Should You Hire an Attorney To File Bankruptcy? New Dangers Exposed in Shapiro v. Henson

Debtors filing Bankruptcy in Fresno metropolitan area can save about $1000 by filing a bankruptcy without an attorney.  Another cheap alternative is to hire company that helps debtors complete bankruptcy petitions. By law, they can only charge $125 per petition.  In some simple cases, this strategy can make sense.  The problem, however, is that you do not have the expertise of an attorney to avoid the many pitfalls in bankruptcy.  One nuance is to file bankruptcy with checks from your bank that have not cleared.  Please read on for the details:

A big surprise happened in Shapiro v. Henson.  It cost the Barbara Henson $3000 that she did not expect. The sad part was that she was represented by an attorney who had done what lots of other attorneys were doing.  Here is what went wrong:

Ms. Henson hired an attorney to help her file Chapter 7 Bankruptcy.  Prior to filing bankruptcy, Ms. Henson wrote several checks from her Bank of America checking account.  On the day she filed bankruptcy, many of the checks had not cleared the bank.  Thus, at the time she filed bankruptcy, her checking account showed that she had $7000.  In the subsequent days after she filed, the checks cleared and her checking account showed less than $800.

After filing bankruptcy, a trustee was appointed.  One of the job's of a trustee is to find assets, sell them, and give them to the trustee.  In most Chapter 7 cases, there are no assets.  However, the trustee assigned in Ms. Henson's case tried a unique approach that surely surprised her attorney and all of the other bankruptcy attorneys.  He brought a motion against Ms. Henson demanding they she turn over the money from the Bank of America checks that had not cleared on the day Ms. Henson filed bankruptcy.  Ms. Henson's attorney fought the trustee and won at the lower court levels.  The trustee was persistent and filed an appeal.

At this point, NACBA joined the fight on behalf of the debtor.  The outcome would have a devastating effect on debtors in California.  NACBA stands for the National Association of Consumer Bankruptcy Attorneys.  Thousands of bankruptcy attorneys throughout the country, including yours truly, contribute money to help fight cases that would have a bad outcome for our clients.  

Ms. Henson lost.  NACBA argued that Ms. Henson did not have possession, custody or control of the money that was in the checking account at the time the trustee filed his motion. The appellate court ruled that it did not matter.  Rather, the trustee can file a motion for turnover of property that was in possession of the debtor at any point during the bankruptcy case.

The lesson prudent bankruptcy attorneys take from this case is to make sure that their client's checks the bank accounts before filing bankruptcy.  Then, debtor should beat the test she did not have possession or control, during, the case.  I just can't see how a debtor without an attorney can stand a chance at knowing all of the small ins and outs of the bankruptcy code.  

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at jorgensenlaw@gmail.com or by telephone at 1-559-324-1882.

Photo Credit: https://www.flickr.com/photos/tristanf/  "Danger Goldfinch"

When Can I Re-file for Chapter 7 Bankruptcy?

When Can I Refile for Chapter 7 Bankruptcy?

A common question we hear is, “I have filed for bankruptcy before. When can I refile a chapter 7 bankruptcy case?”.  The answer to this question -- for Fresno and the rest of California -- is the following:

11 USC Code section 727(a)(8) prohibits a debtor from filing repeated cases under Chapter 7 within eight (8) years of one another.

An example would be if a debtor filed for bankruptcy on April 1, 2006, the next time they can seek Chapter 7 protection is after April 1, 2014.

If 8 Years Has Not Elapsed, What Can I Do?

Other options exist than Chapter 7.  One option is to choose Chapter 13 instead of Chapter 7. Chapter 13 can be filed within 24 months, which is 2 years, of a prior bankruptcy discharge. Since the creditors tend to be paid more in Chapter 13 bankruptcies, it is better for creditors to see a Chapter 13. Chapter 13 is often referred to as a “debt repayment bankruptcy.” The debtor allows his income over a period 36 to 60 months to be used to repay the debts.

A second option is to wait for the eighth anniversary date to file for Chapter 7. If your anniversary date for the last filing is fast approaching, we would generally encourage you to seriously consider this option. It is important to remember that garnishments and asset seizures cannot be stopped without a bankruptcy filing. Still you have some protections.

If you cannot make a decision based on this limited overview, please feel free to meet with me to to get more precise advice for your needs.

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at jorgensenlaw@gmail.com or by telephone at 1-559-324-1882.

Be Prepared When Filing Bankruptcy To Save Your Home From Foreclosure

If you file bankruptcy you need to actively participate in their bankruptcy cases.  It is ill advised to file bankruptcy and not complete bankruptcy documents, attend meeting of creditors and to ignore legal papers. Chances are high the bankruptcy case will be dismissed by the court.  With the dismissal, the court's order that stops creditors from collecting money, or foreclosing on a house terminates.

Typically, must bankruptcy petitioners have nothing to be concerned because they have hired a competent professional to guide them through the process.  However, there are some folks that hurry up and rush to file their case to stop a wage garnishment or foreclosure of a house.  As a result of the rush, further paperwork needs to be completed.  If it is not completed the court will dismiss the case.

Once the case is dismissed under these circumstances, the bankruptcy code provides that no individual may be a debtor within 180 days.  (11 U.S.C. § 109(g)(2).)  Like all rules, there some courts provide exceptions if no creditor would be harmed by the refiling of the bankruptcy case, or if a creditor acted in bad faith.    

There is really no exception for the bankruptcy petition that decides he is going to not to play fairly.  For example, are those debtors that file multiple chapter 13 bankruptcy cases to avoid property foreclosures.  In re Rivera, 494 B.R. 101, 104 (B.A.P. 1st Cir. 2013), a debtor filed a second bankruptcy case right after he had his case voluntarily dismissed.  He had the case dismissed because the Court issued an order allowing the bank to continue with the foreclosure because debtor did not make monthly payments.  On the same day that he dismissed his first case, the debtor filed a new chapter 13 case to obtain a new order that prevented foreclosure.  The bank obtained an order dismissing the second bankruptcy case.

In Rivera demonstrates that a debtor cannot circumvent an order granting a creditor relief from the automatic stay by dismissing his bankruptcy case and filing a new case.  It is important for debtors to actively participate in their bankruptcy cases.  Secured creditors will be able to prevent a debtor from dismissing his case in an attempt to continually frustrate the creditor’s legitimate attempts to foreclose on its collateral.

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at jorgensenlaw@gmail.com or by telephone at 1-559-324-1882.

Photo Credit: http://www.lendingmemo.com/

Bankruptcy Is to Student Loan Debt Like Oil Is to Vinegar -- They Just Don't Mix!

It is a central tenet of bankruptcy law that “the honest but unfortunate debtor has a right to a ‘fresh start.’” This fundamental principle does not, however, apply to the debtor who cannot pay his or her student loans. Rather, the bankruptcy code provides that unless excepting such extreme circumstances, a debtor is not entitled to a discharge of his or her student-loan debt.

Currently there is an overwhelming amount of student loan debt – over $1.1 trillion in the United States! Many people file for bankruptcy, eliminate all of their credit card debt, medical bills and the like but still emerge from bankruptcy with tens of thousands of dollars in student loan debt.  So the question of many of my clients is what, if anything, can be done to help with the student loans.

As with most legal questions the answer depends on several factors.  The first that needs to determined is whether your loans are federal or private.  Federal loans have several programs that can reduce your monthly payment or even eliminate the loan.  Most do not do not involve filing bankruptcy.  Here are several options:

1. Disability: Borrowers may be eligible to have their federal student loan debt discharged because of a total and permanent disability.
2. Loan Rehabilitation: Federal regulations allow borrowers who default on repayment of their loan a one-time opportunity to bring their loans out of a default status and repair the negative credit information reported to credit bureaus. Payment amounts are set at a reasonable rate and borrowers must make nine consecutive on-time payments over a 10-month period. Completing rehabilitation restores a borrower’s loans to good standing and helps to repair credit. Entering a loan rehabilitation agreement has immediate effect on a borrower’s defaulted loans: it stops all collections activity and legal proceedings, prevents wage garnishment, and it may protect a borrower’s state and federal tax refunds from IRS offsets. 
3. Closed School Discharge: Borrowers whose school closed before they could complete the program of study may be eligible for discharge.  
4. Bad School: A borrower’s student loans can be discharged if a school falsely certified the student’s eligibility for a federal student loan on the basis of ability to benefit from the education, signed the borrower’s name without authorization by the borrower
5. Death Discharge: If an individual borrower dies, or the student for whom a parent received a PLUS loan dies, the obligation of the borrower and any endorser to make any further payments on the loan is discharged. 
6. Teacher Loan Forgiveness Program: Teachers in low-income areas and those who teach math or science are eligible for forgiveness of up to $17,500. 
7. Public Service Loan Forgiveness: Borrowers who make 120 qualifying payments under the IBR, ICR, or 10-year fixed payment schedule while employed in the public sector are eligible to have any balance remaining on their student loan debt forgiven. Public service includes employment with most local, state, federal, tribunal nation, or § 501(c)(3) corporations. (Direct Loan Program loans only). 
8. September 11 Survivors Discharge: Survivors of or eligible victims of the September 11 attacks may request discharge of their student loan debt. (Direct Loan Program loans only).

Unfortunately, there are far fewer options when it comes to dealing with private student loans.

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at jorgensenlaw@gmail.com or by telephone at 1-559-324-1882.

Photo credit: http://www.flickr.com