The point of filing a bankruptcy case is to get a discharge of your debts.  The deal is simple.  An honest debtor gets a fresh start.  The price of the bargain?  You have to let the trustee have all of your “non-exempt” assets. That means you have to tell the trustee about everything you have.

If you forget to tell the trustee about everything you have, it’s a very bad thing for many reasons:

• You could lose your discharge
• The trustee can sell or dispose of the asset anyway
• You might be committing a bankruptcy crime
• If you are committing a bankruptcy fine, you could go to jail.

Here are some things you might think are not assets but must be disclosed: Read the rest »

Bankruptcy lawyers can’t help but pay special attention to TV or radio ads aired on behalf of so-called “debt settlement” companies.  Aside from the fact that such firms have frequently been the subject of federal or state regulatory investigations, their ads are often filled with misleading or questionable claims.

Here are some quotes from ads recently aired in Minnesota by debt settlement firms:

• The government has been bailing out the banks — now it’s your turn!
• The bank have been given billions and now they have to clear out their books!
• Don’t declare bankruptcy!  Call for a free consultation.
• Live better — debt free!
• For more information on settling your debt in a government bailout era, call now!
• We’ll tell you the secrets the banks don’t want you to know!
• If you owe $10,000 or more on credit cards, you may be eligible for a special program that will allow you to settle your debt for a fraction of what you owe!
• Did you know you have the right to settle your debt for pennies on the dollar?

“Live better” — shamelessly lifted from Wal-Mart’s well known advertising campaign.  “Free consultation” – suggesting that lawyers or other recognized professionals will consult with you, when that is almost never the case at a debt settlement firm.  “You have the right to settle your debt” — yes, the same way you have the “right” to ask your neighbor if can use his boat this weekend; he also has the right to say no.

The false message of such ads is that there are special programs authorized by the government or even your creditors to obtain a reduction of your debt; or that your debt is actually questionable, so that it should be somehow “settled”;  or that there is a government bailout program aimed at helping people with credit card debt.

Consumers ought to beware of any firms that make sensational or misleading claims concerning “debt settlement” in their TV or radio advertising.

Previously, I discussed how one change to Chapter 11 of the Bankruptcy Code opened up the door for middle-class consumers to take advantage of the code in a way traditionally reserved only for the big boys.

Honestly, I am still a neophyte in this realm of bankruptcy, but I have the good fortune to work with an extremely innovative Chapter 11 lawyer who explains this stuff to me.  So, recently I sat down with the Chapter 11 guru of Parker & DuFresne P.A., Brett Mearkle, to discuss Individual Chapter 11.

As Mearkle explains, “In a typical corporate Chapter 11 case, the Bankruptcy Code requires that if the shareholders are going to retain any interest in the reorganized corporation, all general unsecured creditors must be paid in full.  This requirement, known by bankruptcy petitioners as the absolute priority rule, rendered Chapter 11 useless to most individual consumers.

“However, in 2005, BAPCPA amended Chapter 11 of the Bankruptcy Code, effectively eliminating the absolute priority rule for individuals in Chapter 11.  Instead of rewriting the provisions of Chapter 11, however, Congress simply referred to the requirements found in Chapter 13 for plan confirmation.”

Read the rest »

We all handle medical problems differently.  Go to any Emergency Room and you may wonder why the guy experiencing chest pains for the past week didn’t come in earlier and why the kid with the splinter is there at all.

Financial problems are the same.  Some delay getting financial counsel, while others are pro-active and want to prevent a problem before it becomes uncontrollable.

I had two very interesting calls the other day.  One came from a single man in his twenties who was in obvious distress.  He had no children, no real estate and surprisingly no credit card debt.  He also had no medical bills, student loans, or back taxes.  He was in good health and had a steady job.  So, what was his problem? Read the rest »

Wow, my previous post on Individual Chapter 11 cases lit up my email!  Well, I can understand the interest.  How is Chapter 11 better than Chapter 13, and how could a Chapter 11 bankruptcy possibly be cheaper than a Chapter 13?

According to Chapter 11 attorney Brett Mearkle, the first major difference between an Individual Chapter 11 and a typical Chapter 13 is that there is only a small trustee fee in Chapter 11 versus the huge administrative expense imposed by the Chapter 13 trustee.  In many jurisdictions, including the Middle District of Florida, that fee is 10%. Read the rest »

The United States Department of Justice, U.S. Trustee Program has announced the latest figures to be used under the means test.  For many states’ residents, the income figures have decreased which means that more folks will likely have to file a Chapter 13, as explained by my colleague Jill Michaux, Kansas attorney.   (My colleague Jonathan Ginsberg explains the impact on Georgia residents in his article; For Oregonians, this November 1, 2009, adjustment affects 1 , 2, or 4  person households negatively, as the median income decreased.   The median income for a 3 person household increased slightly.  The  blue figures are until 10/31/09; Red figures are the 11/1/09 and after.

Usually, if a bankruptcy is necessary for one spouse, both spouses will file. Sometimes only one does — does it matter? What happens?This begins a 10-part series on some of the issues when only one spouse files. Issues to be covered include:

• Must the non-filing spouse’s information be disclosed?
• What if my spouse’s assets are separate — must they be disclosed?
• We have a premarital agreement — what does that mean?
• We have a postmarital agreement — does it change anything?
• What about my spouse’s privacy?
• My spouse does not want to cooperate! What do I do now?

Absolutely not!  Many people have expressed concern that if a judgment is entered against them in state (or federal) court, then they are stuck with that particular debt.  In most instances, this is simply not the case.

To understand what occurs, it is helpful to know how a judgment works against you.  First, when a court enters a judgment against you particularly in the county in which you reside, a judgment lien takes effect against your real estate immediately.  The judgment lien is said to “attach” to your real property.  It is this judgment lien that means that you cannot sell your property or gives the judgment creditor the right to ask the sheriff to sell that real property to satisfy your debts.  Even if you do not own any property when the judgment is filed against you, it can still attach real estate that you obtain later.

But in bankruptcy, if the only real estate that you own is your home, you can generally exempt the equity in your home (equity is home value less any prior mortgages).  Read the rest »

Can I keep one of my credit cards when I file for bankruptcy?

A common question heard by bankruptcy attorneys and a common temptation.

And understandable!

In today’s world, it is almost impossible to rent a car or reserve a hotel room without a credit card. Read the rest »

Although it has been in effect for several years, the median income/means test provisions of the Bankruptcy Code continue to confuse potential bankruptcy filers.

In my Atlanta, Georgia bankruptcy practice, I regularly get questions from new clients about the two “budgets” that are filed in Chapter 7 and Chapter 13 cases.  The first “budget” is the median income/means test budget.   The income side of this budget is a calculated figure that arises from a month by month analysis of the gross pay of income earners in a household for the six months preceding the monthly of filing.

The second budget is what I call the “real life” budget that reflects the debtor’s current income and expense situation.

In my view the “means test budget” is not intended to actually function as a budget.  Instead, taken as a whole, the means test is a qualification test to point you to either a Chapter 7 or a Chapter 13. Read the rest »