Bankruptcy FAQ – Frequently Asked Questions

Most consumer bankruptcy attorneys do not understand Chapter 11. Most of our cases are Chapter 7 or 13, but there are sometimes that Chapter 11 is the best choice.

The most common use of Chapter 11 for indvidual debtors whose debts exceed the approximately $1 million secured and $336K unsecured Chapter 13 debt limits. Those above these amounts who have a business or other non-exempt property cannot do Chapter 7 or they will lose it to the Trustee.

While Chapter 11 is expensive if done right it can provide you with some incredible benefits. One of the best advantages is that you can take more than five years to pay off your creditors. Another is that you can cram down vehicles even if you have not had them for 910 days.

Finding the right attorney is hard. I represent Chapter 11 clients and I will consider taking your case even if you live outside of my area. Feel free to call (888) 305-1919 to make an appointment.

The Mortgage Bankers Association reported that loan applications rose 17 from the week before says the Hosuton Business Journal, perhaps in an attempt to grab headlines that the economy is improving. Asie from the fact that is just one week, it is just another example of how the media is part of the problem by portraying a recovery that is not happening.

Bankruptcy filings also increased in August, especially Chapter 13 which is usually used to save a home from foreclosure. This is a better barometer of the economy. I think it will be two years before we are out of the economic crisis because we have not seen the full fallout of the mortgage crisis. Chapter 13 remains the best option for homeowners who want to save their home from foreclosure as mortgage companies still refuse to modify most distressed borrowers loans.

In Chapter 7 you have the option of redeeming your car by paying or getting a loan only for what it is worth even if that is a lot less than what you owe on it. For more information click here to find out more about your options for redemption.

Recent hotel industry association figures released the other day indicate a 17.5 percent drop in revenue per available room. It is very hard to believe the reports of a rebound when you see such numbers. Frankly there are no credible signs of a rebound.
 
Until Congress comes up with a real fix for the mortgage crisis and passes the mortgaga nodification bill, things will just get worse. Right now all they seem to do is to throw money at failed businesses.
 
Since there is no immediate relief in sight for the economy, bankruptcy filings will continue to rise. Those who still have jobs but are susceptible to layoffs may want to make plans for what they would do if they lose their jobs.

It seems that often Chapter 13 gets a bad rap.   I disagree I think it is a good chapter.  Here are some good reasons to file Chapter 13, other than stopping foreclosures and repossessions:

-You keep all your property even if it is non-exempt.
-You can get another Chapter 13 discharge in two years!
-You can get another Chapter 7 discharge in six years or less sometimes!
-You have an absolute to dismissal if you want out.
-It can sometimes be less than 3 years, e.g. 6 months!
-Get divorce decree debt discharged.
-Get civil fines and penalties, including motor vehicle surcharges and toll fines discharged.
-Get divorce decree debts discharged.

These are many good reasons to file Chapter 13.  Also, if you fail the means test filing 13 is not necessarily so bad, because sometimes claims of creditors can be struck and you can finish in 6 to 9 months.  If you are current on your mortgage and car loans there are a lot of things you can do in Chapter 13.

One of the best things is that if you run into new financial problems you can file again and get a discharge of your new debts only two years after the first Chapter 13 filing.  Even better if you had a Chapter 13 that lasted less than 3 years because most of the claims were struck, then you can file Chapter 7 and get a discharge right away!

The benefits of Chapter 13 are a little complicated to explain in general because it varies a lot depending on your circumstances, but they are many.  You should definitely consider Chapter 13 if any of the above reasons appeal to you.

In Chapter 13 you have the right to cure defaults in a mortgage up to the foreclosure sale. On some states you may be able to use Chapter 13 to redeem if there is a redemption period after the sale, but most of the time prior to the sale is the last chance.
 
If you file before the sale and you qualify for an automatic stay then that will stop the sale. In some cases there may also be a codetor stay if the other signer does not file. You can then cure over a five year period out of your future earnings.

Bankruptcy filers receive a number of protections in Section 525. Governmental entities may not discriminate in a wide variety of ways including denying or failing to renew licenses.
 
Especially those in the military and others with security clearances are almost always better off filing, because they are perceived as less of a risk without debt. The UCMJ (Uniform Code of Military Justice for those not familiar) has an offense for dishonorably failing to pay a debt. Bankruptcy protects service members from prosecution for this as you no longer owe the debt. Private employers may not terminate employment or any anyway discrimate against an employee for being in bankruptcy. The open question however is whether they can refuse to hire a person initially. The law is not clear. Courts have ruled differently on this issue. I am taking a case up the appellate process right now on this very issue. It involves a company who refused to hire an applicant with stellar credentials and impeccable character becasue of a bankruptcy.
 
I think it is very short sighted of employers to do this. The good news is that this is an exception rather than the rule. Most employers acknowledge that bankruptcy is the honest and responsible way to handle being over-indebted and respect those who do so. The one client I am suing for is the only one I have ever heard of who has been denied a job because of a bankruptcy.

Business Week reports that commercial mortgage defaults are on the rise and could be the next default wave. According to the editorial the default for commercial mortgages hit 2.25 percent – a fifteen year high. They go on to say that this will worsen even if the economy as a whole improves, with a peak by 2011.
 
I find this prediction very credible. There are a lot of other reports who claim the economy is getting better and I do not believe them. This is the first realistic one in a while.
 
Regardless, bankruptcy rates are going to rise. Uncertainties in the world economy, such as the election in Iran will cause continued turmoil in the world markets and in return consumers will continue to feel the squeeze resulting in more bankruptcies. The commercial mortgage crisis about to hit will certainly contribute to this increase.

In addition to advising my clients to stop charging in preparation for their bankruptcy filing – once I meet with them, I have to advise them that in some rare cases a creditor will object to the discharge of certain recently incurred charges.
 
The creditors have 60 days from the date first set for the meeting of creditors, to object to the discharge of specific debts in your bankruptcy.
 
One such ground for objection is that the debt was incurred by fraud or misrepresentation other than a misreprentation of your financial condition.
 
The hardest way for a creditor to prove such a misrepresentation is to prove that you did not intend to repay the debt when you incurred it. This is not easy.
 
A simpler way is through the use of a presumption of which there are two in that section of the Bankruptcy Code. The first is if you charged more than $500 in luxury goods or services with 90 days of the filing. If they can prove this than the burden of proof shifts to you to prove the absence of fraud or that you intended to pay in order to rebut this presumption. The second presumption of fraud applies if you have taken out more than $750 in cash advances within 70 days of filing. Again this presumption can be rebutted, but the burden of proof shifts to you if the creditir can prove up the facts giving rise the predumption.
 
The best thing to do is to avoid charges especially cash advances soon before you file. Even where you had no choice all is not lost. The number of challenges are few, but it can happen to you. A worst case scenario is just that the particular debt is not discharged. Also if the creditor loses the challenge they have to pay your attorneys fees for defending you.

Bankruptcy is as American as apple pie. Our constitution gives the federal government the power to enact uniform bankruptcy law which is the law we now file bankruptcyn well at least its successor.
 
Robert Morris one of our founding fathers who helped finance the American Revolution apparently got a lot of debt discharged in a bankruptcy. I like to think of bankruptcy as a patriotic American thing to file bankruptcy. You are just exercising your constitutional right to use the laws that Congress has provided to orderly dispose of your debts.