Bankruptcy Questions Answered

David Siegel asked:


We begin with the creation of the automatic stay. The stay is automatically created at the time of bankruptcy filing.

The automatic stay is actually a unique feature. If a creditor attempts to collect from the debtor in any way after the bankruptcy was filed and the automatic stay was enacted, the court can undo creditor’s actions. For example, if a car was repossessed without bringing a motion to lift stay, that car, can be requested to be returned to the debtor. So let’s say you filed your case, your case has been filed, and all of the sudden one of the creditors that has security on your car, purchased money security interest, comes in and repossesses your car. Well that means you can go and ask the court to make the creditor return the car back to you, because what the creditor did was actually illegal, and the creditor can actually be punished for that. So, the automatic stay has some benefits and one of the actual benefits is that it allows you to stay in a house you are surrendering for almost a year.
Taxes and Bankruptcy

Now, let’s talk about taxes, taxes owed to the government that were accumulated within three years prior to the bankruptcy won’t be discharged. However, if you file your taxes then you can actually get your taxes discharged that were accrued prior to three years of filing. So, let’s say its 2008 right now. Taxes that you were supposed to pay in 2004, 2003, 2002, 2001…. as long as you filed them, can actually be discharged.

Not paying your taxes can have a significant consequence. For example, the interest rate can amplify the amount you owe significantly. In a couple of years you can go to actually doubling your debt. Now, once bankruptcy is filed the interest on the debt stops.

Personal Guarantees on Businesses

There are different kinds of bankruptcies there is the business and personal bankruptcy. A lot of people have small little businesses that went downhill and are actually bringing owners along for the bankruptcy. Of course if you have an S corporation it’s a different kind of entity and it’s not totally connected to the owner. Let’s say a debtor has an S corporation, a body shop or a restaurant, whatever it is, in order to actually discharge the business debt, some of the liens that are from that S corporation, some of the credit cards that are on that S corporation, you actually have to file bankruptcy for the S corporation itself. However, most S corporations and other businesses have loans that are also secured by the debtors themselves, by the owners of the S corporations and not only by the S corporation itself. These loans cause the owners of the S corporation and the S corporation to have to file bankruptcy together.

Most of the time lenders won’t give you a loan just for the S corporation knowing that you can easily just file bankruptcy under the S corporations without being liable for the rest of the loan. Therefore most of the loans are secured by personal guarantees and by the corporations themselves. In this scenario both the owner of the S corporation and the S corporation has to file bankruptcy and that’s the only way you’re going to get discharged from that debt completely.



Bankruptcy Questions

David Siegel asked:


Before Filing, You Must:

Stop using your credit cards and don’t incur any additional credit. Once you have decided to file for bankruptcy, you should not use your credit cards nor incur any additional credit from that point forward. Any recent purchases or recent cash advances can be held still due and owing after you file for bankruptcy. The rational is that you never intended to pay those debts back and is therefore, tantamount to fraud. If you’re seeking a fresh start, do your best to insure that you will in fact receive that fresh start. The credit card issuers are very aware of attempts to run-up charges on credit cards. This also applies to cash advances. If you take a cash advance too close to filing bankruptcy, you are likely to see an objection from the particular credit card issuer. The objection comes in the form of an adversarial complaint. If the creditor is successful in their objection, the amount of the recent advance(s) will be held due and owing after your bankruptcy case.

Take the required credit counseling briefing
Before a Chapter 7 bankruptcy case can be filed, you must take a credit counseling briefing from an approved credit counseling agency. This credit counseling briefing can be done on the internet or on the telephone. The entire briefing typically takes less than one hour and at the time of this writing costs approximately $50.00. The credit counseling briefing requires that you provide information as to your monthly income and expenses as well as a listing of your creditors. This briefing must be completed within 180 days prior to filing bankruptcy.

File your taxes

You must file your most recent year’s taxes to qualify for Chapter 7 bankruptcy relief. Although this seems like a simple requirement, you would be amazed at the number of individuals who have not filed their most recent taxes. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed. You must also provide your most recent tax return to any creditor who requests it.

Provide your most recent pay advices

You must provide the most recent 60 days worth of paycheck stubs at the time your case is filed. These will be forwarded to your assigned bankruptcy trustee or may be filed with the Clerk of the U.S. Bankruptcy Court. This measure is in place to make sure that the amount listed on the petition for monthly income is in fact accurate. If you receive income from a source other than employment, evidence of that income must be provided just as if is was a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies of all of your paycheck stubs in an organized manner.



Bankruptcy Questions

Steve Buchanan asked:


Bankruptcy is a very unfortunate situation and can happen even to seasoned businessman or to a new entrepreneur. To avoid falling into such a trap one should ensure to keep his or her financial health in a very good state. Filing bankruptcy is not an easy job and one has to go through a very complex process involving lot of complex court procedure. Also it affects badly your financial rating for securing loans, which you may need for business development or for your personal requirements at any future stage of your life.
Bankruptcy is a law provided for those who are unable to pay their debts and this law is utilized to provide them with a way of paying their creditors. Since there is no debtor’s prison any more, no one has to worry about going to prison because of not being able to pay. Instead, bankruptcy consolidates the debts and sets up a schedule by which the debts can be paid.

One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts. Actually life is not always fair. Most people that file for bankruptcy do so out of necessity not because they simply want to avoid paying their debts. Of all the people that file for personal bankruptcies, nearly 40% of them file due to some financial crisis outside of their control. In many cases this financial crisis is some serious health issue.

The debtor has to file the bankruptcy report in the court to stop further payment of interest on the borrowings on account of his inability to repay with declaration that his income is not going to improve in the near future as well. This requires furnishing causes of bankruptcy viz. losses in business, family dispute, job loss, poor health or illness, heavy expanses on treatment, natural calamity resulting in damage to assets or business etc.

Economic and social changes have prompted the need for reform on the bankruptcy laws through the years. The past couple of decades have seen changes in the financial world as well as social upheaval. With credit flooding the nation the past several decades, consumer debt has sky rocketed and the rate of default on credit cards has caused many to seek bankruptcy protection. Medical problems, divorce and job losses have caused most of the Chapter 7 bankruptcies.

A record number of bankruptcies were filed in the 1980s and early 1990s. Job losses and business losses accounted for this record number of bankruptcies. Many small businesses closed during this period, but also large companies such as Texaco, Continental Airlines, Greyhound and Pan Am also filed for bankruptcy. This large number of bankruptcy filings put the bankruptcy courts in a bind to handle all of them; thus, they utilized the assistance of bankruptcy professionals to speed up the court procedure. These professionals were approved by the court to act as examiners and mediators. The key to avoid bankruptcy is being fully aware of your financial standing at all times. Record your bill payments. You should know if you miss a payment. Try to forecast your ability to pay your bills into the future. If you constantly keep on top of your bills, your spending habits and your ability to earn in the future, you can easily avoid bankruptcy.



Bankruptcy Questions

Steve Buchanan asked:


Business is a situation in which a business organization has more liabilities than assets and is no longer capable of meeting its financial obligations. Any type of business can file for this bankruptcy. Actually it is common part of business, no matter what market you are in. It occurs especially among companies owned and operated by everyday people who place everything they have in order to succeed. There are many times when even successful companies become entangled in debt forcing them to consider a business bankruptcy as their only option. This bankruptcy occurs when a business organization has more liabilities than assets. They are no longer capable of meeting their financial obligations.

Bankruptcy is the filing of Chapter 7 or Chapter 11 by corporations and partnerships. On the filing of a Chapter 7 petition, the court appoints a trustee. The trustee’ primary duty is to sell the assets of the bankruptcy estate, and then make distributions to creditors. Businesses, unlike individuals, cannot have any property exemptions, so all assets are to be sold and distributed.

Many businesses file for bankruptcy because of the relief it provides owners drowning in credit problems with no way out of debt. The good thing about a business bankruptcy compared to a personal bankruptcy is they fact that so many companies do it as a way of restructuring their business that there is not the negative stigma around it. The bankruptcy filings sources are Automatic Display Files (ADF). When you search any of these sources, the system automatically displays a content and/or coverage description. For additional details about these sources, review their source description. Consult your LexisNexis product Help for instructions on retrieving source descriptions.

The bankruptcy law can provide relief to the business owners who are overwhelmed with credit problems and cannot find any other way out of debt. However, business owners must also face the fact of losing one’s business and damaging one’s credit standing and endure embarrassment is a possibility. There is not much stigma attached to Business Bankruptcy because it is, in fact, used by many businesses to restructure their companies.

Business bankruptcy state if filed in court can lead to a situation where you can loose your business completely and thus destroying the chances of recovery. The disadvantages of filing business bankruptcy therefore are many and some are enumerated below:

If you file bankruptcy in court, you will have to hire attorney to present your case but as you are aware that attorney fees is not nominal and you shall have shelve down heavy fees. The litigation costs are very expensive and time consuming. Therefore, don’t expect decision or relief in court.

After filing the case, the court has control over your assets as such you loose the control on your business and therefore improving your business does not arise. Even Mortgage after bankruptcy will also not bring any relief under the situation on account higher interest rates are being normally charged in such cases.

Despite filing bankruptcy case, you have to pay for your pending taxes as such you wont get any relief on your backlog taxes.



Bankruptcy Questions

David Siegel asked:


When is the right time to file personal bankruptcy? This is a personal question that must be answered on a case by case basis. My general thought is that if a person can bail himself out of debt within a period of six months, he should not file a bankruptcy. The hit on his credit rating will not be worth the fresh start. On the other hand, if the person cannot bail out within six months and the prospects for getting out of debt seem bleak, then filing Chapter 7 bankruptcy is probably the better idea.

Many of my clients worry about their credit after filing bankruptcy. They worry about getting financing for an auto, a house or even an apartment. What they fail to consider is that they cannot get credit now under their current financial situation. They must correct the negative credit information, get out from under their debt and try to re-establish credit in the future.

It usually takes approximately two years to qualify for a decent mortgage after filing Chapter 7 bankruptcy. One can obtain an auto loan within 120 days of filing a bankruptcy. One can lease an apartment immediately upon a showing of an ability to pay the rent along with a modest security deposit. Thus, there is a life after bankruptcy. In fact, as many of my client will attest, a pretty darn good life. A life free from creditor harassment. A life full of opportunity to start anew instead of a life of down and outs. One must make that tough decision to self-evaluate their financial situation. Can the person continue to live under the same financial conditions day after day? Is there a light at the end of the tunnel? Does the person even know that he is in the tunnel?

Another factor to consider is the type of debt that one has. If the debt is exclusively student loans, a bankruptcy will not help. Student loans survive a bankruptcy filing and are generally held to be non-dischargeable. If the debt is for past due maintenance, alimony or support, do not consider a Chapter 7 bankruptcy. The debt will simply not be eliminated. However, if the debt is mostly unsecured debts, such as credit card debt, personal loans, services and utilities, then Chapter 7 bankruptcy may be a good option.

To qualify under the current laws, a person must be either earning less than the median amount for a family of his size or qualify under the strict means test. In essence, if someone has the ability to repay all or a portion of his debts, the court will mandate that it happen. If someone attempts to file a Chapter 7 bankruptcy case, despite his ability to repay, the case will likely be dismissed by the United States’ Trustee.



Bankruptcy Questions

Alan Higa asked:


Rising energy costs, soaring personal debt and weakness in the housing market fueled the growth of bankruptcy filings for February 2008, according to Jenny Anderson in an article appearing on the website for Automated Access To Court Electronic Records. AACER provides U.S. bankruptcy data to attorneys, lenders, employers and individuals.

According to AACER, the average number of bankruptcy petitions filed through out the country rose to an average of 3,960 per day in February. This represents an 18 per cent increase from January and a 28 per cent rise from a year earlier.

The total number of bankruptcy filings for March 2008 grew to 90,288 or 4,299 per day. This was the first instance since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect in 2005 that the daily average for a particular month exceeded 4,000.

University of Illinois College of Law Professor Robert M. Lawless cites the overall trend line as an important factor. Lawless, an expert in corporate and bankruptcy law, points out that U.S. bankruptcy filings in January 2006 totaled less than 1,500 per day and that by February 2008 that figure had grown to just under 4,000.

Lawless has predicted that the number of bankruptcy filings in this country will top 1,000,000 by the end of the year. Jack Williams, a Georgia State University professor and scholar in residence at the American Bankruptcy Institute, pegs the 2008 nationwide total to fall between 1.2 and 1.4 million bankruptcies.

Lawless is an author featured on the bankruptcy blog Credit Slips (www.creditslips.org.) Another Credit Slips blogger, Harvard law Professor Elizabeth Warren said in Business Week that more credit card issuers will not cut interest rates to assist consumers who find themselves in financial straits. “If fewer consumers can get any relief, more counseling plans will fail,” said Warren. “That means more bankruptcies . . . “

How are debtor bankruptcy law firms responding to this flood of business?

A March 31, 2008 article on the American Bar Association Journal website analyzes a survey that found that lawyers expect bankruptcy to be the hottest growth area for law firms this year. 25 per cent of the attorneys surveyed said that the fastest area of growth would be bankruptcy work.

Marshall Huebner, co-chair of the bankruptcy group at Davis Pok & Wardwell, said his lawyers are “extremely busy.” In New York City, Skaden, Arps, Slate Meagher & Flom reports that demand for bankruptcy services has “emphatically increased.” In January and February, their bankruptcy department billed 45 percent more hours than the same period last year.

Virtual Bankruptcy Assistants are ideally positioned to benefit from this growing trend. While still in its infancy, this industry is poised to flourish while the demand for bankruptcy services escalates. As more and more consumer bankruptcy attorneys become aware of the benefits of contracting with a VBA, the opportunities for virtual bankruptcy assistants to establish satisfying and profitable careers will thrive.



Bankruptcy Questions

Larence Hubert asked:


A bankruptcy - though never pleasant - to many was a fresh start. Permitting those who got in over their heads, who may have managed finances unwisely, or who encountered sudden fiscal upsets to have a majority of their old debt eradicated and thus start anew on the road to good credit and the responsible management of funds. Yet after October of 2005 and blaming the courts, bankruptcy bound debtors found discharges heavily burdensome and instead of rejoicing at the newfound freedom and ability to once again start over, old debts were said to haunt those in dire financial straits.

While some of the changes were common sense changes for the better of the system, the limitation on the homestead exemption and the means test that would be a litmus test as to whether a family truly needed bankruptcy protection or just unload some assets - frequently at horrendous losses - were two of the most commonly cited reasons for a decline in filings. At the same time, the mandatory credit counseling before the bankruptcy filing was received as a self-serving move on behalf of the credit card industry that is heavily invested with the counseling agencies.

For this reason, though the number of bankruptcy filings have sharply declined, the number of Americans with bad credit and no hope for help in sight has just as sharply risen. In the same vein, a failure to provide quick and decisive discharge action has cost many families precious years of being mired in fiscal muck rather than having a fresh start that would eventually permit them to support their grown children’s higher education. Even if there is very little that can be accomplished by blaming the courts, bankruptcy laws have not changed for the better.

When anyone files for bankruptcy, the proceedings will go through their local federal bankruptcy court as the entire process is governed by federal law. There are a few aspects of the bankruptcy proceeding that may be influenced by state laws, the overall rules and procedures covering the process is under federal jurisdiction.

Whether an individual filing for personal bankruptcy or a company or corporation filing for protection under bankruptcy all of the proceedings are handled in federal bankruptcy court. This is more beneficial to the debtors as some of their creditors may be from other parts of the country and not influenced by decisions of state courts. With all decisions coming at the federal level, it covers the individual or company regardless of the location of the creditors.

Additionally, many creditors are less likely to attempt illegal collection tactics sometimes used when a person initially files for bankruptcy, as they fear facing charges on the federal level. There can also be no misunderstanding of the rules if they would be different in other states. Creditors may make a case speaking to the court’s trustee about the discharge of debt, but in the majority of bankruptcies, there are few times then holders of unsecured loans will appear in federal bankruptcy court.

Due to the procedure going through federal bankruptcy court, it is always best for individuals to find appropriate representation in bankruptcy proceedings. Experienced lawyers understand the process in the courtroom, but more importantly, they know the order in which everything related to the case must be completed to affect an efficient discharge of the case.

In many cases, there comes a time when many borrowers must seek bankruptcy protection from their creditors. While many people can access and utilize the help of debt credit counselors, others have no choice but to file Chapter 7 or Chapter 13 bankruptcy.

Most people who are in financially trouble prefer to seek protection under Chapter 13 bankruptcy. However the court must approve the plan and before they do so, it will have to be proven the borrower is in a situation where the plan will be consistently met within the borrower’s current financial situation. The borrower must have a job to be able to pay back the plan. In addition, the plan must be of a reasonable amount, for it to work.

Many creditors may be reluctant to enter into a loan consolidation plan through a private specialist, but have little choice in bankruptcy courts. They don’t always agree to erase all charges either. However, most often the bankruptcy courts will order them to do so. This allows protection to the borrower and gives the creditor no choice but to meet the orders of the court.



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JCLawGroup asked:


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

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

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

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

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

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

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

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

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

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



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Resolve Legal asked:


Like many people, you may be reluctant to file for bankruptcy even though a Washington bankruptcy lawyer has advised you that bankruptcy is the best – maybe the only — solution to your financial problems. Your resistance is understandable.

You may feel embarrassed – you should be in control of your finances, but you’re not. And there’s a certain stigma attached to bankruptcy, whether you go through the process yourself or are represented by a Washington bankruptcy lawyer. The filing is a public admission that you are unable to pay your debts. Bankruptcy also carries with it several unpleasant consequences, including the following:

• For 10 years, the bankruptcy will be reflected on your credit report (and there’s nothing a Washington bankruptcy lawyer can do to change that).

• You can obtain credit after bankruptcy, but it will cost you more.

• Though it’s highly unlikely you’ll be fired from a job because you declare bankruptcy, there are some jobs and licenses you can’t obtain because of bankruptcy. For example, some professions – stock broker is one — don’t allow a bankrupt to be employed in certain positions. These positions usually involve trust and money. (If you’re considering bankruptcy, a Washington bankruptcy lawyer can advise you about bankruptcy’s impact on your employment.)

• There are restrictions on how soon you can re-file for bankruptcy. For example, if you file under Chapter 7, you can’t file again under that chapter for eight years. (A Washington bankruptcy lawyer can explain these timelines to you.).

• Bankruptcy is listed in the top five life-altering negative events, along with divorce, severe illness, disability and loss of a loved one.

While these consequences are unpleasant, there’s another side to bankruptcy, as a Washington bankruptcy lawyer can explain to you. The right to file for bankruptcy is in the U.S. Constitution. Underlying this right is the idea that those in financial trouble deserve the chance for a fresh start. As every Washington bankruptcy lawyer is aware, some people abuse the bankruptcy system. However, the vast majority of people, whether they represent themselves or hire a Washington bankruptcy lawyer, have a legitimate reason for choosing bankruptcy. And often, as every Washington bankruptcy lawyer knows, those reasons are divorce and medical expenses.

It often helps to discuss feelings about bankruptcy with a Washington bankruptcy lawyer. The bottom line is that you shouldn’t feel bad about filing for bankruptcy. It’s your right. Filing lets you take control of your financial life. Filing makes you feel better about your situation. Filing amounts to a commitment to fix the problem and start fresh. At Resolve Legal, we can help you assess whether bankruptcy is right for you. Find out how, and get started on the road to financial recovery.



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David Siegel asked:


Have you seen the price of gas lately? Have you gone to your local grocery store and checked out the prices for basic food items? Have you been out to eat in the past six months? If you are paying any attention at all, you will have noticed a significant increase.

The primary indicator that most folks notice is that of gas prices. The price of gas has nearly doubled in the last five years with a sharp increase during the most recent twelve months. Since gas prices are rising, that means the cost of all kinds of shipping has increased. This will lead to higher prices in all products that are shipped. Even service businesses will need to raise fees to cover the additional transportation expenses. What this all leads to is increased bankruptcy filings.

When cash money is tight, folks rely on their credit cards to finance normal living expenses. When the credit line becomes exhausted and minimum payments cannot be paid, the balances skyrocket. This is due to late fees, over limit fees and excessive interest rate adjustments. The inability to catch-up eventually leads to collector calls, future lawsuits, judgments and garnishments. When this eventually occurs, many will be force to turn to bankruptcy relief.

Chapter 7 bankruptcy is the most common form of bankruptcy relief. It basically provides relief for an honest debtor who has mostly unsecured debt and does not have significant assets. Often times, the person will choose to maintain a house or car while declaring bankruptcy. To do so, the person will have to continue to make timely payments on those items.

There are several debts that are not eliminated in a Chapter 7 bankruptcy case. Those include, but are not limited to student loans, parking tickets, recent taxes, child support, spousal support and debts incurred through fraud. However, in most cases, the majority of the debt is eliminated. Importantly, the credit card debt is eliminated. An exception would be if the debtor utilized the credit cards too close to the bankruptcy filing and in contemplation of bankruptcy filing. In those cases, the creditor can file an adversarial complaint, seeking to hold the debtor liable for the recent credit card charges.

When prices for normal living expenses become excessive, the natural result will be an increase in bankruptcy filings. People need to be very aware of how much they are spending each month. It may take a reduction in spending just to maintain the status quo under the current economic conditions.



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