13 October 2010
Utility bills, in one way, are just like any other unsecured debt—they are discharged in a successful chapter 7 bankruptcy. So, relief from the outstanding amount at the time of filing for bankruptcy can occur. But that is where the similarity to other unsecured debts ends. 11 U.S.C. § 366. Usually, a creditor has the right to stop extending credit to someone who has filed bankruptcy. One significant difference in how utilities are treated is that they have to continue to provide service after the bankruptcy is filed. However there is a catch. Utility companies have the right to demand “adequate protection” within 20 days of the date of the bankruptcy filing. This can take many forms, including: a cash deposit, letter of credit, certificate of deposit, surety bond, prepayment, or what is agreed upon between the parties. The bankruptcy code does not limit the amount the utility can ask for. If a utility does ask for what a debtor believes is too high a deposit, he can request that the court modify the amount required. The bankruptcy court will determine what is reasonable under the circumstances, and ultimately has the final say. In determining “a reasonable modification” to the utilities’ demand, Bankruptcy courts have typically followed what state regulations allow.
The other major difference is that the utility does not need “relief from the automatic stay” (permission from the bankruptcy court) before terminating service after the petition is filed for failure to pay what is due after the bankruptcy. The utility would still have to satisfy state law however, and state law typically provides significant regulation on the subject.
If you are a potential debtor, before becoming concerned that after bankruptcy you will be required to provide a significant deposit to your utilities, the practical world needs to be considered. It is quite rare in this area for a utility to request a deposit. It is quite unlikely to occur in Massachusetts. We surmise that this is because Massachusetts law does not allow a utility company to require a deposit before providing service, or require an advanced deposit to restore service after it was terminated. 220 CMR 25.00 et seq. (Commercial owners and commercial tenants are a different story. 220 CMR 26.00 et seq.) So, in all likelihood, the amount owed prior to filing will be discharged, the utility company will reset the account as if a new account started the day of the bankruptcy filing, and you will simply have to pay for service going forward. Bankruptcy will most likely have little to no effect on how a utility will operate after the bankruptcy is filed. However, if you have any questions on how the law applies to a particular situation, as there can be facts that could complicate the matter, it is wise to seek competent legal advice. Please feel free to give this office a call.
Showing posts with label bankruptcy. Show all posts
Showing posts with label bankruptcy. Show all posts
Thursday, January 27, 2011
Tuesday, June 15, 2010
What is good faith and why is it important in a chapter 13 bankruptcy?
17 June 2010
The term “good faith” is not defined in the bankruptcy code. Nonetheless, the code expressly requires that your chapter 13 petition be filed in “good faith” and that your chapter 13 plan be proposed in “good faith” (your petition is different than your plan); and your case may be dismissed if a creditor can show that you have not operated in good faith. Needless to say, good faith is required every step of the way in bankruptcy. It is becoming so important that there is a trend in bankruptcy law to not allow a chapter 13 debtor to exercise certain rights expressly stated in the code, that we used to take for granted, unless they are operating in good faith. For example, the code says that a chapter 13 debtor has the right to dismiss the case at any time. That used to mean if circumstances changed so that the chapter 13 was no longer beneficial to you, then you could dismiss it and carry on without the benefits (or obligations under your changed financial circumstances) of chapter 13. But if not operating in good faith, this trend indicates that these rights may no longer be available to you. What does that really mean? It could mean that you will not be allowed to dismiss the case and have to stay in chapter 13, or worse, you may have to convert to chapter 7. Why does it matter if you have to convert to chapter 7? Well the reason many people file a chapter 13 is because they get to keep their non-exempt assets, which is not permitted in chapter 7. Also, many people file a chapter 13 to save their homes from foreclosure, and chapter 7 does not contain the same protections to make that possible. So, failing to operate in good faith in chapter 13 could have devastating consequences.
OK, so it’s important, but what is it? Initially, understand that good faith includes both pre- and post-filing acts. Some factors that are considered include: accuracy in stating debts and expenses, lack of effort/ability to pay debts, honesty in disclosing assets and financial affairs (no surprise), manipulation of the bankruptcy code, the type of debts, the motivation, the amount proposed to be paid to creditors, and prior filings. Courts have generally employed a “totality of the circumstances approach.” In re Sullivan, 326 B.R. 204, 211 (B.A.P. 1st Cir. 2005). That is legal speak for “we will consider just about anything reasonable and use our commonsense.” But, the determination about whether good faith is lacking still needs to be made by an experienced practitioner. This is for many reasons, including that many people feel that bankruptcy is inherently unfair, so a lay person may not be able to put aside those feelings from their analysis. Also, an experienced judge will make the decision if good faith is challenged. So, it pays to consult a trained eye to discern what a court could determine is not good faith, and what is permitted under the law.
If you are planning on filing a chapter 13 and would like to meet the requirements, including good faith, or if you have become involved in a chapter 13 someone else has filed and think it is not done in good faith, feel free to give us a call for a free initial consultation.
The term “good faith” is not defined in the bankruptcy code. Nonetheless, the code expressly requires that your chapter 13 petition be filed in “good faith” and that your chapter 13 plan be proposed in “good faith” (your petition is different than your plan); and your case may be dismissed if a creditor can show that you have not operated in good faith. Needless to say, good faith is required every step of the way in bankruptcy. It is becoming so important that there is a trend in bankruptcy law to not allow a chapter 13 debtor to exercise certain rights expressly stated in the code, that we used to take for granted, unless they are operating in good faith. For example, the code says that a chapter 13 debtor has the right to dismiss the case at any time. That used to mean if circumstances changed so that the chapter 13 was no longer beneficial to you, then you could dismiss it and carry on without the benefits (or obligations under your changed financial circumstances) of chapter 13. But if not operating in good faith, this trend indicates that these rights may no longer be available to you. What does that really mean? It could mean that you will not be allowed to dismiss the case and have to stay in chapter 13, or worse, you may have to convert to chapter 7. Why does it matter if you have to convert to chapter 7? Well the reason many people file a chapter 13 is because they get to keep their non-exempt assets, which is not permitted in chapter 7. Also, many people file a chapter 13 to save their homes from foreclosure, and chapter 7 does not contain the same protections to make that possible. So, failing to operate in good faith in chapter 13 could have devastating consequences.
OK, so it’s important, but what is it? Initially, understand that good faith includes both pre- and post-filing acts. Some factors that are considered include: accuracy in stating debts and expenses, lack of effort/ability to pay debts, honesty in disclosing assets and financial affairs (no surprise), manipulation of the bankruptcy code, the type of debts, the motivation, the amount proposed to be paid to creditors, and prior filings. Courts have generally employed a “totality of the circumstances approach.” In re Sullivan, 326 B.R. 204, 211 (B.A.P. 1st Cir. 2005). That is legal speak for “we will consider just about anything reasonable and use our commonsense.” But, the determination about whether good faith is lacking still needs to be made by an experienced practitioner. This is for many reasons, including that many people feel that bankruptcy is inherently unfair, so a lay person may not be able to put aside those feelings from their analysis. Also, an experienced judge will make the decision if good faith is challenged. So, it pays to consult a trained eye to discern what a court could determine is not good faith, and what is permitted under the law.
If you are planning on filing a chapter 13 and would like to meet the requirements, including good faith, or if you have become involved in a chapter 13 someone else has filed and think it is not done in good faith, feel free to give us a call for a free initial consultation.
Thursday, February 25, 2010
Should I file a chapter 13 plan by myself?
26 February 2010
No. The first reason is because a chapter 13 is a complex legal and financial arrangement. Generally, it is more complicated than a chapter 7. In fact, most lawyers would consider themselves unqualified to assist a client in filing a chapter 7, and even more a chapter 13, and they would be right. The second reason is that the bankruptcy practice is a specialty. This means there are few people out there who are able to give you accurate advice if you are attempting to glean information from those who are knowledgeable. The rest of the information is garbled, off-point, or just flat out wrong. A third reason, related to the second, is that chapter 13 practice, and thus what you need to do, varies substantially from region to region. This means if you are gathering information from the internet or books or pamphlets, if it isn’t geared for your specific locality, its value is decreased. Another reason is that the fail rate for attorney assisted chapter 13 plans ranges roughly between 2/3 and 3/4. The failure rate for pro se filed chapter 13’s approaches 100%. In fact, it is a rarity for the pro se proposed plan to even be confirmed. (Do you know what that means?) Finally, in all likelihood, because of the failure rate, you will waste money, which is probably exactly the opposite of what you are trying to accomplish by filing without the assistance of a qualified attorney.
Let me give you an illustration of the complexity, and thus the danger of filing a chapter 13. A debtor filed a chapter 13, had their plan confirmed, and (after a few bumps in the road) completed the plan all the way to its completion. A success, right? So far I would say yes, and statistically it would be better than about 99% of pro se filers, and even better than the large majority of filers that have the assistance of counsel. But here is what happened.
After the initial filing, but while the chapter 13 plan was underway, the debtor attained a legal claim. After the plan was completed, the debtor sought to pursue the legal claim she obtained while she was completing their plan. The defendant argued successfully that the debtor was barred to pursue the legal claim under the doctrine of judicial estoppel. What happened is that the debtor lost her legal claim because she did not amend her bankruptcy papers while the plan was underway. Robinson v Tyson Foods, Inc., No. 08-14991, 2010 WL 396130 (11th Cir. Feb. 5, 2010).
If after reading this blog you don’t have an idea why the debtor lost her legal claim or what judicial estoppel means, then you shouldn’t file alone. But if you do, when you realize you need help, feel free to give this office a call. However, it would be best to call before trying to do it yourself.
No. The first reason is because a chapter 13 is a complex legal and financial arrangement. Generally, it is more complicated than a chapter 7. In fact, most lawyers would consider themselves unqualified to assist a client in filing a chapter 7, and even more a chapter 13, and they would be right. The second reason is that the bankruptcy practice is a specialty. This means there are few people out there who are able to give you accurate advice if you are attempting to glean information from those who are knowledgeable. The rest of the information is garbled, off-point, or just flat out wrong. A third reason, related to the second, is that chapter 13 practice, and thus what you need to do, varies substantially from region to region. This means if you are gathering information from the internet or books or pamphlets, if it isn’t geared for your specific locality, its value is decreased. Another reason is that the fail rate for attorney assisted chapter 13 plans ranges roughly between 2/3 and 3/4. The failure rate for pro se filed chapter 13’s approaches 100%. In fact, it is a rarity for the pro se proposed plan to even be confirmed. (Do you know what that means?) Finally, in all likelihood, because of the failure rate, you will waste money, which is probably exactly the opposite of what you are trying to accomplish by filing without the assistance of a qualified attorney.
Let me give you an illustration of the complexity, and thus the danger of filing a chapter 13. A debtor filed a chapter 13, had their plan confirmed, and (after a few bumps in the road) completed the plan all the way to its completion. A success, right? So far I would say yes, and statistically it would be better than about 99% of pro se filers, and even better than the large majority of filers that have the assistance of counsel. But here is what happened.
After the initial filing, but while the chapter 13 plan was underway, the debtor attained a legal claim. After the plan was completed, the debtor sought to pursue the legal claim she obtained while she was completing their plan. The defendant argued successfully that the debtor was barred to pursue the legal claim under the doctrine of judicial estoppel. What happened is that the debtor lost her legal claim because she did not amend her bankruptcy papers while the plan was underway. Robinson v Tyson Foods, Inc., No. 08-14991, 2010 WL 396130 (11th Cir. Feb. 5, 2010).
If after reading this blog you don’t have an idea why the debtor lost her legal claim or what judicial estoppel means, then you shouldn’t file alone. But if you do, when you realize you need help, feel free to give this office a call. However, it would be best to call before trying to do it yourself.
Thursday, January 28, 2010
Can I eliminate my student loans in bankruptcy?
28 January 2010
Probably not. Most unsecured garden variety loans can be wiped out, or “discharged” in a bankruptcy. This means that the bankruptcy court enters an injunction on the collection of the debt from your person. In other words, your personal responsibility for the loan is eliminated. (Creditors still may have their rights to any collateral that secures the loan.) However, despite not all unsecured debts are dischargeable. Student loans are one of the types of obligations that are (almost) non-dischargeable. The student loan exception appears in Section 523(a) (8) of the bankruptcy code. The exception applies to:
• an educational benefit, overpayment or loan, made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution; or
• for an obligation to repay funds received as an educational benefit, scholarship or stipend; or
• any other education loan that is a qualified education loan, as defined in section 221(d)(1) of the federal tax code.
Without traversing the different laws that define the scope of the definition of a student loan in the bankruptcy code, suffice it to say, it is really almost any loan related to education. Including even books, supplies, transportation expenses, etc. as long as they are incurred by eligible students to attend eligible education institution, which is almost any education program.
It is possible to discharge student loans if they represent an “undue hardship.” However, this is been construed by the courts to be a very, very high hurdle. It must be compelling. The burden is on the debtor, the person seeking discharge. In re Kopf, 245 B.R. 731(Bankr. D. Me. 2000). It has been said that some courts are so strict that the debtor must be severely disabled to even be considered. However, there are different competing tests the courts can apply. One of the most popular is the “totality of the circumstances.” Some of the factors are: “the debtor’s past, present, and reasonably reliable future financial resources; 2) calculation of the debtor’s and his dependents’ reasonable necessary living expenses; and 3) any other relevant facts and circumstances surrounding that particular bankruptcy case.” In re Andresen, 232 B.R. 127, 139 (B.A.P. 8th Cir. 1999).
A practical consideration is how to afford to present the argument in the first place. First, one must file the bankruptcy, which theoretically can be done pro se in payments or possibly even waived. However, most people file using the services of an attorney, which is wise, but comes with a cost. Then after the bankruptcy is filed, an adversary proceeding must be filed. This is essentially a separate law suit in the bankruptcy case. Also, presentation of an undue hardship argument is not a simple endeavor. Facts must be gathered and analyzed. An argument must be developed, research must be done, and it must be thought though. Not to mention the creditor may pose a worthy opponent. So, if you are wondering if you can discharge your student loans, know that you face a high hurdle and significant practical considerations.
Probably not. Most unsecured garden variety loans can be wiped out, or “discharged” in a bankruptcy. This means that the bankruptcy court enters an injunction on the collection of the debt from your person. In other words, your personal responsibility for the loan is eliminated. (Creditors still may have their rights to any collateral that secures the loan.) However, despite not all unsecured debts are dischargeable. Student loans are one of the types of obligations that are (almost) non-dischargeable. The student loan exception appears in Section 523(a) (8) of the bankruptcy code. The exception applies to:
• an educational benefit, overpayment or loan, made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution; or
• for an obligation to repay funds received as an educational benefit, scholarship or stipend; or
• any other education loan that is a qualified education loan, as defined in section 221(d)(1) of the federal tax code.
Without traversing the different laws that define the scope of the definition of a student loan in the bankruptcy code, suffice it to say, it is really almost any loan related to education. Including even books, supplies, transportation expenses, etc. as long as they are incurred by eligible students to attend eligible education institution, which is almost any education program.
It is possible to discharge student loans if they represent an “undue hardship.” However, this is been construed by the courts to be a very, very high hurdle. It must be compelling. The burden is on the debtor, the person seeking discharge. In re Kopf, 245 B.R. 731(Bankr. D. Me. 2000). It has been said that some courts are so strict that the debtor must be severely disabled to even be considered. However, there are different competing tests the courts can apply. One of the most popular is the “totality of the circumstances.” Some of the factors are: “the debtor’s past, present, and reasonably reliable future financial resources; 2) calculation of the debtor’s and his dependents’ reasonable necessary living expenses; and 3) any other relevant facts and circumstances surrounding that particular bankruptcy case.” In re Andresen, 232 B.R. 127, 139 (B.A.P. 8th Cir. 1999).
A practical consideration is how to afford to present the argument in the first place. First, one must file the bankruptcy, which theoretically can be done pro se in payments or possibly even waived. However, most people file using the services of an attorney, which is wise, but comes with a cost. Then after the bankruptcy is filed, an adversary proceeding must be filed. This is essentially a separate law suit in the bankruptcy case. Also, presentation of an undue hardship argument is not a simple endeavor. Facts must be gathered and analyzed. An argument must be developed, research must be done, and it must be thought though. Not to mention the creditor may pose a worthy opponent. So, if you are wondering if you can discharge your student loans, know that you face a high hurdle and significant practical considerations.
My car was repossessed? Can I get it back if I file for bankruptcy?
Saturday 19 December 2009
It depends on whether the repossession company or creditor still has the car and hasn’t sold it. If the creditor still has the auto, it will most likely be deemed that it is still property of the bankruptcy estate (that means it is property subject to the bankruptcy court’s jurisdiction) and the bank simply holds it as a custodian. See In re Pluta, 200 B.R. 740 (Bankr. Mass. 1996). Your lawyer can then possibly demand the auto be returned to you after you file bankruptcy.
However, this begs the question whether you want it back. It is quite common for people to have the desire to retain their automobile, but an objective outlook is necessary. Is your car a benefit to your financial balance sheet or not? Does the car have equity? In other words, is the auto worth more than the amount owed to the lender? If it was repossessed than there was a loan that was probably in the arrears, and it is unlikely there is equity. And if not, it is a negative on your balance sheet, and probably not worth keeping. But, there may be a way a bankruptcy lawyer can eliminate the excess debt through a chapter 13 plan. Also, there may be a way to keep the car through alternative financing. Lastly, there is a possibility that you could obtain financing for a different car through one of the lenders that specialize in post-bankruptcy financing. In any event, it behooves you to consult an experienced bankruptcy attorney to learn the options available to you under bankruptcy or a different alternative.
It depends on whether the repossession company or creditor still has the car and hasn’t sold it. If the creditor still has the auto, it will most likely be deemed that it is still property of the bankruptcy estate (that means it is property subject to the bankruptcy court’s jurisdiction) and the bank simply holds it as a custodian. See In re Pluta, 200 B.R. 740 (Bankr. Mass. 1996). Your lawyer can then possibly demand the auto be returned to you after you file bankruptcy.
However, this begs the question whether you want it back. It is quite common for people to have the desire to retain their automobile, but an objective outlook is necessary. Is your car a benefit to your financial balance sheet or not? Does the car have equity? In other words, is the auto worth more than the amount owed to the lender? If it was repossessed than there was a loan that was probably in the arrears, and it is unlikely there is equity. And if not, it is a negative on your balance sheet, and probably not worth keeping. But, there may be a way a bankruptcy lawyer can eliminate the excess debt through a chapter 13 plan. Also, there may be a way to keep the car through alternative financing. Lastly, there is a possibility that you could obtain financing for a different car through one of the lenders that specialize in post-bankruptcy financing. In any event, it behooves you to consult an experienced bankruptcy attorney to learn the options available to you under bankruptcy or a different alternative.
Can my (private) employer fire me for filing for bankruptcy?
Friday, 11 December 2009
The answer is No. It is plainly stated in the bankruptcy code that:
11 U.S.C. 525 . . .
(b)No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
This may beg the question what a prospective employer can do when confronted with an applicant who has filed bankruptcy. Some commentators take the position that the answer whether discrimination on this basis is allowed is no. However, almost all of the cases that have interpreted this provision have ruled that it only applies to the debtor's current employer. In re Hardy, 209 B.R. 371, 374-376 (Bankr. E.D. Va. 1997); In re Merriweather, 185 B.R. 235 (Bankr.S.D.TX 1995); In re Briggs, 143 B.R. 438 (Bankr.E.D.MI 1992). But see In re McNeely, 82 B.R. 628 (Bankr. S.D. Ga. 1987)(applying Section 525(b) to service purchaser/independent contractor relationship). None of these cases are binding though, so the question is an open one.
There are some other considerations if you are applying for a new job and concerned over this particular potential ramification of filing for bankruptcy. First, the ambiguity noted above may be enough to stop any employer from taking the chance of violating the law. Typically employers, and especially their counsel, like to take the safe road. Second, the percentage of employers that truly take action based on a credit report, even if they do check it, might be less than you think (I personally have never heard of someone not getting a job due to a prior bankruptcy). Third, an employer may prefer that a person had filed for bankruptcy and eliminated their debt, as opposed to continuing on with a significant debt load. They could be concerned about those with a greater incentive to steal. Who do you think is more of a risk to employ, a person who is probably debt free or someone struggling to carry a significant debt load? Finally, the pros and cons of a decision to file bankruptcy should be carefully weighed with competent counsel. There is wisdom in a multitude of counselors.
The answer is No. It is plainly stated in the bankruptcy code that:
11 U.S.C. 525 . . .
(b)No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
This may beg the question what a prospective employer can do when confronted with an applicant who has filed bankruptcy. Some commentators take the position that the answer whether discrimination on this basis is allowed is no. However, almost all of the cases that have interpreted this provision have ruled that it only applies to the debtor's current employer. In re Hardy, 209 B.R. 371, 374-376 (Bankr. E.D. Va. 1997); In re Merriweather, 185 B.R. 235 (Bankr.S.D.TX 1995); In re Briggs, 143 B.R. 438 (Bankr.E.D.MI 1992). But see In re McNeely, 82 B.R. 628 (Bankr. S.D. Ga. 1987)(applying Section 525(b) to service purchaser/independent contractor relationship). None of these cases are binding though, so the question is an open one.
There are some other considerations if you are applying for a new job and concerned over this particular potential ramification of filing for bankruptcy. First, the ambiguity noted above may be enough to stop any employer from taking the chance of violating the law. Typically employers, and especially their counsel, like to take the safe road. Second, the percentage of employers that truly take action based on a credit report, even if they do check it, might be less than you think (I personally have never heard of someone not getting a job due to a prior bankruptcy). Third, an employer may prefer that a person had filed for bankruptcy and eliminated their debt, as opposed to continuing on with a significant debt load. They could be concerned about those with a greater incentive to steal. Who do you think is more of a risk to employ, a person who is probably debt free or someone struggling to carry a significant debt load? Finally, the pros and cons of a decision to file bankruptcy should be carefully weighed with competent counsel. There is wisdom in a multitude of counselors.
Thursday, January 21, 2010
Can I keep one of my credit card accounts even if I file for bankruptcy?
4 January 2010
It depends on whether the account has a balance when you file your bankruptcy petition, and, if there is no balance, how a creditor may react to the bankruptcy filing. If your account has a balance, the answer is no. The reason is that the chapter 7 bankruptcy petition, which is signed under the penalty of perjury, requires that you list all your debts. So, the account must be listed on the petition, and if the bankruptcy is successful, it will be discharged. What if there is nothing owed on the credit card account? In other words, there is a zero balance. In that case, the account is not technically a debt, so it is not required to be listed on the bankruptcy petition.
So there is nothing in the law that prohibits you from keeping such an account through and after the bankruptcy. (There are a number of practical and other legal issues that would need to be covered. In other words, this type of intent/activity really screams for a bankruptcy lawyer’s consultation.) But the credit card companies will typically learn of the bankruptcy by other means, like your credit report, and are likely to cancel the account, which they have the right to do. So, there is a chance, but a small one.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
It depends on whether the account has a balance when you file your bankruptcy petition, and, if there is no balance, how a creditor may react to the bankruptcy filing. If your account has a balance, the answer is no. The reason is that the chapter 7 bankruptcy petition, which is signed under the penalty of perjury, requires that you list all your debts. So, the account must be listed on the petition, and if the bankruptcy is successful, it will be discharged. What if there is nothing owed on the credit card account? In other words, there is a zero balance. In that case, the account is not technically a debt, so it is not required to be listed on the bankruptcy petition.
So there is nothing in the law that prohibits you from keeping such an account through and after the bankruptcy. (There are a number of practical and other legal issues that would need to be covered. In other words, this type of intent/activity really screams for a bankruptcy lawyer’s consultation.) But the credit card companies will typically learn of the bankruptcy by other means, like your credit report, and are likely to cancel the account, which they have the right to do. So, there is a chance, but a small one.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
What is the Co-debtor (or Co-signer) stay?
13 January 2010
Often debts (loans) have more than one person obligated to repay the creditor (on the hook). These can be loans where the debt is jointly owed by two joint account holders. There are also debts where one person is the primary account holder and receives the money, and another voluntarily becomes obligated despite not receiving any of the money. In these situations the secondary account holder (or co-signer) has agreed to be liable to the creditor in order to allow the primary account holder to get the loan. The most well known situation is a parent who co-signs for an adult child.
The “co-debtor stay” (or “co-signer stay”) arises when one of the debtors files for bankruptcy under chapter 13. It stops the creditor from any collection activity towards the co-debtor and continues until the bankruptcy is either closed or converted. It was created so that a debtor does not feel indirect pressure from a creditor through their efforts to collect from the co-debtor, who is usually a friend or relative.
However, the co-debtor stay does not apply to all situations. For one, the co-debtor must be an individual, and not a business entity like a corporation. Also, it only applies to “consumer debt” as defined under the bankruptcy code and interpreted by the courts. There may also be some variation from jurisdiction to jurisdiction on how the co-debtor stay is believed to apply. The co-debtor stay is a powerful tool for the consumer, but if you want to rely on the co-debtor stay, it would be wise to consult an experienced bankruptcy attorney.
Under chapter 7 bankruptcy, this type of protection of the co-debtor is not available. In fact, when one debtor files for bankruptcy under chapter 7, it may even make the creditor more aggressively pursue the co-debtor. This is one benefit to filing a chapter 13. However, there are a multitude of reasons to consider when deciding what chapter of bankruptcy to file under. It pays to seek counsel to help make that decision.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Often debts (loans) have more than one person obligated to repay the creditor (on the hook). These can be loans where the debt is jointly owed by two joint account holders. There are also debts where one person is the primary account holder and receives the money, and another voluntarily becomes obligated despite not receiving any of the money. In these situations the secondary account holder (or co-signer) has agreed to be liable to the creditor in order to allow the primary account holder to get the loan. The most well known situation is a parent who co-signs for an adult child.
The “co-debtor stay” (or “co-signer stay”) arises when one of the debtors files for bankruptcy under chapter 13. It stops the creditor from any collection activity towards the co-debtor and continues until the bankruptcy is either closed or converted. It was created so that a debtor does not feel indirect pressure from a creditor through their efforts to collect from the co-debtor, who is usually a friend or relative.
However, the co-debtor stay does not apply to all situations. For one, the co-debtor must be an individual, and not a business entity like a corporation. Also, it only applies to “consumer debt” as defined under the bankruptcy code and interpreted by the courts. There may also be some variation from jurisdiction to jurisdiction on how the co-debtor stay is believed to apply. The co-debtor stay is a powerful tool for the consumer, but if you want to rely on the co-debtor stay, it would be wise to consult an experienced bankruptcy attorney.
Under chapter 7 bankruptcy, this type of protection of the co-debtor is not available. In fact, when one debtor files for bankruptcy under chapter 7, it may even make the creditor more aggressively pursue the co-debtor. This is one benefit to filing a chapter 13. However, there are a multitude of reasons to consider when deciding what chapter of bankruptcy to file under. It pays to seek counsel to help make that decision.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Can I tithe during bankruptcy?
14 January 2010
Yes. Under either chapter 7 or chapter 13 a debtor is allowed to regularly contribute up to 15 percent of their gross income to a charitable organization. For example, if a debtor had a gross income of $40,000 a year, they would be allowed to contribute $6,000.00 a year to a charitable organization.
This right has some history to it. At one point in 2006, there was some doubt. In the decision In re Diagostino, No. 06-10384, 2006 WL 2578172 (Bankr. N.D. N.Y. Aug, 28, 2006) a New York bankruptcy court found that above median chapter 13 debtors were not allowed by the recent changes in the bankruptcy code made by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to contribute anything to a charitable organization. It didn’t help matters that the debtors’ bankruptcy petition stated they had not previously contributed anything to a charitable organization in the year prior to their bankruptcy filing. But they sought to pay $100.00 a month during the life of their chapter 13 plan.
This decision made waves and Congress acted swiftly. Shortly after the decision, Senators Hatch and Grassley, along with Congressman Sessions, made public statements that the Diagostino decision incorrectly interpreted current bankruptcy law. They sought to eliminate any doubt. Congress eventually passed the Religious Liberty and Charitable Donation Clarification Act of 2006, which made it clear that a tithe or continuous gift to a charitable organization is allowed in bankruptcy. So, if someone wants to tithe before or during bankruptcy, they are allowed to and will still qualify under either chapter 7 or 13.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Yes. Under either chapter 7 or chapter 13 a debtor is allowed to regularly contribute up to 15 percent of their gross income to a charitable organization. For example, if a debtor had a gross income of $40,000 a year, they would be allowed to contribute $6,000.00 a year to a charitable organization.
This right has some history to it. At one point in 2006, there was some doubt. In the decision In re Diagostino, No. 06-10384, 2006 WL 2578172 (Bankr. N.D. N.Y. Aug, 28, 2006) a New York bankruptcy court found that above median chapter 13 debtors were not allowed by the recent changes in the bankruptcy code made by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to contribute anything to a charitable organization. It didn’t help matters that the debtors’ bankruptcy petition stated they had not previously contributed anything to a charitable organization in the year prior to their bankruptcy filing. But they sought to pay $100.00 a month during the life of their chapter 13 plan.
This decision made waves and Congress acted swiftly. Shortly after the decision, Senators Hatch and Grassley, along with Congressman Sessions, made public statements that the Diagostino decision incorrectly interpreted current bankruptcy law. They sought to eliminate any doubt. Congress eventually passed the Religious Liberty and Charitable Donation Clarification Act of 2006, which made it clear that a tithe or continuous gift to a charitable organization is allowed in bankruptcy. So, if someone wants to tithe before or during bankruptcy, they are allowed to and will still qualify under either chapter 7 or 13.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Do I have to include all my debts in my bankruptcy?
18 January 2010
Yes. The bankruptcy petition requires that you list all your debts and that you make all statements under the penalty of perjury. There is no way around listing all your debts, but there is a plan you can have to make that special creditor whole despite your bankruptcy, read on.
It is so common for consumers to think that they can pick and choose which debts to include in their bankruptcy and which they do not. People often say “I’m not going bankrupt on that debt” or “I’m not including that debt in my bankruptcy.” But that isn’t acceptable. People often have at least one debt which they really want to pay despite needing to file bankruptcy. Usually this debt is owed to a family member or sometimes to an employer. The person feels terrible about “going bankrupt on” that particular debt because they feel an affinity towards the person or entity that gave them the loan. Sometimes a person preparing to file for bankruptcy doesn’t have the money and figures they will get a loan from a family member or friend in order to pay their attorney. One must think about this and what they are doing, filing bankruptcy. This means they will seek to obtain a discharge of their personal responsibility on their debts. So claiming you intend to pay a loan back that you plan to use to file bankruptcy is saying you intend to jump into a pool to dry off.
If you can’t live with yourself if a particular special creditor is not made whole, what you can do is this. After the bankruptcy case is closed, you may voluntarily give the creditor the amount of the previous (now discharged) loan as a gift out of the kindness of your heart. So, if you really want to ensure that a particular creditor is made whole, you can do it, but just after the bankruptcy is over and in the form of a gift.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Yes. The bankruptcy petition requires that you list all your debts and that you make all statements under the penalty of perjury. There is no way around listing all your debts, but there is a plan you can have to make that special creditor whole despite your bankruptcy, read on.
It is so common for consumers to think that they can pick and choose which debts to include in their bankruptcy and which they do not. People often say “I’m not going bankrupt on that debt” or “I’m not including that debt in my bankruptcy.” But that isn’t acceptable. People often have at least one debt which they really want to pay despite needing to file bankruptcy. Usually this debt is owed to a family member or sometimes to an employer. The person feels terrible about “going bankrupt on” that particular debt because they feel an affinity towards the person or entity that gave them the loan. Sometimes a person preparing to file for bankruptcy doesn’t have the money and figures they will get a loan from a family member or friend in order to pay their attorney. One must think about this and what they are doing, filing bankruptcy. This means they will seek to obtain a discharge of their personal responsibility on their debts. So claiming you intend to pay a loan back that you plan to use to file bankruptcy is saying you intend to jump into a pool to dry off.
If you can’t live with yourself if a particular special creditor is not made whole, what you can do is this. After the bankruptcy case is closed, you may voluntarily give the creditor the amount of the previous (now discharged) loan as a gift out of the kindness of your heart. So, if you really want to ensure that a particular creditor is made whole, you can do it, but just after the bankruptcy is over and in the form of a gift.
Contact: George E. Bourguignon, Jr.
(413) 746-8008
gbourguignon@bourguignonlaw.com
www.bourguignonlaw.com
Subscribe to:
Posts (Atom)
