Posted by Kevin on September 21, 2009 under Bankruptcy Blog | 
Bankruptcy is a legal process that lets you use the protection of the courts to deal with debts that you cannot pay. The right of Americans to file bankruptcy is found in the Constitution of the United States. I repeat- this is a constitutional right. The first bankruptcy code was enacted by Congress in 1800. The current bankruptcy law is known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or BAPCPA.
The Bankruptcy Code is divided into chapters. Consumers file bankruptcy under Chapter 7, Chapter 13, or, in rare cases, under Chapter 11. The Bankruptcy Code is federal law; therefore, bankruptcy cases are handled in federal court and not state court.
Prior to filing bankruptcy, a debtor must take a credit counseling course from a government approved agency. The course can be taken in person or on line, and takes about 90 minutes.
A debtor starts the bankruptcy process by filing a petition. Along with the petition, the debtor files schedules of assets and debts, and income and expenses. Under BAPCPA, the debtor is also required to file a means test to determine under what chapter he or she may file, and a certification indicating that the debtor completed the credit counseling course.
In Chapters 7 and 13, the case is assigned to a trustee who administers the case. In a Chapter 11, the debtor administers his or her own case unless the Court appoints a trustee for cause. There is a filing fee of $299 for a Chapter 7, $274 for a Chapter 13, and $1000 for a Chapter 11 case. In a Chapter 7 case, the filing fee can be waived if your income is below a certain level. In both Chapter 7 and 13, the filing fee can be paid in installments with court approval.
A husband and wife can file together. This is called a joint petition. There is only one filing fee involved in a joint petition. If the debtors are domestic partners or live together but are not married, each person must file a separate petition with a separate filing fee.
Once you file bankruptcy, creditors with some exceptions (just like everything else in life, there are exceptions) must stop all collection efforts. This is called the automatic stay, and is one of the big benefits that you get from filing bankruptcy. The automatic stay also means that if your wages are being garnished, it stops. It’s a big plus to pick up an extra $200-300 per paycheck.
Lot’s of people get nervous about filing bankruptcy because they think that they will have to appear in court before a Judge to explain why they are not paying their bills. Well, that does not happen. But, each debtor must appear before the trustee to answer questions at the first meeting of creditors (also called the 341(a) meeting). That’s the bad news. The good news is that the questions lasts only for a few minutes and you have your lawyer with you to protect your rights.
The primary object of bankruptcy is to wipe out your debts. This is called a discharge. In addition, you should be able to keep most, if not all, of your assets allowing you to get a fresh start following bankruptcy.
Individuals do not need to have an attorney to file bankruptcy (corporations do). Individuals can file on their own or utilize a bankruptcy petition preparer. But then again, you don’t need an electrician to rewire your house. Even for the most simple cases (which really are not that simple), legal counsel is recommended. If you cannot afford an attorney, you should contact your local legal aid office to see if you qualify for help.
Filing bankruptcy stays on your credit report for 10 years and does affect your credit score. Since most people who file bankruptcy were behind on payments, their credit score is already in the tank before the filing. So, the hit that you take may be less than expected. Believe it or not, many people show an increase in credit score within 1 year of discharge. Moreover, if you re-establish credit, and pay your bills on time, your credit rating will be substantially rehabilitated within 3-5 years.
For further information, please refer to the following videos
How do I file for Bankruptcy?
Do I need a Bankruptcy Attorney?
Introduction to Bankruptcy
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Posted by Kevin on August 17, 2009 under Bankruptcy Blog |
http://ezinearticles.com/?id=2712791
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Posted by Kevin on May 5, 2009 under Videos |
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Posted by Kevin on under Videos |
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Posted by Kevin on under Videos |
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Posted by Kevin on under Videos |
Watch this video, produced by the Office of the US Trustee, for more information about what you must do to file for bankruptcy.
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Posted by Kevin on under Videos |
You are allowed to represent yourself in bankruptcy, but the process is a complex one. Watch this video, produced by the Office of the US Trustee, for more information.
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Posted by Kevin on under Videos |
Bankruptcy clients need to be honest and complete in their dealings with the bankruptcy court. Watch this video, produced by the Office of the US Trustee, for more information.
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Posted by Kevin on October 22, 0201 under Bankruptcy Blog |
Chapter 7 puts you in the driver’s seat to either keep or surrender the collateral securing your business debts.
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As you close your business, you may have different intentions about what to do with the collateral securing any of your business loans and debts.
- If the collateral consists of business assets you no longer need, your biggest concern is with avoiding or at least minimizing liability after you surrender that collateral.
- If you need that collateral for your new employment or new self-employment, you hope to figure out a way–in the midst of all your financial pressures, to be able to keep paying for it.
- If you had to sign over your personal assets as collateral for your business debts, you want to have sensible ways either to keep such collateral or surrender it, avoiding bad financial consequences either way.
A Chapter 7 bankruptcy filing will help with each of these.
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Surrendering Business Collateral
Regardless what kind of debt you may have that is secured by any business collateral, the odds are very high that if you were to surrender the collateral to the creditor you would still personally owe a large debt. Whether a simple business equipment or business vehicle purchase, the lease of a business premises secured by the business assets on site, or a business bank loan secured by virtually all assets of the business, the collateral’s value at surrender is almost never enough to pay off the entire debt. Furthermore, as you’ve likely learned, you are required to personally sign or guarantee almost all small business credit obligations; efforts to shield your personal liability behind a business or corporate name seldom work.
So it’s good to know that a Chapter 7 bankruptcy almost always (other than in situations of fraud) discharges (forever writes off) any “deficiency balance”—the amount that you would contractually owe after the surrendered collateral is sold and credited to the account.
Keeping Business Collateral
If you are personally liable on a debt with collateral you want to keep, generally the creditor will allow you to keep it as long as the account is current when your Chapter 7 bankruptcy case is filed (or else quickly brought current) and you agree to remain legally liable on the debt. You would likely have to “reaffirm” the debt—formally exclude the debt from the general discharge of your debts. Whether that is wise depends on the value of the collateral compared to the balance on the debt, the importance of the collateral to you, and your confidence in being able to pay off the debt.
A Chapter 7 bankruptcy will help you bring the account current and then to pay it off, since it discharges all or most of your other debts, enabling you to focus your financial resources on keeping the business collateral you need.
Surrendering or Keeping Personal Collateral
Earlier, when you initially entered into credit obligations on behalf of your business, the creditor may have insisted on securing the debt with your personal assets, such as your vehicle, boat, or even a second mortgage on your home. After your business fails, your practical choices on such secured debts would be not very good. If you were willing to surrender the particular collateral, you would very likely owe a deficiency balance. So, in spite of having given up the collateral, you would still have to pay a part of the debt, and often a very large part of it. If you wanted to keep the personal collateral, you would have to catch up on your payments and then make those payments on time until you paid it off. But that would be either extremely difficult or impossible while burdened with all the rest of your business and personal debts.
But a Chapter 7 bankruptcy, as stated above, would enable you to surrender whatever collateral whose debt you felt was not worth paying for, and almost certainly (again, except in circumstances of fraud) without being required to pay any deficiency balance. And on debts with collateral you want to keep, you would much more likely be able to catch up with, make consistent payments on, and eventually pay off the secured debt if you are discharging your other debts through bankruptcy.
Posted by Kevin on August 2, 0201 under Bankruptcy Blog |
Chapter 13 gives you up to 5 years to catch up on your past-due mortgage. How does this actually work?
You get a bunch of tools to help you keep your home when you file a Chapter 13. But the most basic of those tools is this large chunk of time—up to 5 years—to “cure the arrearage.” If you are many thousands of dollars behind on your home mortgage, you need to fully understand how this tool works before investing a lot of time and money doing a Chapter 13 case. This blog, and the next one, should answer your most pressing questions about this.
Can you give a simple example how this works?
Let’s say your monthly mortgage payment is $1,500 and you’ve missed 10 payments, so you are $15,000 behind. If this $15,000 were paid over the full 60 months of a 5-year Chapter 13 plan, that would be $250 each month. ($15,000 divided by 60 = $250.)
If you filed a Chapter 7 case instead, you’d likely be given about 10 months or so to pay that arrearage—amounting to about an extra $1,500 per month. So you’d essentially have to pay double payments, impossible for most people. An extra $250 per month through Chapter 13 may seem hard enough, but this would almost always come with the elimination or significant reduction in what you are paying to other creditors.
(To keep the above calculation simple here, we’ve not included any other fees that could be added to the mortgage arrearage. In most cases the lender would be able to add some late charges, maybe its attorney fees, and perhaps some other costs. And the Chapter 13 trustee would also be entitled to a fee as well.)
If my Chapter 13 plan proposes to catch up my mortgage in 5 years does my mortgage lender have to go along with this?
Most of the time, yes. Although the lender may be able to attach conditions in its favor.
To use the above example, the lender would almost always have to accept the $250 per month arrangement, and give you an opportunity to make those payments under your Chapter 13 plan. But if the mortgage lender is aggressive, it may be able to impose some conditions, ones that are potentially dangerous for you. For example, the lender could require conditions stating what would happen if you failed to comply precisely with the plan’s payment terms—by not being on time with either the arrearage payment or the regular monthly mortgage payment. If you did not make these payments on time, you could be given a very short last chance to pay them or else the lender would be able to start (or re-start) foreclosure proceedings.
Another way of putting this—Chapter 13 gives you a relatively long time to catch up on your missed mortgage payments, but the system is not particularly patient with you if you are then not able to keep to that payment schedule.
What if, based on my income, I’m allowed to finish my plan in 3 years instead of 5?
You’re certainly not required to use the full 5 years, if you can pay off the arrearage and the rest of your Chapter 13 obligations (such as any taxes or back support) faster. Using the above example, $15,000 in missed mortgage payments spread over 36 months would require about $417 per month (again, excluding some likely extra fees), instead of $250. Generally, you would want to finish your Chapter 13 case faster if possible, but should keep your monthly payment low enough to make more likely that you will be able to complete it successfully. If your income qualifies you for a 3 year plan, you are generally allowed to have in a plan that lasts anywhere between 36 and 60 months, depending on what your budget allows.
The next blog will cover these remaining questions:
How are back property taxes handled?
What if the mortgage lender and I don’t agree on the amount of arrearage that’s owed?
What happens if my circumstances change and I decide not to keep the house after all during my Chapter 13 case?
Posted by Kevin on May 8, 0201 under Bankruptcy Blog |
Most of the time, you get to keep whatever you own when you file bankruptcy. These 10 truths tell you how it works.
Truth #1. Exemptions can be trickier than they seem to be: There is much more to protecting your assets than just matching assets to exemptions. Although some exemption categories are straightforward, important ones often are not. Some require knowing prior court decisions, and/or how the local trustees and judges are informally interpreting them.
Truth #2. Federal and state exemption schemes: Congress has left it up to each state whether to use a federal set of exemptions in the Bankruptcy Code for bankruptcies filed in that state, or instead a set of exemptions created by the state, OR even to allow each debtor to choose to use either the federal or state set of exemptions. In New Jersey, we generally employ the federal standards. Why? Because most of the NJ exemptions were instituted about 100 years ago and were never adjusted for inflation.
Truth #3. Which exemption scheme you must use can depend on how long you’ve lived in your present state: If you have not been “domiciled” in your current state for two full years before filing bankruptcy, you cannot use the set of exemptions available to residents of your state. You must use the state you were “domiciled” in during the 6-month period immediately before those two years. And if you were “domiciled” in more than one state during that 6-month period, you must use the exemptions available to the residents of the state where you were domiciled the longest during that 6-month period.
Truth #4. If you have assets that exceed the applicable exemptions, you stand a much better chance of protecting them with pre-bankruptcy planning: This is one of the most important reasons to meet with a competent attorney well before you are pushed into filing bankruptcy. What you do with your assets before filing bankruptcy can be scrutinized by the trustee and/or creditors afterwards, so you must get thorough legal advice beforehand. Doing so can make all the difference in protecting what is important to you.
Truth #5. Some trustees are more aggressive than others, and asset values are matters of opinion: Therefore, do not be surprised if a trustee challenges the value that you assign to an asset.
Truth #6. It is crucial to be thorough in listing assets AND exemptions: Failing to be thorough in listing your assets in your bankruptcy documents can jeopardize your entire case, and in extreme cases even lead to criminal charges against you by the U.S. attorney. Also, failing to list an asset which would have been exempt can result in losing the right to claim that exemption later, and then losing that asset.
Truth #7. Just because you have an asset that’s worth more than the exempt amount, doesn’t necessarily mean the trustee will take it: Trustees can decide not to pursue an asset that is either partly or completely not exempt because 1) the asset is not worth enough to justify the trustee’s efforts to collect or liquidate it; 2) the trustee is not willing to bear the costs to collect or liquidate it (such as the attorney fees needed to pursue a claim of the debtor); or 3) the asset’s detriments arguably outweigh its benefits (such as a parcel of land polluted by hazardous waste).
Truth #8. If you have an asset that you want to keep that is not exempt, you can usually “buy it back” from the trustee as long as you have the money to do so within a few months: It may seem like a bad deal to have to pay a Chapter 7 trustee to keep something you already own (such as a vehicle). But if the alternative is doing without a vehicle, or risking getting an unreliable one, or filing a 3-to-5 year Chapter 13 case to save your vehicle, buying it back from the trustee could be by far the best way to go.
Truth #9: You don’t ALWAYS want to avoid having the trustee claim an asset: Sometimes you may actually want the trustee to take a particular non-exempt asset or two. You may not need them—such as the leftover assets of a closed business—and may appreciate handing the liquation hassles over to the trustee. This could especially be true if the trustee will be paying a significant part of the proceeds of sale to a debt you want paid, such as taxes or back child support.
Truth #10. The difference in exemptions under Chapter 7 and 13: Although the set of exemptions used in filing under both chapters is the same, the exemptions are used for a different purpose. In Chapter 7, the exemptions determine whether you have any non-exempt assets for the trustee to take from you, and distribute their proceeds to your creditors. In Chapter 13, the exemptions are applied in the same way but for the purpose of imagining whether there are any non-exempt assets that a hypothetical Chapter 7 trustee would have taken, and if so paying the estimated amount to the creditors over the life of the Chapter 13 plan.
