Rochester Bankruptcy and Debt Relief

If you are in debt, does it always make sense to file either Chapter 7 or Chapter 13 bankruptcy?  If your only source of  income is Social Security or Social Security Disability, you can file for bankruptcy, but it may not be necessary.  Because of the exemptions under both federal and New York State law, if your sole source of income is either Social Security Retirement or Social Security Disability, you are generally considered to be judgment proof and your income is exempt from garnishment or other collections actions by the creditors.  While your creditors still have the right to sue you and obtain judgments, they are not likely to be able to enforce them against your income or any bank accounts that contain solely the money from either Social Security Disability or Social Security Retirement.  At the same time, the debtor may still have other assets, either personal or real property, that a creditor may reach once it obtains a  judgment.

Even if you are judgment proof, you may still need to file a Chapter 7 or Chapter 13 bankruptcy.  If you have secured debt, such as a mortgage or car payment, and you are behind on your payments, Chapter 13 may give you the ability to bring these secured debts current, while still discharging most or all of your revolving credit debt, personal loans or medical debt.  Another benefit of filing for bankruptcy is that either Chapter 7 or Chapter 13 bankruptcy will stop harassment by the creditors.

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 bankruptcy lawyer.

One of the common issues that may arise in a bankruptcy, is that the debtor may have one or more accounts at a bank to which the debtor owes money.  In those situations, the bank may assert its right of setoff.

The right of setoff in New York is available to a lending institution pursuant to Section 9-g of the Banking Law. Under that section, banking institutions have a long established right of setoff where a borrower is indebted to the institution and also has money on deposit with the institution. This right of setoff is preserved in bankruptcy by Section 553(a), which provides that,

“Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case[.]”

At  a first glance, the setoff appears to require a motion to lift the automatic stay since Section 362(a)(7) specifically covers “the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor[.]”.  Thus, under the statute, in order to exercise that right, the bank must make a motion to lift automatic stay.  However, here in Rochester, in In re Catalano, Judge Ninfo has ruled that under some circumstances, the bankruptcy court will not require the motion to lift stay and set the following policy.

If a banking institution has a clear right of setoff under New York law and the debtor has funds on deposit with it in the amount of $750.00 or less, and also owes the institution a debt in excess of the funds on deposit, the institution may setoff the amount on deposit without obtaining formal relief from the automatic stay, provided that it gives the written notice described herein, and the trustee or debtor does not demand a hearing because there is a genuine dispute as to the asserted right of setoff.

As stated in the decision, the banking institution shall give written notice to the trustee, debtor and debtor’s attorney, if there is one, that: (1) asserts its right of setoff; (2) is accompanied by copies of the debtor’s schedules or other documentation that demonstrates the right of setoff; (3) sets forth a “contact person” at the institution, along with that individual’s address, direct telephone number and a fax number; and (4) advises that unless the trustee or debtor has a genuine dispute as to the validity of the asserted right of setoff, it will be effected ten (10) days after the date of the mailing of the notice. In the event that the trustee or debtor notifies the contact person of a genuine dispute as to the asserted right of setoff, the banking institution shall be required to bring a formal motion to terminate the automatic stay under Section 362(d).

This policy makes it extremely important that the debtor fully discloses his/her financial situation to the bankruptcy lawyer and also allow the bankruptcy attorney to engage in prefiling planning to protect the debtor’s assets from the potential right of setoff.

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 bankruptcy attorney.

A “redemption” is provided for under Section 722 of the Bankruptcy Code and is available for Chapter 7 debtors. That provision allows an individual debtor to retain personal property when that property has been used to secure a debt.  The debtor must pay the fair market value of the item to the creditor.  That fair market value determines to what extent the creditor is secured.  The second choice is to pay the amount of the secured creditor’s debt.  The third choice is to sign a reaffirmation agreement and continue to be legally obligated on the debt again.  The last choice is to surrender the item to the secured creditor.  Under Section 722, a debtor may be able to get the lien released for far less than what he owes.  So, for example, if you owe a creditor $10,000 on a car and the fair market value of the car is $5,000, the Bankruptcy Code allows you to pay you $5,000 to redeem the car.  That amount must be paid in one lump sum to that creditor.  If the creditor agrees with the value, then either the debtor or the creditor has to submit a stipulated order of redemption.  If the creditor does not agree with the value, then the debtor has to file a motion for redemption, and a hearing will be set with the judge deciding what the value of the item is. There are deadlines involved in the redemption process.  The debtor has to have the money to redeem the item and be able to pay the creditor, with many debtors turning to family members and friends.  There are also financial institutions that offer financing in such situations.

Redemption should be considered as an option in Chapter 7, if you own a vehicle that is worth thousands of dollars less than the debt on the vehicle – in other words, you are upside down on the vehicle.  It should also be considered if the debtor is behind on payments or has a spotty payment history.  In Western New York, Judge Ninfo has ruled that the standard for determining the value of a motor vehicle to be redeemed under Section 722 is its wholesale value.   See In re Barse.  You and your lawyer should carefully examine redemption as option if there is a significant disparity between the amount owed and the property’s fair market value.

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 bankruptcy attorney.

If a creditor obtains a judgment against a debtor, that judgment, if filed, becomes a lien against any real property owned by the debtor.  Any such judgment lien against real property can be removed from the property, if the lien impairs an exemption you claim in your bankruptcy.  In New York State, you can only remove a judgment lien against your personal residence.  Debtor’s bankruptcy attorney usually files a motion pursuant to section 522(f) of the Bankruptcy Code.  A typical motion includes a number of attachments such as a copy of the deed, mortgage, current mortgage statement, a recent appraisal of the property, and copies of the judgment filed in the local County Clerk’s office.

Typically,  the debtor is faced with the following situation.  The debtor owns a home with the total equity of less that New York’s homestead exemption, which is currently $50,000 for a single debtor and $100,000 for a married couple filing jointly.   What a $50,000 homestead exemption means is that the debtor can have up to $50,000 of equity in the residence ($100,000 for a married couple) and your home will not be taken or threatened by the bankruptcy trustee or other creditors.   If there are judgments against the debtor, they are viewed as impairing debtor’s exemption in the property and gives the debtor the right to remove them.

If you do not own a residence when you file your bankruptcy, you cannot set aside the judgment in the County Clerk’s office, but the underlying debts are discharged.  This may become a a problem if you purchase (or inherit) real property after your bankruptcy.  In that situation, even though there is no actual lien against the newly acquired property, it may appear that there is to someone searching the Clerk’s office.  This is because they will see a judgment against you, and they will see that you own the property.  Without knowing about the intervening bankruptcy and the discharge of the debt that underlies the judgment, they could draw the conclusion that the judgment was in fact a lien against the property.

The problem often surfaces if there comes a time that you want to borrow against, or refinance the property.  Most lenders are sophisticated enough to recognize that any pre-bankruptcy judgments are usually discharged and a typical judgment search, or a title search, in Monroe County will include a check of the Bankruptcy Court’s records.  It is also the reason to keep a copy of your discharge after the bankruptcy so that the lender can have easy verification that the bankruptcy resulted in a discharge.

If you are dealing with debt problems in 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 bankruptcy attorney.

Unless the bankruptcy debtor can satisfy the daunting legal standard of “undue hardship,” student loans are not dischargeable in a bankruptcy case.  However, the mere fact that student loans will not be discharged does not mean you should give up on the bankruptcy process.  For a chapter 13 debtor, the question might be, how should the chapter 13 payment plan propose to treat the student loan debt?

Some attorneys try to distribute more of the debtor’s income to student loan debts than to other debts by simply inserting a provision into the chapter 13 plan which says that the debtor will continue to pay the student loan out of his or her own pocket, rather than have the chapter 13 trustee pay toward the student loan.  This would have the important advantage of paying more (usually) toward the student loan than would be paid if the trustee made the payments from the plan.

The presumptive authority for paying a student loan “outside the plan” is contained in the bankruptcy law’s section 1322(b)(5).  This section permits the maintaining of payments on any debt where the last regularly scheduled payment is due after the final chapter 13 plan payment is due.  Section 1322(b) reads as follows:

(b) Subject to subsections (a) and (c) of this section, the plan may–

1. designate a class or classes of unsecured claims, as provided in  section 1121 of this title, but may not discriminate unfairly against any class so designated; however, such plan may treat claims for a consumer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than other unsecured claims;
2. modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;
3. provide for the curing or waiving of any default;
4. provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any other unsecured claim;
5. notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due;

Section 1322(b) allows the chapter 13 debtor to continue making student loan payments directly to the creditor, much the same as the debtor would continue paying his mortgage payments, assuming that the bankruptcy trustee agrees with this interpretation and the bankruptcy court confirms it.  However, here in Rochester, the Chapter 13 trustee disagrees with this interpretation of the statute and, instead, takes a position that the student loans should be paid pro-rata as other unsecured creditors.  The trustee’s position is based on the argument that making full student loan payments, while in Chapter 13, treats student loan lenders  better than other unsecured creditors and, in fact, does so at their expense.  While Judge Ninfo has not written on this issue, I think that he would agree with the trustee’s position.  Thus, it is critical to discuss these issues with a bankruptcy lawyer prior to the filing.

If you are dealing with debt problems in 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 bankruptcy attorney.

Recently, I read a New York Times article, “Debt Settlers Offer Promises But Little Help“, that confirmed something that I already knew – debt settlement, in most cases, does not work and usually costs a lot more than a Chapter 7 or a Chapter 13 bankruptcy.  Also, most people working with debt settlement companies are likely to find themselves in the worse financial situation after entering debt settlement.  One quote summarizes how debt settlement industry does business:

Consumers who turn to these companies sometimes get help from them, personal finance experts say, but that is not the typical experience. More often, they say, a settlement company collects a large fee, often 15 percent of the total debt, and accomplishes little or nothing on the consumer’s behalf.

While I appreciate the fact that most debtors want to avoid filing bankruptcy, in my opinion, bankruptcy represents an opportunity for a fresh start for most people.  The critical difference between a bankruptcy and a debt settlement, despite what a debt settlement company may claim, is that the creditor does not have to agree to a debt settlement arrangement.  In a bankruptcy, under either Chapter 7 or Chapter 13, the creditor is obligated to follow the Chapter 13 repayment plan or accept results of the Chapter 7 discharge.

At the same time, if a debtor has a only a few debts, may have other alternatives to either filing a bankruptcy or working with a debt settlement company.

I have experience with “workouts” which is a term used to describe a non-bankruptcy negotiated modification of debt.  A workout is an out-of-court agreement between a debtor and his or her creditors for repayment of the debts between them, which is negotiated without all the procedural complications — and perhaps the stigma — of the bankruptcy process.  A typical workout takes form of either “composition”, which is a contract between the debtor and two or more creditors in which the creditors agree to take a partial payment in full satisfaction of their claims. Another option is an “extension”, which  is a contract between the debtor and two or more creditors in which the creditors agree to extend the time for payment of their claims. An agreement may be both a composition and an extension, i.e., an agreement to accept less money over a longer period of time.

There is no requirement that all of the debtor’s creditors agree to a composition or extension, but most of them must voluntarily support it for it to work. Creditors that do not agree to the workout are not affected by it and remain entitled to pursue other remedies to collect the debts owed to them. My role in this process is to negotiate such agreements on behalf of the debtor.

If you are dealing with debt problems in 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.

The creditors’ meeting, otherwise known as 341 meeting, is a procedural step in every Chapter 7 and Chapter 13 bankruptcy.  In a typical 341 meeting, the debtor will be asked questions under oath by the bankruptcy trustee with respect to his or her financial affairs.  Most debtors are apprehensive of the 341 meeting.  While 341 meeting is also designated as the first meeting of the creditors, creditors seldom come to the first meeting, and there isn’t usually a second meeting.  Most of the time, it is a meeting of the debtor and the trustee appointed in the case.

There are two items that the debtor must have at the 341 creditor’s meeting.  The first one is a state issued photo identification card.  For most people, this is going to be their driver’s license.  The second item is the social security card.  If the debtor does not have these documents at the meeting, the trustee cannot go forward with the creditors’ meeting since the trustee must confirm the debtor’s identity.  Occasionally, trustee may permit the use of a W2 forms, annual social security statements, or a payroll check stub that contains debtor’s social security number.

Take the time to locate these documents before you arrive at the location for your creditor’s meeting.  Here in Rochester, bankruptcy trustees usually tell the debtors to have their identification and proof of social security number ready at the beginning of the meeting.  Most bankruptcy attorneys will ask the clients for those documents so they can be handed t the trustee.  I often have seen people anxiously looking through a purse or wallet for a social security card that they just know they have, only to find out that they don’t have it, or that they are too nervous to find.

The 341 meeting is not a test or a trial.  The trustee won’t be asking any trick questions.  Your lawyer is there for support and to make sure that the record created is truthful and accurate.  In order to have a successful 341 meeting all the debtor has to do is to follow these four steps:  (1) tell the truth; (2) listen to the question; (3) let the trustee finish before you start speaking; and (4) answer in as few words as possible.

It is critical for someone who filed bankruptcy to be honest during 341 hearing.  It is just as critical for the debtor to be honest with his/her attorney prior to the hearing, before the petition is prepared out and filed.  If the debtor’s statements during the 341 hearing contradict the petition, and those contradictions were deliberate on the part of the debtor, that means the debtor may have already committed perjury, which is a federal offense.  When the petition is filed, the debtor, by signing his or her petition, swore that the petition was truthful.

There are a number of questions that a trustee is required to ask the debtor at the meeting of creditors.  They are as follows:

1.   State your name and current address for the record.

2.   Please provide your picture ID and Social Security number card for review.

3.   Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them?

4.   Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time?

5.   Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?

6.   Have you previously filed bankruptcy? (provide trustee with case number and the discharge information to determine discharge eligibility in this case)

7.   What is the address of your current employer?

8.   Is the copy of the tax return you provided a true copy of the most recent tax return you filed?

9.   Do you have a domestic support obligation? To whom? Please provide the claimant’s address and telephone number, but do not state it on the record. Are you current on your post-petition domestic support obligations?

10.   Have you filed all required tax returns for the past four years?

There are also other questions that a trustee may ask you:

1.   Do you own or have any interest whatsoever in any real estate? If owned: When did you purchase the property? How much did the property cost?  What are the mortgages encumbering it?  How did you arrive at the value of the property?

2.   Have you made any transfers of any property or given any property away within the last one year period?

3.   Does anyone hold property belonging to you? If yes: Who holds the property and what is it? What is its value?

4.   Do you have a claim against anyone or any business? If there are large medical debts, are the medical bills from injury? Are you the plaintiff in any lawsuit? What is the status of each case and who is representing you?

5.   Are you entitled to life insurance proceeds or an inheritance as a result of someone’s death?  If you become a beneficiary of any one’s estate within six months of the date your bankruptcy petition was filed, the trustee must be advised within ten days through your counsel of the nature and extent of the property you will receive.

6.   Does anyone owe you money?  Who owes the money and where are they?

7.   Have you made any large payments, over $600, to anyone in the past year?

8.   Were federal income tax returns filed on a timely basis? When was the last return filed? Do you have copies of the federal income tax returns?  At the time of the filing of your petition, were you entitled to a tax refund from the federal or state government ?

9.   Do you have a bank account, either checking or savings? If yes: In what banks and what were the balances as of the date you filed your petition?

10.   When you filed your petition, did you have:

a. any cash on hand?
b. any U.S. savings bonds?
c. any other stocks or bonds?
d. any certificates of deposit?
e. a safe deposit box in your name or in anyone else’s name?

11.   Do you own an automobile? If yes: What is the year, make, and value? Do you owe any money on it? Is it insured?

12.   Are you the owner of any cash value life insurance policies? If yes: State the name of the company, face amount of the policy, cash surrender value, if any, and the beneficiaries.

13.   Do you anticipate that you might realize any property, cash or otherwise, as a result of a divorce or separation proceeding?

14.   Have you been engaged in any business during the last six years? If yes: Where and when? What happened to the assets of the business?

As log as you and your bankruptcy lawyer are prepared, your 341 hearing is likely to be completed quickly.  If you are missing documents or if trustee requires additional information, your hearing may be rescheduled to a later date.

If you are dealing with debt problems in 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.

On occasion, a divorce may result in one or both of the parties filing for bankruptcy, often without an adequate understanding of the limited relief available in the bankruptcy court. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (”BAPCPA”) directly addressed issues related to the dischargeability of marital debt and support obligations, as well as to the effect of the automatic stay on collection and enforcement proceedings out of divorce and family law litigation.  Under BAPCPA, domestic support obligations (usually alimony, child support and property distribution) are given priority over almost every other creditor.

Under bankruptcy law, a “domestic support obligation” is any debt incurred before or after a bankruptcy filing that is owed to or recoverable by a spouse, former spouse, child or governmental unit; in the nature of alimony, maintenance or support; and established pursuant to the terms of a divorce decree, separation agreement, property settlement agreement, court order or administrative determination.

In Chapter 7 bankruptcy, essentially all marital and domestic relations obligations are not dischargeable, regardless of whether they are support in nature, property divisions or “hold harmless” agreements, provided they were incurred by the debtor in the course of a matrimonial proceeding or a divorce action which resulted in a separation agreement, divorce decree, court order or administrative determination.

A debtor’s obligation to pay marital debts directly to a third party ( ie., pay the mortgage on former marital residence) and to hold the former spouse harmless on said debts is also deemed to be non-dischargeable if the obligation has the effect of providing support to the former spouse. A debtor’s duty to pay the following expenses are usually deemed to be in the nature of support and not dischargeable: educational expenses of a minor child; medical insurance coverage for a minor child; and life insurance, with the minor children as beneficiaries.

Attorney’s fees owed by debtor to his own lawyer are clearly dischargeable in bankruptcy, but as a general rule, attorney’s fees owed by debtor to a former spouse’s attorney are not dischargeable, if the underlying legal proceeding resulted in the entry of an order or judgment directing payment of maintenance or spousal support to the former spouse.

The division of a debtor’s pension benefits during the divorce action is usually accomplished by entering a Qualified Domestic Relations Order (”QDRO”). Since division of a pension is considered to be a transfer by debtor of a present interest in his pension, and as such, it is not a debt that can be discharged in bankruptcy.

If there are assets in a Chapter 7 bankruptcy, and you owe any domestic support obligations (alimony, child support, that sort of thing) to your spouse, former spouse or child, the trustee will pay that first.  Next, the trustee will pay any domestic support obligation owed to a governmental unit.

In Chapter 13 bankruptcy, past due domestic support obligations owed by a debtor are not dischargeable, unless they are paid in full over the life of the Chapter 13 plan. However, if a debt created by a separation agreement or judgment of divorce is not in the nature of support, it sometimes can be discharged in Chapter 13 without being paid in full.

For a Chapter 13 Plan to be confirmed by the Bankruptcy Court, it must: pay in full to the former spouse all domestic support obligations owed by debtor at the time of the bankruptcy filing, and the debtor must be current on all domestic support obligations incurred after the bankruptcy filing.  Past due support obligations are generally required to be paid in full through the debtor’s plan but an exception can be made if the creditor agrees.  Support debts have a first priority, meaning they are paid before other kinds of priority debts, like taxes.

A Chapter 13 Plan, even if confirmed by the bankruptcy court, is subject to dismissal if the debtor fails to pay any post-petition or post-confirmation domestic support obligations, and a Chapter 13 discharge will not be entered by the bankruptcy court unless and until a debtor certifies that all domestic support obligations have been paid and that the debtor is current on such obligations.

The automatic stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding to establish paternity; to establish or modify a child support order, determine child custody or visitation issues, or dissolve a marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest. In those situations, the divorce can be granted without first obtaining relief from the automatic stay, but the marital property cannot be divided without obtaining such relief.

The automatic stay also does not prevent the post-petition collection of domestic support obligations such as alimony or child support from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in the same property; from automatic wage deduction orders created by a statute or judicial or administrative order; from the interception of debtor’s federal or state income tax refunds, or
from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license. Therefore, Bankruptcy Court does not offer much protection for someone seeking to avoid the domestic support obligations.

The above rules will apply to the proceedings in New York State courts. In Ross v. Sperow, 57 A.D.3d 1255 (3rd Dept. 2008), the Appellate Division had to address a situation where one of the parties was seeking to enforce a counsel fee award after the other party filed for bankruptcy. In Ross, multiple violation petitions had been filed by the parties over the course of several years. In August 2006, Family Court upheld mother’s motion for attorneys fees and directed father to pay $5,000 of the mother’s attorneys fees. Father filed for a Chapter 7 bankruptcy thereafter, and listed the award of attorneys fees as an unsecured debt. Father’s bankruptcy was discharged in January 2007. Mother brought a violation petition which alleged that father failed to pay the attorneys fees.  Father moved to dismiss petition on ground that he discharged counsel fee award in bankruptcy. The Appellate Division stated that state and federal courts have concurrent jurisdiction over issue of dischargabilityof a particular debt and held that domestic support obligations in the nature of support are exempt from discharge in bankruptcy. While father contended that counsel fees incurred were for custody and visitation proceeding, the record reveals that mother’s initial petition commencing the proceeding raised issues of financial need and hardship.  According to the Appellate Division, term “in the nature of support” is broadly interpreted in the context of discharge of debt obligations in bankruptcy and held that the award of counsel fees was in part in the nature of support, and as such, exempt from discharge in bankruptcy.

It is very important for your bankruptcy lawyer to be aware of any outstanding domestic support obligations if you are filing for bankruptcy.  Here in Rochester, bankruptcy trustees routinely ask during the meeting of creditors (also known as 341 meeting), if the debtor has a domestic support obligation.  If there is a domestic support obligation, the bankruptcy trustee will want to know to whom such obligation is payable, will ask the debtor to provide the claimant’s address and telephone number, and will inquire if the debtor is current on his or her post-petition domestic support obligations.

If you are dealing with debt problems in 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.

In Chapter 13, a debtor can keep his or her car even if the equity is greater than the allowed exemption amount, as long as the value of equity in excess of the exemption is distributed to creditors through the chapter 13 plan, i.e., satisfying the good-faith test.  Chapter 13 bankruptcy can effectively halt car repossession and will allow the debtor to repay any arrears on the loan over the life of the Chapter 13 plan.  In addition, in a Chapter 13, the amount the debtor will pay may depends on how long ago the car was purchased.  If the  car was purchased in the last 910 days (30 months), the debtor must usually pay the full amount owed, regardless of the car’s current value.   However, under appropriate circumstances, the interest rate on the loan may be reduced by the bankruptcy court.  If the car was purchased more than 30 months ago, the debtor is likely to have to pay the lender the amount representing the car’s present value over the life of the repayment plan.  The amount representing the car’s value is treated as secured debt, and the remainder of the debt is treated as unsecured.  This is particularly significant where the car is upside down, i.e., the amount owed significantly exceeds the car’s value.  Those situations may result in significant savings to the debtor.

If the debtor is leasing a car, he or she has two options.  The debtor can reaffirm the lease and keep the car, while continuing to make payments.  Alternatively , the debtor can reject the lease, return the car, and discharge any debt associated with the lease.

If you are dealing with debt problems in 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.

If you were in a difficult financial situation, and were forced to file bankruptcy, you should view your bankruptcy filing as an opportunity for a fresh start in your financial affairs and the first step toward rebuilding your credit. After the bankruptcy, you will be able to rebuild your credit and work toward reestablishing your financial future. After the bankruptcy, many debtors are tired of dealing with credit and debt issues that they delay reestablishing their credit. If you received a discharge in your bankruptcy, or are currently making payments pursuant to a Chapter 13 plan, you can start rebuilding your credit. The first step in doing so is obtaining your credit report and challenging any inaccurate information contained in it. If you eliminate any inaccuracies in your credit report, this is likely to improve your credit score. The next step in reestablishing your credit is to obtain a credit card, and use it responsibly. You have to make sure that you make at least the minimal charges and try to pay off the balance in full every month. Even if you have to obtain a secured credit card, it will help you establish a history of payments demonstrating your financial responsibility. The same is true with respect to any other bills you may have such as utilities, rent, mortgage, or any other form of credit. The more you demonstrate your financial responsibility, the higher your credit score will rise. If you are meeting your bills, you may begin requesting credit increase after 6 months or payments or trying to switch from a secured credit card to unsecured credit card. Since an increase in your credit limit indicates that the lender trusts you to repay the debt, your credit score will continue to rise.

At the same time, you have to be careful to avoid credit traps that may set back this rebuilding process. As you work your way to financial health, make sure you steer clear of these common post-bankruptcy dangers. One very common danger is a simple failure to plan. You will not have any debt if you receive a Chapter 7 bankruptcy discharge, however, that will stay so as long as your expenses do not exceed your earnings. While it seems obvious, many people forget that their continued financial health depends on persistent awareness of those facts.

Another solution to common post-bankruptcy problems is developing a budget and following it. Since all filers are required to take the financial management course during the bankruptcy, the suggestions given in the course should be followed to stay out of debt.

Avoid over-reliance on credit since it is what pushed you into bankruptcy in the first place. After bankruptcy, you should avoid costly sources of credit and to try to pay off any credit balances every month.

It is also important to avoid credit repair scams that promise to wipe out bad credit, erase your credit history or achieve anything else that seems too good to be true. It takes time to rebuild your credit and if you follow the steps outlined above, your credit will improve. Any quick fixes or schemes will likely cost you money and hurt your credit. Instead, pay off your bills every month, don’t open more credit cards than you need and stick with your budget. Over the course of a couple years, you should see your credit improve.

As you are working on rebuilding your credit, be careful selecting credit card offers. Make sure that you are fully aware of the interest rates and fees. You can visit a site like bestcreditcards.com to see different options available to you.

With some planning, discipline and determination, you will be able to rebuild your credit and even improve your credit score after filing bankruptcy.

If you are dealing with debt problems in 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.