Category Archives: Bankruptcy Help

How to recognize an abusive bankruptcy filing

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What is an abusive bankruptcy filing? When does a bankruptcy court consider a debtor’s Chapter 7 filing to be an abuse of the bankruptcy process?

A bankruptcy court will look at whether the person filing the bankruptcy acted in bad faith and at the entire circumstances surrounding the debtor’s financial situation.

A Florida court addressed this issue in a recent case. Not only were the debtors living what the court considered to be “an extravagant lifestyle” both before and after their filing, but they also failed to disclose all relevant information in their bankruptcy filing.

Among other factors, the court found the following to be especially significant – the debtors:
1) Initiated a lease on a luxury car – an Infiniti – the month before filing for bankruptcy;
2) Timed the filing to be right before a significant raise in income;
3) Had excessive withholding of their Federal taxes and increased 401(k) contributions;
4) Transferred property and/or money right before and after filing for bankruptcy;
5) Tried to hide cash from the bankruptcy court; and
6) Spent a lot of money on day trading, brokerage fees, restaurants, and non-essential purchases.

The court also examined whether the debtors were able to pay their unsecured debts. With disposable income of over $3000 per month left over after monthly expenses, the court found that yes, these debtors would be able to pay back about 54% of their unsecured debts over about 60 months.

Primarily because the debtors could repay a significant portion of their unsecured debt, the court found that it would be an abuse of Chapter 7 to give them relief under that chapter. But the court took other factors into account, such as:
1) One of the debtors was experienced in financial matters and they both had experience with Chapter 7;
2) The debtors timed their filing to take place just before a raise in income;
3) They transferred money and/or property before and after their bankruptcy filing;
4) They made no effort to reduce expenses and live “a luxurious lifestyle”;
5) They decided to keep and pay on 3 luxury vehicles that had no equity;
6) They make large mortgage payments on a house that has no equity;
7) The debtors increased their monthly vehicle obligations right before filing;
8) The debtors provide a rent-free home to two relatives, whose utilities they also pay; and
9) Their bankruptcy filing was not the result of an unexpected or catastrophic event.

The debtors’ Chapter 7 case was dismissed and they were given time to convert their case to an appropriate chapter of the Bankruptcy Code.

The factors listed above, taken together, are enough to probably make any bankruptcy court sit up and take notice – in a bad way. The existence of just one of these factors might not be enough to lead to dismissal of a Chapter 7 case, but it really depends on the individual facts of each case.

This post is based on In re Ricci, Case No. 6:09-bk-00914-ABB, (Bankr., Middle Dist. Fla., Orlando Div. 2009).

If you are looking for a New Jersey bankruptcy lawyer, please call (201) 676-0722.

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How I Work with Clients on Consumer Bankruptcy Cases

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I take a personalized approach to working with clients on consumer bankruptcy cases. I understand that everyone’s situation is different, so I tailor my services to meet the individual needs of each client.

Some clients like to ask a lot of questions, and I’m happy to answer them. Others don’t have a lot of time for meetings, so I’m also available by phone, email, and U.S. mail.

No matter how you prefer to communicate, I’m here to help you through the bankruptcy process. I’ll be present at your meeting of creditors, and I’m always available to answer your questions.

I know that filing for bankruptcy can be a stressful experience, so I want to make it as easy as possible for you. I’ll walk you through the process step-by-step, and I’ll be there to support you every step of the way.

If you’re considering filing for bankruptcy, I encourage you to contact me today. I’ll be happy to answer any questions you have and help you get started on the path to financial freedom.

Here are some of the things I do to help my clients:

  • I answer all of your questions about bankruptcy, no matter how big or small.
  • I prepare all of the necessary paperwork for your bankruptcy case.
  • I represent you at your meeting of creditors.
  • I help you get back on your feet financially after your bankruptcy case is discharged.

I understand that filing for bankruptcy can be a difficult decision, but I’m here to help you through the process. I’ll work with you to create a customized bankruptcy plan that meets your individual needs.

If you’re ready to start fresh financially, contact me today for a free consultation.

Would you like to repay Aunt Sally before filing bankruptcy? Read this first.

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The whole issue of whether you should repay someone to whom you owe money before you actually file for Chapter 7 bankruptcy is more complex than it looks at first glance. I introduced the issue in a previous post about repaying debts before bankruptcy, but there is a lot of detail here that is worth examining.

You may recall from my previous post that if you repay someone you owe money (whether it’s American Express or your Aunt Sally) just before filing for bankruptcy, and the total repayment is $600 or more, the bankruptcy trustee could take back that money from your creditor.

The trustee will look back only 90 days before your filing to see if you repaid any ordinary creditors, such as American Express. But for creditors like your Aunt Sally, the trustee will look back a year before your filing for repayments that they can take back. If the trustee finds loan repayments and takes them back, they can be used to repay your other creditors. The money doesn’t go back to you.

A loan repayment made before bankruptcy that the trustee can take back is known as a “preference” or a “preferential transfer.”

But even when the trustee decides that a payment made to a creditor before a bankruptcy filing was a preference that they can take back, there are defenses that might be applicable. Two of these defenses are: 1) The earmarking defense and 2) The new value defense.

The earmarking defense is available when someone provides you with money to re-pay one of your existing creditors.

In a recent decision the Third Circuit Court of Appeals found that certain things need to be present for the earmarking defense to work: 1) An agreement between you (the debtor) and the person providing you with the money stating that the new money will be used to pay the prior debt; 2) Performance of the terms of the agreement; and 3) This transaction does not reduce the value of the debtor’s estate.

The idea behind the earmarking defense is that the debtor never had an interest (in the sense of a property interest) in the funds to begin with.

The second defense is the “new value” defense. In the same decision mentioned earlier, the Third Circuit said that for the new value defense to apply, you need: 1) A preferential transfer; 2) After receiving the preferential transfer, the creditor makes a new loan to the debtor – this new loan must be unsecured; and 3) As of the bankruptcy filing date, the debtor has not yet repaid the new loan to the creditor.

An example of when the new value defense is available would be when you repay your Aunt Sally the $2500 she loaned you and then your Aunt Sally makes a brand new $2500 loan to you that you had not yet repaid by the time you filed for bankruptcy. It’s basically like reversing the loan repayment.

The Third Circuit decision I referred to above is Shubert v. Lucent Techs. Inc. (In re Winstar Communs., Inc.), 554 F.3d 382 (3d Cir. 2009).

If all this is confusing to you and you don’t know what to do, remember this: Seek advice from a bankruptcy attorney before repaying any loans to anyone in any amount, whether it’s American Express or your Aunt Sally or anyone in between! If you’d like, give me a call at 201-676-0722.

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New Jersey household median income levels rising soon

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The picture over there on the right? Those are test tubes. I couldn’t resist – you’ll get it in a minute. Read on.

On November 1, 2009, the Census Bureau median family income for a one-person household in New Jersey goes up from $57,120 to $60,026. What does this mean to you? It could mean a lot, if you are planning to file a Chapter 7 bankruptcy in New Jersey.

Part of what you need to do to qualify for a Chapter 7 bankruptcy is pass the means test. If your income is below the median income for your household size, you pass the means test. If your income is more than the median, you may still be able to pass the means test by deducting certain allowed expenses from your income. The means test form is similar to an IRS form in that it tells you what numbers to put on which lines and allows for specific deductions.

So what about the median income going up in New Jersey? When the median income levels for your state go up, that might make it easier for you to qualify for a Chapter 7, depending on your income and on how much money you have left over at the end of every month.

But the median income is not going up for every state. For example, the median income for a single-person household in New York will actually go down a bit, making it just a bit more difficult for certain New Yorkers to qualify for a Chapter 7. The difference is not huge, though, and consumer bankruptcy attorneys in New York will probably just need to guide their clients in finding a little bit more in expenses to fit onto the means test.

And median income levels in New Jersey will not be going up the same amount for all household sizes. For a single-person household, the rise will be $2906; for a two-person household, it will go up $2147; for a three-person household, it will go up only $673; and for a four-person household, median income will only rise by $227 per year.

For each additional person above four, you will still add $6900 to the total median income for a four-person household, which is no more than you would add prior to November 1, 2009.

So if you are one of those one-person households needing a Chapter 7 in New Jersey who was a bit over the median income before, you might want to look into filing on or after November 1, 2009.

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Inadequate protection from debt collection law

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On October 21, the Government Accountability Office (GAO) released a new report on debt collection abuses and the current state of legal consumer protections against those abuses.

The GAO found that current legal protections for consumers facing abuses by the debt collection industry fall short of actually protecting those consumers. Problems such as excessive phone calls and unauthorized fees still exist. In addition, debt buyers often do not have sufficient information about a debt such that they try to collect the wrong amount or try to collect the debt from the wrong person. And enforcement of the existing Federal consumer protection law is lax.

Sen. Carl Levin is citing the GAO report in his call for the creation of a Consumer Financial Protection Agency. He wants such an agency to enforce the laws, modernize consumer protections to bring them up-to-date with current communications technology, and to monitor compliance with existing law.

The Federal law protecting consumers against debt collection abuses, the Fair Debt Collection Practices Act (FDCPA), was made law in 1977. That law prohibits the disclosure that a communication is being made in an attempt to collect a debt, which creates a problem with the use of answering machines, voice mail, email, faxes, mobile phones, and caller ID. If the Federal Trade Commission (FTC) had rulemaking authority, the report states, it would be easier for the law to keep up with technological changes and to regulate the debt collectors.

Also, the FDCPA does not clarify the account information that should be provided when debt buyer purchases a debt, which creates a problem when attempting to verify the debt. The likelihood of a wrongful lawsuit (on the wrong debt or suing the wrong party) increases.

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Repaying a debt before bankruptcy? Better think twice

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Can you repay a debt to a friend or a creditor before you file for bankruptcy? Yes, you can, but it’s not necessarily a good idea because that repayment may be what bankruptcy law calls a “preference” or a “preferential transfer.”

After you file for bankruptcy, preferential transfers may be taken back by the trustee. Determining whether or not a transfer constitutes a preference is very fact-specific, but bankruptcy law defines a preference as a payment (not necessarily of money) made to or for the benefit of a creditor for a debt previously owed while the debtor was insolvent. To be a preferential transfer, the transfer must be made within the 90 days before filing. Except that if the transfer was made to an “insider” (such as a relative), the trustee can look at transfers made within the year before the bankruptcy filing.

But when you buy something at the grocery store, for example, that’s not a preference because it is a contemporaneous exchange for value. You are immediately getting something in return for your payment.

Section 547 of the bankruptcy code, which governs preferential transfers, contains many other exceptions to the definition of preferential transfers and as mentioned above, the analysis of whether a transfer is a preference is fact specific. If you are thinking of repaying anyone to whom you owe money before filing for bankruptcy, stop and consult an attorney first. My email address is: jweil@jenlawyer.com.

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What Happens At The Bankruptcy Meeting Of Creditors?

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What happens after you file for bankruptcy? If you’ve never done it before, you may not know what to expect.

A few short weeks after you file for bankruptcy, you and your attorney must attend a bankruptcy meeting of creditors, also called a 341 meeting. Named after section 341 of the Bankruptcy Code, this is a meeting at which the trustee assigned to your case asks you some questions under oath.

It’s called a “meeting of creditors,” but your creditors don’t necessarily show up. They can appear to ask questions about your financial condition.

What happens at a typical meeting of creditors in a bankruptcy case? Mainly, the trustee goes through a list of questions that you must answer under oath. Certain answers to some of these questions can spawn other follow-up questions. The trustee can also ask for copies of documents regarding your financial situation.

Meeting Of Creditors Question List

Here’s are some typical questions the trustee might ask:

1. State your name and current address for the record.

2. Please provide your picture ID and Social Security number card for review.

3. Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them?

4. Are you personally familiar with the information contained in the petition, schedules, statements and related documents?

5. To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct?

6. Are there any errors or omissions to bring to my attention at this time?

7. Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?

8. Have you previously filed bankruptcy?

9. What is the address of your current employer?

10. Is the copy of the tax return you provided a true copy of the most recent tax return you filed?

11. Are you expecting a tax refund?

12. Do you have a domestic support obligation? To whom? Are you current on your post-petition domestic support obligations?

13. Have you filed all required tax returns for the past four years?

14. Do you own or have any interest whatsoever in any real estate?

If owned: When did you purchase the property? How much did the property cost? What are the mortgages encumbering it? What do you estimate the present value of the property to be? Is that the whole value or your share? How did you arrive at that value?

If renting: Have you ever owned the property in which you live and/or is its owner in any way related to you?

15. Have you made any transfers of any property or given any property away within the last one year period (or such longer period as applicable under state law)?

If yes: What did you transfer? To whom was it transferred? What did you receive in exchange? What did you do with the funds?

16. Does anyone hold property belonging to you? If yes: Who holds the property and what is it? What is its value?

17. Do you have a claim against anyone or any business? If there are large medical debts, are the medical bills from injury? Are you the plaintiff in any lawsuit? What is the status of each case and who is representing you?

18. Are you entitled to life insurance proceeds or an inheritance as a result of someone’s death? If yes: Please explain the details.

19. Does anyone owe you money? If yes: Is the money collectible? Why haven’t you collected it? Who owes the money and where are they?

20. Have you made any large payments, over $600, to anyone in the past year?

21. Were federal income tax returns filed on a timely basis? When was the last return filed?

22. Do you have a bank account, either checking or savings? If yes: In what banks and what were the balances as of the date you filed your petition?

23. When you filed your petition, did you have:

a. any cash on hand?

b. any U.S. savings bonds?

c. any other stocks or bonds?

d. any certificates of deposit?

e. a safe deposit box in your name or in anyone else’s name?

24. Do you own an automobile? If yes: What is the year, make, and value? Do you owe any money on it? Is it insured?

25. Are you the owner of any cash value life insurance policies?

If yes: State the name of the company, face amount of the policy, cash surrender value, if any, and the beneficiaries.

26. Do you have any winning lottery tickets?

27. Do you anticipate that you might realize any property, cash or otherwise, as a result of a divorce or separation proceeding?

28. Have you been engaged in any business during the last six years?

If yes: Where and when? What happened to the assets of the business?

If you have any questions about what the meeting of creditors would be like in your bankruptcy case, call to schedule a phone appointment with attorney Jennifer Weil at (201) 676-0722.

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Do You Qualify For a Chapter 7 Bankruptcy?

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Qualifying for Chapter 7 bankruptcy is something you should discuss with an attorney.  But there is a basic set of guidelines of which you should be aware.

What is Chapter 7 bankruptcy?  Chapter 7 is the most common type of bankruptcy; the name refers to a chapter of the U.S. Bankruptcy law.  Under a Chapter 7 bankruptcy, some of a debtor’s property may be liquidated, or sold, to pay creditors.  But the debtor’s property is not always sold, such as in a “no asset” case, where the debtor does not have enough property to sell to satisfy any creditors.  If all goes well, the end result of a Chapter 7 bankruptcy should be a discharge of the debtor’s personal liability from debts previously owed.

Who may file for a Chapter 7?  Individuals or businesses.

Are there income limits? If your current monthly income is more than the median income for your state, you must do a means test to see if you qualify to file for a Chapter 7. If you need to complete the means test, you should get a lawyer, because it can be complicated.

What if I’ve filed for bankruptcy in the past? Again, there are some complex rules here and you need to speak with a bankruptcy attorney. You might need to wait a certain period of time, depending on what happened as a result of your last filing and what chapter you filed under, before you can file again.

What about the credit counseling requirement? You are required to take a credit counseling course before filing. At the end of the course, you receive a certificate that you provide at the time of filing. The certificate expires after 180 days. The course you take must be given by a provider that has been pre-approved by the bankruptcy court.

These are only some bare-bones basics about Chapter 7 eligibility. There are situations where filing for bankruptcy under a different chapter (such as Chapter 13) might be the better course of action for a debtor. You should consult an attorney first to find out which is best for you.

Got a debt collection lawsuit before your bankruptcy is filed?

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Household Debt 11Jun09

If you’ve got a debt collection lawsuit against you before you had a chance to file your bankruptcy case, don’t panic.

A bankruptcy filing normally stops all lawsuits against you. But not everyone who is planning to file for bankruptcy can do so right away to stop the debt collection lawsuits.

 

If you’ve been sued by a debt collector, share the details of the debt collection lawsuit with your bankruptcy attorney. Listen to their recommendation. The course of action they recommend will depend on the type of debt-collection lawsuit and on the planned timing of your bankruptcy.

In New Jersey, it might be OK to ignore the typical debt collection lawsuit if you’re going to file the bankruptcy relatively soon anyway. It will take a little while for the debt collector to get a judgment against you and then to get the court to order a bank levy or a wage garnishment. Your bankruptcy attorney can use this time to their advantage to prepare your case. Make sure you get everything that your attorney needs to them as soon as possible, since the longer you wait, the higher the risk that debt collectors could get at your money.

If you’ve got a debt collection lawsuit against you, it might be time to speak with a bankruptcy attorney about your options. Schedule a phone appointment with attorney Jennifer Weil by calling (201) 676-0722.