What Does It Mean To Reaffirm A Debt?

March 28, 2014 Comments off

If you file a Chapter 7 and you have a secured debt, often times a car note or a mortgage, you will be asked by the creditor to reaffirm that debt. What does that mean?  When a Chapter 7 debtor reaffirms a debt they agree to continue paying that obligation even after their bankruptcy case is discharged.  If a debtor wants to keep their car after filing a Chapter 7 they must reaffirm the debt or the car creditor can repossess the vehicle after a certain amount of time has passed.  

The reaffirmation agreement will be sent to your attorney after the filing of your bankruptcy case.  The agreement will list the amount you are reaffirming on the loan, the annual percentage rate, a listing of the collateral you are reaffirming and the repayment terms under the agreement.  Often times the monthly payment and interest you were paying before the filing of the case will not change at all with the signing of the reaffirmation agreement.  

Once the agreement is received by your attorney they will have you come into the office and go through your current monthly income and expenses to ensure that you can afford to continue to pay for the vehicle.  The attorney will make sure the reaffirmation of the debt is in your best interest and will advise you of the legal consequences of putting your signature on that agreement.  Once a reaffirmation agreement is signed and filed with the court, the client has a new legal duty to pay that debt set forth in the agreement.  If you choose to surrender, or give back back your secured collateral, that is completely within the grounds of the bankruptcy.  If this happens you will not be responsible for the debt as long as you have not signed the reaffirmation agreement and you get a discharge in your bankruptcy case.  

The decision to affirm or not to reaffirm a debt is an important one and could have both positive and negative effects on re-establishing your credit.  An experienced bankruptcy attorney can be very helpful in guiding you through this process.  We offer free consultations at 6 different locations in both Illinois and Missouri.  If you would like to schedule a consultation please give us a call at 636-916-5400 or visit our website at http://www.lickerlawfirm.com.  

Following Through On Your Bankruptcy

March 28, 2014 Comments off

The decision to file or not to file a bankruptcy can be stressful and overwhelming.  Many attorneys offer free consultations to get to know the prospective client’s situation to better be able to counsel them in making a proper, informative decision.  If you and your attorney decide that a bankruptcy is beneficial to you and your situation then you would next pay a retainer fee to get your case started.  This article stresses the importance of following through with the bankruptcy and getting it filed as soon as possible.

Clients come into my office for a reason.  Maybe they are overwhelmed by their growing debt, perhaps they are annoyed with the phone calls, and in many cases they have already been sued and are currently having their wages garnished.  Things do not automatically get better when you pay an attorney a retainer, leave his office and then forgot about finishing off your case.  Your creditors need a case number.  That is the only thing that is going to stop a garnishment or the risk of being sued and being dragged into court to defend yourself.  Once you have this case number creditors are forced to leave you alone.  They will no longer be able to call you.  They will no longer be able to sue you.  And, most importantly, they will no longer be able to garnish your paycheck.  

Some clients will pay some money down, leave my office and I will not hear from them again.  Then, one day, they get served with papers from a process server to appear in court and then remember they were going to file a bankruptcy.  Now it is a year later, you still have only paid a small down payment towards your case and you have put 25% of your paycheck at risk because now you have a lawsuit you have to defend.  It is just not worth it.  If you start your case then you started it for a reason.  It is very important you complete the process.  

Filing bankruptcy is an important decision and should not be taken lightly.  We offer free consultations in 6 different locations in Missouri and Illinois.  Please do not hesitate to give us a call at 636-916-5400 if you have any questions regarding this issue or anything else related to bankruptcy.  We are also now currently taking traffic cases and family law cases in the St. Louis area.  

What Is An Insider Payment?

November 16, 2013 Comments off

I Owe My Family Money.  Should I Pay Them Back Now? 

When you file a Chapter 7 bankruptcy, or even a Chapter 13, your attorney might ask you if you have paid any friends or family members any money in the last 12 months?  I ask this question to every single client I meet with and it is definitely the question that potential bankruptcy clients have the biggest problem with.  I hear things such as “why does that matter”?, “but they loaned me money when I needed it”, and “I needed to pay them back, they are my family.”  I assure you I am asking this question for a specific reason. 

 

If you hire me and we file a bankruptcy petition, specifically a Chapter 7 bankruptcy petition, you will have a Section 341 meeting.  That meeting is conducted with a Trustee, whose job is to ask you if you have any assets, and, if you do, liquidate them to pay off your unsecured creditors.  The reason I ask this question in my office before we ever file anything is because the Trustee is guaranteed to ask you this question at your 341 meeting…every single time.   You are under oath.  You will tell them the truth, and if the answer is yes, we have what is known as a preferential payment. 

 

The rationale is this…if you have $1000 that you got through a tax refund or a bonus at work and you choose to pay your mom back because she loaned you money to get caught up on your rent, then you have just preferred to pay her back rather than your credit card bills, that you are now discharging in your bankruptcy.  People don’t like this, but it does make sense.  If you are making these preferred payments to family and friends, the Trustee can take an interest in this money that has been paid over to them, if that money has been paid to them in the last 12 months. 

 

The reason I write this article now is because people are starting to get tax refunds.  If you are considering filing bankruptcy and you are getting a large refund and you have to pay mom and dad back, or your sister back, please consult with a bankruptcy attorney before spending that money.  It might be a good idea to file now.  It might be a good idea to file after you receive the refund and use it to pay other bills.  Your attorney can help you make sure you protect all of your money that you have been waiting all year for. 

If you would like to speak with an attorney about this or any other bankruptcy related issue, please give us a call.  We offer free consultations in six different locations.  We are also now currently handling traffic and family law cases in the St. Louis area. 

Pros and Cons of Corporate Bankruptcy

November 16, 2013 Comments off

Should I file a Corporate Chapter 7 Bankruptcy? 

If you own a business and that business is struggling, bankruptcy might be a consideration for your business.   This article will address filing a Chapter 7 for your business, which essentially means dissolving the business.  If you file a Chapter 7 bankruptcy for your LLC or S-Corporation, there are some things you should know.  This article will help you think through the process.

 

The first thing you should know is that corporations cannot get a discharge of their debts.  A bankruptcy discharge is a court order that releases the debtor from personal liability for all of his or her dischargeable debts and prevents creditors from attempting to collect those debts from the debtor.  However, a discharge only applies to individuals.  So, why file a Chapter 7 bankruptcy for your business? 

 

The advantages are that the attorney fees are inexpensive.  They will be much more inexpensive than it would be to hire an attorney to attend all of the depositions you would have to attend if your business was getting sued.  A corporate bankruptcy would also get closed much quicker than litigating all of these lawsuits would be.  Once your corporate Chapter 7 is filed, the debtor essentially walks away and lets the trustee and creditors liquidate whatever assets the corporation has.  A big advantage of this is that the liquidation of assets is supervised by the court.  This usually keeps creditors happy about the liquidation process, rather than them thinking you are trying to hide assets. 

 

There are, however, disadvantages of filing this type of bankruptcy.  The first disadvantage being that you have to be ready to shut down the business completely.   As far as the liquidation goes, you will not have much flexibility as to how it is done, meaning you will likely not be able to choose what property to sell, when to sell it and under what circumstances the sale will occur.  You will also not have any control over how the proceeds of the liquidation are disbursed.  Additionally, the trustee and the court may ask for several documents, including tax returns and bank statements, which can date back 4 years in Missouri. 

 

It is also important to consider filing a personal Chapter 7 if you are going to file a Corporate Chapter 7.  Many business owners personally guarantee certain debts for their business.  Creditors normally require this to ensure that they get their money.  If you have personally guaranteed any debt and are shutting down your business, you should consult a bankruptcy attorney to see what your options are.  We offer free consultations at several locations in the St. Louis, St. Charles and Southern Illinois areas.  Give us a call today if you would like to speak with one of our experienced bankruptcy attorneys. 

What Happens To My Tax Refund

November 2, 2013 Comments off

            It is getting towards the time of the year when people start thinking about how much money they might receive for their tax refunds early next year.  If a potential debtor is thinking about this, then a Chapter 7 or Chapter 13 Trustee will also likely be thinking about it.  Tax refunds can often be for quite a bit of money and many families rely on that money to get caught up with bills or buy things that are needed for their house.  That is why it is very important that you know the ramifications of receiving a tax refund and filing for bankruptcy. 

            As a bankruptcy attorney, it is very important to me to protect as much of my clients assets as I possibly can.  In the initial consultation I always ask if you are expecting a tax refund and for how much.  It is important for an attorney to know this because we only have a certain amount of exemptions to use in each case to protect this money.  An exemption is something an attorney can use to protect an asset in your bankruptcy case.  In a Chapter 7 case an attorney has a wildcard exemption and possibly a head of household exemption.  The law also gives you $350 to protect for each child you have that is under 21 years old. 

            These exemptions are important and knowing how to use them and apply them to your case is even more important.  You might have noticed something before on your taxes called an Earned Income Credit.  You may have also noticed something called a Child Tax Credit.  If you file your taxes before your bankruptcy is filed this Earned Income Credit that shows up on your 1040 form will also protect that amount of money in your tax return.  If you are in a Chapter 13 bankruptcy, both the Earned Income Credit you will receive and the Child Tax Credit will be exempted (or protected) from the Trustee and your estate. 

            Sometimes, potential clients come and see me and they are going to be getting back a very large refund, sometimes up to $8000 or more.  The more money you are able to get back, the harder it is for me to be able to protect the entire amount.  In a circumstance that I cannot protect all of it, I would possibly advise you to wait to file the bankruptcy until after it was received.  Bankruptcy law can be complicated and if your money is important to you, I would strongly advise speaking with an attorney before attempting to proceed with a case filing. 

            If you have questions about protecting your tax refund or any other questions relating to bankruptcy, please give us a call at 636-916-5400 or visit our website at http://www.lickerlawfirm.com/.  We offer free consultations at 6 different locations in the St. Louis area.  

What Does It Mean To Get A Discharge?

November 2, 2013 Comments off

           If you have spoken to anyone before about bankruptcy, they probably told you that they received a “discharge” of their debts.  I have noticed when I am meeting with clients for the first time and I let them know they are eligible for a discharge, often I get a look as if they do not know what I mean by that statement.  A discharge of your debts is the ultimate goal in a bankruptcy, it is the reason, for the most part, that people file bankruptcy.  This “discharge” fuels the fresh start of the debtor, as it relieves them of their indebtedness. 

            Debtors can receive a discharge in both Chapter 7 and Chapter 13 bankruptcies.  The discharge represents the heart of the fresh start policy that is promoted by the filing of a bankruptcy.  A court generally will grant a discharge unless they are not eligible, due to a prior filing or there is a party objecting to the discharge, due to fraud of some other type of bankruptcy crime.  The party that is objecting to the discharge will have the burden of establishing why the discharge should be denied.  Getting a discharge is not normally a problem for most bankruptcy debtors. 

            A discharge in a bankruptcy case terminates any personal liability on the part of the debtor in regards to all debts that occurred before the bankruptcy petition was filed.  It also operates as an injunction against any debt collectors or court cases that have been filed in regards to the debts listed on your petition.  Creditors will no longer be able to call you regarding that debt, send letters, serve you with a summons or ever be able to collect on a discharged debt.  The discharge is a total bar on any collection efforts against the debtor filing the bankruptcy. 

            Since these debts are discharged, it means that the debtor no longer owes on them.  The bankruptcy eliminates all contracts between debtor and creditor, which means that in a Chapter 7, if a debtor wants to retain their automobile, they will have to file a reaffirmation agreement with the court.  A common misconception is that people who file a bankruptcy will lose their vehicle.  That is simply not the case.  Car loans can be reaffirmed, enabling debtors to keep their vehicles and not affect the car loan in any way. 

            If you have questions about whether or not you are eligible for a discharge in either a Chapter 7 or Chapter 13 bankruptcy, or if you have any other questions related to bankruptcy, please do not hesitate to give us a call at 636-916-5400 or check out our website at http://www.lickerlawfirm.com/.  Our office offers free consultations at 6 different locations in the St. Louis area.  

 

          

Who Can Be Listed As a Dependent?

September 6, 2013 Comments off

A dependent is defined as “someone who relies on another for support; one not able to exist or sustain oneself without the power or aid of someone else.”  This definition matters quite a bit if you are considering filing for bankruptcy.  Times have been rather tough for some Americans as the economy has hit a bid of a downward spiral.  People have lost jobs, which have led to foreclosures, which has led to many adult children returning home.  So, if they are grown adults can they still be considered dependents? 

Whether or not a person is defined as a dependent can mean the difference between their parents filing a Chapter 7 or a Chapter 13 bankruptcy.  For example, the median income for a family size of 2 is about $52,000, but it increases to about $59,000 if that family has 3 people.  If debtors are over that median income, then they will be unable to file a Chapter 7 and will have to discuss their options regarding a Chapter 13.  So, if a married couple has an adjusted gross income of $55,000 they would be over median if they could not include their unemployed, 23 year-old daughter, who is living at home and not paying any rent, but they would be under median if they can include her in their household size. 

This can also make a difference if a debtor is in a Chapter 13 and they are forced to pay back money to unsecured creditors.  They will have less disposable income if they are able to list a dependent child, and therefore, will have to pay back less money over their 60 month plan to unsecured creditors.  Sometimes, having a dependent would push them under median and either allow them to file a Chapter 7 or enable them to complete their Chapter 13 plan early and not pay back any money to unsecured creditors at all. 

No circuit court has addressed whether the term “dependent” requires a legal or familial relationship.  A case-by case analysis is necessary to determine the length of time the claimed dependents have resided in the household, the reason the claimed dependents are residing in the household, and whether it was necessary for them to be living there. 

As stated above it is clear that the law is ambiguous in regards to what the court will define as a dependent.  If you are interested in speaking with an attorney about this article or another issue that is related to bankruptcy, our office offers free consultations at six different locations in the St. Louis area.  Please contact us today if you have questions or feel bankruptcy may be a good option for you.  

Should I Convert My Bankruptcy Case?

August 27, 2013 Comments off

This question may not initially be on the mind of a prospective client when they come into your office, but the situation does come up from time to time when it is in the best interest of the client who originally started their bankruptcy as a Chapter 13 to convert that case to a Chapter 7.  With that said, it is not always the best decision to make and that is why an experienced bankruptcy attorney will be extremely helpful in this process. 

                                          

The question of when to convert sometimes comes up and the answer is laid out in Section 1307(a) of the Bankruptcy Code.  Assuming you have not previously converted your case from another chapter and are eligible to file a Chapter 7 (based on income or prior filings), you can convert a Chapter 13 case to a Chapter 7 case at any time, for any reason. 

 

The question of why you would want to convert is a complicated one.  Some common reasons why debtors want to convert are an inability to make their monthly plan payments to the Trustee, an inability to make mortgage or car payments, or, often times it is just a desire to have their case completed in less than 3-5 years, which is required through a Chapter 13.  If the Trustee is not getting paid by the debtor in the Chapter 13, they will file a motion to dismiss the case.  If this occurs and the debtor cannot become current the case will be dismissed.  If this happens, the automatic stay is lifted and all of the creditors will begin trying to collect as they were before the bankruptcy filing. 

 

Some people file Chapter 13 cases because they are behind on their car payments or mortgage.  You are required to continue making payments on these secured debts during your bankruptcy.  If you fall behind on them, the creditor will file a motion for relief with the court.  If you cannot pay for these any longer and are too far behind to catch up, the motion will be granted and the creditor can start either foreclosure or repossession.  If the decision is made to surrender your vehicle or car, it might be a good idea at that time to convert to a Chapter 7.  The Chapter 7 will erase or “discharge” any deficiency left on the loan or mortgage after they are sold at auction. 

 

Conversions are easy for experienced attorneys.  The attorney will file a motion to convert with the Court and the Court will enter a Conversion Order after a few days.  The attorney will file a few amended schedules, per the local rules, with your motion to convert and he or she can also advise you of any refund you may get from the Chapter 13 Trustee based on what has been sent out to your creditors.  Upon conversion, you will have another 341 Meeting (or Meeting of Creditors).  At this time, you will also be able to add any new debt you have incurred since your Chapter 13 case was filed. 

 

Conversions often make sense, but it is a good idea to consult with an attorney before doing so.  If it is done at the wrong time it can lead to problems, which the attorney can discuss with you.  We offer free consultations at several different locations in the St. Louis area.  If you would like to speak to an experienced bankruptcy attorney, please give us a call today.  

Which Option Is Best For Me…Chapter 7 or Chapter 13?

August 16, 2013 Leave a comment

It is my job to know whether a Chapter 7 or a Chapter 13 is the better option for my clients.  The questions that I ask at the initial consultation asked to make this determination.  Most clients want to file a Chapter 7, but that is not always the best option for them.  Each case is different and the rest of this blog will show the differences between the two options so you can have a better understanding of both.

A Chapter 7 is less expensive than a Chapter 13 and it is cheaper.  In my initial consultation it is important for me to determine what type of debt my clients have.  There are three types of debt: priority, secured and general unsecured.  Priority debt consists of recent tax debt and domestic support obligations, such as alimony or child support.  If someone owes taxes from the last few years and/or a domestic support obligation, a Chapter 7 will not get rid of this debt.  Secured debt is another type of debt.  Secured debt consists of car loans, mortgages or statutory liens.  Secured debt can be taken from you if you are not making the payments.  If the client is current with their mortgages and car loans a Chapter 7 may still be a good option for them.  However, if they are delinquent on secured debts, a Chapter 13 may be in their best interest.  Alternatively, if someone has a high interest rate on a vehicle or the monthly payment leaves them with no disposable income, a Chapter 13 may be a good way to stretch out those payments on the vehicle to free up some other money to take care of other things they may need or start savings.  The last type of debt is unsecured debt.  Unsecured debt is credit card debt, medical bills, old utility bills, pay day loans, etc.  This type of debt is discharged in a Chapter 7, which means it is wiped out.  This type of debt is the reason that many potential clients feel they need to file bankruptcy.

As I said, Chapter 7’s are quicker than Chapter 13’s.  They usually last 4 months or so, while the Chapter 13 will last from 36-60 months, but Chapter 13’s do have some advantages over Chapter 7 bankruptcies.  Below I will list some of the reasons why people may want to file a Chapter 13, rather than a Chapter 7.

For some people, a Chapter 7 is not an option.  They may not be eligible.  In order to be eligible for a Chapter 7 you are not allowed to have filed one in the last 8 years.  Additionally, some people make too much money or have too much monthly disposable income to be able to file a Chapter 7.  If any of these restrictions apply, you can still file a Chapter 13.  Another great reason to consider a Chapter 13 is if you are behind on your mortgage or car payment.  Rather than lose your house to foreclosure or your car to repossession, you could file a Chapter 13 and get protection under the law.  A case filing will stop all attempts at the mortgage company selling your house or the car creditor picking up your car.  A Chapter 13 will also allow you to catch up on your back mortgage payments over the course of 5 years and stretch out your car payments over the same amount of time.

Chapter 13 bankruptcies are also a great option for people who are “upside down” on their house and have a 2nd or even a 3rd mortgage.  In a Chapter 13, if you have no equity in your house in regards to the 1st mortgage, then we can “strip off” the second mortgage.  That means these 2nd or 3rd mortgages would become unsecured debts and could be discharged at the end of the Chapter 13 and you would still be able to keep your house.  Some people are also often behind on tax debt or domestic support payments and need time to catch up.  They might be afraid of a bank levy or a criminal charge.  A Chapter 13 will give them the time to become current without facing further penalties.  These debts can be paid through the plan in a structured way to make it easier to handle for the debtor.

A Chapter 13 is also the only option when you are trying to discharge a debt that was assigned to you in a divorce decree.  It is a good idea if you have gotten a divorce to show the decree to your attorney.  If you have assigned debts through that divorce that you want to discharge it cannot be done through a Chapter 7.  A good, knowledgeable bankruptcy attorney will be able to sort through all of this paperwork and let you know what the best option is for you.

Additionally, I often have clients who have filed a Chapter 7 bankruptcy in the last 8 years, but they are getting garnished by a new creditor.  They come to see me hoping to stop the garnishment but cannot file a Chapter 7.  Often it is a good idea to file a Chapter 13 to stop the garnishment.  We can always file a Chapter 7 later to discharge the debt, but the Chapter 13 will stop the garnishment to free up money so you can pay your rent and utilities and not get further behind on your bills.  These garnishments are often up to 25% of your paycheck, which can be devastating to many people.

Another advantage of Chapter 13 bankruptcies is that they can often be cheaper up front since attorney fees can be paid over the course of 5 years.  We are very willing to work with clients on payment arrangements in a Chapter 13 if they are employed and have the ability to make the monthly plan payments to the Trustee.

This decision on what kind of bankruptcy to file is a complicated one and should not be taken lightly.  We have experienced lawyers here that deal with all types of cases every single day.  It is our job to analyze your debts, assets, income and expenses and have in-depth knowledge of the bankruptcy code.  If you are considering bankruptcy or would like to speak with an experienced bankruptcy attorney in the St. Louis area, please do not hesitate to give our office a call.  We offer free consultations at five different locations across the St. Louis area.

Why Can’t I Get My School Transcript After Filing Bankruptcy?

August 5, 2013 Leave a comment

Schools cannot refuse to release your transcript or diploma just because your bankruptcy case discharged a debt for tuition.  This ruling came down recently from the Seventh Circuit Court of Appeals, which covers Illinois, Wisconsin and Indiana.  It is true that student loans cannot be discharged in bankruptcy, except in special circumstances, such has financial hardship, but money that you owe your school, college or university is not always a “student loan”.

In a recent case, the debtor, was taking art classes at a University in Wisconsin.  The debtor could not afford her tuition payments and decided to file for Chapter 7 bankruptcy.  The Court of Appeals ruled that the debtor is required to pay for the cost of her transcript, as any other student would have to do, but not the back-tuition payments that had been discharged.  Since the school was unwilling to provide a transcript to her unless the tuition was paid, the Court decided that the school was violating her property rights under state law and could be liable for doing so.

In summary, student loans are not normally dischargeable, but your bankruptcy attorney can help you determine whether or not what you actually owe the school is a student loan or just past due tuition.  If their are debts to the school that are not considered to be student loans, a Chapter 7 bankruptcy would discharge those debts and give the filer a fresh start.  The college or university you attended is violating your rights if they are not releasing your transcript after the underlying debts that they are holding on to it for have been discharged.

These questions and many others can be answered by experienced bankruptcy attorneys.  If you have questions regarding this article or anything else related to bankruptcy please don’t hesitate to contact us today.  We offer free consultations at 5 different locations in both Illinois and Missouri.

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