A bankruptcy discharge is an order from the United States Bankruptcy Court.  The discharge is a court injunction prohibiting any attempt to collect on a discharged debt.  Creditors are strictly prohibited from contacting the debtor by mail, phone, or otherwise; filing or continuing a lawsuit; attaching wages or other property; or taking any other action to collect a discharged debt.  A creditor that violates this order is subject to contempt of court and may have to pay damages and attorney’s fees.

A creditor that contacts you in an effort to collect a discharged debt is in violation of the bankruptcy court’s discharge injunction.  Usually such contact is a mistake and the creditor is unaware of your bankruptcy discharge.  While claiming ignorance is not a valid excuse for violating the bankruptcy court order, informing the creditor that you have filed bankruptcy and received a discharge of the debt is often enough to stop future collection actions.  The creditor may want to know certain information about the bankruptcy (case number, date of discharge, chapter, etc.) to update their records and stop further collection efforts.  You can answer these questions or simply refer the creditor to your attorney.

It is good practice to document any post-discharge collection action by creditors.  While these collection attempts are often mistakes, a main purpose of the bankruptcy discharge is to allow you to live your life free from creditor harassment.  The bankruptcy discharge applies to the debt and enjoins any collection of the debt.  Consequently, the discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector.

Your bankruptcy discharge is legal protection against creditor harassment concerning discharged debts.  If you are repeatedly contacted by a creditor after your bankruptcy discharge, document the creditor contact and report it to your attorneys at Haines and Krieger.  The law is on your side and will protect your right to a fresh start free of creditor harassment.

In a Chapter 13 bankruptcy case the debtor proposes a plan to pay back creditors.  That plan is composed of monthly payments to satisfy all or part of the creditors’ claims over three to five years.  Monthly payments are made to the Chapter 13 Trustee, who then pays your creditors.

There is often confusion over when the first plan payment due. Section 1326 of the Bankruptcy Code directs that the first payment must be made within 30 days after filing the bankruptcy case, even if the debtor’s bankruptcy plan has not yet been approved by the court.  Often the first meeting with the Trustee (also known as the "341 meeting" or "meeting of creditors") is scheduled more than 30 days after the filing date, so the Trustee expects your first payment before that meeting.  The Trustee will hold all payments until the plan is approved by the Bankruptcy Court (called "confirmation"), and then make distributions to creditors.

It is critical that you make this initial payment within thirty days after filing.  It is especially important to monitor the status of this first payment when you have instructed your employer to pay the Trustee from your wages.  It is your responsibility to ensure that this first payment is made, and neither the Trustee nor the Bankruptcy Court gives much latitude to a debtor who misses the first deadline in the case.

Making a timely first Chapter 13 payment allows your plan to proceed to confirmation and will expedite the bankruptcy process.  Failure to commence making payments can result in delays, additional expenses, or even dismissal.  Consult with the experienced bankruptcy attorney s at Haines and Krieger regarding payment details, and make that first payment on-time!  Contact us today for a free consultation.

Filing bankruptcy is a very personal process.  Many clients worry that their friends and neighbors will learn about their bankruptcy.  A common question is, “Who will know about my bankruptcy?”

First, personal bankruptcy cases are generally not reported in the local newspaper.  Unless you are a celebrity or public figure, your bankruptcy is not newsworthy.  More than 1.4 million consumer filings were recorded last year, so many larger newspapers would have to publish thousands of bankruptcies in their papers each month.  It is not cost-effective for a newspaper to search through the bankruptcy court records to find individuals who filed in their distribution area and use valuable print space to report on personal bankruptcy cases.

Second, the bankruptcy laws require notices of the bankruptcy filing to go out to the following: 

1. Everyone you owe money (called “creditors”);
2. The bankruptcy trustee;
3. Co-signors and co-debtors; and
4. You and your attorney.

Under special circumstances other notices are sent, for instance if you owe taxes, or if you want to terminate a lease or contract.  Family, neighbors, friends, your employer, your bank, etc. will generally not receive notice of your bankruptcy.  A common exception to this general rule is when the debtor causes a voluntary wage withholding to pay chapter 13 plan payments.

Third, while bankruptcy court proceedings and trustee meetings are open to the public, it is unusual for the press or members of the public to attend.  Most of these meetings are very brief and can even be a little boring.

Finally, other than receiving notice of the bankruptcy filing from the bankruptcy court, there are only a few ways to learn of a bankruptcy case.  The most common way is to contact the bankruptcy court directly.  Most bankruptcy courts have an automated telephone system that will provide basic case information to the public.

Filing a bankruptcy petition is generally a private and confidential process.  While there are no guarantees that your friends and neighbors will not learn about your bankruptcy, chances are they will not unless you decide to tell them.  However, every case is different.  If you have specific questions about the effects of filing bankruptcy, consult with the experienced bankruptcy attorneys at Haines and Krieger.  Contact us today for a free consultation.

Bankruptcy is a powerful tool for eliminating personal debt.  It is important to know what bankruptcy can do for you, and what it cannot.

What Bankruptcy Can Do:

Bankruptcy can eliminate your personal obligation on many unsecured debts.  For many debtors this is the most important benefit of bankruptcy.  Most credit cards and medical bills can be discharged during bankruptcy and you will never worry about them again.

Bankruptcy can stop creditor collection activities and harassment.  When a bankruptcy is filed, all collection activity must stop.  After a debt is discharged at the end of your bankruptcy case, the creditor is prohibited from contacting you to collect on that debt.

Bankruptcy can stop a foreclosure or repossession.  In a Chapter 7 bankruptcy the debtor is given time to negotiate an agreement with the creditor, or prepare to walk-away from the debt and surrender a home or vehicle.  In a Chapter 13, the debtor can also surrender property back to the creditor, or force the creditor to accept payments to cure an arrearage and resume monthly payments.

Bankruptcy can protect personal assets.  Ordinary household goods, certain equity in vehicles or a family home, and retirement accounts are all protected during a bankruptcy.  Statistically only 1 in 20 debtors lose anything, and your bankruptcy attorney can advise you of any property that is at risk in advance of the filing.

Bankruptcy can strip away certain liens.   Many loans that are secured with an item you previously owned (called a Non-Purchase-Money Security Interest) can be stripped away during bankruptcy.  Under certain circumstances a second mortgage can be stripped and made an unsecured debt (and eligible for discharged). 

What Bankruptcy Cannot Do:

Bankruptcy cannot allow you to keep secured property without payment.  While there are exceptions, generally if you do not pay for a secured property (e.g. car or house), the property must be returned to the secured creditor.

Bankruptcy cannot eliminate certain types of debts.  The Bankruptcy Code lists debts that cannot be discharged such as student loans, certain taxes, and child support obligations.  However, every situation is different and many of these “non-dischargeable debts” can be discharged under certain circumstances.  Your bankruptcy attorney can discuss your individual situation and options for eliminating your debts.

The goal of the federal bankruptcy laws is to give the debtor a fresh start on a new financial future.  There are many powerful legal options available in bankruptcy to eliminate or reduce overwhelming debt.  The experienced bankruptcy attorneys at Haines and Krieger can explain your options and guide you to your fresh start.  Contact us today for a free consultation.

During a Chapter 7 bankruptcy all unsecured debts are discharged. Debts that are secured by collateral (e.g. car loans) must be paid or the collateral must be returned to the lender. Occasionally an individual considering Chapter 7 bankruptcy will own a vehicle that is worth less than what is owed. This situation is often referred to as “upside down” and usually involves a late model vehicle that has depreciated faster than the person has paid on the loan. It doesn’t make any sense to pay for something that is “upside down,” but often an individual needs to keep the vehicle for transportation to work and for family use.

Fortunately, a provision of the Chapter 7 bankruptcy code allows an individual to keep a vehicle and pay only its current market value. This process is called “redemption.” During a redemption the value of the vehicle is determined (either by agreement between the debtor and creditor or by the bankruptcy judge after a hearing) and a court order is issued directing the creditor to accept a sum from the debtor in exchange for a release of its lien. In plain terms the lender is paid a lump sum and the lien on the vehicle is released. For example, a debtor that owes $15,000 on an auto that is worth $10,000 will only pay $10,000.

Unfortunately, the payment must be made in a one-time lump sum to the lender at the time of the redemption order. If the debtor is unable to pay for the vehicle, there are finance companies that make redemption loans for debtors in bankruptcy. Before making a redemption loan these finance companies require a loan application and certain assurances of repayment. The interest rate can be high for a redemption loan, however the resulting monthly payment is often lower than the original payment. It is important to carefully consider all of the advantages and disadvantages before making a decision to redeem a vehicle:

Advantages of a redemption loan:

• Retention of the vehicle;
• Vehicle is no longer “upside down;”
• The creditor cannot repossess the vehicle;
• Usually results in a lower monthly payment.

Disadvantages of a redemption loan:

• High interest rate.

Redemption is not the only option for keeping a vehicle after a bankruptcy. A skilled bankruptcy attorney can explain all of your options and help you obtain the best deal for your family. Contact Haines and Krieger for a free consultation. 

Deciding whether to file bankruptcy can be difficult. There is no “bright line” test that signals when a bankruptcy is appropriate to solve a debt problem. For many debtors, it is not one issue, but a combination of debts that makes bankruptcy the right choice.

Below are common debt patterns that attorneys see from their bankruptcy clients. If you are experiencing one or more of these debt problems, a bankruptcy filing can improve your financial situation:

• Your wages are garnished or your bank account is attached
• You are unable to make even minimum payments to your creditors, or you struggle to make minimum payments each month
• Collectors harass you at home and at work
• You pick and choose what creditors to pay on-time
• You are caught up in a cycle of payday loans
• You are paying off large unsecured debts (e.g. credit cards, medical bills, etc.)
• You are at risk for repossession or foreclosure
• You are being sued for a debt
• The IRS is threatening collection action

Whether to file bankruptcy is a decision that is unique to your personal situation. If you are struggling with debt, a bankruptcy filing stops collection action and provides breathing room so you can decide how to move forward with your finances. The bankruptcy laws offer the choice of repayment or the outright discharge of most debts under the supervision of a federal court. In most cases there is no payment to unsecured creditors and the debtor does not lose any property.

If you are experiencing a persistent debt problem, bankruptcy may be the right choice for you. Discuss your situation with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can eliminate your financial burdens. Contact Haines and Krieger and get started on a brighter financial future today!

In 2004 and 2005, the banking industry spent millions lobbying for tougher bankruptcy laws. Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. collectively spent $25 million during that period. The big banks’ efforts paid off in a major overhaul of the Bankruptcy Code in 2005 making it more difficult for struggling families to discharge credit card debt. However, the banks did not foresee the current housing crisis, and new research suggests that the 2005 changes to the Bankruptcy Code may have caused mortgage default rates to rise.

A paper published by the National Bureau of Economic Research states that the 2005 changes “raised the cost of filing and reduced the amount of debt that is discharged" thereby making it more difficult for debtors "to shift funds from paying other debts to paying their mortgages[.]" In other words, before the 2005 changes, many debtors struggling with a mortgage arrears and credit card debt could file bankruptcy, discharge the credit card debt, and free-up money to pay the mortgage. The new bankruptcy provisions make this process more difficult. As a result, fewer debtors are able to afford to save their homes through the bankruptcy process.

Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank said, "Be careful what you wish for. [The banks] wanted to make sure that people kept paying their credit cards, and what they’re getting is more foreclosures."

If you are facing overwhelming debt and want to keep your home, there are many alternatives available to you. An experienced bankruptcy attorney can review your finances and explain your legal options for discharging or repaying your debts. Bankruptcy is not the only option for saving a home from foreclosure, and many cases are successfully resolved using a combination of bankruptcy and non-bankruptcy methods.  Get the facts today and solve your debt dilemma!  Contact Haines and Krieger for a free consultation.

The Bankruptcy Code directs the Chapter 7 debtor to file a statement of intention with the bankruptcy court within 30 days after the petition filing, or on or before the 341 Meeting of Creditors, whichever is earlier. A statement of intention advises the court, the bankruptcy trustee, and your creditors of how the debtor intends to treat secured collateral, like a car or home, in the bankruptcy.

The Bankruptcy Code also requires that the Chapter 7 debtor perform on that intention within 45 days after filing the statement. The Bankruptcy Code allows the debtor to choose one of the following: (1) surrender the collateral back to the creditor and discharge any personal liability; (2) reaffirm the debt and retain the collateral in exchange for continued personal liability on the original debt; or (3) redeem the collateral by paying the current fair market value in a lump sum.

Prior to the overhaul of the Bankruptcy Code in 2005, a Chapter 7 statement of intention had little relevance.  Now the statement of intention can mean the difference between keeping and losing an automobile or other secured property. 

Failure to timely file or perform on a statement of intention causes the automatic stay to be lifted and the property is longer a part of the bankruptcy case. In some cases, a purchase agreement may contain an ipso facto clause which creates a default on the loan by filing bankruptcy. The Bankruptcy Code expressly nullifies ipso facto clauses, but only for property of the bankruptcy estate. Most courts find that ipso facto clauses are enforceable under state law when property is no longer a part of the bankruptcy estate. 

Let me restate this situation in plain English: if you file bankruptcy and do not file or timely perform on a statement of intention, the property is no longer protected by the bankruptcy and can be repossessed by the creditor, even though you are current on the loan. This situation recently was discussed in a Ninth Circuit Court of Appeals case, Dumont v. Ford Motor Credit Company.

If you have an auto loan or other secured item you want to keep, discuss your options with an experienced bankruptcy attorney. The attorneys at Haines and Krieger can help you reach the right decision for you and your family.  Contact us today for a free consultation.

Bankruptcy is a federal legal process for declaring an inability of an individual or organization to pay its creditors. The United States Constitution authorizes the bankruptcy laws and federal laws govern all bankruptcy cases. 

One stated purpose of the federal bankruptcy laws is to give the debtor a financial "fresh start." At the end of most cases the bankruptcy judge will discharge certain debts and release the debtor from personal liability. 

The bankruptcy laws are meant to give the honest debtor a fresh start, but not a head start. Therefore, Congress has identified certain debts that cannot be discharged in a bankruptcy. Many debts that would ordinarily qualify for discharge may be determined as non-dischargeable if a debtor has committed a crime or fraud in acquiring the debt. Other debts are deemed generally non-dischargeable based on public policy reasons (like taxes or child support).

Generally, the following are non-dischargeable debts:

1.                  child support or alimony obligations, and debts considered in the nature of support;

2.                  student loans, unless repayment would cause you undue hardship;

3.                  criminal fines or restitution;

4.                  debts listed in a prior bankruptcy where debtor was denied a discharge;

5.                  recent income taxes less than three years past due; and

6.                  auto accident claims involving intoxication.

Additionally, there are circumstances which may make a debt non-dischargeable:

1. debts incurred on the basis of fraud;
2. debts from willful or malicious injury to another or another’s property;
3. recent purchases with credit cards;
4. debts from larceny (theft), breach of trust or embezzlement; and
5. most federal, state and local taxes and any money borrowed on a credit card to pay those taxes.

All of the categories of non-dischargeable debts in bankruptcy have specific rules and exceptions and each situation has its own challenges. If you have a debt that may fall into a non-dischargeable category, discuss your situation with a qualified bankruptcy attorney and learn your options. The attorneys at Haines and Krieger can provide options for managing, repaying, or discharging the debt.  Contact us for a free consultation today.