dorota trzeciecka bankruptcy blog

Bankruptcy A -Z – N is for Non-exempt Property

Dorota Trzeciecka — Sun, 05 Feb 2012 18:35:33 +0000

In bankruptcy, there are two types of property: exempt and non-exempt. Property is everything that you own. Exempt property is the property you’re allowed to keep when you file bankruptcy. The amount of what you can keep is limited by state and federal statutes. If you live in Florida, you have to rely on state exemptions, except as specified by Florida Statute 222.201, which allows you to keep, among others, public assistance benefits, like social security, unemployment, veteran’s, and disability benefits. The remainder of your property is the non-exempt property. Typically, the following property would be considered non-exempt, provided you have equity in it:

expensive musical instruments
expensive jewelry
computers, ipads, cameras, digital recorders
cash in bank accounts, stocks, bonds, and other securities in brokerage accounts
coin, stamp, and other collections
valuable family heirlooms
real estate investment property
boats, planes, motorcycles, antique cars, off road vehicles
vacation homes

You have to either buy it outright from a bankruptcy trustee, if you really want to keep it (the trustee will make you an offer), swap it in exchange for exempt property, or sell it before filing, and, with those funds, buy an asset that is exempt.

Chapter 13 may be another option for you to keep the non-exempt property. Chapter 13 allows you to keep your non-exempt property regardless of its value. But, you will be required to propose a plan that pays your unsecured creditors an amount that is equal to at least the value of your non-exempt property.

If you have a lot of non-exempt property, you should consult a bankruptcy attorney who can help you determine how much of your property is exempt, and plan for the ways you can keep your non-exempt property.

Here are more bankruptcy terms beginning with letter N:

Naked by Jay S. Fleischman

Never by William Balena

No Asset by Mitchell Goldstein

No Asset Report by Stuart T. Ing

Nondischargeable by Cathy Moran

Nondischargeable by Mitchell Goldstein

Nondischargeable Debt by Ryan D. Caldwell

Notice by Bob Doig

Bankruptcy Alphabet – C is for Costs

Dorota Trzeciecka — Sun, 22 Jan 2012 20:32:58 +0000

A question on the mind of most potential bankruptcy clients is “How much will this cost me?”. Whether you’re filing Chapter 7 or Chapter 13, the costs can be broken down into the following categories: attorneys’ fees, credit counseling and financial management fees, and court filing fees. In addition, if an amendment to your bankruptcy forms is necessary after filing of the original petition, amendment filing fees may apply.

Despite of what you may believe, bankruptcy lawyer fees are not fixed. Lawyers decide what to charge, based on the services they will provide and how complicated your case is likely to be. But, the fees do not go unchecked. Bankruptcy attorneys have to file a Disclosure of Compensation of Attorney for Debtor with the court disclosing the fee in each individual case.

There are two important things that you want to remember about attorneys’ fees. If you’re filing Chapter 7, your attorneys’ fees have to be paid in full by the time you file your petition. That is because no lawyer likes to become your creditor in Chapter 7 bankruptcy — they would likely not be paid for their services. It does not mean that you have to come up with the full amount of attorney’s fee for Chapter 7 all at once. Most lawyers will let you pay it in installments, up to the time of filing of the petition.

Chapter 13 fees, on the other hand, can be paid through your Chapter 13 plan, with or without a deposit at the start of the case. Chapter 13 fees are two to three times the amount of what the Chapter 7 fees are. They’re generally capped at a certain amount by the local rules and guidelines. For example in the Southern District of Florida, the standard attorney’s fees for a Chapter 13 bankruptcy are set at $3,500. Additional set fees may be allowed for filing any necessary motions, for example, a Motion to Value Real Property or PersonalProperty, without application to the court. Your retainer agreement should specify those services that are included in the standard fee and those set fees in addition to the standard fee. The court may award other fees by special application to the court only.

Before you can file petition for bankruptcy, you have to complete a mandatory credit counseling, and before your debts can be discharged, you have to complete a financial management course, at the fee ranging from $10-$45 each.

The court filing fees are $306 and $281 for Chapter 7 and Chapter 13, respectively.

Each amendment to your bankruptcy schedules in both Chapters is $30; this is in addition to the fees specified by your attorney for amendments.

Check out more bankruptcy terms beginning with C

Competence and Compassion

Cramdown by Stuart Ing

Cramdown by Mitchell Goldstein

Credit Card Tips

Credit Counseling

Credit Counseling by Daniel Winter

Creditor by Jay Fleischman

Creditor by Kurt O’Keefe

Creditors Meeting

Bankruptcy Alphabet – B for bad faith filing

Dorota Trzeciecka — Wed, 18 Jan 2012 03:07:45 +0000

Can I file Chapter 13 to stop a foreclosure sale to buy more time to work out a short sale with the bank, and then dismiss the case? This is a a real life question that keeps coming up more and more often in this new economic reality. The answer is “no”. Why? Because this is a classic example of bad faith filing. You take up precious judicial resources and exploit bankruptcy system for the purpose for which it was not designed. But, more importantly, it is because the Bankruptcy Code presumes any subsequent bankruptcy filing within the preceding one year period as being filed not in good faith. What it means is that, when you file a case, and your case is dismissed either by you, voluntarily, or by the court for failure to provide required documents, for example, any subsequent bankruptcy case that you may file within that same year is presumed to be filed in bad faith. The consequence of such filing is that the automatic stay, which protects you from certain actions by creditors when you file bankruptcy, is in place for only 30 days. Such actions may include foreclosure sale, vehicle repossession, filing of a lawsuit or proceeding with a pending lawsuit against you, recording a lien against your property, and seizing your personal property or income, such as garnishment of your bank account or your wages. To continue the automatic stay beyond the 30 days, you have to file a motion with the court, and show that your current case was not filed in bad faith. One of the factors that the bankruptcy court may consider in its decision on your request to continue the stay is, among other factors, whether or not you filed more than one prior bankruptcy in the past year.

So, if you’re remotely considering filing Chapter 13 to stop foreclosure to buy yourself more time to either negotiate a short sale with the bank, or to remain in your home, you should consider it very carefully, and explore other possible alternatives. Filing multiple bankruptcies can land you in a big trouble. When the court spots bad faith filers, it has the power to ban them from future filings, and refer them to the US Attorney’s Office for a perjury prosecution, if they made any significant misstatements in their petition.

If you’re interested in learning more about bankruptcy terms beginning with letter “B”, follow these links:

Bankruptcy Petition Preparers

Bar Date

Best Interest of the Creditors

Beware of these Credit Card Offers

Borrow

Business

Business Bankruptcy for Individuals

Business Bankruptcy

Buy Low Sell High

Bankruptcy Alphabet – A is for Amendment

Dorota Trzeciecka — Tue, 27 Dec 2011 18:16:53 +0000

I considered it very fitting to begin the bankruptcy alphabet with a word “Amendment” for the first letter of the alphabet. By amendment, I specifically mean amendment to creditor information. This topic is near and dear to my heart, and it underscores the importance of providing the correct and up to date creditor information to your bankruptcy attorney.

The correct creditor information is important for two reasons. First, it may affect dischargability of your debts. And second, it is costly and time consuming for your bankruptcy attorney to amend the creditor information after the original filing of the petition and schedules. But, most importantly, it translates into more money in attorneys’ fees and court costs for you to correct the information that you were required to provide to your attorney in the first place.

This is the reason why your bankruptcy attorney always asks for at least 2 statements from creditors, which you received during the last 90 days prior to the commencement of your case. This is not arbitrary — the notice provided to such creditors, in accordance with the information in such a statement, is presumed to be a good notice pursuant to Section 342 of the Bankruptcy Code. That section also instructs us that “[n]otice provided to a creditor by the debtor or the court [...] shall not be effective notice until such notice is brought to the attention of such creditor”. It means that if a creditor is not notified in accordance with that Section 342 of the Bankruptcy Code, you risk that one of your debts may not be discharged. If possible, you should always locate and turn over any communication from the creditor received during the previous 90 days. If that is not available, you should call the creditor, and request a statement to ensure that you have the most current creditor information.

Once the Petition and the Schedules are filed, the only way to amend, and to add creditor information is through the lengthy amendment process. This process involves amending the bankruptcy schedules, filing Notice of Compliance with the Requirements for Amending Creditor Information, filing new Declaration Regarding Electronic Filing (one that you have previously signed under penalty of perjury), and serving all these amended documents on the affected creditors. In other words, it means your attorney, and/or his staff, will have to spend time preparing all these documents for filing. For you, it means that you will have to pay for your attorneys’ time to do the amendment, and the court’s fee for processing the amendment.

E – is for equitable distribution

Dorota Trzeciecka — Tue, 06 Dec 2011 17:55:12 +0000

Equitable distributions are payments that a family court may order from one former spouse to another, and which are not in the nature of alimony and child support. They are named “equitable” because they serve to equally divide the marital property and financial obligations between the former spouses. Like alimony and child support, equitable distributions are not dischargeable in Chapter 7 bankruptcy, but may be dischargeable in Chapter 13. As it usually happens, there is an exception to this rule, as there is to most other rules. In Florida, that exception comes into play when “the court awards a cash payment for the purpose of equitable distribution of marital assets, to be paid in full, or in installments,….” According to Florida Statute sec. 61.075 (2), such equitable distribution award vests when the judgment is awarded. What does this mean to a former spouse, who was ordered to make a cash payment equitable distribution. It means that such equitable distribution is not dischargeable in Chapter 13. And, unlike alimony, it does not terminate upon remarriage or death of either spouse. At least one bankruptcy court in Florida (in an unpublished opinion in In re Rieger), interpreting section 61.075(2) Florida Statutes, ruled that ex-spuse’s equitable distribution, which vested before filing of the bankruptcy petition, had to be included in, and paid through, Chapter 13 plan.

Everything you need to know about bankruptcy that begins with the letter E:

Statutory lien – for S

Dorota Trzeciecka — Mon, 14 Nov 2011 18:53:29 +0000

In the bankruptcy alphabet challenge, most participants must have thought of liens for letter L. But, alas, Jay Fleischman has already done an excellent overview of liens in bankruptcy in his blog L is for Lien. So, I want to expand on a less common category of liens in consumer bankruptcy cases, ones that arise by operation of the law. They are sometimes referred to as statutory liens.

One notable example of the statuary lien is a mechanic’s lien. In many states, including Florida, if you hire a contractor to work on your home and you do not pay them, the contractor and the supplier of materials automatically gets a mechanic’s lien on your home. So does a homeowner’s association in some states, including Florida, if you do not pay your associations dues and special assessments.

Statutory liens have their own definition under the Bankruptcy Code, Section 101(53), and receive a special treatment in bankruptcy. For example, a mechanic’s lien, when properly perfected (within 90 days of the filing of the petition) and enforceable, cannot be avoided by a bankruptcy trustee under Section 547(c)(6) , or by the debtor in a lien avoidance action as an encumbrance on real property that a debtor claims as exempt, like a homestead.

So, unlike a judicial lien that may be avoided in Chapter 7, if it encumbers debtor’s exempt property, or becomes an unsecured debt in Chapter 13 that is discharged upon completion of the plan, a statutory lien that is properly perfected and enforceable at the time of filing of the petition, survives Chapter 7. In Chapter 13, a statutory lien is treated as a secured debt that has to be paid in full over the term of the Chapter 13 plan.

K is for Keeping your business in bankruptcy

Dorota Trzeciecka — Fri, 11 Nov 2011 17:44:20 +0000

Not that many bankruptcy topics come to mind beginning with the letter K. So, when Jay Fleischman said in his post K is for Keys for your business, which you have to hand over to the trustee when you file bankruptcy, I thought back to the Chapter 7 case that I have just wrapped up for a client. It was a personal bankruptcy for a client, who also operated a small service-oriented business, a corporation. Client’s debts were primarily business debts, and they far exceeded the value of the business assets. Consequently, the corporation had little or no value, and the trustee had no interest in taking over the business that was not very profitable. It was also of great benefit to the client that the nature of the business was such that he was the company’s biggest asset. The trustee could not have easily assessed and sell the business, because without my client the business was worthless. So, in that case, the cards were stacked in my client’s favor, and keeping the business became a possibility.

But, before we filed the case, I had to prepare the client for the possibility that he may lose the business. Generally speaking, business entities are not part of personal bankruptcy cases. If , however, you operate a business as a sole proprietor, corporation, or limited liability company, and that business can potentially generate enough income to pay your creditors, the trustee can extend his hand out for the Keyes to your business, literally. The trustee can come in and temporarily close your business to assess the value of your assets and inventory, and the exemptions that you had claimed. The trustee can step into your shoes, vote your shares to close down your business, and sell the assets that you cannot exempt. And, although these may seem like extreme measures, they’re real possibilities of which you need to be aware, if you’re a business owner filing for personal bankruptcy.

Avoid Deficiency – Know your Options

Dorota Trzeciecka — Tue, 08 Nov 2011 19:12:26 +0000

You had suffered through foreclosure, lost your home, and found an affordable alternative housing. You thought this was the end of your financial problems. That is, until you received that letter from the bank saying that you’re liable for the deficiency on your foreclosed mortgage. You read it again and again in disbelief.

That ‘s right — in some states, and Florida is one of them, homeowners are responsible for deficiency after foreclosure. Deficiency is the difference between what you owed on your mortgage and the amount that your home sold for at a foreclosure sale. You can get rid of the deficiency by paying it, settling with the lender for a lesser amount, or discharging it in bankruptcy.

As you can see, after foreclosure your options to avoid deficiency are more limited. That’s why, you should avoid foreclosure, if at all possible, and seek any available foreclosure alternatives. If your home is owned by Fannie Mae or Freddie Mac, or if your loan is serviced by any of the participating Home Affordable Modification Program (HAMP) servicers, you may qualify for short sale or deed in lieu of foreclosure under a government program called Home Affordable Foreclosure Alternatives (HAFA). The advantage of HAFA short sale is that you will not only avoid painful experience of foreclosure, but you will not be responsible for deficiency after the sale. If you are found eligible for short sale under HAFA, you will receive a Short Sale Agreement from the servicer. That Short Sale Agreement has a provision releasing you from all future liability for any deficiency on your mortgage. And, you may also qualify for up to $3,000 in relocation expenses. You must act soon; unless extended by Congress, the HAFA program ends in December of 2012.

creditor charged off my debt – do I still owe the money?

Dorota Trzeciecka — Wed, 19 Oct 2011 16:27:44 +0000

Yes, you do. Many people mistakenly believe that, when a debt is charged off, they no longer owe the money. A charge off, or a write off typically occurs when the debtor had not made a payment on the account for more than 180 days. Think about charge off in terms of a personal loan that you would make to a friend or a family member. If you lend money to someone and they do not re-pay you, you can take a loss for that unpaid debt on your personal tax returns. The creditors can do the same. Charge off is an accounting term used by creditors for tax purposes to remove the bad debt form their balance sheet. It does not affect the validity of the debt. Just like you could report a bad debt, the creditor can report the loss for the unpaid debt on their tax returns.

It does not mean however that the debt was cancelled , and you no longer owe it. In fact, the banks will try to collect on charged off debts long time after the charge off, either through their own collection departments, or by hiring a collection agency that will usually tuck on their own commission, on top of the debt, or may offer you a settlement for a lower amount. It is also a common practice among creditors to sell the debt to a debt buyer for a few pennies on the dollar, and have them incur the cost of collecting on the debt.

A charge off has serious consequences on your credit and affects your ability to obtain credit and borrow money. Per The Fair Credit Reporting Act, charge offs stay on your credit report for 71/2 years from the date of the delinquency.

Protect yourself from a deficiency judgment after foreclosure

Dorota Trzeciecka — Fri, 26 Aug 2011 15:26:14 +0000

There are several steps you can take to either avoid, reduce, or protect yourself from personal liability for a deficiency judgment:

Avoid liability by preventing foreclosure from happening in the first place. Explore alternatives to foreclosure. Loan modification, short sale, and Deed in Lieu of Foreclosure (commonly known as DIL) are the most common ones. But, there are other workout options available.
If the deficiency judgment is unavoidable, you can reduce your liability by offering to settle the deficiency for a lower amount. If the loan servicer accepts your offer, make sure that you ask them for a full satisfaction of the deficiency judgment, if one has already been entered. If you’re negotiating a settlement agreement to settle the deficiency before the judgment is entered, ask for a release of all claims relating to and arising out of the foreclosure lawsuit.
If the loan servicer is unwilling to grant your request for Deed in Lieu of Foreclosure or for a short sale, and the foreclosure is your only option, one sure way to protect yourself from personal liability for deficiency is to file for bankruptcy protection. Upon surrendering of the property to the bankruptcy trustee, your personal liability for the loan, including any deficiency, may be discharged in bankruptcy.