Archive for the ‘Chapter 13 issues’ Category
Monday, December 20th, 2010
With the decline in Atlanta area housing values, a seldom used bankruptcy technique has taken on new life. The technique is called "lien stripping" and it arises from Bankruptcy Code Section 506(a) and (d). A lien strip allows a Chapter 13 debtor to use the power of the Bankruptcy Court to transform a secured second mortgage or home equity line of credit into an unsecured debt, thereby eliminating a monthly payment and reducing total debt by tens of thousands of dollars.
Here's how it works: Let's say that you own a home worth $250,000. Perhaps that home was worth $350,000 three or four years ago but its market value has dropped because of the recession. The balance on the first mortgage is $270,000 and the balance on the second mortgage is $45,000.
In this case, a Chapter 13 debtor can ask his bankruptcy judge to "strip away" the second mortgage debt since all of the value in your home is encumbered by your first mortgage. In other words, if you were to sell your house, the first mortgage lender would not be paid in full and the second mortgage lender would get nothing. The second mortgage lender is, therefore, unsecured.
Lien stripping only works when:
- you are a debtor in a Chapter 13 case
- the fair market value of your house is less than the balance due on your first mortgage
The Clerk's Office of the Northern District of Georgia has provided us with sample lien stripping motions, which you can review by clicking on the link.
I suspect that mortgage companies will mount challenges to lien stripping. There has already been a Minnesota case where a local judge there refused to allow lien stripping. One day this issue may be considered by the United States Supreme Court. For now, however, most bankruptcy judges will allow lien stripping and if your second mortgage or HELOC is fully unsecured, you may want to consider it as well.
My friend and colleague, Charleston bankruptcy lawyer Russ DeMott has published a clear explanation of how he approaches the mortgage lien stripping process (in his district, they refer to lien stripping as "mortgage stripping" but the concept is identical. You can read Russ' post by clicking on the link. Russ correctly points out that out of banks and mortgage companies have not cooperated in out of court mortgage modifications and that lien stripping remains perhaps the most reliable tool to modify a mortgage.
I have successfully "stripped" several junior mortgages. Not surprisingly, the main issue that arises has to do with the fair market value of the home. You may need to pay for an appraisal to convince the judge that the second mortgage is, in fact, fully unsecured.
Posted in Chapter 13, Chapter 13 issues, Lien stripping, Mortgage, and, approaches, bankruptcy mortgage modification, called, in, lien, modifying mortgages bankruptcy, motions, process, refused, remains, sample, stripping, stripping , the, unsecured lien | Comments Off
Friday, July 9th, 2010
Last October, I wrote a post on this blog about bankruptcy fraud, and pointed out that everything included in a bankruptcy filing is subject to scrutiny by the office of the United States Trustee, which is an arm of the United States Department of Justice. In other words, false statements on a bankruptcy petition could land a debtor in hot water – dismissal of the bankruptcy case, fines and even prison.
Because the bankruptcy process can seem informal, it can be easy to forget that a Chapter 7 or Chapter 13 filing is made up of documents filed in a federal district court and subject to investigation by the F.B.I.
Attorney Gini Nelson, a New Mexico bankruptcy lawyer, recently published a post about bankruptcy fraud in the Bankruptcy Law Network blog. Gini's post includes a link to the IRS.gov site containing examples of bankruptcy fraud investigations. I found the IRS.gov link especially interesting in that one can get a sense of the type of fraud that bankruptcy debtors have attempted and the level of fraudulent activity that generated prosecution. Given the highly interconnected and electronic public record access that is available to bankruptcy trustees as well as government investigators I can't believe any of these folks believed that they would not be caught.
Posted in Bankruptcy, Blog, Chapter 13 issues, Chapter 7 issues, Debtors, Fraud, Fraudulent Transfers, access, and, bankruptcy and perjury, bankruptcy fraud, department, easy, electronic, examples, examples of prosecution for bankruptcy fraud, f b i attorney, gini, highly, informal, interconnected, investigation, investigations , nelson, public, record, states, the, united | Comments Off
Sunday, July 4th, 2010
On June 7, 2010, the United States Supreme Court released its decision in the case of Hamilton, Chapter 13 Trustee v. Lanning. The Supreme Court rarely hears argument in consumer bankruptcy cases so the Lanning decision is big news to consumer bankruptcy lawyers.
The issue in Lanning is one that has troubled bankruptcy lawyers since 2005, when the "means test" was added to the Bankruptcy Code. The means test functions as a test – do you have the "means" or disposable income to fund a Chapter 13 repayment plan? If the means test shows that you do not have sufficient disposable income to make a Chapter 13 work, then you qualify for Chapter 7.
As one of the assistant United States trustees once told me – the purpose of the means test is to disqualify as many people as possible from Chapter 7, and to force them into Chapter 13.
In practice, the means test does not work very well in predicting who can make a Chapter 13 work. One of the biggest complaints has to do with the mechanical nature of means testing. To run a means test, I have to gather pay stubs from the past 6 months. I then create a monthly average, which represents available income. Next I prepare a means test budget, but I do not use actual expense amounts. Instead, the means test tells me how much my clients are allowed to spend for food, medicine, utilities, etc. And where do these budget numbers come from? Means test numbers are based on IRS budgets used in delinquent tax repayment plans. In other words, the means test budget allocations are not especially generous.
This explanation of the means test is somewhat oversimplified, but you get the main idea – every bankruptcy debtor's income and expense numbers have to be run through the means test, and not surprisingly this somewhat mechanical test produces some absurd results.
The classic example of absurd results occurs when a debtor has received a Christmas bonus or a one time payment. That bonus/one time payment has to be included in the monthly income numbers even if it is not guaranteed or likely to happen again. In other situations a debtor may have earned a comfortable income but has now lost his job – under a strict reading of the means test, he earns too much money to file Chapter 7. And he can't afford to file a Chapter 13 because he now has no income.
The Supreme Court has injected some common sense into this situation. In the Lemming case, which was filed in Topeka, Kansas, the debtor's 6 month average was skewed by a one time payment arising from a buyout from her former employer. The debtor filed a Chapter 13 plan that called for a payment that the debtor could afford based on her actual, current income. The trustee objected on the grounds that the means test dictated a higher number (that the debtor clearly could not afford based on his actual income).
The Topeka bankruptcy judge agreed with the debtor and approved a plan that Ms. Lemming could afford. The trustee appealed and lost in the 10th Circuit Court of Appeals. The trustee appealed again and the Supreme Court granted certiorari.
The Supreme Court affirmed the decision of the 10th Circuit Court of Appeals and held that bankruptcy judges need not apply a "mechanical approach" to means testing in Chapter 13 cases. Instead, judges should "take into account other known or virtually known certain information about the debtor's future income or expenses." Rather than looking backwards, judges can take a forward looking approach and consider the realities of a debtor's income. This forward looking approach should be considered in cases with unusual facts and the Lemming decision should not be construed as an invalidation of the means testing formula.
Despite the Supreme Court's warning that a "forward looking" approach should only be used in limited situations, I suspect that bankruptcy judges will use "Lemming arguments" mitigate some of the harsh results of Chapter 13 in general. Bankruptcy judges recognize that Chapter 13 cases often do not work because means testing and aggressive trustee arguments force debtors to agree to plans that commit debtors to pay every last dime to the trustee. Unfortunately, family emergencies and unexpected things happen over the course of a five year bankruptcy plan and many plans will fail – not because the debtor did anything wrong, but because there is no "give" in the plan.
I predict that judges will use the rationale of Lemming to reduce some of the harsh results of the means test and help debtors improve their chances at success in Chapter 13.
If you want to read the Lemming decision, click on the link. I also found a nice summary of Lemming in attorney Jordan Bublick's fine South Florida bankruptcy blog.
Posted in 13, 2010, Chapter 13 issues, Debtors, Hamilton Chapter 13 trustee v. Lemming, Means Test issues, Trustee, Trustee objections in Chapter 13, affirmed, aggressive, and, argument, arguments, cases, certiorari the, chapter, chapter 13 plans, court, decision, facts, force, formula despite, granted, hamilton, hears, lanning , lemming, means, means testing, rarely, read, released, states, supreme, testing, the, trustee objections to chapter 13, united, unusual, v, work | Comments Off
Sunday, June 13th, 2010
With the news full of foreclosure statistics showing huge increases along with stories of self-righteous Members of Congress asserting their heartfelt concern for "struggling homeowners" little attention is paid to the question of whether a homeowner ought to fight to save his home. My friend and colleague, Charleston bankruptcy lawyer Russ DeMott were recently discussing this issue and I invited him to prepare a guest post about this very topic:
Chapter 13 bankruptcy is a tool that can be used to save your home from foreclosure. But the big question sometimes isn’t “can I save my home,” but “should I save it?"
We all know that there’s been an epidemic of foreclosure resulting from the recent economic downturn. Jobs were lost, values plummeted, and foreclosures have been on the rise.
So it’s natural to wonder, “can I file Chapter 13 bankruptcy to save my home from foreclosure?” However, when you meet with a bankruptcy lawyer to explore your options, you need to explore all your options—bankruptcy and otherwise. And that might be not saving your home.
When you’re having financial problems and seek advice, you should take the opportunity to review your entire financial situation. Can you afford your vehicle payments? Can you “tighten the belt” and cut back on some unnecessary expenses? And most significantly, “should you try to save your home?”
In my Charleston, South Carolina bankruptcy practice, I get calls every week from folks facing foreclosure. The potential bankruptcy client’s question is always a “can we?” Can we stop foreclosure? Can we make the lender listen? Can we catch up on these payments we’ve missed? Can we protect our home? Can Chapter 13 bankruptcy help?
But I always focus on the “should we.” Here are some factors to consider when deciding whether you should use Chapter 13 to keep your home:
- Can you afford the mortgage payments? Do you have large house payments you can’t really afford, perhaps with more than one mortgage? For example, it may be that you can afford payments of $1800 a month, but your current payments are $2800 per month. Absent a mortgage modification, that’s a tough nut to crack every month.
- Is your interest rate scheduled to adjust? It may be that you can afford your payments now but maybe not once your payments adjust.
- Do you have equity in your home? (Equity is the value of the property less any liens (like mortgages, outstanding taxes, assessments, and home owner’s dues). Lately, I’ve been getting calls from clients who not only have no equity, but actually have “negative equity.” For example, your house might be worth $250,000 and you owe $350,000. If that’s the case, you might not want to try to save your home from foreclosure. You’d actually have more equity if you rented!
- Is this where you want to live for the indefinite future? If not, perhaps you should use your financial problems to reevaluate where you want to live. Perhaps renting in another area would lessen your commute or allow your children to enroll in a better school?
These are just a few factors you should consider. You should weight all the pros and cons of saving your home. You can then have your bankruptcy lawyer help you decide whether filing Chapter 13 bankruptcy to save your home really makes sense.
Jonathan's note: in addition to the very relevant points Russ makes, let me add this: if you decide that saving your house in a Chapter 13 does not make sense, a "fresh start" Chapter 7 could be appropriate. Similarly, you can still file a Chapter 13 to reorganize your other debts while you surrender your home. My point – personal bankruptcy is not a "one size fits all" solution – a good bankruptcy lawyer can offer you several options to consider, many of which you may have never considered.
If there is one lament that I hear from my colleagues, it is this – "I wish my clients would call me earlier, when there is time to evaluate bankruptcy and non-bankruptcy options." Sometimes, when there are only days or hours to go before a foreclosure, an emergency Chapter 13 may be your only choice. Even if bankruptcy is something you really do not want to think about, you would be wise to establish a relationship with a bankruptcy lawyer before you end up facing a crisis.
Posted in 2800, Bankruptcy, Chapter 13 issues, Foreclosure, Foreclosure issues, Lawyer, Mortgage, Russ Demott, a, absent, bankruptcy and foreclosure, charleston, client’s, consent to foreclosure, contest foreclosure, deed in lieu of foreclosure, demott, equity, facing, folks, foreclosure , home when, home , home ” in, huge, increases, modification, month , my, oppose foreclosure sale, potential, question, russ, save, saving, showing, statistics, the, you’d, you’re | Comments Off
Sunday, June 6th, 2010
Because the bankruptcy system operates efficiently and quickly and it serves hundreds of people every day, I sense that many bankruptcy debtors forget that everything they submit to the bankruptcy court is done so under penalty of perjury. I recently ran across an article from a Texas newspaper about a Chapter 7 debtor who ended up in federal prison, convicted of bankruptcy fraud, because he failed to disclose an $84,000 insurance payment, proceeds from the sale of a vehicle and several bank accounts. This particular debtor used Chapter 7 to discharge over $1 million in liabilities.
I bring this case to your attention for several reasons. First, you should recognize that Chapter 7 trustees are very conscious of the likelihood that a certain percentage of debtors will fail to disclose assets. While it may seem that your Chapter 7 trustee is not paying much attention to any particular case, I suspect that trustee training programs provide trustees with profiles of the types of debtors likely to omit important information as well as resources to search for evidence of hidden assets.
In the Texas debtor's case I wonder how he thought that a vehicle sale would be missed by the trustee, given that vehicle liens are public record, as are vehicle registrations.
These days almost any sale of real estate or motor vehicles will generate a paper trail of tax forms, insurance records and title documents. Further I have personally seen situations where an unhappy ex-wife or a former friend will draft a "poison pen" letter to the trustee will allegations about improper activities by a bankruptcy debtor.
Second, be aware that Chapter 7 trustees and the U.S. trustee like to pursue fraud cases periodically to send a message to debtors and debtors' lawyers that the trustees are paying attention. Bankruptcy lawyers may be tempted to say "don't worry about it," to avoid extra expense and complication but playing fast and loose with disclosure rules can create major problems for both debtors and their lawyers.
Occasionally I meet with a client who may say something like "between you and me, no one knows this but…." This type of statement is the last thing that any bankruptcy lawyer wants to hear. From my perspective that client is really saying "I am thinking about committing a federal crime and I want you to help me." My license to practice law is not worth the fee for any one case and I have and will continue to decline representation for any client who wants to use my office to file inaccurate schedules.
Nobody likes to surrender assets, especially in a bankruptcy case that may have come about because of factors beyond one's control (such as a layoff, unfair treatment by a lender, a lawsuit judgment that you did not know about). In most bankruptcy cases you will not lose in assets. However, losing a few hundred or thousands of dollars is a far better fate than federal prison.
Posted in 84, Chapter 13 issues, Chapter 7 issues, Debtor, Discharge issues, Fraud, Fraudulent Transfers, General consumer bankruptcy info, Insurance, Trustee, a, an, and, assets in, assets nbsp, bankruptcy crime, bankruptcy fraud, cases, committing, crime, disclose, documents nbsp, ended, evidence, failed, failure to disclose assets in bankruptcy, federal, hidden, periodically, prison, programs, provide, pursue, records, texas, the, title, training, trustees | Comments Off
Friday, February 12th, 2010
As you probably know, there are two types of consumer bankruptcy cases available to you – a Chapter 7 which wipes out debt, and a Chapter 13 which creates a five year payment plan in which you pay back some or all of your debt with your "disposable income." When I prepare a Chapter 13 case, we work with you to create a liveable budget. The money "left over" after you pay for housing, food, transportation, insurance, utilities and other necessities must be sent to the Chapter 13 trustee, who then disburses these funds to your creditors based on a plan of reorganization that we submit to the court.
What happens if you need to file a Chapter 13, you have not yet filed your tax return for last year, but you know that a refund will be coming your way. The simple answer is that unless you are paying back your creditors at 100%, your Chapter 13 will demand that you turn over your tax refund check, and will use that money to pay your creditors. If you know that a refund is headed your way, make sure to tell your lawyer before you file – there are some steps you can take to preserve some or all of your tax refund money.
Your Chapter 13 trustee will also want future refunds paid to the trustee. This situation is easier to handle – you will want to adjust your payroll withholdings so that you do not have any refund coming. As far as the Chapter 13 trustee is concerned, your tax refund is kind of like a savings account that artificially reduces your net pay amount.
All of the Chapter 13 trustees in the Northern District of Georgia require debtors who are paying less than 100% to creditors to include in their Chapter 13 plans a provision that authorizes the IRS to intercept any refund payable during the years that your plan is in effect and send this money to the Chapter 13 trustee. And until now, the IRS has cooperated with the Chapter 13 trustees in redirecting refund money.
In January, 2010, however, a federal district court in Michigan has rules that the Chapter 13 trustee does not have the power to compel the IRS to serve as its collection agent. In the case of United States v. Carroll, a judge in the Eastern District of Michigan ruled that there is no legal basis for the IRS to withhold money and deliver it to the trustee because Congress has not waived the IRS' "sovereign immunity" that would otherwise leave the IRS vulnerable to contempt actions and other enforcement actions by the trustee (in other words, if the IRS failed to withhold a debtor's refund, the trustee would not have the right to sue the IRS for damages or for remedial action). The Michigan judge issued an order forbidding the bankruptcy courts there from confirming any Chapter 13 plan that has the income tax refund seizure language.
I would not be surprised if bankruptcy courts elsewhere in the nation begin to follow the path set by the Michigan judge. We'll know soon enough, but I suspect that the trustees in the Northern District may discontinue their demand for an income tax provision involving the IRS in Chapter 13 plans.
I do not expect, however that Chapter 13 trustees here or elsewhere in the country will permit Chapter 13 debtors from keeping large tax refunds. I suspect that trustees will still demand provisions that obligate debtors to tender their tax refunds but they will expect the debtors to send in the money, rather than having it withheld by the IRS. I will continue to advise my clients to minimize their refunds to avoid the problem entirely.
Needless to say, losing this automatic tax refund payment mechanism will make enforcement of tax refund plan provisions much more difficult. It will be interesting to what if anything Chapter 13 trustees do to address this potential administrative nightmare.
Posted in 2010, Bankruptcy, Chapter 13 issues, Chapter 13 plan calculations, Irs, Tax issues, a, an, automatic, chapter 13 plan, chapter 13 trustee, court, courts, district, enforcement, federal, forbidding, income, intercept, issued, january, judge, keeping, language i, large, losing, mechanism, michigan, money in, order, payable, payment, plan, provisions, redirecting, refund, refunds , seizure, tax, tax refunds in chapter 13, the, | Comments Off
Friday, December 18th, 2009
Once you file a Chapter 13 bankruptcy and begin contributing monthly to the payment plan, you may wonder where your money is going, who’s being paid and how much money you still owe until you get your Chapter 13 discharge. As a Chapter 13 debtor, you can have access to much of the same information that the Trustee and your attorney have.
The National Data Center allows Chapter 13 debtors to access their case at no charge through its website: www.13datacenter.com. In order to view your case on-line, you must first register for a user name and password. Just go to the www.13datacenter.com website and locate the box that asks for User Name and Password. If you are a new user, click the link “New Debtor Access – CLICK HERE” to register for a user name and password.
Step 1: You will be asked a series of questions to verify your identity. Make sure to enter your name exactly as it appears on your petition, your social security number and your case number.
Step 2: Once you’ve entered all information requested in the first screen, you will be taken to the second screen. Select one of the creditor names listed, which must also be one of the creditors included in your Chapter 13 petition. Select your correct mailing address (NOT the address of the creditor). Finally, select the name of the Trustee that has been assigned to your case.
Step 3: Once the second screen is submitted, you’ll be taken to the third screen. Here you will be able to choose your own username and password, as well as enter your email address.
Once you’ve completed Steps 1 – 3 of the registration process, you will receive an email with your username/password and will be automatically re-directed to the National Data Center homepage. Log-in using your username and password and freely navigate the National Data Center website to view your case on-line and keep tabs on where the money is going.
Post by Susan Blum.
Posted in Chapter 13 data center, Chapter 13 issues, General consumer bankruptcy info, chapter 13 didbursments, chapter 13 plan | Comments Off
Friday, December 11th, 2009
Earlier this month the U.S. Supreme Court heard arguments in a case involving the question of discharge of student loans in a Chapter 13 case. The case arose from a Chapter 13 petition filed in 1992 by Francisco Espinoza, an American Airlines baggage handler.
Mr. Espinoza's story began in 1988. Sensing that airline baggage handling was not a great long term career, Mr. Espinoza enrolled in a technical school to learn computer drafting and design, and he financined his education with a student loan. Unfortunately, he was not able to find a job using his new education and he found himself in a financial bind when American Airlines froze wages and reduced his hours.
By 1992, Mr. Espinoza found himself living paycheck to paycheck and unable to pay down his $13,000 student loan. At that point, he contacted a lawyer and filed a Chapter 13 bankruptcy. The Chapter 13 plan prepared by Mr. Espinoza's lawyer provided for full payment of the balance due on the student loan over the term of the plan but it did not provide for payment of $4,000 in accrued interest or for future interest.
The student loan lender was given notice of this plan provision and did not object. The bankruptcy judge to whom Mr. Espinoza's case was assigned issued an order of "confirmation" that formally approved the plan. Mr. Espinoza dutifully sent in his trustee payments and approximately 5 years later, after payments were made per the confirmed plan, the judge issued a "discharge order" declaring debtor Espinoza free and clear of all debt.
In 2003 and 2004, Mr. Espinoza's student loan creditor renewed its efforts to collect the student loan debt interest. The creditor contends that the Bankruptcy Code does not permit the discharge of any part of student loan debt unless the debtor files a special lawsuit in his bankruptcy case to ask for a finding of "undue hardship." The creditor contends that a bankruptcy judge cannot discharge student loan debt or interest on a student loan debt through a confirmation order in the absence of a hardship discharge finding.
The United States government, 24 states and the student loan lending industry are supporting the student loan creditor in this case. You can read the court documents and more information about the Espinoza case by clicking on the link. The Supreme Court's decision in this case is expected within the next few months.
I will be very surprised if the Court rules in favor of the Espinoza position. The Bankruptcy Code seems fairly clear in placing the burden of showing undue hardship on the debtor – to make a non-dischargeable debt dischargeable because the lender did not object to a provision buried in a Chapter 13 plan seems contrary to the plain language of the code. It will be interesting to see what happens.
Posted in Chapter 13 issues, Discharge issues, Student Loans, United Student Aid Funds v. Espinoza, discharge of student loans, undue hardship | Comments Off
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
Thursday, October 8th, 2009
My Bankruptcy Law Network colleague Rachel Foley from Kansas City has written a useful article on the Bankruptcy Law Network blog that brings to light a problem that many debtors (and perhaps many debtors' attorneys) don't think about too much – bankruptcy fraud.
In my practice I observe that when they come to meet with me many prospective bankruptcy filers are angry – angry at harassing creditors, angry at their employer for cutting hours or jobs, and angry at some of the rules that apply when one files bankruptcy. Despite what some in Congress may say, no one wants to file bankruptcy and I have met many very nice, reasonable people who feel that they played by the rules and now they are going to have to start all over at age 40, 50 or older.
The net result of this anger sometimes is a sense of "us against them." Sometimes this manifests itself in an attitude that the debtor will follow the rules mostly but who is going to harm if they don't reveal a cash payment to a relative or the transfer of an old car to a brother.
As Rachel points out in her fine post, this sort of an attitude can really get you in trouble.
When you sign your name to a bankruptcy petition, you are declaring under oath that the information contained therein is truthful and accurate. If you leave something out intentionally you may not get caught, but, then again you may. The U.S. Trustee and the U.S. Attorney have been known to prosecute debtors to set precedent.
Attorneys give you long questionnaires for a reason. If you leave something off and it later comes to light, we can turn to your original paperwork to confirm what was disclosed to us. In this same vein, if you notice a mistake on your petition, advise your lawyer in writing. Proving a verbal notice is difficult. Further, given that there is a filing fee to add creditors it is unlikely that any lawyer would file an amendment without payment of a filing fee.
The bankruptcy process is not an enjoyable process, although it can put you on the road to financial recovery. Don't put the benefit of a bankruptcy discharge or risk criminal prosecution by intentionally leaving relevant information off your bankruptcy petition.
Posted in Bankruptcy Petition, Chapter 13 issues, Chapter 7 issues, bankruptcy fraud, fraudulent transfer, omitted creditors | Comments Off
