Bankruptcy Discussion

Archive for the ‘Bankruptcy’ Category

We are all participants in the creation of our collective reality. Therefore, if enough people change their behavior, we will change the way things are done. Case in point: The demise of Bank of America’s $5.00 debit card fee.

While I do, of course, explain the bankruptcy process to my clients, once in a while I forget to explain to them what happens in the immediate aftermath of filing. We’ll file a bankruptcy petition on Monday. The world does not seem to change. Tuesday comes. Now what? Are we just waiting until the meeting with the trustee?

Interestingly enough, the very moment we file your bankruptcy petition with the court, something does happen. Most, and many times all, of your creditors are automatically stayed from action against you and your property. What exactly does that mean? That means that creditors may NOT contact you with regard to collecting a debt without breaking the law, whether they actually know about your bankruptcy case or not.

So, Bank of America or Portfolio Recovery Services calls you Tuesday, the day after you file your bankruptcy petition, and the representative starts to speak with you about your $7,000.00 credit card balance. They are breaking the law. However, before you begin dreaming of revenge and suing the company for sanctions, you should keep in mind that we live in the real world and honest mistakes are made. A good representative of one of these companies will be polite and simply ask you for your case information. Have it handy.

When you are contacted by a creditor after you file your bankruptcy petition, simply be ready to offer him or her the following information:
1. Date of Filing
2. Chapter
3. Case Number
4. Name of Court (e.g., Eastern District of New York)
5. The name and contact number of your attorney

Eventually, all the telephone calls should cease, and the letters will stop invading your mailbox. Save all post-petition correspondence from your creditors. If a particular creditor does not seem to get the message that communications with you must stop, contact your attorney about it. He or she will set them straight or sue for sanctions.

THIS ARTICLE will inform you on some ways to prepare for a bankruptcy filing, both legally and logistically. Without exception, potential clients ask me what they need to bring to me in order for me to do my job and prepare their petitions. The following are some of the items I need and the reasons for which I need them:

1. PRIOR 2 YEARS OF TAX RETURNS – federal and state
Why?
* You must have filed tax returns for the past two years in order to file bankruptcy. If you were not required to file, you must have an accountant’s letter or at least sign an affidavit to the effect that you had insufficient income to require a filing.
* Tax returns tell me a client’s gross income for the prior 2 years and the source or sources, such as unemployment or distributions from retirements accounts. They tell me about deductions, dependents and spousal relationships. They also reveal whether the client will be entitled to a tax refund in the coming year. Lastly, they offer evidence of the degeneration of a person’s financial situation.
* Some jurisdictions require more than 2 years of tax returns. Some only require 1 year.
* If you haven’t filed tax returns in the past couple of years, the trustee will want to see tax returns for the last year you filed
2. PAY STUBS FOR DEBTOR FOR LAST 6 MONTHS – and recent pay stubs for non-debtor spouse living in same household
Why?
* They allow me to average the client’s income for the means test
* They allow me to get an idea of average overtime or bonuses
* The non-debtor spouse’s pay stubs are necessary if the non-debtor spouse resides in the same household as the client. His or her income is included on the income schedule of the petition. A client cannot file a chapter 7 bankruptcy if the client and his or her spouse’s combined income substantially exceed the household expenses.
3. LAST 6 MONTHS OF STATEMENTS FOR ALL FINANCIAL ACCOUNTS
Why?
* This tells me if there have been large transactions recently. Making large payments to one or more creditors while snubbing the others is not allowed. Also, hiding money by emptying accounts at the eleventh hour is not allowed. By the way, I’ve seen trustees ask for the last 3 years of financial account statements, but they only do so when they feel the debtor might be hiding something.
4. DEED TO REAL PROPERTY
Why?
* You’d be surprised how clients do not know who owns what and how, whether their spouse is on a deed, whether they own as a tenant in common, etc.
5. LEASES TO REAL PROPERTY (both as landlord and as a tenant)
Why?
* When the client is a tenant, the client cannot just come up with an arbitrary number for rent to make his expenses higher. There has to be evidence of an agreement.
* When the client is a landlord, the client cannot just come up with an arbitrary number for rent to make his income lower.
6. LAST MORTGAGE STATEMENT(S)
Why?
* The mortgage statement tells me a lot – the name and address of the lender or servicer, the amount of the mortgage payment, what the principal balance is, whether the taxes and homeowner’s insurance are part of the mortgage payment and whether the mortgage is in default
7. TITLE TO ALL VEHICLES IN DEBTOR’S NAME
Why?
* Like the deeds to real property, clients sometimes do not know who owns which vehicle, especially between spouses. It is important to note that each debtor gets only one vehicle to exempt, so if one spouse owns both vehicles, it may be important to divide the ownership.
8. LAST STATEMENT FOR LEASE OR FINANCE AGREEMENT ON VEHICLES
Why?
* The last lease or finance statement tells me the creditors name and address, the principal balance owing, the amount of the payment and sometimes the maturity date of the agreement. It is extremely helpful for me to have the original lease or retail contract also.
9. HOMEOWNER’S INSURANCE POLICY
Why?
* The homeowner’s insurance policy sometime reveals that a client has insured a collection, a collector’s item, an expensive piece of jewelry like an engagement ring or some other asset. A trustee can always ask to see the policy.
10. BILLS AND STATEMENTS FOR MONTHLY HOUSEHOLD EXPENSES (home heating bills, cable, internet, home phone, cell phone, lawn maintenance, car insurance, health insurance, life insurance statement, real estate taxes, estimated tax payments, child care, medical co-pays, student loans, back tax plan payments)
* I also ask for estimates of food, gas, car repairs, etc. (the more members of your household, the higher the food bills should be, the closer you are to your job, the lower your gasoline bills should be)
* the expensive habit of smoking can usually be accounted for
11. EVIDENCE OF YOUR UNSECURED DEBTS (medical bills, credit cards, promissory notes)
* I want as many as you can offer me, up to 12 months
* I want statements, invoices, collection letters, lawsuit documents
* These give me the names and addresses of creditors, balances, chain of title of the debts as well as a general idea of whether there was abuse of credit cards just prior to the bankruptcy
* You should stop using your credit cards well before filing a bankruptcy petition
12. OTHER QUESTIONS
* Do you have life insurance
* Do you own a time share, guns, coin collection, boat, trailer, jetski, unregistered car (you wouldn’t want a trustee to drive by your house and see a boat and trailer in the side yard)
* Does anyone owe you any money?
* Did someone die and you may be entitled to inherit?
* If you received a tax refund in the past, are you expecting a similar refund next time?

A bankruptcy case filed under Chapter 7 of the Bankruptcy Code is the type of case in which a debtor seeks to discharge all of his or her unsecured liabilities (credit cards, personal loans, medical bills, judgments that are not liens on an asset, even personal liability on secured loans) without paying a percentage of those debts through a multi-year plan. Typically, one will file a Chapter 7 petition with the bankruptcy court (e.g., April 20th) and then meet with the Chapter 7 trustee about thirty days later (e.g., May 20th). At the meeting, the Chapter 7 trustee gets to ask you any and all questions about your financial situation, both present and past. The meeting with the trustee also is a forum in which the creditors are able to attend and ask you questions.

If all goes well at the meeting with the trustee . . . well, what does that mean? From your standpoint, “if all goes well” means if the trustee confirms that you have no assets that the trustee can sell to pay some of your debt or if the trustee finds that you do not have disposable income sufficient to convert your case into one under chapter 13. So . . . , if all goes well at the meeting with the trustee, then you must wait about sixty more days (e.g., to July 20th) for the period to run in which interested parties are able to object to the dischargeability of a particular debt or to the discharge of your debts globally. If that additional sixty or so days runs without an extension or the filing of a lawsuit by the trustee or a creditor, then the court will usually issue your discharge order and then administratively close the case shortly thereafter (e.g., July 21st to August 20th).

Therefore, to sum up, an uncontested Chapter 7 bankruptcy case will usually run from 90 to 120 days, from the filing of the petition to the close of the case. The momentous dates are the petition filing date, then the meeting with the trustee about 30 days later, then an additional 60-day period during which the trustee or creditors can object, then the discharge order and close of case. Be warned, though, that a Chapter 7 case can run many more months if the trustee must dispose of an asset to pay some of your debt.

A credit score is a numerical expression based upon a statistical analysis of a person’s credit files, to represent the credit worthiness of that person, or so says wikipedia. FICO is a publicly traded corporation (under the ticker symbol FICO) that created the best known and most widely used credit score model in the United States.

When you file a bankruptcy petition, you are asking the bankruptcy court to apply the bankruptcy laws to your situation, basically in one of three ways: (1) to discharge all your unsecured debt immediately (chapter 7), (2) to force your creditors to accept 100% payment over a period of time (chapter 13 100% plan), or (3) to force your creditors to accept payment over a period of time with your unsecured creditors receiving less than 100% of what is due to them (chapter 13 partial plan).

A chapter 7 bankruptcy stays on your credit report for about 10 years after filing. A chapter 13 bankruptcy stays on your credit report for about 7 years after filing. The idea is that you put more effort into a chapter 13 bankruptcy to pay back creditors, so you are rewarded by having the bankruptcy removed from your credit report in less time.

Can you and how do you rebuild your credit rating after a bankruptcy filing. Yes you can rebuild. That is the whole point of bankruptcy. In fact, many of my clients, in our initial consultation, will convey worry that a bankruptcy will hurt their credit rating. However, after they make their worry known, they quickly realize that their concern is, as Mr. Spock might say, “quite illogical”. Most often, if you’re looking at the prospect of filing bankruptcy, your credit rating has already taken a beating. I can’t say for certain how a particular credit rating agency will react to a particular bankruptcy, but I can say that wiping the slate clean of unsecured creditors is a step in the right direction.

My advice as to how to start rebuilding your credit rating after a bankruptcy is to fill out the next credit card application that comes in the mail (and they will come). The credit card companies and banks need you more than you need them. They might approve you for a $500.00 limit. Before I start getting attacked for advising to take another nip of the dog that bit you, there are two warnings I have. First, if you have an uncontrollable compulsion to use credit cards (like a gambler in a casino), then do not apply for another credit card and stick with a debit card. Secondly, if you do get approved for another credit card, do not carry a balance and pay finance charges. Pay off the balance at the end of each month. If you can’t stick to that plan, don’t get back into this dangerous game.

Some, especially people in the lending industry, may tell you to carry a balance and keep your payments current. This is technically the better way to build your credit rating more quickly, however, I do not condone playing this game and paying finance charges. My way will build your credit rating also. Slow and steady will win the race every time.

Finally, your credit score will affect the rate you get on your next auto loan or whether or not a life insurance company will issue you a policy, but do not judge yourself by your credit score. Enjoy your time off the credit grid. Maybe you’ll get used to it. Too many Americans are in too much debt, and the stress of carrying a load of debt is no good for your life on any level. Let bankruptcy be a fresh start and a respite for reflection upon life’s priorities.

I am a bankruptcy attorney with offices in Nassau County and Suffolk County, on Long Island, in New York. I have been practicing for over fifteen years in the same courts, and I would love to dispel some myths about bankruptcy and enlighten people on the legitimacy of deciding to file a bankruptcy petition.

The architects of this country were much more tuned in to finances than you may think. In fact, the basis for the freedom they envisioned had as much to do with money as it did with enumerating basic individual rights. So what does a room full of powdered wigs have to do with your bills? Everything. Article I, Section 8 of the United States Constitution authorizes Congress to enact uniform Laws on the subject of Bankruptcies for the benefit of debtors who are United States citizens. Under this grant of authority, Congress enacted the Bankruptcy Code. It is a set of statutes identified as Title 11 of the United States Code, and it was conceived, drafted and passed into law for . . . YOU!

Unfortunately, you may find yourself in one of the follow situations:

* You or the breadwinner in your family just fell victim to an accident or serious illness and the medical bills and paperwork have crushed your credit, your ambition and any chance you may have had to live like you used to.

* You or your spouse lost a lucrative job or position, and you didn’t realize until now how fragile the balance was between monthly expenses and your ability to pay them.

* Over the past few years, you genuinely believed that your income would improve, so you kept maintaining your needs by expanding your credit card balances. After all, it was only a matter of time before things turned around. However, you’re now maxed out and you have tapped your extended family for “loans” as much as you and/or they are willing.

* You took student loans out to get that degree or license, because that degree or license was your ticket to a higher income. However, the job in your fantasy never came to fruition and now you’re not only in student loan debt but credit card debt as well.

* You bought your house and were on the road to owning the biggest asset of your life. Then you refinanced and decided to take some extra money out of the equity for an addition, or a car, or to pay your kids tuition or to take a vacation, etc. Well, now your house is worth close to or less than your mortgage balance, and your taxes and your groceries and your utilities are 4 times as high. Should your start draining your retirement account?

In the past, the common attitude toward these situations was 1) you were irresponsible, 2) you made your bed, now lie in it, 3) get yourself a couple of jobs, you’ll eventually work it off. I say, with total sincerity and authority, to reset the game for yourself, and have no regrets about it. Just read the following, and you’ll begin to see why.

For the past thirty years, our Federal Government, with our States Attorneys General sitting on their hands, has let banks run wild and they’ve managed to get themselves into a pretty deep hole. Savings banks have been combined with investment institutions. Corporations have started their own banks and have issued their own credit cards. High finance allows bets on just about anything at such levered levels as to put the very existence of these institutions at risk. The Federal Reserve has offered very cheap money to banks, has set artificially low interests rates, and has prevented natural market forces from prevailing. The list goes on, and it may be hard to understand how this relates to you, but here is the prime example of how you may be affected by this game.

The Federal Reserve made money cheap for banks to borrow, and banks lent out much more than they held, as much as ten times more. Many of these loans were recklessly approved over the past decade. However, quasi-governmental agencies offered insurance for these loans as long as the banks made these loans in accordance with certain guidelines. Neither the banks nor the government actually investigated whether these loans were made within the guidelines, but that’s okay because the loans were be bundled together and sold around the world as highly-rated securities. Since it was so easy to get loans, for example for the purchase of a house, the prices of houses skyrocketed. In 1997, the fair market value of a house may have been $165,000, and your loan may have been $125,000. Ten years later, in 2007, the fair market value of the same house was $465,000 and your loan to purchase it was $450,000. Four years after that, the fair market value of the house is $320,000, and the balance on the loan is $440,000, plus the loan is now in foreclosure and real estate price are continuing to decrease in a stagnant market. That’s because the government and the banks manipulated the market. There are two parties left holding the bag – you, the homeowner, and the pension fund or other investor that bought that bundle of securitized mortgages. Next time you hear, “Banks got bailed out. We got sold out.,” you’ll understand it with a little more depth.

With all the sensationally ill-conceived policies and acts of governments, banks and corporations going on these days, and with many of these policies and acts negatively affecting the “common citizens”, you are well within your rights, both morally and legally, to reset the game with respect to your creditors and get a fresh start on life. You can end the telephone harassment. You can end the letters from collection agencies, and tomorrow can really be the first day of the rest of your life. Bankruptcy not only is the beginning of the credit healing process, it is the beginning of the psychological healing. It will help alleviate your stress. This is your health and well-being about which we are speaking. This is important stuff. After all, are you a consumer first, or are you first a human being, family member, friend and soul? Just think about the word, “consumer”! It’s demeaning, and you may never have even noticed.

Therefore, the next time you think about the possibility of bankruptcy for yourself, DO NOT CONSIDER what your neighbor may think about it. He or she has no business judging you, and most likely cannot even begin to contemplate the psychological pain you are now suffering. In fact, your neighbor will probably not even find out if you file a bankruptcy case unless he or she searches the federal docket. The decision to make legitimate use of the bankruptcy laws is a decision that should be made between you and your attorney, end of story.

I am a bankruptcy attorney with offices in Nassau County and Suffolk County, on Long Island, in New York. I have been practicing for over fifteen years in the same courts, and I would love to dispel some myths about bankruptcy and enlighten people on the legitimacy of deciding to file a bankruptcy petition.

The architects of this country were much more tuned in to finances than you may think. In fact, the basis for the freedom they envisioned had as much to do with money as it did with enumerating basic individual rights. So what does a room full of powdered wigs have to do with your bills? Everything. Article I, Section 8 of the United States Constitution authorizes Congress to enact uniform Laws on the subject of Bankruptcies for the benefit of debtors who are United States citizens. Under this grant of authority, Congress enacted the Bankruptcy Code. It is a set of statutes identified as Title 11 of the United States Code, and it was conceived, drafted and passed into law for . . . YOU!

Unfortunately, you may find yourself in one of the follow situations:

* You or the breadwinner in your family just fell victim to an accident or serious illness and the medical bills and paperwork have crushed your credit, your ambition and any chance you may have had to live like you used to.

* You or your spouse lost a lucrative job or position, and you didn’t realize until now how fragile the balance was between monthly expenses and your ability to pay them.

* Over the past few years, you genuinely believed that your income would improve, so you kept maintaining your needs by expanding your credit card balances. After all, it was only a matter of time before things turned around. However, you’re now maxed out and you have tapped your extended family for “loans” as much as you and/or they are willing.

* You took student loans out to get that degree or license, because that degree or license was your ticket to a higher income. However, the job in your fantasy never came to fruition and now you’re not only in student loan debt but credit card debt as well.

* You bought your house and were on the road to owning the biggest asset of your life. Then you refinanced and decided to take some extra money out of the equity for an addition, or a car, or to pay your kids tuition or to take a vacation, etc. Well, now your house is worth close to or less than your mortgage balance, and your taxes and your groceries and your utilities are 4 times as high. Should your start draining your retirement account?

In the past, the common attitude toward these situations was 1) you were irresponsible, 2) you made your bed, now lie in it, 3) get yourself a couple of jobs, you’ll eventually work it off. I say, with total sincerity and authority, to reset the game for yourself, and have no regrets about it. Just read the following, and you’ll begin to see why.

For the past thirty years, our Federal Government, with our States Attorneys General sitting on their hands, has let banks run wild and they’ve managed to get themselves into a pretty deep hole. Savings banks have been combined with investment institutions. Corporations have started their own banks and have issued their own credit cards. High finance allows bets on just about anything at such levered levels as to put the very existence of these institutions at risk. The Federal Reserve has offered very cheap money to banks, has set artificially low interests rates, and has prevented natural market forces from prevailing. The list goes on, and it may be hard to understand how this relates to you, but here is the prime example of how you may be affected by this game.

The Federal Reserve made money cheap for banks to borrow, and banks lent out much more than they held, as much as ten times more. Many of these loans were recklessly approved over the past decade. However, quasi-governmental agencies offered insurance for these loans as long as the banks made these loans in accordance with certain guidelines. Neither the banks nor the government actually investigated whether these loans were made within the guidelines, but that’s okay because the loans were be bundled together and sold around the world as highly-rated securities. Since it was so easy to get loans, for example for the purchase of a house, the prices of houses skyrocketed. In 1997, the fair market value of a house may have been $165,000, and your loan may have been $125,000. Ten years later, in 2007, the fair market value of the same house was $465,000 and your loan to purchase it was $450,000. Four years after that, the fair market value of the house is $320,000, and the balance on the loan is $440,000, plus the loan is now in foreclosure and real estate price are continuing to decrease in a stagnant market. That’s because the government and the banks manipulated the market. There are two parties left holding the bag – you, the homeowner, and the pension fund or other investor that bought that bundle of securitized mortgages. Next time you hear, “Banks got bailed out. We got sold out.,” you’ll understand it with a little more depth.

With all the sensationally ill-conceived policies and acts of governments, banks and corporations going on these days, and with many of these policies and acts negatively affecting the “common citizens”, you are well within your rights, both morally and legally, to reset the game with respect to your creditors and get a fresh start on life. You can end the telephone harassment. You can end the letters from collection agencies, and tomorrow can really be the first day of the rest of your life. Bankruptcy not only is the beginning of the credit healing process, it is the beginning of the psychological healing. It will help alleviate your stress. This is your health and well-being about which we are speaking. This is important stuff. After all, are you a consumer first, or are you first a human being, family member, friend and soul? Just think about the word, “consumer”! It’s demeaning, and you may never have even noticed.

Therefore, the next time you think about the possibility of bankruptcy for yourself, DO NOT CONSIDER what your neighbor may think about it. He or she has no business judging you, and most likely cannot even begin to contemplate the psychological pain you are now suffering. In fact, your neighbor will probably not even find out if you file a bankruptcy case unless he or she searches the federal docket. The decision to make legitimate use of the bankruptcy laws is a decision that should be made between you and your attorney, end of story.

Hi, and welcome to my Bankruptcy Discussion blog. My name is Charles Fisher. I am an attorney, and I have been practicing bankruptcy law for over 15 years. Before that, I worked for a bankruptcy court judge whose court was located in Suffolk County. My offices are located in Nassau County and Suffolk County, but my clients are located from Westchester to Montauk, and also in New Jersey.

Over the years, and after seeing many clients and changes, I am pretty well keyed into my clients’ main concerns about bankruptcy. This blog may help answer some questions for you and may give you some added knowledge, which in most cases means a little comfort. You are welcome to contact me anytime for more information.