There is nothing easy about making the decision to file for bankruptcy. I welcome the opportunity to speak with you personally and confidentially to help you find the ideal solution to your financial challenges.
1. The “automatic stay” provisions of section 362(a) of the Bankruptcy Code are probably the most important tool available to the Debtor when filing a bankruptcy petition, whether it’s a chapter 7 petition, chapter 11 petition or a chapter 13 petition. Essentially, filing a petition, even an involuntary petition under section 303 of the Bankruptcy Code, operates as an automatic stay, applicable to all entities, mostly creditor entities,
(a) Except as provided in subsection(b) of section 362, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as an automatic stay, applicable to all entities.
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) 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; and
(8) the commencement or continuation of a proceeding before the United States Tax Court concerning a tax liability of a debtor that is a corporation for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title. Under section 362(b), the filing of the Petition does not operate as a stay of the commencement or continuation of a criminal action or proceeding against the debtor, and the following:
(b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as an automatic stay –
(1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor;
(2) under subsection (a) –
(A) of the commencement or continuation of a civil action or proceeding-
(i) for the establishment of paternity;
(ii) for the establishment or modification of an order for domestic support obligations;
(iii) concerning child custody or visitation;
(iv) for the dissolution of marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate; or
(B) of the collection of a domestic support obligation from property that is not property of the estate;
(C) with respect to withholding of income that is property of the estate of property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute;
(D) of the withholding, suspension, or restriction of a driver’s license, a professional or occupational license, or a recreational license under State law, as specified in section 466(a)(16) of the Social Security Act;
(E) of the reporting of overdue support owed by a parent to any consumer reporting agency as specified in section 466(a)(7) of the Social Security Act;
(F) of the interception of a tax refund, as specified in section 464 and 466(a)(3) of the Social Security Act or under an analogous State law; or
(G) of the enforcement of a medical obligation as specified under title IV of the Social Security Act;
What’s important about the automatic stay is that it automatically goes into place upon the filing of a voluntary petition for bankruptcy relief whether its chapter 7, chapter 11 or chapter 13. Although it’s generally wise to give some kind of fax or email notice to a creditor that is about to take action against the debtor, such as a repossession, a trustee’s foreclosure sale or wage garnishment.
It is better practice to spend 2 to 3 minutes sending, emailing or faxing out a Notice to a creditor about to take an aggressive action against the debtor, as oppose to taking some action against the creditor for violating the stay by taking action after a voluntary petition for bankruptcy was filed, even though they may have not known about the filing itself.
The automatic stay continues until such property is no longer property of the estate, or the Automatic Stay of section 362 continues until the earliest of – (A) at the time the case is closed; (B) at the time the case is dismissed; (C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, chapter 11, chapter 12, or chapter 13 of this title, the time of discharge is granted or denied.
That explains why in a chapter 7 case that normally last 4 to 8 months from the time of petition filing to the time the discharge is entered, why a secured creditor takes no action to obtain relief from the stay. It can recommence its Trustee’s foreclosure sale or any other action to take possession of real property after the discharge has been granted or denied.
The way for a creditor to gain relief from the automatic stay, or to lift the bankruptcy umbrella from actions that the creditor may intend or was acting upon the petition filing, is found in section 362(d), which states that the Court may grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay –
(1) for cause, including the lack of adequate protection of an interest in property of such party in interest.
(2) with respect to an automatic stay of an act against property under subsection (a) of this section, if –
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective reorganization.
In the case of single asset real estate cases, there are certain matters that determine when a creditor may gain relief from the stay, such as the debtor filing within the 90 day period a Plan of Reorganization that has a reasonable possibilities of being confirmed within a reasonable time; or the debtor commenced monthly payments that are in an amount equal to interest at the then applicable full contract rate of interest on the value of the creditor’s interest in the real estate. An individual filing a petition can always resort to providing adequate protection to the creditor in order to stop the court from terminating, modifying, annulling or conditioning the automatic stay provisions of section 362(a).
Ways of getting adequate protection are found in section 361 of the bankruptcy code. The most common method of providing adequate protection to creditors is to make a cash payment or periodic cash payments to such creditor entity, or provide such entity an additional or replacement lien to the extent such stay, use, sale, lease or grant results in a decrease in value such entity’s interest in such property; or granting such other relief, that will result in the realization by such entity of the indubitable equivalent of such entity’s interest in such property.
Between 2013 and 2016, 1 in 8 filers in the U.S. was age 65 or older; during the same time period, 21% were age 55 to 64, according to Robert Lawless, law professor at the University of Illinois’ College of Law who has co-authored research on the subject. There’s been an overall trend toward older filers since the study was first conducted in 1991, he says.
While some of the stigma of declaring bankruptcy has dissipated, there can still be negative consequences such as losing property and long-lasting effects on credit. Before filing, make sure you weigh your options and avoid these potentially costly mistakes:
Not sufficiently exploring self-help options
Haphazardly liquidating assets
Taking on additional financial obligations to pay the bills
Not seeking legal help
If you’re feeling in over your head, it’s advisable to consult an attorney. The Eldercare Locator connects older Americans and their caregivers with trustworthy local support resources, including legal help, based on their location. Seniors can also use the Legal Services Corp. website to locate nonprofit legal aid organizations in their state that may be able to help them navigate debt and bankruptcy-related issues.
The website of the National Association of Consumer Bankruptcy Attorneys is another resource seniors can use to locate an attorney in their area. For seniors who don’t qualify for legal aid, but are concerned about fees, there are a number of firms that will do pro-bono work and sometimes firms will offer reasonable and discounted payment plans.
Many seniors also experience a lack of support, lack of access to necessities, and isolation. Filing in Nevada for bankruptcy offers a way to ease the burden of debt and get peace of mind in their golden years.
What Kind of Bankruptcy Can Seniors Qualify For?
Most older adults filing for bankruptcy will qualify for either Chapter 7 or Chapter 13 bankruptcy:
Chapter 7 Bankruptcy
This type of filing will allow seniors to discharge most or all their debts. Chapter 7 is usually granted to filers who make less than their state’s median income.
The court may also order a means test to determine if an elderly filer can pay a Chapter 13 plan. Under Chapter 7, the court trustee may ask the debtor to turn over any non-exempt assets. These assets will be sold to help pay the petitioner’s creditors.
Chapter 13 Bankruptcy
This type of filing involves a three-to-five-year repayment plan. Successful filers generally get to keep their property and assets.
Older adults who still have steady income may prefer this repayment plan, especially for those who do not pass the means test or make more than the state’s median income. The success of filing may depend on selecting the right type of bankruptcy to file for. Therefore, it is best for petitioners to seek the help of a bankruptcy lawyer in Raleigh for expert assistance on the next steps.
Seniors May Be Able to Keep Their Homes After Filing for Bankruptcy.
There is something called a homestead exemption when it comes to bankruptcy laws. It is a certain amount of home equity that’s protected under bankruptcy. However, some seniors may risk losing their homes, especially if they have large amounts of equity or unpaid mortgage.
It is critical to learn how much equity the debtor’s state protects under bankruptcy. Some cover the full value of the petitioner’s home under Chapter 7 in Nevada. On the other hand, older adults may keep their home under Chapter 13, provided they are able to continue paying the mortgage. The repayment plan can also help debtors pay mortgage arrears.
Learn More About Bankruptcy for the Elderly in Reno.
Bankruptcy can pave the way for a more secure retirement for debt-ridden older adults. It is natural to have many questions about the decision to file, especially when it involves factors like your social security income and retirement accounts. Call the Harris Law office today at 775-786-7600 for a free consultation, also visit our new Facebook Page for more information.
This post will primarily deal with Chapter 7 bankruptcy and 13 bankruptcies. Chapter 11 business reorganization bankruptcies are a different animal all to themselves. You will follow the steps below when you file for a personal or as it’s sometimes termed ‘consumer’ bankruptcy for debt relief.
STEP 1 – Assessing Your Case
In order for the attorney to be able to properly assess your case, an initial interview will gather the following information:
Copies of three years of your most recent tax returns.
The amount of income tax that you may owe.
The amount of domestic support obligations in any arrears.
What is your home worth and the balance owed on recorded mortgages and the amount of monthly installments that you are behind.
How much are your cars worth and the amount that you owe on them.
An approximate of balances that you owe on all your bills including credit cards.
A copy of pay stubs for the last 60 days.
Your home mortgage documents.
The certificate of title on any motor vehicles you on.
In court papers for lawsuits you are involved in.
Divorce, domestic support orders or marital settlement agreements.
Documents showing the amount of income from any sources.
STEP 2 – Finding Creditors
Begin finding your creditors. In most cases you know who you owe money to. Remember, you only receive a discharge for those creditors you list in your bankruptcy schedules, notwithstanding the correctness of the amounts owed. You have outstanding invoices and bills which detail the amount of money owed, the account numbers and their contact addresses. In a few instances, you may be unsure of any outstanding balances. You want to be sure that there are not any old or forgotten debts. Again, creditors you do not include on your bankruptcy documents will not be discharged.
Order credit reports from all three of the major credit reporting agencies. Some creditors may have not reported to all the agencies, and some are missed by others.
STEP 3 – Choosing an Experienced Attorney
Interview and decide on an experienced attorney. Now that you have all your information gathered, you can interview attorneys well-armed about your specific circumstances, and you will receive informed answers to your questions.
After deciding on an attorney, ask them for a worksheet of all information they are going to need. This will require you to gather as much information as possible. The answer to all these questions is going to wind up in the bankruptcy filing, so it is important to have accurate and timely information.
STEP 4 – Credit Counseling
Arrange for credit counseling. Ask your attorney for local recommendations. BARF or BAP requires you have a certificate from an approved credit counseling agency within 180 days of your petition filing for chapter 7 bankruptcy.
STEP 5 – The Questionnaire
Many law firms will give you a questionnaire to complete at home, click on the link for an example. Fortunately, you have already taken a big step toward completing this paperwork by gathering the data in Step One. It’s important to complete the questionnaire accurately. Remember this information is going to the bankruptcy court and it will be reviewed and even sometimes audited. Take your time.
Return your paperwork to your attorney and they will make up the official documents and pleadings from the questionnaires you have completed. When they give you the draft, take it home and review it thoroughly and make any corrections before you return it to the attorney.
STEP 6 – Filing the Petition
Once all the documents are complete, you and your attorney assess your situation and will decide on the actual date to file the petition and pleadings with the court. There are several considerations that may come into play as to the filing, or petition date. For example, you may have recently lost your job. You may want to delay the filing so your average income for the last six months would be lower, thereby making it easier to pass the Means test. Your attorney will guide you to this decision.
Once you do file, the section §362(a) automatic stay kicks in. The stay simply means that creditors are forbidden to take any action against you. Collection calls and actions will stop immediately. It usually takes about 7 to 10 days for the courts to notify your creditors. If you receive collection calls, simply tell them you have filed for bankruptcy and they will receive their notice in the mail in a few days.
It is imperative that you have an attorney to deal with the current bankruptcy laws. In almost all cases, an experienced attorney will save you at least the amount of their fees by avoiding pitfalls that you will inevitably make trying to do it yourself. Your attorney will become your direct interface with the other players in the bankruptcy process and will keep the interaction that you have with the other players to a minimum.
Insist on an experienced bankruptcy attorney, not a credit counselor, debt counselor or paralegal.
After you have settled on an attorney to handle your filing, it is important that you be candid, honest and straightforward with him. This is the only way in which your attorney can provide the best outcome for your individual circumstances. Remember, your bankruptcy attorney is not going to assist you in hiding assets or fail to disclose assets.
Once your attorney has all the facts of your specific situation, he or she will spend a great deal of time discussing whether Chapter 7, Chapter 13 or Chapter 11 is the best way for you to proceed. He or she will discuss the advantages and disadvantages of each kind of bankruptcy. Therefore it is so important for you to disclose all accurate facts and circumstances of your case with your attorney.
The best method of finding a reputable, competent lawyer is through a referral. If you know an attorney who does not handle bankruptcy, ask them to recommend a specialist. They will tend to recommend someone that they respect. Ask any friends or relatives who may have filed bankruptcy about their past experience with their attorney. Go interview those referred attorneys to see what your comfort level is with them. Many times the initial consultation is free. Be sure you talk directly with the attorney that would handle your case, not an assistant or paralegal.
There are several reasons to hire a local bankruptcy specialist:
Your attorney will have knowledge of the policies and procedures of your local bankruptcy court. Even though the bankruptcy law is nationwide, how things are handled, and local customs vary in each jurisdiction. Also, the state law on exemptions may dictate the guidelines of your specific case.
Your attorney will help you with pre-filing guidance. He or She will point out things to do and things to avoid prior to filing.
Your attorney will help you with timing issues. There are many deadlines both before and after filing that can become critical to a successful bankruptcy. Poor timing can cost you thousands of dollars. Only experience will help you avoid disastrous pitfalls.
Your attorney can help you with tax issues. Regardless of when you file, the tax clock will always be ticking.
Your attorney will protect you from creditor claims. Sometimes creditors will not agree with you on repayment plans, exempt property issues, fraud claims and other issues. Your attorney will know how to best shield you from these claims.
Your attorney will help you determine the best kind of bankruptcy to file considering your individual financial circumstances.
Your attorney will help you complete and file the bankruptcy documents and pleadings required by the Court.
Your attorney will represent you at the 341 first meeting of creditors hearing and the planning for it.
Your attorney will keep your filing from being denied or revoked or dismissed.
Your attorney will guide you through the endless minefield of Chapter 11.
Your attorney will help you propose a Plan of Reorganization that will allow you to potentially retain valuable assets, assuming the value of the assets are paid for through Plan Payments, and to hopefully to receive a discharge of all the unpaid obligations at the end of Chapter 11 Plan repayment period.
Your attorney might guide you in the timing for filing, such as any potential re-payment of loans to non-insiders or insiders are beyond the applicable time limitations found in §547 of the Bankruptcy Code.
Your attorney can legally assist you in legally redeploying assets from non-exempt holdings to exempt holdings.
The Bankruptcy Judge
In most cases you may never even see the US Federal Bankruptcy judge where your case is assigned. Bankruptcy Judges are appointed to 14-year terms. Most of them are well versed in the intricacies of bankruptcy law and are quite competent and conscientious. Most issues are resolved by negotiation with bankruptcy case trustees. The judges are usually called into play to make decisions over problems and disputes. The judges may make decisions on creditor’s objections to proceedings. He will approve leases and sales requests. Their decisions can be reviewed by U.S. federal judges.
Other than your attorney, the bankruptcy trustees are the real work horses in the process. In Chapter 7 cases, the bankruptcy trustee’s primary job is selling non-exempt property and distributing the proceeds to your creditors, if there are any non-exempt properties. In over 90% of Chapter 7 cases, there are not any assets that are liquidated, because all of them are exempt or not worth the trouble to liquidate. The trustee is compensated on a commission basis of how much money they collect and pay creditors, as directed by the Bankruptcy Code.
The trustees and their staffs will review your bankruptcy documents and pleadings and ask you questions in a 341 meeting (more later) to determine whether any assets can be sold to pay some or all your debts. He may also gather monies from tax refunds, or divorce property settlement you may have received and collect inheritances you may be entitled to collect in the six months after filing. He may also ask you about any payments or transfers of assets that are made within two years prior to your filing to see if he can recover additional monies for creditors.
The standing bankruptcy trustee’s job in a Chapter 13 case is a bit different from Chapter 7 cases. They also ask you questions about your assets and expenses. They’re trying to assess whether your repayment plan meets the court’s requirements and assess how likely it is to succeed. Specifically, the standing trustee’s mission is to collect the monthly payments that you make under the repayment plan and distribute them to creditors.
After your bankruptcy filing date, you probably will have very little to do with your previous creditors. Sometimes they will attend the 341 meeting, where they can ask questions on your assets and liabilities, but typically few actually do. Most contact is handled by the trustee or your lawyer. Occasionally a creditor will hire their own attorney to protect their claim, where there are substantial assets in a Chapter 13, or 7 or 11 case. After you file, all creditor’s collection activity will stop or be stayed, so you will not hear from them.
Depending on your individual circumstances, choosing which kind of bankruptcy to file can be very difficult. Let’s look at some of the factors that may help you make the right decision.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy allows a person to keep all their exempt assets and discharge their debts. The trustee is appointed to gather all the nonexempt assets, sell those assets, and distribute them pro-rata to the creditors.
Chapter 7 bankruptcy may be your best choice under the following circumstances:
If all the property you have is exempt under both state and federal bankruptcy laws. In other words, you do not have assets that you will have to give up. Over 90% of all bankruptcy cases are this variety.
You are current on your home and automobile payments before filing for bankruptcy.
You are willing to give up your house and automobile before filing bankruptcy.
You do not have any extra funds left over each month after paying all your expenses. In other words, you don’t have money to reclaim assets like in a Chapter 13 bankruptcy case.
You don’t have a previously discharge chapter 7 bankruptcy, or chapter 13 bankruptcy in the last eight years.
If you qualify for chapter 7 bankruptcy under the means test and Median test, you give up all your nonexempt assets, and keep those that the law allows. This option gives you a new and clean start without the pressures and anxiety hanging over your head.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to make partial payments to your creditors for 3 to 5 years and obtain a discharge of all your remaining debts. Chapter 13 in many instances will allow you to retain some or all your non-exempt assets, as long as you pay for the value of those nonexempt assets in your Chapter 13 repayment plan. Chapter 13 will also allow for liens and liens strip downs under certain circumstances. Chapter 13 allows “first aid” pursuant to section 362 of the bankruptcy code, in that any foreclosures at the time bankruptcy filing are stayed until future order of the bankruptcy court.
Chapter 13 bankruptcy is probably your best choice under the following circumstances:
if you need time and/or have adequate income to pay passed bills.
You need time to catch up on back mortgage payments. Chapter 13 repayment plans give you 3 to 5 years to make up your arrears.
You need time to pay off old tax debt without penalties in interest. This can be a huge savings under some circumstances.
You need time to pay alimony and child support that is best due.
You already received a discharge in a bankruptcy case within the last eight years.
You may be able to reduce payments on unsecured loans to the value of the collateral, and not the full amount of the loan. For example, you may owe $15,000 on automobile, but is currently worth only $10,000. So, you might get relief of the $5,000 difference.
You will get to keep the nonexempt property by making payments on it through your Chapter 13 repayment plan.
Any cosigners of your debt would be spared the harassment of bill collectors by making payments through your plan.
You may back of out of a chapter 13 plan and take another route without the court’s permission. A big part of choosing Chapter 13 depends on your income. Many Chapter 13 repayment plans are proposed with too much optimism. Only about two thirds of Chapter 13 plans are fulfilled. Most of those failed plans are forced into Chapter 7 or the bill collectors come back with a vengeance since you are no longer protected by the bankruptcy automatic stay provisions.
Chapter 11 Bankruptcy
Chapter 11 is your best choice if you have a business and/or substantial assets and want to continue in business. The Chapter 11 also gives you the most flexibility in negotiations. You can also withdraw from the Chapter 11, which would put you back to where you were with creditors before filing.
Chapter 11 filings allow individuals and business entities to file for reorganization, thereby allowing the petitioner to repay their general unsecured debt in their priority unsecured debt such as taxes, and their secured debts over a period, such as five years. Chapter 11 petitions also invoke the provision of 1129(b) Chapter 11 filings are known for “cram downs,” which allows a treatment term and for interest rates to imposed on a security and or unsecured creditors over their objection. Thus, cram down or forced acceptance under certain terms and conditions are set forth in section 1129(a)(b) of the Bankruptcy Code.
The provisions of the Bankruptcy Code governing Chapter 11 filings also allows for repayment of tax debt over a five-year period commencing on the date of assessment. Further, bankruptcy court has the authority under section 507 to determine the validity, extent and amount of tax claims. In the instance of an individual filing Chapter 11, relief or a partial discharge of debt is allowed if the individual debtor contributes to disposable income, over five-year plan.
The best next move is to call an experienced bankruptcy lawyer for a free and confidential consultation, such as Harris Law in Reno, Nevada at (775) 786-7600 or (775) 690-9120 anytime.
Portrait of Stephen R. Harris, Esq. local Nevada bankruptcy lawyer. He has been providing financial protection and debt-relief for 46 years.
At Harris Law we have been providing financial protection and guidance in the Reno area for the last 46 years. Bankruptcy may not be your only option. Let’s explore all of the alternatives and possibilities that could exist for you.
Let me work with you. Please call 775-786-7600 to make an appointment for your free, confidential and personal consultation to talk things over.