Bankruptcy Planning – Page 4 – Rochester Bankruptcy and Debt Relief

Emergency Bankruptcy Filing – It Can Be Done

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.

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.

Top Ten Bankruptcy Myths

There are lot of myths and misinformation regarding debtors’ rights to file bankruptcy. In my practice, I see a lot of debtors who seek to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, who have heard a lot of rumors and incorrect information with respect to their rights and obligations when they file for bankruptcy relief. The following is a compilation of the typical questions, and correct answers to the questions I frequently hear from the debtors.

1. I will not be able to buy a house for ten years since I will not be able to obtain a mortgage.

Although Chapter 7 Bankruptcy will appear on your credit report for a period of ten years, you will be able to buy a house again much sooner than that, because the bankruptcy is likely to improve your credit rating. Chapter 13 Bankruptcy is likely to improve your credit sooner and is likely to disappear from your credit report much sooner as well.

2. I won’t be able to buy a car for ten years since I will not be able to obtain a car loan.

Although Chapter 7 Bankruptcy is likely to be on your credit report for a period of ten years, you will be able to borrow money to purchase a car again because because the bankruptcy is likely to improve your credit rating.

3. I won’t get a credit card or a good credit score for ten years.

Both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are likely to improve your credit rating. In my experience, although I do not recommend it, the debtors are able to obtain credit cards again within 1 to 2 years.

4. I won’t be able to get a student loan for myself or my children.

Since guaranteed student loans must be repaid, and cannot be discharged in bankruptcy, therefore, there is little concern that student loans will not be paid back. Any private lender may deny a student loan based on the debtor’s credit score, however most student loans are government backed.

5. My employer will fire me because I filed for bankruptcy.

While bankruptcy information is available as a public record, employer, or prospective employer, is not allowed to discriminate against you based on debtor’s decision to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. If a prospective employer asks you for a copy of your credit report, questions you about bankruptcy, most employers are prefer to know that the debtor no longer has any financial issues which may affect work performance. Discharging the debt is preferable to an employer as opposed to a situation where the debtor is receiving phone calls at work from collectors or a credit report that shows a pattern of irresponsibility. Further, in Chapter 7 Bankruptcy, employers are not notified of the filing. In Chapter 13 Bankruptcy, the employer is likely to be aware of the filing since here in Rochester, New York, the Bankruptcy Court requires a wage deduction order that is sent to the debtor’s employer and requires a portion of the wages to be remitted directly to the Chapter 13 Trustee.

6. I don’t qualify for chapter 7 bankruptcy because I own a house.

You can file for a Chapter 7 Bankruptcy even if you own a home. Most states, including New York, allow a homeowner a certain amount of equity in their residence. In New York, pursuant to its homestead bankruptcy exemption, a single filer can have $50,000 worth of equity in their residential property, and joint filers (husband and wife) can have $100,000 worth of equity in their property.

7. I will lose my car if I file for bankruptcy.

If the debtor has a financed car, and can afford the payments, the bankruptcy court will not take away the car, unless the amount of equity in the vehicle is considerably greater than New York’s vehicle exemption. Further, the lender is likely to ask the debtor to reaffirm the car loan. Most Chapter 7 Bankruptcy filers who have car loans, tend to reaffirm them.

8. I am not a citizen, and therefore I can’t file for bankruptcy protection.

You can qualify to file bankruptcy even if you are not a United States citizen. If you have the right to reside in the United States, have a social security number, and have filed income tax returns, you can file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy protection.

9. Bankruptcy can’t help because I have unpaid federal and state taxes.

Under appropriate circumstances, even taxes can be discharged in Chapter 7 Bankruptcy. Chapter 13 Bankruptcy can reduce debtor’s monthly payment to the IRS or New York Department of Taxation and Finance and allow for payments over the life of the plan, as long as five years, without interest.

10. My creditors tell me they will still sue to recover the money owed to them.

Once the bankruptcy is filed, the automatic stay, imposed by the bankruptcy law, protects you from any further attempts to collect a debt or any pending or future lawsuits. While secured creditors may ask for their property back if you do not continue to make payments, they must seek consent of the bankruptcy court before attempting to recover the property.

Chapter 7 and Chapter 13 Bankruptcy, Giving Advice to Clients and Restrictions Under BAPCPA

The U.S. Supreme Court has resolved an issue earlier this week that was of great concern to the bankruptcy lawyers ever since enactment of BAPCPA in 2005. This issue had to do with a provision of BAPCPA, which barred attorneys from advising their clients to take on more debt before filing for bankruptcy protection. The Supreme Court held in Milavetz, Gallop & Milavetz v. United States, 559 U.S. ___ (2010), that giving such advice is permissible in appropriate situations.

The high court, in an opinion written by Justice Sonia Sotomayor, said the provision prohibiting such advice was valid, but should be read narrowly. This provision should be read to prohibit bankruptcy lawyers from advising clients to abuse the bankruptcy system. Justice Sotomayer indicated that it would be permissible for lawyers to advise clients contemplating bankruptcy to take on additional debt in certain situations. She wrote that bankruptcy lawyers could advise clients to refinance a mortgage or purchase a reliable car prior to bankruptcy on the grounds that doing so would reduce the debtor’s interest rates or improve the debtor’s ability to repay. According to the opinion, “[i]t would make scant sense to prevent attorneys and other debt relief agencies form advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors.” Professionals specializing in bankruptcy “remain free to talk fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case,” Sotomayor wrote.

This provision has been problematic in the past in situations where my client would have a vehicle that was likely to need repairs in the near future due to its age or mileage. Under BAPCPA, I could not advise the debtor in Chapter 7 Bankruptcy or Chapter 13 Bankruptcy to obtain a new car lease or car loan, as getting a new car is easier to do before filing for bankruptcy than after. Since BAPCPA contained a provision which prevented attorneys from advising clients to incur debt in contemplation of bankruptcy, I was unable to give debtors such advise since BAPCPA’s enactment. Similarly, this provision prohibited me from advising a debtor to refinance his mortgage immediately prior to filing for bankruptcy in order to benefit from a lower interest rate in the future.

The Supreme Court decision now clarifies the scope of BAPCPA provisions and holds that as long as bankruptcy lawyer’s advice is not meant to abuse the system, it is considered appropriate. Of course, a bankruptcy attorney cannot advise a client to go out and run up debt when the client has no reasonable expectation to repay it. The decision also upheld the BAPCPA’s requirement that attorneys make certain disclosures in their advertisements and ruled that attorneys who provide bankruptcy assistance are debt relief agencies within the meaning of the law. This requirement is the reason that whenever bankruptcy attorneys advertise their service, that sentence is included in the advertisement.

Overall, Milavetz was a positive result for bankruptcy lawyers here in Rochester, New York, and elsewhere across the country. The Congress should not have limited bankruptcy attorneys’ ability to engage in frank and open communications with their clients and give debtors the best possible advice.

Filing for Chapter 7 Bankruptcy and Keeping Your Bank Accounts

One of the most common questions I hear from clients is whether they are able to keep their bank accounts while they are in bankruptcy, or to open new accounts after bankruptcy. My usual answer to that question is that there is nothing under bankruptcy code that would prevent a debtor from having or keeping bank accounts. While there is nothing under the bankruptcy law that prohibits it, there are may be some practical complications.

As I have discussed previously, a typical bankruptcy requires planning and preparation. One of the possible situations I prepare my clients for is a possibility that their bank may close their bank accounts or withdraw money from their accounts. If the debtor has a bank account with a bank or credit union that has also loaned him or her money, that bank has the right of set-off. That is the bank has the right to set-off the money in the debtor’s account against any debt owed to the bank. This is true even if the debt was not delinquent and the funds would be protected by the debtor’s cash exemption. Under a typical lending agreement, a bank or a credit union is usually cross-collateralized. That means that any assets you have securing the loan, including any accounts you may have at that institution, secure all of debtor’s debts with that bank or credit union. If the debtor files for bankruptcy, the bank may take any funds and apply them to any outstanding loan. Even if the debtor is planning to continue to pay on the loan, and sign a reaffirmation agreement, the funds may be frozen or suddenly become unavailable. It is usually my advice to open a back-up account elsewhere, at an institution where the debtor didn’t borrow any money.

If the debtor has accounts which might be subject to set off, there is no need to close such accounts. If there is a small amount of money left in the account, those issue can be resolved after the bankruptcy filing. With respect to opening bank accounts after bankruptcy, the debtor may run into some problems with the Chex Systems which is utilized by most banks. Chex Systems operates similarly to credit bureaus and receives reports from its member institutions.

Should You Use Credit Cards Once You Decided to File Chapter 7 or Chapter 13 Bankruptcy

If you are contemplating filing Chapter 7 or Chapter 13 bankruptcy, you should stop using your credit cards. Once you’ve decided to file for bankruptcy, any credit card use after that point will be highly scrutinized by both the credit card issuer and the bankruptcy trustee, and is likely to be viewed with a great deal of suspicion. The reasons for this are obvious. If the debtor decides that he is seeking to eliminate his credit card debt through Chapter 7 bankruptcy, or pay a lesser amount though a Chapter 13 filing, then incurring additional credit card debt can be considered fraudulent. Specifically, the credit card issuer will make an argument that the additional debt was incurred without intention to repay, then the discharge can be objected to. Also, the issuer will also look at all of the transactions to verify that the money was not spent on such things as vacation trips, or that other unnecessary spending didn’t take place. If a credit card issuer learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt.

Also, if the bankruptcy trustee, or United States Trustee, learn that the debtor intentionally ran up his credit cards before filing, then either trustee can seek to have the debtor’s discharge denied or move to have the case dismissed. There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud, which is a criminal offense.

While consumer Chapter 7 bankruptcy allows the debtor to eliminate all credit card debts and get a fresh new financial start, the debtor should not jeopardize his ability to seek bankruptcy protection by engaging in self-serving or foolish behavior. There is simply no reason to create problems for the upcoming bankruptcy filing. Therefore, don’t use your credit cards once you’ve decided to file bankruptcy.

If you 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 New York bankruptcy lawyer.

Can Trustee Search Your Residence in Chapter 7 or Chapter 13 Bankruptcy?

A question that I commonly hear from debtors in Chapter 7 and Chapter 13 bankruptcies in Rochester or surrounding counties, is whether when they file for bankruptcy, someone will come to their house or apartment, and search or remove their assets. My typical response is to reassure them by telling them that in my experience, any such visits are extremely rare, and would only serve to verify the accuracy of their bankruptcy petition and other disclosure provided during their bankruptcy case. At the same time, as a bankruptcy lawyer, any such statements makes me concerned, since whether or not someone will actually come to search your house or apartment if you file for Chapter 7 or Chapter 13 bankruptcy, the petition, schedules and statement of financial affairs must to be completed truthfully and accurately. Any attempt by the debtor to conceal assets, or any dishonest statements in the bankruptcy petition or other information provided during the bankruptcy, if caught, are likely to result in a referral to the U.S. Attorney Office for criminal prosecution. There are currently individuals serving time in federal penitentiary who have been convicted of bankruptcy crimes, including those whose bankruptcy crimes cases were prosecuted in Rochester. In addition, the financial consequences of the dismissal of the bankruptcy case, and denial of discharge, can be significant, even if there is no criminal prosecution.

With respect to obtaining access to the debtor’s house or apartment, the bankruptcy trustee has the ability to obtain an order authorizing him or her to search the debtor’s house or apartment, with the assistance of the United States Marshall, and to break doors, locks and safes during the course of an investigation. Usually such order will be obtained on an ex parte basis — meaning without prior notice to the debtor to prevent him or her from hiding the assets.

As I have written before, when you file Chapter 7 bankruptcy, you receive the benefit of bankruptcy exemptions. For most debtors, the exemptions allow them to keep most, if not all, of the property they own. While each case is fact specific, and depends of the property owned and its value, a bankruptcy lawyer will be able to engage in pre-bankruptcy exemption planning to maximize available exemptions, and to minimize the assets that would have to be turned over to the trustee if their value exceeds permissible exemptions.

Therefore, the bankruptcy petition, and all of the schedules and other documents provided to the bankruptcy court, should be prepared truthfully and completely, while understanding that the trustee in your bankruptcy case has the ability to get a court order authorizing him to verify the accuracy of your petition. If the debtor provided truthful and accurate disclosure, he or she has nothing to fear. As a bankruptcy attorney, I work closely with all of my clients to make sure that they understand their obligations as debtors, but also to make sure they get to keep as much property as they are legally allowed.