Bankruptcy attorneys have struggled to explain the logic to their clients why the U.S. Trustee takes the position that you cannot deduct the ownership expenses for vehicles unless you owe debt or a lease payment on it.
The Fifth Circuit Court of Appeals whose rulings apply to Texas, Louisiana, and Mississippi has ruled in the Tate case No. 08-60953, that you can deduct ownership expenses in the means test on a vehicle even if you do not have a debt payment or lease payment on it.
This means that many bankruptcy attorneys need to advise their clients who have fewer than two cars to go out and buy one or two old cars. The attorneys should encourage the client to pay cash, because we are prohibited from advising clients to incur debt.
The cars should also be at least 6 years old by model year or have at least 75,000 miles so you can get the additional $200 per vehicle deduction per vehicle. This is per the IRS manual 5.85. Some bankruptcy courts may not allow this deduction, but they should!
In short where the vehicle expense is $489 per vehicle with the additional $200, a debtor with only one vehicle could get an additional $689 deduction on the means test. In Chapter 7 it might make you pass easier and avoid a dismissal and in Chapter 13 it might save you money you would otherwise have to pay to the unsecured creditors.
I am not telling consumers themselves to go out and buy the additional car, talk to your attorney first and make sure it helps in your case.
Bankruptcy Means Test – make sure you have at least two cars
Written by admin on June 12th, 2009Bankruptcy attorney recommended option to clean up your credit report
Written by admin on June 11th, 2009As a bankruptcy attorney I am often alone among my colleagues in recommending good resources on how to rebuild your credit and finances after bankruptcy.
Stephen Snyder has gotten together with some former Bradley Ross employees who are starting a new credit repair service. Snyder puts out the Life after Bankruptcy email list and the After Bankruptcy Foundation’s seminar.
Snyder has a record of altruistically helping those who have filed bankruptcy.
The new credit repair service opens Monday, June 15, 2009 at 11 am central time to 2500 charter members. I recommend signing up now at www.allenmichael.com to get a chance to become a charter member before they open to the general public. I warmly recommend this service and wish that other bankruptcy attorneys would join me in recommending the service.
Chapter 7 bankruptcy discharge without passing the means test
Written by admin on June 10th, 2009Chapter 7 bankruptcy may still be an option for you even if you do not pass the means test. If you have primarily business debt or other non-consumer debt or certain active duty military are exempt from the means test as we know. But even if you are subject to the means test that does not mean that your case will be dismissed if you do not pass.
The United States Trustee, who oversees bankruptcy filings and makes sure no one who is not entitled to it receives a Chapter 7 discharge, will sometimes decline to file a motion to dismiss if they think it is appropriate. Common reasons for declination are significantly reduced income, severe medical conditions, or other compelling reasons. Someone who just lost their job will not have the same level of income in the furture.
Additionally, Section 707(b) of the Bankruptcy Code makes dismissals discretionary for the judge. The judge is not required to dismiss the Chapter 7 even if the presumption of abuse is not rebutted. You may be able to persuade the judge if there are good reasons.
Sometimes dismissal of your Chapter 13 bankruptcy case is the best thing
Written by admin on June 9th, 2009There are times when it is hard to keep a Chapter 13 bankruptcy case going. If you can’t make the payments it can sometimes be hard to catch up. One advantage of a dismissal and a refile is that you might have had a car for more than 910 days before the filing of the second case, then you can cram it down and pay only the vale of the car, even if it a lot less than what is owed.
Just make sure the dismissal is without prejudice so that you are allowed to file again. If dismissal is due to your inability to make payments that is usually without prejudice.
In the new case you will have to file a motion to extend the automatic stay or impose one if you had two cases pending within the previous year. It is always best to talk to your attorney and weigh the options very carefully, but a lot of times it is better if the case is dismissed and you get to start over.
Filing bankruptcy and keeping $11,000 to $22,000 in cash
Written by admin on June 7th, 2009If you live in a state that allows you to use the bankruptcy code exemptions, such as Texas, or you are otherwise eligible for the bankruptcy code exemptions, you can keep up to about $11,000 for single filers or $22,000 if married filing together.
This is because of the Section 522(d)(5) wild card exemption which allows you to use the unused portion of the homestead exemption for any type of property. The wildcard is very handy and you can use it in combination with other of the bankruptcy code exemptions, as well as tenancies by the entirety and the special retirement exemptions which apply regardless of which exemption scheme you choose.
The bottom line is that if ýou are eligible to use the bankruptcy code exemptions, you can keep a lot of cash.
Keeping your car in Chapter 7 by only paying the value.
Written by admin on June 6th, 2009Bankrutcy – after the creditors meeting in Chapter 7
Written by admin on May 21st, 2009What’s the next step in your bankruptcy after a creditors meeting in Chapter 7?
Thirty days after the conclusion of your creditors meeting is the deadline for the trustee or any other party to object to exemptions. If no objection is filed by this date then it is waived. Thirty days after is also the deadline to follow through with your intent to reaffirm or redeem secured debts and collateral. If this is not done timely, the automatic stay may have terminated and the lender may be allowed to repossess the car or other personal property even if you are current. Read more about this.
Forty five days is the deadline to take the financial management course, but as a practical matter if you take it before sixty days there is no cponsequence for being late.
Sixty days is the deadline to object to you getting a discharge at all and to dischargeability of specific debts. If no one objects and you have filed your certificate of financial management course, then your discharge could be almost automatic.
In some districts if you have failed to file the certificate the case will close without a discharge. This is problematic not only because the automatic stay expires and you have no protection, but also because you will have to pay a filing fee that is almost as high as the original one to reopen the case and get the court to issue a discharge.
Additionally if you want to reaffirm a debt the agreement must be made before discharge and possibly also filed with the court before discharge.
How to prepare for the creditors meeting in my bankruptcy
Written by admin on May 19th, 2009The rules state that you need to bring a copy of your most recent paystub and a bank statement reflecting the balance of each account on the date of filing. In Houston the Chapter 7 trustees also ask for 90-180 days of bank statements that need to be provided in advance of the meeting as well as a questionnaire. I prefer to fill out the questionnaire in advance with the client so that there are no surprises and to prevent having to discuss this with the client in front of other poeple.
Do not bring any firearms or other weapons. It is a federal offense to have them on the sidewalk outside of the building and to enter with it even if you declare it at the checkpoint you will be handcuffed and may be prosecuted depending on whether the U.S. Attorney tells the U.S. Marshalls to let you go or not. Do not push this one.
Also you will be asked to leave any cell phones, computers, or other devices that have cameras or recording devices with the U.S. Marshalls at the checkpoints. Note that in some other federal court houses you will not be allowed to bring any cell phones, or mobile data cards inside. These policies vary from court house to court house.
Once you are in the door and waiting in the creditors meeting waiting area, beware that the meeting run behind schedule all the time. While most consumer bankruptcy cases will only involve five minutes with the trustee you may wait for an hour first. You will be asked to put your name on a sign in sheet and show a picture ID and social security card. You will be asked why you filed for bankruptcy, if your attorney has advised you of the effect of a discharge in bankruptcy and if you understand the consequences of reaffirming a debt and you may be asked to acknowledge if you become entitled to a tax refund, an inheritance or certain other property within 180 days of filing you must notify the trustee is it maybe part of your bankruptcy estate.
Remember that there is no judge there, just the trustee. This is also why you can dress casually. You will however be sworn in and give testimony under oath so make sure you speak clearly and do not guess. If you are not sure of the answers you should say so.
Creditors usually do not show up except for Conn's and maybe Rent-A-Center. They can ask questions. They are not required to appear. If you have a Chapter 13 case the IRS may send someone to ask questions if there are missing tax returns or other discrepancies. If you are in a Chapter 7 the U.S. Trustee may send someone who might ask a lot of questions particularly if you are above median income on the means test and do not clearly pass in their opinion. If this is the case they are likely to have many more questions than the Chapter 7 Trustee.
After the creditors meeting you should take your financial management course, make any final decisions on whether to reaffirm a secured debt in Chapter 7, and then wait for your discharge which will be at least 60 days later.
You might not be stuck with another state’s bankruptcy exemptions just because you lived there two years ago.
Written by admin on May 18th, 2009A majority of states have opted out from the bankruptcy code exemptions meaning that you are limited to state law to keep property. Remember that if you file Chapters 11, 12, or 13 instead of Chapter 7 then you can keep your non-exempt property.
Most of these opt-out states have written their opt-out statutes so that they only apply to residents or domicilaries of that state. So if the state uses that language and you do not live there or do not intend to come back then chances are good that you can use the bankruptcy code exemptions to keep property. Most states fall into this category. California is unclear, but Louisiana, Maine, Missouri, Nebraska, are problematic because you are probably stuck with those state’s laws. If you have lived in the Lone Star State for two years and have intended to stay there those two years you are okay. But even if you are a newly naturalized Texan unless you come from one of the above listed states you can use the bankruptcy code exemptions in most cases.
What you can keep in bankruptcy depends on your domicile rather than your residence
Written by admin on May 18th, 2009If you have been in your home state for more than two years it is really clear cut which state’s law applies, but otherwise it gets tricky.
If you have not lived (“domiciled” that is lived with an intent to remain there indefinitely) in the same state the last two years (730 days to be exact) the state whose law applies is the one where you were domiciled for 180 days before the 2 years. If those 180 days was not in a single state then the one where you were domiciled for the longest portion of those 180 days applies.
If you have not yet been confused then hats off to you. What really complicates it is that “domicile” means something different than “residence.” Your domicile is the place where you intend to remain indefinitely. You can have more than one residence, but not more than one domicile.
So at least now you which state’s law applies, but some state’s laws do not apply extra-territorially, and some states prohibits their residents, domiciclaries, and in some cases their non-residents from using the bankruptcy code exemptions to keep property. You may be stuck with that state’s law.