Reasons why a bankruptcy case might get dismissed

By doug | Published: August 24, 2010

If you do file a bankruptcy case, generally you don’t want the court to dismiss it out from under you! Generally, dismissals look bad on your record — if you file another case right after the dismissal, you might have to “beg” a bankruptcy judge to let you file again.

Forth Worth bankruptcy attorney Reed Allman recently put together a list of some of the reasons why debtors have their cases tossed out.

At the top of Reed’s list was “failing to provide tax returns to the bankruptcy trustee at least seven days prior to the meeting of creditors.” Here in New Hampshire and Massachusetts, this will typically not trigger an instant dismissal, but rather a stern request from the trustee to cough up the returns, as well as a postponement of the creditors meeting (read: another trip to court for you). Eventually, of course, if you refuse to provide the returns, your case will be dismissed. Note that if you are not required by the tax law to file a return (say, an elderly debtor with just a small social security check), you are excused from this requirement.

The second reason for dismissal is related: failing to give the trustee your paystubs for the 60 days prior to the day you filed your case. Again, if you weren’t working during that time, you are excused. As a practical matter, you give the taxes and paystubs to your attorney, who gives them to the trustee: if this isn’t happening, something is wrong!

A third cause for dismissal is “if the debtor is found engaging in delaying tactics with the aim of manipulating the system and preventing creditors from being repaid.” Anyone doing that probably deserves to have their case thrown out!

Fourth on the list is failure to pay court-mandated fees and costs. Note that in cases of extreme hardship, the court’s filing fee can be paid in installments.

In the case of a Chapter 13 bankruptcy case, the bankruptcy can be dismissed if the debtor fails to make payments to the bankruptcy trustee one the repayment plan has been implemented. As a practical matter, these cases often result in a new Chapter plan being submitted to the court, or having the case converted to Chapter 7 instead of being dismissed.

Finally, a debtor’s Chapter 13 bankruptcy case may be dismissed of the debtor fails to file a repayment plan in a timely manner. Under usual circumstances, a plan should be submitted at the time the case is filed, or within two weeks afterward.

 

By Doug Beaton

Posted in The Bankruptcy Code | Comments closed

Mortgage relief program falling short of goals

By doug | Published: August 21, 2010

The New York Times is reporting that the federal “Making Homes Affordable Program” can only help one-sixth of the people it was intended to.

The program, which encourages lenders to give trial loan modifications to embattled homeowners, flunked out 96,000 homeowners just in the month of July.

Those numbers are leading some housing specialists to call the program, which modestly rewards lenders for modifying mortgages, a failure. But administration officials say many households were helped even if their modifications were only temporary.

“They were able to benefit from reduced mortgage payments each month at no cost to the taxpayers,’’ Herbert M. Allison, an assistant Treasury secretary, said during a briefing.

The high number of cancellations was attributed to the rush to set up the program, which encouraged lenders to enroll borrowers first and ask questions later.

If you have tried this program, or one like it and it hasn’t worked out, give me a call. A bankruptcy case can sometimes be more effective, because each bankruptcy case is effectively backed by a court order mandating relief.

 

By Doug Beaton

Posted in Bankruptcy News, Foreclosure | Comments closed

More people tapping into retirement accounts

By doug | Published: August 21, 2010

Fidelity Investments is reporting that more Americans are raiding their retirement savings to stave off eviction or foreclosure, pay for college, or buy a home.

Early withdrawals from retirement savings jumped 38 percent in the second quarter, according to the Boston Globe.

And the number of people borrowing money against 401(k) accounts is at a ten year high, according to Fidelity. Twenty-two percent of 401(k) holders have outstanding loans against their accounts.

Most financial planners advise against tapping retirement funds early because there are taxes and penalties involved, and most plans won’t accept new contributions to an account for at least six months after a withdrawal. And then there’s the long-term danger of not having enough money to live on during retirement.

A bankruptcy case can sometimes help people in this predicament, at least if they are borrowing or withdrawing because their back is against a wall. Retirement savings are completely exempt from attachment in a bankruptcy case, while loans against the accounts can be discharged. Eliminating underlying debt may eliminate the need to tap retirement funds in the first place, allowing debtors to save their savings for the future, and participate in an economic recovery when we have one. Talk to a bankruptcy attorney about it!

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Why you need to list all your property when you file for bankruptcy

By doug | Published: August 18, 2010

It’s no exaggeration to say that the bankruptcy laws require every person and corporation to give a full and complete list of their property when they file a bankruptcy case.

Real estate is listed on Schedule A of the bankruptcy forms, and “personal property” (that is to say, everything else besides real estate) is listed on Schedule B. If you guessed that Schedule B’s can sometimes become quite long, you’re right!

Before you file, your bankrupcy attorney will give you a questionnaire on which you write down all of your valuables, along with their estimated worth. Although this is often an exhausting and somewhat thankless task, it is crucial to a successful outcome for your case.

In legalese, any property that isn’t listed isn’t “administered” as part of your “bankruptcy estate.” What this means is that you could literally lose title to the property later if the omission surfaces. the law will consider the unlisted property as part of your bankruptcy estate forever — even afer the case is closed — potentially depriving you of your rights to it.

An extreme example of this recently came out of California. In the Dunning Brother’s Company case, a bankruptcy judge re-opened a case that was more than seventy years old because unreported assets were discovered!

Those assets — the right of way to a portion of railroad track — were the type where establishing a clean title is important even after the passage of decades, but the main point applies to everyone’s case; it is never too late for a court to reopen a bankruptcy case to deal with unscheduled assets!

 

By Doug Beaton

Posted in Practical tips | Comments closed

“Will I qualify for bankruptcy?”

By doug | Published: August 17, 2010

“Will I qualify for bankruptcy?” This common question can usually be answered “yes,” although it is not always possible to determine what Chapter of the bankruptcy code should be used until consulting with a bankruptcy attorney.

Horror stories, rumours, and just plain wrong information abounds out there. It is rare that someone wouldn’t qualify for bankruptcy at all, and if that does happen it is usually reflective of a past history of telling lies or half-truths to the court.

What does it take? If you file, you should be doing it for some strategic reason — usually that you can’t pay all of your bills. Don’t let anyone tell you that you can’t own any property after you file, it simply isn’t true. The allowances are fairly generous — for example a Massachusetts homeowner can have up to $500,000 in home equity after filing. New Hampshire homeowners can have up to $100,000 in equity after a filing, and $200,000 for married homeowners filing jointly.

On the other hand, there is no minimum amount of debt required to file. Senior citizens, in particular, often benefit from a bankruptcy case even if the total amount of their debts would seem small to others.

You may be behind in some payments and struggling to make ends meet. There are some pretty significant rules as to what kind of bankruptcy you can file and which type will be best for you. I would be glad to review your circumstances and advice you as to whether you should file and if so, under which chapter.

 

By Doug Beaton

Posted in Practical tips | Comments closed

We are not on the short list for foreclosure relief

By doug | Published: August 6, 2010

The Obama administration announced the second round of states that will be receiving foreclosure relief aid, and neither Massachusetts nor New Hampshire is on the list.

Instead, North Carolina, Ohio, Oregon, Rhode Island, and South Carolina will divvy up $600M in aid. The first round of states receiving aid, which were announced in June, were Arizona, Florida, California, Michigan, and Nevada.

States receiving aid will use it to make mortgage payments for unemployed homeowners for up to a year while they search for work. The states can also provide incentives for lenders to lower balances on underwater loans.

Hey, but what about us? Sometimes the old saying that “the Lord helps those who help themselves” is very apt. Chapter 13 of the bankruptcy code provides something of a do-it-yourself mortgage rescue program, at least for homeowners who still have a stream of regular income each month. In Chapter 13, arrearages on a first mortgage can be paid off over five years, and in many cases second mortgages or home equity lines can be entirely eliminated. There are, of course, many details, so if you’d like to find out about them, please give me a call.

 

By Doug Beaton

Posted in Chapter 13, Foreclosure | Comments closed

“How many of those crazy fees can they really tack on?”

By doug | Published: August 4, 2010

Here’s a bankruptcy situation that is all too common: The debtors, a married couple called the Shepards, filed a Chapter 13 case in Boston in part because they were behind on their mortgage. On their bankruptcy petition, they listed the debt to the mortgage company as $227,000.

The mortgage company responded by filing a secured claim in the case. But their claim was for $254,000. What gives?

Well for one thing, the mortgage company tacked on to the bill a slew of charges in addition to the basic arrearage (late payments).

In this case (In re Shepard) , both the debtors and the lenders put on their gloves and said “lets fight this out in court.” The debtors objected to the lender’s claim, and the lenders objected to confirmation of the Chapter 13 plan.

The job of sorting these issues out fell into the lap of Boston bankruptcy Judge Joan Feeney. After examining the documents submitted by both parties, here is how she ruled:

* A $76 charge to “Record an order of Notice” was thrown out; the judge found it duplicated similar charges already collected.

* The judge threw out a $300 auctioneer’s fee (remember, because the debtor filed for bankruptcy, no actual auction was ever held). The judge didn’t think the fee was necessarily too high, but found there was no proof that any work was ever done, especially since the auction was cancelled by the bankruptcy.

* The judge allowed a $250 legal fee for “continuance of foreclosure sale” to stand. While the foreclosure sale was also put on hold by te bankruptcy, this was considered a basic and proper legal expense.

* The judge reduced certified mail fees from $109 to $83 becuase that is all the lender could support with receipts.

* The judge allowed almost $2, 600 in escrow shortage charges to stand, as the lenders provided a detailed account of how post-petition escrow balances were calculated.

So the result is a mixed bag, and perhaps the best lesson is this: questioning charges, fees and statements will sometimes pay off if you are planning a Chapter 13 case and need to confirm a plan on a tight budget.

 

By Doug Beaton

Posted in Chapter 13, Practical tips | Comments closed

What is all this talk about the “automatic stay,” and what does it do for me?

By doug | Published: August 3, 2010

You can’t talk to a bankruptcy lawyer for very long before the phrase “automatic stay” pops out of his mouth. And that’s a very good thing, because the automatic stay is one of the most powerful concepts in the bankruptcy code, and one of the most important from the debtor’s point of view.

But “automatic stay” is an awkward term, one that regular folks usually don’t throw around out by the barbecue. To simplify things just a little, I tell my clients to think in terms of an “automatic freeze” instead.

When a consumer files a bankruptcy case, all collection actions against them are frozen. Creditors can’t call you to collect their debts. Collection agencies can’t either. They can’t write you letters, send demands for payment. They also can’t sue you to collect the debt. If they already have sued you, that case is now “frozen,” and grinds to a halt. Foreclosures are also frozen, and wage garnishments prohibited.

In other words, it is this freeze (or “stay” if you are a bankruptcy attorney) that provides most of the immediate benefits of a bankruptcy filing. The stay typically lasts for the duration of the bankruptcy case, though there are some important technical exceptions to that rule.

As for the “automatic” part, it is just like it sounds: the stay goes into effect as soon as your case is filed, without the necessity for additional motions, hearings, pleadings, or waiting. This is the reason why I often say that you get the benefits of filing a bankruptcy as soon as a case is filed with the court.

So you see, bankruptcy lingo is often a bit awkward, but a little knowledge of it can really help you understand how powerful the bankruptcy code can be for people with debt and credit problems.

 

By Doug Beaton

Posted in The Bankruptcy Code | Comments closed

How come everyone is a debt relief agency?

By admin | Published: August 3, 2010

If you’ve been searching around for a bankruptcy lawyer, you may have started wondering why nearly every one of them claims to be a “debt relief agency” or “federal debt relief agency.”

The answer turns out to be simple: since 2005, the bankruptcy code has mandated that lawyers include those words in public communications including advertisements. (On this site, you can find the magic words at the very bottom of the home page).

You might ask what possible point could be served by requiring bankruptcy attorneys to remind potential clients that they file bankruptcy cases. It seems that the disclaimer requirement was aimed at a few people in the last decade who would try to sell debtors on bankruptcy without stating so in so many words.

But with the plunge in the economy, the game has changed. Nowadays, there are plenty of “debt settlement services” trying to cash in on debtors misfortunes, and it only causes more confusion to force licensed lawyers to brand themselves as “debt relief agencies.”

Lawyers being the combative types that they are, a few have rebelled. In fact, one firm took the issue all the way to the United States Supreme Court, arguing that it was an infringement of their free speech rights. This past spring, in the case of Milavitz v. United States (discussed here), the Supremes voted to let the requirement stand, at least for the time being.

So for the foreseeable future, this is a debt relief agency. And if you live in Massachusetts or New Hampshire, don’t forget that we help people file bankruptcy cases under the bankruptcy code!

 

By Doug Beaton

Posted in Practical tips | Leave a comment

New exemption for firearms in the works

By doug | Published: August 2, 2010

By the time hunting season rolls around this fall, the federal bankruptcy code may have a specific exemption allowing debtors to keep firearms when they file a bankruptcy case.

The House of Representatives has passed a bill that will create a new exemption covering “the debtor’s aggregate interest, not to exceed $3,000 in value, in a single rifle, shotgun, or pistol, or any combination thereof.” The measure still needs the approval of the Senate and president to become law.

While this new exemption will be of some interest to sportsmen, by itself it probably won’t have a dramatic impact, as firearms and all other sports equipment are already covered by the generous exemption for household goods of $11, 525.

The most likely scenario where the firearms exemption would come in to play is a debtor who had more than $12,000 in ordinary household goods, and an extensive gun collection as well. In that case, the debtor could keep an extra $3000 of his favorite pieces, despite filing the bankruptcy case.

 

By Doug Beaton

Posted in Exemptions | Comments closed
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