Posted on November 11, 2016 in Chapter 13

There are various ways of dealing with debts that arise during the course of your Chapter 13 “adjustment of debts” case.

On Monday we wrote about debts that arise before filing a Chapter 7 case and those that arise after filing. Those that arise before filing—“pre-petition” debts—are included in the “straight bankruptcy” Chapter 7 case. If they are the kind of debts that can be written off in bankruptcy (“discharged”), then they are. Those debts that arise after filing—“post-petition” debts—are not included and are not discharged.

A Chapter 7 case usually takes only about 4 months to complete. There is nothing in the law preventing you from incurring new debts at any time. On the other hand a Chapter 13 “adjustment of debts” case takes 3 to 5 years. You are usually not allowed to incur new debts during that time except with court or trustee permission. Also, your payment plan is based on a budget that usually does not have room for paying any new debts. So Chapter 13 presents some special issues in dealing with pre-petition and post-petition debts.

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 Posted on November 09, 2016 in Chapter 7

Pre-petition assets are “property of the bankruptcy estate,” part of your Chapter 7 case. Post-petition assets are not.

Chapter 7 Timing

In our last blog we talked about the importance of the timing of your Chapter 7 “straight bankruptcy” case filing. We looked specifically at “pre-petition” vs. “post-petition” debts. Pre-petition debts are those that existed at time of your bankruptcy filing and so are included in the case. Post-petition debts did not exist until after filing and so are not included.

There is a similar distinction between your pre-petition and post-petition assets.

Pick a Point in Time

A Chapter 7 bankruptcy case is a financial snapshot in time. The bankruptcy system has to pick a specific time to look at your financial life, including your assets, your property. That point in time is the moment you file your case.

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 Posted on November 07, 2016 in Discharge of Debts

The timing of your Chapter 7 “straight bankruptcy” case can make a huge difference in dealing with your debts.

Chapter 7 Timing

So much in bankruptcy is related to timing, especially the timing of the filing of your case. Let’s start today with Chapter 7, the most common type of bankruptcy.

You start a Chapter 7 case by filing a “petition” at the Bankruptcy Court. Everything that happens before you file your case is called “pre-petition.” Everything that happens after that is “post-petition.”

Pre-Petition Debts

Specifically, the timing of your Chapter 7 case affects how your debts are treated.

Debts that you owe as of the time you file that petition are pre-petition debts. Your bankruptcy case deals with those debts.

Your bankruptcy does not deal with debts that become due after you file your case—post-petition debts.

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 Posted on September 30, 2016 in Bankruptcy Options

Your domicile, and sometimes your residence, determines whether you can file bankruptcy, where to file, and what property you keep.

1. Who Can File Bankruptcy? A person can file a bankruptcy case in a U.S. bankruptcy court if he or she “resides or has a domicile, a place of business, or property in the United States.” (Section 109(a) of the U.S. Bankruptcy Code.)

2. Where Can You File? The bankruptcy case must be filed in the bankruptcy court of the federal judicial district in which the person filing the bankruptcy has his, her, or its domicile, residence, principal place of business... , or principal assets.” (28 U.S. Code Section 1408.)

3. What Property Can You Keep? The person filing bankruptcy (the “debtor”) uses the set of “exemptions” (to protect property from creditors) available “at the place in which the debtor’s domicile has been located for the 730 days immediately preceding” the date of the bankruptcy filing. (Section 522(b)(3) of the Bankruptcy Code.)

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 Posted on September 26, 2016 in Bankruptcy Options

Almost all consumer bankruptcies are voluntary. Involuntary ones are mostly for businesses. Joint cases with your spouse save time and money.

Voluntary Bankruptcy Filing

People who need bankruptcy relief usually file voluntarily. This is the overwhelming way that bankruptcy cases are filed.

A voluntary case starts by your filing of a petition at the bankruptcy court. (See Section 301 of the United States Bankruptcy Code.) This is usually done electronically by your bankruptcy lawyer without anyone physically going to the court.

Your voluntary petition states which Chapter under which you are filing. You have to qualify to be a debtor in the Chapter you designate. If you are an individual (instead of a corporation or other business entity) you can file under Chapter 7, 11 or 13. (See our most recent blog post for a description of each of these options.)

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 Posted on August 26, 2016 in Foreclosure

Here’s an example of how Chapter 13 can allow you to hold onto your home but then change your mind about it later.

Our last blog post introduced the option of saving your home through Chapter 13, while keeping open the possibility of surrendering the home later if your circumstances change.

Advantage of Keeping Your Options Open

Sometimes it’s hard to know whether hanging onto your home is worth the money and effort. For example, if you were about $10,000 behind on your mortgage and property taxes, and could get that money by borrowing from a relative or from a retirement account, would that be worthwhile? What if the home had no equity—the mortgage loan balance was higher than the value of the home? What if you were not confident you could afford to pay back that $10,000 loan? What if the main current reason to stay in the home now would no longer apply in a couple years?

If you filed a Chapter 7 “straight bankruptcy” case you would have to make that decision quite quickly. If your mortgage lender was in the process of foreclosing your home, or was threatening to do so, a Chapter 7 filing protects your home for only about 3 months, sometimes less. You effectively have about that much time to decide whether to keep your home, and to figure out how.

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 Posted on August 22, 2016 in Vehicle Loans

Chapter 13 gives you powerful ways to hold onto a vehicle, but it also lets you give up that vehicle without paying its debt.

Our last several blog posts have been about situations in which secured debts can be turned into unsecured debts. They’ve all been about how this can happen in a Chapter 7 “straight bankruptcy.” But how about in a Chapter 13 “adjustment of debts” case?

Today we’ll start a series of blog post about secured debts turning into unsecured ones under Chapter 13. We start with surrendering a vehicle, how that’s done, and why that might be better, or at least usually no worse, in a Chapter 13 case.

Avoiding a “Deficiency Balance” through Bankruptcy Discharge

You have a major advantage in surrendering your vehicle to the vehicle lender when filing bankruptcy. That advantage is that you get to legally and permanently write off—“discharge”—whatever balance you owe—the “deficiency balance.” Without a bankruptcy discharge you would have to pay that “deficiency balance” after giving up your vehicle.

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 Posted on August 12, 2016 in Secured Debts

A secured debt effectively turns into an unsecured debt if you surrender the collateral, which may make sense to do more than you think.

“General Unsecured” Debts and Secured Debts

Our last blog posts described the huge difference in the treatment of “general unsecured” and secured debts in bankruptcy. “General unsecured” debts are discharged—legally and permanently written off. But with secured debts, the lien that the creditor has in something you own is not usually affected in bankruptcy. The lien continues in effect, giving the creditor continued rights to your asset after the bankruptcy case is completed, including usually the right to repossess or foreclose. So if you want to keep that asset, usually you have to pay the debt.

However, last time we listed 3 situations in which bankruptcy effectively turns a secured debt into an unsecured one. We focus on the first of those situations today.

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 Posted on July 27, 2016 in Chapter 13

Both Chapter 7 and Chapter 13 can wipe away judgment liens. But doing so under Chapter 13 can be better when used with its other benefits.

In our July 1 blog post we gave a list of 10 ways that a Chapter 13 case can help you keep your home. Today we cover the 9^th of those 10 ways. Here’s how we introduced this earlier.

9. Judgment Lien "Avoidance"

A judgment lien is put on your home by a creditor who sues and gets a judgment against you. It then records that judgment in the county where your home is located. (Or the creditor uses whatever procedure creates a judgment lien in your state).

In bankruptcy, a judgment lien can be removed from your home under certain circumstances. Essentially, the equity in your home that’s encumbered by the judgment lien must be covered by the applicable homestead exemption. In other words, the judgment lien must "impair" the homestead exemption. If it does, the judgment lien can be removed, or "avoided," from the title of your home.

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 Posted on June 08, 2016 in Child And Spousal Support

A support obligation is a very special kind of debt, and the resulting lien on your home has to be dealt with in a very special way.

Support—A Very Special Debt

If you are behind on child or spousal support then you owe a debt that is treated differently both outside and inside bankruptcy.

Before you file bankruptcy, your ex-spouse and support enforcement agencies have very aggressive tools they can use against you, your income, and your assets to try to make you catch up on unpaid support.

If you own a home, those tools include a lien that is very likely imposed on your home’s title in the amount that you owe.

Some of the support collection tools that can be used against you, including the support lien on your home, are affected when you file bankruptcy and some are not. It depends on the circumstances and especially on whether you file a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” Chapter 13 gives you a much more powerful way to fight back.

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