Posted by Kevin on December 11, 2011 under Bankruptcy Blog | 
Every year about this time, my bankruptcy practice slows down. Why? People are focused on the holidays and buying presents. Then, in January and February, I get lots of calls for consultation. Sort of like a last hurrah.
Well my advice is that if you really want to file bankruptcy in January or February, then do not use your credit cards during the holiday season.
When you file bankruptcy, you want to get a discharge from your debts. There are exceptions to discharge, however. One exception is exceptions is for consumer debts totaling over $500 to a single creditor for luxury goods or services incurred with 90 days of filing. Another is for cash advances totaling over $750 obtained within 70 days of filing. For these situation, the presumption is that if you bought the HD tv or took the cash advance, you do not get the discharge.
In addition, there is the catch all that if you obtain credit by false pretenses, then it usually is not dischargeable. This could mean that you ran up a credit card and then filed. The court takes the position that the debtor had no intention of re-paying the debt.
A word to the wise.
Posted by Kevin on October 5, 2011 under Bankruptcy Blog |
When the Code was changed back in the late 1970’s, a debtor could discharge a student loan if there was a hardship situation or if loan payments were due more than 5 years before the filing. Now, a debtor can only get a hardship discharge. I tell all my clients that you have to be in pretty bad shape with little or no prospects for a decent living to get a hardship discharge . Even then, it was iffy.
Read more of this article »
Posted by Kevin on September 4, 2011 under Bankruptcy Blog |
Now, this is a little advanced. You open your mail in Hackensack and have been hit with a Notice of Federal Tax Lien. Not good because it applies to all your property and, more importantly, the collection agent is the IRS. The one thing that you do not want is for the IRS to start levying on your property to satisfy the lien. That will ruin your day or year, for that matter.
Read more of this article »
Posted by Kevin on August 22, 2011 under Bankruptcy Blog |
Bankruptcy has its own language- sometimes quite colorful. We have cram downs and strip offs. Long before we talked about mortgages being underwater, underwater was a term used frequently in bankruptcy to determine whether a claim was secured or not.
Read more of this article »
Posted by Kevin on August 13, 2011 under Bankruptcy Blog |
The object of a consumer bankruptcy is to get a discharge of your debts. That means that you do not have to pay them back. The Code, however, has certain exceptions to discharge. Among them is a debt for willful and malicious injury by the debtor to another person or the property of another person or entity.
Read more of this article »
Posted by Kevin on August 8, 2011 under Bankruptcy Blog |
Many middle class families find themselves in economic distress when the kids go to college. Well, unfortunately, the bankruptcy code does not help those families. It basically says that if you have to choose between paying your creditors and Junior’s tuition, Junior is SOL.
Read more of this article »
Posted by Kevin on July 20, 2011 under Bankruptcy Blog |
Under the 2005 Code know as BAPCPA, a consumer debtor must pass the means test to qualify for Chapter 7 bankruptcy. Chapter 7 allows a debtor to make no payments to unsecured creditors while keeping all exempt property.
What most consumers believe is that if you are under the median income for your area , you pass the means test, and you get to file under Chapter 7. Yes and no.
Read more of this article »
Posted by Kevin on July 16, 2011 under Bankruptcy Blog |
The 2005 Act, BAPCPA, requires that a debtor submit to a means test to determine eligibility for Chapter 7. The means test was based on an IRS test to determine what part of income a taxpayer can pay on back taxes.
The means test has a two part test for motor vehicles. The first is an ownership allowance. The second is an operations allowance. The ownership allowance gives the debtor a $496 deduction per vehicle per month no matter what you owe on it. If your monthly payment is $200- you get $496. If your monthly payment is $600- you get $496. But what happens if you have your vehicle paid off?
Read more of this article »
Posted by Kevin on July 9, 2011 under Bankruptcy Blog |
The main purpose of this blog (in fact, this whole website) is to give you, the consumer, information so that you may make an informed decision concerning whether to file bankruptcy. Your entire financial future can be riding on this decision.
From time to time, I review the posts to see that they are covering a wide range of topics in bankruptcy. I did that this morning. Then, I started to think back why I wanted to get involved in bankruptcy law in the first place. Besides helping people, I found bankruptcy to be more complex that I had imaged, was ever changing (2 Codes and numerous revisions over the years), and allowed me to be a deal negotiator and a litigator (trial lawyer) at the same time.
Read more of this article »
Posted by Kevin on July 8, 2011 under Bankruptcy Blog |
In a Chapter 13, the debtor is limited to $360,475 of unsecured debt. Unsecured debt is debt where there is no collateral. Like credit card debt.
However, in a Chapter 13, a debtor can strip off otherwise secured debt that is completely underwater. For example, if your house is worth $300,000 and the first mortgage is for $350,000 and the second mortgage is for $100,000, the second mortgage is totally unsecured and could be “stripped off”. When it is stripped off, it becomes unsecured debt and must be added to other unsecured debt.
Read more of this article »
Posted by Kevin on June 29, 2011 under Bankruptcy Blog |
The Dodgers filed Chapter 11 in the Bankruptcy Court in Delaware. The case has a lot of intrigue. An expensive and messy divorce involving the owners, allegations of misuse of funds by the baseball commissioner, court maneuvers, hedge funds, you name it. But the one thing that caught my eye was a list of creditors. It seems that the Dodgers owe players, like Manny Ramirez, millions of dollars in deferred compensation.
So, big deal. A contract is a contract, right? Well, maybe not. The bankruptcy code allows a debtor to reject an executory contract. That term is not defined in the Bankruptcy Code, and there has been much litigation, both in bankruptcy court and other courts, as to what constitutes an executory contract. Generally speaking, an executory contract is a contract where there has not been complete performance- one party or both still have to do something under the contract.
Read more of this article »
Posted by Kevin on June 22, 2011 under Bankruptcy Blog |
In a Chapter 7 case, at the meeting of creditors, the trustee almost always asks whether you are going to receive an inheritance within 180 days. If so, the trustee has a right to claw back that inheritance less any exemption that you might have.
Read more of this article »
Posted by Kevin on June 21, 2011 under Bankruptcy Blog |
This is the third blog on the automatic stay.
By now, it should be sinking in that the automatic stay is a powerful tool which can help a debtor by giving him or her some breathing room to move forward.
But the automatic stay only applies to the property that is in the bankruptcy estate.
Read more of this article »
Posted by Kevin on June 3, 2011 under Bankruptcy Blog |
In a previous post, I reviewed a case in the Eastern District of NY which extended the automatic stay to include actions against an separate, non-filing entity where the debtor is a guarantor. Stay applied.
However, in a recent PA bankruptcy case, the court found that the automatic stay was not violated. In that case, A sued B (eventual debtor), C & D before A filed bankruptcy claiming that A fraudulently transferred property to B & C. A fraudulent transfer occurs when a person owes creditors and owns property (usually real estate). The debtor transfers the property for less than fair market value to a third party (usually a friend or relative) so that the creditors cannot get their hands on the property once the creditor has obtained a judgment.
Read more of this article »
Posted by Kevin on May 23, 2011 under Bankruptcy Blog |
It is the law that a bankruptcy filing acts as an automatic stay of most collection efforts against the debtor. But how broad is that protection? In a recent case in the Eastern District of New York (In re: Ebadi), the stay went beyond property owned by the debtor. The debtor was a shareholder of CBC Media Realty. CBC owned a commercial building which it used as collateral for a loan. The debtor personally guaranteed the loan. CBC defaulted on the loan and the creditor obtained a foreclosure judgment. The debtor was named as a defendant in the foreclosure case. Just prior to the sale, the debtor filed a Chapter 13 and notified the foreclosing creditor of the filing. The creditor went ahead with the sale anyway.
Read more of this article »
Posted by Kevin on May 18, 2011 under Bankruptcy Blog |
Back in January, 2011, I posted a blog concerning the surrender of a property. On the petition, the debtor must disclose what it intends to do with certain property. You can state that you intend to surrender the property to a secured creditor (like your lender). But, the catch is that the lender does not have to take back the property.
In a recent Chapter 7 case in Maine, HSBC filed a foreclosure action. The borrower filed a Chapter 7 petition and stated its intention to surrender the property. HSBC sent a letter to the debtor saying that it was dropping the foreclosure action but stated that the debtor still owed HSBC pursuant to the Loan Agreement. After two letters from the debtor’s attorney, HSBC acknowledged that the debt was discharged but refused to foreclose and refused to release the mortgage lien without payment.
Read more of this article »
Posted by Kevin on May 10, 2011 under Bankruptcy Blog |
The object of a bankruptcy is to get a discharge of your debts. The Code, however, has delineated certain types of debts which are not dischargeable; for example, certain taxes, claims based on a DWI, etc. One of the exceptions to discharge is for debts based on willful and malicious injury by the debtor to another entity or to the property of another entity. The usual example for this type of exception to discharge would be if the debtor beat up and injured someone who then got a judgment. However, this exception to discharge does way beyond the obvious. It can include an intentional breach of contract.
Read more of this article »
Posted by Kevin on May 7, 2011 under Bankruptcy Blog |
In NJ, year ending December, 2009 indicates 36420 bankruptcies. Year ending December, 2010 indicates 41366 bankruptcies. This was up 14%. In addition, Chapter 7 filed 3.3 times more than Chapter 13. Remember, we told you that the purpose of the new law, BAPCPA, was to make more people file under Chapter 13. It failed.
Note the the American Bankruptcy Institute indicated that bankruptcies in the US were down 6% from the first quarter of 2010 to the first quarter of 2011. That trend is not happening in NJ which bankruptcies are even or slightly higher.
Posted by Kevin on April 27, 2011 under Bankruptcy Blog |
The means test, as we have stated before, serves as a gatekeeper to who can file under Chapter 7. If you are below the median income based on household size for your region, then you have passed. If you are above median, the next step is to compare your average income for the previous six months against expenses. For expenses, the means test looks at national expenses (food, auto), regional expenses (housing) and actual expenses.
One of the key deductions involves automobiles. The means test has two expense lines which refer to automobiles: ownership costs and operating costs. The ownership cost is a generous $490+ per month which can be applied to two vehicles.
Read more of this article »
Posted by Kevin on February 22, 2011 under Bankruptcy Blog |
Of course, they are related. People who cannot pay their mortgages are likely to be people who are having trouble paying other debt, like credit cards.
But, I am talking about strategy. Some of the same arguments that are being used by the cutting edge foreclosure defense attorneys were actually used first by bankruptcy attorneys.
Read more of this article »
