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Get a New Financial Start with this New Year

Posted by Kevin on January 21, 2018 under Bankruptcy Blog | Comments are off for this article

The beginning of a year is a good time to take stock of yourself.  People routinely make New Year’s resolutions about diet, exercise, going back to school.

Are your debts getting out of control?  Worried about harassing telephone calls from debt collectors?  Getting sued?  Wages being garnished?  Now is the right time to do some financial assessment.  Bankruptcy may be the right tool for you to put your financial problems in the rear view mirror.

A New Start with Chapter 7

With Chapter 7 “straight bankruptcy” you get a new start very fast. As soon as your case is filed most of your creditors can’t collect their debts against you. They can’t go after your money or your property. Then usually about 3-4 months later the bankruptcy court enters an order discharging your debts. As quick as that, you become debt-free. The only exceptions would possibly be debts you want to keep and special debts you can’t discharge under the Bankruptcy Code.. Debts you might want to keep could include a vehicle loan or home mortgage. Debts you can’t discharge include recent income taxes, unpaid child and spousal support, and criminal fines.

A New Start with Chapter 13

With Chapter 13 “adjustment of debts” the new start is more nuanced, but sometimes much better.

Just as with Chapter 7 your creditors can’t take any action to collect their debts as of the moment you file your case. But under Chapter 13 that protection from creditors lasts not just a few months but for years. You finish your Chapter 13 payment plan in  3 to 5 years. Whatever debts you have not paid off get discharged. The final discharge of debts happens much later but in the meantime you can get many benefits unavailable under Chapter 7. You can deal in creative ways with special debts like home mortgages and car loans. Same thing with income taxes and child support arrearages that can’t be discharged. Plus you get protection from collection actions against any co-signers that you don’t get under Chapter 7.


Don’t kick the can down the road.  Take control.  We are available for consultation.


Bankruptcy Basics

Posted by Kevin on October 3, 2017 under Bankruptcy Blog | Be the First to Comment

Over the last couple of years, this blog has dealt with many Chapter 7 and Chapter 13 issues.  Some simple, some complex.  Every once and awhile, however, it is good to go back to the basics.  So, in the next few blogs, that is what we will do.

We will begin with an overview.  Many people are skittish about filing bankruptcy.  Yes, they are in a bad financial situation.  Not enough money coming in, debts are mounting, creditor calls are becoming more than annoying, and maybe there are lawsuits.  In society, we are brought up to be responsible and honor our obligations.  It is part of being an adult.  For many, the thought of bankruptcy is equated with failure.   But I take a different point of view.  Bankruptcy should be looked as a vehicle for a new start, a fresh start.

Many people do not know this, but the right to file bankruptcy is in the Constitution.  Congress is given the right to establish uniform laws concerning bankruptcy.  The first bankruptcy law was adopted by Congress in 1800.  It was clearly pro-creditor.  There were subsequent bankruptcy acts in 1841, 1867, 1898 and 1938.

The next major revision was the Bankruptcy Reform Act of 1978, commonly referred to as the Bankruptcy Code.  The Bankruptcy Code marked a significant change in the point of view of bankruptcy laws.  It was decidedly more pro-debtor compared to prior law.   It allowed a vast majority of debtors to file Chapter 7  where debtors are not required to make cash payments to creditors and keep most, if not all, of their assets.

Creditor groups complained that the Bankruptcy Code was too pro-debtor and lobbied Congress for changes.  This led to minor revisions in the 1980’s and 1990’s.  The lobbying continued.  In 2005, Congress adopted the Bankruptcy Abuse Protection and Consumer Protection Act (BAPCPA).  Although this was a major overhaul of  many areas of the Bankruptcy Code, from a consumer’s point of view, BAPCPA tries to force more debtors into Chapter 13 where monthly payments must be made by the debtor for periods ranging from 36 months to 60 months.  All in all, BAPCPA has made the bankruptcy process more complex and more costly to a prospective debtor.

If there is anything that you should take from this blog, it is that bankruptcy is a right that you have under the Constitution of the United States.  It gives you an opportunity to deal with your debts and get a fresh start.



Mistakes to Avoid–Don’t Sell or Borrow Against Assets Protected in Bankruptcy

Posted by on September 8, 2016 under Bankruptcy Blog | Be the First to Comment

 How to How to Get the Most Out of Your Bankruptcy

The focus in bankruptcy is on dealing with your debts, wiping out and getting a handle on the negative side of your balance sheet. But getting a financial fresh start means not just getting relieved of your debts, but also protecting your essential assets—the positive side of your balance sheet. You can maximize this crucial benefit of bankruptcy by not selling, using up, or borrowing against your protected assets BEFORE filing your bankruptcy case.

In my daily work as a bankruptcy attorney, I constantly meet with new clients who have sold, spent, or borrowed against important assets in desperate attempts to keep their heads above water. This is usually a mistake.

Bankruptcy Protects Assets

If you are like most people, bankruptcy will protect all of your assets. First, Chapter 7 “straight bankruptcy” protects all “exempt” assets, so that a very high percentage of people who file under Chapter 7 keep everything they own.  Oddly enough, this is called a “no asset case” because the Trustee does not administer (= sells) any of the debtor’s assets.  Second, if you have assets which are worth more than the applicable “exempt” amounts provided by law, Chapter 13 “adjustment of debts” can almost always protect those “non-exempt” assets as well. And third, if you do have assets that are not “exempt,” with wise pre-bankruptcy planning with a knowledgeable bankruptcy attorney, those assets may be all the better protected once your bankruptcy case is filed.

Get Legal Advice BEFORE Wasting Your Assets

If you are considering spending, selling, or borrowing against any of your assets to pay your debts, do you know whether that asset is one which would be protected in bankruptcy?

Consider a person in her late-50s cashing in a substantial amount of her 401(k) retirement plan to keep paying creditors when those creditors could be—and eventually are–written off in bankruptcy. That decision would likely significantly harm the quality of her retirement lifetime, with no tangible benefit to show for it.  Or consider a husband and wife selling a free-and-clear vehicle that’s in good condition to pay creditors that eventually are written off in bankruptcy.  Under certain circumstances, that vehicle may be exempted or a deal can be made with the trustee that allows you to keep the vehicle.

These kinds of decisions can have serious long-term consequences, so they shouldn’t be made without legal advice about the alternatives.

Chapter 13 and Good Faith

Posted by Kevin on March 14, 2012 under Bankruptcy Blog | Be the First to Comment

Bankruptcy gives the honest debtor a fresh start.  We hear that often.  Bankruptcy courts are courts of equity.  Hear that too.  We also hear words like “good faith”, “fairness”, and “substance over form”.  These are not just empty platitudes but heart felt beliefs held by the court, trustees and a vast majority of practitioners.

The Code allows debtors to discharge most of their debts.  That means that they go away.  Chapter 13, which requires monthly payments over a period of 36 to 60 months, provides not only a discharge if all payments are made under a plan that was approved by the court, but also allows the debtor to adjust the obligations to certain secured creditors.  A secured creditor is a creditor that has collateral.  Like GMAC lends you money to buy a car and takes the car as collateral.

Now, in Chapter 13, you can adjust the interest rate on your car loan.  So, if your loan is for 14%, you may, subject to court approval, reduce it to, say, 4%.  The creditor can object to that treatment.  Then, the court decides what is fair, what is good faith.

In a recent case in South Florida, a Chapter 13 debtor went too far.  He bought a 2007 Suzuki and financed it at 19.95% interest. Less than 90 days later, he filed Chapter 13.  In his plan, the debtor proposed to pay 5.25% interest.   The debtor testified at the confirmation hearing and was cross-examined by the finance company’s lawyer.  Debtor admitted that he conferred with and retained  bankruptcy counsel just before he bought the car.  Of course, he did not tell the car dealer that he was going to file.  The court found that the debtor “pulled a fast one”, and bought the car knowing that he would knock down the interest rate in his plan.   The court stated that good faith focuses on whether the filing is fundamentally fair to the creditors.  Debtor was not fair.    The Court found that the debtor must pay the contract rate of 19.95%.  if he wanted the plan confirmed.

So play it straight.

Bankruptcy Statistics

Posted by Kevin on January 9, 2012 under Bankruptcy Blog | Be the First to Comment

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?

Read more of this article »