Friday, December 23, 2011
Tuesday, December 20, 2011
Wht happens to my car loan if I file for Bankruptcy?
What happens to my car loan if you file for Bankruptcy?
What will happen to your car loan in bankruptcy law depends on several factors, including: the balance due, the chapter of bankruptcy that you file, and your ability to pay the loan. Even though the loan itself may change slightly through bankruptcy, it is likely to remain very much the same as when you first entered the bankruptcy. The amount you owe before bankrutpcy is generally the same amount you will owe after bankrutpcy. The advantage of bankruptcy, however, is that it usually results in the reduction of other debts, so that you can afford to make the payments on your secured obligations, like a car loan. If you owe a small amount, it may be worth trying to pay the note. Of course, you should discuss your options with a local attorney.
Contact the Menifee Bankruptcy Attorney for a FREE Consultation. Call (951) 226-5294
Monday, December 12, 2011
What is a Chapter 7 Bankrutpcy?
Chapter 7
Chapter 7 bankruptcy is a liquidation proceeding in which the debtor's non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities established in the Code.
Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Debtors whose debts are primarily consumer debts are subject to a “means test" designed to determine whether the case should be permitted to proceed under Chapter 7.
Eligibility to file Chapter 7 is determined by the means test instituted with the 2005 amendments to the bankruptcy code.
In most consumer cases, all the assets are exempt, and therefore there are no assets to liquidate and there is no dividend to creditors. Chapter 7 is generally the quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships.
The purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts.
After you file your bankruptcy petition, you will get a hearing in front of a trustee within 4 to 5 weeks. They will review the documents and determine whether you are eligible for Chapter 7 bankruptcy.
You will have to undergo a means test as well, which is a mathematical formula based on income, total debts and other factors. If you pass the means test, you can begin the Chapter 7 bankruptcy process.
Within three to four months, your debt will be completely discharged and you will get a fresh start.
If you are considering Bankrutpcy please contact Raxter Law your Local Bankrutpcy Attorney for a FREE Consultation so we can discuss your options.
Call Today:
(951) 226-5294
Friday, December 2, 2011
Bankruptcy Fees have increased
The Central District of California recently announced a price increase in the filing fee of Chapter 7 bankruptcies. The old fee was $299.00. Effective November 1, 2011 the new fee will be $306.00.
Wednesday, November 30, 2011
BANKRUPTCY TERMS
Bankruptcy has it own language. Here is a brief definition of some of those terms that you will find on my website and in court documents.
A
Adequate protection: Payment to a secured creditor to protect the value of the creditor’s lien during the bankruptcy proceeding from loss due to depreciation or non payment of a senior lien.
adversary proceeding: A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court. A nonexclusive list of adversary proceedings is set forth in Fed. R. Bankr. P. 7001.
arrearage: The amount by which one is past due on a secured debt obligation. For example, if your mortgage payment is $2,000 per month and you are three months behind, your are $6,000 in arrears.
assets: Anything, in any form, that a debtor owns. This includes tangible assets such as real estate, cars, and jewelry, as well as intangible assets, such as business goodwill, the right to sue someone, stock options, or future interests in a will.
assume or assumption: An agreement to continue performing duties under a contract or lease.
automatic stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
avoidance: The ability to remove a lien. The bankruptcy code allows certain types of liens to be avoided, such as judgment liens if they impair an exemption claimed in the bankruptcy case.
avoidance powers: rights to recover certain transfers of property such as preferences or fraudulent transfers, or to void liens created prior to filing a bankruptcy case.
B
bankruptcy: A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).
Bankruptcy Abuse Prevention and Consumer Protection Act: The name (mis-name) given by Congress to the new bankruptcy law legislation passed and signed into law by President GW Bush, effective October 17, 2005 which was designed to dramatically change the way eligibility for filing bankruptcy was determined. It was neither designed to protect consumers nor to address actual bankruptcy abuse.
Bankruptcy Code: The informal name for title 11 of the United States Code (11 U.S.C. 101-1330), the federal bankruptcy law.
Bankruptcy court The bankruptcy judges in regular active service in each district; a unit of the district court.
Bankruptcy estate: All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)
Bankruptcy judge: A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
bankruptcy petition: The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case. (There are official forms for bankruptcy petitions.)
business bankruptcy: a case in which the majority of total debts owed are business (or, non-consumer) related.
C
Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)
Chapter 9: The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
Chapter 11: The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
Chapter 12: The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.
Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)
Chapter 15: The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.
Charged Off: This is an accounting term that means the creditor does not expect to collect on the debt. It relates to the creditor’s taxes. It starts time periods under the Fair Credit Reporting Act. It does not mean that the debt is no longer legally enforceable.
Collateral: The property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim: it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior creditor. The general rule with respect to liens is “First in time, first in right.”
claim A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
confirmed: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed.
confirmation Bankruptcy judges’s approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.
consumer debtor: A debtor whose debts are primarily consumer debts. Compare business bankruptcy.
consumer debts: Debts incurred for personal, as opposed to business, needs.
contested matter: Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.
contingent claim: A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.
Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.
creditor One to whom the debtor owes money or who claims to be owed money by the debtor.
credit counseling: Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.
current monthly income The average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor’s spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. 101(10A).
D
debt: liability on a claim
debtor: A person who has filed a petition for relief under the Bankruptcy Code.
debtor-in-possession: This refers to the debtor in a Chapter 11 case because the debtor usually remains in possession and control of his/her/its assets. A debtor-in-possession has all the duties and rights of a trustee and is a fiduciary for the creditors of the estate and, therefore, owes them the highest duty of care and loyalty. If a debtor-in-possession fails in its duties, a separate trustee can be appointed in a Chapter 11 case and take over possession of the debtor’s assets and interests.
debt relief agency: A debt relief agency is a made-up designation that our Congress created as part of the 2005 Bankruptcy Reform Act and is defined in 11 U.S.C. 101(12A). It includes “any person who provides any bankruptcy assistance to an ‘assisted person’ in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer…”. Debt Relief Agencies are required to give certain additional disclosures and incur more costs by virtue of this designation which is neither honorary nor punitive.
defendant: An individual (or business) against whom a lawsuit is filed.
denial of discharge: a creditor, trustee, US Trustee or other party in interest may, pursuant to 11 USC 727, file a complaint to deny the discharge of any debtor if certain things can be proved (such as material misstatements in the bankruptcy schedules, like omission of assets, etc.). If successful at trial, this results in the entire discharge being denied, not just the discharge of a particular individual debt.
discharge: A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)
dischargeable debt: A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated. More on which debts can be discharged.
disclosure statement: A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization.
dismissal: the termination of a case without either entry of a discharge or a denial of discharge. After dismissal, the debtor and creditors have the same rights and remedies as they had prior to the case being commenced–as if the case had never been filed (almost).
disposable income: In general, this is any income left over each month after you pay all your necessary monthly expenses. However, for Chapter 13 bankruptcy purposes, Congress has re-defined this to mean your current monthly income (as that term is defined, above) less allowed expenses according to IRS standards.
domestic support obligation: debts owed for alimony, maintenance or support to a child, spouse or other entity for support or maintenance of a child or spouse.
E
equity: The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 of equity.)
executory contract or lease: Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. (If a contract or lease is executory, a debtor may assume it or reject it.)
Exempt: Property that is exempt is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.
Exemptions: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state.
exemptions, exempt property: Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in (or if multiple states have been lived in in the past 2 years, there is a formula for deciding which state’s law applies
F
family farmer or family fisherman: An individual, individual and spouse, corporation, or partnership engaged in a farming or fishing operation that meets certain debt limits and other statutory criteria for filing a petition under chapter 12.
Fiduciary: one who is entrusted with duties on behalf of another. The law requires the highest level of good faith, loyalty and diligence of a fiduciary, higher than the common duty of care that we all owe one another. The debtor in possession in a Chapter 11 is a fiduciary for the creditors, owing loyalty to the creditors and not the shareholders of the debtor.
fraudulent transfer: A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.
fresh start The characterization of a debtor’s status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)
G
General Unsecured Claim: a claim by a creditor against a bankrupt debtor which does not have a priority for payment and for which the creditor holds no security interest or collateral.
I
Indemnify: to guarantee against any loss which another might suffer. In bankruptcy, it is used to describe the undertaking of one spouse in a divorce to assume certain debts of the marriage and to see that the other spouse is not forced to pay. Also called a “hold harmless” clause.
insider (of individual debtor): Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control.
insider (of corporate debtor) A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.
Involuntary Petition: A bankruptcy case may be commenced by a specific number of creditors against a debtor without the debtor’s consent. There are specific requirements for the amount of claims the creditors must hold and number of valid creditors who may commence the case. 11 U.S.C. 303 sets forth the requirements. (please not that the information contained on that link may not be up to date)
J
joint administration: A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)
joint petition: One bankruptcy petition filed by a husband and wife together.
judgment: a court order giving a creditor the ability to take any collection remedy allowed under applicable state or federal law against a debtor (for example, wage garnishment, liens, levies, etc.)
judgment proof: a debtor who has all exempt assets and income so that a creditor cannot collect anything from them even if they obtain a court judgment against them.
L
lien: The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.
lien stripping: Refers to the mechanism by which a lien (deed of trust, mortgage, etc.) against property is removed when the value of the property is less than the amount owed to any liens senior (above) the one(s) being stripped.
liquidation: A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
liquidated claim: A creditor’s claim for a fixed amount of money. Even if the amount is not known, it is liquidated if it is “readily capable” of being determined.
M
means test: Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,000, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,000. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Meeting of creditors The debtor must appear at a meeting with the trustee to be examined under oath about assets and liabilities. Creditors are invited but seldom attend. The meeting is sometimes called the 341 meeting, after the section of the Bankruptcy Code that requires it.
motion to lift (for relief from) the automatic stay: A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.
N
net income: this is basically “take-home” pay. The amount you receive after necessary tax withholding deductions have been taken, union dues, insurance, etc. If you are self-employed, this is the amount left after paying your ordinary business expenses.
no-asset case: A chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims.
non-dischargeable debt: A debt that cannot be eliminated in bankruptcy. Examples include debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared non-dischargeable only if a creditor timely files and prevails in a nondischargeability action.
non-contingent debt: debt which is owed now without any contingent acts needing to occur first.
O
objection to dischargeability: A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.
objection to exemptions: A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.
P
party in interest: A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most matters.
personal bankruptcy: A bankruptcy where the majority of debts are non-business. Usually this is a Chapter 7, but can also be Chapter 11 or Chapter 13 depending on the circumstances.
personal property: Any property or interests held by someone that is not real estate. For example, cars, jewelry, clothes, stocks, rights to sue someone, etc.
Petition: The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as “pre-petition”, happening before the bankruptcy petition was filed, and “post petition”, after the bankruptcy was initiated.
petition preparer: A business not authorized to practice law that prepares bankruptcy petitions.
plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. Plans are required in Chapter 13 and Chapter 11 cases (also in Chapter 9 and 12).
plaintiff: A person or business that files a formal complaint with the court.
post-petition transfer: A transfer of the debtor’s property made after the commencement of the case.
pre-bankruptcy planning: The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Pre-bankruptcy planning typically includes converting nonexempt assets into exempt assets.)
preference or preferential debt payment A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.
pre-petition: Occurring prior to the commencement of a bankruptcy case.
post petition: Occurring after the commencement of a bankruptcy case.
presumption of abuse: see means test
priority: The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full. For example, under the Bankruptcy Code’s priority scheme, money owed to the case trustee or for pre-petition alimony and/or child support must be paid in full before any general unsecured debt (i.e. trade debt or credit card debt) is paid.
priority claim: An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.
proof of claim: A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)
property of the estate: All legal or equitable interests of the debtor in property as of the commencement of the case.
R
Reaffirm: The debtor can chose to waive the discharge as to a debt that is reaffirmed. Generally, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing: the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn’t pay
reaffirmation agreement An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession. In order to be valid, the reaffirmation agreement must be signed and filed with the court prior to the discharge being entered.
real property: land and, generally, anything affixed to the land.
Relief from stay: A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property, or limited, as for example, allowing the recordation of a notice of default
S
schedules: Detailed lists filed by the debtor along with (or shortly after filing) the petition showing the debtor’s assets, liabilities, and other financial information. (There are official forms a debtor must use.)
secured creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.
secured debt: Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.
small business case: A special type of chapter 11 case in which there is no creditors’ committee (or the creditors’ committee is deemed inactive by the court) and in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors. The Bankruptcy Code contains certain provisions designed to reduce the time a small business debtor is in bankruptcy.
statement of financial affairs: A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use.)
statement of intention: A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.
substantive consolidation: Putting the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to allow substantive consolidation since the action must not only justify the benefit that one set of creditors receives, but also the harm that other creditors suffer as a result.)
341a meeting: The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors’ meeting. See more details.
T
transfer: Any mode or means by which a debtor disposes of or parts with his/her property or assets.
trustee: The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.
U
U.S. trustee: An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.
under-secured claim: A debt secured by property that is worth less than the full amount of the debt.
undue hardship: A Congressionally-created and undefined term used to describe the level required to discharge a student loan in bankruptcy. To see how this term is defined and analyzed in the ninth circuit, see more on student loan discharge.
unliquidated claim: A claim for which a specific value has not been determined.
unscheduled debt A debt that should have been listed by the debtor in the schedules filed with the court but was not. (Depending on the circumstances, an unscheduled debt may or may not be discharged.)
unsecured claim: A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
V
Voluntary Petition: a bankruptcy petition may be commenced by the debtor, as a voluntary petition, or it can be commenced involuntarily by creditors (see involuntary petition).
Voluntary transfer: A transfer of a debtor’s property with the debtor’s consent.
Raxter Law / Menifee Bankruptcy Lawyer provides Flat Fee Bankruptcy Services. For more information call (951) 226-5294
A
Adequate protection: Payment to a secured creditor to protect the value of the creditor’s lien during the bankruptcy proceeding from loss due to depreciation or non payment of a senior lien.
adversary proceeding: A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court. A nonexclusive list of adversary proceedings is set forth in Fed. R. Bankr. P. 7001.
arrearage: The amount by which one is past due on a secured debt obligation. For example, if your mortgage payment is $2,000 per month and you are three months behind, your are $6,000 in arrears.
assets: Anything, in any form, that a debtor owns. This includes tangible assets such as real estate, cars, and jewelry, as well as intangible assets, such as business goodwill, the right to sue someone, stock options, or future interests in a will.
assume or assumption: An agreement to continue performing duties under a contract or lease.
automatic stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
avoidance: The ability to remove a lien. The bankruptcy code allows certain types of liens to be avoided, such as judgment liens if they impair an exemption claimed in the bankruptcy case.
avoidance powers: rights to recover certain transfers of property such as preferences or fraudulent transfers, or to void liens created prior to filing a bankruptcy case.
B
bankruptcy: A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).
Bankruptcy Abuse Prevention and Consumer Protection Act: The name (mis-name) given by Congress to the new bankruptcy law legislation passed and signed into law by President GW Bush, effective October 17, 2005 which was designed to dramatically change the way eligibility for filing bankruptcy was determined. It was neither designed to protect consumers nor to address actual bankruptcy abuse.
Bankruptcy Code: The informal name for title 11 of the United States Code (11 U.S.C. 101-1330), the federal bankruptcy law.
Bankruptcy court The bankruptcy judges in regular active service in each district; a unit of the district court.
Bankruptcy estate: All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)
Bankruptcy judge: A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
bankruptcy petition: The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case. (There are official forms for bankruptcy petitions.)
business bankruptcy: a case in which the majority of total debts owed are business (or, non-consumer) related.
C
Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)
Chapter 9: The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
Chapter 11: The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
Chapter 12: The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.
Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)
Chapter 15: The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.
Charged Off: This is an accounting term that means the creditor does not expect to collect on the debt. It relates to the creditor’s taxes. It starts time periods under the Fair Credit Reporting Act. It does not mean that the debt is no longer legally enforceable.
Collateral: The property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim: it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior creditor. The general rule with respect to liens is “First in time, first in right.”
claim A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
confirmed: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed.
confirmation Bankruptcy judges’s approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.
consumer debtor: A debtor whose debts are primarily consumer debts. Compare business bankruptcy.
consumer debts: Debts incurred for personal, as opposed to business, needs.
contested matter: Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.
contingent claim: A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.
Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.
creditor One to whom the debtor owes money or who claims to be owed money by the debtor.
credit counseling: Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.
current monthly income The average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor’s spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. 101(10A).
D
debt: liability on a claim
debtor: A person who has filed a petition for relief under the Bankruptcy Code.
debtor-in-possession: This refers to the debtor in a Chapter 11 case because the debtor usually remains in possession and control of his/her/its assets. A debtor-in-possession has all the duties and rights of a trustee and is a fiduciary for the creditors of the estate and, therefore, owes them the highest duty of care and loyalty. If a debtor-in-possession fails in its duties, a separate trustee can be appointed in a Chapter 11 case and take over possession of the debtor’s assets and interests.
debt relief agency: A debt relief agency is a made-up designation that our Congress created as part of the 2005 Bankruptcy Reform Act and is defined in 11 U.S.C. 101(12A). It includes “any person who provides any bankruptcy assistance to an ‘assisted person’ in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer…”. Debt Relief Agencies are required to give certain additional disclosures and incur more costs by virtue of this designation which is neither honorary nor punitive.
defendant: An individual (or business) against whom a lawsuit is filed.
denial of discharge: a creditor, trustee, US Trustee or other party in interest may, pursuant to 11 USC 727, file a complaint to deny the discharge of any debtor if certain things can be proved (such as material misstatements in the bankruptcy schedules, like omission of assets, etc.). If successful at trial, this results in the entire discharge being denied, not just the discharge of a particular individual debt.
discharge: A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)
dischargeable debt: A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated. More on which debts can be discharged.
disclosure statement: A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization.
dismissal: the termination of a case without either entry of a discharge or a denial of discharge. After dismissal, the debtor and creditors have the same rights and remedies as they had prior to the case being commenced–as if the case had never been filed (almost).
disposable income: In general, this is any income left over each month after you pay all your necessary monthly expenses. However, for Chapter 13 bankruptcy purposes, Congress has re-defined this to mean your current monthly income (as that term is defined, above) less allowed expenses according to IRS standards.
domestic support obligation: debts owed for alimony, maintenance or support to a child, spouse or other entity for support or maintenance of a child or spouse.
E
equity: The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 of equity.)
executory contract or lease: Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. (If a contract or lease is executory, a debtor may assume it or reject it.)
Exempt: Property that is exempt is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.
Exemptions: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state.
exemptions, exempt property: Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in (or if multiple states have been lived in in the past 2 years, there is a formula for deciding which state’s law applies
F
family farmer or family fisherman: An individual, individual and spouse, corporation, or partnership engaged in a farming or fishing operation that meets certain debt limits and other statutory criteria for filing a petition under chapter 12.
Fiduciary: one who is entrusted with duties on behalf of another. The law requires the highest level of good faith, loyalty and diligence of a fiduciary, higher than the common duty of care that we all owe one another. The debtor in possession in a Chapter 11 is a fiduciary for the creditors, owing loyalty to the creditors and not the shareholders of the debtor.
fraudulent transfer: A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.
fresh start The characterization of a debtor’s status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)
G
General Unsecured Claim: a claim by a creditor against a bankrupt debtor which does not have a priority for payment and for which the creditor holds no security interest or collateral.
I
Indemnify: to guarantee against any loss which another might suffer. In bankruptcy, it is used to describe the undertaking of one spouse in a divorce to assume certain debts of the marriage and to see that the other spouse is not forced to pay. Also called a “hold harmless” clause.
insider (of individual debtor): Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control.
insider (of corporate debtor) A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.
Involuntary Petition: A bankruptcy case may be commenced by a specific number of creditors against a debtor without the debtor’s consent. There are specific requirements for the amount of claims the creditors must hold and number of valid creditors who may commence the case. 11 U.S.C. 303 sets forth the requirements. (please not that the information contained on that link may not be up to date)
J
joint administration: A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)
joint petition: One bankruptcy petition filed by a husband and wife together.
judgment: a court order giving a creditor the ability to take any collection remedy allowed under applicable state or federal law against a debtor (for example, wage garnishment, liens, levies, etc.)
judgment proof: a debtor who has all exempt assets and income so that a creditor cannot collect anything from them even if they obtain a court judgment against them.
L
lien: The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.
lien stripping: Refers to the mechanism by which a lien (deed of trust, mortgage, etc.) against property is removed when the value of the property is less than the amount owed to any liens senior (above) the one(s) being stripped.
liquidation: A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
liquidated claim: A creditor’s claim for a fixed amount of money. Even if the amount is not known, it is liquidated if it is “readily capable” of being determined.
M
means test: Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,000, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,000. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Meeting of creditors The debtor must appear at a meeting with the trustee to be examined under oath about assets and liabilities. Creditors are invited but seldom attend. The meeting is sometimes called the 341 meeting, after the section of the Bankruptcy Code that requires it.
motion to lift (for relief from) the automatic stay: A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.
N
net income: this is basically “take-home” pay. The amount you receive after necessary tax withholding deductions have been taken, union dues, insurance, etc. If you are self-employed, this is the amount left after paying your ordinary business expenses.
no-asset case: A chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims.
non-dischargeable debt: A debt that cannot be eliminated in bankruptcy. Examples include debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared non-dischargeable only if a creditor timely files and prevails in a nondischargeability action.
non-contingent debt: debt which is owed now without any contingent acts needing to occur first.
O
objection to dischargeability: A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.
objection to exemptions: A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.
P
party in interest: A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most matters.
personal bankruptcy: A bankruptcy where the majority of debts are non-business. Usually this is a Chapter 7, but can also be Chapter 11 or Chapter 13 depending on the circumstances.
personal property: Any property or interests held by someone that is not real estate. For example, cars, jewelry, clothes, stocks, rights to sue someone, etc.
Petition: The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as “pre-petition”, happening before the bankruptcy petition was filed, and “post petition”, after the bankruptcy was initiated.
petition preparer: A business not authorized to practice law that prepares bankruptcy petitions.
plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. Plans are required in Chapter 13 and Chapter 11 cases (also in Chapter 9 and 12).
plaintiff: A person or business that files a formal complaint with the court.
post-petition transfer: A transfer of the debtor’s property made after the commencement of the case.
pre-bankruptcy planning: The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Pre-bankruptcy planning typically includes converting nonexempt assets into exempt assets.)
preference or preferential debt payment A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.
pre-petition: Occurring prior to the commencement of a bankruptcy case.
post petition: Occurring after the commencement of a bankruptcy case.
presumption of abuse: see means test
priority: The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full. For example, under the Bankruptcy Code’s priority scheme, money owed to the case trustee or for pre-petition alimony and/or child support must be paid in full before any general unsecured debt (i.e. trade debt or credit card debt) is paid.
priority claim: An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.
proof of claim: A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)
property of the estate: All legal or equitable interests of the debtor in property as of the commencement of the case.
R
Reaffirm: The debtor can chose to waive the discharge as to a debt that is reaffirmed. Generally, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing: the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn’t pay
reaffirmation agreement An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession. In order to be valid, the reaffirmation agreement must be signed and filed with the court prior to the discharge being entered.
real property: land and, generally, anything affixed to the land.
Relief from stay: A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property, or limited, as for example, allowing the recordation of a notice of default
S
schedules: Detailed lists filed by the debtor along with (or shortly after filing) the petition showing the debtor’s assets, liabilities, and other financial information. (There are official forms a debtor must use.)
secured creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.
secured debt: Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.
small business case: A special type of chapter 11 case in which there is no creditors’ committee (or the creditors’ committee is deemed inactive by the court) and in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors. The Bankruptcy Code contains certain provisions designed to reduce the time a small business debtor is in bankruptcy.
statement of financial affairs: A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use.)
statement of intention: A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.
substantive consolidation: Putting the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to allow substantive consolidation since the action must not only justify the benefit that one set of creditors receives, but also the harm that other creditors suffer as a result.)
341a meeting: The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors’ meeting. See more details.
T
transfer: Any mode or means by which a debtor disposes of or parts with his/her property or assets.
trustee: The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.
U
U.S. trustee: An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.
under-secured claim: A debt secured by property that is worth less than the full amount of the debt.
undue hardship: A Congressionally-created and undefined term used to describe the level required to discharge a student loan in bankruptcy. To see how this term is defined and analyzed in the ninth circuit, see more on student loan discharge.
unliquidated claim: A claim for which a specific value has not been determined.
unscheduled debt A debt that should have been listed by the debtor in the schedules filed with the court but was not. (Depending on the circumstances, an unscheduled debt may or may not be discharged.)
unsecured claim: A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
V
Voluntary Petition: a bankruptcy petition may be commenced by the debtor, as a voluntary petition, or it can be commenced involuntarily by creditors (see involuntary petition).
Voluntary transfer: A transfer of a debtor’s property with the debtor’s consent.
Raxter Law / Menifee Bankruptcy Lawyer provides Flat Fee Bankruptcy Services. For more information call (951) 226-5294
Saturday, November 19, 2011
BEWARE OF CUT RATE or DISCOUNT BANKRUPTCY SERVICES
Below is a reprint of an article that appeared on MSN Money.
Here are a few things that should rasie the red flag when you interview bankruptcy lawyers:
1. Did you meet with the lawyer? (If not, find a law firm that will allow you to meet with the attorney)
2. Did the lawyer advise you the advantages or disadvantages of filling for bnakruptcy? Every case has its pros and cons
3. Is the lawyer you met (if you even got to meet the lawyer) the same lawyer that will attend the 341(a) meeting with you?
4. Will the lawyer accept calls from your creditors?
5. Is the lawyer open to receiving calls from you?
6. Is the lawyer charging you for a credit report? Why?
Raxter Law / Menifee Bankruptcy lawyer works differently than most bankruptcy law firms:
- You meet with the lawyer who will prepare your case - FREE CONSULATIONS
- The initial consultation is schedualed for an hour - plenty of time to discuss your situation in detail
- The lawyer you meet will follow you through the whole process
- No charge for a credit report
- Low cost credit counseling (required to file)
- Low flat fee
Read the article below and do your research and then give us a call:
(951) 226-5294
Beware cut-rate bankruptcy advice
Bankruptcy has become little more than a few months in purgatory rather than the 7-year ache -- and lifelong disgrace -- it once was.
Deborah and Victor Valle fell behind on their mortgage payments last year after Victor, a 43-year-old union truck driver, was idled by the Southern California grocery workers strike.
When their lender started foreclosure proceedings, the Valles hired a lawyer, David Baran, to file a Chapter 13 bankruptcy so they could keep their home and have time to make up the late payments.
Baran filed the bankruptcy papers on Oct. 3, 2003. Within a few weeks, Victor was back at work and the couple had enough cash to bring their mortgage current.
But the attorney failed to file the necessary paperwork to stop the foreclosure and didn't show up for a key hearing -- all the while, the Valles said, assuring them that everything was fine.
On Dec. 5, 2003, the couple learned that their home had been sold.
2 types of bankruptcy mills
"Somebody comes to your door and says you have four days to move out," said Deborah, 39, the mother of four. "That was a shock."
The Valles now live in a budget Orange County motel. The real estate company that bought their four-bedroom house in La Mirada, Calif., quickly sold it to another family. Deborah sadly watched the new owners move in recently as she was driving by her former home.
As bankruptcy filings have soared to new records, many consumers are turning to high-volume bankruptcy law practices and bankruptcy-petition preparers for help in reorganizing their finances, staving off foreclosure or wiping out debt. Dubbed "bankruptcy mills" by their critics, many advertise heavily on radio and television, while others deluge homeowners in foreclosure by direct mail -- which is how the Valles found their attorney.
Bankruptcy mills can come in two flavors:
- High-volume practices run by attorneys, who may or may not ever meet their clients before appearing in court.
- Storefront bankruptcy-petition preparers who advertise cut-rate services, usually without a lawyer's help.
Either way, critics say, the results can be disastrous. Some mills employ bait-and-switch tactics, advertising a low-cost bankruptcy and then jacking up the fees. Others insist they can help debtors avoid insolvency for a fat up-front charge, only to push clients into filing -- or filing the bankruptcy paperwork without the clients' knowledge.
Bad advice costs the consumer
Critics say the mills often give poor advice, causing their clients' cases to be dismissed, leaving them saddled with debts that could have been erased or encouraging them to file when they shouldn't.Dawn Carr of Phoenix used a paralegal to file Chapter 7 liquidation to wipe out her student loan debt. It wasn't until two years later, when a collection agency started calling, that she learned student loans only rarely can be erased in bankruptcy. Hers wasn't.
"So now I have a bankruptcy on my credit report that is essentially an empty one," Carr fumed. "What makes me more upset about the whole thing is that they should have known and didn't say a word, but they sure didn't have a problem taking my money for all the fees."
Debtors also can lose property that should have been protected. Miguel Vasquez of Lancaster, Calif., lost his home because of a bankruptcy preparer's incompetence, according to his attorney, Oscar Parra.
The preparer talked Vasquez into using his girlfriend's Los Angeles address as his own because the preparer didn't want to drive to Lancaster, more than an hour away, to attend the bankruptcy hearing, Parra said. Vasquez, who speaks little English, didn't understand the repercussions of the decision -- and apparently, neither did the preparer.
Because the Lancaster property wasn't listed as his primary residence, the bankruptcy trustee could -- and did -- seize the home to pay Vasquez' creditors. Had the preparer listed the property correctly, Vasquez' equity in the property would have been protected under state law, Parra said.
An increasing problem
The U.S. Trustee Program, which supervises bankruptcy case administration, says bankruptcy mills are an increasing problem. The program filed 243 actions in fiscal year 2002 for attorney misconduct, up 62% from the year before. Actions against bankruptcy petition preparers rose 43%, to 1,150.Among the cases:
- A bankruptcy-petition preparer in Woodland Hills, Calif., advertised $99 bankruptcies, only to use high-pressure sales tactics on low-income elderly and disabled clients to boost the fee to $650.
- A bankruptcy-petition preparer in Alexandria, Va., called himself a "foreclosure specialist" and charged up to $3,500 for his services, which included trying to buy clients' homes at below-market prices and then renting the properties back to them.
- An Oklahoma City attorney repeatedly failed to show up for bankruptcy hearings, in one case forcing a disabled client to make a 280-mile journey to attend a rescheduled meeting.
- A Denver attorney in at least five cases redeemed his clients' property from foreclosure proceedings, reselling each time for profits of up to $50,000.
- In Los Angeles, the U.S. Trustee last year forced attorney Claudia Phillips to sell her practice as part of a settlement agreement after she repeatedly failed to meet with clients or represent them adequately in court. Court papers said Phillips allowed others to forge her signature and those of her clients on documents, adding that Phillips' husband, Kenneth, who was not a lawyer, actually ran the practice and offered legal advice.
Another problem, bankruptcy attorneys say, is lawyers who push clients with few assets into Chapter 13 repayment plans rather than the Chapter 7 liquidation plans that make more sense. The reason? Chapter 13's increased complexity means higher fees -- and the repayment plan puts the attorney first among all the creditors who get repaid.
DIY bankruptcy on the rise
The problem of bad or incompetent advisers has grown so acute in recent years that two years ago the then-U.S. Trustee for the Southern California bankruptcy court, one of the busiest in the nation, took the extraordinary step of warning consumers about the perils of discount advice.The trustee, Maureen Tighe, now a bankruptcy court judge, said debtors were "routinely" losing property in bankruptcy that should have been protected or were winding up stuck with debts that should have been erased.
The report, co-authored with the Los Angeles County Bar, focused on the rise of bankruptcy-petition preparers in the area. Nearly one in three bankruptcy filings in Southern California is "pro se" ("for self"), which means the filer has no attorney and has typically used a bankruptcy-petition preparer. The rate is nearly one in two in Santa Barbara, home of the largest bankruptcy-petition preparer chain, We the People.
Some firms cry 'foul'
Some of those dismissed as bankruptcy mills, however, say they're getting a bum rap."We do thousands and thousands of bankruptcy filings a year, and the vast, vast, vast majority have gone through just fine," said Jason Searns, general counsel for We the People, which has 150 offices in 28 states. "We are serving a huge, underserved market that can't afford lawyers."
We the People is the nation's largest legal self-help chain, advertising $199 bankruptcies, $349 divorces and low-priced business incorporation services. The company does not provide legal advice, Searns said, but helps consumers fill out the appropriate forms to represent themselves in court.
"Is it perfect for everyone? No. There are some people who really should go to lawyers," Searns said. "But people have the right to do it themselves if they want to, just as people have the right to go to Home Depot and do their own bathroom."
Petition preparers and discount attorneys say they're being lumped in with incompetents and scam artists as part of a legal turf war by higher-priced attorneys trying to protect their fees. The high-volume operators say they offer consumers a low-cost alternative to regular bankruptcy attorneys, who typically charge $800 to $2,500 for a bankruptcy filing.
Advice that's simply wrong
But critics say too many consumers are being scammed, ending up with botched cases or filing for bankruptcy when they really shouldn't."'Bankruptcy-petition preparer' is a nice term for something that's evil," pronounces Leon Bayer, a Los Angeles bankruptcy attorney with 25 years' experience who now represents the Valles. "It's a street-corner paralegal who thinks that 'whatever a lawyer can do, I can do,' and their clients pay the price."
Then again, bankruptcy-mill attorneys may not be much better. In addition to representing clients whose attorneys have served them poorly, Bayer has collected some of the direct-mail appeals his clients receive when their lenders start foreclosure proceedings, a public process that tips off bankruptcy mills that someone might need their services. Some of the most deceptive letters were sent by attorneys soliciting business, Bayer said.
"Chapter 13 is NOT BANKRUPTCY," one attorney-sent letter proclaims, "but rather the 'Wage Earner Plan' designed to allow financially troubled persons to pay their bills, not wipe them out."
Of course, Chapter 13 is a bankruptcy filing. In return for paying some of their debts over three to five years, consumers can have the rest of their debts erased. In Chapter 7, most unsecured debts (other than student loans and recent taxes) are wiped out without a repayment plan.
Both types of filings put an automatic stop to any foreclosure or eviction proceedings, but Chapter 13s typically make it easier to protect the equity in a home. In a Chapter 7, the home's equity may be used to pay creditors.
For the Valles, justice is more bitter than sweet
Unlike some bankruptcy-mill victims, the Valles actually knew they were filing for Chapter 13. But the Valles say their attorney failed to act when their lender gave notice that it wanted to reinstitute foreclosure proceedings, a routine procedure known as "a motion for relief from the automatic stay."After receiving a letter from the court about the motion, the Valles said they phoned their attorney and visited his office and were reassured the matter would be taken care of. A month after the lender filed its motion, the Valles got notice that the court had granted the lender's request. Court records show no opposition to the motion that was filed, and the Valles said the attorney failed to attend the hearing. Less than 10 days later, the home was sold. The Valles have received some justice. Bankruptcy court Judge Thomas Brown recommended that Baran be disbarred from bankruptcy practice, ruling that his "failure to perform services competently . . . directly caused the debtor, Victor R. Valle, to lose his home in a foreclosure sale."
The Valles are pursuing a malpractice case against Baran as well. But the most they can hope for is a return of the home equity they lost when their house was sold. They won't be able to get their house back or receive any compensation for the trauma they experienced.
"There's no such thing as 'pain and suffering'" in such cases, Deborah Valle said. "We lost our house, and that's it."
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
Thursday, November 10, 2011
WHEN THE DEBT COLLECTOR CALLS YOU ABOUT A DEBT THAT ISN'T YOURS
Dealing with Debts that Aren’t Yours
So what can you do if debt collectors won’t leave you alone about someone else’s debt? Pursuant to the Fair Debt Collection Practices Act, you can take action:- Review your credit report. Make sure your identity isn’t being used by anyone other than yourself.
- Send the collectors a letter explaining why you are not responsible for these debts and asking them to stop contacting you.
- Request written proof that you are the one who owes these debts. If the collector is unable to prove that you owe the debt, you may never hear from them again.
The attorney at Raxter Law is able to assist you whether you owe a debt or if you are being harrased by a collector for a debt that isn't yours.
New way to calculate FICO Scores. What does that mean for your credit score?
Though the Fair Isaac Corporation (FICO) introduced a new credit-scoring model more than three years ago, lending institutions are only now beginning to adopt it. According to a new report on Credit.com, the delay could be bad news for consumers hoping to apply for credit or loans.
The new model, called FICO 8, was ready for adoption in 2008 and rolled out in 2009. But, aside from Citibank, which adopted the new scoring method earlier this summer, the major lenders in the U.S. have yet to change their scoring techniques.
Negative credit actions (including defaulting on loans, filing for bankruptcy, going into foreclosure, etc.) lower a credit score; positive credit actions (paying bills on time, having a low credit usage ratio, etc.) raise it.
The new model, called FICO 8, was ready for adoption in 2008 and rolled out in 2009. But, aside from Citibank, which adopted the new scoring method earlier this summer, the major lenders in the U.S. have yet to change their scoring techniques.
FICO Background
The FICO credit score is generally heralded as the gold standard in the lending industry. This score ranges from 300 to 850 and determines what kind of rates consumers get on loans (and whether they qualify for loans at all).Negative credit actions (including defaulting on loans, filing for bankruptcy, going into foreclosure, etc.) lower a credit score; positive credit actions (paying bills on time, having a low credit usage ratio, etc.) raise it.
What does the nwe FICO Score mean to borrowers?
Sources note that FICO 8 introduces scoring tools that could give consumers a better chance of qualifying for loans, including:- Less emphasis on unpaid debts under $100. Many of those debts, it seems, might be from the doctor. According to the Commonwealth Fund, 14 million Americans are currently fighting medical bills. The FTC notes that half of all debts in collections are medical.
- More consumer categories. Rather than dividing consumers into 10 groups, FICO 8 carves out 16, meaning that scoring tools will be able to more accurately predict consumer behavior.
- Fairer comparisons.The new model allows lenders to compare someone with, say, a short credit history to others with histories of a similar length. This will help provide a more accurate picture of whether or not someone is a good credit risk compared to her peers.
- Credit utilization will count more. To balance the effect of counting small unpaid debts less, high credit utilization ratios will hurt a score more significantly (i.e. those with maxed out on cards will suffer).
Why the wait?
According to Credit.com, the delay in adoption of FICO 8 might be related to a number of factors. Fannie and Freddie for example, are currently facing opposition in Congress to the government support they enjoy. After suffering major losses in the mortgage meltdown, they may be more focused on staying afloat than changing the way they do business.Sunday, November 6, 2011
Chapter 7 - Fact vs. Fiction
CHAPTER 7 FACTS
Answers to commons questions
If you are considering Chapter 7 bankruptcy, you may have heard different things from different people about the impact your filing will have on your life. Chances are, some of the information you received is fact and some of it is probably fiction.
Below, your local bankrutpcy lawyer has highlighted 3 common myths:
1. When you file for Chapter 7, all of your debt is erased. This, unfortunately, is a myth as certain debts may not be subject to discharge. For example, if you have student loans or unpaid tax bills, these debts will not be eliminated.
2. You'll lose all your possessions. When you file for Chapter 7, some of your assets may be liquidated for money that is used to pay back your creditors. However, liquidation occurs on a case-by-case basis and there is a possibility that you can still keep your assets.
3. Filing for bankruptcy is easy so you don't need a lawyer. Like any legal process, filing for bankruptcy is quite serious and the process is governed by a unique set of laws. If you do not comply with the laws or fail to submit required information, a judge may deny your bankruptcy petition. With this in mind, working with a bankruptcy attorney is a wise idea as you will have a legal professional on your side who can handle your filing from start-to-finish.
Need help with your Chapter 7 filing in Southern California? Contact a local bankruptcy lawyer today! The banks have lawyers, you should have fighting for you also! Contact your local Bankruptcy Lawyer today at (951) 226-5294.
Answers to commons questions
If you are considering Chapter 7 bankruptcy, you may have heard different things from different people about the impact your filing will have on your life. Chances are, some of the information you received is fact and some of it is probably fiction.
Below, your local bankrutpcy lawyer has highlighted 3 common myths:
1. When you file for Chapter 7, all of your debt is erased. This, unfortunately, is a myth as certain debts may not be subject to discharge. For example, if you have student loans or unpaid tax bills, these debts will not be eliminated.
2. You'll lose all your possessions. When you file for Chapter 7, some of your assets may be liquidated for money that is used to pay back your creditors. However, liquidation occurs on a case-by-case basis and there is a possibility that you can still keep your assets.
3. Filing for bankruptcy is easy so you don't need a lawyer. Like any legal process, filing for bankruptcy is quite serious and the process is governed by a unique set of laws. If you do not comply with the laws or fail to submit required information, a judge may deny your bankruptcy petition. With this in mind, working with a bankruptcy attorney is a wise idea as you will have a legal professional on your side who can handle your filing from start-to-finish.
Need help with your Chapter 7 filing in Southern California? Contact a local bankruptcy lawyer today! The banks have lawyers, you should have fighting for you also! Contact your local Bankruptcy Lawyer today at (951) 226-5294.
Why people choose to file Bankruptcy
When people are facing long-term financial challenges and are in need of a solution that will enable them to have a fresh start, they may consider filing for Chapter 7 bankruptcy in the state of California.
Below, your local bankruptcy lawyer has compiled a list of common reasons why people choose to file for Chapter 7:
1. To stop wage garnishment. When people are having their wages garnished, they may choose to file for Chapter 7 to put an end to the garnishments. However, it is important to note that wages that are garnished for litigation or child support payments will not be impacted by Chapter 7 – meaning people will still be responsible for paying such expenses.
2. To address large amounts of unsecured debt. People who have accumulated a great deal of unsecured debt (i.e. credit card debt) may file for Chapter 7 to have their debt discharged. Remember, people who have high balances on their credit cards and fall behind on their payments often incur interest and late fess which make it harder to pay off amounts that are owed.
3. To put a stop to foreclosure temporarily. Many people choose to file for Chapter 7 when they learn that their home is being subjected to foreclosure. While Chapter 7 may not prevent foreclosure in all cases, it can put a temporary halt to proceedings.
These are just some of the many reasons people file for Chapter 7. If you are thinking about filing for this type of bankruptcy, take the time to contact Raxter Law your local bankruptcy lawyer to set up a FREE consultation, so we can discuss all of your options.
Raxter Law is your local Bankrutpcy Lawyer serving Wildomar, Menifee, Canyon Lake, Perris, Murrieta, Temecula, and Hemet.
Below, your local bankruptcy lawyer has compiled a list of common reasons why people choose to file for Chapter 7:
1. To stop wage garnishment. When people are having their wages garnished, they may choose to file for Chapter 7 to put an end to the garnishments. However, it is important to note that wages that are garnished for litigation or child support payments will not be impacted by Chapter 7 – meaning people will still be responsible for paying such expenses.
2. To address large amounts of unsecured debt. People who have accumulated a great deal of unsecured debt (i.e. credit card debt) may file for Chapter 7 to have their debt discharged. Remember, people who have high balances on their credit cards and fall behind on their payments often incur interest and late fess which make it harder to pay off amounts that are owed.
3. To put a stop to foreclosure temporarily. Many people choose to file for Chapter 7 when they learn that their home is being subjected to foreclosure. While Chapter 7 may not prevent foreclosure in all cases, it can put a temporary halt to proceedings.
These are just some of the many reasons people file for Chapter 7. If you are thinking about filing for this type of bankruptcy, take the time to contact Raxter Law your local bankruptcy lawyer to set up a FREE consultation, so we can discuss all of your options.
Raxter Law is your local Bankrutpcy Lawyer serving Wildomar, Menifee, Canyon Lake, Perris, Murrieta, Temecula, and Hemet.
REBUILDING YOUR CREDIT AFTER BANKRUPTCY
After people file for Chapter 7 or Chapter 13 bankruptcy, they often wonder how and if they can rebuild their credit score. While filing for consumer bankruptcy can adversely impact people's credit reports for a period of time, it is important to know that this is temporary and by taking the right actions, people can in fact rebuild their credit scores with time.
If you filed for bankruptcy and are wondering how you can improve your credit score, following these two tips can help.
First, make sure that you pay all your bills on time from here on out. Don't allow yourself to fall behind as being delinquent can lead to a lowered credit score.
Second, be responsible with your credit cards – this means that you must avoid overspending. You have to be strict with yourself and follow a budget that is feasible or else you will find yourself accumulating debt that you can't afford to pay. AS you know, this can lead to your credit score being lowered if you can't afford to pay your bills.
If you have additional questions, contact Raxter Law, your Menifee, Canyon Lake, Murrieta, Wildomar Bankruptcy Attorney.
If you filed for bankruptcy and are wondering how you can improve your credit score, following these two tips can help.
First, make sure that you pay all your bills on time from here on out. Don't allow yourself to fall behind as being delinquent can lead to a lowered credit score.
Second, be responsible with your credit cards – this means that you must avoid overspending. You have to be strict with yourself and follow a budget that is feasible or else you will find yourself accumulating debt that you can't afford to pay. AS you know, this can lead to your credit score being lowered if you can't afford to pay your bills.
If you have additional questions, contact Raxter Law, your Menifee, Canyon Lake, Murrieta, Wildomar Bankruptcy Attorney.
Thursday, October 27, 2011
Website dedicated to Bankruptcy
If you are searching for a local bankruptcy attorney and informaiton regarding bankruptcy we have created a website dedicated to Bankruptcy. The site is full of information and has information regarding common bankruptcy issues.
please visit www.menifeebankruptcylawyer.com
Local Bankruptcy Attorney
please visit www.menifeebankruptcylawyer.com
Local Bankruptcy Attorney
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