Posted by Kevin on February 22, 2012 under Bankruptcy Blog | 
I have spoken with a number of people who are in a tough economic situation because of the ongoing recession. The economy soured in 2008. They were laid off in 2009, and have been on unemployment since then. In the meanwhile, they have accumulated debt and fear legal action. Or have had judgments entered against them. Normally, the simple answer is that such a person would be a candidate for bankruptcy. But, there is an added wrinkle. The person filed Chapter 7 before and received a discharge. Can that person file bankruptcy again?
The law is that a person can file a Chapter 7 and receive a discharge but only if the second filing is 8 years after the first filing. How do you measure the 8 years? Say you filed Chapter 7 on August 1, 2004 and were discharged on January 15, 2005. When can you file Chapter 7 again and get a discharge? The answer is August 2, 2012. We measure the 8 years from filing date to filing date.
What if you accumulated new debt shortly after your first discharge or you fell behind on your mortgage.? Creditors are not going to wait 8 years. Well, you can file a Chapter 13 and obtain a discharge of debts if the Chapter 13 filing is 4 years after the Chapter 7 filing. Once again, the 4 years is measured from filing date to filing date.
These are the basic rules. In future blogs, we will explore situations where it may be advantageous to file a Chapter 13 within 4 years of filing a Chapter 7.
Posted by Kevin on February 13, 2012 under Bankruptcy Blog |
The New Bankruptcy Law (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) was adopted by Congress after a decade of lobbying by banks and the credit card industry. These groups argued that the Bankruptcy Code of 1978 allowed debtors who could afford to pay some of their debt off the hook by making Chapter 7 too available. They wanted more debtors to be required to file under Chapter 13 where they would have to make monthly payments for 36-60 months.
My position, which has been set forth in this blog and in an ezine article, is that the law is a failure, that Chapter 13 filings are down, and that the cost of bankruptcy has practically doubled. All you have to do is look at the yearly statistics compiled by the bankruptcy clerk in NJ. You will see that initially Chapter 13 filings were up, but now, the ratio of Chapter 13 to Chapter 7 filings is about the same as when BAPCPA was enacted. Costs are up because BAPCPA makes the lawyers do significantly more work, requires the debtor to take two dubious courses, and requires the debtor to pay for additional searches and credit reports to demonstrate due diligence.
Well, a recent study bears out my conclusions. A study conducted on over 11,000 bankruptcy cases from 90 judicial districts on cases filed from 2003 to 2009 indicated that costs had increased and distributions in Chapter 13 cases had gone down. Now, 11,000 cases is just a drop in the bucket since about 1,000,000 cases are being filed annually. But, it is a decent sample and goes beyond what is referred to as “anecdotal reporting”. The other thing the study found was that even though fees had increased, the lawyers doing Chapter 7’s and 13’s are being squeezed on fees by the courts and, at the same time, required to do more work. This is leading to more mistakes and more stress to both attorneys and their clients.
What does this all mean to a Bergen County resident who is considering filing bankruptcy. Well, on a philosophical level, it demonstrates that new may not mean better. Second, it should be an indication to the consumer that the process is not going to be particularly quick or cheap. Third, if you are content with getting it done on the cheap, beware, sometimes you do get what you pay for.
Posted by Kevin on January 29, 2012 under Bankruptcy Blog |
One on the advantages of Chapter 13 is that you can extend payments on long term debt. Section 1322 (b)(2) allows a debtor to modify the rights of holders of secured claims (collateralized claims) other than claims secured only by a security interest in the debtor’s principal residence. Section 1322 (b) (5) allows the debtor to cure defaults and make periodic payments during plan on debts where the last payment on the debt is due after the last payment under a plan.
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Posted by Kevin on January 16, 2012 under Bankruptcy Blog |
Now, that my seem like a harsh title. You may have spent an extended period on unemployment because of the prolonged economic downturn. While you were on unemployment, you used up all your savings and went into debt. You sent out hundreds of resumes and spent hours on the net looking for a job- even if it was for less than your prior jobs. Things are now looking up. You are back to work. But, now is the time to be wary.
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Posted by Kevin on January 15, 2012 under Bankruptcy Blog |
If you file a bankruptcy under Chapter 7 and the case has assets to distribute (not a no asset case) or you file a Chapter 13 case, creditors are required to file a proof of claim to participate in the bankruptcy.
The burden is on the creditor to file before the bar date and provide sufficient backup to justify the claim. In today’s marketplace, however, many claims are sold to hedge funds or other companies for pennies on the dollar. In many cases, these claim purchasers do not have any backup to support their allegation that they have a claim. If challenged, the claim can be expunged and the creditor is SOL.
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Posted by Kevin on January 9, 2012 under Bankruptcy Blog |
It appears that the economy is getting better. On a national level, bankruptcy filings went from 132,173 in October, 2010 to 106,255 in October 2011. This is a reduction of 19.6%. In New Jersey, bankruptcy filings went from 3,511 to 2,995 over the same period of time. That is a reduction of 14.7%. Not as good as the national numbers, but still pretty good.
Now, does that mean the economy is getting better, or does it mean that people are so bad off that they don’t have enough money to file bankruptcy?
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Posted by Kevin on January 2, 2012 under Bankruptcy Blog |
Credit card debt is almost always discharged in bankruptcy. That means that you do not have to pay the debt. If a creditor tries to collect a credit card debt while the bankruptcy is pending, that is called a violation of the automatic stay. If it happens after the bankruptcy discharge and close of the case, it is a violation of the bankruptcy injunction against collecting discharged debts.
But there is another way to get a debt “discharged”. That occurs when a credit card company does not sue you before the statute of limitations runs. This is sometimes referred to as “expired debt”. In NJ the statute of limitations is usually 6 years. In the past, if a credit card company did not sue before the statute of limitations ran, they were SOL.
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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.
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