcy filing when there is a pending collection action (e.g. foreclosure, repossession, lawsuit, etc.)

The bankruptcy automatic stay will stop your creditors dead in their tracks. If you need this type of powerful relief relief, speak with an experienced bankruptcy attorney. Your attorney can explain how the federal bankruptcy laws can protect you and your property.

Tax Refunds Fuel Bankruptcy Filings

Bryan Fears — Wed, 28 Mar 2012 08:12:52 -0600

A recent study conducted by economists at Columbia University, the University of Chicago, and Washington University in St. Louis found that bankruptcy filings increase after tax refunds are received. According to this study, the total number of bankruptcy cases increased seven percent in 2008 after debtors received their tax refunds.

This research confirms what consumer bankruptcy attorneys have known for years. However, the economists concluded that many Americans could not afford to pay the bankruptcy fees without the tax refund money. Granted, in some cases the bankruptcy client is unable to pay bankruptcy fees and needs tax money for this purpose. However, in many cases the debtor's attorney will recommend delaying the bankruptcy filing until after the tax refund money has been received and spent.

When you file a bankruptcy case, all of your assets become part of a bankruptcy estate overseen by a bankruptcy trustee. If you are owed an income tax refund, the refund belongs to the bankruptcy estate. In many cases you are allowed to keep all or a portion of your anticipated tax refund by applying legal exemptions. However, if your tax refund amount exceeds your entitled exemptions, you may lose the excess amount. In these cases your attorney may advise you to delay filing until after your refund is received and spent.

The way your tax refund is spent can sometimes cause you headaches. For instance, paying off a loan to a family member just before filing is considered a "preference" payment. The bankruptcy trustee can "avoid the payment and ask for the money. Similarly, paying off a secured loan (like a car loan) may create an equity issue and you may lose the collateral. It is important to discuss the specifics of your bankruptcy case with your attorney before your receive and spend your tax refund check.

Tax refunds can be a big help if you are struggling with debt, and can provide options to help restructure your finances. Whether the money is used to help pay your bankruptcy fees, or used to catch up on rent or utilities, it is important to discuss your financial situation with your attorney.

Discharge Your Debts and Keep Your 401(k)

Bryan Fears — Mon, 26 Mar 2012 08:52:33 -0600

Have you ever heard the phrase “throwing good money after bad?” It means spending money on something that has little chance of success. When you get into financial trouble, the sensible thing is to fight to work your way out of trouble. Unfortunately, many people fail to recognize that point when it no longer makes good sense to continue throwing money at a problem. Some will eat through savings and retirement accounts hoping to delay the problem long enough for something good to happen. In the end the savings and retirement accounts are gone, and the debt is still there.

Bankruptcy is a legal process than can reorganize your finances and eliminate your overwhelming debt. In bankruptcy most retirement funds are protected, so if you’re facing a debt that you cannot pay, consider filing bankruptcy instead of draining your retirement accounts.

Whether a retirement account is protected first depends on if the account is “property of the bankruptcy estate.”. The U.S. Supreme Court in the case Paterson v. Shumate, 504 US 753 (1992), stated that retirement plans that contain an “anti-alienation clause” are not property of the bankruptcy estate pursuant to 11 USC § 541(c)(2). An “anti-alienation clause” prevents creditors (and the bankruptcy trustee) from seizing your retirement funds. Nearly all ERISA retirement plans and 401(k) accounts have an “anti-alienation clause.”

If your account does not have an “anti-alienation clause,” it may be exempt from creditor collection. Examples of retirement accounts that are exempt during bankruptcy include Roth IRAs, up to $1,171,650.00; and qualifying plans under sections 401, 403, 408, 414, 457, and 507(a) of the Internal Revenue Code. Other plans not listed above can be exempt during bankruptcy. In some cases the law on exempting retirement accounts is complicated and is changing rapidly. Consult your attorney for specific advice on your retirement account.

If you are overwhelmed by a debt problem that will not go away, speak with an experienced bankruptcy attorney before cashing out your retirement accounts. In many cases your debt can be discharged or paid over three to five years, and you can keep your retirement accounts. So consider bankruptcy to throw out the bad debt and keep your good money!