Category Archives: Bankruptcy Law: Your Rights

Home Owner Association (HOA) how to fight a foreclosure

Recently on our bankruptcy forum a user asked, “I have been fighting with the Home Owner Association (HOA) in my neighborhood for years and now they are threatening to foreclose on my home. How do they have this much power? I am current on my mortgage payments. Can they really take my house away from me? Please help!”

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Can I file bankruptcy on my own?

Filing bankruptcy with the assistance of a bankruptcy attorney can be expensive, especially if you are struggling to pay for your basic financial needs. But do you really need a lawyer to file bankruptcy? Is there no way for you to file bankruptcy on your own and save the legal costs? Recently on our legal forum a user asked, “Can I file bankruptcy on own, and if so, what do I need to do to get started?”

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Wage Garnishment rules and regulations

Many debtors have questions about wage garnishments. State and federal laws both regulate wage garnishments, and state laws can vary. In general, if the state and federal laws are in conflict, the law which is most favorable law to the debtor generally prevails. Basic information found in Title III of the Consumer Credit Protection Act (CCPA.) is outlined below.

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A National Election May Have an Affect on Bankruptcy

It is less than 24 hours until Americans exercise their voting privilege in another national election. The economy has been one of the hottest issues the two candidates have discussed since they first began their primary races back near the first of this year. For those of you in financial trouble because of the poor economy, will a national election really have any affect on you if you are experiencing a bankruptcy anyway? Continue reading

Employer Cannot Discriminate Against You for Filing Bankruptcy

Entertainment Lawyer John J. Tormey III, Esq. ...

Entertainment Lawyer John J. Tormey III, Esq. - Employment And Severance Scenarios - Page 6 (Photo credit: Wikipedia)

From time to time, questions from debtors worried about losing their job because they are being forced to file for bankruptcy protection will pop up on bankruptcy forum websites. One such debtor recently posted this question about her husband’s job: “We are preparing to file Chapter 13, and the one question I have revolves around the fact my husband works for a large retail corporation, and one of the credit cards that will be discharged ($2,800) was issued from his company. My question is can my husband be fired for being in default of this particular card? We are considering selling off personal items to pay for this particular bill before we file, but our bankruptcy attorney advised against this.”

First of all, the bankruptcy attorney was wise in advising the client not to sell items and pay off the credit card. This kind of move can be considered preferential treatment, and because the husband works for the company that provides the credit, this particular preferential treatment can be considered insider preference.

A bankruptcy court trustee would surely go after the funds if such an arrangement was ever made by the debtor. Under certain circumstances, the preferential payments could even cause the bankruptcy to be dismissed.

As to the question about her husband being fired for being in default for that particular card, an employer cannot discriminate against you for filing bankruptcy. It is against the law.

Bankruptcy law under Title 11 USC 525 (b) states: No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

In the illustration provided above, the employer would be risking a wrongful termination suit if they fired the husband. They may find other reasons for firing the husband, but but blatantly firing him for filing bankruptcy to discharge the credit debt could easily be proven as wrongful termination in a court of law. Firing him for any other reason during the time frame of the bankruptcy filing process could possibly be construed as wrongful termination, so it might not be wise for a large corporation to do.

No one can positively say what would happen in a particular case, but in order for a debtor to protect themselves against such wrongful termination by an employer during a bankruptcy, it might be wise to consider retaining a lawyer with that type of experience.

 

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Should Wyndham Change Rules for Consumers in Mid Stream?

Since I write legal content blogs on bankruptcy, my mind is constantly on the economy and bankruptcy issues. I suspect I tend to pay a little closer attention to economic events when I am out and about than the average person. One such economic event that recently occurred caused me to question if the Wyndham hotel chain should be changing the rules for consumers during mid stream.

My wife and I made a trip to the Dallas/Fort Worth Metroplex this past Memorial Day as a long weekend getaway. As our home base, we chose to stay in a Hawthorn Suites by Wyndham.

To procure our room at Hawthorn, I used my credit card with the understanding that the time for any type of cancellation on the room would have to be almost two days in advance of our arrival check in time. That meant if any emergency were to arise after the cancellation time had expired, I would have been at the mercy of the hotel if I expected a refund.

At check in, the sweet, young, and beautiful clerk serving us asked me to date and sign a contractual form stating that this particular Hawthorn Suites was a non-smoking facility, and that we should understand the hotel would charge us $250 per day if we were caught smoking in the room. Neither my wife nor I smoke or have ever smoked. Caught off guard by the unusual request, I signed the document, but balked at dating the contractual instrument when I noticed the $250 amounts. I told the clerk we didn’t smoke and documented that fact on  the signed instrument.

The clerk responded in a professional manner reassuring me she didn’t think we did smoke. She then commenced to explain that I would be surprised by how many consumers violated their stay by smoking in the rooms. She said the staff always knew who were the smokers and when they smoked. She then said the smokers always acted surprised when they found the new charges at check out time.

I asked, “What if one of your employees who clean the rooms smoke in them? How would you know whose smoke that would be?” I then let the clerk know that I had been uncomfortable about signing the document for that reason.

Despite Wyndham’s employee’s being professional and polite to me over the non-smoking document, I felt uncomfortable with what I had experienced. As a consumer, I felt like Wyndham had changed the rules for staying at their facility after I had already paid for my room. Living on a limited budget in difficult economic times, these questions flooded my mind:

  • Would Wyndham have refunded my deposit if I had refused to sign the contractual document?

  • In a time when the economy is still poor and when business and consumer relations are already strained, does making these kinds of business decisions make good business sense?

  • Doesn’t city smoking ordinances take care of smoking violations without having to re-stipulate that which is obvious?

  • Can Wyndham legally and civilly penalize a violator of their business policies?

  • What recourse does an innocent consumer have if accused and financially charged by Wyndham for violating their smoking policy?

At check out, another young, beautiful, and well trained professional provided the service. I explained to the clerk that I wanted a copy of the contractual document I had signed at check in, and I wanted someone in authority to sign off that we had not smoked in the room. The clerk politely complied with my request.

This story turned out well for this consumer. I cannot help but wonder if there are other similar stories that have not turned out so well. Should Wyndham be allowed to change rules for consumers in mid stream?

Seizure of Property is a Legal Process

property

property (Photo credit: qmnonic)

A question on seizure of a car recently came up in a bankruptcy forum website. The blogger wrote, “I’d like to know if, say, you owe $5,000 on a credit card and stop paying it, the likely hood of a creditor seizing your car. Will they? I have between $8-10k equity in the vehicle.”

Seizure of property is a legal process normally governed by state laws. It is not the same as a repossession.

In a repossession of secured property, the property has a lien on it that allows the secured creditor to repossess the property without going to court in order to do so. Each state has its own repossession laws of legal procedure the creditor must follow in order to reclaim the property that is in default of the loan.

In order to seize property owned by a debtor to satisfy a debt, you must first file a lawsuit proving the debt claim in order to obtain a judgment of the court for satisfaction of the debt. Once a creditor is armed with a judgment order of a court of legal jurisdiction, the creditor can proceed to attach or seize assets of the debtor, but only under legal procedures and guidance. Seizure rules and procedures are normally state laws that guide the creditors in what they can and cannot do in seizing property.

Since seizure of property is a legal process, the process is often expensive for a creditor to go through. The easiest and least expensive asset a creditor can attach or seize is your checking or savings accounts. If the creditor who is armed with a judgment can find out where you bank, they can freeze your account through attachment and then take what they need from the account to satisfy their debt. They have the right to take from your account the principal, interest, fees, and penalties as described in the court judgment.

To seize a physical asset like a car to sell and satisfy a judgment is another matter. These types of seizures are not done that often because of the legal process accompanying such actions and the additional costs. For instance, not only does a creditor have legal costs to obtain a judgment, but they will have expenses related to seizing the vehicle and selling it.

In addition, if the debtor files for bankruptcy protection during the process of seizing the property, the creditor will be forced to stop the process or pay more expenses in challenging the automatic stay of bankruptcy. On top of that, the property the creditor has targeted to seize may have state or federal exemptions protecting the asset in a bankruptcy case. That means the creditor must satisfy the exemption amount of the asset seized before they can claim their adjudicated portion of the value of the seized property. Unless the property has a high value, most creditors will not go through the expense of trying to seize a debtor’s assets.

Will a creditor seize your car? Not likely! If you feel they are trying, filing for bankruptcy will stop them in their tracks.

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Bankruptcy and the 90 Day Rule

Doc 44783 Payments

Doc 44783 Payments (Photo credit: theirhistory)

First time bankruptcy filers always have numerous questions when they first begin to learn about the process. They quickly learn from friends, relatives, and from online forums things about bankruptcy that are true, partially true, and not true at all. Questions inevitably arise about the 90 day rule.

As an example, a filing wannabe debtor asked these questions on a bankruptcy forum website today concerning the 90 day rule: “Does anyone know from their experience, if the 90 day rule applies to payment of monthly rent, car note, and utilities? Does this 90 day rule mean to stop paying the electric, car, and landlord even though they are not included in the Chapter 7 debt of creditors?”

This illustrated blogger has made a common mistake many first time filers make in misunderstanding the so called 90 day rule. Misunderstandings generally occur through hearing rumors and horror stories about trustees who have taken back payments made by debtors. The trustees take the payments that have been made during the 90 days up to filing to place them back into the bankruptcy estate. This does occur, but it rarely happens, and it really does not involve the debtor so much as the creditors.

The rule, Title 11 USC 547, was placed into the bankruptcy laws to handle situations that sometimes arise when a filing debtor shows preferences in paying creditors. To be fair in the distribution system of bankruptcy, the trustee has the right to look back to see if there were any preferential payments made to creditors. This usually always involves more than $600 transfers because it is economically not very feasible to legally take back that much or less.

The trustee, according to the code, can look back 90 days at payments made by the debtor. He can look back a year for “insider” payments. “Insider” payments are payments made to creditors that may be family or someone in a close relationship with the filing debtor.

Making these type of payments are not illegal unless there was an intent to defraud. The trustee has the right, in most circumstances, to determine if he or she thinks money was paid out in a preferential manner and to correct the situation if needed. When the trustee comes after preferential payments, they are not coming after you, but they are simply coming for the money to make the system a fair and equitable system of payments.

Some newbie filers, like the blogger illustrated above, get the wrong idea. They often think the rule prohibits them from paying bills during the run up to bankruptcy or buying anything. Others are just unclear how the rule works.

The 90 day rule is specifically mentioned in USC 547 (b) and specifically gives the trustee the option to avoid any transfer of interest of the debtor in property. The law spells out the type of transfers the trustee can reclaim for the bankruptcy estate.

In USC 547 (c ), the law spells out what types of payments the trustee may not avoid. These types of payments are clearly listed as normal and usual payments for doing business. Utility bills, grocery bills, car payments, and the like are examples of these type of payments made by debtors. That means you can make payments for doing your normal and usual business up until the day you file for bankruptcy, and most likely, depending on the type bankruptcy you file, thereafter.

If you are in doubt about what is normal or usual business, ask your bankruptcy attorney to assist you.

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Quitclaim Deed and Bankruptcy

If you have ever looked for a quick and easy way to transfer real estate between family members, you may have used or have at least heard of a quitclaim deed.  A quitclaim deed, which is often mistakenly referred to as a “quickclaim deed,” allows someone to transfer his rights to real property, such as real estate, to another person.

A quitclaim deed is similar to a warranty deed except that it does not offer the clear title protection provided with a warranty deed.  Therefore, whereas a title company will use a more formal warranty deed to execute the transfer of property and provide a guarantee of clear title, quitclaim deeds are typically used to transfer property between family members or others who know and trust one another where the need to warranty a clear title is not as important.

But what happens if you have received property from a family member using a quitclaim deed and now you have to declare bankruptcy?  What if you have recently transferred the property back to that family member or you are wondering if you can give the property back just before you declare bankruptcy?  Read on to find out what you should consider if a quitclaim transfer of property has occurred (or you are wanting it to occur) just before you declare bankruptcy.

Binding Nature of a Quitclaim Deed

A quitclaim deed is a binding legal document, the same as a warranty deed or other legal documents that may be used to transfer real property from owner by one person to another.  This is true even though any individual can execute a quitclaim deed, as opposed to having the deed executed and filed by a title company or an attorney.  Therefore, if a quitclaim deed is executed properly—that is, if it has all the appropriate signatures, is notarized, and is filed in the county where the property exists—then the legal transfer of property from one person to another has taken place and has been recorded in the public record.  The transfer is as legitimate as when a title company files a warranty deed as a part of you purchasing a home from a home builder.

As a result, if the person who received property through a quitclaim deed needs to declare bankruptcy, that property they received through the quitclaim deed is a part of the person’s assets.  The person declaring bankruptcy would need to include the property in the list off their assets on the appropriate bankruptcy paperwork.  This is true whether the person is considering filing Chapter 7 or Chapter 13 bankruptcy.

Quitclaim Transfer Just Before Bankruptcy

If you need to declare bankruptcy and you transfer property you previously received through the filing of a quitclaim deed back to the original property holder (or to anyone else for that matter), the bankruptcy court will by default assume you are trying to hide the asset and commit fraud.  It is a common practice for people declaring bankruptcy to transfer their assets to someone else just before declaring bankruptcy in an attempt to keep that property from being used to satisfy money owed to creditors.

Hiding a Quitclaim Deed Transfer from a Bankruptcy Court

It is generally unwise to attempt to hide the transfer of property from the bankruptcy court even if that transfer was performed using a quitclaim deed.  As noted above, if a quitclaim transfer of property was executed properly and filed with the county, it is considered a binding legal transfer and is available for viewing in the public record.  A bankruptcy court can potentially identify through the public record any property that you have that you have failed to list in your bankruptcy.  Such an attempt to hide assets and deceive the bankruptcy court can result in your entire bankruptcy being thrown out.


The information above is general in nature.  While it is accurate in terms of how bankruptcy courts will generally view the transfer of property away from someone before that person declares bankruptcy, there could be other details in your individual situation that are relevant that cannot be addressed in this forum.  Therefore, it is important to speak with a bankruptcy attorney about your situation.  A bankruptcy attorney will be able to evaluate your unique case and advise you on what options you have before you declare bankruptcy.

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4 Ways to manage a payday loan

How do I handle Payday loans ?

With the increase in the amount of debt that many Americans are carrying related to credit cards, mortgages, and other liabilities, the number of places offering payday loans has skyrocketed.  Payday loans, also known as cash advance loans, are short-term loans—usually for one to three weeks—that are designed to allow a person to pay their expenses until their next payday.  When you accept the payday loan, you are typically required to provide income and employment information to the lender along with a post-dated check (although it is becoming common for payday loans to be obtained online).  The post-dated check would be written to the lender for the amount of the payday loan plus the fees charged by the lender.

Laws Governing a Payday Loan

The laws governing the fees and interest a payday lender may charge for payday loans varies by state.  However, where payday loans are allowed, they are typically bad news for consumers, because once you accept a payday loan, it is difficult to ever get out of debt given the typically high fee and interest rates these lenders charge.  For example, it is not unusual for the payday lender to charge $15 (or more) for every $100 borrowed; this could mean that for a two-week payday loan of $300 you have to repay $345.

When your payday comes, you are expected to return to the payday lender to repay the payday loan amount plus the fee.  If you do not return as agreed to repay the payday loan, the lender will attempt to cash the post-dated check to satisfy the amount owed.  If the check bounces, the payday lender will begin charging you interest and start taking other steps to collect the money owed.

Collection methods used by lenders for payday loans include those commonly used by credit card companies and other holders of unsecured debt.  These methods can include letters and phone calls to you, filing a lawsuit against you to obtain a judgment, or assigning or selling the debt to a collection agency.  Lenders are not legally permitted to contact your employer or your neighbors, nor can they arrest you for failing to repay a payday loan.  However, it is not unusual for cash advance lenders to threaten jail time in an attempt to scare the borrower into repaying the loan.  But as failing to repay a loan is a civil rather than a criminal issue (assuming you did not take the loan under fraudulent circumstances, such as with the plan of not repaying the payday loan from the start), jail time is simply not a possible punishment.

Top 4 ways to stop payday collections

If you are looking for ways to address the money you owe related to cash advance loans or you want to stop collection efforts, you have several options:

 

1. Notify the collection agencies to cease collection efforts for the payday loan under Public Law 95-109 Section 805-C.

This law stipulates that if you notify a collection agency in writing to stop contacting you, they are permitted to contact you one final time outlining what steps you need to take and what action they may perform if you do not take those steps.  The final action they indicate they will take against you will often be threatening in nature, such as filing a lawsuit against you.  What the collection agency and the original lender actually do if you do not repay the loan will depend on the unique circumstances of your situation.

 

2. Wait for the statute of limitations to expire.

Every state has laws defining how long a lender can collect an unsecured debt, which is known as the statute of limitations.  If the lender is unable to collect from you by when this timeframe is reached, the lender will no longer be legally able to collect the money you owe them.  If the lender believes you are unable to repay the debt and that you likely will not have the money to do so, they may choose to write off the debt rather than pursue you further through legal action or other means.

 

3. Negotiate with the payday lender or collection agency.

Payday lenders expect that many of the consumers they loan money to will default on repaying the loan.  If you truly do not have enough money to repay the full amount, you can likely negotiate with the lenders or collection agencies to accept less than the full amount you originally owed but still consider the loan repaid.  Just be careful that if you enter into such an agreement that it is reviewed by an attorney who is experienced in such matters, to be sure that it is binding against the lender.

 

4. Declare bankruptcy

Depending on your overall financial situation, declaring either Chapter 7 or Chapter 11 bankruptcy is an option that can eliminate unsecured debt such as payday loans and give you a fresh start.  However, bankruptcy has a significant and lasting impact on your credit, so you should consider bankruptcy as a last resort.

Keep in mind that the information about is general in nature.  Before you settle on an option for your situation, it is typically a good idea to consult an attorney.  An attorney familiar with debt collection issues will be knowledgeable of laws and statutes applicable for your state and can give you specific guidance as to what option is best for your individual situation.

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