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Inform Yourself: Bankruptcy Law Blog

Our blog gives information and insight into bankruptcy law from a local Atlanta Bankruptcy Attorney

Our Atlanta Bankruptcy Blog

If you are seeking information and insight into bankruptcy law in the state of Georgia, you have come to the right place. As an Atlanta Bankruptcy Lawyer, one of my primary goals is to inform the public and empower my clients through knowledge. You cannot make good decisions about finances without ensuring that they are informed decisions. In order to help Atlanta area residents gain knowledge and make informed decisions, I started writing a bankruptcy blog. Since July of 2012 Cherney Law Firm, LLC has been posting informative blog entries and helpful reviews on news articles, current events, and other areas relative to bankruptcy. It is vitally important for you to educate yourself on your financial situation and how bankruptcy may or may not be the best option for you, so be sure to check back soon for new posts. Similarly, feel free to browse my firm’s website and review all of the informative pages for helpful facts, or call my firm today for a free initial consultation.

Will I Lose My Home if I File for Bankruptcy?

The short answer to this question is no, you will not lose your house

There is no requirement in the Federal Bankruptcy Code that requires you to surrender your home. How relevant your home is in a Bankruptcy proceeding depends on the chapter of Bankruptcy that you file.

Chapter 13 Bankruptcy

Filing a Chapter 13 Bankruptcy can do a number of helpful things; regarding your home, you can stop a foreclosure proceeding and/or bring all of your mortgage arrears current through the Chapter 13 Plan that you, your attorney, and the Chapter 13 Trustee agree upon.

With a Chapter 13 Bankruptcy Plan, you will be making a monthly payment to a Trustee. This payment will include any past due amounts owed to your mortgage company. You must also continue making your regular mortgage payment and keep your ongoing mortgage payments current. It is important to make your Trustee payments for the entire duration of your plan (usually 3-5 years) and to not miss any of your regular monthly mortgage payments.

Chapter 7 Bankruptcy

Filing a Chapter 7 Bankruptcy only puts your home at risk if you are delinquent on the payment to the mortgage company and/or there is equity in your home. In a Bankruptcy proceeding, there is only equity if your home’s value exceeds the amount owed, plus your allowable exemptions. The exemptions are specific to the state in which you file. If your home is not exempt, then it can be sold by the Chapter 7 Trustee. The money made from this sale is used to pay your creditors.

A qualified Bankruptcy attorney will determine all of the necessary qualifications for you, and make sure that your case proceeds smoothly.

Preparing for a 341 Meeting of Creditors


Upon filing a Chapter 13 Bankruptcy petition with the U.S. Federal Court, your case will be assigned by the Court to a specific Trustee that will oversee, and administer your case. Once a Trustee is assigned to your case, a Creditor Meeting under Section 341 of the Bankruptcy Code will be scheduled by the clerk of the court. The clerk will then send a notice of the time and place of this meeting to you and all your creditors.

You must appear at this meeting and answer questions from the Trustee about your petition.

Your creditors do not usually attend this meeting. The Trustee will ask you a series of questions related to your bankruptcy petition, schedules and relate documents that were filed with the court. This meeting is fairly quick. Your attorney will attend this meeting with you but cannot respond to the questions for you. You will answer these questions under oath, so it is imperative that you are honest.

Once the 341 Meeting is underway, some of the questions asked may include the following:

  1. Did you read and sign all the documents related to your case?
  2. Is all the information in these documents true and correct?
  3. Are all your creditors listed, including friends or relatives to whom you owe money?
  4. What is your reason for filing for bankruptcy?
  5. Are all your assets listed on your petition, including any and all bank accounts of any kind, real property in any country, and any and all personal property (jewelry, art, collectibles, vehicles, etc.)?
  6. Do you have any mortgages or other real estate interests?
  7. Have you ever filed Bankruptcy before?
  8. What is your job?
    1. Are you paid hourly or are you salaried, and what is this amount?
      b. How often are you paid?
    2. Do you have any alimony or child support obligations?
  9. Do you own any businesses?
  10. Are you the beneficiary of or the trustee of any trust?
  11. Are you going to receive any inheritance upon someone’s death?
  12. Are you entitled to the life insurance proceeds of anyone?
  13. Do you have any ongoing lawsuits against someone else?

The specific questions will generally vary by jurisdiction. Your attorney will go over all of the specifics with you prior to your hearing. When scheduled a 341 meeting, it is best to have an experienced bankruptcy attorney walk you through the process and represent you on the day of your meeting. Call attorney Matthew Cherney to schedule a consultation today.

How Bankruptcy Can Help With Back Taxes


If you owe back taxes (federal, state, or local), this can be a tremendous stress. Many people inquire as to whether filing bankruptcy can help deal with their tax debt. While every situation is different and needs to be assessed by a qualified bankruptcy attorney, there are ways in which a bankruptcy filing may help you with your back taxes.

If you owe money for back taxes, the IRS or State Revenue Department can garnish your wages or your bank account. Filing a bankruptcy will stop a tax garnishment. This is what is known as the automatic stay, which requires all creditors (including the taxing authorities) to immediately cease collection action. What happens to your taxes next depends on the chapter of bankruptcy you are filing.

Chapter 7 Bankruptcy

Certain taxes are dischargeable in a Chapter 7 bankruptcy. Here are the general rules regarding dischargeability of taxes in Chapter 7 Bankruptcy.

The Three-Year Rule

The tax return was due at least three years ago. Most returns are due on April 15 for the previous tax year. If the taxes were due from a return filed on April 15, 2017, they would be eligible for discharge (provided all other criteria are met) after April 15, 2020.  Do not forget to take extensions into consideration. This means that the three year rule applies to the extension date.

The Two-Year Rule

You must have filed the return at least two years before you filed your bankruptcy case. If you don’t file a return, sometimes the IRS will file one for you. Many bankruptcy courts do not consider that a return for purposes of fulfilling this rule.

The 240 Day Rule

The taxes must have been assessed at least 240 days prior to filing Chapter 7. When the taxing authority enters the liability on its records, they have “assessed” it. This doesn’t necessarily happen the minute you file your return. It could take weeks or months. In some cases, the taxing authority will audit your return and assess additional taxes years after the return is filed. This period could be tolled or extended if you filed an offer in compromise with the IRS or if you filed a bankruptcy case during that period that was discharged or dismissed.

Chapter 13 Bankruptcy

If you cannot discharge your income tax liability in Chapter 7, you can certainly treat the income tax liability in Chapter 13 Bankruptcy Plan of Reorganization. This means that you can propose to pay back the tax liability over a period of up to five years. The Chapter 13 will also stop future interest and penalties from accruing on the amount outstanding.

Your attorney will determine which taxes are and are not dischargeable in Chapter 7.

Representation in a Bankruptcy Case


You have 2 options when it comes to representation in your bankruptcy case:

  1. Hire an attorney to represent you OR
  2. Represent yourself (this is called “pro se”).

There are many complicated issues that arise in a bankruptcy proceeding, and an attorney can effectively navigate these complexities for you.

A recent Federal Bankruptcy Court filing report showed that only 61% of Chapter 7 pro se bankruptcy cases end up with a positive outcome (an order of discharge) versus 99% of Chapter 7 cases filed with an attorney. While there are several reasons for this, the most important thing to understand is that every single case filed must, with no exceptions, follow the strictly regulated Federal Bankruptcy Code, in addition to following any and all local/state procedures. If these rules are not properly followed, the case may be dismissed.

Some of the more common mistakes made by people filing for bankruptcy without an attorney:

  1. Incorrectly filing for a Chapter 7 instead of a Chapter 13 (or vice versa);
  2. Failing to apply the Chapter 7 Means Test correctly;
  3. Failing to timely file necessary documents with the court;
  4.  Claiming an inaccurate number of property exemptions;
  5. Making mistakes regarding reaffirmation agreements (i.e. vehicles);
  6. Responding to a creditor’s objections incorrectly;
  7. Misunderstanding the terms of documents filed with the court;

Any one of these mistakes may be enough for the court to dismiss your case, denying a discharge in your case, or possibly cause you to lose property that you own. While it is true that there are fees involved when you hire an attorney to represent you, there are also fees if filing pro se.

There are rules in the Bankruptcy Code as to attorney fees, and these fees are always approved by the court

In the long run, if a case is filed pro se and is then dismissed, the restrictions imposed on you by the court are serious. It is possible that a judge may not allow you to file another case for a number of months or years. If your case is dismissed, then you automatically lose all of the important protections you received upon your case filing, including protection from foreclosure and repossession.

DEBT CONSOLIDATION: CHAPTER 13 VS. DEBT CONSOLIDATION PROGRAM


It is important to understand the difference between a Debt Consolidation/Counseling Program and Chapter 13 Bankruptcy

There are many advantages to filing a Chapter 13 Bankruptcy. The number one reason is the simple fact that a Chapter 13 Bankruptcy plan has the power of the Federal Bankruptcy Code to oversee it. The Bankruptcy Code protects you immediately upon filing your bankruptcy case. This does not occur when consolidating your debt with a debt consolidation program (perhaps offered by a bank or counseling service). The following advantages apply once you file a Chapter 13:

  1. You have immediate relief by a Court Order to any and all of your current debt collectors. 1) You have immediate relief by a Court Order to any and all of your current debt collectors. All collection action against you is ordered by the court to stop—this is called the Automatic Stay. This collection activity includes (but is not limited to): foreclosure, wage garnishment, vehicle repossession, lawsuits from creditors and creditor harassment.
  2. You can include the following types of debt in a Chapter 13, but not in a debt consolidation program: car payments, mortgage arrears, child support arrears, and tax debt.
  3. Bankruptcy law is Federal law, as opposed to a debt consolidation program. The Court has the power to tell your creditors what to do and when to do it, and to impose punishments when these orders are not followed. With debt consolidation, your creditors can voluntarily opt out at any time.
  4. A Chapter 13 Plan typically lasts for 3-5 years. With a debt consolidation plan, the repayment plan could drag on indefinitely.
  5. There are no interest or late fees paid to creditors in a Chapter 13 plan.
  6. Your attorney is obligated to represent your best interests. With a debt consolidation program, you do not have someone to ensure that you are well represented.
  7. With the power of the Bankruptcy Code, you can prioritize which creditors are paid first, and you are not penalized for given preferential treatment to your home mortgage or car finance company. This is not the case with debt consolidation programs.

While filing bankruptcy may not be right for everyone, you owe it to yourself to see if it is right for you.

Vehicle Repossession and Chapter 13


Vehicle Repossession

If you have fallen behind on your car payments, then you are at risk for vehicle repossession. Even if you are just one day late making your monthly payment, the car loan company (your lender) has the legal right to repossess your vehicle. Lenders are not under any legal obligation to give you extra time to make your payment. Additionally, if you make a partial payment instead of the full amount owed in a particular month, you are also at risk for vehicle repossession. The unpaid portion is considered late.

Trying to Reach Out to Your Lender

Reaching out to your lender during a time of financial distress is a good idea, but may not always make a difference in regards to the lender repossessing your vehicle. Sometimes a lender will be willing to work with you to come up with a solution to your late payment(s) after you explain your situation. Approaching the lender before your situation spirals out of control is important. If you have recently lost your job, for example, it is best to contact the lender and explain what is going on when this first happens, rather than waiting until you miss several payments.

Consider a Chapter 13

If you are unable to make arrangements with your vehicle lender to catch up the payments, and do not want to risk the lender repossessing your vehicle, a Chapter 13 bankruptcy may be an options for you. A Chapter 13 allows you to pay off the loan during the course of a three to five year plan.

In most circumstances, a Chapter 13 will also obligate your lender to return your vehicle to you if it has already been repossessed. Additionally, under some circumstances, Chapter 13 may allow you to pay back what the vehicle is worth, at a reduced interest rate vs. what you actually owe on the loan. This can oftentimes result in a significant savings.

How is My Credit Score Affected After a Bankruptcy Filing?

Many people who file for bankruptcy already have a low credit score and/or are unable to obtain credit cards or a mortgage. With unpaid bills piling up and possible lawsuits from creditors,  a person’s credit score continues to go down as time goes on.

After filing for bankruptcy, your credit score will lower at first

It is important to know that this is not in any way a permanent situation, and your bankruptcy attorney will advise you on how best to rebuild your credit and increase your score.  Ultimately for the majority of people in a tough financial predicament, filing for bankruptcy will be the better choice than ignoring bills and missing more payments.  

A Chapter 7 bankruptcy filing will remain on your credit report for 10 years. A Chapter 13 bankruptcy filing will remain on your credit report for 7 years.

Given the fact that a credit score can go up quickly once the proper steps are taken, you can begin to rebuild and repair your credit immediately.  

Some ways to quickly and positively impact your credit (once you have filed bankruptcy) include:

  • continuing to make monthly mortgage payments on time (if a Chapter 13 was filed),
  • continuing to make all car payments on time (if you are keeping your car), and
  • paying off any credit cards in full every month (for credit cards obtained after your bankruptcy filing). 

Many credit card companies will offer credit cards to people with a bankruptcy filing because you have either reorganized your debt (Chapter 13) or had your debt discharged (Chapter 7). Therefore, you have less debt than many credit card holders. These credit card companies are more willing to take a risk on you because you have shown that you will be able to make your monthly payments.  

If you file for bankruptcy and then rebuild your credit, you will ultimately have better credit in the long term versus continuing down the path of unpaid bills and getting deeper into debt.  Mortgage lenders and credit card companies are much more willing to approve someone for a loan or a credit card if you have taken positive steps toward improving your situation in a proactive manner.

IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

  • November 8, 2019
  • Bankruptcy,Chapter 13,Chapter 7
  • Comments : Comments Off on IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

Make sure you have all the bankruptcy information

As a debtor filing for bankruptcy, you are entitled by law to a court-ordered rule of protection known as the automatic stay. This applies in a Chapter 7 and in a Chapter 13 filing. There are several creditor activities that the automatic stay protects and/or prohibits. One of the prohibited acts involves any creditor continuing a foreclosure sale that has begun prior to the bankruptcy filing, or starting a foreclosure proceeding during the length of the bankruptcy case. If you want to file for bankruptcy and keep your home, there are certain requirements that must be met. A qualified attorney will look at your situation in detail to determine whether you meet the requirements.

See Chapter 7 vs Chapter 13

In a Chapter 7 filing, a debtor can buy some time for him/herself with the automatic stay by preventing immediate foreclosure on a debt secured by real estate. If there is a scheduled foreclosure sale, this sale gets cancelled. It is very important to note: the debt that is allowed to be wiped out in a Chapter 7 does not include missed mortgage payments. Once the debtor in a Chapter 7 receives a discharge at the resolution of his/her case, then the automatic stay is lifted. At this time, the creditor can resume or begin foreclosure proceedings against a debtor who has missed mortgage payments prior to filing the Chapter 7. The creditor can also seek relief from the automatic stay prior to your Chapter 7 discharge. Chapter 7 bankruptcy does not allow a debtor to “catch up” overdue mortgage payments within his/her case. Additionally, there is no requirement for the bankruptcy court to work out any repayment plan with the lender. Lenders are not required to modify a mortgage if you file a Chapter 7.

One important thing to consider regarding Chapter 7 is that money may be freed up for you once all allowable debts are consolidated into a Chapter 7 plan. This can, in some circumstances, allow a debtor to pay the lender all of the missed payments owed. Then the debtor must continue to keep the mortgage current and pay the monthly mortgage, both during the Chapter 7 proceeding and after the discharge.

Usually, the better option if you want to keep your home is to file a Chapter 13 bankruptcy. This is a reorganization of your debts, which is a 3-5 year repayment plan on debt owed. Missed mortgage payments do qualify to be part of this repayment plan. This means that you can “catch up” on all overdue mortgage payments, and also not have to pay them all at once. Through a Chapter 13 plan, monthly payments are made to a Chapter 13 Trustee who oversees the case. The debtor must continue to make all ongoing mortgage payments during the entirety of the Chapter 13 case. At the end of the Chapter 13 case (the 3-5 year period), the debtor receives a discharge on all debts that were part of this plan. The debtor keeps his/her home and continues to pay the monthly mortgage payment.

New Chapter 11 Bankruptcy Law

WHAT IF I AM OVER THE DEBT LIMIT IN ORDER TO FILE FOR A CHAPTER 13 BANKRUPTCY?

A Chapter 13 Bankruptcy allows individuals to pay all or a portion of their secured and unsecured debts through a U.S. Trustee-approved plan, totaling 3-5 years. After the payment plan is finished, the debtor receives a discharge of all remaining debt that was part of the plan.

As of 2019, the debt limit for an individual to file for a Chapter 13 is $419,275.00 for secured debts and $1,257,850 for secured debts.

What Happens if My Debt Exceeds the Current Limit?

If your debts exceed the current limits, then you may have the option of filing a Chapter 11 bankruptcy under a newly created law in October of 2019. This new law allows a debtor to be treated as a small business. The total debt to be repaid must not exceed $2.75 million. This is a 3-5 year repayment plan, similar to a Chapter 13 repayment plan. Speak with bankruptcy attorney Matthew Cherney to see if this new subchapter of Chapter 11 bankruptcy would apply in your situation.

Obtaining a Mortgage After a Chapter 13 Discharge

In a Chapter 13 Bankruptcy filing, payments are made to a Trustee for a set amount of time. Once all the payments have been made, the person who filed the bankruptcy is “discharged,” or released, from all debts that were part of the Chapter 13 repayment plan.

Many people believe that they may never be able to obtain a mortgage after a bankruptcy filing.

This is not the case. In fact, it is often easier to be approved for a mortgage with a bankruptcy filing on one’s credit report than continuing to incur financial distress. For example,:

if a person is unable to pay bills, is sued by a credit card company, and continues on a downward financial spiral, this will make it extremely difficult to be approved for a mortgage.

By putting a stop to this with a Chapter 13 Bankruptcy filing with an attorney, the outlook for a owning a future home is bright. Lenders often look at a bankruptcy filing as proof of an effort to try and repay some of the debts owed, rather than continue to drown in debt and avoid creditors for long periods of time. The long-term result of a bankruptcy filing is positive, not negative, for the person looking to be approved for a mortgage.

Waiting Periods After a Bankruptcy

Once a filer is discharged from the debts stemming from their bankruptcy filing, there are different waiting periods depending on which type of mortgage loan you are looking for.

  • For an FHA loan, the waiting period is generally 1 year from the date of discharge.
  • For a VA loan, the waiting period is generally 1 year from the date of discharge.
  • For a conventional loan, which has stricter requirements since they are not guaranteed by the government, the waiting period is generally 2 years from the date of discharge.

Owning a home after a Chapter 13 bankruptcy discharge is definitely a possible goal for anyone who has filed Chapter 13.