Changes in the bankruptcy law in 2005 made it a lot tougher for individual debtors to file multiple bankruptcies. For a Chapter 7 bankruptcy a debtor can only file once every 8 years; before 2005 it was every 6 years. But a debtor can file a Chapter 13 bankruptcy four years after filing a Chapter 7 bankruptcy. For example, if a debtor filed Chapter 7 in 2006, they would not be allowed to file for Chapter 7 again until 2014; but the debtor could file for a Chapter 13 bankruptcy in 2010.

If the debtor filing for Chapter 13 bankruptcy, as described above, fails to maintain the payments, he or she will not be allowed to convert that Chapter 13 into a Chapter 7 bankruptcy after that case was filed. The time period for when a debtor is eligible to file bankruptcy again is counted from the day of bankruptcy filing, not the date of discharge. For example, if a debtor filed Chapter 7 bankruptcy in 2006; but the bankruptcy case was discharged in 2008, the debtor would be allowed to file Chapter 7 bankruptcy again in 2014.

If you filed bankruptcy a few years ago and find yourself swamped with debt again, contact a bankruptcy attorney today to find out your bankruptcy options.

When filing bankruptcy, debtors have the right to claim certain assets as exempt from seizure by creditors. Although bankruptcy law does not allow transfers of assets designed to “hinder, delay or defraud” creditors, it does allow debtors to plan for bankruptcy exemptions. For example, a debtor considering bankruptcy is allowed to plan for the homestead exemption and might be allowed to use non-exempt property to pay down a home mortgage before filing for bankruptcy under certain circumstances. A debtor might also be allowed to transfer non-exempt assets to other exempt assets such as a retirement account or a child’s college fund. It is important to emphasize that all exemption planning must be done without any intention to “hinder, delay or defraud” creditors.

Often, debtors unknowingly “giveaway” too much of their assets to creditors without protecting the financial stability of their family. Failing to save for retirement, pay healthcare or maintain a home for your family because you are trying to repay debt is not something that the bankruptcy court expects you to do. Bankruptcy is designed to give debtors a fresh start, not put them deeper into the hole by taking all or most of their assets.

If you’re considering bankruptcy and want to protect your family’s assets by increasing the amount of your exempt assets talk to a bankruptcy attorney today.

An automatic stay, which generally becomes effective once a bankruptcy is filed, stops all collection actions against the debtor. But the automatic stay will end once one of the following events occur:

1. The bankruptcy case is closed in a Chapter 13 case. For example, if a debtor withdraws a bankruptcy petition then the case would be closed and the automatic stay would be lifted and collection actions against the debtor would begin again. The bankruptcy case could be closed by the court or trustee.
2. The bankruptcy case is dismissed. For example, the bankruptcy court has determined that the debtor is not eligible to file bankruptcy and dismisses the case. In this case also, the automatic stay is lifted and debt collection actions would resume.
3. The debtor is granted or denied a bankruptcy discharge in a Chapter 7 case. If the debtor is granted a bankruptcy discharge, then those debts that were not dischargeable would probably be placed back into collections (i.e. student loans, child support). If the bankruptcy is denied, the automatic stay is lifted and all creditors would resume collections against the debtor.
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Many debtors considering bankruptcy fail to file their taxes which can have huge financial implications as well as a negative impact on any future bankruptcy. Here’s why…when a debtor files a tax return, even if they don’t pay, the clock starts on two very important time periods that impact bankruptcy. The first important time period for taxes in bankruptcy is the three year period in which the IRS is allowed to assess more taxes for that year’s tax return. This can potentially reduce tax debt owed in any future Chapter 13 bankruptcy. The second important time period for taxes is the 10 year time period where the IRS can pursue collection on a tax debt. That’s right, the IRS cannot try to collect tax debt on a tax return that was filed more than 10 years ago. This also reduces tax debt in any future bankruptcy. But that’s not all, if you want to discharge taxes in bankruptcy, you can only do so on tax returns that were a) filed on time, b) filed within the granted extension time or c) filed two years before you declare bankruptcy.

Many debtors find themselves unable to discharge burdensome tax debt in bankruptcy simply because they did not file under the prescribed rules. Don’t let that happen to you. Even if you cannot pay, you must file your taxes, doing so increases your chances of discharging them in bankruptcy.

When debtors file for bankruptcy many don’t realize that the bankruptcy trustee may request a copy of the debtor’s bank statements covering the previous 60 days before they filed for bankruptcy. This is where your bank statements may actually jeopardize your bankruptcy case. Before filing bankruptcy many debtors have been completely careless with their spending and their bank statements often reveal that they not only did not make a good faith effort to pay their debts; but they are also spendthrifts.

For example, prior to filing bankruptcy some debtors pay for dinner at expensive restaurants, buy expensive designer clothes, purchase pricey spa treatments, shop at gourmet grocery stores and stock up on other non-essential items all paid with their debit card, within the 60 days prior to filing bankruptcy.

Buying expensive, non-essential items with your debit card before filing bankruptcy leaves a paper trail that may lead the bankruptcy court to dismiss your case. If you’re planning to file for bankruptcy and have a habit of purchasing expensive, non-essential items on your debit card, you need to stop BEFORE you file bankruptcy. If you suspect that your bank statements may jeopardize your bankruptcy case, speak with a bankruptcy attorney about what you can do to decrease the chances of your bankruptcy case being dismissed.

Although America rid itself of debtors’ prisons long ago, there are still stiff penalties for intentionally providing false or misleading financial information to the bankruptcy court. Debtors can be sentenced to up to 5 years in jail and fined up to $250,000 for providing false or misleading financial information to the bankruptcy court.

For example, if you file Chapter 13 bankruptcy and fail to disclose that you earn an additional $300 a month this would obviously cause your monthly repayment plan to be lower. But this “little white lie” could possibly send you to jail. Even if financial lies are “discovered” after your bankruptcy case has been discharged you could still face criminal prosecution for lying to the bankruptcy court. It is important that you disclose all financial information to your bankruptcy attorney, including cash income, property/asset transfers, real estate and other assets and income no matter how insignificant they may appear. If you are in the middle of a bankruptcy and “discover” that you have more assets, notify your bankruptcy attorney immediately. Saving a few dollars in bankruptcy is not worth spending 5 years in jail. Many debtors have already been successfully prosecuted for lying about their financial assets during bankruptcy, don’t become one of them.

As we have noted often on this blog, many debtors wait to the absolute last moment to file for bankruptcy. Many debtors who should have filed bankruptcy years ago find themselves facing garnished wages, seized bank accounts, repossessed cars and even home foreclosures. But even if a debtor waits until the very last minute to file bankruptcy, the bankruptcy laws allow the debtor to start a bankruptcy case by filing only the 3 page petition with a list of creditors (even if the list is incomplete).

This is a very quick process; we’re talking a few days at the most. Once this 3 page petition is filed, it will stop aggressive collection action against a debtor immediately. The bankruptcy law allows the debtor to file the remaining forms and schedules within 15 days after filing the bankruptcy petition. In some cases the bankruptcy court may even extend the 15 day deadline if it deems it reasonable and necessary.

Do not try to file the bankruptcy petition yourself, because if it is done incorrectly your bankruptcy petition could be dismissed. Speak with a bankruptcy attorney immediately regarding an emergency bankruptcy filing to stop pending foreclosures, wage garnishments and other aggressive collection practices.

Many debtors considering bankruptcy know they need a bankruptcy attorney; but they are afraid of what it will cost and of course how they will pay the fees. If you’re considering filing for bankruptcy and are worrying about how you will pay bankruptcy attorney fees, you’re not alone. To take away the mystery of bankruptcy attorney fees, let’s take a look a number of factors that will determine the cost of your bankruptcy attorney fees.

1. The complexity of your bankruptcy case.
2. The amount of time the bankruptcy attorney will be required to devote to the case.
3. Whether you are filing a Chapter 7 or Chapter 13 bankruptcy.
4. The amount of assets involved in the case.

And those are just a few of the determining factor. That’s why there is no one-size fits all for bankruptcy attorney fees. The cost for filing a bankruptcy involving $1 million in assets will not cost the same as filing a bankruptcy for $30,000 in assets. The only way that a bankruptcy attorney can give a debtor an accurate fee quote is to sit down and discuss the bankruptcy case with the debtor. After discussing the bankruptcy case with the debtor, the bankruptcy attorney can discuss what assets can be used to pay the fees and other payment options that may be available. Many debtors view bankruptcy attorney fees as just another bill; but that’s a huge mistake in perception. The fees paid for a bankruptcy attorney is an investment in your financial future.

When parents file for Chapter 7 or Chapter 13 bankruptcy, the bankruptcy trustee is not allowed to seize any existing accounts designated for a minor. But the bankruptcy trustee can prevent a debtor from continuing contributions to a child’s account including a college fund or college trust. Not only can the bankruptcy court demand that a parent in bankruptcy stop contributing to a minor’s college fund, they can demand that the parent cease paying tuition for or sending money to a child already in college.

While a bankruptcy trustee allows debtors to pay for necessities such as rent, food, utilities and medical expenses, paying for a child’s college education is not considered essential under bankruptcy law. Basically if your child is at least 18 years old the bankruptcy court will not allow even small contributions to the child’s income.

If you are considering filing for bankruptcy, but are currently paying for an adult child’s education, speak with a bankruptcy attorney to find out how you can possibly help your child through college before you file for Chapter 7 or Chapter 13 bankruptcy.

If you arer filing a Chapter 7 or Chapter 13 bankruptcy be careful how you calculate your income. Does your employer pay your rent or mortgage? Do you drive a company car? What about travel expenses to and from work? Do you use the company credit card to pay for personal items? All of these perks are counted as income under bankruptcy law. In bankruptcy, this type of income is considered non-traditional income and if it is not reported or reported inaccurately it can jeopardize a debtor’s bankruptcy discharge.

For example, if you use your company credit card to pay for personal utilities, such as a phone, gas or electricity, this will be counted as income in bankruptcy. Of course the exception will be if you have to pay those expenses back to the employer. Another example would be if you employer paid for a vacation for you and your family, which sometimes is a perk of executives. This also would be considered income. The bankruptcy court will assess each perk a value and that value will be counted as income.

If you’re filing for bankruptcy and have employee perks, talk to your bankruptcy attorney about how those perks will be counted as income during your bankruptcy case.

Workers need a car, that’s just a fact. Unless you live in a centralized city like New York, a car is a necessity. If you want to get a job, keep a job, shop, take the kids to school and other outings, the car is essential to daily survival. But what about a debtor filing for Chapter 7 or Chapter 13 bankruptcy, can he/she keep their car? If the car has a loan, that’s not affordable and a debtor is filing bankruptcy it is natural to assume that the creditor will demand the property back. But there are ways to save your car during bankruptcy, even if you have a car loan. When a debtor files for Chapter 7 bankruptcy, he/she can "redeem" the car by paying the lender the value of the car and discharging the rest of the car loan in bankruptcy. In a Chapter 13 bankruptcy a car can also be "redeemed" if the car loan is more than 910 days old or if the loan was not used only for purchasing the loan (i.e. a rollover loan from a trade-in). 

If the debtor in bankruptcy does not have the cash available to pay for the value of the car, he/she is allowed to take out a loan to do so, even while in bankruptcy. This is good news for debtors facing upside down car loans. These debtors can file bankruptcy and keep their car.

For years banking institutions have worked hard at convincing debtors that they should bank and borrow money at the same financial institution. But what if things go bad and you can’t pay your bills without jeopardizing the roof over your head? Filing for bankruptcy will stop judgments and other collections efforts of creditors; but what if you bank with one of those creditors? Well, if you file for Chapter 7 or Chapter 13 bankruptcy and have a bank account with one of your creditors, a few things may happen.

1. The bank may close your checking or savings account after you file for bankruptcy.
2. Sometimes the bank will "illegally" seize your money in the bank account after a bankruptcy filing.
3. The bank may freeze the money in the bank account after the bankruptcy filing.

The best course of action a debtor can take before filing for bankruptcy is to close the checking or savings accounts where they hold debt and reopen the account with a bank where they have no debt.

Many debtors filing for Chapter 7 or Chapter 13 bankruptcy hold debt that has a co-signer. Although this type of debt can and should be included in a bankruptcy filing, it will not protect the co-signer from being pursued by creditors. When someone co-signs on a debt, they are basically saying that they will repay the debt if the main person on the loan defaults or somehow does not fulfill their terms of the debt. For example: If you took out a car loan and had your mother co-sign the car loan, she would become responsible if you didn’t pay. Whether you have a co-signer (or not) does not impact in any way your ability to file for bankruptcy; but it does not relieve the co-signer of their responsibility to repay the debt.

Don’t let having a co-signer on a car loan, mortgage etc. deter you from filing for bankruptcy. You can always reaffirm the debt and continue to make payments after the bankruptcy. Or, you can work with your co-signer to pay on their behalf after your bankruptcy has been discharged. It’s important to remember, that once your debt as been discharged you have no legal obligation to repay the debt; but you can voluntarily do so without penalty.

Many debtors filing for Chapter 7 or Chapter 13 bankruptcy may have bank accounts open for their children and want to know if a creditor can seize the money in those accounts during a bankruptcy. Well, the answer is no, a child’s bank account cannot become the property of the bankruptcy estate. But that is only true if the child’s bank account was setup properly. If the account was not setup properly, the debtor will have to prove to the bankruptcy trustee that the account was truly for the child. For example, if you opened an account under your name and pay for the child’s expenses and the general expenses of the household, that account would probably not be considered exclusively for the child’s benefit by the bankruptcy trustee. If you did not setup your child’s bank account properly, no matter what type of proof you present the bankruptcy court be prepared for the possibility that the account won’t be protected from liquidation during a Chapter 7 or Chapter 13 bankruptcy. But if your child’s bank account is properly setup, according to the Uniform Gift To Minors Act (UGTMA) creditors cannot seize money in that account during a bankruptcy. Under the UGTMA a gift to a minor is irrevocable, it cannot be taken away from them and becomes the property of the child once the child reaches adulthood.

When a debtor applies for a bankruptcy filing fee waiver, the law states that the bankruptcy court must decide immediately if the waiver application will be approved. Once the decision is made, the information will be given to the United States trustee or bankruptcy administrator, the case trustee, the debtor, and the attorney for the debtor. If a bankruptcy filing fee waiver is denied the bankruptcy law requires that the debtor be notified within a reasonable time, about 10 days. Any debtor denied a fee waiver can pay in full or make payments in installments according to a schedule provided by the bankruptcy court. If the debtor fails to pay the bankruptcy filing fee in full or is late making payments, the bankruptcy case may be immediately dismissed by the bankruptcy court.

Sometimes a debtor will begin making payments on the bankruptcy filing fee; but find later on that he/she cannot continue because of economic restraints. If this is the case, the debtor can reapply for a bankruptcy filing fee and the court will waive any balance if they approve the waiver application.

Even if you believe that you can afford to pay the bankruptcy filing fee, speak with your bankruptcy attorney to see if you meet the eligibility requirements of the bankruptcy fee waiver program. Make sure that you accurately depict your financial circumstances to your bankruptcy attorney. If it is discovered during the bankruptcy process that you could afford the filing fee the waiver will be vacated by the bankruptcy court and you will be required to pay the filing fee or face dismissal of the bankruptcy case.

It is important to note that all the assets of a sole proprietor and the assets of their businesses will be considered ONE when a debtor files for Chapter 13 or Chapter 7 bankruptcy. In other words, all of your business assets will become a part of the bankruptcy estate when filing for personal bankruptcy when your business is not incorporated. There are some obvious dangers in this type of setup when a debtor files for bankruptcy; but the least obvious danger is that the bankruptcy trustee may require you to stop operating your business while in bankruptcy to avoid the accumulation of more debt. The best way to protect your business from the fallout of filing for Chapter 13 or Chapter 7 bankruptcy is to incorporate your business before you file for bankruptcy. Incorporating your business will at least require the bankruptcy court to treat your business as a separate entity and give you other rights and options that you don’t have access to as a sole proprietor.

We’ve spoken earlier about individual owners of incorporated businesses and how the company is handled in a bankruptcy. Now let’s take a look at what happens when a debtor filing for bankruptcy is a partial owner of an incorporated business. In bankruptcy, any stock owned by the debtor filing for bankruptcy comes under the jurisdiction of the bankruptcy trustee who can liquidate it to repay creditors. When a debtor owns some stock in a company, that stock can be sold by the bankruptcy trustee to repay creditors. For example, if a debtor is a 50% owner of a company and owns 50% of the stock, that stock can be sold at market value to repay creditors; but it must honor any written rules about the sale of that stock. For example, if the debtor is in a contract that says that the partner must have the first opportunity to buy the stock, the bankruptcy trustee must honor this rule. Also, the debtor can buy back the stock from the bankruptcy estate if he pays the "fair value" for the stock.

A common question amongst debtors filing for bankruptcy is, "can a bankruptcy trustee take my business if I file a Chapter 7 bankruptcy?" Well the answer is, yes the bankruptcy trustee can take your business…"well maybe." Many business owners go through the trouble of incorporating their business because they want to protect themselves from liability if something goes wrong with the business. But what happens when a business owner files for personal bankruptcy? Well, it all depends on the debtor’s stake in the company. Is the debtor a shareholder? If so, the bankruptcy trustee can liquidate the debtor’s share of the company during a bankruptcy court if it is not exempt. This is especially true if the debtor is the sole shareholder. You see, although the bankrupt debtor does not own any assets in an incorporated business, he/she does own the stock. Any stock the bankrupt debtor owns becomes part of the bankruptcy estate. So, if a debtor filing for bankruptcy owns 100% of the stock in a company, then the bankruptcy trustee owns 100% of the shares thus 100% of the assets of the company and as the owner can liquidate all of the company’s assets in bankruptcy to repay creditors. What this means is that the bankruptcy trustee can sell the company’s computers, technology, furniture, etc.

After sixty years in business, Harold’s Stores, Inc. filed for bankruptcy last Friday. Harold’s which has been a household name for generations of Dallas-Fort Worth residents, opened its first Dallas area store in 1977; but has been experiencing financial difficulties since the 1990’s. Last year, the company posted a $9.5 million loss on revenue of $82 million. As part of its bankruptcy, the Dallas-based men’s and women’s specialty retailer is starting a liquidation sale at its 43 stores in 19 states. That means another round of job losses for the Dallas-Fort Worth area as many retailers find it nearly impossible to eek out a profit in these economically turbulent times. Many retailers face bankruptcy as consumers tighten their spending and shop less even as the holidays approach.

A recent bankruptcy case in the Seventh Circuit Court is a perfect example of what happens when self-employed debtors fail to properly track their expenses, report their income accurately and understand basic accounting. This basic knowledge is even more important when self-employed debtors are trying to file a Chapter 7 or Chapter 13 bankruptcy.

In the case - Stamat, Nicholas and Penny; In the Mat­ter of ( Neary, U.S. Trustee, v. Stamat) , 19 CBN 83 (Bankr. N.D. Ill. 2008) married self-employed debtors were denied a Chapter 7 bankruptcy discharge because they failed to understand the difference between net-income and gross-income. The couple owned two businesses, a pediatric health center and a medical billing company and were filing bankruptcy on thousands of dollars of debt. When the couple reported their income to the bankruptcy court, they failed to report the gross-income and disclosed the net-income only, which of course was the lesser of the two. The bankruptcy found this inaccurate disclosure to be cause enough to deny their discharge. Don’t let this happen to you.

If you are self-employed debtor planning to file for Chapter 7 or Chapter 13 bankruptcy you must have all of your records as accurate as possible. Work with a bankruptcy attorney and maybe an accountant to make sure that creditors have no reason to challenge your discharge. Do not try to navigate this bankruptcy process alone.

It’s quite common for debtors filing for bankruptcy to forget or not realize that they are required to take a Personal Financial Management course within 45 days after filing for bankruptcy. So what do you do if your bankruptcy case is past the 45 day mark and you never took the second required course? First, don’t panic.

Contact your bankruptcy attorney immediately and ask if the bankruptcy case has been closed. Sometimes, the 45 day filing limit is not an issue as long as you take the required course before the case is closed. If your bankruptcy case has not been closed take the course immediately and file the certificate with the court.

If your bankruptcy case was closed before you could complete the Personal Financial Management course most judges will allow a debtor to reopen a bankruptcy case for the purpose of filing the certificate.  There’s usually a fee to reopen the case, around $200; but it’s worth every penny to get your bankruptcy discharge.

When a landlord files for bankruptcy, many tenants are left in the dark about their rights and protections. Well, the good news is that when a landlord files for bankruptcy, the tenants do not lose any of their rights due to the bankruptcy. What this means is that the rights, as defined in your lease will be respected by the bankruptcy trustee; but it doesn’t necessarily mean that you will be able to stay in your rented home.

For Example: If you are living in a rented home and your lease states that the landlord must give you 90 days to vacate the home if they want to you leave, then the bankruptcy cannot force you to leave sooner. So, let’s say that your landlord is in a Chapter 7 bankruptcy and has been ordered to liquidate the property. The landlord would have to give you the notice to vacate within the parameters of the lease. If you don’t have a lease, typically the landlord can give you 30 days to vacate.

The bankruptcy law also states that the landlord’s bankruptcy trustee cannot interfere with the use, possession, or quiet enjoyment of the apartment or premises.  The amount and timing of payments remains the same.  The tenant keeps all existing rights of renewal and extension. It is important to remember, you only have rights that are clearly stated in your lease. In the case of renewal and extension, to enjoy this right while your landlord is in bankruptcy your lease must clearly state that you have a right to renewal or extension.

If you’re going through a divorce and you intend to file for bankruptcy afterwards, you may be required to disclose your intentions to your spouse. A recent case found a debtor’s divorce related debts such as alimony non-dischargeable because he failed to disclose his intention to file for bankruptcy. The case, filed in the Southern District of Texas found that the debtor entered into alimony settlement negotiations with the full intention of filing for bankruptcy afterwards. The court found that the debtor’s silence about his intentions constituted false representation; therefore the bankruptcy court would not discharge the alimony debt in bankruptcy. The debtor may have alleviated this situation by revealing his bankruptcy intentions and negotiating a lower or lump sum alimony settlement.

So many Americans facing mounting debts never consider bankruptcy because they’re under the often false assumption that they make too much money. But the reality is that thousands of Dallas-Fort Worth consumers file for bankruptcy every year even with incomes over $100,000.

To find out if you qualify under Chapter 7 bankruptcy you need to calculate your household income. To determine your household income, the bankruptcy law requires you to use a special formula which averages your income over the last six months before filing. Once you determine your household income, you can compare it to the family median income for the state of Texas. See below:

Texas Family Size Median Income
1 $36,285
2 $51,355
3 $53,803
4 $61,511

Add $6,900 for each additional individual in the household.

Is your household income less than the income for a similar sized family? If so, you’re eligible to file for Chapter 7 bankruptcy. But even if your household income is more than the median income for Texas you are allowed to deduct certain expenses from your income under the bankruptcy law, such as housing, food, transportation, taxes, insurance and many other items. Taking these deductions will usually reduce your household income, bringing it below the Texas median income.

Speak with your Dallas- Fort Worth attorney today to find out if you qualify for Chapter 7 or Chapter 13 bankruptcy.

When filing for either Chapter 7 or Chapter 13 bankruptcy there are few things that you can expect from your creditor.

1. The creditor will stop all collection actions against you. This means that when you file for bankruptcy the creditor will not call, send you letters or try to seize your bank accounts or garnish your wages.
2. The creditor will file a claim against your assets in the bankruptcy court.
3. The creditor may challenge your right to discharge the debt in bankruptcy.
4. The creditor may claim that you are hiding assets or that you have transferred assets in order to avoid repayment of debts. If the creditor can prove this your bankruptcy case may be dismissed.
5. Secured creditors will most likely ask for a "relief from stay" caused by the bankruptcy filing. If the judge grants this relief to the secured creditor they will have power to seize assets such as a car that still has payment obligations.
6. A creditor will also closely monitor your bankruptcy case and if it is dismissed, they will most likely quickly resume collection actions against you.

Chapter 7 and Chapter 13 filings have shot up 18% in Texas according to El Paso Times. But it’s not just Texas, all over the country many ordinary citizens are finding themselves too financially strapped to pay for the basics of life plus all of the debt they have accumulated in the past 10 years of financial prosperity. Nationwide nearly 1 million Americans have filed for bankruptcy in 2008 according to the Administrative Office of US Courts. Many of the new bankruptcy filers are individuals who own multiple homes they acquired loans for with no proof of income. These people are finding that they can no longer flip the homes nor can they afford the mortgages which are often ARMs scheduled to reset soon. For them bankruptcy is the only solution.