Rochester Bankruptcy and Debt Relief

For most part, filing either Chapter 7 Bankruptcy or Chapter 13 bankruptcy is an administrative process. The bankruptcy lawyer gathers information, prepares and files the petition. In Chapter 7 bankruptcy, the debtor attends a brief hearing conducted by a trustee.   In Chapter 13 Bankruptcy, the debtor also has to attend a confirmation hearing. However, in some cases an “adversary proceeding” is filed.

An adversary proceeding is essentially a case within a case. It is a lawsuit within either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy case about an issue related to the bankruptcy case. There are many other situations in which adversary proceedings arise. In other instances, the debtor brings the adversary proceeding to bring a claim or to obtain a determination from the court. The Bankruptcy Rules of Procedure specify the situations in which parties must file adversary proceedings.

There are three parties in the bankruptcy court case who can file an adversary proceeding. Those parties are the creditor, the trustee (either the Chapter 7 Bankruptcy trustee, Chapter 13 bankruptcy Trustee, or the United States Trustee), and the debtor. Each adversarial proceeding is heard by the United States Bankruptcy Judge for the district where the bankruptcy is filed. For the cases filed here in Rochester, the adversary proceeding cases are heard by Hon. John C. Ninfo, II.

When a creditor files an adversary proceeding, it is usually because the creditor is claiming that the debt owed to the creditor should not be discharged in the bankruptcy. Usually the creditor will argues that it is only that particular creditor’s claim that should not be discharged since it falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.  Alternatively, the creditor may argue that the filing of the bankruptcy case was done in bad faith and the debtor is not entitled to the discharge altogether.  These kinds of adversary proceedings are not common.

Another kind of adversary proceeding is filed by the Chapter 7 Trustee, Chapter 13 Trustee, or the United States Trustee. A trustee may argue that the schedules were not filled out accurately and were intentionally fraudulent. A trustee may file a motion to dismiss the bankruptcy case if paperwork is not filed timely, improperly, or if the debtor misses a court date without a good reason. A trustee may file an adversary proceeding seeking to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to reverse a transfer of real property. The United States Trustee may file an adversarial proceeding to force the debtor to move from Chapter 7 Bankruptcy to Chapter 13 bankruptcy, if the U.S. Trustee believes that the filing of the bankruptcy petition was done in bad faith. The U.S. Trustee may also file an adversary proceeding to dismiss the case, if the U.S. Trustee believes the filing of any bankruptcy petition was done to abuse the bankruptcy system.

Finally, a debtor may file an adversary proceeding against a creditor. The debtor may recover damages for a creditor’s actions taken in violation of the U.S. Bankruptcy Code, or violated the automatic stay, or the discharge (such as contacting the debtor after the bankruptcy is completed).

Mere fact that an adversary proceeding is filed does not mean that the party filing it will prevail. The bankruptcy judge will hear the case and will determine each party’s rights. It is the job of the bankruptcy attorney to advise the party as to the likelihood of success in an adversary proceeding, but the case will be decided by the bankruptcy judge .

The following is an example of a situation where an adversary proceeding is filed. The debtor obtained a large cash advance prior to filing.  That cash advance was used to prevent a foreclosure or recover a vehicle after a repossession. However, the credit card issuer is likely to object claiming that the cash advance taken out only a few months prior to filing bankruptcy and argue that the debt is nondischargeable since it was either fraudulent or the money was borrowed in anticipation of the bankruptcy filing.

The litigation would commence with a filing or a complaint. An answer would serve, and the parties would engage in discovery. If the parties were unable to resolve their dispute during pretrial proceedings, there would be a trial.

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.

Once debtor’s Chapter 13 Bankruptcy plan is confirmed, the debtor has an obligation to make monthly payments.  Unfortunately, sometimes circumstances change and the debtor cannot continue to make payments.  When the debtor can’t make the payments on a confirmed Chapter 13 plan, the choices available to the debtor are limited.  While there are a number of options, the best option for the debtor is usually a hardship discharge under §1328(b).

A bankruptcy discharge under §1328(b) eliminates all the debt that would have been dischargeable had the case been filed initially as a  Chapter 7 Bankruptcy.  While certain types of claims would still survive a hardship discharge, but the remainder of the debt is discharged, as if the plan has been completed over its term.

In order to obtain a hardship discharge, the debtor has to satisfy the best interests of creditors test, i.e.,  creditors must have received at least as much as they would have received had the case been filed as a Chapter 7 Bankruptcy.  Additionally, the debtor’s reasons for his inability to complete the plan must be events outside of the debtor’s control.  Usual events include death, illness,  job loss, and, occasionally, divorce.

I prefer hardship discharge  for my clients, as opposed to converting a Chapter 13 Bankruptcy to Chapter 7 Bankruptcy?  When the discharge is entered under Chapter 13, the debtor is eligible to file another Chapter 13 immediately.  If the case is converted to a Chapter 7 Bankruptcy, the debtor cannot file under either chapter of the Bankruptcy code for a period of time.  An additional advantage of a hardshipt discharge is that there is no need for a new 341 meeting or amended schedules, as there would be if the case were converted to Chapter 7.

Since Chapter 13 Bankruptcy often includes debt that is not dischargeable in Chapter 7 Bankruptcy, while the hardship discharge won’t discharge priority taxes, by obtaining a hardship discharge, the debtor is eligible to file another Chapter 13 when he is again healthy or employed.  Further, the debtor can receive the automatic stay in a subsequent case to finish paying the debts that often caused the Chapter 13 Bankruptcy.

In subsequent posts, I intend to discuss additional options available to the debtor.

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.

Often, it is not the debt itself that drives someone to file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, but it is the actions of the creditors.  Creditors have many different ways to try to collect a debt, such as repeated telephone calls to debtor’s house or work, letters from collection agencies and attorneys, lawsuits, wage garnishment, and other collection activities.

The debtor has only one tool available to stop the creditors.  That tool arises as a result of filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.  It is called “automatic stay” and arises under 11 U.S.C. §362.  The automatic stay will stop all collection activities by a creditor to recover a debt.   The creditor will not be able to call debtor’s home or place of work, send letters, commence or continue a law suit, or enforce a judgment.  It will prevent any garnishment and will stop any garnishment already in place.  It will also stop any pending foreclosure.  It will stop all collection activities and will require all creditors to resolve their claims in the bankruptcy court.  If you file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, the automatic stay will prevent the utility company from shutting off your service.  The automatic stay will even stop contempt proceedings in the divorce case that relate to nonpayment of financial obligations.

Once the automatic stay is in place, in order to take any further action, the creditor will have to file a motion in the bankruptcy court seeking to lift stay.  Most of the motions to lift the automatic stay involve cars and houses. Typical creditor in a Chapter 7 may just be seeking to enforce it state court rights against the assets, especially if the debtor is surrendering the asset.

In Chapter 13 Bankruptcy, motions to lift automatic stay are usually filed by secured creditors when they believe that they aren’t getting paid sufficient money before the plan is confirmed.  The most common motions to lift stay in a Chapter13 are filed after confirmation of the plan, usually, when the debtor fails to make the required payments.

Once imposed, automatic stay requiring a stop to almost all debt collection activity against the debtor and his property remains in effect until the earliest of the following events:

1. The case is closed;
2. The case is dismissed;
3. Or the debtor is granted or denied a discharge.

After the automatic stay is terminated, either by operation of law or special order, it is important to remember that property exempted in a bankruptcy generally remains protected from pre-petition debts, even if these debts were held to nondischargeable in the case.

The Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) which went into effect on October 17, 2005, included provisions that made it more dangerous for the creditors to violate automatic stay.  Previous to BAPCPA, there appeared to be an exception for creditors who violated the automatic stay if the acts were done in good faith due to a bona fide question of law regarding the applicability of the automatic stay.  In other words, if a creditor technically violated the automatic stay but believed it was not violating the stay due to the facts or its interpretation of the law, such an act would not have been considered “willful” so as to allow damages, attorney fees, and costs.  Pretty much any act by a creditor in technical violation of the automatic stay is now actionable, despite the fact that the creditor truly believes its actions are completly justified.  Even if the debtor may not sustain any actual damages, the creditor will be liable for statutory damages.

There are some exceptions to the automatic stay.  However, one of the exceptions included in §362(b) allows for actions in Family Court matters and also in Supreme Court involving domestic support obligations.

In short, the automatic stay is the most powerful tool in the bankruptcy lawyer’s arsenal.  It will provide the debtor with an opportunity to resolve all claims in a single proceeding before the bankruptcy court.  Without automatic stay, it would be very difficult for a bankruptcy attorney, if not impossible, to guide the debtor toward the fresh start contemplated by the bankruptcy law.

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.

When I prepare a bankruptcy petition in either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, I do everything possible to make sure that every creditor is included and given a proper notice of the filing. However, once in a while, a Chapter 7 debtor realizes that he or she forgot to include a creditor after the case has closed.

If you are a bankruptcy lawyer, this occurs periodically.  I file a routine Chapter 7 bankruptcy petition, the case goes proceeds normally, the debtor gets a discharge, and, subsequently, the case is closed.  Then, sometime later, the debtor contacts me to say that a creditor was inadvertently omitted.  The debtor explains that that he simply forgot and that it was an innocent mistake. A bankruptcy lawyer may think that this should not be a big problem since the case can be reopened by motion, and an application can be brought to amend the schedule of creditors to include the omitted one.

However, there have been a great number of cases on this issue, with divergent theories and conclusions. Some have held that the case can be reopened, and some have held that it can’t. Some bankruptcy courts routinely grant debtors’ motions to amend schedules to list previously omitted creditors.  Some cases focus on whether there is prejudice to creditors or whether there was fraud.

Some courts will refuse to permit the case to be reopened, because they believe omitted debts are non-dischargeable.  Yet other courts will refuse to permit the case to be reopened because they believe that omitted debts are automatically discharged even if they are not listed, and therefore reopening the case serves no purpose.

There are two possible approaches that courts can take in addressing this issue. Under the “mechanical approach” courts have denied motions to reopen no-asset cases, finding that the debt owed to an omitted creditor is discharged “as a matter of law.”  Under this approach, there is no reason to reopen a bankruptcy case, provided that it is a no-asset case and the debt is not otherwise excepted from discharge.

Under the “equitable approach,” courts consider whether the debtor’s omission was the result of fraud, recklessness or intentional design, or if it would prejudice the creditor’s rights.  Good faith is an important element.  Courts adopting this approach have held that motions to reopen no-asset cases to list omitted creditors should be liberally granted.

For most garden variety situations where the debtor omits a typical credit card debt and advises the attorney within a few years, the courts will probably be unwilling to permit counsel to reopen the case to add the creditor, asserting that, under the mechanical approach, the debt is dischargeable.  In such cases, the bankruptcy attorney should consider sending a certified letter to the creditor stating that the debt has been discharged, together with copies of the notice of commencement and order of discharge.

However, in situations where the creditor raises objections to this approach, the bankruptcy lawyer should be prepared to file a motion to reopen, in which case the court will probably consider the various factors in the equitable approach.

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.

On March 23, 2010, the U.S. Supreme Court issued its decision in United Student Aid Funds v. Espinosa, No. 08-1134 (2010), which affirmed the 9th Circuit’s holding that a Chapter 13 Bankruptcy debtor can obtain a discharge of a student loan by including it in a Chapter 13 plan.  The loan can be discharged if the creditor fails to object after notice and opportunity to do so, and the bankruptcy court enters an order confirming the Chapter 13 plan.

In a typical bankruptcy, whether Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, a student loan is not discharged unless the bankruptcy court makes a determination that the student loan would be an undue hardship on the debtor. Under Bankruptcy Rules, the court is required to make such a determination in an adversary proceeding, which is a lawsuit within the bankruptcy case.  In United Student Aid Funds, the debtor did not bring an adversary proceeding.  Rather, the debtor put in his plan that only the principal amount of the student loan would be paid through the plan, but that accrued interest would be discharged.  The student loan lender did receive a copy of the plan, and even filed a Proof of Claim.  However, the lender did not object to confirmation of the Chapter 13 plan.

Subsequently, the bankruptcy court entered an order confirming the plan as proposed.  After confirmation, the Chapter 13 trustee sent a notice to the lender, saying that the Proof of Claim amount differed from the amount stated in the Chapter 13 plan, and that if the lender disputes the amount in the plan, it should notify the trustee within 30 days.  After the debtor completed his plan payment, several years later, the student loan lender tried to collect the remaining amount due.

The debtor filed a motion seeking enforcement of his bankruptcy discharge.  The lender filed a motion seeking to declare the order confirming the Chapter 13 plan void.  Ultimately, this was the issue that the Supreme Court resolved. That is, the student loan lender argued that the bankruptcy court order confirming the Chapter 13 plan void because the lender was denied due process regarding the required statutory finding of undue hardship, which did not happen in this case.

The Supreme Court, in looking only at Bankruptcy Rule 60(b)(4), which permits a court to relieve a party for a final order or judgment, found that the lender was not denied due process, since the lender did receive the plan, filed a claim, and received the notice from the chapter 13 trustee.  The Court agreed that the confirmation of the plan without an undue hardship determination was legal error, however, the legal error does not void the order.  The Court noted that Rule 60(b)(4) strikes a balance between the need for finality of judgments, and the right of parties to have a full and fair opportunity to raise issues and the lender had ample notice and opportunity to contest the debtor’s actions.

What is to be learned from United Student Aid Funds?  Bankruptcy lawyers are well aware of the fact that lenders can make errors in dealing with both Chapter 7 Bankruptcies and Chapter 13 Bankruptcies.  However, in most chapter 13 bankruptcies, here in Rochester, New York, and elsewhere, the student loans are paid pro rata through the plan.  Thus, the bankruptcy lawyers are unlikely to follow the debtor’s approach to the student loans in United Student Aid Funds, since it is likely to be rejected by the bankruptcy court.  It appears that the bankruptcy court in that case ignored its obligation to make sure that the debtor followed the Bankruptcy Code in his Chapter 13 Bankruptcy.  At the same time , there is little harm in trying to discharge some or all of the student loan debt, since if the above approach is followed, and the bankruptcy court or the bankruptcy trustee object, the plan can be amended to comply with the law, but if the bankruptcy court rubberstamps the plan and the lender fails to object in a timely manner, the debtor may get a discharge.

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.

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.

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.

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.

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.

Whenever there are judgments against real property, owned by the debtor who files Chapter 7 Bankruptcy, those judgments, under appropriate circumstances, can be removed by filing 522(f) motion.  The judgment can be removed provided that the debtor’s equity in the property does not exceed $50,000.00 per single filer, or $100,000 per married couple.  The $50,000.00, otherwise known as a homestead exemption, comes from the present version of New York’s Debtor and Creditor Law.  Prior to August 30, 2005, New York’s homestead exemption was $10,000.00 per single filer, or $20,000.00 per married couple.

One issue that was not conclusively resolved in Western New York bankruptcy court was what happened in a situation where the creditor’s judgment was perfected prior to August 30, 2005.  If the judgment was perfected prior to the effective date of the increase in the homestead exemption, would the new homestead exemption or old homestead exemption would apply if the debtor filed Chapter 7 Bankruptcy?

According to the United States Bankruptcy Court Judge Bucki in Buffalo, the applicable homestead exemption amount is the new $50,000.00.  In Re Calloway, Judge Bucki held that once the New York statute was amended, the homestead exemption amount became $50,000.00, and it would apply regardless of the date it was perfected.  Judge Bucki wrote that to hold otherwise, would disregard the meaning of the statute and its interpretation under New York law.  Specifically, he wrote that “C.P.L.R. § 5206 was immediately changed to provide that a homestead “not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.””

Pursuant to the Debtor and Creditor Law § 282, the debtor has exercised her right to exempt her property from the bankruptcy estate.  Therefore, pursuant to 11 U.S.C. §522(f), the debtor may now avoid judgment liens that impair a homestead not exceeding $50,000 in value.

Therefore, debtor’s bankruptcy attorney does not need to be concerned with the date when the judgment was perfected.  As with most §522(f) motions, the biggest concern that a lawyer would have is the value of the property and whether debtor’s equity in it does not exceed the homestead exemption.

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.

I am frequently asked by the debtors how long their bankruptcy filing will remain on their credit report and whether they would be able to obtain credit after the filing.  There is a substantial amount of confusion with respect to when a bankruptcy can no longer be reported on the debtor’s credit report and whether credit becomes available to those who file for bankruptcy relief.

The length of time a bankruptcy can be reported on the debtor’s credit report is governed by the Fair Credit Reporting Act (“FCRA”).  The FCRA orders credit reporting agencies to remove bankruptcy case information from all consumer reports ten years after “the date of entry of the order for relief.”  It does not differentiate between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.  The order for relief according to §301 of the Bankruptcy Code is entered on the filing date, so the ten year period is measured from the bankruptcy filing date, not the discharge date.

It is usually a good idea to order your credit report after the bankruptcy to make sure that the bankruptcy discharge also shows on the credit report so that potential new creditors understand that the creditors whose claims were discharged in bankruptcy have no remaining legal claims.

In my opinion, bankruptcy is no more harmful to the debtor’s credit score than the financial circumstances that lead to the bankruptcy filing. In today’s lending environment, credit is available to the recently bankrupt. It may be more expensive than prior to the bankruptcy filing, and available with lower limits, but it is likely to be offered. Similarly, according to the credit industry’s studies, 18-24 months after a bankruptcy discharge, bankruptcy debtors can qualify for a mortgage loan on the same terms as if they had not filed bankruptcy. The anecdotal experience of my clients has been that they were able to obtain mortgages within two years of filing Chapter 7 Bankruptcy.  While it takes some effort to rebuild credit after bankruptcy, it is possible to do so.

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.

I have previously written about the requirements that a debtor must meet in order to file for Chapter 7 Bankruptcy.  As long as the debtor is able to meet the means test and disposable income test, the debtor can file for Chapter 7 Bankruptcy. However, there are a number of conditions that would disqualify a debtor from filing Chapter 7 Bankruptcy. The following post will address those conditions.

Generally, any debtor who is qualified to file and complete a Chapter 7 Bankruptcy case is eligible for a Chapter 7 Bankruptcy Discharge, unless the debtor falls into one or more of the following categories:

A person who has been granted a discharge in a Chapter 7 Bankruptcy case that was filed within the last 8 years.  This limitation prevents debtor from filing another Chapter 7 Bankruptcy case despite meeting all other qualifications.  The bankruptcy petition specifically asks debtors regarding any prior bankruptcy filings.

A person who has been granted a discharge in a Chapter 13 Bankruptcy case that was filed within the last 6 years, unless 70% or more of the debtor’s unsecured claims were paid off in the Chapter 13 Bankruptcy case. Therefore, if the debtor’s Chapter 13 Bankruptcy case paid less than 70% of the unsecured claims, the debtor is limited to filing Chapter 13 Bankruptcy within the 6 year period.

A person who files and obtains court approval of a written waiver of discharge in the Chapter 7 Bankruptcy case.

A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 Bankruptcy case. This relates to the provisions denying discharge to the debtor who committed that type of conduct.

A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.

A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.

A person who files to satisfactorily explain any loss or deficiency of his or her assets.

A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.

A person who, after filing the case, fails to complete an instructional course on personal financial management. This is the reason that it is critical for the debtor to complete the course within 45 days of the meeting of the creditors.

A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.

If the debtor meets on or more of the above conditions, he is not eligible for a Chapter 7 Bankruptcy discharge and should not file a Chapter 7 Bankruptcy.

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.