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Posts Tagged ‘Chapter 13’

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. 

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.  

Will I Lose My Home If I File Bankruptcy?

November 12, 2012 Leave a comment

The short answer is no…you do not have to surrender your home if you file for bankruptcy.  If you are having financial trouble and problems making your ongoing mortgage payment, I would first recommend contacting your lender and trying to modify your mortgage.  Some lenders will work with you, but if they are not willing to do, a Chapter 7 or Chapter 13 bankruptcy may be the right option for you.

If you are filing a Chapter 7 bankruptcy and you want to keep your house, you will have to be current on your mortgage.  You will also need to continue to make payments on that mortgage and enter into a reaffirmation agreement with your lender.  When you reaffirm your debt, you are agreeing to repay a debt (in this case, you are agreeing to continue to pay your mortgage) that would other be discharged in your bankruptcy.  You would then need to continue making payments to the mortgage company under the reaffirmation agreement.  If you breach this agreement and fail to make the monthly payments that have been agreed upon, the bank could then start foreclosure proceedings because you would have breached your promise to pay them.

If you are filing a Chapter 13 bankruptcy and you want to retain your home you can do so by continuing to make your ongoing mortgage payments.  The advantage of filing a Chapter 13 when you want to keep your home is that you will have the ability to pay the mortgage arrearage over a period of 3-4 years through your bankruptcy plan.  For example, if you have a $1000 mortgage payment per month and you have not paid anything to the mortgagor in 6 months, you will owe them $6,000 in arrears.  In a Chapter 13 plan, you can pay this $6,000 over a period of 3-4 years and the bankruptcy will stop any foreclosure proceedings that may have been started or would ultimately be started.

Some people also have equity in their homes.  In Missouri, we have the Homestead Exemption.  You can exempt $15,000 in your home, according to MO. Ann. Stat. §513.475.  That means that if you owe $100,000 on your home and it is worth $130,000, you will have $30,000 in equity.  The Homestead Exemption will allow you to exempt $15,000, but you will still have $15,000 of non-exempt equity.  The trustee will  have you pay them the amount of non-exempt equity so that they can distribute it to your unsecured creditors.  Rather than paying this amount to the trustee in one lump sum, you can pay this amount over time in your Chapter 13 plan and still be able to keep living in your home.

Both the Chapter 7 and the Chapter 13 bankruptcy options may enable you to keep your home, but it is in your best interest to contact a local attorney and speak to them about whether filing for bankruptcy will be a good option for you.  They will be able to tell you how the bankruptcy laws will work in your situation and enable you to keep your home.

What Type of Bankruptcy is Right for Me?

August 30, 2012 Leave a comment

If you are considering filing for bankruptcy you probably have a number of questions. Often times people turn to the internet or friends for advice, and may get confusing and inconsistent answers. The best course of action is to meet with an attorney. Many attorneys offer free, no obligation consultations. This is a great way to sit down with a qualified professional to discuss your particular case, ask questions, and get advice. While you should meet with an attorney, here there are some things you may want to consider and things you will want to be prepared to answer.

In meeting with an attorney, he or she will help you determine whether you should file a Chapter 7 or a Chapter 13 Bankruptcy. One of the first considerations is your income. Chapter 7 Bankruptcies are commonly known as “straight discharge” and the debtor(s) do not make any payments to creditors. A chapter 13 is known as a “reorganization” and the debtor(s) will enter into a three to five year repayment plan.

To file a Chapter 7 Bankruptcy you must be under the median income for your family size. This is calculated by looking at your income for the six months prior to the month of filing. If you are married and living with your spouse both of your income amounts will be included, regardless of whether you are filing a joint petition. If your income initially appears to be over median, you may still qualify for a Chapter 7, as your attorney can further evaluate your case to determine if your expenses pull you under the median income. If you are over the median income you will need to file a Chapter 13.

However, there are a number of reasons debtor(s) may desire to file a Chapter 13 instead of a Chapter 7, irrespective of qualification for a Chapter 7. If debtor(s) are behind on a secured debt, such as a house or a car, the arrears can be put into the bankruptcy plan. A Chapter 13 can save a house from foreclosure or repossession. There are a number of debts that cannot be discharged through a Chapter 7, but could be paid back through a Chapter 13 Bankruptcy. This approach may help the debtor(s) address all issues at once and get back on a track to financial stability.

Each case is different and the law can be quite complex and difficult to navigate. If you would like to set up a consultation, please contact a St. Louis Bankruptcy Attorney Today.

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