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Clear Counsel Law Group / Bankruptcy
bankruptcy

Is Bankruptcy Right for Me?

If you are buried in debt, chances are that you are looking for a way out from under the heavy financial burden. In most cases, individuals in debt are contacted by debt collectors on a daily basis, making life difficult to enjoy. Depending on your circumstances, you may be considering bankruptcy. While this is a viable option for some, there are alternatives to filing bankruptcy that could work better for you.

Before you file for bankruptcy, there are some things you need to be aware of. Most people find the most troubling aspect after filing bankruptcy to be getting approval for various types of loans. Having a bankruptcy on your credit record usually prevents you from being approved for conventional mortgages and car loans, at least for the first few years after filing.

So what are the alternatives to bankruptcy? Depending on how far in debt you are and how much income you have, there are ways to deals with debt issues.

Check Debt Collection Laws

If you are being harassed by debt collectors, it would be best to look into collection laws. Having debt collectors hound you every day can be tiresome and only adds to the stress you already have regarding your debt. If debt collector harassment is your primary concern, bankruptcy is probably not your best option. Look into your legal options and go from there.

Work with Your Creditors

Depending on your financial circumstances, you may be able to make monthly payments to minimize your debt. However, your creditors may be charging you more than you can afford each month. If this is the case, try reaching out to your creditors to negotiate smaller monthly payments. In many cases, creditors will decrease your monthly payment if you have an active repayment history. In the simplest terms, creditors just want their money back and they will likely work with you so that you can pay back what you can, even if it takes longer.

Credit Counseling Assistance

There are non-profit credit and debt counseling agencies out there to assist you in your debt repayment. These agencies help you figure out a repayment plan that works with your income by working with your creditors.

Similar to Chapter 13 bankruptcy, debt counseling will help you pay your debt back over an extended period of time. Debt counseling does have one advantage over Chapter 13: you get assistance with repayment, but you will not have bankruptcy on your credit history.

However, be aware that there are scams out there involving credit counseling agencies. In many cases, these agencies are funded by the very same creditors that you are trying to pay back. There could be a conflict of interest depending on what agency you turn to and who your creditors are.

No Action

In some rare cases, doing absolutely nothing may be your best option if you are deeply buried in debt. If you have minimal income and few valuable assets, you could be considered “judgment proof.” What this means is that if someone were to sue you, they would not be able to collect anything from you because you do not have anything valuable to collect.

Contact an Attorney

If you are carrying significant debt that you can no longer handle, contact an experienced bankruptcy attorney. The attorneys at Clear Counsel Law Group are here to help you figure out the best plan of action for your individual circumstances so that you can get on with your life. Call today to set up an appointment.

 

Bankruptcy - 12/05/2014
stripping a second mortgage

Stripping a Second Mortgage under a Chapter 20

If you are familiar with the bankruptcy code, you know there is no “Chapter 20” anywhere in the code.  But some attorneys plan for and file so-called “Chapter 20” bankruptcies by filing consecutive Chapter 7 and Chapter 13 bankruptcies.  The basic idea is that the Chapter 7 will discharge any dischargeable debt, while the Chapter 13 can help strip a second mortgage or help create a structured payment for a debt not otherwise handled in the Chapter 7.   The most commonly useful function is to strip the second mortgage.

Of course, the obvious problem in the Chapter 13 filed on the heels of a Chapter 7 discharge is that the debtor cannot obtain a second discharge if the Chapter 13 is filed within 4 years of the Chapter 7.  Thus, the debtor shouldn’t use the Chapter 13 as a discharge tool.

In the case of stripping a second mortgage, there does not need to be a discharge.  The debt was discharged as to the debtor in the first Chapter 7.  Thus, the Chapter 13 is used to strip the second mortgage, which then becomes a discharged, unsecured debt.

Naturally, creditors disapprove of this strategy.  And several creditors have fought against it.  In the recent Eleventh Circuit case of Wells Fargo v. Scantling, Case No. 13-10558 (11th Cir. June 18, 2014), http://law.justia.com/cases/federal/appellate-courts/ca11/13-10558/13-10558-2014-06-18.html, Wells Fargo argued that a lack of discharge in the Chapter 13 prevented the debtor from stripping the unsecured junior lien holder.  As you can probably guess from my introduction, the debtor in this case had exposed junior lien holders on his property.  Specifically, the property was valued at around $118k and had three lien holders in the following order: (1) $122K (2) $79k and (3) $24k.  As you can see, no equity applied to the second or third liens.

The Eleventh Circuit held that Code Sections 506(a) and 1322(b) allowed the debtor to classify the two junior liens as wholly unsecured liens that could be stripped.  Wells Fargo argued the Section 1325(a)(5) prevented lien stripping without a discharge.  Section 1325(a)(5)(B)(i) provides that the “holder of [an allowed secured claim] retain[s] the lien securing such claim until the earlier of payment of the underlying debt determined under nonbankruptcy law; or discharge under section 1328.”  Clearly the bank was alleging that the strip cannot be finalized until the discharge.

The Eleventh Circuit ultimately held that a Chapter 20 debtor can take full advantage of the benefits of a Chapter 13 (with the obvious exception of receiving a discharge).  The court further held that the operation of Sections 506 and 1322(b) change the nature of the debt, thus disqualifying the debt for protection under Section 1326(a)(5).

The Eleventh Circuit pointed out that there is a split in the courts as to whether a lien strip in a Chapter 20 is allowed.  The court conveniently provided a list of jurisdictions holding each view.  The majority opinion allowing a Chapter 20 lien strip include the 4th Circuit, the 8th Circuit, and the bankruptcy courts of Florida, Maryland, Nevada and California.  However, dissenting opinions in S.D. Florida, S.D. California, and Illinois exist.

A Chapter 20 can be a very useful lien-stripping tool.  If you would like to learn more, please call us to set up an appointment.

Bankruptcy - 12/04/2014

What are the main mistakes in bankruptcy?

TRANSCRIPTION OF VIDEO:

The question is, what are the main mistakes that I've seen people make that prevent them from getting a discharge? The two most common scenarios that I've come across are where people fail to adequately disclose information to either their attorney or to the bankruptcy court, or they fail to appear at their required meetings.

Now, bankruptcy is a good deal and you're going to be discharging presumably a lot of debt in your bankruptcy case, so it's important that you play by the rules and it's important that you disclose everything. The bankruptcy court requires that certain information be disclosed and if you're in any kind of doubt as to whether or not it's something that is required to be disclosed or not, err on the side of disclosure and play it safe, so that you can make sure that your discharge order is not going to be jeopardized by failure to include some pertinent piece of information to your bankruptcy case.

It's also important that you show up to your meetings that are required. Now, by meeting I mean, principally, the 341 meeting of creditors. That's a meeting that everyone has to attend. So as long as you show up to that meeting and disclose all the information and play by the rules that the court wants to play by, you're going to receive a discharge order and avoid these common pitfalls.

 

 

Bankruptcy / Bankruptcy Videos - 07/30/2014

Can a creditor block my discharge?

TRANSCRIPTION OF VIDEO

The question is, Can a creditor block my discharge? The answer may be "Yes." In bankruptcy creditors are provided an opportunity to do what's called an objection to your discharge. That's basically a way in which they file an objection with the court, saying that their particular debt should not be subject to the discharge, or in some certain cases that you shouldn't be allowed to receive a discharge at all. Those cases are pretty rare; but if you haven't committed fraud, or you haven't otherwise committed some sort of wrongful injury to the creditor, the chances are very rare that a creditor will actually object to your discharge.

There is a deadline to object to this discharge. In the Chapter 7 case it's 90 days, roughly, after you've filed your bankruptcy case. If they haven't filed that objection to discharge within that time frame, they're time-barred, meaning they've missed the time frame in which they can file their objection. If they've missed that time frame in which to file their objection, then they can no longer file that objection and your discharge will be entered.

Bankruptcy / Bankruptcy Videos - 07/30/2014

Do I have to tell my attorney about all of my assets in bankruptcy?

TRANSCRIPTION

Question is, do I have to tell my attorney about all of my assets in a bankruptcy? The simple answer is yes. You want to tell your attorney about all of your assets. The bankruptcy laws require that you disclose all of your assets, all of your income, all of your expenses and all of your debt.

Now, in order for your attorney to give you proper and adequate advice, your attorney is going to need to know about all of the assets because it's going to be required that your attorney include all of that information in your bankruptcy paperwork. So err on the side of disclosure and tell your attorney about everything, probably more than he or she wants to hear, and you'll be in good hands.

Bankruptcy / Bankruptcy Videos - 07/30/2014

Do I have to tell my attorney everything in bankruptcy

TRANSCRIPTION OF VIDEO

The question is, what can happen if I don't tell my attorney about everything? Well, bad things can happen, is the short answer. If your attorney doesn't have all of the information, your attorney can't adequately advise you on what's going to happen about whatever asset that you failed to tell him about.

For example, there was a guy that filed bankruptcy and he didn't tell his attorney about his mother's house that just happened to be titled in both his mother's name and his name. He thought it was a harmless mistake because he didn't live in the house and, as far as he was concerned, it was his mother's house.

However, because he was on title, he had a legal claim to the house. His trustee ended up finding out about this house that was titled in both his mother's name and his name and he ended up losing his interest in the house, meaning the house was sold, forcibly sold, and his interests in the house was liquidated and the proceeds from that sale were distributed to his creditors.

That's the type of disastrous that can happen if you don't tell your attorney about everything. So, please, if you're thinking about filing bankruptcy it's really important to think about everything that you might need to disclose to your attorney so that he or she can adequately advise you on how best to proceed.

Bankruptcy / Bankruptcy Videos - 07/30/2014

Do I have to tell my attorney about all of my debt in bankruptcy?

TRANSCRIPTION OF VIDEO

Question is, do I have to tell my attorney about all of my assets in a bankruptcy? The simple answer is yes. You want to tell your attorney about all of your assets. The bankruptcy laws require that you disclose all of your assets, all of your income, all of your expenses and all of your debt.

Now, in order for your attorney to give you proper and adequate advice, your attorney is going to need to know about all of the assets because it's going to be required that your attorney include all of that information in your bankruptcy paperwork. So err on the side of disclosure and tell your attorney about everything, probably more than he or she wants to hear, and you'll be in good hands.

Bankruptcy / Bankruptcy Videos - 07/30/2014

What if I didnt list all of my debts in bankruptcy

TRANSCRIPTION OF VIDEO

The question is: What happens if I don't list all of my creditors on my bankruptcy schedules? The answer to this question can vary a little bit. It depends on what type of Chapter 7 case that you have as designated by your Chapter 7 trustee. There are two types of cases. There's no asset cases and then there's also asset cases.

If your case is a no asset case, that means that there's no distributions that are going to be made to your creditor. In the Ninth Circuit, which is the Circuit in which Nevada bankruptcy cases are filed, there's a rule or case law which is a decision that a judge made which says that even if you fail to list all of your creditors in a no asset case, those debts are still discharged. The reasoning is that those creditors wouldn't have had an opportunity to receive any better treatment had they known about the bankruptcy.

The exception to that rule is that if it was a non-dischargeable type of debt, then even if it's a no asset case, it wouldn't have been dischargeable in that case anyway. If your case was an asset case and you failed to list that creditor, then yes, the answer is that that creditor may not be subject to your discharge and they'll have the right to pursue collection action against you after your case has been closed and discharged.

Bankruptcy Videos - 07/30/2014

What if my name is on my moms bank account in bankruptcy

TRANSCRIPTION OF VIDEO

The question is: What if my name is on someone else's bank account? Is that a required piece of information to disclose to the court? Yes, the answer is simply yes. If your name is on a bank account that you judge not to be a bank account that you use primarily even though it's not an account that you're  using, your name is on it so there is some legal interest in the bank account.

Now, an experienced attorney can help you plan for this and advise you of the ramification of this type of account and the particular circumstances. However, you need to err on the side of disclosure. You don't want to run afoul of failing to disclose a required piece of information and having it come back to haunt you and prevent you from getting a discharge.

Bankruptcy / Bankruptcy Videos - 07/30/2014

When do I get my discharge in a Chapter 13 - Video

TRANSCRIPTION OF VIDEO

The question is: When do you get a discharge order entered in a Chapter 13 case? Chapter 13 cases vary in their time length. There's three year plans and there's five year plans, and in some cases you can submit plans that are in between that time frame. In order to receive a discharge in a Chapter 13 case, you have to have completed all payments required under your Chapter 13 plan.

Now, depending on whatever time length you've decided upon with your attorney, that will dictate when the discharge order can be entered. Once you've completed all the plan payments whether it be three years or five years or somewhere in between, the Chapter 13 trustee that has appointed over your case will do a final accounting of your case and it will typically be entered within a short time frame thereafter, usually about three months after you've completed plan payments.

Bankruptcy / Bankruptcy Videos - 07/30/2014
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