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6151 Lakeside Dr.,  Suite 2100
Reno, NV  89511

Reno Bankruptcy Attorney

Stephen R. Harris, Esq.

Providing Financial Protection

for 46 Years

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.

3 Ways Filing For Bankruptcy Can Save Your Home

3 Ways Filing For Bankruptcy Can Save Your Home

We will spend some time talking about your home because the home is usually the biggest asset that most people have. Also, legislatures have recognized that people must have a place to live and homeownership has always been one of the cornerstones of American life. In fact, the number one reason people file bankruptcy is to keep their homes. Let’s discuss the 4 ways that bankruptcy may be able to allow you to keep your home.

1. The Stopping of a Foreclosure Action

Homeowners fall behind in the mortgage loan payments and they can lose their home through foreclosure. Foreclose is the last option a lender has. Previously, the lender has sent out all manner of notices and threats to get the homeowner to pay up, or make some kind of arrangements to pay, and therefore, it not a surprise when foreclosure proceedings begin.

Since the 2008 mortgage crisis, lenders have invented numerous alternatives to foreclosure. Foreclosure is the process that allows the lender(s) to reclaim the property, and then sell it to get their money back.

Foreclosure laws vary from state to state, but in Nevada, it usually begins when the lender files a lawsuit with the county, called a judicial foreclosure action.   In the case of a non-judicial foreclosure, the lender records a default notice with the county and mails copies of the filing to you.

The default notice will inform the homeowner that the home will be sold through a public auction or trustee’s foreclosure sale. The time between the foreclosure notice and the trustee’s foreclosure sale is usually three to four months. During that time, the homeowner still owns the home. After the auction, the new owner can evict the borrower. So practically, the lender will usually not file foreclosure proceedings until you’re at least 90 days overdue in your payments. Typically it will be another 90 days before the public auction. So this gives the borrower at least four months to solve the delinquency problem. Here is a detailed timeline for you to review in greater detail.

A chapter-7 bankruptcy filing stays or stops, the foreclosure action temporarily until you can arrange a satisfactory solution to the payment delinquency. Your filing gives you options to head off foreclosure in 2 ways:

  1. The official Chapter-7 bankruptcy filing will probably allow you to get rid of most of your other debts and therefore making it much easier to afford the mortgage. If you are current or can get current with mortgage payments, the value of your home may be covered by the state’s homeowner exemption, which in Nevada is $550,000. You can then stay in your home as long as you remain current on your mortgage debt. If the value of your home is more than the available state exemption, your home is subject to sale by the trustee, and that excess is used to pay your creditors.

For example: If your home is worth $600,000, the trustee can force you to sell it, give you a check for $550,000, and the remaining fifty thousand dollars is distributed to your creditors.

  • A Chapter 13 filing offers you another option to make up to the delinquent late payments over a 3 to 5 year bankruptcy plan.  If you are $5000 in arrears on your mortgage, then Chapter 13 allows you to pay off the $5000 over the  3 to 5 year life of your bankruptcy plan. Needless to say, you must remain current with your regular monthly payment during this time. So, if your arrears are $5000, and your plan is 36 months, then you would pay an additional $138.89 ($5,000 divided by 36 months) each month to pay off your arrears.  Remember, you may have eliminated a lot of other debt to make that additional payment affordable, and you get to stay in your home.

In some cases where the home is worth less than the first mortgage and there is a second mortgage on top of that, you may be able to eliminate the second mortgage, therefore making bankruptcy even more attractive.

2. Mortgage Restructuring

The filing for a Chapter-7 bankruptcy gives you the opportunity to take advantage, in some situations in which you may be able to restructure your home mortgage in the following ways:

  • You can propose to suspend payments until you can sell the property and pay off the secured mortgage.
  • Restructure the debt to reduce the interest rate and maybe change the terms.
  • You may be able to eliminate part of a debt in what is commonly called, cram down or strip off, in which Chapter 13 debtors do not pay the full amount of debt, but just the value of the collateral. For example, assume your property is worth $100,000 and has two mortgages. The first mortgage is $75,000 and the second mortgage is $40,000. The first mortgage is fully covered by the value of the property and therefore fully secured. But after you deduct the $75,000 on the first mortgage from the value of the property, only $25,000 remains. You did eliminate all but $25,000 a second mortgage. If you paid a second mortgage $25,000 over the course of your Chapter 13 plan, the mortgage debt is reduced dramatically,  even though you owed $40,000.

There are a few situations where residential mortgages have special protection and/or allow some modifications such as:

  • Loans that are due or will come due, during the next five years, like balloon loans.
  • Loans are secured by other property in addition to your home.
  • Loans that are completely unsecured because the property was fully encumbered by prior mortgages.

3. The Nevada Homestead Exemption

Even in bankruptcy, there are a number of categories of debt that cannot be wiped out. Even though the Nevada Homestead exemption is generous compared to many other states. As a general rule, the equity in your home is exempt from being taken up to the amount specified in the state law; in Nevada, it is $550,000.

BUT, the exemption can have all sorts of limitations such as the following:

  • If you bought your home within 1215 days in chapter-7 bankruptcy your home exemption may not equal the allowed amount of exemptions in your state.
  • There is $125,000 on homesteads if you have been convicted of certain federal securities laws or criminal acts that cause serious injury or death within five years of the bankruptcy.
  • The Homestead exemption may be reduced to the extent that the equity in your home was created with the intent to hinder or defraud creditors within 10 years of the bankruptcy.
  • Your exemption amount may be more than the amount stated by state law because the exemption must be more to cover the costs of selling your home. Commissions and other costs must be paid before your exemption is impaired.
  • Some kinds of residences may or may not be covered by the exemption, depending on the local court. Houseboat residences, for example, have for some time been deemed exempt, but sometimes not.
  • If you rent out part of your home, most courts have found that it does not impair your homestead exemption.
  • If you have lived in your current state for less than two years, the exemption law of your prior residence state may be the one that applies.
  • In most states, you must personally live in the residence to reap the homestead exemption.
  • Joint ownership of a home provides further confusion if only one spouse files for bankruptcy. Except for the eight community property states, when only one spouse files for bankruptcy, the other spouse’s interest in the property does not come into play.

So, I hope it is becoming clear that dealing with homestead exemptions is extremely complicated and one that needs to be discussed in-depth with your attorney.

Your Home Valuation Regarding The Nevada Homestead Exemption

Before we can make any decisions on how to handle your homestead exemption, you need to know how much your home is worth. If you have recently purchased your home, the selling price will be a good starting guide. You may need to hire a real estate appraiser to give you an accurate valuation. It is not wise to use either asking prices of similar homes in your neighborhood or real estate agents’ estimates. They tend to be higher estimates with the bias towards listing your home. After you have a good fair market value, you will need to make adjustments to discover the real net value.

Take the real net value of your home, subtract the cost of selling it, which may be as high as 10%. From that number, subtract the amount owed on any outstanding mortgages and the amount owed on any other liens or judgment, real estate taxes, etc., and this figure will be your real equity. If your real equity is less than your homestead exemption, then this is the amount that you claim as exempt, not to exceed the exemption limit in your bankruptcy.

In conclusion when contemplating the various financial and personal issues involved with filing for any type of bankruptcy please be sure to consult a qualified and experienced Nevada bankruptcy lawyer, especially if you are you in a considering entering into a Chapter-13 bankruptcy plan. Renting your home, moving, making improvements, refinancing, signing a contract to sell can all have serious consequences for debtors.

Please call our office at (775) 786-7600 or (775) 690-9120 and set up an appointment for a free and confidential consultation with me to discuss your financial situation. We will investigate all of your options and alternatives, even those that don’t require you to file bankruptcy at all. Feel free to visit our website at www.harrislawreno.com to learn more about our practice and services here in Reno.

The Chapter 13 Bankruptcy Process

The Chapter 13 Bankruptcy Process

The steps for working your way through a Chapter 13 bankruptcy are pretty much the same in steps one through eight explained in a previous post. A Chapter 13 filing requires that you propose a plan to repay creditors over a period of 3 to 5 years. The trustee will oversee compliance with that plan. You must have a plan in place within 15 days after you file your petition and your first plan payment is due within 30 days of the petition filing.

The 341 Meeting

The 341 meeting for a Chapter 13 is very similar as in the case of the chapter 7, but the standing trustee will be more concerned with your income and expenses to see if your plan can reasonably be expected to succeed. The trustee and creditors may raise any questions, concerns or objections after submitting your plan to the court.

You and your lawyer may attempt to justify your plan and satisfy the questions. If you cannot satisfy the standing trustee or your creditors, you will have the opportunity to modify your plan and to schedule another hearing to have it approved. Occasionally, problems will be so severe or cannot be negotiated away that the court may consider the problem so serious they could dismiss your Chapter 13 bankruptcy case altogether. This is rare.

One of the places that tend to be stumbling blocks is the valuation that you place on assets that might be different from your creditor’s estimates. One of the issues that usually come up has to do with real property and the liens against it. Your attorney will probably attempt to strip off liens, depending upon the valuations of your real properties.   

Lien Stripping

Lien stripping and lien strip downs are an important component of the Chapter 13 process.  Many Chapter 13 debtors have a residence or a rental house that they are attempting to strip off any junior liens, and in the case of a rental house, strip down the value of the lien to the value of the collateral rental house.  Lien stripping would be as follows:

The debtor has a homestead residence which they own and reside in.  The residence is worth $100,000.00, but it has a first trust deed obligation of $125,000.00 and the second trust deed obligation of $75,000.00.  In this instance, the Debtor has the potential for filing a Chapter 13 Plan for 5 years where the second trust deed obligation would be stripped off the debtor’s residence, assuming the debtor completes its 5 year Plan of Reorganization and timely makes the payments. 

Again, assuming the debtor’s homesteaded residence is worth $100,000.00, if the Debtor has a first trust deed obligation of $95,000.00, and second trust deed of $75,000.00, in this instance, the Debtor would not be able strip off the second trust deed, since there is potentially $5,000.00 equity that inures to the benefit of the second trust deed holder.  Translated, any equity in a residence that the second trust deed holder may possess would prevent that lien from being stripped off by the debtor in a Chapter 13 Plan.  In the case of rental houses, not only can the debtor do a lien stripping, but it can also do a lien strip down. 

An example of this would be a debtor owns a rental house worth a $100,000.00, with a first trust deed obligation of $50,000.00 and a second trust deed obligation of $150,000.00.  In this example, the debtor can propose upon a Chapter 13 Plan where the second trust deed obligation is reduced from $150,000.00 to $50,000.00, which reflects that amount of equity after the first trust deed obligation is subtracted from the valuation of the house that inures to the benefit of the second trust deed obligation.  Therefore, after the debtor successfully completes the 5 year plan payment period, the second trust deed holder would be mandated to reduce its lien and would have a $50,000.00 of the lien paid off, and the remaining $100,000.00 would be discharged.

              2.           An example of lien stripping or lien strip downs are as follows: debtor resides in his homesteaded house that he owns, which house has a first trust deed against it for $100,000 and a second trust deed against it for a $200,000.  If the house is worth $90,000, then the debtor  is able to strip off the $200,000 second because there is no equity in favor of the second, thereby allowing the debtor in a Chapter 11 or Chapter 13 to strip off the entire amount owing on the second.  

If you are using the same debtor in the same homesteaded house that the debtor resides in, the house is worth $125,000, the debtor owes a first trust deed of $100,000 and the second trust deed of the $200,000, then the debtor would not be able to strip off any of the $200,000 second trust deed, because of reported $25,000 equity above and beyond what is owed to the first.   An important thing to remember in this situation is that the debtor is residing in the house and claims it as a homestead.  

Using the same lien values of $100,000 for the first trust deed and $200,000 for the second trust deed, and a house valued $125,000, if the debtor is not residing in the house and rents the house to third parties, then the debtor could strip down the value of the second lien from $200,000 to $25,000, by reason of the $25,000 equity in the rental above, beyond $100,000 owed on the first lien.  

In an extreme situation using a rental house, a debtor could have a house worth $125,000, owe $100,000 on the first, $200,000 on the second and $100,000 on the third.  In this factual situation, the debtor could reaffirm the $100,000  first lien, strip down the $200,000 second lien to $25,000, conditioned on paying that $25,000 residence value for a five-year period  in equally amortized monthly payments, unless the secured creditor consents otherwise, and to strip off the entire $100,000 third lien  obligation.  

If your lawyer is unable to negotiate the differences, then the bankruptcy judge will decide.

Repayment to Creditors

The other major difference between Chapter 13 and Chapter 7 cases is that Chapter 13 cases involve repayment to creditors, and the standing trustee may want to keep tabs on how you are doing. Each year you must file a statement with the court regarding your income and expenses for the past year. These reports will continue until the plan is fulfilled. You and your lawyer should set up the process for completing those reports annually. Also, you must file a copy of all tax returns that become due while your bankruptcy case is open.  Potentially if your annual income significantly increases, then your plan payments may increase.

Since several creditors may be receiving payments from your Chapter 13 plan, you want to be sure that the money you pay will go toward satisfying those debts. The document called a proof of claim should be filed by the creditors up to 90 days after the 341 meeting. This ensures that they will receive the money that you are paying toward your plan. If the creditor does not file the proof of claim, you should file same on their behalf, with one exception.

That one exception is government agencies. They have up 280 days to file a proof of claim which are called priority debts. These debts would not normally be discharged in Chapter 13, but if they fail to file a proof of claim they could be discharged. Hopefully, their claim may fall through the cracks and you might be lucky indeed

Summary

I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.

The Chapter 7 Bankruptcy Processes You Should Know . . . Continued

The Chapter 7 Bankruptcy Processes You Should Know . . . Continued

This article will primarily deal with the processes involved with the filing of chapter 7 bankruptcy, sometimes called ‘consumer,’ or ‘personal’ bankruptcy and is a continuation from the article of the same name.

Step 7 – Notification of Creditors

About 7 days after the court receives your chapter 7 bankruptcy petition, it will notify all those creditors that you have listed on your filed pleadings that you have filed bankruptcy. The court will announce the case trustee and the date and time for the section 341 first meeting of creditors.

Step 8 – Supplying Copies of Your Federal Tax Returns

At least one week before the 341 meeting, you must supply copies of your most recent federal tax returns to the trustee and certain financial documentation, such as three months bank statements incurred prior to filing.

In chapter 13 cases, you must supply the standing trustee the last four years of your tax returns. If you fail to supply these tax returns, your case may be dismissed.

Therefore, it is important to file your tax returns prior to filing the bankruptcy.

Step 9 – Chapter 7 Bankruptcy 341 Meeting; First meeting of Creditors

Most petitioners dread the 341 meeting because they do not know what to expect. This fear is usually way overblown. Since these meetings are open to the public, we suggest that you attend a meeting for other positioners prior to attending your own. Since 341 meetings are little different between Chapter 7 and Chapter 13, be sure to attend the correct kind of filing meeting. This will give you a complete and accurate picture of what actually goes on at a 341 meeting and enables you to be thoroughly prepared for your own.

In Chapter 7 cases, seldom do any creditors show up at the meeting, although one or two might. They do have the right to ask questions, but this does not frequently happen. The 341 meetings are not emotional affairs. There are conducted to gather, clarify and affirm the statements that you made in your bankruptcy filing documents, with respect to assets and liabilities.

The 341 meeting usually takes place 30 to 40 days after you file. The trustee conducts the meeting, and you and your attorney must attend. Also bring proof of your Social Security number and a photo identification document, like a driver’s license.

Typically, the trustee will ask you if you have any nonexempt property that can be sold to pay off creditors. They may also ask about any payments or transfers you made in the two years preceding the bankruptcy. They will probably also ask about the value of your home, value of your car, any retirement plans, and other questions that meet the requirements of the state you live in.

They may also ask about nonexempt assets that you may want to keep, and if so, arrange for you to pay for them. If you do not want to keep nonexempt property, the trustee arranges to have those assets evaluated and picked up. They will then be sold for the benefit of creditors.

Your attorney will review 341 meeting questions with you before the meeting. An experienced attorney can usually anticipate any areas of uncertainty and will usually deal with those before the 341 meeting. In most chapter 7 cases there will be little or no nonexempt assets. Usually this is the end of 341 meetings. In about 60 to 90 days after the 341 meeting, the bankruptcy debts are discharged, assuming the debtor passed and file their post condition credit counseling certificate.

There are a few milestones and chapter 7 bankruptcy processes that you want to keep in mind:

  1. The trustee has 10 days after the 341 meeting to decide whether you passed or failed the Means test. If you fail, the trustee will ask the court to dismiss your case.
  2. The trustee and creditors have 30 days after the 341 meeting to object to any of your claims of exempt property. If you have amended exemption claims, the 30 day clock starts from the time of any amendments.
  3. Creditors have 60 days to object to the discharge of certain kinds of debt. If they don’t file objections, it’s too late for them to do it later, and you are over the last bankruptcy hurdle.

All these deadlines assume you have supplied accurate information and have answered questions accurately.

Section 341 first meeting of creditors are important for the debtor filing the petition,  in that they will have the opportunity to answer questions the bankruptcy trustee for their case might have with respect to the extent location and availability of assets to pay creditors’ claims, as well as information regarding the liabilities of the petitioner.  For creditors, some opportunity to ask questions of the petitioner with respect to his available assets and liabilities in the case as well as asking questions about inconsistencies found in the schedules of assets and liabilities, and statement of financial affairs filed by the debtor.  

Additionally, this section 341 first meeting of creditors date triggers the time for filing complaints objecting to discharge then go 90 days after the time first set the 341 meeting, as well as time for the debt of the bankruptcy trustee to object to the debtor’s claim of exemptions – 35 days from the date last set for the section 341 meeting.  Extended 341  first meeting of creditors are not encouraged  by the bankruptcy trustee and the debtor’s attorneys, especially if the question becomes too intense at the 341 meetings specific to a creditor’s particular issue  concerning the debtor.

After 15 to 60 minutes of questioning the chapter 7 bankruptcy trustee will more than likely suggest and/or recommend to the creditor or the creditor’s attorney asking the questions to notice  a rule 2004 examination in order to ask the debtor questions in a formal atmosphere with no time constraints.  Normally there are time constraints at a section 341 first meeting creditors because there are other scheduled debtors to give testimony and to answer questions to the bankruptcy trustee, normally anywhere from 3 to 8 cases every half hour.  

 Assets in Chapter 7 cases 

In a few Chapter 7 cases that have assets that need to be liquidated or distributed for creditors, the case will remain open until all those assets are dealt with. Sometimes, depending on the kind of assets, their disposal can take quite a long time, sometimes years. Once your case is filed the non-exempt assets are turned over to the trustee and those assets become property of the bankruptcy estate, and no longer yours to do what you want.

You must, of course, cooperate with the trustees to dispose of those non-exempt properties and assist with collecting any monies or properties that might be owed to you. You may have tax refunds that are outstanding at the close of bankruptcy, or outstanding real estate or personal notes that needs to be collected or sold to pay your creditors.

Those are the steps that you must go through to finalize your Chapter 7 bankruptcy case. Barring any foreseen complications, you should be done with your bankruptcy case in about 120 to 180 days after the 341 meeting.

I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.

Bankruptcy for the Elderly: Beware of This Horrific Fact; 1 in 8 Filers Were Over 65 Years of Age.

Bankruptcy for the Elderly: Beware of This Horrific Fact; 1 in 8 Filers Were Over 65 Years of Age.

Senior-citizen bankruptcies are on the rise, driven by socioeconomic factors such as insufficient Social Security payments, higher health-care costs, and increased individual responsibility for retirement savings.

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.

Why Many Older Americans Are Going Into Debt?

Experts have observed a rapid surge of retirees getting into insurmountable debt. The skyrocketing figures are due to the following reasons:

  • Credit card debt
  • Medical expenses
  • Job loss
  • Reduced income
  • Expensive insurance co-pays

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.

Chapter 7 Bankruptcy & Chapter 13 Bankruptcy Processes You Should Know

Chapter 7 Bankruptcy & Chapter 13 Bankruptcy Processes You Should Know

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.

TO BE CONTINUED: Next Blog Post – Information about the automatic stay provision.

Bankruptcy: Who Are the 4 People Important to You During Your Filing?

Bankruptcy: Who Are the 4 People Important to You During Your Filing?

Your Bankruptcy Attorney

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:

  1. 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.
  2. 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.
  3. 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.
  4. Your attorney can help you with tax issues. Regardless of when you file, the tax clock will always be ticking.
  5. 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.
  6. Your attorney will help you determine the best kind of bankruptcy to file considering your individual financial circumstances.
  7. Your attorney will help you complete and file the bankruptcy documents and pleadings required by the Court.
  8. Your attorney will represent you at the 341 first meeting of creditors hearing and the planning for it.
  9. Your attorney will keep your filing from being denied or revoked or dismissed.
  10. Your attorney will guide you through the endless minefield of Chapter 11.
  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.
  12. 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.
  13. 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.

Bankruptcy Trustees

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.

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.

I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.