Category Archives: Bankruptcy Terms

Understanding the Role of the Trustee During Bankruptcy

Understanding the role of the trustee during bankruptcy is an important concept to new filers because the term trustee is bandied about and used for different responsibilities in different types of bankruptcies. Continue reading

Bankruptcy Fraud Not for Senior Citizens

Senior Citizens Party

Senior Citizens Party (Photo credit: Wikipedia)

According to a recent article posted by Levi Pulkkinen of the SeattlePI.com staff, two senior citizens were indicted this past October on 43 counts related to bankruptcy fraud. The U.S. Attorney’s Office in Seattle returned an indictment from the grand jury with multiple counts of money laundering and fraud. Michael Mastro, and 87-year old senior and his 62-year wife, Linda, were caught in France as fugitives from justice. Continue reading

Differences between a Bankruptcy Discharge and Close

English: Part of Title 11 of the United States...

English: Part of Title 11 of the United States Code (the Bankruptcy Code) on a shelf at a law library in San Francisco. Photographed by user Coolcaesar on March 14, 2009. (Photo credit: Wikipedia)

There has been a lot of questions asked recently about the differences between a bankruptcy discharge and close.

Bankruptcy Discharge

A bankruptcy discharge in any type of bankruptcy occurs when any portion or all of a debt that you may owe a creditor has legally been forgiven by a bankruptcy court. The forgiveness of a discharged debt is stipulated by state and federal bankruptcy laws. That means you no longer have a legal fiduciary responsibility to pay the creditor owning the debt. The creditor cannot legally come after you in order to collect on the debt from the time of discharge.

In fact, if a creditor tries to collect on a debt that has been discharged, the creditor can be found to be in violation of bankruptcy law. They can then be penalized by the bankruptcy court to have to pay penalties, legal fees, and court costs.

There are some debts that are exempt from bankruptcy discharge. They include such debts as spousal and child support; certain taxes; student loans; debt obtained through fraudulent methods; debts for malicious and willful injury; certain fines and penalties by government institutions; home owner association fees occurring after filing bankruptcy; and debts for judgments in wrongful death or personal injury lawsuits resulting from the operation of a motorized vehicle, vessel, or aircraft accident if you were convicted of using them while intoxicated.

Bankruptcy Close

There is an official time after a bankruptcy discharge that the bankruptcy is closed, or completely finished. When the bankruptcy clerk has formally sent you a notice in the mail the bankruptcy has been closed, you no longer have to worry about creditors that were included in the bankruptcy or the bankruptcy court. They can never interfere again into the financial business that resulted in this particular bankruptcy filing, unless there is evidence that you have perpetuated fraud during the bankruptcy.

Depending on the type of bankruptcy, the closing of a bankruptcy case may linger for some time because of some administrative matter that has not been finished. Bankruptcy trustees have to make reports to the bankruptcy court on all proceedings when debt has been discharged. They have to notify creditors, debtors, and their legal representative, and all of this takes time. In most simple Chapter 7 cases without assets, the closing of a bankruptcy usually occurs shortly after the bankruptcy discharge, normally in days or a few weeks, simply because there is little to report.

Re-opening a Bankruptcy Case

There are usually two incidences in which a bankruptcy case might be re-opened after it once has been closed. One incident comes at your request and the other incident can come at the request of the U.S. Bankruptcy Trustee.

  1. When you re-open a bankruptcy case.

    A debtor normally re-opens a case when he or she has forgotten to include a creditor from a debt that occurred before the filing of bankruptcy.

    You will have to pay the required fees for re-opening the case, and a bankruptcy lawyer may or may not require you to pay additional fees for the extra work. At conclusion, the case will then be re-closed.

  2. When a U.S. Bankruptcy Court Trustee re-opens a case.

    A Trustee might re-open a case if he or she gets wind that you in control of assets not reported in the bankruptcy or if there is suspected fraudulent activity that occurred.

Bankruptcy laws can be complicated. Be encouraged to seek out a bankruptcy lawyer to help answer any questions you have on bankruptcy laws.

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Tenancy by the Entirety and Bankruptcy

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Tenancy by the Entirety Simply Defined

Not to be confused with Joint Tenancy and Tenancy in Common, Tenancy by the Entirety is a relatively new legal concept in property law. Simply defined, Tenancy by the Entirety is a legal form of ownership of certain assets between a husband and wife.

In a tenancy by the entirety, the husband and wife must acquire their interest in the asset simultaneously and through one title; they must have equal interest in the asset as well as equal rights of possession; and they must be husband and wife as recognized by their state laws. Not all states have tenancy by the entirety laws, and some states have the laws only for real estate property.

Tenancy by the Entirety Laws Can Have an Affect on Bankruptcy

Tenancy by the Entirety laws may have an affect on your filing of a bankruptcy, especially when it comes to Chapter 7 exemptions. One such filer of a Chapter 7 recently asked this question from a state which has Tenancy by the Entirety laws: If I file a Chapter 7 alone, how is my interest in jointly held marital property calculated toward my total personal property exemptions?

Exemptions are important in filing a Chapter 7 because, either by state or federal exemption law, these assets are protected from the bankruptcy court liquidating them and paying the creditors.

How Creditors Are Treated in Tenancy by the Entirety States

Before you can understand how bankruptcy is affected in a tenancy by the entirety, you need to understand how the state having such laws covering all property treats creditors. In these type of states, creditors of an individual spouse cannot attach and sell the interest of the other spouse. Only creditors of the couple may attach and sell the interest of the property owned by the couple. That means a creditor must go to court to seek a judgment against both spouses in order to attach a lien and sell the property, but if only one spouse is in debt to the creditor, the creditor is out of luck in attaching a lien to the property or gaining control of it.

How Creditors are Treated Affects a Simple Chapter 7

How creditors are treated by a tenancy by the entirety complicates bankruptcy in a simple Chapter 7. Bankruptcy court trustees represent the creditors when liquidating assets. Normally in states without tenancy of entirety laws, the trustee seizes the asset if one of the spouses has an interest in it, sells it, and pays the creditors. Under these new state laws, time will tell through court challenges what precedence is set and how the trustee will have to handle the case. They may not be able to liquidate a non-exempt asset if only one of the spouses is filing. The type of exemptions in this case become very important to the creditors.

Exemptions Can be Affected by Tenancy by the Entirety

If only one spouse is filing a Chapter 7 and there are a lot of tenancy by the entirety non-exempt assets held by the couple, exemptions will become a larger issue than in states that do not have these types of laws. In effect, the tenancy by the entirety laws might provide in essence more exemptions for the filing debtor.

There are other complicated scenarios affecting a tenancy by the entirety in a bankruptcy filing, and these complicated scenarios are all good reasons to consult with a bankruptcy lawyer.

 

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What property can I keep if I file bankruptcy?

Bankruptcy exemptions, created by both federal and state bankruptcy laws, determine what property is exempt in the bankruptcy process.  Exempt property can vary from state to state, although some states let the debtor decide if they want to use the federal bankruptcy exemptions or their state’s exemptions. Other states require the filer to use the state exemptions.

Federal bankruptcy exemptions can be used in the following states: Arkansas, Connecticut, Washington, D.C., Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.

State bankruptcy exemptions must be used in the following states:  Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

Debtors who choose to use their state’s bankruptcy exemptions may also be able to use additional exemptions outlined under federal law called the federal nonbankruptcy exemptions.

What type of property is considered exempt under federal bankruptcy law?

Federal bankruptcy exemptions laws are generally updated every three years. Updates were made in 2010. Keep in mind, if you are married and filing a joint bankruptcy petition you may double the federal exemptions. All code references are to 11 U.S.C. (Title 11 of the United States Code).

Homestead:

522(d)(1), (5) – Real property, including mobile homes and co-ops, or burial plots up to $21,625. Unused portion of homestead, up to $10,825, may be used for other property.Personal Property:

522(d)(2) – Motor vehicle up to $3,450.

522(d)(3) – Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $550 per item, and up to $11,525 total.

522(d)(4) – Jewelry up to $1,450.

522(d)(9) – Health aids.

522(d)(11)(B) – Wrongful death recovery for person you depended upon.

522(d)(11)(D) – Personal injury recovery up to $21,625 except for pain and suffering or for pecuniary loss.

522(d)(11)(E) – Lost earnings payments.

Pensions:

522(b)(3)(C) – Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

522(b)(3)(C)(n) – IRAS and Roth IRAs to $1,171,650.

Public Benefits:

522(d)(10)(A) – Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.

522(d)(11)(A) – Crime victim’s compensation.

Tools of Trade:

522(d)(6) – Implements, books and tools of trade, up to $2,175.

Alimony and Child Support:

522(d)(10)(D) – Alimony and child support needed for support.

Insurance:

522(d)(7) – Unmatured life insurance policy except credit insurance.

522(d)(8) – Life insurance policy with loan value up to $11,525.

522(d)(10)( C ) – Disability, unemployment or illness benefits.

522(d)(11)( C ) – Life insurance payments for a person you depended on, which you need for support.

Wildcard:

522(d)(5) – $1,150 of any property, and unused portion of homestead up to $10,825.

What property is exempt under state bankruptcy exemption laws?

What if you live in a state which does not allow you to choose the federal bankruptcy exemptions? In most states the exemptions include personal property, homestead exemptions, tools of the trade, clothing, household good, income, unemployment benefits, pensions, workers compensation, insurance, and welfare benefits. Due the variations in state laws, it is a good idea to talk to a bankruptcy lawyer prior to filing bankruptcy to understand the exact amount of the exemptions for your state.

What else should I consider before filing bankruptcy?

There are generally two types of bankruptcies filed by debtors: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Chapter 7 Bankruptcy is considered a liquidation bankruptcy and allows the court-appointed trustee to liquidate the debtor’s non-exempt assets. Chapter 13 Bankruptcy permits debtors to keep their property and create a bankruptcy repayment plan to pay creditors over a 3 to 5 year period.

Bankruptcy Exemption Examples

So how does the exemption actually work? Let’s assume you own a car that is worth $4,000 and the exemption in your state for a car is $5,000. If you file Chapter 7 Bankruptcy, the full amount of the car is exempt and you will keep your car. But now let’s assume you own a car which is worth $20,000. If you file Chapter 7 Bankruptcy the trustee will most likely decide to sell your car and use the proceeds to pay your car loan, pay your unsecured creditors and give you $5,000 for the exemption.

What happens in Chapter 13 Bankruptcy? Debtors can either pay the non-exempt value to the creditors over the duration of the Chapter 13 Bankruptcy plan or they can sell the property, giving the trustee the proceeds from the sell. Of course, the benefit of Chapter 13 Bankruptcy is that most of the debtor’s property can be retained and does not have to be liquidated.

How will filing bankruptcy affect my credit rating

Are you facing a financial crisis but you are not sure if filing bankruptcy is the right decision?  Bankruptcy was established as an option to give a person the ability to start over by releasing them from certain types of existing debt.  However, there are repercussions of filing bankruptcy.

The primary negative consequence of filing bankruptcy is how it affects your credit rating.  A bankruptcy will reduce your credit rating or score by several hundred points, and the bankruptcy will appear on your credit report for up to 10 years, depending on the type of bankruptcy you declare.

What is your credit rating? It is a rating used by lenders to determine if they are taking an acceptable risk by loaning money to you.  This can include loans for buying a home, car, or other real property.  Your credit rating may also be evaluated when applying for revolving credit such as a credit card, when establishing utility services, and when applying for certain jobs.

Once you have declared bankruptcy, you can begin to rebuild your credit score by establishing a new payment history.  A payment history can be rebuilt by successfully make monthly or other periodic payments on-time over the course of months and years after a bankruptcy to prove that you are reliable and trustworthy in handling your debt obligations going forward.

This payment history can be for debt that you chose not to have released as a part of the bankruptcy or for new debt you establish after the bankruptcy.  Keep in mind, obtaining new debt after declaring bankruptcy may be difficult.  Many lenders will not be willing to loan money to you due to your reduced credit score and the bankruptcy on your credit report; they will simply consider the risk too high.  Those lenders that are willing to work with you will likely charge you a higher interest rate than if you had a good credit rating.

Do I need to hire a bankruptcy attorney?

If you are considering filing for bankruptcy, it is wise to seek the counsel of a bankruptcy attorney.  A bankruptcy lawyer can review your financial situation and determine if bankruptcy is the best option for you.

If you complete the short evaluation form below, a bankruptcy attorney will review your situation free of charge.  The review is 100% confidential and there is no obligation.  Act today to see if bankruptcy is the right option for you.

What is the Creditor Hearing And is There Any Extra Fees for It?

A hearing in a court of law is an official scheduled court proceeding that can range in purposes from simply collecting factual information all the way up to rendering summary judgments without trial but often accompanied by court orders. Sworn testimony can be used in these normally informal proceedings to expedite the process of law.

In the case of the Creditor Hearing in a bankruptcy, also commonly called the 341 Meeting or the First Creditor’s Meeting, the sworn testimony of the debtor is used to give an opportunity for the creditors and court trustee to ask the filing debtor any questions they may have about his or her financial condition and bankruptcy petition. The purpose of this informal hearing is a fact gathering adventure.

The filing debtor is required to attend this meeting if they want a successful bankruptcy. Failure to attend the meeting could result in legal consequences.

The Creditor’s hearing is a common part of all bankruptcies. The 341 meeting is required by bankruptcy law under Title 11, Chapter 3, Section 343. Under this section, the law states, “The debtor shall appear and submit to examination under oath at the meeting of creditors under section 341 (a) of this title. Creditors, any indenture trustee, any trustee or examiner in the case, or the United States trustee may examine the debtor. The United States trustee may administer the oath required under this section.”

Also under federal law, the 341 meeting is a part of the total cost of filing for bankruptcy. When you pay your filing fee, there is no extra charge by the bankruptcy court for the 341 meeting. The hearing is a part of the bankruptcy process.

If you retain a bankruptcy lawyer to help you with your bankruptcy, he or she may or may not be required to attend the Creditor’s hearing. Some states like Massachusetts require the attorney to attend the meeting, otherwise, the attorneys are deemed to have NOT represented the debtors. In other states, you may save the expense of your attorney accompanying you to the meeting. In any case, that is something you might want to discuss with your attorney before you retain them.

In most cases, it is rare for the creditors to attend the Creditor’s Hearing. It costs them money to be represented at the hearing, and unless there is a special need, they will not want to expend their resources.

The Creditor Hearing is usually a simple process taking between 3 and 5 minutes. You as the debtor will be sworn in by the bankruptcy court trustee, and the trustee usually asks a few basic questions of you that require a simple yes and no answer.

If you have a lawyer, your lawyer most likely will already know whether there will be any rare complicating questions that might arise at the 341 meeting. If there are any legal questions creditors have about the debts owed, they are addressed through a different format and are not addressed at this meeting.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Riverside or San Bernardino, California, contact us here today at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.

The Difference Between Secured and Non-secured Debt in Bankruptcy

The simplest way to understand the difference between a secured and a non-secured debt in a bankruptcy case is to ask yourself if there is anything a creditor can take away from you if you are not able to make payments for the item on time.

Technically, the basic difference between secured and non-secured debt is that in non-secured debt there is no tangible property attached to the loan document providing collateral for the loan. In secured debt, there is some type of tangible property put up as collateral guaranteeing the fulfillment of the loan.

If a debtor cannot fulfill his part of the loan contract, the creditor of a secured loan holds the legal right to take the collateral in the form of tangible property from the debtor. In order to seize collateral, the creditor must go through legal channels. In some states, creditors are allowed to file lawsuits on deficiencies when the value of the collateral the creditor has recovered is not sufficient to pay off the debt.

Some examples of non-secured debt can include credit cards, medical bills, personal loans, utility bills, online services, cable bills, telephone services, store credit, and a whole host of others.

Just like non-secured debt, there is a host of secured debt as well. Sometimes the tangible property placed as collateral can be very subtle. For instance, a payday loan uses your paycheck as collateral; a utility company may ask for a security deposit in the form of cash; landlords of rental property ask for a security deposit to insure against damage to the property or payment for the first and last month’s rent; and some credit unions use cross collateral as a means to secure their loans. In their loan contracts, many credit unions state they can freeze or take money from other accounts you have with them in order to pay off any debt you have defaulted.

Two examples of the more obvious secured debt are automobiles and houses. An automobile loan usually comes with a lien on the title, and when you default on the loan, the creditor will start repossession proceedings to recover the automobile. A mortgage loan, likewise, has a lien on the Title Deed, and if you default on your agreement to make timely payments, your mortgage lender could begin the foreclosure process against you to recover the property.

The type of bankruptcy you file has a bearing on secured and non-secured debt. A Chapter 7 bankruptcy, called liquidation, may discharge all or a part of non-secured debt, depending on the amount of non-exempt assets you own. Deficiencies in secured debt, the difference between the current value and what you owe on the secured property, may be discharged in bankruptcy. Whether or not deficiencies are discharged depends on state law.

A Chapter 13 bankruptcy, called a wage earner’s plan, allows an employed individual to file a plan to pay back all or part of their debt over three or five years. If your disposable income is not enough to pay all of the debt, the non-secured debt not paid at the end of the plan can be discharged. Depending on the state, deficiencies and second mortgages may also be discharged.

Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Philadelphia, Pennsylvania, contact us here today at   www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.