Don't Go Alone: A Bankruptcy Law Blog

Are my Firearms protected from my Creditors in a Bankruptcy case?

2012-02-16T10:00:00.000-05:00

It’s no secret that Kelsey & Trask, P.C. is a Second Amendment friendly law firm. While most of our firearms practice is dedicated to licensing and firearms law compliance issues, firearms and Second Amendment issues come up in many of our other practice areas as well.

Firearms are often a good investment; they hold their value well, do not depreciate significantly, and for certain items, can appreciate significantly in value, particularly for Curio & Relic items and other historical firearms. Many firearms owners do not keep these items purely for their investment potential, but rather for personal protection or because their employment requirements requires them to keep and maintain a firearm. In either instance, whether or not you can keep your firearms if you file for bankruptcy is an important question.

How are firearms treated in bankruptcy?

Like any other asset, firearms must be disclosed to the bankruptcy court and are subject to acquisition by the trustee if they are not exempt under the Federal or Massachusetts exemptions. There are a number of exemptions that may be used to establish the exemptability of firearms. Ultimately, the amount of the allowable exemptions may be affected by the debtor’s desire to exempt other personal property, but generally speaking, the following exemptions are available to protect a debtor’s firearms:

Federal Exemptions:

11 U.S.C. § 522(d)(5): $1,150.00, which is federal catch-all exemption and may be applied to any personal property owned by the debtor;

11 U.S.C. § 522(d)(5): Up to $10,825.00 of unused home equity not already exempted under 11 U.S.C. § 522(d)(1);

11 U.S.C. § 522(d)(6): $2,175.00 for tools and equipment used in business. For this exemption to be applicable to the debtor, the debtor must establish that the items are necessary for the debtor’s trade, employment or business.

Massachusetts Exemptions

A debtor filing for bankruptcy in Massachusetts may elect either the Federal exemptions or the Massachusetts exemptions. Massachusetts exemptions applicable to firearms ownership are as follows:

M.G.L. c. 235 § 34(10): The uniform of an officer or soldier in the militia and the arms and accoutrements required by law to be kept by the officer or soldier is fully exempt under the law. For this exemption to be applicable to the debtor, the debtor must establish that his status as an “officer or soldier” (e.g., a police officer, a National Guard member, or member of the U.S. Military) who, per the requirements of his or her duties, must personally purchase and maintain firearms for the performance of their duties.

M.G.L. c. 235 § 34(5): $5,000.00 for tools and equipment used in business. Like the federal exemptions, for this exemption to be applicable to the debtor, the debtor must establish that the items are necessary for the debtor’s trade, employment or business.

M.G.L. c. 235 § 34(17): Up to $6,000.00, representing the debtor’s aggregate interest in any personal property, not to exceed $1,000 in value, plus up to $5,000 of any unused dollar amount of the aggregate exemptions provided for the exemption of household furnishings, tools of the trade and a motor vehicle.

If you are facing bankruptcy and have personal and other property, such as a home and retirement accounts that you want to ensure is protected through the bankruptcy process, contact Attorney Matthew P. Trask to learn more about how to protect your assets and find your financial freedom.

Credit Counseling Requirements in Bankruptcy

2012-02-13T10:00:00.000-05:00

If you are planning to file a Chapter 7 or Chapter 13 bankruptcy, you must complete two court-approved courses:

A court-approved pre-petition credit counseling course no more than 180 days before your bankruptcy filing.
A court-approved post-petition financial management course must be completed within 45 days after your § 341 Creditor’s Meeting.

If your case is filed without proof of completing the credit counseling course, you must file proof of completion within 15 days, or your case will be dismissed. Failure to take both of these courses in a timely manner will result in the dismissal of your case or the denial of your discharge. However, a debtor may request permission from the court to extend these deadlines if exigent circumstances exist that make it impossible to complete the course by the prescribed deadlines.

Both the credit counseling course and financial management course are offered by a number of agencies and organizations. Courses may be completed on-line, over the telephone, and in person. Costs range from approximately $25.00 to $50.00 per course. Many courses offer significant discounts if you purchase both the pre-petition credit counseling and post-petition financial management courses as a package in one transaction. I advise nearly all of my clients to go this route.

If you are married and filing a joint petition, you and your spouse can take the course together. Many providers offer a joint fee, and will allow you to save on both the cost of having to purchase two separate courses, and the time of having to complete the courses separately.

There are exceptions to the credit counseling and financial management course requirements. If you are disabled, and the nature of your disability prevents you from completing the course, the requirement may be waived with permission of the Bankruptcy Court. Similarly, if the debtor lacks the requisite mental capacity to understand the nature of the information provided in the course, the requirement may be waived. Finally, military debtors in active service in a designated combat zone are not required to complete the course.

A list of Massachusetts approved credit counseling and financial management agencies is provided here.

Can someone else pay my legal fees for my bankruptcy?

2012-02-09T10:00:00.000-05:00

If you are facing financial difficulties, one of the biggesthurdles is coming up with the retainer for your bankruptcy attorney torepresent you through the preparation and submission of your bankruptcycase. For a fortunate few potential clients, they will have family and friendsin a position to pay their attorney on their behalf. Before you acceptmoney from a family member for your bankruptcy, or enlist the help of friendsto pay for your attorney, it is important to know the potential pitfalls of doingso.

Under the means test guidelines required to file Chapter 7bankruptcy, or used to determine the plan commitment period for a Chapter 13bankruptcy, the court will consider all income received by the debtor in thesix months immediately before filing “from all sources”. This means thatif you received money from another source with the intention of filingbankruptcy, the funds you received will be considered income received by thedebtor during the applicable income inclusion period.

Depending on thelevel of your current income, and the amount of assistance you receive withyour legal fee, the additional contribution conceivably may raise yourannualized income as calculated for means test purposes above the allowablelimits, and disqualify you from filing a Chapter 7 bankruptcy, or require thatyou repay your creditors with a monthly payment for 5 years instead of only3.

Even if the assistance received was not enough to render youineligible for Chapter 7, it still must be disclosed to the bankruptcy Court,both on the means test form (Official Form B22A) and on the Disclosure ofCompensation of Attorney for Debtor. The Attorney Disclosure is adocument filed with the Court and reviewed by the trustee to look at the amountcharged by the Attorney to represent you in the case, some specifics about theterms of your representation, and the source of the funds. If theinformation provided for the means test does not match the information providedon the Attorney Disclosure, the trustee may seek to dismiss your case, or atthe very least, look at your case with an undue level of scrutiny.

The Interplay of the Automatic Stay, Child Support, and Alimony

2012-02-06T21:45:00.000-05:00

One of the most significant benefits of filing for bankruptcy is the Automatic Stay. In short, the Automatic Stay halts other existing court proceedings that the individual filing for bankruptcy is involved in, as well as any collection efforts for the individual's debts, until the bankruptcy proceedings are resolved.

In certain situations, the Automatic Stay might not prevent other court proceedings from continuing, at least in part. For example, in any family law case involving child support and custody, issues involving visitation or current child support are not subject to the Automatic Stay, but issues involving past due child support will be continued until the Automatic Stay is lifted at the end of bankruptcy proceedings. It is possible that a judge in this instance will actually not hear any issues at all until the Automatic Stay is lifted, but the circumstances might be such that the issues of visitation or current support need to be addressed in a more timely manner.

It is important to understand that although the Automatic Stay will halt court proceedings, any existing order for current child support or alimony will still accrue. In other words, an individual that is obligated to pay child support or alimony each week will not be relieved of this after a filing for bankruptcy, whether the person filing for bankruptcy is the individual who is supposed to pay the alimony or child support, or the individual who is to receive the alimony or child support. The Automatic Stay should, however, suspend efforts to collect any arrearage.

Additionally, for individuals that file for bankruptcy who are to receive alimony or child support payments and are owed an arrearage, any past due child support or alimony obligations and any current child support or alimony obligations are exempt from the bankruptcy proceedings, meaning that a bankruptcy trustee may not use this support to pay other creditors.

Should you have any questions about family law matters or bankruptcy, contact Attorney Jonathan R. Eaton by calling 508.655.5980 to schedule a one hour initial consultation.

Why Bring an Attorney to the 341 Meeting?

2012-02-02T10:00:00.000-05:00

Each petition under Chapter 7 and Chapter 13 of the United States Bankruptcy Code will have a meeting of creditors, commonly referred to as the "341 Meeting". If you are represented by an attorney at your 341 Meeting, your attorney will sit next to you when your case is called by the trustee. Usually, your attorney will not be required to speak much, as the trustee will ask you questions directly. Although the lion's share of the work that your attorney will put into your case will be prior to your 341 Meeting, there are certainly advantages of your attorney being with you.

Having your attorney there gives you certain advantages over going alone. First and foremost, you are benefiting from the attorney's experience and knowledge as to the intricacies of a complex field of law. Your attorney will know how to treat each of your assets and debts, and what the trustee is looking for, as well as how to fill out your schedules.

Second, an attorney will know how to explain areas where your case might be interpreted against your interests if not properly and carefully explained to the trustee.

Third, your attorney is another set of eyes that can refresh your memory if you forget anything on your schedules. The trustee has the ability to ask about anything that you have filed, and having another person familiar with your case sitting next to you can help if your memory fails you.

To speak with Attorney Matthew Trask about bankruptcy call 508.655.5980 or email us.

5 Common Misconceptions about Bankruptcy: #1 I Should be Ashamed

2011-12-27T10:00:00.000-05:00

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy. In these 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #1: I Should be Ashamed

"The Congress shall have power to…establish…uniform Laws on the subject of Bankruptcies throughout the United States"
-The Constitution of the United States, Article 1, Section 8, Clause 4

Bankruptcy is one of the oldest laws in the United States, and was included in the original 1787 draft of the U.S. Constitution. In fact, the originating language is older than the Bill of Rights. The Founding Fathers recognized that a system of laws was necessary to protect the “honest but unfortunate debtor”, and such laws were in the general interest of the country and its citizens.

Many people are proud to stand up for, and take advantage of, their constitutional protections – and they should be. From its original incarnation and its amendments over the years, such protections have become the cornerstone of our society, our government and our way of life.

So, should you be ashamed of filing for bankruptcy?

Well, are you are ashamed of your freedom of speech, or freedom from unwarranted searches and seizures, or freedom of self incrimination? Are you ashamed of your right to elect a president or legislative representatives? Why be ashamed of utilizing one constitutional protection, but not others?

Now, I am not suggesting that filing bankruptcy is somehow a patriotic thing to do. Actions have consequences, and the consequences to bankruptcy should certainly be considered whenever you are considering any debt resolution plan. Put another way, just because you can doesn’t always mean you should. But, if you ever find yourself in the position where you should be considering bankruptcy, know that you are in good company. Thomas Jefferson, Alexander Hamilton, and Benjamin Franklin, among others, would have supported your ability to do so.

If you’re not swayed by my flag-waiving, red, white and blue history lesson, ask yourself which is more shameful: Finding yourself and your family in a difficult financial situation and choosing to do nothing about it, or finding yourself in a difficult financial situation and using the law to improve your finances so that you can better provide for you and your family’s needs.

Kelsey & Trask, P.C.’s attorneys are here to help you find financial freedom no matter what mistakes you have made in the past. If you’ve made some questionable financial decisions in the past, admit your mistakes, correct your behaviors, and find a qualified attorney to help fix the problem.

After all, it’s your right to do so.

5 Common Misconceptions about Bankruptcy: #2 How do I get a Free House?

2011-12-22T10:00:00.000-05:00

Common Misconception #2: How do I get a Free House?

In our last post, we discussed the misconception that bankruptcy discharges all debts. There are some debts that you might still owe even after filing bankruptcy.

In addition, there are some debts which you can choose whether to still owe or not: Secured Debt. Secured Debt is debt that you have agreed to pledge some collateral for, and in the event you don't pay the debt then the creditor can take the collateral. Some common examples of secured debt are house mortgages or car loans.

In most cases secured debt can be discharged or kept, depending on whether you want to keep the collateral. However, you cannot keep the collateral and discharge the debt. There are no free houses and cars in bankruptcy. Although you may have exempt equity in a car or house, if you cannot pay the loan you do not get to keep the collateral.

5 Common Misconceptions about Bankruptcy: #3 Freedom from All Debts

2011-12-20T10:00:00.000-05:00

Common Misconception #3: Freedom from All Debts

Another common misconception about bankruptcy, is that once it is over you no long owe any money to anyone. In some cases this is true, but those cases are very rare.

Most people have some debts which are nondischargeable, which means they will still owe those debts, even after the bankruptcy is complete. You may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel or aircraft while intoxicated on alcohol or drugs.

Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

5 Common Misconceptions about Bankruptcy: #4 Filing is Free

2011-12-15T10:00:00.000-05:00

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy. In the next 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #4: Filing is Free

Many people believe that filing for bankruptcy means you have reached a point where you have no money left. If you have no money left, then filing for bankruptcy must be free, right?

Actually, most people who file for bankruptcy have some assets and some income. They simply don't have enough income or assets to keep up with their debt.

And filing for bankruptcy is not free, but it is a bargain. The filing fee for filing a Chapter 7 Bankruptcy is $306 and for a Chapter 13 Bankruptcy is $281. In addition, our attorney's fees range from $999 to $3,500 for a consumer bankruptcy, depending on how complicated the case is. For clients who are concerned about paying a few thousand dollars to file for bankruptcy, we usually point out that this amount is much much smaller than the amount of debt being discharged in exchange. If someone told you that they would settle your $50,000 credit debt for $2,000 you would probably take them up on it.

For a more specific calculation of what a bankruptcy would cost in your case, visit our Bankruptcy Cost page.

5 Common Misconceptions about Bankruptcy: #5 Picking & Choosing

2011-12-13T10:00:00.000-05:00

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy. In the next 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #5: Picking & Choosing

Many people believe that they get to pick which debts to "bankrupt." Some clients don't want to report a debt owed to a family member, because they don't want that person knowing about their bankruptcy. Other clients only want to "bankrupt" specific debts but not all of their debts. That is not how bankruptcy works.

Every debt you owe must be completely and accurately disclosed in the documents filed to commence your bankruptcy case. Bankruptcy is not a "pick and choose" proceeding. You cannot not put some debts in and leave other debts out. Intentionally omitting debts from your bankruptcy case may result in the non-dischargability of those debts, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

Visit the Office of the Future in the World of Tomorrow!

2011-12-11T14:19:00.001-05:00

Thanks to FirmFuture presenter Gabriel Cheong for inspiring us to make better use of our iPad in the office.

Now when you schedule an initial consultation we can use our iPad, displayed on the flat screen TV (pictured above), to show you:

how to calculate Child Support or Alimony online
how to create Parenting Plans online
how calculate the cost of Bankruptcy online
or evaluate the length of time a Bankruptcy will take online.

And if you want any of the information printed out so you can take it home, our new laser HP printer can print directly from the iPad right in our conference room, using WiFi magic.

These are just some of the ways that we are trying to design our new office, at 160 Speen St, Suite 202, Framingham, MA, to be as friendly, convenient and useful to current or potential clients. If you are interested in checking it out, give us a call at 508.655.5980 or set up an appointment online here.

Special Considerations When Surrendering Condominiums in Bankruptcy

2011-11-28T14:14:00.003-05:00

When you file for Chapter 7 Bankruptcy, and indicate on your bankruptcy schedules that you intend to surrender your real property and discharge the underlying mortgage debt, I often recommend to my clients that they stop paying the mortgage as soon as the decision to surrender is made. Upon discharge at the conclusion of the bankruptcy, the debtor’s ongoing contractual obligation to pay will be discharged by the Bankruptcy Court, meaning that the debtor no longer has to legally pay the mortgage. Of course, the bank now may move to foreclose on the property and re-take title to protect its secured interest in the now-discharged loan, but the lender will not incur any new legal liability to the bank. This applies even if months (or even years) pass between when the debtor filed his Chapter 7 case, and when the bank finally completes the foreclosure on the surrendered property.

You should pay special attention to situations where the property you are surrendering real property that is subject to an fee or assessment from a condominium association, homeowner’s association, or cooperative corporation. Under 11 U.S.C. § 523(a)(16), pre-petition fees and assessments are dischargeable in a debtor’s bankruptcy but all post-petition condo fees, association dues, or co-op charges are not dischargeable, “for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in [the property]. This means that you are legally obligated to pay these fees (but not the mortgage) for as long as you own the property – up to and until the lender formally takes title to the property in foreclosure. Given that some lenders can take months (or even years) to foreclose on a property surrendered in a Chapter 7, 11 U.S.C. § 523(a)(16) places a significant financial burden on owners of condos, homeowner’s association members, and co-op tenants. The Automatic Stay will provide some relief to the debtor during the pendency of the bankruptcy, and the association cannot take any action to collect the fees while your case is before the court. However, the monthly charges will continue to accrue. If you do not pay the fees, the association may commence legal proceedings or make other appropriate efforts to collect the debt.

If you own property that is subject to such a fee or assessment, be sure your bankruptcy attorney is aware of these obligations. While there is no way to discharge the post-petition fees or assessments, it is possible to minimize the impact of 11 U.S.C. § 523(a)(16). Options include:

1. If possible, wait to file your bankruptcy case until after the foreclosure auction has taken place, thereby ensuring all fees are pre-petition debt.

2. If you are no longer residing in the property, consider renting out the property, and use the rental income to pay the association dues.

3. Don’t pay. However, if the debtor lives in a jurisdiction where foreclosure is taking years, the debtor risks exposure to a lawsuit for personal liability. Nevertheless, once the foreclosure is complete, the foreclosing lender must cure the deficient fees and assessments in order to pass clear title to the new buyer. This option involves a great deal of uncertainty, and risk to the debtor, but may be the only option in some circumstances.

4. Consider a short sale. Since your mortgage deficiency will be discharged (or was already discharged), a short sale can significantly shorten the amount of time the property is in your name, and can expedite the transfer of title.

New Median Income Figures Released for all Bankruptcy Cases Filed after November 1, 2011

2011-11-07T13:10:00.002-05:00

The United States Trustee Program has released new Census Bureau data which is used for means testing calculations regarding Chapter 7 bankruptcy petitions, and for calculating the plan commitment period for Chapter 13 cases. Due to the updated figures, the various standards for the expenses in the "means test" form will change for all bankruptcy cases filed on or after November 1, 2011.

The new figures reflect a decrease in the median income, and will make it more difficult for individuals to file for Chapter 7 bankruptcy. Additionally, the decrease in the median income, coupled with amendments to the National and Local standards may require a longer commitment period for Chapter 13 cases.

In Massachusetts, the new Median Family Income figures are as follows:

Family Size of 1: $53,496
Family Size of 2: $64,174
Family Size of 3: $80,337
Family Size of 4: $99,067

In addition, add $7,500 for each individual in excess of 4.

For a list of the updated median family income figures for other states, as well the updated National Standards and Local Standards is provided here.

If your household income exceeds the median income for your state of residence, other factors are considered for means testing criteria. In addition to updated median income figures, the Department of Justice and Internal Revenue Service have also updated National Standards for Food Clothing & Other Items; National Standards for Out-of-Pocket Health Care Expenses; and Local Standards for Housing, Utilities and Transportation.

While the changes in the Median Income, National Standards and Local Standards have effectively "raised the bar" for new Chapter 7 cases, the changes are not so significant to place bankruptcy out of reach for most individuals and families requiring assistance. If you would like to know more about your options for finding financial freedom, contact Attorney Matthew P. Trask for a free initial debt-relief consultation, or call 508.655.5980.

5 Contributors to Your Credit Score [Infographic]

2011-11-01T10:00:00.000-04:00

Though credit scores play an integral role in our lives, few of us actually know which factors make up the numbers assigned to us and how they are weighted. The following credit score infographic sheds some light on this subject.

Courtesy of: Credit Card Education

Reprinted from: CreditCardEducation.com.

Kelsey & Trask, P.C. provides this graphic for informational purposes only. We do not endorse nor claim endorsement from the source site or organization. Kelsey & Trask, P.C. is not responsible for any information contained therein, unless indicated specifically on that site.

FAQ #30: I Received My Discharge, but Creditors are Still Calling Me. What Should I Do?

2011-10-26T10:00:00.001-04:00

Although you no longer owe any scheduled (and dischargeable) debts following your bankruptcy, it is important that you do not simply ignore a creditor’s efforts to collect a debt after discharge.

Call your attorney right away, and be sure to provide copies of any letters, bills or notices you received, or the name, business name and telephone number of the creditor or collection agency that has contacted you. Any creditor that received notice of your bankruptcy and was included on the creditor matrix cannot continue to collect any debt that was discharged. Any entity that does so is in contempt of an Order of the U.S. Bankruptcy Court.

Any efforts to attempt to collect a discharged debt are unlawful, and if the creditor’s actions are deemed to be a willful violation of the Court’s Order, the creditor can be forced to pay the debtor’s actual damages, and, in certain cases, punitive damages. As a practical matter, most cases of a creditor attempting to collect on a discharged debt can be resolved with a simple letter to the creditor, as well as a copy of the Discharge and Creditor Matrix. Additional bankruptcy litigation (and the costs associated with having to go to Court is usually not necessary.

FAQ #29: What happens if I forget to add a creditor to my bankruptcy?

2011-10-24T10:00:00.001-04:00

As we discussed in response to a previous question (Do I have to include all my bills when I file bankruptcy?), every debt you owe must be completely and accurately disclosed in the documents filed to commence your bankruptcy case. Bankruptcy is not a "pick and choose" proceeding. You cannot not put some debts in and leave other debts out. Intentionally omitting debts from your bankruptcy case may result in the non-dischargability of those debts, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

The bankruptcy court requires that you undertake an appropriate level of “due diligence” to determine your debts and your potential creditors. This means that you need to make a concerted effort to review supporting documentation, such as a credit report, account statements, collection notices, and other information pertaining to the existence of a debt or potential claim. When you sign your bankruptcy petition, and testify at the §341(a) Meeting of Creditors, you are indicating to the Court that your petition is “true, accurate and complete”. Bankruptcy will only discharge “scheduled” debts – meaning the creditor must receive notice of the bankruptcy – and any debt not listed in your creditor matrix may not be discharged.

So, then, what happens if you unintentionally omit a creditor?

In most cases, if the mistake was unintentional (i.e., you forgot about the debt, or did not know about the claim), and you have not yet received your discharge, it is possible to file an amended schedule of your debts to include the missing items. This involves preparing a new list of debts, and preparing a Motion for Leave to Amend Schedules, which is a formal request to the Court for permission to add the new creditors. The Court will almost always allow the motion, but there is a $26.00 filing fee for the Motion to Amend. Additionally, the Court will usually give your added creditors sufficient time to object to claimed exemptions or the dischargability of the new debt. The added time will delay your discharge. Still, it’s better to wait a little extra than to owe the debt following the bankruptcy.

If you have received your discharge and your case has been closed, the process is more complex. You must first request that the Court re-open your bankruptcy case. Cases can be re-opened for any number of reasons, including “to administer assets, to accord relief to the debtor, or for other cause” (See 11 U.S.C. § 530(b)). Courts have nearly universally held that re-opening a case to include an unintentionally-omitted creditor will “accord relief to the debtor”, and will allow the request. The Court will charge a filing fee of $260.00 to re-open a closed bankruptcy case, so be sure to conduct your “due diligence” and get things right the first time.

FAQ #28: Can I file Chapter 7 Bankruptcy Even if I Have Filed Before? How many times can I file bankruptcy?

2011-10-17T10:00:00.000-04:00

Whether or not you may re-file (and the amount of time that must pass before you may re-file bankruptcy) depends on whether or not you received a discharge under your most recent bankruptcy filing.

If you received a discharge under a Chapter 13 bankruptcy case, then you cannot file for relief under Chapter 7 unless:

1. Six (6) years have passed since the discharge in the Chapter 13 case; or
2. You paid at least 70 percent of your allowed unsecured claims in the Chapter 13 case, and your plan was proposed in good faith and represented your best effort to pay.

If you received a discharge under a Chapter 7 bankruptcy case, then you cannot file for relief under Chapter 7 unless eight (8) years have passed since the discharge in the previous Chapter 7 filing.

If you filed a Chapter 7 or Chapter 13 case that was dismissed because you failed to obey court orders or you voluntarily requested a dismissal and did not obtain a discharge, then you cannot file for relief under Chapter 7 unless 180 days have passed since the dismissal of the previous filing.

Assuming that you meet the above time restrictions for re-filing, there is no limit to the amount of times you can file bankruptcy.

FAQ #27: What happens to my tax refund when I file bankruptcy?

2011-10-13T10:00:00.001-04:00

Your tax refund is what the bankruptcy court would consider an “unliquidated asset”, and is treated by the bankruptcy court like other personal property. Any unissued tax refunds would need to be listed on your bankruptcy schedules as assets, and properly exempted if you want to prevent that property from being seized by the Trustee and applied to pay your creditors. If the tax refund is fully exempt or is abandoned by the trustee, you will not be required to turn it over to the bankruptcy Trustee.

FAQ #26: If I am not married, but living with my partner and he pays most of the bills, will that affect filing?

2011-10-11T10:00:00.001-04:00

Having other people in your household will not implicate your cohabitant(s), inasmuch as the bankruptcy will not affect their credit or discharge any of their debts. However, the means test (for Chapter 7 eligibility or Chapter 13 plan commitment purposes) looks at the debtor’s “total household income” when considering the income available to the debtor. Therefore, it may be necessary to disclose to the court your cohabitant’s income. Some trustees will accept the argument that, in cases where the cohabitants maintain sufficiently separate finances, the debtor’s total income is not available to the debtor. However, the debtor would need to disclose, as income, the portion of income made available for the debtor’s benefit, including any amount the cohabitant pays toward the debtor’s monthly expenses.

FAQ #25: After bankruptcy, what steps need to be taken to rebuild my credit?

2011-10-07T17:30:00.001-04:00

First and most importantly, time heals all wounds. Only time can fully repair the damage from a bankruptcy (and being significantly behind on a lot of credit card debt beforehand).

The best thing you can affirmatively do right now is to start developing a history of on-time payments to creditors that report to your credit bureaus. Pay your bills early, or at worst, pay them on time.

Because of the way the bankruptcy system works and the way creditors report reaffirmed debts, you will not get credit for on-time mortgage payments or car payments. Therefore, it is necessary to establish a new account that you can make solid, on-time payments on. We recommend applying for a secured credit card or gas card. Before you apply, take the time to confirm that the card management company reports to all three credit bureaus every month. If they don’t report every month, or if they do not report to all three, go elsewhere. Use the card, but pay it off early or on time, every month. Carrying a small balance (less than $100 is OK), but never utilize more than 50% of the available credit.

If you have a mortgage, then as soon as feasibly possible, refinance your mortgage. Paying off the current loan and keeping a new loan current will, once again, give you credit for on-time mortgage payments.

In addition, as soon as you feasibly can, refinance your car loan, or sell your car and purchase a new car. Again, the key is to obtain a new loan that will report to the credit bureaus. Post-bankruptcy, many current secured lenders will not report payments to the credit bureaus. Of course, be sure to keep that loan current.

Obtain copies of your credit reports approximately 90 days after receiving your discharge. Ensure every debt is reported as “Discharged in Bankruptcy” or something similar. If they are not, send a letter to the creditor and the credit bureau requesting that information be reflected accurately. Remember, your credit report is a list of your “debts”, and right now, you have no debts aside from your house and car (and any non-dischargeable debts). Make sure your credit reports accurately show that, although you had debts discharged in bankruptcy you should not currently owe any money to dischargeable creditors.

Besides paying the above-described loans on time there are also a number of things you should avoid doing:

1. Avoid opening credit accounts with co-signers, if possible. Having a co-signer on an account indicates you are a greater credit risk.

2. Avoid financing with finance companies or sub-prime lenders, if possible. Doing business with these companies can actually lower your credit score.

3. Avoid future financial risk. Bulk up your savings account. Develop a budget, and stick to it. That way, when emergencies or unexpected expenses come up, you can pay in cash, rather than increasing your debt.

4. Some industry experts recommend that you obtain a small personal loan, and use the funds to open a CD account. Pay the loan on time, and when the loan is paid off, you will have some funds in savings, which you can take out once the CD matures. Of course, this only works if you can fit these payments into your budget. Setting up a workable budget should be your first priority.

FAQ #24: If my partner is listed as an authorized user on my credit cards, will his credit be hurt?

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This is an interesting question, and the answer often depends on how the information is reflected on a credit report. An “authorized user” is someone who is merely authorized to make purchases on an account, but bears no legal responsibility to repay the debt. Some credit bureaus (TransUnion in particular) often do not report credit accounts to the individual who is an authorized user only; but others sometimes do (such as Experian).

Additionally, not all credit card companies report authorized users to the credit bureaus. If you are an authorized user on a credit account, and that account is discharged, there may be a notation in your credit profile that indicates your prior access to an account, and the fact of that accounts discharge in bankruptcy. While an intelligent loan officer should understand the distinction when making a credit decision, it is important to obtain a copy of your credit report if the primary cardholder files bankruptcy in order to understand how that debt is reporting, and contact the credit bureau in writing to correct any errors.

FAQ #23: Why would I choose bankruptcy over debt consolidation or settlement?

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Debt consolidation involves getting one loan to pay off multiple smaller loans. The advantages are that the debts are paid off in full, often at little to no damage to credit, and the new loan may have more favorable terms over the old loan, such as a reduced monthly payment, a larger monthly payment (that will insure the loan is paid off quickly) or a lower interest rate.

Consolidating loans takes the logistical hassle in making sure that multiple loans are paid on time and ensures that the debtor only has to make one payment, and gives the debtor the ability to “shop around” for the best deal. However, since debt consolidation requires a new loan, someone with excessive or past-due debt may not be able to obtain a consolidation loan. Additionally, depending on the debtor’s situation, debt consolidation may not provide enough relief, especially if the borrow cannot afford the payments on the new loan.

Debt settlement is the process of attempting to pay your existing debts for less than you owe. No creditor is required to settle a debt, but for financial and practical purposes many companies will compromise the amount owed. If your creditors agree to accept less than you owe, you must usually make a lump-sum payment, which may be difficult. Also, paying a debt for less than you owe has tax consequences – the “forgiven” portion of the debt is considered to be income by the IRS, and, with certain exceptions, you will be required to pay taxes on that income.

Bankruptcy, on the other hand, ultimately involves the discharge of the obligations, meaning that you are not required to pay them back. Bankruptcy also provides other legal protections that may be beneficial to someone needing financial assistance. For example, the automatic stay in bankruptcy is a useful tool in temporarily stopping foreclosure proceedings brought by your mortgage holder(s), as well as halting collection efforts, collection calls and lawsuits filed by your creditors. Click here for more information on chapter 7 and chapter 13 bankruptcy.

FAQ #22: If I get married after filing for bankruptcy will it affect my spouse?

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If you get married after filing bankruptcy, the “taint” of bankruptcy on your credit report will not affect your spouse’s credit. However, a bankruptcy on one spouse’s credit may make it difficult to obtain joint credit accounts, which are often necessary for large purchases, such as cars or home mortgages. This is because the lender will consider the total credit risk of all parties to the note, not just the one with the good credit. While you still may qualify for a loan, a poor credit rating may exclude you from certain FHA loans, and you may be required to pay a higher interest rate over the course of the loan.

FAQ #21: Is there any way to have a bankruptcy removed from my credit report?

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The fact that you filed for bankruptcy will appear as a “public records” entry on your credit report for up to 10 years, and individual debts that were discharged in bankruptcy will remain on your credit report for 7 years after discharge. Remember that in a Chapter 7 case, your discharge is granted approximately 5 months after filing; in a Chapter 13 case, your discharge is granted between 3 and 5 years after filing, depending on your plan terms. Despite the negative effect bankruptcy can have on your credit, it is not necessarily a good idea to attempt to make no mention of your prior bankruptcy. In some cases, the fact that a debt is reflected on your credit report as being discharged in bankruptcy is evidence to a prospective lender that you no longer owe that debt, and are more able to repay a future loan. Additionally, some prospective employers would consider a bankruptcy filing evidence of a proactive attitude toward resolving a poor financial situation, as opposed to having a credit report populated with debts that have been “written off” (but still legally owed), as opposed to debts “discharged in bankruptcy.”

FAQ #20: What assets can I keep (house, car, property)?

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When filing bankruptcy as a resident of Massachusetts a debtor can choose to use the exemptions allowed under either State or Federal law, but you must choose one or the other. There are many exemptions that are similar under both schemes, such as the exemption of most qualified retirement plans. Click here to view a table of the maximum exemptions as of April 14, 2011 in categories where the state and federal exemptions differ significantly. On April 7, 2011 a new Massachusetts law went into effect significantly increasing the personal property of Massachusetts residents that is protected from seizure by creditors. Please note that these figures are subject to change and you should consult with an attorney to obtain the most current figures and to decide which option you should choose.

In addition certain types of income may also be exempt from the bankruptcy estate. You should consult with an attorney to obtain further information.