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Personal Bankruptcy

Sunday, January 22, 2017

What is Pre-bankruptcy Credit Counseling?

Today, individuals who are seeking relief under Chapter 7 or Chapter 13 of the Bankruptcy Code are required to complete credit counseling with an agency approved by the U.S. Trustee's office. The purpose of pre-bankruptcy credit counseling is to determine if the debtor qualifies for bankruptcy or whether an informal payment plan is a better option.

In any event, credit counseling is necessary even if a payment plan is not feasible. Moreover, counseling must be completed within the 180-day period before the bankruptcy filing. Also, a certification of completion must be filed with the bankruptcy court within 15 days of the filing date. If the required course is not completed the bankruptcy petition will be dismissed.

The fact that participation in credit counseling is mandatory does that mean the debtor must agree with the counselor's recommendations, which are based on an assessment of the debtor's financial situation. In addition to informal payment plan, a credit counselor can also recommend a formal repayment plan under Chapter 13. This plan must be filed along with the other bankruptcy documents. On the other hand, the counselor may find that a Chapter 7 filing is the only option. Ultimately, the courts are inclined to agree with the agency's recommendations.

It is important to note that this is not the only counseling bankruptcy filers must agree to. If the bankruptcy petition is approved, it is also necessary to complete an approved course on consumer debt, before the debts are discharged. The goal of this course is to educate debtors about finances, including matters such as how to develop a budget, manage money, and use credit responsibly.

In the end, the decision to file for bankruptcy is difficult and one that requires serious consideration. While filing for personal bankruptcy can help a distressed debtor make a fresh start or work out a payment plan, bankruptcy can cause long lasting damage to his or her credit worthiness. Regardless, it is best to speak to an experienced bankruptcy attorney who can help explore all the options.

 


Monday, December 26, 2016

What Happens to My Car When I File Chapter 7?

If an individual filing for Chapter 7 bankruptcy owns an automobile, that vehicle may become the property of the bankruptcy estate used for the purpose of making creditors whole. If the car has a lean on it from the lending institution, the loan must be reaffirmed or redeemed, or the vehicle must be surrendered.  If the loan is reaffirmed, the individual who took out the loan must sign a contract agreeing to continue making payments to the lender. The car loan will be unaffected by the bankruptcy, and the debt will not be discharged. An individual in bankruptcy may use the opportunity to renegotiate the terms of the loan for his or her benefit, though the new agreement must be approved by the bankruptcy court. 

When an individual chooses to satisfy a car loan through redemption, that person must work with the lender to determine the current value of the automobile. The individual must pay the lender that amount, thereby settling the debt for less than its full value. If a person is not able to meet either of these sets of conditions, the car must be surrendered to the bankruptcy estate and the debt associated with it will be discharged. The creditor cannot take the car until after the bankruptcy is completed unless it files a motion with the court to repossess the vehicle earlier.

If there is no loan on the car, a bankruptcy petitioner still has options available. Both federal and state rules allow individuals to exempt personal possessions and motor vehicles up to a maximum value from the bankruptcy estate. If a bankruptcy petitioner is able to declare the entire value off the car as exempt or if the non-exempt value is negligible, the bankruptcy trustee will allow the petitioner to keep the car. If an automobile in bankruptcy is worth significantly more than the amount allowed by the exemption, the petitioner may pay the trustee the balance between the value of the car and the exempt portion. Althernatively, the petitioner may surrender the automobile to the bankruptcy trustee who will sell it and return the exempt portion to the petitioner. In any case, the petitioner has the right to decide what should happen to his or her car.


Monday, November 28, 2016

Common Bankruptcy Terms

Bankruptcy is designed to protect individuals, small businesses, and corporations from being overwhelmed by debt.  The process involves reorganization and restructuring of debt so that a significant portion of it is discharged ("forgiven"), and the remainder is repaid at a lower rate. Bankruptcy is designed to enable an individual or company to continue to function and prevent ongoing harassment from creditors. The two basic types of bankruptcy are liquidation and reorganization.

Discharge in Bankruptcy

There are several types of discharge in bankruptcy, but not all debts are able to be discharged.  A secured creditor may enforce a lien to recover property secured by a particular loan, such as an automobile or a house. If the debtor wants to retain such property, payments must be paid to these creditors. Also, while many debts can be discharged, and the debtor who declares bankruptcy can be protected from harassment by most creditors, there are other debts that are deemed to be  be non-dischargeable, including,  taxes, penalties, fines, college loans, and child support and alimony payments.

Types of Bankruptcy

The various types of bankruptcy are named for the chapters of the U.S. Bankruptcy Code in which they are defined. . The two most common forms of bankruptcy filed in the U.S. are Chapter 7 and Chapter 13, and bankruptcies under these chapters are typically filed by individuals or couples. On the other hand, a Chapter 11 bankruptcy is usually filed by businesses.

Chapter 7 bankruptcy is also referred to as a liquidation  because under this process the bankruptcy trustee can takes charge of, and sells, some of debtor's property to pay back a portion of the accumulated debt.  Chapter 7 bankruptcy is designed to relieve  the debtor of unsecured debts, such as credit card and medical bills. In order to qualify for Chapter 7 bankruptcy, however, the debtor must have little or no disposable income. This means that if you earn too much money, you cannot apply for this type of protection.  Chapter 7 bankruptcy, therefore, is usually helpful to low income debtors with few assets, and typically discharges debts within 3 to 5 months.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, unlike Chapter 7, is a form of reorganization of debt. This filing is  designed to assist debtors with regular income who can repay at least some portion of their debts through a structured repayment plan. While many debtors, because of their elevated income or asset level, find it necessary to file Chapter 13, there are also other advantages  such as the ability to catch up on delinquent mortgage payments. Debtors who file for Chapter 13 are permitted to keep all of their assets as long as they make structured payments to pay off their non-dischargeable debts.  Chapter 13 bankruptcy plans are usually completed within a period of 3 to 5 years.

Although the vast majority of debtors seeking individual relief from debt file for Chapter 7 or Chapter 13, there are a number of other types of filings used for various purposes. The most common of these is Chapter 11 bankruptcy.

Chapter 11 Bankruptcy isanother type of bankruptcy reorganization available to individuals, corporations and partnerships. Where Chapter 13 bankruptcy limits the amount of debt that can discharged, chapter 11 does not. Therefore, Chapter 13 is typically used by businesses undergoing financial struggles and looking to reorganize. Because it is fairly cumbersome for individuals -- being both expensive and time-consuming -- Chapter 11 is generally only used by individuals with debt levels too high for Chapter 13 filing, or by individuals with extraordinarily high assets or complicated finances.

There are a number of other chapters of bankruptcy, such as those applying to family farms or fisheries, or designed to relieve municipalities or school districts of overwhelming debt, but these do not concern the typical individual. If you find yourself burdened with debt that cannot be repaid, you should consult a bankruptcy attorney promptly to discuss your best options.


Monday, October 17, 2016

6 Wildly Successful People who have Declared Bankruptcy

Walt Disney: Before Walt Disney became a household name, he started a company called Laugh-o-Gram with a used camera in Kansas City. His plan was to make advertisements and cartoons. When money got tight and his overhead costs were too expensive to maintain, Disney declared bankruptcy and moved to Hollywood. Five years later, he created Mickey Mouse.

Donald Trump: Donald Trump has never filed for personal bankruptcy, but the casino and hotel empire on which he has built his fortune has declared bankruptcy four times. The Trump Taj Mahal declared bankruptcy in 1991, and it worked so well that Trump Castle Associates followed suit in 1992. In 2004 Trump Hotel and Casino Resorts filed bankruptcy, and, most recently, Trump Entertainment resorts filed bankruptcy in 2009 after it missed a $53.1 million bond payment. He severed his ties with the remaining casinos in Atlantic City, including two that declared bankruptcy in 2014. Trump has no regrets for these bankruptcies saying, "I have used the laws of this country ... the [bankruptcy] chapter laws, to do a great job for my company, for myself, for my employees, for my family,"

Larry King: Larry King filed for bankruptcy in 1978 with $352,000.00 in debt. He had been struggling to find work as a journalist for years. Luckily, that same year, CNN offered him a job as a late night talk radio host in Washington DC. Later, this show became Larry King Live, which ran for 25 years. He is thought to be worth $150 million.

Cyndi Lauper: In 1981, Cyndi Lauper was working in a Japanese restaurant and in retail trying to make ends meet while waiting for her music career to take off. It took a little longer than she could manage, so she declared bankruptcy, two years before she released her breakout album, “She’s so Unusual.” Her net worth is now approximately $30,000,000.00.

Milton Hershey: Milton Hershey was always better at making candy than he was at running a business. His first two attempts at a candy shop went bankrupt, one in Philadelphia, and one in New York City. He sold his third company for a million dollars in 1900, and went on to create the recipe for milk chocolate for which his fourth company was so well known.

Henry Ford: Henry Ford’s first attempt at car manufacturing was called the Detroit Automobile Company. In two years, the company only produced twenty cars and went bankrupt. The company changed its name to the Henry Ford Company before its founder left to create the Ford Motor Company.  The reorganization helped the Henry Ford Company tremendously which still exists and operates as Cadillac Automobile Company.


Monday, September 12, 2016

What should I do if a creditor violates the automatic stay?


Immediately upon the filing of a Bankruptcy petition, a petitioner is granted the protection of an automatic stay. This means that creditors must cease all collection activity, including repossession, garnishment, law suits, phone calls, letters, or any other attempts to collect on the debt. If they fail to do so, they are in violation of the stay.

If a creditor attempts to collect a debt after the filing of a Bankruptcy petition, the Petitioner should let the creditor know that a claim has been filed. It may have been an honest error and the creditor may stop attempts to collect and correct any actions taken after being told that a bankruptcy was filed.
Read more . . .


Monday, August 29, 2016

If I’m planning on filing bankruptcy, can I take on more debt?

It seems like a perfect plan. If a consumer is about to declare bankruptcy to discharge all or most of his or her debts, why wouldn’t that consumer try to increase his or her credit card debt as much as possible to maximize the benefit granted by bankruptcy protection? The answer is simple.  It won’t work.

Generally speaking, credit card debts are dischargeable in bankruptcy. However, a bankruptcy trustee examines a consumers spending in the months leading up to a bankruptcy petition. If excessive amounts are charged to a credit card prior to the claim being filed, the credit card company may file an adverse proceeding challenging the bankruptcy petition and preventing the debt from being discharged. If luxury items were purchased, or items not necessary for the support and maintenance of the debtor, those charges might not be discharged. Examples of items that might be considered luxury purchases by the court include vacations, expensive clothing or cosmetics, additional vehicles, household furnishings, jewelry, artwork, magazine subscriptions, cameras, and computers. Any charge of more than $650.00 will set off red flags, both with the bankruptcy trustee and the creditor.

If cash advances were taken out in the months immediately preceding the petition, the creditor may sue the consumer for fraud. If the cash advance is for more than $925.00, there is a presumption that the debt is not dischargeable.  If a consumer makes payments on the debt prior to declaring bankruptcy, it can help to demonstrate that he or she had intended to repay the debt. Showing that an unexpected life event occurred making the bankruptcy unavoidable can also help a creditor to prove that he or she had no intention to defraud creditors.

If a consumer makes expensive purchases immediately before declaring bankruptcy, it is counter-productive. The debts will not be discharged, meaning that the consumer will still be in debt, even after having completed all the requirements of the Bankruptcy Court. The goods and services purchased will not be worth the debt that remains after the bankruptcy is completed effectively ruining the consumer’s credit without a benefit. The entire Bankruptcy Petition might be dismissed for the attempted fraud. Participating in suspicious spending that might provoke a challenge from a creditor is a bad idea. As inviting as it might seem to load up on debt before seeking a discharge, the system is designed to prevent consumers from doing so.

 


Monday, July 25, 2016

Common reasons why a Bankruptcy Petition might be dismissed

Bankruptcy Fraud: It cannot be overstated how important it is to tell the truth and accurately disclose all income assets, debts, and other required information when preparing a Bankruptcy Petition. If a Court finds that a Petitioner committed a willful fraud, the Petition will likely be dismissed. The Court may also impose criminal penalties including fines and incarceration.

  1. Failing the Means Test: In order to be granted a discharge under Chapter 7 Bankruptcy protection a Petitioner’s disposable income must be low enough to pass the means test. The Court compares the Petitioner’s average income for the six month period before filing and compares it to the state median for a similar household. If the Petitioner’s income is below the median, than he or she qualifies automatically. However, if the Petitioner makes more than half median income, the Court must examine the Petitioner’s expenses to determine whether he or she qualifies for a discharge. If the means test is failed, the Trustee will likely offer the Petitioner the opportunity to convert the Bankruptcy to a Chapter 13 reorganization instead of a discharge before dismissing the Petition altogether.

  2. Failure to Complete Mandatory Credit Counseling Courses: Every Bankruptcy Petitioner is required to complete two credit counseling courses as a part of the Bankruptcy proceeding. The course can be completed online or over the phone. After the course is taken, a certificate proving it was completed must be filed with the Court.  If a Petitioner is not in compliance with this procedure, the case will be dismissed by the Trustee.

  3. Not Paying Filing Fees: If a Petitioner is indigent, he or she may apply for a waiver of Court fees, but unless a waiver is granted, a case will be dismissed for failure to pay filing fees., you may apply for a waiver of your court fees. The court will take into account your income and expenses when granting or denying your waiver. Unless you receive a waiver, the court will dismiss your case if you fail to pay the required filing fees.

  4. Improperly Completing Forms or Failure to Submit all Required Documents: It is important to take time and ensure that all paperwork filed with the Court is completed properly. If any financial disclosures, forms, schedules, or other documents required by the court are improperly completed or omitted, or if any information is missing, a bankruptcy court might dismiss the Petition.  If the trustee requests pay stubs, tax returns, or other documents to verify the information in the Petition, it would behoove the petitioner to get that documentation to the Trustee as quickly as possible.

  5. Not Attending the Meeting of Creditors: Early on in the Bankruptcy process, the Trustee holds a meeting of creditors to allow a Petitioner’s creditors to appear and ask questions under oath about the papers submitted. This process usually lasts only a few minutes and creditors rarely appear, but if a Petitioner fails to appear, the Trustee will likely dismiss his or her claim.

  6. Failing to Make Chapter 13 Plan Payments: Reorganization plans under Chapter 13 of the Bankruptcy code are designed to allow Petitioners some breathing room to pay off their debts with more reasonable monthly payments. However, the Petitioner must act in good faith when preparing a repayment plan and afterwards, by actually making the payments. If the payments are not made without a good reason, the Bankruptcy will be dismissed.

Monday, June 27, 2016

Why Might I be Denied Bankruptcy Protection?

While there are certain debts that cannot be discharged through bankruptcy proceedings, such as college loans or child support payments, for most people bankruptcy is available as a protection from overwhelming debt. Nonetheless, certain circumstances can result in your being denied the entire discharge, leaving you responsible for all outstanding debt. Alarming as this may sound, as long as you have been open and honest with your creditors, you should have nothing to worry about.

Reasons for Denial of Chapter 7 Bankruptcy Discharge

The primary reasons you may be denied Chapter 7 bankruptcy discharge are all based on dishonest and/or illegal behavior. These reasons include:

Attempt to Defraud

If you have transferred, destroyed or concealed property within a year before, or at any time after, filing for bankruptcy, you may be accused of attempt to defraud and lose your right to file for bankruptcy protection.  For this reason, it is extremely important that you be completely honest with your attorney about any transactions involving property that may have occurred, even if such transactions took place without any intent to defraud.

 

Lack of Sufficient Information

Any failure to maintain sufficient records about your finances during the period in question may result in your being accused of destroying, mutilating, or falsifying pertinent data. You have to be able to back up your assertions with proper recorded information.

Lying

The point has already been made that honesty is not only the best, but the only policy that will help you file for bankruptcy. When you file for bankruptcy protection, you take an oath that everything in your statement is true and accurate. You are therefore open to perjury charges if you are not completely honest with your attorney and with the court.

Inexplicable Loss of Assets

You are responsible for your own financial record-keeping and will be held accountable if you cannot explain to the satisfaction of the court where certain assets have gone. 

Refusal to Comply with a Court Order 

If the debtor fails to obey a lawful court order during the proceedings, he or she has forfeited the right to bankruptcy protection.

 Failure to Take an Instructional Course on Debt Management 

Under the bankruptcy code, debtors must take two instructional courses, one in credit counseling before the proceedings can begin, and a second one in financial management that must be completed during the case. The second one must be completed as a prerequisite for getting debt discharged through the bankruptcy proceeding. 

How to Avoid Being Denied Bankruptcy Protection

It is always best to work with a skilled and experienced attorney when you are preparing to file for bankruptcy. Having an attorney who specializes in bankruptcy proceedings is important because such a professional will not only help you to achieve the most effective resolution of your debt problem, but will guide you through the procedure with as little turmoil as possible.  It is crucial that you choose an attorney with whom you have a personal rapport, one you can trust implicitly and with whom you can be completely honest. 


Monday, May 30, 2016

What Happens If I Cannot Keep up with My Chapter 13 Repayment Plan?

If a bankruptcy petitioner in Chapter 13 fails to make payments according to the schedule mandated in his or her repayment plan, creditors can ask the court for relief from the automatic stay, allowing them to resume collection activities including foreclosure and repossession actions. If the court has not yet confirmed the bankruptcy repayment plan, it is unlikely to do so if a petitioner is unable to keep up with the plan prior to confirmation. A bankruptcy judge may dismiss a petitioner’s case for failing to comply with the terms of the repayment plan, terminating the case without discharging (forgiving) any debt, frustrating the benefit of filing for bankruptcy relief in the first place.

A petitioner who fails to make Chapter 13 payments usually does so because of a temporary financial emergency. Regardless of whether a lost job or a bout with illness is to blame, a court will allow a petitioner to explain the reason for default and to request time to cure the default. Most courts will offer a petitioner the opportunity to catch up to their payments before dismissing the bankruptcy petition. 

If the reason the original bankruptcy plan was untenable is because the petitioner suffered a permanent change in circumstances, the bankruptcy court may be willing to modify the bankruptcy plan. A petitioner may also request a hardship discharge, which would discharge the unpaid portion of the debt even though the repayment plan has not been completed. A hardship discharge will not affect priority debts, such as child support arrears, that cannot be discharged. Depending on the situation, it may be prudent to ask the court to convert the bankruptcy petition to a Chapter 7. If a court refuses to allow any of these options, and dismisses the bankruptcy petition anyway, a petitioner may refile the claim as a Chapter 13 once his or her financial situation improves. The court may prohibit refiling of a claim for six months, however, if it finds a petitioner has disobeyed court orders, and may limit the automatic stay in the second case to 30 days if filed within a year of the previous petition.


Monday, April 25, 2016

Can bankruptcy save my home from foreclosure?

Bankruptcy can be a useful tool to protect a secured asset, such as a home, from foreclosure or repossession. First, in the case of a chapter 13 bankruptcy, an automatic stay will go into effect, which requires that debt owners cease all collection activity and puts a hold on any legal proceedings concerning the collection of a debt.  The arrearages on the mortgage, that is any late payments accrued, can be consolidated and included in a repayment plan.  This reduces the amount on the arrearages to a manageable payment, allowing them to be paid off within the time limit set by the bankruptcy court, usually three to five years.  In order for this option to be viable, a petitioner must have enough income to make the existing mortgage payments on a monthly basis.

If a secured asset is underwater, that is, if its value is less than the amount owed, a chapter 13 bankruptcy can strip second and third mortgages of their secured status. That means that, though the debts may not be discharged, they will not be tied to the house, and they become last in line to be repaid. Similarly, if a first mortgage is greater than the value of the home to which it is attached, the amount of the mortgage above the value of the home may be separated from the mortgage, stripped of its secured status, and incorporated into the repayment plan.

In a Chapter 7 bankruptcy, a bankruptcy trustee may order assets liquidated to repay unsecured creditors. This means that, if a home has sufficient equity, the trustee may force the sale of a home in order to create money to pay off debts that would otherwise be discharged. If a homeowner is behind on payments, Chapter 7 does not provide a mechanism to catch up as Chapter 13 does, although it does institute an automatic stay on foreclosure proceedings.

There are other options besides bankruptcy to save your home from foreclosure. Loan modifications are often available to those who qualify under the lender’s criteria. Government programs also exist to assist homeowners. A bankruptcy attorney can help determine the best course of action in each individual situation. 


Monday, March 21, 2016

How to Rebuild Credit After Bankruptcy

Bankruptcy is often a last resort for an individual struggling with keeping current on rent payments. This does not mean that bankruptcy is the end of a person’s financial life. Quite the opposite; it is a new beginning. It takes 7 to 10 years for a bankruptcy to be erased from a person’s credit report. In the meantime, it is important to take steps to rebuild credit.

The most important thing that a consumer can do to improve his or her credit is to practice responsible spending habits. Maintaining a budget and making sure that all monthly payments are made on time is crucial to re-establishing credit worthiness. It takes 7 years for a delinquent payment reported to a credit agency to be removed from a credit report, so it takes consistent payments over that long period of time to clear a credit report of all delinquencies. People should invest in saving after their bankruptcy to avoid falling into dire straits again in the future.

It is also important to check your credit report for any problems or mistakes. If a debt had been discharged and it still appears on your credit report as delinquent, it may be a violation of the Fair Credit Reporting Act. Errors or mistakes can damage your credit even further and should be disputed. Credit reports are available annually for free from each of the credit reporting agencies, TransUnion, Experian, and Equifax.

In order to re-establish credit after a bankruptcy, a consumer might need to apply for a secured credit card. This credit card requires a deposit of money with a bank as a guarantee of payment. Usually, this security collects interest. It also helps to open a new checking or savings account. After a few months of responsible spending, applications for credit cards may come in. Obtaining a second credit card will improve a consumer’s credit rating, but it is important to pick a card that will not tempt the holder to splurge unnecessarily. A gas card can help an individual repair his or her credit while effectively preventing bad shopping habits common with other cards. The balances on the cards should be paid off in full every month and the cards should not be closed. Together, payment history and total amount owed against available credit make up 65 percent of an individual’s credit score.


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