Archive for the ‘Bankruptcy’ Category

Bankruptcy for Creditors 101

Tuesday, May 30th, 2017

By: Sarah Saville

Ever loaned money to a friend? Are you a landlord or have a roommate? Does someone pay you child or spousal support payments? You may not think of yourself as a “creditor”, but if the person who owes you money files bankruptcy, you will be a creditor in bankruptcy.  Here’s 3 things to know when that person files bankruptcy:

 

  • STOP in the Name of the Automatic Stay!

The moment a person files bankruptcy, an automatic stay is issued and all collections activities must come to a screeching halt.  That means no phone calls, no notices, no court actions, no texts or tweets or communications of any kind to the debtor about any contract or debt owed before the bankruptcy was filed. Although the stay has limitations, violating the stay is a punishable offense, so it’s best to consult with an attorney before taking any action.

 

  • Know the Chapter

The most common bankruptcy is Chapter 7, in which the debtor’s non-exempt assets – if any – will be paid to their creditors.  In a Chapter 13, the debtor makes monthly payments under a 3-5 year plan.  In all Chapter 13 and Chapter 7 – Asset bankruptcies, creditors must file a proof of claim to be paid through the bankruptcy.  Mark the claim deadline on your calendar as soon as you learn there’s a bankruptcy so that you don’t miss it!

 

  • Know the Debt

Is your debt secured? Are there monthly payments that will accrue after the petition is filed? Can the debt be discharged? These factors will determine your rights as a creditor. If your debt is secured, your lien may survive the bankruptcy.  If a debtor fails to make ongoing monthly payments, the court may give you relief from stay to collect the debt.  Some debt may not be discharged in a bankruptcy.  That means you will be allowed to pursue the debt after the bankruptcy is over.  Understanding how the bankruptcy will affect your debt can help you plan for protecting your rights as a creditor.

Stop in the name of bankruptcy graphic

 

Some Financial Effects of Divorce

Tuesday, May 1st, 2012

When two people are dating, they often decide to move in together for a number of reasons, and one of those reasons can be financial.  After all, why pay for two sets of living expenses (rent, electric, cable etc.) when you are spending all of your time together?  It is cheaper to combine expenses.

The opposite happens when people get divorced, but for some reason it seems to come as a surprise to people that they are not able to continue to maintain the same lifestyle that they had as a couple.

Often, the couple’s financial difficulties are one of the reasons they got into marital problems in the first place, and now that same combined income needs to pay for two separate households.

Everyone seems to understand that the ‘stuff’ to be divided at the time of a divorce includes the house, the cars, the televisions and the other tangible items.  What they often don’t understand is that debts are also considered marital ‘stuff’ that will be divided.  Debts are contracts made between parties where one side (the creditor) agrees to provide something (money) in exchange for the other side’s agreement to pay the creditor back, usually with interest.

Most of the time, the divorce will assign the debt to the person who signed this debt contract as the ‘responsible party’ for the debt.  For example, if Bob gets a credit card in his name alone, he is the ‘responsible party’ for that debt and he will probably be assigned that debt in the divorce.

If the debt is in both of their names, the divorce may assign the debt to one party, but the contract with the creditor has never been changed.  What this means is that the creditor can still file a lawsuit against both Husband and Wife to try to get repayment of the debt.

As an example, Bob and Carol were married when they applied for a credit card to cover the cost of furniture for their home and they both signed the credit card contract.  Now, Bob and Carol are divorced and that debt has been assigned by the divorce to Bob.  Bob does not make the payments on the credit card and the credit card company sues both Bob and his ex-wife Carol for repayment.  Carol will need to defend herself against that lawsuit in court so that the court can order that Carol is not to be held responsible for this particular debt.  Carol can do this herself, but she will probably hire an attorney to assist her.  If the divorce decree is worded correctly, Carol can then file suit against Bob to have him reimburse her for her legal fees.

There are also times when one or both of the parties files for protection under the Bankruptcy Code.  Again, a careful drafting of the divorce decree can help protect the other party from being held responsible for a debt that has been discharged by the other ex-spouse.

Divorce is an emotional and difficult process that can have immense and varied financial implications that should be discussed with an attorney who can help provide you the assistance and protection you need.

If you have any questions about this or any other legal subject, please feel free to give us a call at 757-234-4650 or visit our website at http://www.BeaversLaw.com.

How To Pay Your Criminal Restitution Through A Chapter 13 Bankruptcy

Tuesday, March 20th, 2012

criminal restitution in chapter 13 bankruptcy

Today we have a guest post from Jay S. Fleischman, a great consumer bankruptcy attorney who is a member of the National Association of Consumer Advocates, a member of — and the New York co-chair of — the National Association of Consumer Bankruptcy Attorneys, and a partner in the New York law firm of Shaev & Fleischman, LLP

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Let’s say you’re convicted of a crime.  Your lawyer can get you jail time or criminal restitution, perhaps a mix of both.  Here’s how to handle that restitution order using the U.S. Bankruptcy Code.

Bankruptcy is usually thought of as a way to get out of credit card debt, stop foreclosure, and the like.  And though you can’t wipe out a criminal restitution order using the bankruptcy laws, you can leverage the system to repay that debt in a way that doesn’t interfere with your ability to earn a living.

Discharge of Criminal Restitution In Bankruptcy

Under 11 USC 523(a)(7), you cannot discharge a debt that is for a “fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty”.  In other words, you can’t wipe out your criminal restitution obligation in bankruptcy.  When you file for Chapter 7, which is designed to lead to a discharge of your obligations, you will still owe the criminal restitution when you complete your case.

Chapter 13 Bankruptcy As Repayment Tool

There is, however, a different type of bankruptcy case that is available to those who have regular monthly income.  Under Chapter 13 bankruptcy you can repay a portion or all of your debts over a 3-5 year period.  The amount you are required to pay each month under Chapter 13 is dictated by a combination of your income, expenses and debt, and the monthly payments go to a bankruptcy trustee for distribution to your creditors according to a legally-mandated formula.

Chapter 13 is an elegant way of reorganizing your financial life and structuring repayment in such a way as to minimize the impact on your day-to-day life.  While you’re in an active Chapter 13 case the government cannot execute against your income or assets in connection with the restitution award, so you won’t need to worry about your paycheck or bank account being seized during this period of time.

If you’re in a Chapter 13 bankruptcy, however, you’re going to need to repay that restitution award in full because, as in Chapter 7, the claim won’t be discharged at the end of the case.  That’s why it’s important to structure your Plan accordingly.

Order Of Repayment In Chapter 13

Debts get paid in a particular order under the U.S. Bankruptcy Code.  The U.S. Bankruptcy code has at its core the policy of fairness to all creditors of equal legal priority.  At the lowest priority of repayment stands the general unsecured claim, which includes credit cards and medical bills.  § 507(a) of the U.S. Bankruptcy Code lists those debts that are entitled to priority over other unsecured debts. Although the list of priority claims includes certain type of debts that would also be nondischargeable, criminal restitution claims are not among those listed.  In addition, the bankruptcy court can’t change the priority scheme established by the Bankruptcy Code.
If you file for Chapter 13, your repayment plan can’t attempt to repay your criminal restitution award before other general unsecured creditors except in extremely limited situations.  In fact, the reported cases addressing separate classification of restitution claims have uniformly denied confirmation. See, e.g., In re Crawford, 324 F.3d 539 (7th Cir. 2003)In re Bowles, 48 B.R. 502 (Bankr. E.D. Va. 1985)In re Williams, 231 B.R. 280 (Bankr. S.D. Ohio 1999)In re Limbaugh, 194 B.R. 488 (Bankr. D. Or. 1996).

The Ever-Lasting Chapter 13 Bankruptcy

If you owe money for criminal restitution, but you’re not going to be able to repay it during the course of a single Chapter 13 bankruptcy case, you may want to consider whether it makes sense to file one case, go through the entire repayment plan, and then file another one as soon as the first one is completed.  This gives you the opportunity to restructure your finances over a longer period of time than would otherwise be possible in a single bankruptcy case.
There are going to be considerations once you complete your first repayment plan, such as whether your income is higher or lower than it was when you began your case.  The second repayment plan will need to reflect your new income and expense levels, but for some it’s a valuable tool to help wrangle that restitution award into shape.

Jay S. Fleischman is a lawyer who helps people file Chapter 13 bankruptcy.  He also sues harassing bill collectors on behalf of his clients.

Image credit:  stevendepolo