Tag Archives: bankruptcy laws

Community Property and Its Effects on the Bankruptcy Process

English: A map showing community property stat...

English: A map showing community property states in red. (Photo credit: Wikipedia)

Community property is a marital property system that deals with the division and ownership of the property obtained in a marital relationship. The idea of community property originated from ganancial community systems which developed in the United States through the influence of Mexico and Spain. There are nine states in the United States which practice the community property model, and Alaska allows a marital couple the choice of entering such an arrangement. Whether or not you live under a community property system can have its effects on the bankruptcy process. Continue reading

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

Merry Christmas to All Who are Bankrupt and a Happy New Year

How the Grinch Stole Christmas!

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The Grinch Who Stole Christmas

Being bankrupt this time of year must seem a whole lot like the Grinch Who Stole Christmas, but if you stop to think about it, it really doesn’t have to be that way to those who believe.

The Hope for Forgiveness and Better Times

To the Christian who celebrates Christmas, Christmas is all about good news and glad tidings. During the Christmas season, Christians celebrate the coming of the God-man into this world, the baby Jesus, the one whom they believe brought the hope of eternal salvation to them. The baby, who grew up to be the God-man in their faith, brought hope for a better time and a new world to any who will believe.

There is probably little doubt how much Christian influence was generated by our country’s Founding Fathers in their approach to bankruptcy. The Founding Fathers provided for those of you who might go bankrupt by placing a provision for bankruptcy into the Constitution of the United States. This provision has allowed millions of Americans throughout the history of the United States forgiveness and a fresh new beginning.

Many of our Founding Fathers experienced the harshness of debtor’s prison, and their new found attitude toward forgiveness and a fresh new beginning must have reigned in their hearts with their new found sense of independence. So, it should not come as a surprise the Founding Fathers were quick to make a provision for a sense of financial hope in the Constitution.

In the Christian religion, the God-man, Jesus, taught his followers to forgive one another, and the Christian belief in the new spiritual birth certainly simulates the spirit of a new beginning, a fresh start.

To those of you who currently find yourselves bankrupt during this season of glad tidings, hold your heads up. Your redemption may be drawing near! There is still reason for hope during the celebration of Christianity’s hope because it takes place right before the New Year.

The Financially Practical New Start

New Year’s celebrations in America have historically been about a new beginning, a fresh start. Filing for bankruptcy protection for those of you who are bankrupt can and should be all about a new beginning, a fresh start.

So, although it may seem like the Grinch stole Christmas, it doesn’t have to be that way. You can make up your mind right now that the New Year is going to be something financially better for you and yours. You can use this Christmas season as a season for hope that things will get better for you in the future, a chance to look forward to a new beginning.

Christians believe the season of Christmas is not so much about the ability to give gifts as it is about the gift of hope, forgiveness, and a fresh new beginning provided by God.

Let all of us here at bankruptcyhome.com take this opportunity to wish a Merry Christmas to all of our American friends who have become bankrupt and wish you the very happiest and prosperous of New Years.

Allow us to help you find the way to hope and a fresh new start financially. God bless and provide for you.

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A Creditor Might Reopen a Bankruptcy Too

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There are a variety of reasons a debtor might want to reopen a bankruptcy after discharge, and likewise, there are reasons a creditor may want to reopen a bankruptcy after discharge too.

Federal Law on Reopening Discharged Bankruptcies

Section 350 of the Bankruptcy Code permits a bankruptcy judge to reopen a bankruptcy that has been discharged “to administer assets, accord relief to the debtor, or for other cause.”

Possible Reasons a Debtor Might Reopen a Bankruptcy

A debtor may want to reopen a bankruptcy after discharge for these 3 reasons:

  1. discovery of assets

  2. granting some form of relief

  3. failure to remove a judgment lien placed on real estate

Because the bankruptcy courts can reopen a bankruptcy does not mean they will necessarily do so. It has been pointed out in a bankruptcy case law precedence that reopening a bankruptcy to add a creditor not listed on the creditor schedule when there is no additional assets to pay the creditor is a pointless exercise, and it creates an unnecessary burden on the bankruptcy court. The reason given is that the debt has already been discharged and the burden of proof otherwise is placed on the creditor.

Ultimately, it is up to the bankruptcy judge to decide whether or not a debtor has shown a justifiable reason to reopen a bankruptcy after discharge.

One of the more important reasons a debtor might want to consider reopening a bankruptcy after it has been discharged is to get relief from a creditor whose debt has been already discharged. By bankruptcy laws, creditors cannot continue to try and collect a debt once the debt has been discharged by bankruptcy. The bankruptcy court can impose sanctions and attorney’s fees when a creditor is found guilty of such charges.

Possible Reasons a Creditor Might Reopen a Bankruptcy

A creditor may want to reopen a bankruptcy after discharge for these 3 reasons:

  1. suspicion and/or proof of fraud by the filing debtor

  2. discovery and proof of additional assets failed to be listed

  3. failure to be listed on schedule of creditors

If a creditor can reopen a bankruptcy after the bankruptcy has been discharged and does so because the debtor failed to list the creditor on the creditor’s schedule, there are often good reasons creditors might need to address pertinent questions to the debtor in the 341 meeting held in his or her absence. If the creditor has been denied the availability of the debt because he or she did not know about the bankruptcy, the creditor can sometimes prove to the bankruptcy just cause for reopening the case.

Burden of Proof For Reopening a Bankruptcy

In any regards, it is up to the person who files a petition to the bankruptcy court to provide the burden of proof by bankruptcy law for why the discharged case should be reopen.

One thing a debtor or creditor should remember if they are going to reopen a bankruptcy is that there is a filing fee associated with such that could range anywhere from $200 to $1000, depending on the type of bankruptcy that was filed. Under certain circumstances, the fee can be waived.

Reopening a bankruptcy after it has been discharged is usually best done by a professional like a bankruptcy attorney who understands the complexities of the bankruptcy laws associated with addressing a bankruptcy court.

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Disease Can Cause More than a Bankruptcy

 

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Juvenile Disc generation, a part of the Lumbar Scheuermann’s disease, is a disease that starts in juveniles causing spinal parts in their Lumbar region to have pits in the discs of their spine.

In latter years of the Scheuermann’s disease, when the discs begin to deteriorate, the condition can be painful and debilitating. Up until that time, and the time varies from patient to patient, Scheuermann’s disease may go undetected because pain is not really associated with the condition until the discs begin to deteriorate and rub against the spinal nerve.

Under some circumstances, Scheuermann’s disease can deteriorate the discs of the spine so that the person with the disease might eventually become disabled.

When the disease has caused your spine to deteriorate to the point you have unbearable pain, there are only about 3 options left for you in today’s medical world to help you alleviate the pain.

Option One is a Conservative Approach.

You can push through pain until the disk is completely degenerated. Once that happens there will be no more pain. Conservative treatments of Scheuermann’s disease can help you push through the pain and may include one or combinations of the following:

  1. Medicines
  2. Chiropractic or osteopathic manipulations
  3. Epidural injections
  4. TENS units
  5. Physical therapy (exercises, stretching)

Options Two and Three are Radical Options.

Radical options for Scheuermann’s disease are invasive in nature. They are normally not recommended for the vast majority who has this disease, but there have been abnormal cases reported where the deterioration has called for radical options.

  1. Radical option two for curing the symptoms of Scheuermann’s disease is surgical spinal fusion of the disc involved. Here, the surgeon scrapes out the disc material, places pins and a plate where the disc was and allows the bone to fuse.

One of the downsides to spinal fusion is that it is very invasive and has the potential of limiting your skeletal movements when completed. Recovery time from the operation can be long and painful. Normal movement varies from person to person.

  1. Radical option three for curing the symptoms of Scheuermann’s disease is a relatively new surgical procedure called spinal disc replacement. Here, a surgeon uses not so invasive a technique going through the abdomen and replaces the disc with a specialized disc.

The downside to disc replacement is that many insurance companies will not cover the cost because it is such a new procedure here in the United States. Recovery time is much faster. Skeletal and body movement are usually not hindered.

Scheuermann’s disease can disable a person. When you are disabled, your disability can cause the inability to work. Combine the facts you may be disabled and cannot work with the fact you have large medical bills, and you have a recipe for bankruptcy. Since the disease can cause you to be both disabled and bankrupt, disease can cause more than a bankruptcy.

If you are suffering from any kind of disease that has disabled you and caused you to lose your job or face bankruptcy, contact us here and we will help you find a disability or bankruptcy lawyer in your area. Our attorneys can help answer any questions you might have about bankruptcy or disability.

 

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Federal Law and Raiding Individual Retirement Accounts

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Reasons for Dipping into IRAs

An interesting question cropped up recently on a bankruptcy forum website when a blogger curiously asked, “why do folks dip into their 401K/IRAs before filing for bankruptcy?”

The general consensus to answering the question revolved around the blogger’s admittance that the reason they took money out of their Individual Retirement Accounts (IRAs) before filing bankruptcy was because they were plain ignorant about bankruptcy laws.

  1. One blogger from the state of Michigan suggested, “I find most people take out these large withdrawals in an attempt to “not” file for bankruptcy, usually to terrible consequences. People just don’t know.” 
  2. A blogger from Florida wrote, “There was no excuse for us–just plain ignorance.”

Another leading factor causing bankruptcy filers to take money out of their Individual Retirement Accounts they filed bankruptcy was their societal conditioned response to feel guilty about not being able to pay their bills when their financial condition was only temporary. The old adage, “hind sight is better than foresight,” certainly must have a realistic meaning to bankruptcy filers who made this mistake.

  1. An example of a blogger who might have felt societal expectations wrote, “I kept borrowing and doing hardships to save my home and pay off my car, but as you said I should have just filed (bankruptcy) from the early signs of hopelessness.”

What federal law says about IRAs

The U.S. Supreme Court ruled in April 2005 that Internal Revenue Accounts receive Federal Creditor Protection under federal law. This means that creditors cannot seize assets in Individual Retirement Accounts. The Supreme Court ruled unanimously that IRAs should join pensions, 401(k)s, Social Security, and other benefits tied to age, illness, or disability, that are afforded protection under federal law and thus shielded from creditors in bankruptcy proceedings.

One exception to the IRA federal law

Today, there really is not a good reason to raid or dip into Individual Retirement Accounts but for one exception to the federal law. The only debt for which an IRA should be dipped into is to pay a non-discharged tax debt. Even then, you should have resolved to exhaust all your other options before you do. The reason for raiding your IRA under these circumstances is because an IRA is not exempted in a bankruptcy from an Internal Revenue Service levy as described by federal law.

 Raiding Individual Retirement Accounts before filing bankruptcy is not a good idea even if you do not have tax debt. Under federal law, you not only will have to pay penalties for early withdrawal on your Individual Retirement Accounts, you will have to pay income taxes on them as well.

If you are facing bankruptcy when you decide to raid your Individual Retirement Accounts, what makes you think you will ever be able to replace the income loss? Who will take care of you when you reach retirement age, and you do not have enough retirement income to live on?

Individual Retirement Accounts are designed to help you when you need it the most in life, in your old age. A bankruptcy can happen to anyone just because of happenstance, but there is really no reason you should raid your Individual Retirement Accounts. That would be caused by you, not happenstance.

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Will Increasing or Decreasing Income Affect a Bankrutpcy Plan?

A Chapter 13 bankruptcy is commonly called a wage earner’s plan. It is a type of bankruptcy most individuals can file requiring you to design a pay back plan with your disposable monthly income to pay your unsecured creditors. During the plan, all secured debts will be expected to be paid on time and up to date.

The plan can be designed to pay all or a portion of your debts over 3 to 5 years, depending on the amount of your disposable income. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If your income is more than the state median, the plan is normally for five years. In no circumstances can a plan be for more than five years. Any unsecured debts still existing at the end of the pay out plan will be discharged.

What happens in a Chapter 13 if your income increases or decreases during the plan period?

Basically, if your income decreases for some reason through no fault of your own, and you cannot make the planned monthly payments to the bankruptcy trustee, you must petition the bankruptcy court to alter your payment plan to account for the loss. Otherwise, you run the risk of getting your bankruptcy dismissed if you cannot make the payments on time.

If your income is lowered enough to bring your total family income below the state median, there exists the possibility you can convert you bankruptcy to a Chapter 7. It would be wise to consult with a bankruptcy lawyer before you convert to consider all the ramifications for converting.

One recent question about increasing your income came from a debtor on a bankruptcy forum website who got a small raise, less than 3%, and an increase in tips. She was in a Chapter 13 plan, and her question was, “In bankruptcy, will increasing your income affect a Chapter 13 plan?”

She was afraid her meager earnings would be quickly gobbled up by the bankruptcy trustee, and she felt like she needed the cost of living raise to compensate for the rise in the cost of living. She also felt like the increase in tips might be temporary as they often are. She also wanted to know whether or not she was required to turn in the increase.

Bankruptcy laws require the woman to turn in any change of income to the bankruptcy court, or for that matter, any other kind of financial change that may occur during a Chapter 13 plan. It is not likely the bankruptcy trustee is going to be interested in such a meager and unstable increase in income. The raise was a cost of living raise and the increase in tips would have to hold up for a long period of time to make any difference.

A Chapter 13 plan is one of the harder types of bankruptcies to file because the bankruptcy laws governing it are complicated, and it requires an ongoing disciplined maintenance of the plan once filed. By filling out the form below, we can help you find a bankruptcy attorney in your area who can help design a Chapter 13 plan for your particular circumstances.

Foreclosure, Bankruptcy, and a Mortgage Bank Not Quit Claiming

The environment in the mortgage industry is quickly changing. With foreclosures and bankruptcies on the rise these past few years, mortgage banks are not as quickly to cooperate in short sales, quit claims, or a deed in lieu of foreclosure. With houses losing their value at a record pace, especially if it has been abandoned during a bankruptcy and has now been vandalized, mortgage banks are not willing to pay the expenses of taking back the worthless homes.

Not long ago, a mortgage bank would jump at the chance for a quit claim, a short sale, or a deed in lieu of foreclosure because those options were a less expensive alternative to foreclosure. Recent bankruptcy stories on the internet are providing us with a different reality today.

One debtor evolving from a bankruptcy and filing a quit claim to avoid the tax consequences of owning a home not yet foreclosed, shared that his mortgage bank is suing him for removal of the claim. The bank said the value of the home was not worth the ongoing expenses of ownership.

In most states, mortgage banks can take up to 20 years before they are forced to foreclose on a property. That means a homeowner can be potentially responsible for the taxes on the home during that time because he still technically owns the home. Twenty years of unpaid taxes with interest tacked on them can amount to a lot of money in a hurry. Since the taxes would be new debt, they would not be covered by any bankruptcy filed in the past, and they may be exempt from the filing of a bankruptcy anyway.

A bankruptcy discharges only the debt in a mortgaged home. A bankruptcy does not discharge a lien. Whether or not a mortgage company begins the foreclosure process after a bankruptcy is up to them. Foreclosure costs money and is a legal process that the banks have to abide.

When a foreclosure takes place and finalized is when a lien is released, and the homeowner no longer owns the home. Up until that point, the home is legally owned by the ones whose names are on the title of the deed.

Before a transfer of a title of deed becomes legal, both parties of a secured contract have to sign off on the transfer. A quit claim normally is a one sided transfer made by an homeowner who wants out of a lien. Not challenged too much in the past by mortgage companies because of the convenience of not having to foreclose, mortgage banks are now beginning to challenge the procedure in a court of law. It will be interesting to see what happens if more and more mortgage banks begin to challenged quit claims.

As the lack of foreclosure phenomenon begins to shape up, it will be interesting to see how the federal and local governments respond to the plight of taxpayers who have been financially wounded enough to file for bankruptcy only to be forced to pay taxes they cannot pay. It will be equally interesting to see how the taxpayers themselves respond when the governments begin to crack down to get their money.

Can You Buy a House Before a Bankruptcy is Complete?

One of the more difficult things to do once you file bankruptcy is to buy a house. A bankruptcy can remain on your credit report for up to 10 years. There are circumstances that are exceptions to a spouse having poor credit when a report prevents the spouse from buying a house, and that is when the other spouse has good credit, separate accounts, and can independently buy a house under his or her own volition.

A debtor recently reported on a bankruptcy forum website about similar circumstances. The debtor had private student loans and a huge amount of credit card debt that she could not pay off because of not making enough income. Her husband had a good job, good credit, separate accounts, and could qualify for a mortgage loan by himself. She was concerned that once the bankruptcy had been filed, that the filing would reflect on her husband’s ability to buy a house. She worried whether or not the bankruptcy court trustee would allow the husband to buy a house while still married to her as a filer. So, she asked the question, “Can you buy a house before a bankruptcy is complete?”

Technically, a bankruptcy trustee cannot keep the non-filing spouse from buying a house under those circumstances. Federal bankruptcy laws, even in a common law property state, generally states that if only one spouse files for a Chapter 7 bankruptcy, only that spouse’s debts will be discharged. The non-filing spouse’s debts will not be discharged.

If the spouse filing has no joint debt with the non-filing spouse or joint accounts for the trustee to go after, there is really no conflict of interest that would prevent the spouse from buying a house during the bankruptcy. Even though in a common property state a debt is owned equally by both spouses, federal bankruptcy law prevents the trustee from going after the non-filing spouses debts.

In other words, the trustee, bound by federal law, is not going to try to manipulate a new debt made by the non-filing spouse just because a state law says the debt is joint owned. Federal law always overrides state law in most all circumstances.

A concern some may have that may seem more significant in this case is whether or not a lender will loan the non-filing spouse the money to buy a house, especially if they get wind of the filing spouse’s bankruptcy. A Chapter 7 bankruptcy is normally concluded in most cases in six months or under, so some question the wisdom of buying a house during this time. Their reasoning might include the question, why not wait?

If you are going to include both spouse’s names on the title of the house at closing, it really does not matter whether or not you wait to buy a house. When you apply for a loan to buy a house, during the application process, many lenders include those names that will be on the title, and many lending institutions will run credit checks on both names, even though only one spouse is borrowing the money to buy the house. Running a credit check will alert the lending institution of a bankruptcy filing. This may or may not kill the transaction.

Nothing really prevents a non-filing spouse from buying a house if he or she puts it in their own name. That may be hard to do in a common property state.

What are Your Options on Inheritance Before Filing Bankruptcy?

Many of you who are needing to file bankruptcy sometimes come into a small financial windfall in the form of an inheritance. What are your options on inheritance before filing bankruptcy?

To help you understand your options if you suddenly come into an inheritance and are considering bankruptcy, lets assume you shared an inheritance with siblings after one of your parents suddenly passed away.

Let us assume you live in Texas, you have not yet filed for bankruptcy, you just got a new job for the first time in three years, you owe a credit union money for an unsecured loan of $7,500, you owe over $75,000 in credit card debt, a collection agency is currently threatening a lawsuit against you, you have student loan payments due that are incurring interest, and you have back taxes due. Your inheritance will be around $25,000 for your share. What are your bankruptcy options to protect yourself?

Option number one is to hold off on filing bankruptcy until the inheritance is settled. The bankruptcy code prevents you from giving preferential treatment to creditors up to twelve months before you file for bankruptcy protection. Bankruptcy court trustees pay particular attention to preferential insider treatment like paying off the debt of a family member, but here are some options for using the inheritance money during the time before filing for bankruptcy:

  • You might use the money to pay off debt that is exempt from discharge in a bankruptcy. Under the illustrated assumptions made, you might use the inheritance money to pay off your student loans and/or back tax burdens. This may be done if your filing either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

  • If you want to keep some of the money for yourself, you may be able to dump some of the money in an eligible Individual Retirement Account (IRA).

  • If most of the inheritance is coming from the sale of the home of the deceased, you may rent the home from your siblings using the Texas homestead exemption for your percent of ownership. After the bankruptcy is closed, you can sell the home and keep the proceeds.

  • If willing, your siblings could buy out your share of the inheritance before you file bankruptcy and before the estate of the deceased is settled. The bankruptcy court trustee would most likely give you the the option of buying back your part of the home received in an inheritance anyway if the home becomes a part of the bankruptcy estate.

The second option is to go ahead and file for bankruptcy protection realizing some inheritance estates take years to settle. Regardless of how long it takes the administrator to distribute the assets from the estate of the deceased, your right to any future distribution is a part of the bankruptcy estate. If the asset is not exempted, it is subject to liquidation by the trustee in a Chapter 7 bankruptcy, and he may wait on a settlement of an inheritance as long as it takes.

Theses are just a few of the options you might consider when dealing with bankruptcy and inheritance. If you have inheritance and bankruptcy issues, it may be wise to consider consulting with a bankruptcy lawyer. Let us help you find a bankruptcy attorney in your area of Texas that will answer you questions about bankruptcy laws.