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With certain exceptions, the filing of a bankruptcy petition immediately and automatically puts into place a court order of a stay of collection action applicable to all entities against actions by creditors against the person who filed for bankruptcy relief as well as his property. The bankruptcy stay remain in effect until it is terminated by the bankruptcy court or as otherwise provided by the Bankruptcy Code.

Chapter 13 Co-Debtor Stay
In a chapter 13 case, the automatic stay is also effective against a person who is a co-signer on consumer debt.

Violations of the Automatic Stay
Most court hold that actions taken in violation of the automatic stay are void.

Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com

At the end of a contentious legislative session, the Governor signed into law an important piece of legislation strengthening Alabamians’ ability to protect their house and car from being seized by creditors.  The bill (SB 327), sponsored by Sen. Cam Ward (R-Alabaster), Rep. Jim Hill (R-Moody) and passed unanimously by legislative members, was due in large part to tireless consumer advocates like Alabama Appleseed, who recognize the importance of protecting the very assets Alabamians working poor are struggling so hard to maintain.
 
Before the law was changed, a creditor could seize your car, bank accounts, and household goods if the creditor said you were delinquent.  You would only be able to keep these items if the total value of this personal property was less than $3,000.  In practice, this amount may have been sufficient to protect some items from being seized, however, because cars typically are worth much more than $3,000, it rarely protected vehicles from being seized by creditors.  The result left many working poor without a way to work.  If you can’t get to work you can’t pay your debts.
 
Even more oppressive was a creditor’s ability to seize your house if it had more than $5,000 in equity.  Building equity in a home has traditionally been considered a stable investment for the future, providing favorable tax benefits (and one that has been encouraged by generous government backed mortgages) in addition to contributing to a stable and productive environment for the family.   Yet, under the prior law, if you couldn’t pay a medical bill or private school tuition debt, the equity you had built in your home could be the very thing that would allow a creditor to seize and sell it.
 
If you were forced to file bankruptcy to manage your debt, the old law would often force people who could not afford to pay creditors into a sometimes impossible repayment plan just to protect their property.  In my practice, I had to constantly correct the notion that “they gotta leave me with one house and one car, right?” Wrong.  That would have been correct in the age when a house cost less than $5,000 and vehicles cost less than $3,000, however, in today’s world it would be impossible.
 
As an example, suppose you owe $130,000 on your home and you live in a county where the county tax assessor has valued your home at $136,000, meaning you have $6,000 equity in your home on paper and more than the legal limit of $5,000.  If you are sued for an unpaid medical bill, the creditor would be able to sell your home to pay for your debt, even if the debt is more than the equity you have in your home.
 
The old protections (exemptions) were the lowest in the country, making Alabama, already burdened with some of the highest poverty rates, one of the most creditor friendly states as well.
 
The new law signed by Governor Bentley on Thursdayof last week went into effect immediately and increased the protection for personal property (the “personal property exemption”) to $7,500 and increased the protection for residential property (the “homestead exemption”) to $15,000.   These amounts will be adjusted every three years in order to keep pace with the cost of living.  Every state has their own version of exemption laws designed to prevent a creditor from forcing people into financial destitution.  Most states recognize that exemption laws are necessary to allow a person the ability to work productively to support their family.
 
This new law will provide substantial protections to consumers who are constantly being threatened by predatory lenders, medical bills which are not covered by insurance and the rising cost of everyday expenses such as childcare, student loans and utilities.  As a person who sees the devastating effect a creditor friendly environment can have on the working poor, I applaud the efforts of Alabama Appleseed, Senator Ward, Representative Hill and Governor Bentley in moving Alabama out of the dark ages of debtor servitude.

Chapter 13 bankruptcy is described as "Adjustment of Debts of an Individual with Regular Income" in the Bankruptcy Code. Although it is not referred to as a "reorganization" as is chapter 11, it is actually quite similar to chapter 11.

Chapter 13 Plan

Under chapter 13, an individual is given the opportunity to deal with both his secured and unsecured debts ("claims") by proposing a chapter 13 plan. In contrast to chapter 11, only the chapter 13 debtor is allowed to propose a plan.

The Bankruptcy Code sets forth various permissive and mandatory provisions for a chapter 13 plan. A typical chapter 13 plan has a term of three to five years.

The payments under a chapter 13 plan are normally made from the debtor's regular wages or other source of income.  The chapter 13 plan payments are made to the chapter 13 trustee who disburses the payments to creditors in accordance with the chapter 13 plan.

Chapter 13 Plan Confirmation

The Bankruptcy Code also provides the requirements to be met for a chapter 13 plan to be confirmed by the Bankruptcy Court.Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com

The 8th Circuit Court of Appeals has ruled that the Additional Child Tax Credit is a protected asset in bankruptcy cases filed in Missouri.  In re Hardy, case number 14-1181 (2015).   Are such tax credits exempt in Nebraska bankruptcy cases?
Missouri law protects a person’s right to receive a “Social Security benefit, unemployment compensation or a public assistance benefit”  Mo. Rev. Stat. §513.430.1(10(a).  The term “public assistance benefit” is not defined under Missouri law, so the court reviewed the history of the Additional Child Tax Credit, especially the legislative history of recent amendments favoring lower income taxpayers.
In reversing the lower courts, the 8th Circuit found that the Additional Child Tax Credit was indeed a “public assistance benefit” even though some of the credits went to higher income families.
Whether Nebraska’s public assistance exemption applies to the Additional Child Tax Credit is less clear. Nebraska’s public assistance exemption law states the following:
 “No person shall have any vested right to any claim against the county or state for assistance of any kind by virtue of being or having been a recipient of assistance to the aged, blind or disabled, aid to dependent children, or medical assistance for the aged. No such assistance shall be alienable by assignment or transfer, or be subject to attachment, garnishment or any other legal process.”  Neb. Rev. Stat. §68-1013.
Is Nebraska’s protection of “aid to dependent children” the legal equivalent of Missouri’s protection of a “public assistance benefit?”  Does the Nebraska exemption only protect financial aid paid directly by state welfare offices or does it more broadly cover benefits received through a tax credits intended to benefit the elderly, disabled and minor children?
The Missouri public assistance benefit statute is located in the middle of a list of various property exempted in bankruptcy cases, whereas the Nebraska aid to dependent children law is contained in a chapter of laws describing public benefits paid by the state to its poorer citizens.  Does this distinction make a difference?  Just as Missouri’s public assistance benefit is a somewhat vague and undefined term, the Nebraska protection of aid to dependent children is equally vague and undefined.
Nebraska also protects aid to poor families in another statute:
§ 68-148. General assistance; not alienable; exception: 
No general assistance shall be alienable by assignment or transfer, or be subject to attachment, garnishment, or any other legal process, except that a county may pay general assistance directly to any person, corporation, or other legal entity providing goods or services, as described in section 68-133, to the poor person.
This time the Nebraska law speaks to a “general assistance” and not just aid to dependent children.  Did the Missouri and Nebraska legislatures anticipate their exemption laws being extended to protect Additional Child Tax Credits delivered through federal income tax refunds?  Probably not.  But what is clear that both states intended to protect government benefits specifically designed to alleviate the financial burdens of lower income families.
At this time it is unknown how the Nebraska bankruptcy court would rule on this issue.  It seems like the better argument is that such tax credits are protected, but debtors are better counseled to file their bankruptcy case after their tax refunds are received until a Nebraska ruling is issued.
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