2009 August | Bankruptcy Questions Answered

Archive for August, 2009

Monday, August 31st, 2009

Jon Arnold asked:

When an individual consumer, not a business or corporation, is looking to file for bankruptcy, it is almost always most appropriate for them to either file under Chapter 7 bankruptcy law or Chapter 13 bankruptcy law. The majority of consumer bankruptcies are filed under Chapter 7. In Chapter 7 bankruptcy, the consumer is able to get rid of almost all his debts, thereby providing them with the chance to start over again, where their focus would be on rebuilding their severely tarnished credit report.

That last sentence is important to realize for anyone considering filing bankruptcy under any chapter or code. If your bankruptcy is approved by the federal bankruptcy courts after an extensively and detailed look at your current financial situation, the bankruptcy will be highlighted and readily visible on your credit report from each of the major credit bureaus for the next seven to ten years. This is a big reason why it is important to consider the act of bankruptcy as a last resort option, where you have thoroughly examined and evaluated each of your bankruptcy alternatives and found that proceeding with the bankruptcy petition is really your best option in your circumstances.

Even with the drastic changes in the bankruptcy laws in recent years, it should be noted that the underlying PUPOSE of filing Chapter 7 bankruptcy has not changed. But with that said, be aware that the changes in the bankruptcy laws have significantly changed the method and procedure for doing any kind of bankruptcy, including Chapter 7.

For the consumer considering chapter 7 bankruptcy, this is most often caused by a huge pile of debt, usually credit card debt and usually with high interest rates, where the consumer is unable to pay even the minimum amount due each month. Note that “fault” is not assigned in a bankruptcy hearing. The financial situation of the consumer may have come about due to things out of the control of the consumer, not due to the financial mismanagement of the consumer. The most frequent causes that lead up to this situation are a job layoff, high unexpected medical expenses that are not covered under one’s health insurance plan, a hotly contested divorce settlement, and too many other things which are out of the consumer’s direct control to list here.

This can be a problem. Most consumers really want to pay off their debt if they had the ability to do so. But a consumer with, for example, $60,000 or more in debt could find themselves continuing to pay on that debt for the next 20 years or more, even if they did not acquire additional debt and even at low or no interest rate being assessed.

After the bankruptcy petition is filed, the consumer needs to show up in court on a specified date, a date of which all his creditors have been notified of, and each side presents their case. The creditors, if they show up (they often do not) may argue that money was loaned to the consumer with fair expectations of repayment. It is ultimately up to the bankruptcy judge to decide how to proceed, and there is not a set or established standard for how this plays out, since each individual case is different.

Although Chapter 7 bankruptcy could conceivably be done without a bankruptcy lawyer, this is strongly not recommended. With the changes in the bankruptcy laws, compounded with variations of the law from state to state, the consumer could find himself spending more time and money that what the lawyer fees would have come to, and it is almost always worth the investment in a bankruptcy lawyer to guide you through the process, since they have a very thorough understanding of bankruptcy law and what the variations are in your state.

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Saturday, August 29th, 2009

Cornie Herring asked:

People loves credit card because it provides convenient on spending that meets today’s lifestyle, but they also **** it because it may cause them to trap in overwhelming debt, some people even need to go for bankruptcy filing to relief themselves from credit card debt. If you are at this worse financial situation due to large credit card balances that beyond your financial affordability to clear it, what are the options available for you to resolve your debt problem?

Many heavy credit card debtors tend to think of going for a bankruptcy filing so that they can relief themselves from hassling phone calls and surprising visits from their creditors to ask for their debt payment. But, they did not or might not aware of the consequences of filing a bankruptcy that will follow them for years (7 to 10 years) before they can freely reuse their credit again. Hence, bankruptcy filing should always be your last option after you have explored all alternatives for better options than bankruptcy which can potentially resolve your debt issue.

Credit card debt consolidation can be your alternative to bankruptcy. You should always explore this option for debt relief before you go for extreme solution such as bankruptcy filing which may badly hurt your future credit worthiness. You either can choose to consolidate debt with an unsecured or secured loan. But, if you have reached the status of receiving harassing phone call and getting visits from debt collectors, then you may already hurt your credit ratings due to the late payment or default payment. Then, it might be hard for you to get an unsecured loan to consolidate your credit card debt; however, it still worth to try to search for one, but be prepared that you won’t be able to get the best interest rate. If you manage to get an unsecured loan with interest rate that is good enough to consolidate the debt and bring it to current status, then you can avoid the need to filing for a bankruptcy.

If you own a home, you will be at a better situation to resolve the overwhelming credit card debts by consolidating them into a secured loan. You can apply for a home equity loan or refinance a mortgage to cash out money to pay off your debt. By pledging an asset for a loan, you should be able to find a good loan with low interest rate which you can use it to consolidate your debt. Remember, using your home to secure a loan also means that you are risking your home because you may lose it if you default the loan, so you should always make your loan repayment on time and don’t build more new debt before you clear the loan.

Summary

Bankruptcy filing is not the only solution for heavy debtors to get a relief from their overwhelming debt problem. You should always explore other alternatives for better debt relief options such as debt consolidation, which can potentially resolve your debt problem and able to minimize impacts on your future credit worthiness.

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Friday, August 28th, 2009

Tara Mathews asked:

Bankruptcy marketing gathers information for lenders about those who have filed for bankruptcy. Bankruptcy is a process to relieve an individual or business of the legal responsibility for paying its creditors. Debtors who file for bankruptcy cannot file again for at least six years. Once their debts are discharged by the courts, they owe little or no debt, but their financial options are limited. Having a claim for bankruptcy on file prevents them from buying on credit for a long time.

Traditional financial institutions such as mortgage lenders, automobile dealerships and credit card companies usually require a credit history before extending credit. Those who have filed for bankruptcy are not considered a good risk. Therefore, these debtors need to connect with businesses who offer non-traditional forms of financial assistance. Bankruptcy marketing provides a venue for that connection to be formed.

Through bankruptcy marketing, non-traditional lenders can pinpoint potential customers for their services. Information on bankruptcy claims is a matter of public record and includes many data. In addition to the basics of name and address, the claim contains specific financial statistics such as income, amount of lien, type of bankruptcy, and status of the claim. This data can be compiled and sorted by any number of factors, but is most often categorized by filing status (filed, dismissed, discharged) and type of bankruptcy.

Bankruptcy can be filed under six different types called chapters. Chapter 7 and 13 are most common filing types for individuals. Businesses normally file under Chapter 11. Because the filings are different, the bankruptcy-marketing plan is different, too.

Chapter 7, for instance, involves liquidation of all assets to pay creditors. Chapter 13 involves retention of some assets and designation of future income to pay creditors, usually over a period of three to five years. Debt consolidation companies and credit reorganizers would more likely target those filing Chapter 13. Companies that provide methods to establish new credit would target their bankruptcy-marketing plan to those filing under Chapter 7.

The database of bankruptcy claims is nationwide and can contain over a million filings for just one calendar year. Gathering this information is time-consuming. Many businesses, therefore, hire marketing firms to provide leads for their bankruptcy marketing. Compilation of data can be customized for each lender, by filing status, bankruptcy type, income, discharge date or location. Customization also determines how often data is generated, and the extent of information included.

Companies who provide bankruptcy-marketing services do so by gathering data from courthouses across the United States, utilizing state of the art technology. Data is updated regularly, often daily, and is validated and verified for accuracy before being customized for the lenders. Adding verified current phone numbers is another service available to lenders, in the event that lender wants to incorporate telemarketing into its bankruptcy marketing strategy. The data from the public records can be merged with the lender’s own business information, too. Bottom line: Bankruptcy marketing, however customized, is a powerful tool for the non-traditional lender. Take advantage of this unique concept in marketing today and increase your business exponentially.

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Friday, August 28th, 2009

Cornie Herring asked:

Filing for bankruptcy is a very personal decision. Heavy debtors may choose to file a bankruptcy if they see no other way out from their heavy debts. By declaring bankruptcy and filing a petition with U.S. Bankruptcy Court, the bankruptcy filer will be protected and relief from debts under the Bankruptcy Code.

Bankruptcy filing should be you last option if there are no better options available, because the consequences of filing a bankruptcy will follow you for 7 to 10 years. If bankruptcy is your only option, then by understanding the process of filing bankruptcy will get you more prepare to face it. Bankruptcy procedure and exemptions may vary from one state to another state. This article will walk through with you the general process of filing a bankruptcy.

The first part of the bankruptcy filing process is collecting your personal financial information. This includes your existing secured and unsecured debts and tax returns for past two years. Prepare all your deed documents which include real estate you own, car title, land title and other loan documents. You may want to order your credit report, it will provides you some helpful information on your past records.

Then, you either assign a bankruptcy attorney or you can choose to file the bankruptcy yourself. If you choose to file the bankruptcy yourself, you need to get the bankruptcy forms (you can get these forms online) and get them fill up. You have to fill in your current financial status and recent financial transactions (within last 2 years) into the bankruptcy forms. At the mean time, you need to decide to file under what type of bankruptcy; there two commons types which are Chapter 7 and Chapter 13, chapter 7 bankruptcy is the preferred one, but not all are eligible to file under chapter 7. If you choose to file under chapter 13, you need to enclose your proposed repayment plan with your petition. Once the bankruptcy petition is completed you will need to file the petition with your local United States bankruptcy court. If you have assigned a bankruptcy attorney to handle your bankruptcy case, the attorney will help you and guide you through the above process.

Once you have submitted your petition to the bankruptcy court, you will be immediately protected under the bankruptcy code. Your creditors are not allowed to make direct contact with you or making a claim to any of your property from the date of filing. About 1 month later, the trustee will call a first meeting with all your creditors and your creditors’ lawyer. Objections are typically resolved by negotiation between you as the debtor and your creditors. If there is no challenge raises in the meeting, you should receive a notice from court after 4 to 6 months stated that your bankruptcy has been discharged; otherwise, if compromise can be reached by all parties, a judge will intervene.

In Summary

Bankruptcy filling is a long process, it may takes up 6 months to a few years if a court case involve. You must be prepared to face it and if you have no confidence to get through yourself, it’s better to assign an attorney to handle the bankruptcy process.

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What Happens if my Chapter 13 Case is Dismissed?

Thursday, August 27th, 2009

Earlier this week, I wrote a post entitled Should I Oppose the Chapter 13 Trustee's Motion to Dismiss. In that post I spoke about the relatively common scenario whereby a Chapter 13 debtor will fall behind on payments to the trustee or an unexpected claim will cause the plan to run longer than 60 months. In such a case, the trustee will file a motion to dismiss and the debtor and counsel will have an opportunity to propose a cure to the delinquency. Usually this cure takes the form of a lump sum payment immediately with the remaining delinquency paid to the trustee over time.

What happens if the proposed cure is not feasible for the debtor? In such a case, the judge would sustain the trustee's motion to dismiss or the debtor would not oppose the motion. Either way, the debtor's Chapter 13 case will be dismissed.

When a Chapter 13 case is dismissed, creditors can immediately pursue all non-bankruptcy alternatives. If there is a home and mortgage delinquency involved, the mortgage lender can start foreclosure proceedings. If there is a car payment involved, the car lender can immediately start the repossession process. Credit card lenders can restart collection efforts including calls and letters.

More importantly creditor claims go back to their pre-bankruptcy status. If, for example your Chapter 13 plan called for a payment amounting to 5 cents on the dollar to unsecured creditors, a dismissal would give those unsecured creditors the right to pursue 100% of balances due + interest.

The law does allow a debtor to refile Chapter 13, but there are strings attached. In a refiled case the automatic stay (the core protection of bankruptcy) would only last 30 days – your attorney would need to file a special motion asking the judge to keep the stay in effect beyond 30 days.

Generally, if case #1 was dismissed because of circumstances beyond the debtor's control – i.e. a job loss or illness – judges will be amenable to extending the stay and eventually approving a 2nd plan. However, 2nd cases are inherently looked at with suspicion by Chapter 13 trustees.

Posted in Chapter 13 issues, Trustee motion to dismiss, chapter 13 case dismissed, motion to extend stay, refile chapter 13, trustee mtd | Comments Off

Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss

Tuesday, August 25th, 2009

As you may know, Chapter 13 cases function as payment plans whereby you send your Chapter 13 trustee a monthly payment and the trustee disburses those funds to creditors. Since Chapter 13 cases usually last five years it is not surprising that sometimes a debtor may fall behind on payments, even if the payments are made through an automatic payroll deduction.

A certain percentage of my Chapter 13 clients will fall behind because of illness, job loss, family emergencies, or an employer's failure to send in withheld funds. Sometimes employers stop withholding funds for no particular reason.

Whatever the cause if you fall behind on your payment schedule to the Chapter 13 trustee, you will eventually face a trustee "Motion to Dismiss." In the Northern District of Georgia, each of our three trustees use a computer system that periodically produces reports identifying cases that have gone delinquent and the system thereafter spits out a form motion to dismiss.

A motion to dismiss may also arise if claims (usually tax claims) come in higher than expected, thereby causing the plan to run more than 60 months.

What should you do if you receive a Motion to Dismiss in your case?

First, you should contact your lawyer's office to address the reason why the motion was filed and to discuss possible solutions.

From my side of the desk, I will discuss with you possible cures. The good news here is that our Chapter 13 trustees are usually willing to work out a deal to save your case. Typically the trustee will want 25% to 50% of the delinquent funds paid immediately and will accept the remaining balance of delinquent payments over time.

Here is an example: Tom filed a Chapter 13 case in September, 2006. It is now August, 2009. The trustee motion to dismiss indicates that Tom is $3,500 behind on his payments to the trustee. In this situation, I would look at the trustee's web site to see if there is a problem with the payroll deduction. Perhaps Tom has changed jobs and I need to file a new payroll deduction. Perhaps Tom's employer has been withholding and sending in the wrong amount.

I would also calculate how much longer Tom has in his plan. Here the plan has been active for almost 3 years (36 months). This means that I have only 24 months left.

If Tom can come up with $1,000, I can propose a cure to the trustee: $1,000 payable now and $2,500 payable over the next 25 months at $105 per month. Assuming the trustee accepts, I would modify the payroll deduction order to increase the monthly payment by $105.

The trustee will likely want "strict compliance" on such a cure – this means that if Tom should fall behind again, the trustee would not need to file a second motion to dismiss. Instead the trustee would only need to send Tom and me a letter giving him 10 days to cure the delinquency, otherwise the case would be dismissed without further notice or hearing.

Now, let's consider another example: Sally has been a debtor for 20 months. Her monthly trustee payment is $1,300 per month. Because of unexpected illnesses, Sally has fallen behind by $10,000. She is currently out of work but will be back at her regular job in 6 weeks. The hearing on the trustee's motion is scheduled for next week.

In this case, Sally would be able to come up with $2,000 within the next month. Dividing the remaining $8,000 by 40 months = $200. My proposal to the trustee would be $2,000 in 30 days + an additional $200 per month for the remainder of the plan and strict compliance on future payments.

If the trustee won't go for this type of deal, I would argue for it in a hearing before the judge. The trustee might not accept it, and the judge might be concerned as well because Sally has no money up front.

What happens if Sally cannot afford this cure or if the judge would not accept our proposed cure? I'll discuss that in another post.

Posted in Chapter 13 issues, Trustee motion to dismiss, delinqency, mtd, trustee payments | Comments Off

Bankruptcy Exemptions In Florida Part 1 - Homestead

Saturday, August 22nd, 2009

When you file for bankruptcy, a bankruptcy estate is created (11 U.S.C. 541). Individuals are allowed to protect items of personal property, cars and equity in real estate from their creditors. The process is called claiming an exemption or exemption planning. When an item is claimed as exempt, the property is theoretically removed from the bankruptcy estate and is no longer available to pay the claims of creditors.

If you are a Florida resident or have lived here for at least two years prior to the date of filing for bankruptcy protection, you must use the Florida Exemptions to protect your personal property in a Chapter 13 or a Chapter 7.

Even if you are just falling behind on your bills or have lost your job and think you may have some financial troubles, knowing the Florida Exemptions is important. In a nutshell, exempt property is protected from liquidation by a creditor. So, if you have a creditor or creditors coming after you, you know that your property is safe because it is exempt.

Florida's most significant exemption is the Homestead Exemption because it is unlimited. The reason it is significant is because the protection arises in the Florida Constitution. Therefore, the homestead exemption cannot be altered without a constitutional amendment. The exemption extends to real property of 1/2 acre within a municipality and 160 acres outside a municipality. Accordingly, a person can own up to 160 acres outside of a municipality with a house with no mortgage and a creditor cannot touch the place. This exemption was limited by the 2005 Bankruptcy Amendments.

In Bankruptcy, to qualify for the unlimited Florida Homestead Exemption, you must own the residence for 40 months. Or, if you owned your current home for less than 40 months, you must have owned a previous home in Florida for 40 months total. If you have owned a home(s) in Florida for less than 40 months, then you are only allowed to exempt $136,875.00 of equity per person.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog and the firm's mortgage modification blog.

Posted in Consumer Protection, Debt Collection Law, Good News, Sign of the Times, Southwest Florida News | Comments Off

Saturday, August 22nd, 2009

Roilee Mandeville asked:

How can you begin with your bankruptcy? If you want to declare yourself bankrupt you have to start the process by filing the official bankruptcy forms. You must know the several methods on how to file for bankruptcy. Your objective is to get the most inexpensive bankruptcy solution and save huge money on legal expenses. This article will give you an overview of the different process of filing for bankruptcy. This article is not a substitute for legal advice, and it is not intended to give you specific legal advice on your financial situation.

The Safest Method

This is the easiest and safest way to file personal bankruptcy — retain a bankruptcy lawyer full-time. The attorney will guide you through the whole bankruptcy process. It is the lawyer’s job to evaluate, prepare and file your case. During the creditors meeting your attorney will handle all the tough issues that may arise. The only negative in using this method is that it costs more. You must find a way on how to filter attorneys the right way for you to get the best workable deal if you want to use this method.

The Hybrid Method

This method is the most followed technique in filing for bankruptcy. The hybrid method normally works best in filing Chapter 7. The key component here is to hire the services of a lawyer or law firm to prepare your forms. You need to pay the service provider with a fixed fee. Once they file your documents you’re on your own. You can save large amount on legal fees because half of the solution is a do-it-yourself work. You should look for a bankruptcy preparation service that will also give you a mini seminar on how to manage the do-it-yourself portion as part of the package.

The Cheapest Method

This method is a full do-it-yourself (DIY) solution or “pro-se” filing. You need to educate yourself with the complexity of the bankruptcy laws. You can download the official bankruptcy forms free but it is usually easier to do this method if you buy an up-to-date bankruptcy book or a bankruptcy kit. If you try to ask instructions from your local court clerks they will say they can’t help you. They will not give you advice on how to fill up the forms because that would be “practicing the law” — a task reserved only for licensed bankruptcy lawyers.

What To Do Next?

Now that you know the different ways of filing personal bankruptcy, which method are you going to select? The new bankruptcy law does not require you to have an attorney, but it is in your best interest to seek the advice of an seasoned bankruptcy attorney. If you choose to file bankruptcy without the help of a lawyer, you will need to have to exhibit a lot of patience and diligence. Keep in mind and remember that when it comes to personal bankruptcy, you either liquidate your assets or you protect them.

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Thursday, August 20th, 2009

sadanand naik asked:

BANKRUPTCY LITIGATION IN USA

INTRODUCTION

A bankruptcy case is a special kind of a civil case, involving people or companies who can no longer pay their debts.

Congress has established a special court, called as the bankruptcy court to adjudicate bankruptcy matters. Bankruptcy protects both the debtors and creditors

HIERARCHY OF COURTS

Ø     US Supreme Court

Ø     The Circuit court of appeals

Ø     The district courts or bankruptcy appellate tribunal (BAP )

Ø     The bankruptcy courts

GOVERNING LAWS

Ø     Title 11 Federal rules of bankruptcy procedure

Ø     Title 18 Crimes (sec.151 through 158 deals with bankruptcy fraud and other bankruptcy crimes). E.g.

Ø     Title 26 IRC Implication of tax avoidance

Ø     Title 28 Judiciary and judicial process

Ø     Federal rules of appellate procedure

Ø     Federal rules of Evidence.

BANKRUPTCY JUDGESHIPS

The judges to the bankruptcy courts are appointed by the judges of US circuit courts for such circuits for the period of 14 years. Currently there are 324 judgeships in the US.

THREE MAIN CHAPTERS ON BANKRUPTCY

There are mainly three chapters under the bankruptcy law in USA.

Chapter 7: liquidation

Chapter 11: Reorganization

Chapter 13: Adjustment of debt of the persons, having regular income.

CHAPTER 7: LIQUIDATION

Bankruptcy under this chapter offers a fresh start for the individuals. In this chapter, most of the debtor’s property will be sold to raise the amount of the creditor. If the value of the asset is more than the debt owed, the remaining amount will be paid to the debtor.

After, 2005 enactment by the congress, it is mandatory to pass the Means test in order to qualify for the filing bankruptcy under chapter 7.

How the case move through under chapter 7

1. Petition

The case begins with the filing of voluntary petition with the clerk of the bankruptcy court. Debtor must also file the following documents shortly after filing the petition, they are

1. the list if creditors

2. the schedule of assets

3. the statement of financial affairs

If the debtor is not in position to pay the fees at once, he can request for payment in installments.

It is not necessary that always the creditor must file the petition. Even the creditors can initiate the bankruptcy proceedings; these are called as the involuntary petitions. If the debtor has not more than 11 creditors, then the one creditor can file an involuntary petition. If it is more than 12 creditors, three creditors must join together to file a petition.

2. Automatic stay

Once the petition filed before the bankruptcy court, there will be an automatic stay. It stays the suits, claims, appeals filed against one another before or after

3. Trustee selection

After filing a voluntary petition in the bankruptcy court, a notice will be sent to all the creditors. The creditors are required to be present at the trustee selection. Then the case will be assigned to bankruptcy judge and added to the docket of the US Trustee. US trustees maintains the list of case trustees.These case trustees will liquidate the debtor property at the auction or at the private transactions and collect the money, deposit it in the account maintained for that purpose.

4. Creditors meeting

It is also called as the Sec.341 meeting. Interim trustee will preside over this meeting. After a notice issued to the creditors, creditors have to come before the court and attend the meeting. If the creditor is not found, it will be published in the newspapers on which date the creditors have to attend the court.

It is compulsory that the debtor must be present at the meeting. The debtor will be put under oath and he will be asked several questions by the creditors. The purpose of this meeting is get to know hidden assets or undervalued assets of the debtor. And finding out is there any claim by the debtor which would yield more money if pursued. And the goal is to accumulate more money for the bankruptcy estate.

5. Liquidation of assets

After the creditors meeting, the case trustees will sell the asset of the debtor either at the auction or at he private transactions.

If the debtor is the business, it will cease to exist. If it is an individual he will be discharged. However certain debts are not dischargeable such as the alimony, taxes etc.

6. Collection of the bankruptcy estate

Once the assets are liquidated, case trustee will deposits the amount in the bank account, along with any other amount accumulated from the legal suits.

7. Distribution of the bankruptcy estate

After the deposit of amount in the account, the amount deposited will be distributed among the creditors.

Majority of the cases are no asset cases. If there are no assets to distribute then the case trustee will simply file before the court a report no assets to distribute.

Even if there is money to distribute, sometimes the creditors would not get the whole amount which is due to him by the debtors. Sometimes some creditor will get less, some creditors will get more.

The question arises in our mind is that, who will be paid first. At the stage of distribution, the administration of the estate such as the professional fees of the trustee, attorney or accountant appointed by the bankruptcy estate will be paid first.

8. Claims

There are two kinds of the claim and creditors in the bankruptcy. One is the Secured claims and other one is an unsecured claims. Secured claims are one that gives the creditor an interest in property as assurance of payment. For example people will mortgage house in secure of loans. If the loan is not paid there will be foreclosure and sale of the house. Holder of unsecured claims cannot look into any such payments.

Under unsecured claims are again divided into two: Unsecured priority claims and unsecured non priority claims. Unsecured creditors who have priority must be paid first before paying to unsecured non priority claims.

In Campbell v. Countrywide Home Loans, Inc., 2008 U.S. App. LEXIS 21405 (5th Cir. October 13, 2008, Filed)

It was held that an automatic stay serves to protect the bankruptcy estate from actions taken by creditors outside the bankruptcy court forum, not legal actions taken within the bankruptcy court.

9. Conversion

A chapter 7 debtor has right to convert the chapter 7 case to one under chapter 11 or 13 at any time during the proceedings.

In re South Star Oil Co.,2008 Bankr. LEXIS 2426 (Bankr. D.Or., September 15, 2008, Decided)

Held that a cause for conversion or the dismissal includes a number of criteria, including substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation

In Toibb v. Radloff, 501 U.S. 157 (1991)

In this case the voluntary petitioner, after discovering stock in an electronic power company, has substantial value, decided to avoid its liquidation by seeking conversion to chapter 11. His motion was granted and he was allowed to file a reorganization plan. But the court dismissed his petition finding that he did not qualify for relief under Chapter 11 because he was not engaged in an ongoing business. The District Court and the Court of Appeals affirmed.

10. Dispute resolution

The petition may be contested after filing the bankruptcy petition through the adversary proceedings. for example one party may initiate proceeding against the other by filing the complaint and questioning the validity of the petition such will be adjudicated if the parties are willing to adjudicate. There may even be motions objecting to the discharge of the debtor, objections to the sale of debtor’s property.

In Dewsnup v. Timm et al].

Petitioner Dewsnup, the debtor in a case under Chapter 7 of the Bankruptcy Code, filed an adversary proceeding, contending that the debt of approximately $120,000 that she owed to respondents exceeded the fair market value of the land securing the debt and that, therefore, the Bankruptcy Court should reduce respondents’ lien on the land to the land’s fair market value pursuant to 11 U. S. C. § 506(d), The court determined that the then value of the land in question was $39,000, but refused to grant the requested relief and entered a judgment of dismissal with prejudice. The District Court and the Court of Appeals affirmed.

Held: Section 506(d) does not allow Dewsnup to “strip down” respondents’ lien to the judicially determined value of the collateral, because respondents’ claim is secured by a lien and has been fully allowed pursuant to § 502 and, therefore, cannot be classified as “not an allowed secured claim” for purposes of the lien-voiding provision of § 506(d). Pp.414-420.

11. Discharge and closing of case

After the property of debtor is sold and distributed among its creditors, the debtor will get discharged. However the debts like alimony, child support and certain taxes which are due to the government cannot be get discharged.

In Roe v. College Access Network , 2008 U.S. App. LEXIS 21362 (10th Cir., October 9, 2008, Filed)

It was held that a permanent medical condition will certainly contribute to the unlikelihood of a debtor earning enough money to repay her student loan debt, but such a condition is not a prerequisite to discharging the debt.

In re Hlavin, 2008 Bankr. LEXIS 2397 (Bankr. D. Ohio, September 30, 2008, Decided)

It was held that under 11 U.S.C.S. § 707(b)(1), the court may dismiss a case filed by an individual debtor under Chapter 7 whose debts are primarily consumer debts if it finds that the granting of relief would be an abuse of the provisions of Chapter 7.

12. Appeal

When there is a discharge of the debt or dismissal of the bankruptcy petition, there may be an appeal. If the petition dismissed, the debtor may go an appeal. If there is discharge without any payment to the creditors, the creditors may go an appeal. Appeal may be preferred either to the district court or to the bankruptcy appellate panel. Where there is no bankruptcy appellate panel, appeal is always preferred to the district court.

CHAPTER 11: REORGANIZATION

This chapter is known as the business reorganization chapter. Sometimes individuals may also seek remedy under this chapter. Once the petition is filed under this chapter the debtor shall also file plan of reorganization.

Debtor is also required to file following documents along with the voluntary petition.

Ø     Schedules A through J

Ø     Summary of Schedules

Ø     Statement of Financial Affairs

Ø     Matrix

Ø     Statement of No Prior Filing

Ø     List of Equity Security Holders

Ø     Corporate Resolution (when applicable)

Ø     Pro Se Debtor’s Statement

How the proceedings takes place under chapter 11

1. Petition

There will be a voluntary or involuntary petition

2. Automatic stay

There will be an automatic stay after the petition is filed.

In re Forletta, 2008 Bankr. LEXIS 2491 (Bankr. D.N.Y., October 10, 2008, Decided)

Held: debtor could not extend the automatic stay under 11 U.S.C.S. § 362(c)(3)(B) because the debtor’s earlier Chapter 7 proceeding was closed on a final decree and discharge under 11 U.S.C.S. § 727 and § 362(c)(3)(B) did not apply unless the case had been dismissed under 11 U.S.C.S. § 707. Extension of stay was warranted under § 362(c) (3)(C).

3. Continued control by management

As in chapter 7 case, the US trustee doesn’t appoint a case trustee; instead the US trustee monitors the progress of the case. He reviews the financial reports of the debtor, who continued to operate the business and adequacy of the disclosure statement and reorganization plan.

4. Role of the creditors committee

There will be an unsecured creditors committee appointed by the US trustee who is willing to serve monitor the case. Unsecured creditors cannot look at he specific property of the debtor.

Difference secured claim and unsecured claim

A secured claim is one that gives the creditor an interest in property as assurance of payment, such as a mortgage on the house to secure a home loan; the holder of an unsecured claim can’t look to any specific property of the debtor for payment. The committee negotiates with the debtor to develop a plan that will protect the interests of unsecured creditors. Because there is no case trustee in a Chapter 11 case, the committee has the authority to perform investigative functions, such as reviewing the debtor’s assets, liabilities, and financial conduct to determine its ability to continue in business.

5. Creditors meeting

It is also called as the 341 meeting. It may take place within 20 to 40 days of filing the bankruptcy petition. Debtor takes an oath in this. Usually US trustee or the assistant presides at the 341 meeting.

6. Plan of reorganization

It is a Debtor’s proposal to repay the amount in certain period. Debtor files it in the court for its approval.

7. Disclosure and disclosure statement

The debtor must file the disclosure statement which must be approved by the court. Once this filed there will be a disclosure hearing. Sometimes the creditors may oppose to it. Once the disclosure statement is approved he or she will also set a time limit on voting for or against the reorganization plan.

8. Voting and confirmation

Once the debtor has the reorganization plan the court must approve or confirm the plan. Before confirmation hearing, each class of creditors votes separately by mail on whether to accept the plan. If a majority of the voters in each class and holders of two-thirds of the amount of claims in each class approve the plan, the court will generally confirm the plan. The plan then becomes binding on all of the pre confirmation creditors, whether they voted for or against it.

If majority of the creditors did not approve the plan, then the debtor may attempt a cram down.

9. Discharge

After the reorganization plan is confirmed the debtor gets a discharge. Most claims for pre confirmation debts are wiped out. The debtor only has to pay the debts spelled in the plan.

Custom Mortg. Solutions, Inc. v. Hood (In re Hood),

2008 Bankr. LEXIS 2474 (Bankr. D. Ill., October 2, 2008, Decided)

A plaintiff has the burden of proof by preponderance of the evidence to show that the debt in question is non-dischargeable under 11 U.S.C.S. § 523(a)(6).

In re Timmerman, 379 B.R. 838, 2007 Bankr. LEXIS 4055 (Bankr. D. Iowa, December 10, 2007, Decided)

Debtors were estopped from seeking dismissal of their bankruptcy action under 11 U.S.C.S. § 707(a) because they falsely stated that they had obtained credit counseling and had taken advantage of the bankruptcy laws for 21 months, and granting their motion would have prejudiced their creditors and impaired the integrity of the bankruptcy system.

10. Paying creditors

The debtor has to make payments according to the reorganization plan. If not met accordingly, the creditors can seek the liquidation of the debtor by moving to convert the cases to chapter 7, or they may sue to force the debtor to make the plan payments.

11. Dispute resolution

Suits, contesting matters will be resolved if any.

12. Appeal

Appeal is preferred either to the bankruptcy appellate tribunal or to the district courts.

CHAPTER 13:ADJUSTMENT OF DEBT OF THE PERSONS, HAVING REGULAR INCOME

Under this chapter debtor develops a plan, how he or she proposes to repay creditors. By agreeing to use future income for plan payments, the debtor is able to keep his or her property.

Difference chapter 7 and chapter 13

In chapter 7 the debtor property is liquidated but it does not include future income.

But in the chapter 13 debtors is allowed to keep his property and the debtors have only 15 days to propose a plan, in contrast to the 120 days of chapter 11 debtors.

How the proceedings takes place

1. Petition

Debtor files a voluntary petition before the court. He is required also to file following documents:

Ø     Schedules A through J

Ø     Statement of Financial Affairs

Ø     Matrix

Ø     Statement of No Prior Filing

Ø     Plan

Ø     Disclosure of Compensation - FRBP 2016(b)

Ø     Pro Se Debtor’s Statement

Ø     Filing fee

2. Automatic stay

Once the petition is filed before the court, every suit concerning the debt recovery will be stayed.

.

3. Creditors meeting

It is also called as the 341 meeting. It may take place after the 15 to forty days after the petition is filed. Both creditors and the debtor attend it.

Chapter 13 trustees or Standing trustee presides over the 341 meeting.

4. Confirmation

Before the debtors plan takes effect, the court must approve the plan. It is the standing trustee’s job to review the plan and advice the court whether it seems workable or legal. Standing trustee has to recommend the plan. Creditors have no right to propose a new plan but they can oppose the plan.

5. Paying creditors

Within thirty days after filing the plan, the debtor must start paying the creditors. Debtor pays it to the trustee who then pays it to the creditors as provided for in the plan. The debtor has up to five years to pay of his debts.

6. Dispute resolution

Adversary proceedings if any contested matters will be resolved at this stage.

7. Discharge

After completion of plan payments, the debtor will receive a discharge. It discharges all debts except the long term home mortgage debts, alimony, child support obligations, and certain education loans.

8. Appeal

Appeal may preferred either to the district court or to the BAP.

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Thursday, August 20th, 2009

Poly Muthumbi asked:

For the benefit of those who have got no idea what this term mean, I will start by defining what exactly it is. Bankruptcy is a lawfully declared incapacity of an individual or organizations to pay their creditors or lenders at a given period of time. Creditors may file a bankruptcy plead against a debtor which is called -involuntary bankruptcy, in an effort to recover a section of what is due to them. Commonly, many bankruptcy cases, however, are initiated by the debtor called a voluntary bankruptcy that is filed by the insolvent entity or business.

Even though bankruptcy permit a debtor a way out of a violent cycle of debt, it should not be taken carelessly, and should be a means of last option. But in this particular article, I will concentrate more on the two main types of bankruptcy which is the chapter 7 and chapter 13 bankruptcies. They are widely used for personal bankruptcy individual, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor’s unsecured creditors.

Chapter 7 type of bankruptcy as straight bankruptcy is the favorite option for people with less or no property and a batch of unsecured debt. It is a liquidation bankruptcy implicating that the court will trade any non-exempt assets you have to pay your creditors and irrespective of the quantity paid, release that debt. The debtor will not be granted a discharge if he or she is guilty of certain types of unsuitable behavior such as concealing records concerning his financial condition.

Similarly some debts such as spousal hold up, student loans, some taxes will not be discharged even though the debtor is usually discharged from his or her debt. Many individuals in financial distress own only exempt property like household goods, an older car and will not have to give up any property to the trustee. The amount of property that a debtor may let off varies from state to the other. Chapter 7 type of a bankruptcy, relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is.

Chapter 13 type of Bankruptcy, from time to time called the wage earner’s plan, or reorganization bankruptcy, is quite different from Chapter 7 bankruptcy which swab out most of your debts. In a Chapter 13 bankruptcy, you employ your income to pay some or all of what you are obligated to your creditors over time which is proximately anywhere from three to five years, depending on the size of your debts and income.

These debts must also be non-contingent and liquidated, meaning that they must be for a certain, fixed amount and not subjected to any conditions. Secured creditors may be entitled to greater payment than unsecured creditors. When preparing to enter bankruptcy, ensure you check as many personal bankruptcy online services as likely, where you will get advice on the type of bankruptcy best suited to you. Generally there are six types of bankruptcy but these two are the key ones.

Poly Muthumbi is a Web Administrator and Has Been Researching and Reporting on Debt for Years. Visit Her Site at TYPES OF BANKRUPTCY

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Thursday, August 20th, 2009

Usha Pradhan asked:

Bankruptcy means an official declaration of economic failure or mutilation of ability of a person or company to pay their creditors. A bankruptcy petition may be filed against a debtor. Sometimes creditors file this kind of “involuntary bankruptcy” petition to recover their due payment.

Body:-

Bankruptcy means an official declaration of economic failure or mutilation of ability of a person or company to pay their creditors. A bankruptcy petition may be filed against a debtor. Sometimes creditors file this kind of “involuntary bankruptcy” petition to recover their due payment. In most of the cases, however, the debtor, individual or organization, initiates the economic collapse, known as the “voluntary bankruptcy”.

Know More 1: The word bankruptcy shares its root with the ancient Latin bancus (a bench, table or bank) and ruptus (broken).

Therefore, in other words, bankruptcy is a legal filing that relieves a person of responsibility for all or some of their debts because they are unable to pay. Credit history or credit report, as you wish to call it, is nothing but, the record of past borrowing and repaying of an individual or company. This record, as you understand, includes information about late payments and bankruptcy as well.

Fact 1: Bankruptcy is submitted to the jurisdiction of the bankruptcy court

Bankruptcy allows the unfortunate debtor an honest and “fresh start” in financial life by relieving most debts. It also allows creditors to restore some portions of what they owe.

Records say that consumers who have effectively cleaned their credit report denied a bankruptcy or judgment, second and even a third time, and finally they got it cleared. So never get discouraged! Your patience and resolution could be the two important keys in repairing a damaged credit report.

Fact 2: Bankruptcy case begins by legally filing a petition containing defaulter’s economic information.

How well is this going to work for you depend on how patiently you try …

However, you must know that certain items are easier to remove than others.

Fact 3: A married couple may file a joint petition.

Here is a list of easier Items to dispute and get removed Stuff older than 2 years:

* Discharged bankruptcy

* Charge-offs

* Inquiries

* Repossessions

* Late payments

* Accounts that were late but now paid off

Fact 4: Liquidation and Reorganization are two common forms of bankruptcy.

Do you know why it is so? It is simple! When you challenge an older account or item presently charged off, the creditor is not too bothered with the account any more. Even they may fail to find the required information to bear out the dispute.

Know More 2: Some scholars still believe that the term bankruptcy is originated from the Italian banco rotto meaning broken bank.

And a list of more difficult items to dispute:

* Accounts currently due

* Recent bankruptcy

* Judgments

* IRS or State Tax Liens

* Current collection accounts

Fact 5: liquidation bankruptcy is a kind of bankruptcy in which the defaulter’s non-exempt (means legally unprotected) asset/possessions/properties are distributed to suit creditor claiming.

These are the items which you can say are trickier as creditors keep track of these in their current files and expect you to pay them. This is the reason why it will be easier for them to verify the information and keep the item on your credit file. However, it is always good to try.

Fact 6: In reorganization bankruptcy the defaulter rearranges/redistributes possessions and unpaid amounts.

Important: It is completely legal for you to contest items on your credit file even though you know they are correct. When you do so, you are only trying to see if your creditors have maintained proper account to verify the dispute. Your pretext could be a very bad memory that makes you forget that the negative accounts on your credit file are really yours … and in case they are unable to verify your dispute, it must be removed from your file, this is what the law says!!

Know More 3: In the years 1557, 1560, 1575 and 1596 four state bankruptcy cases were declared by Philip II of Spain. Thus historically, Spain, the sovereign nation, held the first place to declare bankruptcy.

Removing Negative Credit

First, identify the negative items that you want removed.

Secondly, after you review your updated credit file and getting most or all the negative items removed, you may go for building a positive credit profile. Positive information will always overshadow the residual negative items that may still remain in your file.

Fact 7: The law of United States offers a single chapter on liquidation bankruptcy (chapter 7); all other chapters are provided only for reorganization bankruptcy (chapter 9, chapter 11, chapter 12 and chapter 13.)

Thirdly, as you know already, if the dispute is sent in from anyone other than you, it raises all sorts of Red Flags. As they themselves make so many mistakes they believe you are working alone and trying to fix a real lawful mistake.

If there is a negative item, such as a bankruptcy, charge off or collection account, just write it that this is NOT your account and you want it removed immediately.

Fourthly, if in case the creditor is able to supply you with the written proof you asked for, propose to settle the debt for 10 cents on the dollar if you have the money. Thus, if you owe $1,000, offer $100 to the creditor. If they refuse, tell them that you will file Bankruptcy and they will get nothing. This will certainly open them up to negotiating with you.

“Bankruptcy is a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.” ~ Joey Adams

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Wednesday, August 19th, 2009

Larence Hubert asked:

Preparing to file bankruptcy will require you getting your documentation and statements showing proof of income and expenses together. The bankruptcy judge will require this information before making his or her decision of which debts will be discharged. He’ll also use the information to see what type of bankruptcy you’ll be most qualified for and benefited from.

The paperwork will include required pay stubs which will show the amount of income you gross per month. You’ll also be required to prove your monthly expenses, including rent, utilities and grocery costs. Your statements showing credit card expenses, loans, taxes and unpaid medical bills will also be part of your paperwork to gather. The judge will then look over your income. Most often your assets and debts will be compared against your state’s median income. Some states have tougher standards for comparison than others. The comparison results will determine what type of bankruptcy you’ll qualify for.

Each state has its own list of specific assets that are eligible for exemption. It’s best to consult with a bankruptcy attorney when trying to figure out what you own that will qualify for exemption. Taking assistance from a bankruptcy attorney is a good move, so you can ensure you’re doing everything you can to conclude your bankruptcy on the most positive note possible.

United States bankruptcy courts are the bankruptcy judges in active and regular service in each district. They hold the power to handle bankruptcy matters. There are ninety four federal judicial districts in the United States and each of them handles bankruptcy petitions. Bankruptcy petition can be described as Debtor’s petition or Creditor’s petition depending on who files the petition as can be implied.

Bankruptcy petitions cannot be filed in any court. The petition must be filed in a court with jurisdiction. In the United States, bankruptcy cases have to be filed in Bankruptcy courts which are usually the (Federal) courts with jurisdiction to handle such matters. Notwithstanding, district courts also have subject matter jurisdiction over bankruptcy matters and may refer petitions to the bankruptcy court at any point by order.

Bankruptcy laws are designed to protect financially distressed individuals or organizations and also to make provision for liquidation of any non-exempt assets for orderly distribution to creditors.

In the United States, judges who preside over bankruptcy matters, otherwise referred to as “bankruptcy judges” are appointed for a fourteen year term by the US court of appeal. They constitute a unit in the applicable district court in each judicial district.

A United States Bankruptcy Judge is the court official empowered to make decisions on bankruptcy issues in United States bankruptcy courts. He determines the eligibility of the debtor for the form of petition filed and also if the debtor should be discharged of his debt obligations.

Typically, a debtor who files for Chapter 7 bankruptcy has limited or no involvement with the bankruptcy judge and may not see him unless an objection is raised on the petition.

A typical United States Bankruptcy court will administer the federal bankruptcy law in order to meet congress goal for enacting the law which is to give debtors a “fresh start” while also protecting creditors from unfair exploitation.

If you are filing for bankruptcy, your attorney knows the courts with jurisdiction to handle your case. So you need not worry. If however, you are filing your application yourself, endeavor to research the appropriate bankruptcy court in your district before filling your forms. Online database are available for your use in case you are not sure.

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Wednesday, August 19th, 2009

Jon Arnold asked:

If you are considering bankruptcy, you need to be aware of the recent drastic changes in the bankruptcy laws. It used to be that a person could file bankruptcy almost on a whim, simply to get out from under a huge burden of financial obligations. Then that person would start over, and a couple years later file bankruptcy again. This type of scenario is no longer possible for the most part due to the new bankruptcy law.

The bankruptcy laws still vary from state to state but much of the common foundation within the bankruptcy law is still there in all states. The variations and changes that are state specific are, for the most part, fairly minor points. In addition, one of the effects of the new laws are that if you are going to file bankruptcy, you must do it in the state in which you are a resident, and you cannot go to another state to file bankruptcy just because they may have more lenient laws in some areas.

With the new bankruptcy laws, the person who is considering filing must go through a process known as a means test. The means test can be very complex and the results of that test could mean the difference between filing bankruptcy and even not be allowed to file bankruptcy.

What this means to you is that the court looks at your financial situation with a very fine tooth comb. The court can determine that you do not need to file bankruptcy based on your level of income and that you can indeed pay your financial obligations, which still being able to maintain your reasonable and necessary living expenses. This is where things really get sticky, because while a consumer may consider “reasonable and necessary” to be that beach front condo in Miami, it is highly unlikely that the court would agree with your definition of “reasonable and necessary”.

Another change in the bankruptcy laws is that the consumer who plans to file bankruptcy is now required in almost all states to attend credit counseling sessions. To a certain extent, this does not make sense since the underlying reason that a consumer may be considering bankruptcy would not be financial mismanagement, but could be host of other financial difficulties, like a job layoff, extensive medical debts, an ugly divorce case, and other things that are totally unrelated to financial mismanagement, and in fact, the consumer may be the sharpest person in the world in terms of finances. But that person still needs to attend the credit counseling sessions, this is mandatory.

Because of the many changes in the bankruptcy law, consumers who may have wanted to file under Chapter 7 bankruptcy may now need to file under Chapter 13 or even Chapter 11 bankruptcy. Much of this determines how much of your personal assets can be retained, or perhaps sold out to satisfy your debtors.

One thing that has become clear with the new bankruptcy laws is that bankruptcy is no longer a “do it yourself” process. One mistake in filling out the mountain of forms can cause your bankruptcy application to be dismissed. You should work with a good bankruptcy lawyer who understands the bankruptcy law and also the variations in your state so that you can file correctly with the least amount of personal damage.

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Debt To Income Ratio Explained

Tuesday, August 18th, 2009

Yesterday, Board Certified Consumer Bankruptcy Attorney Carmen Dellutri published an article on the Bankruptcy Law Network about Debt to Income Ratios. The blog put into perspective what a debt to income ratio is, the importance of your debt to income ratio and how to use a debt to income ratio to gain control over your finances.

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Filing For Bankruptcy Is Not A Reflection On You As A Person

Saturday, August 15th, 2009

JCLawGroup asked:

JC Law Group specializes in helping individuals and families in the Bay Area with filing for Bankruptcy and debt relief. Their areas of practice focus on Chapter 7 and Chapter 13 bankruptcy. If you are burdened by debt and want to explore filing bankruptcy as an option for relief, they can help you very well.

Filing for bankruptcy is not a reflection on you as a person. Perhaps you owe more on your home than what it is worth and you are struggling to make the payments, you are going through a life changing experience such as a serious illness, loss of employment, divorce or death in the family. You do not have to go on living with the constant calls from the creditors or mounting debts. Bankruptcy laws allow people who are overwhelmed by debt to get a fresh start easily.

According to the American Bankruptcy Institute “household debt is at a record high relative to disposable income.” The Administrative Office of the U.S. Courts reported that the number of filings for the year ended March 31, 2003 “exceeded 1.6 million for the first time in any 12 month period,” a 15.1 percent increase from the previous year.

There are two types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with the financial crisis. Personal bankruptcy must be filed in a federal bankruptcy court. You will have to pay about $160.00 in court fees. Attorney fees will be additional.

Chapter 7 of bankruptcy involves the liquidation of all your assets that are not exempt from the bankruptcy settlement. Exempt property can include automobiles, some household furnishings, and property needed for work-related use; for example if you were a mechanic the tools you use to perform your work would be exempt from the bankruptcy settlement. Exemption amounts vary from state to state.

A Chapter 13 bankruptcy allows you to keep property, like a mortgaged house or car, as long as you have a steady income. Chapter 13 bankruptcy is a court-ordered and approved repayment plan to your creditors. This allows you to use your future income to pay back your debts over a 3-to-5 year period without surrendering any property. Once you complete the payments under the plan, your debts are discharged by the court.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, utility shut-offs, and debt collection activities. Both provide exemptions that allow people to keep certain assets, although exemption amounts vary.

The sweeping changes to the laws in 2005 made filing bankruptcy more complex, and often inaccessible to most people, particularly those with low incomes. Attorney’s fees increased due to the added complexity of bankruptcy cases; court fees have gone up; there are new credit counseling and debtor education requirements that cost money.

However, consider this when contemplating bankruptcy. If you have $40,000 in unsecured debt at about 20 percent interest, the cost of the interest alone is $8,000 per year. Divided by 12 that is about $667 per month. For less than the cost of 4 months of interest payments, you can pay for a Chapter 7 bankruptcy and be done with it once and for all.

For more information on Bankruptcy San Francisco Call us at 415.963.4004 to schedule a free consultation with a San Francisco bankruptcy lawyer.

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New FCA Rules Put Lenders and Brokers Directly in Their Gun Sights

Friday, August 14th, 2009

The author is a member of the Firm's Government Contracts & Regulated Industries Practice Group. For additional articles and postings concerning this and related topics, please refer to Sheppard Mullin's Government Contracts Blog, which can be found at www.governmentcontractslawblog.com.

I. INTRODUCTION

Without a doubt, the False Claims Act ("FCA") has been dramatically changed in the last few months. As will be discussed in more detail herein, it certainly appears that the FCA has been retooled so that the playing field is now stacked in favor of the government and qui tam plaintiffs. There is also every indication that lenders who have federally insured mortgages, redevelopment funding, or other financial support from the government, are at risk of being sued for false claims unless they take certain precautions to educate and protect themselves.

In fact, it is a good idea for all companies who receive government funding (e.g., defense contractors, health care providers, academic institutions) to look closely at their internal compliance programs, and modify them to reflect the recent changes in the FCA. This article is intended to offer some specific suggestions, and also encourage companies to have their programs amended, and implemented by legal counsel who are receptive to flexible billing arrangements including flat fee schedules.

II. MANY OF THE HURDLES TO LITIGATING FALSE CLAIMS ACTIONS HAVE BEEN REMOVED

The following are some of the more significant changes to the FCA:

(1) There is essentially no time bar for the government to intervene in the private party ("relator") action – the government can easily have its complaint relate back to the timely filing of the relator action.

(2) The government can now essentially "deputize" private parties and local governments to aid in the pursuit of these actions, by sharing documents and testimony that the government has obtained through Civil Investigative Demands ("CIDs"). The FCA now expressly authorizes the sharing of information obtained under a CID with "any qui tam relator," with federal, state or local government agencies, and with other interested persons (i.e., courts, consultants, auditors, experts, arbitrators) if it is done in connection with an investigation, case or proceeding. Thus, it is even more important now to involve legal counsel early on in negotiating the parameters of the CID, and coordinating the company's response.

(3) The universe of potential relators has been expanded dramatically, and can include contractors and agents, all of whom appreciate the considerable financial windfall that relators recover in qui tam actions with treble damage awards. Since the 1986 amendments, qui tam plaintiffs have accounted for more than half of the over $21.5 billion recovered under the FCA, with the plaintiffs recovering anywhere from 15-30% of the government's recovery. Thus, companies need to worry not only about disgruntled and terminated employees who may recast themselves as possible "whistleblowers," but also contractors with whom relations have become strained for any reason. The FCA anti-retaliation provision now applies to contractors and agents in addition to employees.

(4) Subcontractors or others who submit a bill for payment to a recipient of government funds can now be held liable under the FCA, even if their bill is not submitted to the government directly. The definition of "claim" in the FCA has been expanded to include these indirect claims, so long as the funds involved are used on behalf of the government or in furtherance of a government program or interest. For example, in the context of federally insured mortgages, the government support is provided based on a private entity certifying that the borrower has complied with a variety of criteria underlying the loan agreements, any of which could form the basis of a false claims action, even if the certifying entity is not submitting a claim to the government.

(5) In amending the FCA, Congress specifically rejected several court decisions that made it more difficult for plaintiffs to establish liability. For example, the Allison Engine requirement that a claim or statement must be designed "to get" false claims paid or approved has been relaxed considerably, with the FCA amendments:

These amendments to Section 3729 clarify that the False Claims Act was intended to extend to any false or fraudulent claim for government money or property, whether or not the claim is presented to a government official or employee, whether or not the U.S. Government has physical custody of the money, and whether or not the defendant specifically intended to defraud the U.S. government. With this change, the additional elements read into the statute by the Supreme Court and the D.C. Circuit decisions are vitiated, and Allison Engine and Totten would be overturned by this legislative action.

February 5, 2009, Statement of Sen. Patrick Leahy, Chairman, Senate Judiciary Committee, Introduction of Fraud Enforcement and Recovery Act of 2009. Thus, the specific intent element that the United States Supreme Court imposed in Allison Engine, to keep FCA enforcement from becoming effectively "boundless," has been removed. To establish FCA liability now, the plaintiff only needs to prove that the false statement was "material" to the government's decision to pay a false claim. "Material" is defined loosely as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property."

In addition, there are further amendments moving through Congress that would also increase the number of FCA plaintiffs. Most significantly, the "public disclosure" defense to qui tam suits would be greatly weakened by eliminating the FCA defendant's right to move to dismiss a relator complaint based on the public disclosure bar. Further, the bills would redefine what constitutes "public disclosure" to make it more narrow, and also allow a court to dismiss a qui tam action only if the "allegations relating to all essential elements of liability of the action or claim are based exclusively on the public disclosure of allegations or transactions…." When viewed in the context of the vast amount of public information that is available through the Internet, the elimination of this defense for defendants could exponentially increase the number of private plaintiff suits. Given the speed with which the recent amendments were approved by Congress and signed by the President, there should be little doubt that further amendments in favor of qui tam plaintiffs are just a matter of time.

III. THE GOVERNMENT IS TARGETING THE MORTGAGE LENDING BUSINESS, AND USING THE FCA TO DO IT

These changes also come with considerable bite behind them with the government approving substantial spending budgets for enforcement purposes. The bill authorized $155 million a year for hiring fraud prosecutors and investigators at the Justice Department for fiscal years 2010 and 2011, with the expectation that the FBI can double the number of its mortgage fraud task forces nationwide – from 26 to more than 50.

Finally, if there is any remaining doubt that the FCA is a powerful tool that the government is using to prosecute mortgage fraud, then the following remarks are worth considering, in addition to the cases that the government has been litigating in the last year. In introducing the Anti-Fraud Legislation that included the amendments to the FCA, Senator Patrick Leahy said, "The federal government has spent hundreds of billions of dollars to stabilize our banking system, and Congress will soon spend even more to restart our economic recovery. But to date, we have paid far too little attention to investigating and prosecuting the mortgage and corporate frauds that has so dramatically contributed to this economic collapse." Similarly, President Barack H. Obama in signing the bill stated: "This bill nearly doubles the FBI's mortgage and financial fraud program, allowing it to better target fraud in hard-hit areas. That's why it provides the resources necessary for other law enforcement and federal agencies, from the Department of Justice to the SEC to the Secret Service, to pursue these criminals, bring them to justice, and protect hardworking Americans affected most by these crimes."

Recent cases are a good indication of the mortgage industry practices that are coming under scrutiny. In June 2009, Beazer Homes USA Inc. agreed to pay $5 million to the United States, plus contingent payments of up to $48 million dollars to be shared with victimized private homeowners, to resolve allegations that Beazer Mortgage Company was involved in fraudulent mortgage origination activities with federally insured mortgages. Beazer allegedly induced unqualified home buyers to enter into Federal Housing Administration ("FHA") insured mortgages, and, then, when the buyers defaulted, the FHA was wrongfully required to pay on the mortgage insurance claims.

Similarly, mortgage lenders who offer HUD-insured mortgages are becoming the subject of false claims actions. In this scenario, the HUD approved lender can "directly endorse" a mortgage for low and middle-income buyers under certain conditions, but can be held liable if the lender submitted unqualified loans to the HUD for insurance endorsement, without disclosing that the loans did not satisfy FHA guidelines. (Nat'l City Mortgage, June 2, 2008, $4.6 million settlement; and RBC Mortgage, November 25, 2008, $10.71 million settlement).

Presently pending in the United States District Court in Los Angeles, California is an action against mortgage lender Capmark Finance, Case No. CV 09-04104 RSWL (JCx), in which, the government is seeking to recover damages and penalties under the FCA arising from Capmark's submission of allegedly false documents and claims to HUD's multifamily mortgage insurance program. Specifically, the complaint alleges that Capmark engaged in fraudulent conduct to obtain HUD mortgage insurance in connection with two loans made by Capmark that financed the borrowers' acquisition of two existing residential nursing home facilities. When the loans defaulted, HUD sustained losses by having to pay $25.9 million dollars in mortgage insurance claims. In the Department of Justice press release for the Capmark case, the Department of Justice representative stated, "Mortgage fraud is a top priority for this Administration, especially when public dollars are at stake. We will aggressively pursue fraud claims against federal mortgage insurance programs, which are so vitally important to this economy." Thus, all loans at risk of default that are covered by government mortgage insurance are ripe for possible false claims actions.

IV. IT IS A PRUDENT BUSINESS PRACTICE FOR COMPANIES, INCLUDING THE MORTGAGE LENDING SECTOR, TO PROTECT THEMSELVES THROUGH EFFECTIVE COMPLIANCE PROGRAMS AND REGULAR INTERNAL AUDITS

There are a number of reasons why it is in a company's best interest to have a current and effective compliance program in place. Early discovery of possible FCA violations can create opportunities for voluntary disclosure, provide a basis for resolving the problems through a negotiated settlement, and shorten the damages time period by identifying problems early on. In light of the recent amendments to the FCA, compliance programs should be updated along the following lines, with additional modifications tailored to the particular needs of the company:

(1) Schedule internal audits of all agreements that involve federal funds that may be at risk, including, without limitation, federally insured loans to at risk borrowers.

(2) Establish an alert system for identifying agreements where the payments are overdue, and there is a risk that the contract will be breached, or the property foreclosed in the case of a mortgage loan.

(3) Establish an audit system of agreements involving subcontractors with whom the company has either terminated the relationship, or the relationship has become strained, in order to ensure that the underlying agreements were handled properly and, therefore, there is no basis for a qui tam complaint by a subcontractor or, alternatively, any problems can be identified and addressed.

(4) Evaluate the advantages and disadvantages of having a hotline system for contractors and agents to report FCA concerns, now that they are included in the class of possible qui tam plaintiffs.

(5) Remind all company departments that prompt notice to management upon receipt of any subpoena or government inquiry is essential. Now that the documents and testimony produced in response to a CID can be shared more broadly, it is even more critical that companies work with legal counsel in complying with these requests.

For further information concerning our Government Contracts Practice, contact our Practice Group Leaders, Bryan Daly in Los Angeles at (213) 617-5466 and Anne Perry in Washington, D.C. at (202) 218-6875.

Authored by:

Michelle Sherman
(213) 617-5405
msherman@sheppardmullin.com

and

Peter Morris
(213) 617-5414
pmorris@sheppardmullin.com

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Wednesday, August 12th, 2009

Lesley Lyon asked:

Bankruptcy law provides for a plan that allows a debtor who is unable to pay his creditors to resolve his debts through the division of his assets among his creditors. This also allows the interest of all creditors to be treated with equality. Certain bankruptcy laws allow a debtor to continue his business and use the revenue generated to pay off the debts. An additional aim of bankruptcy law is to allow certain debtors to liberate themselves of the financial obligations they have accumulated after the division of their assets. Bankruptcy law includes comprehensive access to civil litigation, credit, consumer law and commercial transactions.

Bankruptcy cases are either voluntary or involuntary. Voluntary bankruptcy cases involve debtors petitioning the bankruptcy courts. In involuntary bankruptcy, creditors rather than the debtors file the petition. Voluntary bankruptcy cases are majority whereas involuntary cases are rare except occasionally in business settings to force a company into bankruptcy so that creditors can enforce their rights.

Bankruptcy law prohibits some filers with higher income from using chapter 7. To file for chapter 7 current monthly incomes against median income is measured. If it is less than or equal to median income, chapter 7 can be filed. If it is more, the ‘means’ test must be passed to file for chapter 7 which is the requirement of the new bankruptcy law.

The purpose of the ‘means’ test is to find out certain allowed expenses and debt payments are subtracted from the current monthly income. f the balance is below a certain amount chapter 7 can be filed.

Bankruptcy law can be broadly classified as follows:

Co-operative bankruptcy is filing of chapter 7 or chapter 11 by co-operations and partnerships in which the trustee appointed by the court sells the assets and distributes the proceeds to the creditors. The trustee’s commission, priority debts and debts to unsecured creditors are paid on a pro rata basis.

In chapter 7, the debtor’s business operations cease once the case is filed. On the other hand in chapter 11 the business typically remains in operation and the debtor is given the same right as a trustee.

Personal bankruptcy is commenced by an individual filing chapter 7, 11, 12or 13. The debtor is allowed to exempt certain property (household furniture, jewellery, clothing, pensions, insurance policies and other assets) from liquidation by the trustee. Exemptions vary from State to State. The automatic stay takes effect immediately upon the filing, which prohibits collecting money, or taking property from the debtors. It usually remains in effect through out the case.

In chapter 7 bankruptcies, the debtor files a petition with the court with detailed financial information about his assets, debts and income. These papers are executed under penalty of perjury, the duration being three to four months. Chapter 11 bankruptcies are a reorganization procedure used by business partnership and co-operations. In this case, the debtor will act on his own as a trustee and is called a debtor ‘in possession.’

As a general proposition, bankruptcy laws state that older income taxes (more than three years old) can be wiped out in bankruptcy, but not the new incomes taxes. Prior to filing bankruptcy, the debtor should have his own particular tax situation assessed. As a general rule, debtors filing bankruptcy continue to complete their own returns and pay their own post-bankruptcy taxes.

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Wednesday, August 12th, 2009

Cornie Herring asked:

Debt relief related industries are in a rapid growth rate showing that more and more people are looking for debt free solutions to get them out of debt. The fact shows 40% of American households are holding at least ten thousands of debt and many of them are at overwhelming level that urgently need a solution for relief. The bad news is many of debtors are getting out of debt with the worst option: bankruptcy filing. If you are in a serious debt trouble, you want to avoid bankruptcy with your best effort. Then, what are the alternative options available for you other than bankruptcy?

Before finding a debt solution that can pull you out of debt, you must first understand your debt situation. Don’t ignore your debt problem and let your debt continue to snowballing from month to month, you will be very surprise when your debt is piling up to the level that is out of your expectation if you keep ignoring them. The earlier you face your debt problem, the more chances your will resolve it with the best option.

The first thing your need to do it is “Get to know your debt”. Although it very scaring to look at all your credit card bills and loan balances that are over due and need immediate payment, you must take out all these statements and do a summary on what you owe and the overdue amount that need immediate attention. If you are too stressful to calculate all your debt, you may get help from your family members, spouse or friends to help you. If you are considering of getting help from professional counselor to analysis your debt situation, then you may contact a consumer credit counseling agency. Most of credit consumer credit counseling services are free. Their purpose is to help and educate anyone who needs help in handling their debt issue. A counselor will be assigned to handle your case and he will help you to analysis your debt situation before propose to you a debt solution.

Once you know your total debt. You next action is to think of the best solution to settle your debt and this is the hardest part. The immediate action that you can do is carefully thinks of what are the ways to cash out in the shortest period of time. You may perform garage sell or sell your home items at eBay or at your local newspaper free ads column to cash out as much cash as possible. If you have more than one car at home, you may want to reduce to one and sell the rest to cash out the money or reduce your monthly auto loan installment.

The next thing to do is reduce as much as possible your monthly expenses so that you don’t add more debt to your current balance and able to squeeze more money out to be allocated for debt payment. You should create a budget plan so that you know where your money goes and what expenses can be cut to reduce your monthly spending. With that you know how much money left each month that you can dump into your debt payment.

After knowing how much money you can cash out and the amount of money that you can allocate for monthly debt payment, it’s time to negotiate with your lenders for a settlement with discount. Many lenders are willing to reduce the amount you owe as long as you can settle your debt in one settlement. You probably can save 20% to 30% if you have enough cash for settlement. If you have not enough money for one time settlement, lenders may accept to waive the interest as long as you promise to pay an agreed amount each month. Try to negotiate with your lenders to come to an agreement that benefits both parties. If you feel that you are not confident enough to perform the negotiation with your lenders, then you can get help a debt settlement company to do the negotiation on your behalf. But, be aware that there will be fee involved. In most case, lenders do not want you to file a bankruptcy because they won’t really benefit from it. If the negotiate terms are acceptable by lenders, you can be avoided from filing a bankruptcy while working your way out of debt.

Summary

The bottom line is bankruptcy may not be the ultimate option. There are other options available which should be better that bankrupt filing. What you need to do is understand your debt situation, get help from professional if needed to explore the available options and work out with your lenders to get yourself relief from overwhelming debt problem.

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Sunday, August 9th, 2009

Roy Barker asked:

In the 21st century, many men and women find themselves struggling to keep their heads above water financially. With ever mounting debt, these people oftentimes need to seek relief by filing for bankruptcy. Perhaps you are such a person who is fighting to make ends meet. As a result, you may be wondering how to file for bankruptcy.

The first step in learning how to file for bankruptcy is to make a comprehensive list of all of your creditors and outstanding debts. When you are working to determine how to file for bankruptcy, you need to appreciate that if you to proceed with a bankruptcy case, you must be sure that all of your debts are disclosed and listed in a bankruptcy petition.

The next step in filing for bankruptcy is to determine exactly what assets you have available to you. Your assets include your recurring income from your job, your home and major items of personal property that you might own (including such items as motor vehicles).

The third step you need to undertake when it comes to seeking bankruptcy relief is to contact all three major credit bureaus. When all is said and done, the three major credit bureaus may have the best record of all of your outstanding debt. By obtaining your credit reports from the three major credit bureaus, you will be able to cross reference your list of debt to make certain that you have all accounts covered and listed.

The forth factor that needs to be considered on the road to filing for bankruptcy, is to determine whether you will seek professional assistance in the pursuit of a bankruptcy case. Some people do elect to file for bankruptcy on their own without the aid and assistance of a lawyer. However, in most instances, it probably is in your best interest to seek the professional assistance of a lawyer in order to properly pursue a bankruptcy case. Therefore, unless you have a very simple bankruptcy on the horizon and unless you actually have some definite, practical legal experience, you should seek out the assistance of a lawyer to aid you in pursuing your case.

In working towards fully understanding how to file for bankruptcy, if you do make the decision to hire a lawyer, you will need to begin an organized search to find the best attorney to meet your needs. Keep in mind that in this day and age there are lawyers that specialize specifically in the area of consumer bankruptcies. As a result, you most likely will want to narrow your search to those specific attorneys who do have experience in dealing with bankruptcy cases. In the long run, you will be best served by engaging the services of a lawyer who has dedicated his or her career to bankruptcy law.

Once you narrow down the list of attorneys you are considering, the next phase in considering bankruptcy is to obtain references in regard to each of these attorneys’ prior performance. References will provide you with specific information on how a particular lawyer handles his or her business and on how successful he or she has been in the pursuit of prior bankruptcy cases. Your local bar association can provide you with the names of lawyers that specialize in the practice of bankruptcy law.

The final step in considering bankruptcy is to actually engage the services of an attorney. At this juncture, you attorney will prepare a bankruptcy petition on your behalf that will be filed in the bankruptcy court. With the filing, your creditors will have to suspend seeking debt collection from you during the period in which the bankruptcy case is pending.

By following the steps outlined in this article, you will be able to take serious action in order to get your financial house in order. Of course, bankruptcy really is an option of last resort when it comes to dealing with impossible debt. Therefore, you need to make sure you have exhausted any alternative options before you actually begin the course of pursuing a bankruptcy case.

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Friday, August 7th, 2009

Legal Helpers asked:

Bankruptcy in its legal sense is the inability of an individual or organization to meet their financial obligations to their creditors. The individual or organization is not able to pay for cash transactions and are also unable to pay owed money. Bankruptcy may be declared to relieve a debtor of most or all of his debt and begin on a clean slate or to allow a debtor repay his creditors in a manner as would be most convenient for both parties depending on the ability of the debtor.

No matter if you are a struggling business or you are suffering from piles of personal debt, there is a solution for debt relief through bankruptcy. Bankruptcy is not a split second decision for debt relief but instead it is the last resort choice for financial freedom. You have to keep in mind that as there is a good and bad to every area in life the same philosophy goes for bankruptcy.

Positive Effects Of Bankruptcy

· Unsecured debts are discharged

· Foreclosure is stopped

· Repossession is stopped

· End Garnishments

· Utility shut off can cease

Negative Effects Of Bankruptcy

· Difficulty acquiring credit

· Hassle when buying a home

· Concerns with life insurance availability

· Job hire discrimination

With bankruptcy comes a stigma that might last an entire lifetime and one after-effect and fear that plagues most people who may have been declared bankrupt at some point. This stigma is the difficulty in securing credit facilities during their period of bankruptcy or in the future although technically, after two years, such an individual is able to start afresh and build a new credit record.

Other Debt Concerns

You may or may not be aware that some debts are unable to be discharged. Such debts can include child support, alimony, fines, taxes and student loans. Asset exemptions vary between each state and between which bankruptcy chapter is filed. An example of this is when filing chapter 7, the majority of the debtor’s assets are sold in order to pay of debt to creditors. Chapter 13 however allows the debtor to maintain possession of certain assets such as a vehicle or home.

Credit Scars

There is also hope of a successful financial future after bankruptcy. Credit can be rebuilt over time as a previous debtor makes bill payments on time and does not spend outside of ones means. Taking the time to set up a bill payment system and a personal budget is one key to maintaining the path towards financial health. Performing such steps will help creditors to see that you are in the progress of rebuilding your credit though your credit report will continue to show proof of your bankruptcy. Chapter 7 appears for ten years and chapter 13 appears on your credit report for seven years.

However, all hope is not lost. Being bankrupt is actually not the end of the road like most people would imagine. Even if you have been declared bankrupt (involuntary bankruptcy) or if you have declared yourself bankrupt (voluntary bankruptcy) before, you can still live a normal life after your bankruptcy period.

Many people do not know that you can actually get a bankruptcy loan during or after your bankruptcy. This is a lot easier if you are in chapter 13 bankruptcy. To improve your financial security, get some relief with repayment of your debts or even to quickly restore your credit rating, you can get bankruptcy loan and there are experts who can help you in situations like this. So you know you are not alone. You can get bankruptcy loan to refinance your bankruptcy and pay your trustees. Getting a bankruptcy loan can help a genuinely bankrupt individual recover quicker than you expect.

The End Result

In the end of filing a bankruptcy claim you will receive a new beginning to make wiser financial decisions for a more sound credit history. We are provided with a second chance through bankruptcy to learn from our mistakes and to become more responsible spenders.

Fill This Out For Free Bankruptcy Evaluation!

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New Check Fraud From Cash Advance Scam

Thursday, August 6th, 2009

There is a new check fraud scam in Southwest Florida. In the past few weeks, I have received numerous emails and phone calls from clients and potential clients regarding phone calls and messages they and members of their families have received on a check fraud investigation resulting from a payday advance. The callers allege that they are “investigators” and are investigating the debtors for check fraud for a loan from a payday advance that was not paid. The callers state the debtors need to return the call to prevent criminal charges. Some callers even go as far to say that a warrant has been issued and give fake case numbers for the court where the debtors live. As you can imagine, many people become extremely frightened and upset when they hear this.

The first thing you need to know is the allegations made are completely FALSE! There are no criminal charges for the inability to pay a debt. Not paying a payday advance is not check fraud. A fraudulent check can occur in situations where you issue a check on an account knowing it has insufficient funds to cover the check or forging a signature on another person’s account. When a payday advance is taken, the advancing company is loaning you money until your next payday and is getting interest (usually very high) back on the return. It is a loan, plain and simple, not a fraudulent check.

The phone calls are coming from collection agents attempting to scare people in paying back the debt. How can this misrepresentation be legal you ask – the answer is, it is NOT! Consumers have numerous protections under the law against this type of abusive and misleading debt collection. The protections arise under both federal and most state laws.

The conduct described can subject the collectors to liability for any actual damages sustained such as emotional distress, statutory damages, and punitive damages. Under the federal Fair Debt Collection Practices Act, statutory damages can reach $1,000 in addition to any actual and punitive damages. Florida law also allows for $1,000 in statutory damages and recovery of actual and punitive damages for violations of the Florida Consumer Collection Practices Act. Both of these Acts allow a debtor successful in litigation to recover attorney’s fees and costs from the abusive debt collectors. The abusive collections can also subject them to civil penalties through actions brought by state attorney generals and the Federal Trade Commission.

So if the conduct is illegal and subjects the collectors to liability, why do they do it? Because it works. Under a cost-benefit analysis, these abusive debt collection companies make a lot of money by using illegal scare tactics. If it leads to a few lawsuits, their profits make the potential liability worth it. Or, the company is so small that once it is served with a lawsuit it can quickly close shop and disappear. Therefore, the best defense against these companies and their illegal ways is the knowledge that their representations of pending criminal charges are flat out lies.

This post was submitted by Attorney David Fineman of The Dellutri Law Group, P.A.

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Thursday, August 6th, 2009

Reethi asked:

Bankruptcy is a phrase heard and used by many. Individuals tend to have pre-conceived notions about bankrupts that they are individuals who are totally broke. But bankruptcy information can be a real eye opener for debtors who are contemplating bankruptcy and individuals who are seeking information about bankruptcy. It helps debunk all the myths attached to bankruptcy.

1)What is bankruptcy?

Bankruptcy is a legal term to formally identify an individual as bankrupt. It refers to the inability of any debtor or organization to pay their creditors. In majority of the cases, bankruptcy is initiated by debtors or organization themselves. The main purpose of bankruptcy law is to provide any honest debtor a chance to start afresh and to help a debtor repay his/her creditor/s in an orderly manner to the best extent possible by the debtor. Debtors are discharged of most of their financial obligations after their non-exempt assets have been distributed. Creditors can no longer harass debtors or continue any lawsuits once the debtor has opted for bankruptcy.

2)Implications of bankruptcy:

Filing bankruptcy is one of the hardest financial decisions. Debtors must carefully examine the implications of bankruptcy and choose it as a last resort to deal with financial troubles. Following are the implications of bankruptcy:

Lose control over your assets (except items/equipment required for work/household purposes)Cannot act as director of a company/practice as a lawyer/chartered accountantNegative publicity as a bankruptcy is advertised in ‘London Gazette’ and a local newspaperBankruptcy remains on record with credit agencies, land registry and other organizations

3)Common terms to understand bankruptcy

Bankruptcy petition: Individuals who opt for bankruptcy need to formally request protection of the federal bankruptcy laws. It involves filling of two important forms-The petition (Insolvency Rules 1986 form 6.27) and the statement of affairs (Insolvency Rules 1986 form 6.28).Chapter 7 bankruptcy: This chapter of the bankruptcy code provides for ‘liquidation’. The debtor’s non-exempt property will be sold and the proceeds will be distributed among his/her creditors. Chapter 13 bankruptcy: This chapter of bankruptcy provides a reorganization plan for individuals with regular income. It allows a debtor to retain his/her property and pay back his/her debt within 3-5 years.

Debtors could also consider various alternatives to bankruptcy before filing for bankruptcy. IVA, debt consolidation loan, debt management etc are proven alternatives to bankruptcy which the debtor can consider before he/she files for bankruptcy.

For comprehensive bankruptcy information log on to www.bankruptcy-information.bankruptcy help

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Wednesday, August 5th, 2009

Stephen Snyder asked:

When I first began applying for credit after my bankruptcy I noticed a trend.

Lenders would ask me the same series of questions over and over again. They all seemed to care about a few key things. Of course, now I realize they were trying to quickly assess if I was creditworthy or not.

You see, after you file bankruptcy, lenders will be very cautious when considering if they should extend you credit (and rightfully so).

Can you blame them?

After bankruptcy your number one mission is to prove to lenders you’re now a low credit risk.

So what do they want to see from you? The right answers to the following six questions.

Question 1: Are You Discharged?

The first thing a lender will need to confirm is if your bankruptcy is discharged. Or, in other words, if your bankruptcy is complete.

The reason lenders want to know that you’re discharged is because if your bankruptcy is still “open,” then you could technically still add accounts to your bankruptcy (including the lender you’re applying with). Not many lenders are going to grant you credit when you still have the ability to include them in your bankruptcy.

Make sure you don’t confuse the term “discharge” with the term “filing.”

Hopefully you’re not one of the poor saps who’ve had a bankruptcy dismissed.

Having a dismissed bankruptcy is bad, bad, bad. You basically receive all the negative effects of filing bankruptcy-but none of the benefits-since your bankruptcy was not completed.

It’s like paying off one of your collection accounts…then realizing the collection account remains on your credit reports. So your FICO credit scores don’t increase at all. They stay the same.

But there’s hope even if you’ve been dismissed. So don’t throw in the towel just yet. Life’s a garden-dig it …plant some seeds of hope…and watch as you prosper…You can still start the process of increasing your credit scores.

Question 2: When was your bankruptcy discharged?

This is very simple.

The more time that has passed since your discharge-the better.

You see, each lender has different credit guidelines. A lender’s credit guidelines are essentially their minimum requirements that you have to meet in order for them to approve your application.

For instance, you won’t be able to finance a new car through a low interest lender until you’re discharged. Being discharged is a basic credit guideline when financing a car after bankruptcy.

Getting approved for a secured Visa® or MasterCard® is relatively easy. Just being discharged and sending in your deposit are the two most important criteria.

Unsecured credit card lenders’ credit guidelines vary. Some lenders won’t touch you until the bankruptcy no longer shows up on your credit reports. If you discharge debt with some lenders, you’ll never get another card with them until that debt is paid back (e.g., American Express®). There are lenders that will give you a second chance-but it won’t be soon after your discharge (so don’t hold your breath).

Mortgage lending requirements are more complicated. How much time you have after your discharge will determine what type of mortgage financing you qualify for.

Anything less than 24 months after your discharge and you’re considered a sub-prime borrower. If you have more than 24 months after discharge you may qualify for more conventional mortgage programs.

Chapter 13 filers have even more options for getting a mortgage after bankruptcy, most of which are determined by the amount of time since your filing date.

So keep track of how long it’s been since your discharge. Or if you filed Chapter 13, how much time since you filed. They are important dates to memorize.

Question 3: How have you paid your bills since your discharge?

Late payments appearing on your credit reports after a discharged bankruptcy are kisses of death.

Some lenders even consider 1 day late after the due date to be enough for them to report a 30-day late payment to the credit reporting agencies. The reason is that technically, they count everything in the 1-30 day late payment range the same. So even being one day late could burn you.

Bottom line-don’t be late. Pay early, worst case on time. You simply cannot afford to be late.

Lenders will look to see how you’ve handled your credit since your discharge.

And if you think late payments hurt you…collection accounts, judgments, and other nasty things like those will haunt you much more.

You need to be able to tell a lender that you’ve paid everything early or on time since your discharge. When they review your credit reports they will see what you’re saying is true.

Question 4: Have you reestablished new credit since your discharge?

Avoidance is not recovery.

Although it’s good if you reaffirm a few credit accounts through your bankruptcy, it’s even better if you can show lenders that you’ve established new credit since your discharge.

The types of new credit you need to aim for are:

- Home mortgage

- Car loan

- Car lease

- Credit union loan

- Bank loan

- Overdraft protection

- Credit card

- Retail credit card

- Gasoline credit card

- Home equity loan

- Student loan

The catch-22 is that the lenders you really want to work with don’t really want to be the first ones to grant you credit. It can be frustrating trying to open that first account-which is why you need a strategic plan of attack. In other words, don’t apply for a business loan (which can be tricky to get) if you can’t even qualify for a secured credit card yet.

But it all starts with you. I’m saving you months-even years-worth of trial and error. But you have to take the information and put it into action. So get to it!

You simply will not recover unless you jump back into the fire and prove to the world you can manage credit effectively.

Question 5: How much do you have for a down payment?

It will be necessary in most cases to be able to come up with a down payment or deposit. So start saving! Lenders don’t take food stamps, or post-dated checks.

As a general rule of thumb, if you made all your payments as agreed on your last car, you should plan on no more than $500 to finance a new car at a normal interest rate…that is IF you follow what I teach in the free Credit After Bankruptcy seminar.

On the other hand, if you missed or made late payments on your last auto loan, your only option will most likely be 20% down at a high interest rate through a finance company.

If a car dealer is telling you to come up with more money, you’re either at the wrong dealer…or you need to wait until you’ve reestablished your credit a little more.

If you want a good secured credit card-plan on depositing around $250 to $500. There are some secured credit cards that you can get that have lower deposits, but I don’t recommend them. Most of the lower-deposit cards have hidden fees…don’t report to the credit reporting agencies properly…and usually have higher interest rates to boot.

A down payment on a home will obviously depend on the amount of the mortgage. Although 3% to 10% of the purchase price is considered the norm-it’s more than possible to get a mortgage for no money down. And I’m not talking about some crazy television infomercial that’s promising you the world. I’m talking about real, bona fide mortgage programs.

So be prepared. Have a little money down to show you’re a playa.

Question 6: What are your credit scores?

Of course you knew this was coming, right?

Back when I was recovering from bankruptcy, credit scoring was just starting to become popular. You couldn’t even purchase all 3 of your credit scores before 2003.

Today credit scores are used by nearly every lender in the United States and Canada.

If you don’t know your FICO credit scores-you should.

Most important, you need to know which credit reporting agency has your…

…HIGHEST credit score

…your MIDDLE credit score

…and your LOWEST credit score

To gain the most leverage over any lender you should choose to work with the lender that uses the credit reporting agency that has your HIGHEST FICO score. This way you receive the lowest interest rate and best terms.

A Final Note

So there you have it. The six questions lenders will ask you after bankruptcy. Like my scoutmaster taught me many years ago…be prepared.

Chance favors a prepared mind.

Fill This Out For Free Bankruptcy Evaluation!

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How To Search For Records

Tuesday, August 4th, 2009

leeannmeyer1 asked:

searchresult911.com Fully organized public record databases, you will have access to complete research tools for obtaining public record information of people from the privacy of your own home or office. … “criminal records search” “bankruptcy file search” “phone search” “address search” “locate *** offenders” “people search”

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Monday, August 3rd, 2009

Jon Arnold asked:

When a consumer is considering bankruptcy, the usual way to file it is to use Chapter 7 bankruptcy but in some cases it makes more sense for the consumer to file under Chapter 13 bankruptcy law. All bankruptcies, regardless of which chapter is filed, are done under the jurisdiction and supervision of the federal bankruptcy court.

The consumer who files under Chapter 13 bankruptcy protection is shielded and protected from creditors who might otherwise file a separate lawsuit against the consumer to collect the outstanding debt owed. When a consumer files Chapter 13 bankruptcy, the debt from all creditors is consolidated into one debt, it drastically reduces and sometimes even eliminates interest payments, and in almost all cases, it lowers the total amount of money that the consumer needs to lay out each month.

One of the beautiful parts about this is that after you have notified the creditors that you have filed bankruptcy, Chapter 13 or any other chapter, they can no longer call you or send you threatening letters, which only serves to increase your stress level anyway. You are recommended to keep a notebook near your phone and note which creditors you told about your bankruptcy, noting date, time, creditor and the name of the person you talked with. If they persist in calling after being notified that you have filed bankruptcy, they are in violation of federal law and you may have the option at that point of bringing a countersuit against them for that violation. Believe me, they are well aware of that and do not want to risk it.

Now by looking at this explanation, if you have been doing research into your bankruptcy options, you may have noticed that Chapter 13 bankruptcy sounds very similar to the process of using a debt consolidation service. You are right, but there are some very distinct advantages and disadvantages of each. For example, a debt consolidation service charges a small fee for their services, where the total amount of that fee would probably be a bit more than you would pay for your Chapter 13 bankruptcy filings and legal fees. But then again, with a debt consolidation service, your credit score is maintained and the fact that you are using a debt consolidation service is frequently not even visible on your credit reports, whereas a bankruptcy filing is a huge neon sign on your credit reports for the next 7 to 10 years. Although everyone’s situation is different, it would seem that a debt consolidation service, even though costing a bit more, would have much fewer long term negatives. You should really compare both options with a good bankruptcy lawyer so you can make an informed decision about what is best for your circumstances.

So the bottom line is that a chapter 13 bankruptcy gives the consumer the opportunity to pay off their financial obligations in a timely manner. The amount that the consumer will pay each month is determined by the bankruptcy court and will be an amount determined by a close examination of the consumer’s sources of income. A trustee is appointed by the court and the consumer’s check each month is given to that trustee. In most cases, this must be a certified check or cashier’s check, so it is going to be a bit more hassle to get that kind of check each month and get it to the trustee.

If you are considering bankruptcy as a consumer, you can either file Chapter 7 or Chapter 13. But especially with the recent changes in the bankruptcy laws, filing bankruptcy is no longer a “do it yourself” process unless you are willing to get very familiar with the bankruptcy laws. Making a mistake in the complex procedures that have been established could easily end up costing you more than a bankruptcy lawyer’s fees.

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Bankruptcy Questions Answered

Archive for August, 2009

What Happens if my Chapter 13 Case is Dismissed?

Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss

Bankruptcy Exemptions In Florida Part 1 - Homestead

Debt To Income Ratio Explained

Filing For Bankruptcy Is Not A Reflection On You As A Person

New FCA Rules Put Lenders and Brokers Directly in Their Gun Sights

New Check Fraud From Cash Advance Scam

How To Search For Records

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