Starting the New Year Off Debt Free With Bankruptcy

January 3, 2014 - 03:01 by rmckinney

It’s a new year and a new you! But what if your new year is already feeling weighed down by the debt that was plaguing you last year? Filing bankruptcy may be able to help you truly start this year off with a financial fresh start. If you are wondering whether filing a Chapter 7 or Chapter 13 bankruptcy is right for your specific situation here are some things to consider:

1. What debts are causing your main struggle?

Deciding to file bankruptcy can start by figuring out which debts are really causing you the most trouble. Chapter 7 bankruptcy is best for individuals whose main debt struggle is caused by credit cards, medical bills, payday loans, or other unsecured items. On the other hand Chapter 13 bankruptcy can help with secured debts like a home in foreclosure or a vehicle that is on the verge of being repossessed. If your debts do not fall in either of those categories then you may be dealing with debts that bankruptcy cannot really help with like: back taxes, parking tickets, student loans, child support or alimony.

2. Do you make enough to pay your monthly bills?

Income has a lot to do with which type of personal bankruptcy is right for you. Start by asking yourself how much money you have left over at the end of the month once you have paid necessary bills like rent, utilities, groceries, etc. If the figure you end up with is a negative number or very close to $0 then you will most likely qualify for a Chapter 7 bankruptcy. If the figure you end up with is $500 or more then the bankruptcy court may conclude that you have enough to pay back some of your debts in a Chapter 13 bankruptcy repayment plan.

3. Are creditors contacting and/or garnishing you?

Some good indicators that you may need to consider the option of filing bankruptcy is when creditors begin calling you non stop, writing threatening letters, or take you to court in order to obtain a garnishment order from the judge. If anything like this is happening to you then take comfort; filing bankruptcy can stop the debt collection process in it’s tracks! That’s right, just by filing a Chapter 7 or Chapter 13 bankruptcy the court provides a protection that keeps creditors from pursuing any type of debt collection against you. Even garnishments that are already in motion are brought to a screeching halt when the debtor files bankruptcy.

If you have been asking yourself these questions for months and are dealing with debt that you just don’t think you can overcome alone then it may be time to consider going bankrupt. Don’t let another year go by without picking up the phone and asking a bankruptcy attorney for help. Let bankruptcy help you start this new year off right by becoming debt free!

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Bankruptcy Adversary Proceedings

September 22, 2013 - 16:25 by rmckinney

Although I spent years working as a bankruptcy paralegal at one of the nation’s largest firm I rarely saw bankruptcy cases that involved adversary proceedings. Perhaps that is why they were always so interesting to me. Not many people have heard of an adversary hearing so let me first start by explaining what it is. An adversary proceeding is a lawsuit that is brought within a bankruptcy proceeding and based on conflicting claims, usually between the debtor (or the bankruptcy trustee) and a creditor. Adversary proceedings are governed by special procedural rules under Part VII of the Federal Rules of Bankruptcy Procedure.

So what does this mean in layman’s terms? Basically an adversary hearing starts when one of the creditors involved in an individual’s bankruptcy decides that they do not think the debt they hold should be able to be erased in the debtor’s bankruptcy. This could be for various reasons, but in most cases the claims a creditor makes against a defendant in an adversary proceeding are for fraudulent transfers (transfers of the debtor's assets to a third party, with the intent to prevent creditors from reaching the assets to satisfy their claims).

Adversary proceedings are handled in civil court, which means that in most cases debtors hire a separate attorney or pay their bankruptcy attorney extra fees to handle their adversary proceeding. This is something that you should discuss with your bankruptcy attorney even if you do not thing that an adversary hearing could happen to you. Ultimately you have no control over which of your creditors will choose to pursue an adversary proceeding so you should be prepared either way.

Some common reasons that adversary proceedings are filed are:

1. To recover money or property
2. To determine the validity or extent of lien or other interest in property
3. To object or revoke a discharge
4. To revoke an order of confirmation of a plan (Chapter 13)
5. To determine the dischargeability of a debt

Typically an adversary is first filed by the plaintiff and the court clerk will issue a summons to alert the debtor that the paperwork has been filed. The summons will include a complaint so that the debtor will be aware of exactly what the creditor is filing the adversary case for. The adversary will be considered “open” until the Judge creates a decision, judgment, or the parties agree on a settlement.

Bankruptcy can sometimes be a complex process, but adding an adversary hearing to a bankruptcy can truly make for a confusing experience. Ask any attorney that you may consider hiring how they handle adversary proceedings and how much, if any, they would charge on top of their normal fees. The good news is that in most cases the adversary hearings only include 1 or 2 debts out of the dozens you will likely be filing on. This means that even if the adversary proceeding goes in favor of the creditor, your bankruptcy can still eliminate other debts that are causing you grief.

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Reasons Your Bankruptcy Could be Denied

September 15, 2013 - 15:13 by rmckinney

Many people who file bankruptcy are unaware of the fact that their case could be denied. Most debtors just assume that the court will grant them the bankruptcy they desire as long as they meet all of the eligibility requirements. This, however, is not the case. There are several reasons that your bankruptcy could be denied, and if you or someone you know is considering bankruptcy then these are reasons that you will want to know. Here are just three of the main reasons why people’s bankruptcies get denied.

  1. Documents - Bankruptcy revolves around the debtors financial situation, and because of this the debtor will be required to present certain documentation to their attorney’s and ultimately to the bankruptcy court. Some of the most commonly requested documents are: paycheck stubs, bank statements, mortgage info, vehicle leases, and prior year’s tax returns. The majority of the paperwork will be requested by your attorney in order to create your bankruptcy petition, but in some cases the bankruptcy court will request documents form you directly. If, for some reason, you provide incorrect or insufficient documents to the bankruptcy court they have the right to deny your case.
  2. Timing – One thing is for sure if you do decide to file Chapter 7 or Chapter 13 bankruptcy; you will not be the only one filing. The courts are jammed full of petitions to consider, and allowing every debtor the ability to extend deadlines would push decisions back months, if not years. In multiple instances, federal and local courts have ruled that they do not possess the authority to cure an untimely bankruptcy filing. If you fail to meet a deadline that the bankruptcy court has set for your case, then that is grounds for dismissal.
  3. Fraud – When you stand before the bankruptcy trustee at your required bankruptcy court appearance they will ask you simple questions regarding your case and financial situation. These questions are to ensure that no fraud has taken place. Fraud in a bankruptcy could mean neglecting to list a creditor or debt, not telling your attorney about money you have in other accounts, or not admitting to being eligible for money like an inheritance once your bankruptcy is complete. Bankruptcy fraud is taken seriously and most bankruptcy judges have no problem denying the case on those grounds. In some severe cases where fraud is proven the bankruptcy trustee has the right to make sure the debtor can never file bankruptcy on those certain debts again.

Bankruptcy dismissals and denials are not an hourly occurrence, but they are something to be mindful of nonetheless. If you are serious about using bankruptcy to become debt free then you should do everything you can to make sure it does not get denied. Stay organized, aware, and in contact with your attorney every step of the way to make sure that your bankruptcy is completed smoothly so you can finally be on your way to financial freedom.

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Power of Bankruptcy Judges

September 7, 2013 - 16:42 by rmckinney

Bankruptcy is a federal legal process presided over by specific bankruptcy judges. The judges have the power to deny bankruptcies, approve payment plans, deny creditors the right to sue, and much more. So why should someone filing bankruptcy have this knowledge? Because every person who files personal bankruptcy is required to be present at a bankruptcy hearing and speak to a bankruptcy judge.

The bankruptcy hearing is officially known as the “meeting of creditors,” but is sometimes referred to as the “341 hearing” because of the specific bankruptcy code that requires it. The hearing can last anywhere from 8-30 minutes depending on the complexity of the case and the questions that the bankruptcy judge chooses to ask. In most cases the questions directed at the debtor are simple ones: “how many vehicles do you own.” “how much do you owe on your mortgage,” and “have you ever filed bankruptcy before” are not uncommon. The hearing is primarily for the bankruptcy judge to determine whether he/she feels that the debtor has committed fraud. It is typical for bankruptcy attorneys to attend these hearings with their clients, and if not, to make sure that they are prepared.

During the hearing, as well as in all correspondence, it is imperative that the debtor show respect for the bankruptcy judge. Unfortunately, not every debtor is aware of that very important piece of advice. In a case being heard by a bankruptcy judge in St. Louis, MO the owner of a company currently in bankruptcy filed documents with the court making various personally-insulting comments aimed at the judge (referring to her as a “black-robed bigot” among other things). The bankruptcy judge ordered the company owner to come to court and explain herself or risk fines of $1,000 per allegation. Instead of appearing in court, she filed paperwork apparently reiterating the accusations which led to the judge fining her $500 per comment. On July 19, 2013 the federal court of appeals in St. Louis concluded that a federal bankruptcy judge has the “inherent power to protect the judicial system and the court’s own dignity by issuing fines for contempt of court.”

So, what’s the lesson here? First, leave your personal issues at the door and avoid personally attack judges for doing their jobs. Second, despite being well provoked to issue serious punishment, most judges do keep their cool and do their job with an even temper. The bottom line is that bankruptcy judges want the legal process to do what it is meant to do: help Americans get out of debt so that they can jumpstart their financial future. Speak with a bankruptcy attorney in your area today to learn more about which Chapter of personal bankruptcy may be right for you.

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Bankruptcy for the Motor City

August 31, 2013 - 16:40 by rmckinney

On July 18, 2013 Detroit, Michigan became the largest American city ever to file for bankruptcy. Its long-term debts are estimated at $18.2 billion, or $27,000 for each resident. The City filed what is known as a Chapter 9, or municipal bankruptcy. The filing is being seen as the best option for the city to help them rebuild, restructure, and regain control of its finances. Many speculate that Detroit will sell assets like treasured pieces of art to pay down debts. How can the bankruptcy Detroit filed relate to you and your decision to file bankruptcy? Simple: the ultimate goal is the same, to eliminate the debt that is holding you (and Detroit) captive from a strong financial future.

Although individuals are not eligible to file the same type of bankruptcy that Detroit filed, there are 2 distinct types available to them: Chapter 7 and Chapter 13 bankruptcy. The municipal bankruptcy that Detroit is going through is most similar to a personal Chapter 13 bankruptcy because it involves a reorganization and restructuring of debts in order to efficiently pay them back. For individuals or families who choose to file a Chapter 13 bankruptcy they will be given a 3-5 year repayment plan in which the court will order them to payback a certain percentage of their overall unsecured debt. The percentage that the court orders individuals to pay back in a Chapter 13 bankruptcy varies due to the debtor’s monthly income and expenses, but it can range from 10-100%. At the end of the 3-5 year plan the debtor will be debt free and up to date on all secured monthly payments such as a car note or a mortgage.

Chapter 13 bankruptcies are typically beneficially to individuals or couples that have large amounts of secured debt or debt that is tied to a specific object such as a car, home, or loan. Excess money or a substantial “disposable income” is also a requirement for a Chapter 13 case because the debtor(s) must have money to make their monthly bankruptcy payment for 3-5 years.

The other type of personal bankruptcy is one that Detroit probably wishes it had the opportunity to file because it is known for completely eliminating debt and giving the debtor a “fresh start.” This type of bankruptcy is called Chapter 7 and it is the most commonly filed Chapter in America. If the debtor meets the eligibility requirements the court will grant them a discharge of debts which will wipe away unsecured debts such as credit card debt, medical bills, utility bills, and even types of personal loans.

As you can see, the common theme of all bankruptcies, whether they are on a large scale like Detroit’s or a small scale like yours or someone you know, is to eliminate debt. Contact a local attorney in your area if you think that a Chapter 7 or 13 bankruptcy could be a help to you and your finances.

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Does Bankruptcy Really Require Classes?

August 23, 2013 - 16:38 by rmckinney

One of the most confusing things about filing bankruptcy comes when your attorney’s office calls to remind you to take your classes. What classes? That’s the most common response I got from clients when I had to make that phone call. Then came the dreaded “what if I don’t pass?” Allow me to put your mind at ease and tell you a little bit about the classes required of anyone filing personal bankruptcy.

In 2005 Congress passed new legislation known as the Bankruptcy Abuse Prevention & Consumer Protection Act, otherwise known as BAPCPA. It was the largest overhaul to the bankruptcy code in several decades and it created the requirement for certain classes. Section 109(h) states that a debtor will not be eligible to file Chapter 7 or Chapter 13 bankruptcy unless within 6 months prior to filing the debtor received an "individual or group briefing" from an approved credit counseling agency. The law also required that all debtors complete an "instructional course concerning personal financial management" soon after their case has been filed.

Both courses are available to be completed online, over the phone, or in person and take somewhere between 1-2 hours. Neither course is pass or fail, but rather just for completion. These courses typically cost between $30-$50 apiece and that amount may or may not be included in the fees you pay your attorney. Here’s a bit more information about both:

  • Credit Counseling Course - The credit counseling course should be taken before your bankruptcy paperwork is filed with the court. In fact, if your case is filed without your certificate of completion it could be thrown out altogether. It is imperative that you take the course as soon as you can after you attorney tells you it is available so that your filing is not slowed down.
  • Debtor Education Course - This course is taken after your case has been filed with the court, but before it has been finalized and completed. That means you will have a smaller window of time to complete this course. In most cases bankruptcy attorneys recommend that you take this course before your bankruptcy hearing which is typically scheduled for 30 days after your case is filed.

These courses were made mandatory by the BAPCPA in order to prevent bankruptcy abuse from taking place, or in other words to make it a bit more difficult to file. The law was not created to keep those who really need bankruptcy from filing - it was created to prevent those individuals who habitually file from taking advantage of the system. Be sure and discuss these 2 courses with your bankruptcy attorney so that you are prepared when it is time to take them.

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How to Find the Right Bankruptcy Attorney for You

August 15, 2013 - 16:37 by rmckinney

No two bankruptcies are exactly the same. Your financial situation may require a totally different bankruptcy than someone else’s and that is why it’s important to find the best bankruptcy attorney for your situation. Not only is finding a good bankruptcy attorney good for your stress level, but it will make the process smoother for you. Think of it this way, if a mistake is made by your attorney on the official bankruptcy paperwork then your case could be completely thrown out or sent back to the beginning of the process. Here are just a few tips (in no particular order) on how to find the right bankruptcy attorney for you.

  • Online Research - We are living in the internet age so take advantage of it! Just do a simple search for your zip code and the words “bankruptcy attorney” and see what comes up. Be sure to read reviews if they are available and check the Better Business Bureau if that is applicable.
  • Friends & Family Recommendations - Ask those people in your life that you trust if they have ever had to file a bankruptcy and whether or not they would recommend their attorney. Make sure to ask questions about how long their case took to file and exactly what characteristics they liked or did not like about their previous lawyer.
  • Local Bar Association - If you do not know anyone in your area who has filed bankruptcy then make a quick phone call to your local bar association (phone number can be found in the yellow pages or online) and ask them to provide you with a list of attorney’s in your area that specialize in bankruptcy.
  • Consultations - Once you have done your research, asked friends and family, or contacted the local bar associations begin making phone calls to request a free consultation with a bankruptcy attorney. Take notes during these consultations and make sure to have specific questions for them such as “which chapter of bankruptcy do you file more often” or “what is your typical timeline?” You will also want to jot down exactly how much the bankruptcy attorney charges and what kind of payment arrangements can be made. Some bankruptcy lawyers prefer to be paid up front, while others offer monthly payment plans.

The bottom line is that only you can decide which bankruptcy is right for your situation. Just remember that whoever you choose will be with you throughout the process and be the person you should turn to when you have questions. Bankruptcy is a complex legal procedure and having a lawyer you are comfortable with can really make a difference.

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How Your Property is Affected by Bankruptcy

August 7, 2013 - 16:34 by rmckinney

It is true that bankruptcy has some kind of an effect on all parts of your finances, but what about your property? Many people assume that filing bankruptcy means that you have to give up your property, but that is not the case. In most cases your property can be safe from liquidation as long as you are current on the payments. Here are some cases where your property may not be safe:

  • You have a high amount of equity in your home - Because of the housing crisis our nation has faced over the last several years this situation does not apply to a lot of Americans. However, some individuals have a balance that is much less than the fair market value of their home resulting in an amount of equity that the court may want to use to pay creditors. In most cases this will be something discussed between you and your bankruptcy lawyer so that it does not have to be a surprise.
  • You have paid in full vehicles and/or homes - As far as the bankruptcy court is concerned, any paid in full vehicle or home that you own is considered an asset that could potentially be sold in order to pay back your creditors. Typically the court will not choose to liquidate the sole vehicle for the household because they understand that it is necessary in most areas in the company. However, when a family has several paid in full vehicles the court will want to evaluate which ones are not necessary. The same is true for homes.
  • You have valuable “luxury items” - The definition of luxury items will differ with each case, but basically it can be any item of a large value. Common luxury items that are liquidated in bankruptcies are boats, jewelry, art, and high end electronics. Again, you most likely will have discussed these items with your attorney beforehand so you will know if there is any chance that you could lose them.

The good news is that even if you own some of the items mentioned above there are exemptions in each state that will protect a certain value. For instance, in Illinois a married couple filing bankruptcy can have up to $30,000 in equity and keep their house because the exemption keeps the home safe. If they had more than $30,000 then the bankruptcy court may suggest selling the home. Exemptions are created by the states specifically for their citizens and your local bankruptcy attorney will be privy to what they can and cannot protect. If there is a certain item, or set of items that you are worried about protecting just contact a bankruptcy attorney and ask them a few questions.

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Filing Bankruptcy to Stop a Garnishment

July 30, 2013 - 16:33 by rmckinney

Are you one of the thousands of people who think that filing bankruptcy is only beneficial for those individuals trying to get out of debt? Well after this blog you will understand that eliminating debt is just one reason that people choose to file bankruptcy. In today’s economy creditors will do whatever it takes to get paid, and garnishing wages is one of their first choices. For a creditor, access to garnish a debtor is great because it is court ordered and there are only 2 ways to stop it: completely paying the debt back or filing bankruptcy. That’s right - you can bring a garnishment to a halt just by filing Chapter 7 or Chapter 13 bankruptcy. Here’s more information about exactly how it works:

On the day that your bankruptcy is officially filed with the courts a notice of filing is mailed to all of your creditors. This notice of filing will inform them that an “automatic stay” has been put into effect. The automatic stay is essentially an umbrella of protection over you that says no one can attempt to collect a debt from you any longer. Once this stay is in place your creditors must adhere. Therefore, the company garnishing your wages loses the right to do so on the day your case is filed. This occurs because of what a garnishment really is: a court order. The only item that trumps a court order is another court order, and in this case the “automatic stay” is a direct order from the bankruptcy court.

As with any legal process there are exceptions. One type of garnishment that filing a bankruptcy typically cannot stop is one where the government is the creditor doing the garnishing. If you are being garnished by the government for debts such as child support, alimony, or back taxes then you should inform your bankruptcy attorney as soon as possible so that he/she can find out what a bankruptcy will be able to do for your specific situation.

Garnishments can be detrimental to your finances. In most cases it is legal for creditors to garnish up to 25% of your gross wages, and if you are being garnished by the government they may be able to take much more. Filing Chapter 7 or Chapter 13 bankruptcy to end a garnishment can allow you to start seeing your full paycheck again which will help you in your goal of becoming financially free. If you are being garnished and do not know where to turn then it may be time for you to contact a local bankruptcy attorney to see if filing would be beneficial to you.

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Chapter 13 Bankruptcy Timeline

July 23, 2013 - 16:31 by rmckinney

Chapter 13 bankruptcy is the second most common type of personal bankruptcy filed in the United States today. It is also the more complex of the two. A Chapter 13 bankruptcy is considered more complex because it involves a 3-5 year payment plan in which the debtor is allowed to payback a percentage of their overall unsecured debt. So, for our purposes the timeline will be a minimum of 3-5 years. This may seem like a long time, but it will go by quickly and at the end of the payment plan you will be debt free. Here’s a generic timeline to help you see how your Chapter 13 bankruptcy will go:

  1. Locate and Hire an Attorney - Because of its complexity, it is nearly impossible to file a Chapter 13 bankruptcy without a licensed attorney. The payment plan involves specific calculations and constant communication with the bankruptcy court that the average layman just can’t do. The time it takes you to locate and hire an attorney is dependent entirely on you.
  2. Provide paperwork - Once you have hired an attorney you will be responsible for providing them the financial documentation they need. Most of the required paperwork involves items that you alone will have access to, and this is why the attorney does not obtain them. The paperwork includes pay stubs, bank statements, prior year tax returns, mortgage documents, car loan information, and other financial items.
  3. Draft Petition - The documentation you provide to your Chapter 13 bankruptcy attorney
  4. is for his/her use in preparing the official document required to file a bankruptcy: the petition. The amount of time needed to draft the petition depends on a lot of variables, but you should check with your attorney for an estimate.
  5. Confirmation Hearing - After your case has been filed the bankruptcy court will set up a time to meet with your attorney to discuss the repayment plan he/she has requested for your Chapter 13 case. This is called a confirmation hearing and you are not required to attend if your attorney is present. In many cases it is not necessary for the debtor to be present. The bankruptcy trustee will either approve your plan or send it back to be revised.
  6. Meeting of creditors - If your payment plan is approved then the court will schedule another hearing which you will be required to attend known as the meeting of creditors. This hearing will involve the bankruptcy trustee asking you a series of questions to ensure that no fraud has taken place.
  7. Payment Plan - Your first Chapter 13 payment will be due 30 days after your case was filed and will continue for 3-5 years depending on what the court agreed to. You will make 1 payment every month.
  8. Discharge - At the end of your payment plan you will receive discharge papers in the mail from the bankruptcy court stating that your case was successfully completed. This means that you are debt free and done with your Chapter 13 bankruptcy!

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