Archive for October, 2009
Saturday, October 31st, 2009
Another bankruptcy attorney emailed me asking me for my opinion about a case where an Orlando bankruptcy judged permitted a Chapter 7 debtor to "strip" off a second mortgage on their homestead. The law as I understood it was (and is) that only Chapter 13 debtors can use bankruptcy to strip a second mortgage lien off their homestead. The second mortgage is removed when the debtor successfully completes the Chapter 13 assuming that the house value is equal to or less than the first mortgage balance.
I looked up the case the attorney referred to. Sure enough, it was a Chapter 7 bankruptcy, and the judge issued an order stripping a second mortgage from the residence. The judge did not write an opinion explaining the order. There was no objection filed by the second mortgage lender.
I don’t accept this order as precedent. I think the judge’s office made a mistake. The law is clear on this issue. A second mortgage can be stripped only in a Chapter 13 case. That there was not lender objection and no written opinion suggests that this order was entered in error.
If a debtor’s attorney submits an order with a 20 day negative notice (any party has 20 days to object or the order will be granted) , and no party objects, the judge’s office will draft an order approving the motion and present it to the judge for signature. I think in this instance the judge’s office saw an order to strip a second mortgage with a routine negative notice, did not catch the fact that it was a Chapter 7 proceeding, and drafted an order approving the motion for the judge. If the judge understood that this was a Chapter 7 case, the judge would have written an opinion explaining why the mortgage could be stripped from the homestead.
This case may be a windfall for this debtor. Debtors may get in trouble with the court if they try to "slip by" a strip motion in a Chapter 7 bankruptcy.
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida
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Saturday, October 31st, 2009
Pnreddy asked: Bankruptcy is one option to consider in order giving yourself a “fresh start,” when you have more debts than you have assets. There are in fact many types of bankruptcy provided under the law but the most common is Chapter 7 bankruptcy, which is also known as liquidation.
When filing under Chapter 7 bankruptcy, all your assets, excluding those that are exempt under the law of your state, are dissolved and liquidated. Generally, the person tasked to do this is the court-appointed official, called a trustee.
All in all, the vital task of the trustee is selling your properties and using the proceeds to pay your creditors. After doing such, the court will then cancel many of your remaining debts, thus affording you a “fresh start” to life.
Here is a step-by-step guide to filing a bankruptcy under Chapter 7 bankruptcy:
Step 1: Decide whether you should file bankruptcy or not.
Filing bankruptcy is a personal decision, influenced by many factors, such as the amount of serious debts and your ability to meet the original payments or pay the full amount. For starters, when you are broke, it is never a nice experience getting harassed by creditors for debts incurred. For another, your decision to file should not be made for the sole purpose of putting a stop to your demanding creditors.
This is a significant point as secured creditors may apply for “relief from stay,” thus allowing them to continue their efforts to repossess or foreclose even though you already filed for bankruptcy.
Step 2: Get an attorney
While the law on Chapter 7 bankruptcy does not need individual consumers to hire an attorney who would represent them in court, it is still advisable to ask for legal help, particularly concerning critical decisions involved in bankruptcy.
Step 3: Comply with the legal requirements.
File your petition with the bankruptcy court serving in your area. If you are a business debtor, then file with the bankruptcy court in the place where the business was organized or has its principal place of business or principal assets. Your attorney should be able to advise you on how to deal with these required legal forms.
Step 4: Pay the necessary fees.
As with any other court cases, there are certain fees required, such as:
• Case filing fee
• Miscellaneous administrative fee
• Trustee surcharge
Upon filing, you are usually asked to pay these fees to the clerk of court.
Note that the number of installments is limited only to four. Additionally to that, you are also required to make the final installment no later than 120 days after filing the petition.
Step 5: Notice to the creditors and meeting.
After filing your petition for bankruptcy under Chapter 7, paying the necessary fees, and complying with the legal requirements, an “automatic stay” is granted to you by operation of law. This stay will efficiently stop most collection actions against you and your properties. This means that as long as the stay is in effect, creditors cannot initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.
After the bankruptcy case has been filed, the bankruptcy clerk will give notice to all creditors whose names and addresses you provided. Then, the case trustee will hold a meeting of creditors between 20 and 40 days after you filed your petition.
Step 6: Cooperate with the trustee.
The case trustee has a vital role in a bankruptcy case. His primary responsibility is to liquidate your nonexempt assets in a manner that maximizes the return to your unsecured creditors. He does this by selling your property, if it is free and clear of liens and as long as it is not exempt, or if it worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.
In view of the broadness of a trustee’s power, it is significant therefore that you cooperate with the trustee. Provide any financial records or documents that the trustee requests and answer questions, which the trustee is necessary to ask at the meeting of creditors under the Bankruptcy Code.
Step 7: After the discharge…
If all goes well with your Chapter 7 bankruptcy case – that is, no one files a complaint objecting to the discharge or a motion to extend the time to object – the bankruptcy court will issue a discharge order relatively early in the case, about 60 to 90 days after the date first set for the meeting of creditors
A discharge order is an order issued by the bankruptcy court, releasing you from personal liability for most debts and preventing your creditors from taking any collection actions against you. As a rule, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of Chapter 7 bankruptcy cases.
For someone filing under Chapter 7 bankruptcy, a discharge of almost all of your debts is the ultimate goal. With the release of all your debts and creditors stopped from pursuing any further collection actions against you, the opportunity for a fresh start is apparent.
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Sunday, October 25th, 2009
A lawyer called me with a question about a car lease in a Chapter 13 bankruptcy. His debtor filed Chapter 13 with a car lease that terminates in three years. His client’s bankruptcy plan is a five-year plan. Chapter 13 debtors cannot incur new debt (such as a new car loan or lease) without permission. The attorney and debtor are concerned that three years into the Chapter 13, at the end of the current car lease, the debtor be without a car. The attorney asked me if I knew of a way for a Chapter 13 plan to extend the term of an existing car lease.
The general rule is that Chapter 13 debtors can assume or reject leases and other contracts. This debtor will assume the car lease to keep the car for the balance of the lease term. Another general Chapter 13 rule is that debtors cannot modify the terms and conditions of existing contracts such as mortgages and leases. I don’t think this Chapter 13 debtor can extend the term of his car lease.
However, there is an easy solution. Three years into the bankruptcy plan the debtor can request permission from the Chapter 13 trustee to purchase a car when the car lease expires. The key will be to keep the debtor’s monthly payments for the next car at or below the amount of the debtor’s payments under the current lease. If the debtor does not increase his monthly car expenses the trustee will approve the purchase because the new car payment will not increase total monthly expenses and will not decrease the amount of money paid monthly to the debtor’s unsecured creditors under the bankruptcy plan. New car debt equal to or less than the current car payment does not negatively impact the debtor nor his creditors.
posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida
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Sunday, October 25th, 2009
I filed Chapter 7 bankruptcy for a relatively wealthy husband and wife. The debtors passed the means test primarily because they had large mortgages on their residence and a few investment properties. Secured mortgage payments provide income offsets in means test calculations. The debtors lived in a nice house, drove nice cars, and the family enjoyed an annual income over $100,000. As expected, the U.S. Trustee filed a notice of a "b(3)" challenge which means that the U.S. Trustee may consider the Chapter 7 bankruptcy to be an abuse. Bankruptcy courts will dismiss a Chapter 7 bankruptcy as an abuse where the debtor is using bankruptcy to sustain a "lavish" lifestyle at the expense of unsecured creditors. Simply stated, your bankruptcy could be in trouble when your house and your car are nicer than the judge’s and trustee’s houses and cars. In this instance, my clients got lucky.
My clients’ had two mortgages on their principal residence including a small first mortgage and a large second mortgage. The U.S. Trustee took my clients’ deposition. During the deposition he asked the clients why they incurred the large second mortgage. The clients testified that they used the proceeds of the large second mortgage to make down payments on their investment properties during the real estate bubble.
The U.S. Trustee concluded from the deposition testimony that the debtors’ debts were primarily non-consumer debts because the large second mortgage on the residence, as well as the mortgages on the debtor’s investment properties, were used for investment purposes. The general rule is that mortgages on your primary residence are consumer debts, not business debts. When a debtor uses a homestead’s second mortgage proceeds for business as opposed to consumer purposes, such as down payment on investment properties, the second mortgage is deemed to be for investment rather than consumer purposes.
A debtor whose debts (secured and unsecured) are primarily non-consumer debts is exempt from the means test in determining eligibility to file Chapter 7 bankruptcy. The U.S. Trustee explained that the non-consumer debt test also applies to the so-called "b(3)" abuse issue. Even when the U.S. Trustee believes a Chapter 7 debtor is living an extravagant lifestyle after filing Chapter 7 bankruptcy the Trustee cannot challenge the filing as an abuse when the debtor’s debts are primarily non-consumer debts.
posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida
Posted in Chapter 7 | Comments Off
Saturday, October 24th, 2009
John Chase asked: Bankruptcy Questions
Filing for bankruptcy after those endless debt issues may seem as the last resort. However, it might be more of a fearful act. Bankruptcy is a hard-nosed procedure with almost permanent impact. The menacing after effects of bankruptcy, which often are not properly assessed before filing for bankruptcy tend to confuse during the process, thus impelling many to cancel the proceedings.
Debt issues are difficult to deal with and even more strenuous are the problems which typically complement the financial agonies; however, Filing for bankruptcy is not the very perfect answer to curb miseries. Instead, Filing for bankruptcy might just aggravate the issue, leading to even greater, unmanageable troubles. Therefore, before beginning with the official bankruptcy Filing act, read on to find all about bankruptcy and thus refrain from the insidious obligations.
Bankruptcy - The Concept
In the most positive terms, bankruptcy is a legal proceeding that allows individuals and companies to start over again without managing their debt obligations. When large corporations opt for bankruptcy, the leading media representatives talk about it, while when average earning people apply for one, they are an addition to the statistical reports. In the UK, both the stated bankruptcy filing announcements are a norm, thus making bankruptcy sound as a very tempting debt solution route. To further entice the sufferers of the debt, bankruptcy promises to cease all financial stress, and suggest a way out with less to pay, thus eliminate all debt issues.
Bankruptcy has a Host of Harmful Consequences
If you are just thinking about filing for bankruptcy, then consider the matter deeply, because there is much more to it than the benefits stated above, Bankruptcy also has a host of disadvantageous consequences. Once an entity begins filing for bankruptcy and thus declares the bankrupt is devoid of assets of value such as a house or other equity. Businesses could be sold, including machinery to repay creditors. Those declared bankrupts may have accommodation issues, with landlords not too delighted to accept them as tenants. Remember, bankruptcy, is a legal procedure, and therefore is recorded by bankruptcy law. Bankruptcy stays in files for years (see enterprise act for updates) and therefore negatively impacts financial transactions until the same time. The image is not very helpful in envisaged career moves as well. Employers too are apprehensive of those with bankruptcy records in their credit files. Of course, seeking and obtaining competitive credit terms can be just a dream after filing for bankruptcy.
Bank current accounts suddenly seem unobtainable. And after all this mess, there are certain debts which even bankruptcy cannot deal with and there are secured creditors, who have every right to their share, even after the bankruptcy has been declared.
Bankruptcy offers a chance to start again, but there may not be many resources to start again. For more useful information on bankruptcy questions, please visit Debt Relief Adviser.
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Saturday, October 24th, 2009
With a sluggish economy, I have met with an increasing number of small business owners who are considering personal bankruptcy to deal with credit card debt and personal loans, but who want to keep their business assets and credits separate. Is this possible.
First, it does make a difference whether the small business is incorporated. If your small business is a proprietorship (i.e. "Tom Smith d/b/a Tom's Lawncare") then there is no way to separate personal assets and debts from business assets and debts. In this situation, all debts are "personal" because the proprietorship does not have a separate identity from the individual. All debts would have to be listed – for bankruptcy purposes in this situation, there is no difference between your personal credit card debt that arises from gasoline and grocery purchases and a credit card that you use for business purchases.
Assets of the proprietorship would be considered personal assets – assets that do not fit within the Georgia exemption statute would be at risk.
In a Chapter 7, if you have non-exempt assets you would have to surrender those assets to the trustee or offer to buy the "estate's interest" from the trustee (usually at a discount from fair market value).
Note that any receivables of the business or any other property with potential resale value (i.e. customer lists, pending contracts) could be claimed as estate assets.
In rare instances a Chapter 7 trustee could object to your small business bankruptcy using an "income suppression" argument. This argument asserts that you should not be eligible for bankruptcy relief because you have intentionally suppressed your income by leaving a highly paid job or intentionally refused to maximize income opportunities.
If you are incorporated, the shares of your business are assets and you may very well be asked to justify a de minimus (i.e. $500) valuation that you put on those shares. I see this issue frequently when clients own service businesses. For example, I recently represented a client in an incorporated service business that had about $75,000 worth of equipment, but also had around $80,000 of credit card debt, $2,000 of tax debt and was behind on rent and facing a possible eviction. What is the value of the shares in this case? Is it $75,000 under the theory that the equipment was not subject to any lien and could be liquidated? Is it zero under the theory that the business (and my client as personal guarantor) could be liable for a fraudulent transfer if it liquidated the equipment when the business was insolvent? Or is the value somewhere in between zero and $75,000 using a compromise argument?
The income suppression argument described above also applies when the individual debtor's business is incorporated. I have seen trustees take the position that a debtor with a certain level of education and training should make a reasonable effort to monitize that education rather than chase an entrepreneurial dream at the expense of creditors.
In the case of an incorporated business where the debtor has partners, the Chapter 7 trustee may become a replacement partner by virtue of his trustee powers and thereafter force a liquidation or a buyout.
I usually advise my clients who own small business clients that there is a possibility that the trustee may demand that the business close its doors and that they may have to find a new line of work. This possibility is less likely if the business is a service business that does not involve hard assets or inventory, and more likely if there are business assets with value or receivables.
Needless to say there are a myriad of potential issues for small business owners who are thinking about filing a personal bankruptcy. As always, you will benefit greatly by seeking counsel before your situation becomes critical.
Posted in General consumer bankruptcy info, Georgia Bankruptcy, Protected property issues, Tax issues, atlanta bankruptcy, jonathan ginsberg, small business and personal bankruptcy, solo practitioner bankruptcy | Comments Off
Friday, October 23rd, 2009
Jon Arnold asked: Sometimes situations arise when you can no longer pay your bills. Although you may have the best intentions of paying off your debt, you simply may not have the means to make this happen. When you can no longer pay your bills, you may need to consider filing bankruptcy. Hopefully you will have considered your alternatives but sometimes bankruptcy is the most viable option. The question then becomes which type of bankruptcy will best suite your financial needs, Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Your current situation will help you to decide which bankruptcy route is best for you.
A majority of consumers choose to go with Chapter 7 bankruptcy. There are a variety of differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy does not require you to make a plan of repayment. When you file for Chapter 7 bankruptcy, your debt is not immediately wiped out. Instead, a bankruptcy trustee will sell off your non-exempt assets in order to pay off your debts. It is important that you understand with Chapter 7 bankruptcy, you could potentially lose any property that you currently own.
However, with Chapter 13, you are not required to liquidate your assets in order to repay your creditors. Instead, you make a repayment plan to pay a portion or all of your unsecured debt back. This is done through the court system and payments can be made over a 36 to 60 month period. The amount you repay your creditors must be equal to or greater than what they would receive should you have liquidated your assets, as with Chapter 7 bankruptcy. If you follow through with your repayment plan, then your remaining unsecured debt will then be discharged.
If you have lost your job or have no means of repaying your debt, then you should probably consider filing for Chapter 7 bankruptcy. However, if you are still able to meet some of your monthly obligations, but cannot pay off your entire debt, then you may want to consider filing for Chapter 13 bankruptcy.
It is important that you have a full understanding of the lasting impact of filing for bankruptcy. Whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are financial consequences. Chapter 7 bankruptcy will have a steeper impact on your financial situation. By filing Chapter 7 bankruptcy you are telling creditors that you cannot be trusted to pay off your debts. Therefore, you will have a hard time finding creditors to lend you money in the future. This will be extremely important if you are ever in the need for a new car, mortgage or even a simple credit card.
Chapter 13 has less of an impact on your overall credit rating. Since you are still paying off your debt, just in a restructured form or at a lower interest rate, creditors see you as less of a financial risk, than someone who has wiped out there entire debt through Chapter 7.
Be aware that there are certain types of debt that cannot be discharged with either chapter of bankruptcy, so make sure you have a thorough understanding of bankruptcy law, especially with the major recent changes to the laws.
There are both pros and cons to filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Before committing to either one, you should sit down with a financial adviser and go over your obligations and options completely. Weighing out the pros and cons of both types of bankruptcy and basing your decision on your current situation, you will be able to easily decide which bankruptcy route you should go with.
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Thursday, October 22nd, 2009
Debtors are discovering that they can strip off their second mortgage lien on their primary residence by filing a Chapter 13 where the value of the house is equal or less than the balance of their first mortgage. In such cases, there is no equity securing any part of the second mortgage. Debtors with upside down second mortgages often also have substantial unsecured credit card debt. They could not afford even a first mortgage unless they get relief from their credit card payments.
Some of my own clients have asked me whether they can combine a Chapter 7 bankruptcy and a Chapter 13 bankruptcy to both discharge unsecured debts and then strip their second mortgage from their primary home. The plan is to file a Chapter 7 and discharge all credit card debt. After the Chapter 7 discharge is entered, the debtor would immediately file for Chapter 13 bankruptcy. There would be not automatic stay applied in the Chapter 13 case, but the debtor would be current on his mortgage payments would not benefit from an automatic stay’s protection from foreclosure. The debtor would file a motion to strip the second mortgage in the Chapter 13 case. The debtor would end up with no unsecured debts (all discharged in the Chapter 7) and no second mortgage on his residence (stripped in Chapter 13). Can this plan work?
I don’t think this plan will work, and here’s why. The judges in the Orlando Division have written a standard order granting a motion to strip a second mortgage in Chapter 13 case. The standard order states that the debtor’s second mortgage will be released from the property when the debtor completes the Chapter 13 plan and the court enters a Chapter 13 discharge of any debts not paid in the plan. However, under the new bankruptcy law a debtor is ineligible for a discharge under Chapter 13 if he received a prior discharge in a Chapter 7 case file four years before the current Chapter 13. Therefore, the Chapter 13 filed immediately after the Chapter 7 could not earn a discharge. Since the standard mortgage strip order requires a Chapter 13 discharge, the Chapter 13 filed soon after the Chapter 7 case could not strip the debtor’s second mortgage.
Sure, the debtor could wait four years after the Chapter 7 case to try the Chapter 13 mortgage strip, but by then the debtor either will have defaulted on the unaffordable second mortgage or a market recovery will have increased the property value to the point where a mortgage strip is not allowed.
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Wednesday, October 21st, 2009
leena.ebrandz asked: An attorney is familiar with the rules and regulations of your state; hence, he can be the only option to solve your financial problem. Filing for bankruptcy is not at all a simple matter; you may sometimes become too worried to go through the process.
A competent bankruptcy attorney may handle your financial trouble smoothly, and may point out the advantages and disadvantages of filing after analyzing your crisis in details. You must appoint a reputable attorney who has in-detail understanding of the bankruptcy law. The hired attorney must also know the entire process of filing bankruptcy.
How to Find a Bankruptcy Attorney
You must take time to choose the right bankruptcy attorney for you. It is essential to find a bankruptcy lawyer who may explain you the process of filing bankruptcy clearly. Try to find an attorney who may help you to overcome the process easily. You must ask them to give you a list of fees they charge, and also what services they offer. This will help you to judge whether the bankruptcy attorney is right for you or not.
If you have doubt regarding which attorney to choose, you may take the suggestion of other attorneys to find the right bankruptcy attorney for you. Even a personal attorney may suggest someone who is skilled and experienced in the field of bankruptcy law. You can also visit bankruptcy courts if you get time. This will help you to understand how the process of bankruptcy functions, and will also give you a detail understanding of the type of person you must employ to fight for your case.
How a Bankruptcy Attorney Solves Financial Problems
Bankruptcy attorneys are familiar with the bankruptcy law and offer legal services for commercial businesses or individual to wipe out their debt problems. They liquidate the assets and distribute them among the creditors. They also resolve the financial problem by developing a plan which involves repayment of creditors from time to time.
Bankruptcy attorney explain the main purpose of bankruptcy laws, and also illustrate the way they function to help businesses and individuals come out of their financial crisis. They offer a new financial start and relieve men from indebtedness. Title 11 of U.S code regulates the proceedings of bankruptcy, including what bills may be eliminated, what possessions may be kept, how long the payments can be extended, and several other details concerning bankruptcy.
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Sunday, October 18th, 2009
One of my bankruptcy clients had approximately $700 in a checking account just prior to filing Chapter 7 bankruptcy. Before we filed the bankruptcy petition one of the judgment creditors listed on A bankruptcy called my office to complain that one of the debtor’s judgment creditors garnished the checking account. The debtor called the creditor and asked them to release the writ of garnishment. They refused. Then, the debtor called our office complaining that the creditor was violating the automatic stay by refusing to release the garnishment on the checking account. Is the creditor violating the bankruptcy stay by maintaining a garnishment after the account owner files bankruptcy? I think not.
The writ of garnishment creates a judicial lien on the debtors bank account when the garnishment is served on the bank. Courts have found that the debtor has no affirmative duty to dissolve the bank account garnishment. Further actions in state court to get the money after the bankruptcy filing would probably constitute a stay violation. If the debtor claims an exemption of the bank account funds because, for example, the money represents wages of a head of household debtor, the judgment creditor would have to release the money to the debtor unless the exemption is timely and successfully challenged in bankruptcy court. If the money is non-exempt, then the money becomes part of the bankruptcy estate to be distributed equally among all unsecured creditors. If the judgment creditor had already received the money prior to the bankruptcy by virtue of the garnishment the bankruptcy trustee could claim the money back from the judgment creditor because the garnishment would have produced an unallowable preference. A bankruptcy trustee can void the judicial lien of the garnishment if necessary to recover the preferential payment to this creditor.
The judgment creditor’s duty would be different if this were a wage garnishment. Wage garnishments apply to future wages which are owed to the debtor for his employment after the debtor filed bankruptcy. The debtor’s future wages are not part of the bankruptcy estate and are not available to pre-filing creditors. Courts have held that judgment creditor have an affirmative duty to dissolve a wage garnishment against a bankruptcy as soon as the bankruptcy is filed.
posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida
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Sunday, October 18th, 2009
As you may know, there are both federal and state laws that offer a variety of protections to individuals who are in debt and who are being dunned by debt collectors. The Fair Debt Collection Practices Act offers a variety of protections in cases involving collection agencies (as opposed to the actual creditor). In other words, a credit card company can do and say certain things and remain legal, but if a collection agency does or says the exact same things, those actions would be a violation of the FDCPA and make the collection agency subject to a claim for damages.
Two of the protections provided by the FDCPA include:
- a prohibition against communicating with a debtor when the collection agency employee does not identify himself as a debt collector; and
- communicating about your debt with third parties
The 11th Circuit Court of Appeals (which provides controlling precedent for Georgia) recently issued an important decision that struck down a somewhat bizarre argument by a debt collector regarding phone messages. This case benefits consumers by clarifying the rules about telephone messages by bill collectors.
The case of Edwards v. Niagara Credit Solutions involved a situation in which the debt collector (Niagara) left "bare bones" messages on a phone answering machine asking Ms. Edwards to call back about an "important matter."
Niagara argued that its employee did not identify itself as a debt collector because someone other than the debtor might hear the message, thus violating the "third party communications" prohibition.
The 11th Circuit rejected Niagara's argument, stating that it is not permissible to violate one provision of the FDCPA in order to comply with another provision. The Court further noted that the FDCPA does not guarantee a debt collector the right to leave answering machine messages.
What does this mean to you? If an unknown party leaves you a message asking that you call about an "important matter" you should save the message and contact a lawyer knowledgeable about FDCPA actions. If a debt collector leaves you a message and identifies himself as a representative of a collection agency or otherwise discusses a debt that you may owe, save that message as well. You may have a cause of action for damages.
Posted in Consumer Protection, Edwards v. Niagara Credit Solutions, FDCPA Claims, fdcpa violation | Comments Off
Saturday, October 17th, 2009
Jessica Bennet asked: If you have too much of debt and there’s no income as such to support your debt payments, bankruptcy filing may be the only option for you.
However, you need to get an idea as to what bankruptcy is all about and how it can affect you once you file it. Given below are the 5 things you should surely ask before you file bankruptcy.
1.Find out if you’re eligible to file: If you have more than enough income and asset limit, you may not be allowed to file Chapter 7. In such a case, the court may ask you to file Chapter 13 which is basically a repayment plan developed in order to help you pay off debt within a period of 3-5 years. So, it’s important for you to know under what conditions bankruptcy filings are possible.
2.Know what debts won’t be wiped out: It’s essential to find out those debts which cannot be canceled or wiped out through bankruptcy filing. There are certain debts such as student loans, child support, back taxes, alimony etc which cannot be discharged or wiped out in bankruptcy. So, it’s no use including such debts into your filing.
Credit cards and personal loans are debts, which can be discharged through bankruptcy filings. But if they are fraudulent debts (for example: you have lied on your credit application), then you will not be able to include them in your bankruptcy filing.
3.Effect on your spouse or cosigner: Bankruptcy filing won’t affect your spouse unless his/her name is on the debt account. If you’ve filed Chapter 7, your spouse’s credit will get tarnished along with yours. But Chapter 13 will protect your spouse or cosigner as it is a sort of repayment plan that allows you to reorganize your debts.
4.You may be able to keep your home/car: Chapter 13 bankruptcy filing will help you to keep your home or car as you’re making payments under a court-approved payment plan. But if you file Chapter 7, chances are that you may lose your home or car if your home equity is more than the Federal or State exemptions applicable in your state of residence.
5.Know if your 401k plan and insurance policies are safe: Retirement plans such as 401k, 403b etc and pension are protected under the Federal law. As such, they won’t be affected by bankruptcy filings. However, IRAs and Keogh plans may not be entirely protected, but they do have exemptions (for example: creditors cannot take up to the first $1 million of your funds in an IRA) defined under the bankruptcy laws.
Bankruptcy filings can help you get out of debt or restructure payments depending upon whether you qualify for Chapter 7 or Chapter 13. However, just make sure you’re quite comfortable with disclosing your financial details to your creditors as well as the bankruptcy court.
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Friday, October 16th, 2009
Miodrag Trajkovic asked: It is better to realize as early as possible that going through a bankruptcy claim is not easy. People generally opt for it as their first remedy. You must know the bankruptcy laws well in order to decide.
The bankruptcy law has been crafted in a way to promote provisions that are a part of filling bankruptcy claims. It contains systematized laws that help the debtor to rid himself of any financial obligations that he has to undergo. The Chapter 7 bankruptcy law is in other words called straight bankruptcy. This law deals with the liquidation process. According to this, the one who is filing for bankruptcy has to surrender all his assets except those that are unaccredited or exempted to the lawyer or the trustee in bankruptcy.
The court must appoint a trustee in bankruptcy and he will be given charge of selling the assets or converting them into cash. Once the assets have been converted to cash the creditors are paid with these funds. Under the Chapter 7 bankruptcy law you are discharged from any obligation after a period of four months.
When can you apply the Chapter 7 bankruptcy law? It is applied when the debtor is left with no property to give up or lose. This is one of the most common bankruptcies that are filed in the United States by either individuals or business corporations. You could personally file bankruptcy by abiding with the Chapter 7 bankruptcy law or the court may impose it.
The Chapter 7 bankruptcy law will prompt a business man to sell all his assets and pay what he owes the creditors and finally close down his business. The procedures are very similar for individuals who have been forced to file under the Chapter 7 bankruptcy law, the only difference here is the individual will have no business to close down.
The advantages of filing a claim under the Chapter 7 bankruptcy law first and foremost are that any amount of debt may be cleared and as soon as you get out of the trouble you are in, you get a clean chit. The other advantage is that there is no particular amount of debt to qualify you for filing under the Chapter 7 bankruptcy law. As there is a protection that is granted by this law, the creditors cannot exert any authority over you. It is processed very quickly and you can be discharged from any debts in a short period, say in about four to six months.
The disadvantage of the Chapter 7 bankruptcy law is that you have to give up your whole property. Debts like taxes, child support, housing mortgages, students’ loans and car loans are not discharged under the Chapter 7 bankruptcy law. Along with you the co-signers will also be pulled in and asked to pay for your home loan. This law may be only availed once in every six years.
It becomes difficult to avail other loans because your credit rating gets damaged. Once you have filed for the Chapter 7 bankruptcy law, it cannot be withdrawn.
Tread cautiously if you are considering filing under the provisions that are based on the Chapter 7 bankruptcy law. All you need is to be protected and not end up with added problems.
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Friday, October 16th, 2009
To read this article on bankruptcies in the fashion industry published by American Lawyer, please click here, or visit the AmLaw Daily website.
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Thursday, October 15th, 2009
Yesterday morning Attorney Carmen Dellutri and David Lampley were on Fox 4 Rising discussing the Dellutri Law Group's Mortgage Modification workshop, held at Florida Rural Legal Services in Fort Myers. For more information on when and where this workshop is held, please visit Fox 4 Rising, or contact out office at 239-939-0900 Ext. 237.
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Wednesday, October 14th, 2009
Tomas Loden asked: If you are considering filing for personal bankruptcy, Here are some of the myths and facts about it.
1)Will Bankruptcy Stop Foreclosure On My Home? If your home is in foreclosure, Chapter 13 Bankruptcy will stop the foreclosure at any time prior to the sale. Note; bankruptcy does not eliminate mortgages on your property.
2) Credit after bankruptcy. Some banks offer credit to “potentially” risky customers. The debtor puts up a small amount of money in order to secure payment in the future. Once the debtor proves his ability to pay, his credit limits are raised. In recent years, creditors have looked more to a debtors stability, as opposed to the fact you filed for bankruptcy. Call you bank now and tell them about your situation, help can be closer thn you think.
2) Filing bankruptcy with a bankrupct expert lawyer is often the best option. If you are facing financial problems and you are seriously considering filing for personal bankruptcy, you should speak to a bankruptcy expert lawyer. Bankruptcy can be a very difficult, complex and very complicated legal process, so it is very important to seek an experienced and skilled bankruptcy lawyer. Filing for bankruptcy is a complex and time consuming process that can leave you overwhelmed. Look online and dp some research, ut can save you time andlots of money.
3) You can not file for Personal Bankruptcy… Or? The truth is that anyone can today file a personal bankruptcy. You will have no difficulties at all. Changes made by the US Congress in early 2005 allow any debtor to file for personal bankruptcy. Bankruptcy is also now governed by state laws. The laws differ from state to state, with mounds of legal paperwork to complete, so be sure that the lawyer you select is an expert in this field. take your time and do your research, again this can save you lots of time and money.
4) Individuals wishing to file bankruptcy under Chapter 7 or Chapter 13 must show proof of income by providing federal tax returns from the last tax year. If an applicant is ineligible for filing under Chapter 7, he or she must file under Chapter 13 instead. Ask ae bankruptcy expert about this..
5) One of the most confusing parts of the new bankruptcy law is the bankruptcy means test. With the new bankruptcy laws in effect, debtors have to first pass a 2 part “means” test before filing for Chapter 7.
The actual test is alot like doing your taxes. The means test revolves around the median state income for the state in which the debtor will file bankruptcy. Under the “Means Test”, any creditor, trustee or judge will look at your monthly income, minus certain living expenses like food and rent. Your Chapter 7 bankruptcy will likely be successful if you are unable to pay at least $6,000 or $500 per month over the next 5 years.
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Tuesday, October 13th, 2009
Black Book Data asked: You just graduated from law school and are now ready to make money while helping people resolve their legal problems. You decide that you will partake in the bankruptcy niche, since that area of law seems to be in high demand, especially considering all the foreclosures that are happening. You put some ads in the paper and acquire a few clients. But you want to get more without breaking your budget. The best way to do this is to look into buying bankruptcy leads.
What are bankruptcy leads and how do they work? Bankruptcy leads contain information relating to people who are considering bankruptcy or may have already filed bankruptcy. The latter won’t do you much good unless you’re offering a service that can help rebuild credit. So, your best bet involves looking into the first option, which allows you access to ‘true’ bankruptcy leads. These are the individuals that are basically ready to file bankruptcy to avoid legal consequences, whether it’s a lawsuit, wage garnishment or foreclosure.
Bankruptcy leads can come in a variety of forms, ranging from a list of emails to a collection of addresses. Most companies offering bankruptcy leads tend to provide them in the form of addresses, since there’s a lot of controversy surrounding bulk email campaigns. This means that when you build up your bankruptcy mailing list, you’ll probably have to use direct mailing to advertise to your potential clients.
Of course, this doesn’t mean that the leads within your bankruptcy mailing list can’t convert for email marketing. In fact, this can be an excellent way to ensure your bankruptcy leads will eventually take advantage of your services. All you have to do is create an informational e-book explaining how bankruptcy can free a person of their financial problems. Such an e-book can explain: the legal consequences of avoiding debt, how Chapter 13 bankruptcy can avoid foreclosure and how bankruptcy doesn’t mean the end of a person’s credit history. From there you create a website. This website should promote your services as well as the free e-book you’re offering. Don’t forget to advertise this website when sending out flyers to those on your bankruptcy mailing list. They will want to visit the website because they would be getting a free e-book. But before you allow them to access the e-book, make them provide at least an email address and their first name. It is through this email address you will send them e-courses further explaining the benefits of filing for bankruptcy.
So, what can you expect to pay if you build a bankruptcy mailing list through bankruptcy leads? It will depend on how many leads you buy as well as the company you buy them from. Usually, you can get thousands of bankruptcy leads for a few hundred dollars. Of course, you will still need to pay for your direct mail campaign as well. If you use a professional service to conduct your campaign, expect to pay several thousand dollars. But if you do it yourself, you really will only have to worry about the cost of stamps, printing cartridges, envelopes and paper. If you’re a beginner at direct mail marketing, don’t be afraid to advertise in a simpler way to the individuals on your bankruptcy mailing list. It may be a bit more crude, but you don’t need fancy postcards or circulars to get people to respond.
Disclaimer:This blog or article is for information purpose only, and should not be treated a professional advise or price protection guarantee. This blog is mainly used for search engine optimization and other commercial purposes and it is advised that readers seek professional consultation in the field of interest for more information.
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Tuesday, October 13th, 2009
Most people who file bankruptcy are good people who do not abuse the bankruptcy system. In fact, almost all of my bankruptcy clients feel bad about wiping out debts they believe they are morally obligated to pay. Then, once in a while, I encounter the sleazy debtor who tries to use Chapter 7 bankruptcy to steal as much money he can from his creditors.
I received a phone call last week from a prospective bankruptcy debtor who asked me about the following pre-bankruptcy planning scenario. One of his good friends was planning do a home repair with a cost of about $25,000. The friend agreed to pay this caller $25,000 in cash which the caller would then hide under the mattress. The caller would pay for his friend’s home repair on his personal credit cards. He would make minimum payments for a few months. Then he would file Chapter 7 bankruptcy and discharge the debt for his friend’s $25,000 repair bill as well as all his previous credit card debt. He wasn’t asking me to take him as a client, but he wanted to consult with me to see if his plan would work.
This is bank robbery under the disguise of bankruptcy. I suspect these types of scams usually slip through the bankruptcy system. This guy will probably get away with it because he’ll not disclose the arrangement to his bankruptcy attorney. It bothers me because, as I said above, the overwhelming majority of bankruptcy debtors are honest people who lost income and are without adequate savings, or are people who bought things they could not afford in order to live above their means. In either case, most bankruptcy debtors do not intentionally borrow money with no intent of trying to pay back the money.
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Tuesday, October 13th, 2009
For the first time since means testing was instituted in 2005, the median income number in Georgia have gone down. This means that potential Chapter 7 debtors will have a more difficult time avoiding a "presumption of abuse" and the extra cost and hassle of means test calculations.
Here is a comparison table
Current Median Income Numbers Median Income numbers after November 1, 2009
Family size
1 $40,760 $40,691
2 $54,054 $55,258
3 $61,959 $61,104
4 $71,554 $68,502
Let's consider how this change affects you if you have a family of 4. If you file by October 31, 2009, you can have household income of $71,554 and still qualify for Chapter 7 without having to qualify under the means test. As of November 1, 2009, if you earn $71,554, the presumption of abuse arises and you must try to qualify by rebutting the presumption using the means test.
If your six month average gross income (April-September) is close to the current median income numbers and you expect the May-October numbers to be similar, it may make sense to try to file prior to November 1 – or at least to discuss this possibility with your lawyer.
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Sunday, October 11th, 2009
The census bureau’s median income figures are changing effective for bankruptcy petitions filed after November 1, 2009. Median income is used to determine if prospective bankruptcy debtors pass the means test. Florida’s median income has been increasing since the new bankruptcy law went into effect in October, 2005. People whose family income is below the median income for their family size can file for Chapter 7 bankruptcy automatically without having to pass the "means test." As the median income increased it became easier for people to qualify for Chapter 7.
The latest revised median income levels are lower probably because more people have lost jobs or have reduced income during the recession. For example the median income for a single person household in Florida is reduced from $42, 468 to $41,226. For a family of four, the median family income is lowered from $71,124 to $69,009. The recession is making it somewhat more difficult to file bankruptcy. For those debtors above median income, the lower census figures make it a little harder to pass the means test.
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida
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Saturday, October 10th, 2009
Scott Goodman asked: Being so much in debt that repaying your debts becomes well nigh impossible is something that many people find them facing and which leaves them with no alternative but to file bankruptcy in order to get their financial situation back on track. However, as good as it may seem that filing bankruptcy will help you out of such financial mess, it can also lead to much confusion in your mind trying to figure out what is Chapter thirteen bankruptcy and how does it differ from chapter seven bankruptcy.
Understand What Bankruptcy Is
However, before looking at what Chapter 13 bankruptcy is, it would be necessary to first understand the meaning of bankruptcy itself. Bankruptcy is a legal process filed in a law court with the intention of eliminating debts and provides the individual or business that is filing bankruptcy with relief from having to pay off the debts, and thus can make a new start in life.
Chapter 13 bankruptcy may cost you about one hundred and eighty-five dollars to file and it is commonly also referred to as reorganization bankruptcy and such a form of bankruptcy is generally filed by persons that wish to eliminate their debts in three to five year’s time. Under Chapter 13 bankruptcy, individuals can keep part of their possessions and also have a means to finance some of their day to day expenses while at the same time still have some money left over to pay off their debts.
So, when you decide on filing Chapter 13 bankruptcy, you will need to present your petition for bankruptcy in which you need to list your schedule of liabilities and also assets. And, following the filing of Chapter 13 bankruptcy, you need to provide a plan for repayment of debts which has already been reviewed by creditor’s to see that it does indeed satisfies their requirements.
Filing Chapter 13 bankruptcy is beneficial to you if you want to hold on to some possessions including your home, and in fact, filing for this kind of bankruptcy can, under certain circumstances, prevent foreclosure and such an instance is known as automatic stay which will give you time to catch up on your outstanding debts. It is only after you still cannot meet your debt obligations in the period of reorganization that your home will be foreclosed.
As with other bankruptcies, filing Chapter 13 bankruptcy should be done through an attorney who is an expert in bankruptcies, and even though such a form of bankruptcy has its advantages, there is no denying the fact that the price you will have to pay is high, because you will have a tarnished credit standing for at least ten years, which means that the future will not look good for you if you are considering applying for credit in that time period.
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Saturday, October 10th, 2009
Jon Arnold asked: Nobody plans for bankruptcy, especially with the tightening of the bankruptcy laws that has been done in recent years, but whether it is for your business or your personal life, sometimes bankruptcy is your best option. While bankruptcy should always be considered to be your last resort, sometimes it is also your best option.
But how do you know when bankruptcy is right for you? Like anything else, you need to make sure you have investigated and validated all other possible alternatives. With the huge importance of making sure that bankruptcy is the option you want to pursue, this step is critical. Yet it is amazing that many people do not investigate all other possible options, and may not even be aware of the number of other options that are available to them, and they file bankruptcy with no more planning than if they were buying a dozen eggs.
So your financial status is bleak but that does not mean bankruptcy is your only viable option. You see, bankruptcy carries with it a whole series of things which will stay with you for years after your filing, and that is a huge burden to bear. For example, filing for bankruptcy will put a huge red mark, a warning flag, on your credit report for about 7 to 10 years. You may be able to get credit after filing bankruptcy, but be prepared for the fact that establishing new credit is not going to be easy, and the interest rates offered are going to be far from prime.
There are some things that bankruptcy will not absolve you of. For example, if you are responsible for making child support payments each month, those payment requirements will continue even after filing bankruptcy. This type of debt cannot be discharged via bankruptcy, since bankruptcy is more geared towards problems with credit and unsecured debt. Student loans are also usually not eligible for inclusion in a bankruptcy debt discharge, since student loans typically originate from a government source.
The world of bankruptcy is very complex and unless you yourself are a financial expert, you are best advised to seek advice from a qualified attorney who specializes in bankruptcies. There is a maze of legal requirements, and for some types of bankruptcy, believe it or not, you may not even be eligible!
Before you consider bankruptcy, you should sit down and take the time to determine what put you in your current situation, and what can you learn from that. It is always much more than “not enough sales” in the business world, or “too much credit card debt” in your personal world. Take several steps back and really focus on the root cause of how you got where you are. In business, did you try to expand faster than you should have? In your personal life, were you trying to lead a champagne lifestyle on a beer budget? These are tough questions to ask, but you need to ask yourself and get a real answer. During the bankruptcy process, these questions will be asked of you, and one of the things that will be expected is that you will have learned some things from this experience so that it doesn’t happen again in the future after you have re-established yourself.
Your best option is to talk with a qualified attorney who specializes in bankruptcy cases. There is a form at our web site that will allow you to talk with a lawyer who is local to you and make a real determination about your need to file bankruptcy. Like anything else, being informed with the facts and options is more than half way towards winning the battle.
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Friday, October 9th, 2009
Albert Alexander asked: Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due.
Bankruptcy is not something I recommend any more than I would recommend divorce. Along with a divorce, bankruptcy is listed in the top 5 life-altering negative events that we can go through, along with severe illness, disability, and loss of a loved one. In its simplest form, bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors.
Chapter 7 bankruptcy provides for the discharge, or elimination of, unsecured debts in order to start financial recovery. Chapter 13 bankruptcy provides a repayment plan for secured debts, such as a home mortgage. There are pros and cons to each of the consumer bankruptcy options as well as personal financial circumstances that may limit your options.
Because it completely rids you of your unsecured debt, Chapter 7 bankruptcy is the easiest way to come out of debt. Since all your debt is, in essence, wiped clean in a Chapter 7 filing, people have started abusing it. In a bankruptcy case under chapter 7, you file a petition asking the court to completely discharge your debts. Chapter 7 relief is available only once in any eight year period. Chapter 7 bankruptcy, which is sometimes referred to as total bankruptcy, stays on your credit report for 10 years.
Chapter 13 bankruptcy, more like a payment plan, stays on your credit report for seven years. Chapter 13 bankruptcy is the most common type of “reorganization” bankruptcy for consumers: You get to keep all of your property, but you must make monthly payments over three to five years to repay all or some of your debt. The specific amounts of your repayment are determined by the courts.
Although bankruptcy can help with your financial situation, it does not help in every circumstance. Debts that are not eligible to be discharged include child support payments, some taxes, and student loans. Debts that can be discharged include personal loans, credit card debts, and medical bills.
Filing bankruptcy is a very serious move, and you must consider your options in comparison to your financial future. Filing bankruptcy involves a series of steps that you must be aware of. Filing bankruptcy is a major decision, with many benefits, including its ability to stop foreclosure, wage garnishment and creditor harassment. Filing can provide borrowers with clean financial slates either by discharging debt so that the one no longer is liable for its repayment, or by instituting a realistic repayment plan under the discretion of the bankruptcy court.
Filing for bankruptcy may be one of the most difficult decisions a person can make. There will always be those who file bankruptcy because of irresponsible financial behavior while others have simply fallen into unfortunate circumstances. For many who are forced to consider bankruptcy, the actual decision to file is usually the hardest part. Even with the negative implications of filing bankruptcy, most who have filed will agree that the psychological relief is a huge strain removed from their lives. Filing for bankruptcy is not the end of the world.
Bankruptcy is not a substitute for financial responsibility. Bankruptcy is not a quick fix for all credit problems. Bankruptcy is designed as a legal option to help resolve such a crisis, and act as a financial life preserver for those drowning in debt. Bankruptcy is the process by which you are legally allowed to get rid of your debt. Filing bankruptcy should only be used as a last resort effort to help people crawl out of a credit hole and get back on their feet.
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Friday, October 9th, 2009
Legal Helpers asked: When you choose to file bankruptcy, it is a personal decision. Sure you may be thinking about your personal debt and may be thinking bankruptcy is your only option.
However, the final decision on whether or not you should file bankruptcy all depends upon your personal situation. Before you decide to file bankruptcy, you’ll need to fully look at the advantages and disadvantages.
When you’re thinking about bankruptcy filing, you will need a bankruptcy petition. The petition is a collection of your financial information and is usually about 20 pages. Some states may require additional asset or other information as well. The whole process is done because the court will want a full picture of your current assets, liabilities, income, expenses, and recent financial transactions. It is vital you are honest about your finances. If you aren’t honest you could be fined or even be convicted and spend time in jail.
It’s often most helpful to consult a bankruptcy attorney or bankruptcy firm when you’re trying to file for bankruptcy. When you consult a professional, you can be sure everything is being done just as it should be done. You will have to likely pay for any bankruptcy service from a professional. However many offer payment plans that are quite affordable.
Today’s laws allow individuals to file for bankruptcy without professional assistance. As with most legal proceedings, “pro se” (meaning by yourself) is quite acceptable. While you have the right to represent yourself, you likely shouldn’t. An attorney would serve your interests much better because they know the laws well and know how to use the law to best benefit your individual situation.
Throughout the bankruptcy procedures there will be a ton of paperwork that can be quite confusing if you’re not familiar with the process. If you don’t file the paperwork correctly you could end up being seen as fraudulent or even be denied.
You should be careful when choosing your bankruptcy attorney. While it is necessary to hire one, you’ll want to be sure you are choosing one you feel comfortable with. If you can, check into their history of cases to see what their track record holds. Ask around to see if they have a good reputation of working with clients. It will be a difficult time for you and your family and you’ll want to work with someone who will make the process easier.
If you’re behind on your bills, you can bet you’ll be getting collection calls if they haven’t already bombarded you. These calls can cause stress and aggravation. Most collection companies will call you all day long, every day. However, when you file for bankruptcy the calls will stop coming.
In addition to stopping the collection calls, filing for bankruptcy can prevent the shutoff of utilities in Chapter 7. It eliminates the past due balance and in Chapter 13, pays the amount past due through the court-approved plan. Therefore you don’t need to worry about your electric or water being shut off for non-payment.
Student loans are one area of bankruptcy that is not usually changed. Due to many students taking out unusually high loans and then filing bankruptcy after college, student loans are rarely part of court approved plans for bankruptcy. Of course, student loans can often be deferred in financial crisis. It’s best to contact your lender about the options for you.
Bankruptcy can be an effective tool in getting the collection calls to stop. Filing for bankruptcy will eliminate your debt and you’ll be back on your way to a better financial future.
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Friday, October 9th, 2009
If you have been hurt on the job in Georgia and rely on weekly wage benefits from workers' compensation you know that temporary total disability benefits payable per Georgia law will require you to downsize your standard of living. Sometimes the financial strain caused by your loss of a regular paycheck may lead you to consider Chapter 7 or Chapter 13 bankruptcy. What are the implications of pursuing bankruptcy while you are receiving workers' compensation benefits?
My wife and law partner, Jodi Ginsberg, was recently questioned about this subject by a man who she is representing in a Georgia workers' compensation case. This gentleman had been in a Chapter 13, but his case was dismissed after over 3 years when he got hurt and lost his regular income. Now that his Chapter 13 has been dismissed, one of his creditors has filed suit.
Jodi's client wants to know if he should refile his Chapter 13 case to avoid having a judgment rendered against him. He is rightly concerned that a judgment creditor could seize his bank account and/or place a lien on his home.
Here is my take on this: while I think that a refiled Chapter 13 could work, I would be very reluctant to pursue this course of action. First, there is the practical question of whether Jodi's client has enough disposable income to make a Chapter 13 work at all. I have not run the numbers in this case, but it would not surprise me if there is zero or negative cash flow in this prospective debtor's budget – and a Chapter 13 will not work without some positive cash flow.
Second, our prospective client will not face any kind of garnishment of his workers' compensation benefits as Georgia law protects weekly wage benefits from garnishment. I would think that this protection would extend to benefits even after they have been deposited into a bank account but I have not seen any statute or case law on this point – so, in my mind, a workers' compensation claimant should be careful about depositing wage benefits into a (possibly) unprotected bank account.
Thirdly, I think that a Chapter 13 filed on behalf of a workers' compensation claimant would be complicated and expensive. There is a strong likelihood that the case would become ripe for settlement at some point during the 3 to 5 year pendency of the Chapter 13. This means that the debtor's counsel would need to file a motion to ask the court to declare the settlement as "exempt" property. Further, since a settlement means that weekly wage benefits will stop, the Chapter 13 would fail if the debtor could not come up with another source of income. Then, there is the possibility that the debtor might apply for Social Security disability.
The bottom line – as a debtor's attorney, I see a filing by a debtor who is currently on workers' compensation as a time consuming project and I would hesitate to accept such a case without a substantial retainer up front (not a likely prospect for debtor in such a situation).
This is one of these situations where multiple areas of law overlap with the amount of legal work needed greatly in excess of what a prospective debtor can afford.
Posted in Chapter 13 issues, Georgia Bankruptcy, TTD benefits and Chapter 13, bankruptcy and Georgia workers' compensation, workers' compensation and chapter 13 | Comments Off
