Rochester Bankruptcy and Debt Relief » Bankruptcy Planning

Paying For a Bankruptcy

alexkorotkin — Sat, 14 Aug 2010 02:42:58 +0000

If you are thinking about filing bankruptcy, you are likely having serious financial problems. Eventually, you decide that you decide to have a consultation with a consumer bankruptcy attorney. During your consultation, you and the bankruptcy lawyer discuss the positives and negatives of filing bankruptcy and decide that you will be filing either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Then you ask the final question, how much will it cost me to file my bankruptcy case?

The attorney will tell you about his attorney’s fee and disbursements for filing fee, credit counselling and debtor education. Then you are likely to ask the following question: where can I get the money and when do I have to pay it?

Initially, lets talk about where that money can come from.

If you are filing a bankruptcy under either Chapter of the Bankruptcy Code, you are generally advised to stop making any payments on unsecured debt, such as credit cards, bank loans, past due medical bills, etc. Debtors are often advised to continue making payments for any asset that they are keeping, such as a car, house, pension loans, rent, etc. As a result, this is likely to improve their cash flow by freeing up the money that was being paid to the unsecured creditors.

If you are not working, or already stopped all payments to creditors, you may need to ask relatives or friends for partial or full payment of the fees and disbursements required in a bankruptcy. While those loans would generally be dischargeable, they can be repaid after the bankruptcy.

Most bankruptcy lawyers offer payment plans. On average, a bankruptcy takes several weeks to prepare and the payments can be spread over that period. Alternatively, you can request additional time prior to the filing while the bankruptcy petition is being prepared.

Paying for bankruptcy is also different depending on whether you are filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.

In Chapter 7 Bankruptcy, I cannot collect any money from the client against fees or disbursements after the filing of the bankruptcy. It is prohibited by the Bankruptcy Code. Therefore, all fees and disbursments must be paid prior to the filing of the petition.

In a Chapter 13 Bankruptcy, which results in a repayment plan, with payments of part or all of the debts paid through the bankruptcy court, a portion of the fee can be put into the Chapter 13 plan payment, making it easier on the client and expediting the filing of the bankruptcy petition.

If you are contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Upcoming Changes to New York’s Bankruptcy Exemptions

alexkorotkin — Sat, 31 Jul 2010 21:49:32 +0000

As readers of this blog know, if a debtor is filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in New York, New York’s bankruptcy exemptions will apply. Unfortunately, those exemptions have not been updated in quite some time and are very limited as far as the values of protected assets is concerned.

There is a bill pending in New York State’s legislature that would substantially change the value of assets that could be protected in bankruptcy by changing the figures included in the Debtor and Creditor Law and CPLR which are the basis of those exemptions.

Specifically, this bill would increase the level of certain exemptions from the satisfaction of a money judgment. In addition to the increases, it would add one computer, one cell phone and one motor vehicle worth up to $4,000 to the list. If such vehicle was equipped for use by a disabled person, the limit would be $10,000. The money judgment exemption for the motor vehicle would not apply if the debt enforced is for child support, spousal support, maintenance or alimony.

It would increase the homestead exemption value of a home under Section 5206 of the CPLR from $50,000 to: $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state.

It would also amend Subdivision I of Section 282 of the Debtor and Creditor Law to increase from $2,400 to $4,000 the exemption for one motor vehicle in bankruptcy. If such vehicle was equipped for use by a disabled person, the limit would be $10,000 in bankruptcy. The bill would amend section 283 of the debtor and creditor law to increase the amount of the aggregate individual bankruptcy exemption from $5,000 to $10,000.

The bill would add a new section 285 to the Debtor and Creditor Law to permit debtors to choose either the current federal exemptions or the exemptions in New York Law. The New York State exemptions are listed in Debtor Creditor Law Art 10-A, Sections 282 and 283. Federal exemptions are enumerated in 11 U.S.C. 522(d). It will apply a Cost of Living Adjustment to be published by the New York Banking Department for the applicable exemptions in sections 5205 and 5206 of the CPLR and Section 282 and 283 of the Debtor and Creditor Law.

If those proposed amendments pass into law, the debtors living in Rochester, and Western New York, would be able to protect an additional $25,000 in home equity per filer and also benefit from an increase in the value of vehicle exemption.

More significantly, the debtors will be able to chose between the New York exemptions or the Federal exemption limits. At this time, New York does not allow debtors to make this choice. The ability to utilize federal exemptions will help those debtors who do not own a home more than anything else, because there is a wildcard exemption under Federal Rules. The wildcard exemption, 11 U.S.C. 522(d)(5), typically allows the debtor to exempt a substantial amount of cash, which is presently limited under New York’s exemptions to $2,500.

Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Immigration Status

alexkorotkin — Sun, 25 Jul 2010 17:17:19 +0000

Can my bankruptcy filing affect my immigration status? This is a question periodically asked by my clients. The answer to that question is actually depends on the particular circumstances of each case, but here are some of the issues that may be relevant.

There is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for naturalization. Additionally, there is no specific question on Form N-400, Application for Naturalization, related to bankruptcy. However, the debtor’s immigration status can be affected if he has not filed required tax returns or if he owes money to the IRS.

While reviewing immigration-related applications, the INS is usually checking to see if an individual seeking naturalization has evidence of “poor moral character” which could be grounds to deny an application. The filing of a bankruptcy petition as a consequence of financial hardship clearly does not rise to the level of “poor moral character.”

However, if you are facing any type of immigration issue and are about to file for either Chapter 7 or Chapter 13 Bankruptcy, you should disclose that fact to your bankruptcy lawyer at your initial consultation as well as discuss your potential bankruptcy filing with your immigration attorney.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Do Both Spouses Have to File for Bankruptcy Together?

alexkorotkin — Sat, 17 Jul 2010 23:21:11 +0000

While most married people think that if they file for Chapter 7 bankruptcy or Chapter 13 Bankruptcy, they must do so with their spouse. That is not true.

Whether one spouse or both file a bankruptcy petition, it’s their choice. It is not uncommon for one spouse to have most of the debt in his or her name only, in which case an individual filing would more appropriate. However, if both spouses are have a significant amount of debt, they should file together.

Sometimes I meet with only one spouse because the other spouse is is not willing to file for bankruptcy. In these situations, one spouse to file the bankruptcy petition and obtain necessary relief from the bankruptcy court.

There are also some additional issues that need to be considered. Initially, if only one spouse is filing and the couple is residing together, the other spouse’s income may be relevant for the purpose of household income as reflected on Schedule I, resulting disposable income reflected on Schedule J, and that spouse’s income may also be relevant for the means test.

As far as the means test, it is necessary to determine whether there is a presumption that there is enough disposable income available to give unsecured creditors sufficient payment under a Chapter 13 bankruptcy plan, such that permitting a Chapter 7 could be considered an abuse of discretion. But even if the means test is passed, and no presumption of abuse arises, or, alternatively, if this is a non-consumer bankruptcy and the means test is not even required, abuse can still be found given the totality of the circumstances. The income and assets of the non-filing spouse are important in both those considerations. If the debtor has legal rights to share in the income and assets of a non-filing spouse or even if the practice has been between spouses to share income and assets regardless of legal rights, the bankruptcy law tells us that the debtor’s access to the non-filing spouse’s income and assets has to be considered in deciding whether the bankruptcy court would permitting a Chapter 7 bankruptcy filing.

An experienced bankruptcy attorney can analyze each consumer’s financial situation and suggest whether a married couple should file an individual or a joint petition.

Can You Be Fired For Filing Bankruptcy?

alexkorotkin — Sun, 04 Jul 2010 02:41:10 +0000

Many people who file for bankruptcy in New York have fears about their relatives, friends, neighbors and employers discovering that they have filed for bankruptcy. They try to hide this fact from everyone. Many people who would greatly benefit from filing for bankruptcy under either Chapter 7 or Chapter 13 are reluctant to do so is because the perception among some people is that it is shameful to file for bankruptcy. I spend a considerable amount of time explaining to my clients that there is nothing shameful about filing for bankruptcy.

A lot of people are scared that their employers would find out that they filed for bankruptcy. They are afraid that their employers might fire them from their jobs if employers find out about their bankruptcy filing. They try as much as possible to hide their filing for bankruptcy because of this sense of insecurity.

The debtors should not be concerned since federal law prohibits employers from discriminating against them or from terminating their employment solely because of the debtor’s bankruptcy filing. Specifically, the bankruptcy code’s non-discrimination provision, 11 U.S.C. section 525(b), states as follows:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title … solely because such debtor … is or has been a debtor under this title…. 11 U.S.C. sec. 525(b).

One caveat to the above provision is that the Bankruptcy Code prohibits discrimination solely on the basis of the bankruptcy filing. It will not protect an employee who is having other employment-related problems.

The reality now is that a great number of people in Rochester, New York, or elsewhere in Western New York, have filed or are filing for bankruptcy. For a business having employees who file for bankruptcy is simply a fact of life. In many respects, it is better for the employer to have an employee file for bankruptcy, so that the employee is not spending time answering phone calls from the debt collectors, or that employer does not have to waste time garnishing employer’s wages. In today’s economy, bankruptcy is a reality that everyone is facing, and so companies would rather not do anything that would appear to be a form of discrimination against their employees.

Should You Hire a Bankruptcy Lawyer?

alexkorotkin — Tue, 29 Jun 2010 02:31:41 +0000

Some of the major reasons why people who know they need to file for bankruptcy, but postpone doing so, is fears about filing either Chapter 7 or Chapter 13 Bankruptcy, and concern about paying the legal fees.

Some debtors consider filing bankruptcy on their own. However, this can be a major mistake and can create additional problems. As I have written about previously, bankruptcy involves a number of procedural and substantive steps and tests that have to be satisfied before the bankruptcy court can grant a discharge.

In both Chapter 7 and Chapter 13 bankruptcy cases, the debtor must appear before a court-appointed trustee for a 341 hearing. The bankruptcy trustee who conducts the hearing is not someone who is there to help the debtor. His role is just the opposite. The trustee is charged with investigating the debtor and his financial circumstances to determine if there are any assets available for thee benefit of creditors. Meeting with an experienced bankruptcy attorney will enable the debtor to have his or her financial situation reviewed and assets protected in advance to the extent possible.

What debtors may not realize is that certain types of financial transactions that may have taken place years before filing can have a major impact on the debtor’s bankruptcy. For example, if any significant assets were given away or if real estate was transferred, this may amount to what is known as a fraudulent conveyance or a preference, and may result in significant litigation in the bankruptcy case. Usually, a bankruptcy lawyer will review these issues before a bankruptcy petition is filed in order to mitigate the risk.

While the bankruptcy petition is written in plain English, it is a difficult document to prepare for someone who is not familiar with the Bankruptcy Code. A complete petition in a Chapter 7 Bankruptcy in New York, including all of the various forms and schedules runs in excess of 40 pages. The petition requires preparing numerous schedules and budgets. The debtor must list appropriate information about his debts, assets, income and expenses.

The Statement of Financial Affairs includes numerous questions that must be answered. All of the debtor’s creditors must be listed not only in a schedule of debts (segregated in three separate categories) but also in a special format called a Matrix. Such listing must include creditors’ names, addresses, account numbers, dates when any debts were incurred and their purpose.

When Congress passed BAPCPA in 2005, it imposed many new requirements. The most significant of those requirements is a complex and complicated means test, as well as the requirement for mandatory credit counseling. The Chapter 7 trustee as well as the Office of the U.S. Trustee reviews each and every petition to make sure all of the requirements under the new law are properly met. The means test is complicated, and the debtor’s failure to properly prepare the bankruptcy means test can create significant problems as the United States Trustee can seek to have the bankruptcy case dismissed.

The debtor must also choose which Chapter of bankruptcy to file. If a debtor is seeking to stop foreclosure and cure mortgage arrears, a Chapter 7 Bankruptcy filing won’t be helpful. At the same time, a Chapter 13 Bankruptcy filing is likely to result in a 3-5 years payment plan.

There are self-help books that explain how a debtor can prepare and file his petition and complete the process. However, there are many traps for the unwary that even attorneys who do not regularly practice bankruptcy often create problems for their clients.

Every bankruptcy trustee I know in Rochester, New York, has expressed concern about those debtors who file bankruptcy without an attorney because these debtors often make serious procedural and substantive mistakes. Self-representation by pro-se debtors in bankruptcy matters can end up being a mistake, and result in further financial problems for the debtor.

Bankruptcy and Personal Injury Lawsuits

alexkorotkin — Sun, 18 Apr 2010 00:21:37 +0000

Periodically I meet with debtors who either have a personal injury law suit pending, or may have a potential personal injury case. Personal injury lawsuit issues can complicate a bankruptcy since there are limitations on the debtor’s ability to receive a personal injury award, as well as different procedural hurdles imposed by the bankruptcy code.

Initially, personal injury lawsuits and causes of action are assets of Chapter 7 Bankruptcy estate. Under New York’s bankruptcy exemptions, the debtor can exempt the first $7,500 in net proceeds, but anything over and above that belongs to the bankruptcy estate and would be administered by the bankruptcy trustee. Since personal injury lawsuit or causes of action are assets, it is critical that the bankruptcy lawyer includes the debtor’s personal injury lawsuit or cause of action in the bankruptcy petition. If the debtor fails to include a potential cause of action in the bankruptcy petition, that may cause a dismissal of the personal injury action. According to New York cases, if a plaintiff in a personal injury lawsuit filed a Chapter 7 Bankruptcy petition but failed to list a potential cause of action for personal injuries, then the plaintiff lacks standing to bring the personal injury action.

If the personal injury case or cause of action is included in the petition, the bankruptcy trustee will decide whether the case is valuable enough to administer. The bankruptcy lawyer is expected to provide the trustee with copies of the pleadings. Most trustees will consider the right to sue for a relatively small injury as being of “inconsequential value to the bankruptcy estate” and may decide to abandon the trustee’s interest in the cause of action. Generally, if a personal injury case will not result in any significant non-exempt recovery, then the trustee will not care about administering it. If the trustee determines that the case has value in excess of the exemption, he may want to administer the personal injury claim as an asset of the bankruptcy estate.

The Bankruptcy Code requires that all attorneys who render services to a debtor must be approved by the court. A trustee may employ as special counsel under a contingency fee arrangement, any attorney who has represented the debtor in pre-petition litigation, when it is in the best interests of the bankruptcy estate and the attorney has no interest adverse to that of the debtor or the estate. Theoretically, the trustee can hire any attorney of the trustee’s choosing to represent the debtor in the personal injury lawsuit, and can even take the case away from the existing personal injury attorney.

The automatic bankruptcy stay imposed by Section 362 of the Bankruptcy Code does not stay any actions brought by the debtor. The automatic stay only acts to stay actions brought against the debtor including cross-claims, counter-claims and third-party claims.

The greatest unknown in a personal injury case filed by the bankruptcy debtor, is what interest the bankruptcy trustee will take in the case. Debtor’s bankruptcy attorney would do well to contact the trustee at the earliest opportunity to get an idea of the trustee’s intentions with respect to the personal injury lawsuit.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Bankruptcy and Cash in Excess of New York’s Exemption

alexkorotkin — Sun, 11 Apr 2010 01:04:30 +0000

Sometimes clients come to me with while having cash or liquid bank accounts in excess of New York’s $2,500 cash exemption. As a bankruptcy lawyer, it is my job to help the client retain as much value as possible for the fresh start after the bankruptcy. So what can be done without running afoul of the Bankruptcy Code?

Initially, there is a difference between the way this situation is treated in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. In Chapter 7 Bankruptcy, any cash in excess of the New York’s $2,500 cash exemption is the property of the bankruptcy estate and is no longer the debtor’s property to use. In Chapter 13 bankruptcy, any such funds are still property of the debtor, provided that the debtor’s Chapter 13 plan pays to the creditors a sum equal to the unexempt portion of the cash or other unexempt assets over the plan’s duration. This is also known as the good faith test.

If the debtor will be filing Chapter 7 Bankruptcy, the debtor can spend the money prior to the filing in such way that it would be accepted by the bankruptcy trustee. Some of the things that can be done include the following:

Stock up on groceries
Fix the car
Make a mortgage payment ahead of time
Pay car or homeowner’s insurance
Repay retirement loans
Pay for medical or dental care
Pay delinquent child support or spousal support
Pay for child care
Pay overdue taxes

Having too much cash in a bank account can be a problem for a debtor. Discussing these issues in advance with a bankruptcy lawyer and engaging in bankruptcy planning can preserve the debtor’s cash and help with the future after the bankruptcy. Avoiding problems is the joint responsibility of the debtor and the debtor’s bankruptcy attorney. Timing is critical to minimizing your financial exposure. An experienced bankruptcy attorney can help you maximize the benefits of the bankruptcy laws and navigate around any problem areas.

Bankruptcy, Cancellation of Debt and Tax Issues

alexkorotkin — Sat, 03 Apr 2010 19:51:32 +0000

I am often asked if the debt discharged in bankruptcy is treated as debtor’s income and is subject to taxes. The answer to that question under the Bankruptcy Code, for both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy is unequivocally no. Debt discharged in bankruptcy does not result in taxable income to the debtor.

While I have written previously about the problems with debt settlement, this is one more advantage that bankruptcy has over various debt settlement arrangements. If the debtor has his debt reduced or cancelled, the creditor may issue an IRS Form 1009-C form and the debtor would have to report it on his taxes. As a result, the amount of cancelled debt will be added to the debtor’s income as miscellaneous income, and while not subject to self-employment or social security tax, it will be subject to income taxes. If the amount of the cancelled debt is significant, the debtor may face an unexpected tax liability amounting to thousands of dollars.

One exception to the above is cancellation of mortgage debt. The Mortgage Debt Relief Act of 2007 generally allows debtors to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief as well.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. For a detailed discussion of IRS’ position on these issue, please follow this link.

Occasionally, even the debtor who filed fro bankruptcy may receive 1099-C from one of his creditors. Nonetheless, if the debtor received a discharge as a result of either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, the debtor is able to file IRS Form 982, which will inform the IRS that the debtor went through the bankruptcy and any discharged debt should not be included in his gross income. If you are considering your options between a bankruptcy or debt settlement, one of the issues that you should discuss during a consultation with a bankruptcy lawyer is what impact either approach would have on your tax liability.

Emergency Bankruptcy Filing – It Can Be Done

alexkorotkin — Wed, 31 Mar 2010 03:26:01 +0000

Late at night, most people are sleeping. However, sometimes circumstances arise when someone needs to file either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy before the stroke of midnight, in the middle of the night, or early in the morning. Therefore, occasionally I file bankruptcy petitions late at night.

Sometimes, there are clients who come to me at the very last minute, when there may just be hours to spare before a scheduled foreclosure sale. In such cases, the bankruptcy petition needs to be filed as soon as possible because the minute the petition is filed, the “automatic bankruptcy stay” goes into effect, effectively preventing the sale from going forward. Lawyer’s ability to file an emergency bankruptcy cases is an important part of effective bankruptcy representation.

The reason I am able file bankruptcy petitions in the middle of the night is because all of the bankruptcy filings are done by electronic case filing (otherwise known as “E.C.F.”). By using E.C.F., the petitions and other bankruptcy documents are filed over the internet electronically, directly into the bankruptcy court’s computers. As a result, I can file a bankruptcy petition at any time.

The local rules do not require that the debtor file all of the supporting schedules at the time the case is initially filed. The case can be commenced by filing just the two-page bankruptcy petition together with a list of creditors and their addresses either in the form of the matrix or by filing the schedules of creditors. The debtor must also pay the filing fee.

The local rules permit the debtor to file the remaining schedules and forms within the next few days. If the remaining schedules and supporting documents are not filed during the applicable time periods, the Bankruptcy Court has the right to automatically dismiss the case. One requirement of a normal bankruptcy filing that cannot be waived in an emergency filing is the consumer credit counseling course. However, with consumer credit counseling courses available over telephone and internet, an emergency course provider can be found and a course can be completed at almost any time of day and night.

I prefer not to file emergency petitions, but sometimes it is necessary, and it is a part of the service I offer. Sometimes, I receive calls from the debtors who believe their house is about to be sold at a foreclosure sale. However, many of them confuse a motion return date in the foreclosure proceeding with the actual sale date. Before preparing an emergency filing, I always verify that there is a need to file bankruptcy as soon as possible.