Blogs

4 years 9 months ago

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
Folks usually seek out the services of a bankruptcy attorney only when their situation becomes dire. One of those situations occurs when a credior sues someone. A lawsuit can be detrimental enough, but the real pain happens if the creditor is able to get a judgment against the person. Once the creditor obtains the judgment, the creditor can take whatever legal action is available to enforce the judgment. One action is the ability of the creditor to garnish a person’s wages, bank accounts, and other revenue streams. A garnishment can turn things from bad to worse.
Fortunately, one way to stop a garnishment is to file bankruptcy. When a person files bankruptcy, an auotmatic stay of protection is put into effect. The automatic stay prevents a creditor from taking certain actions including enforcing a pre-petition garnishment action.  Not only will the garnsihment stop, but as long the person remains in bankruptcy and receives a discharge, the underlying debt will likely be dischargeable as well.
If a creditor has filed a lawsuit against you, seek out the advice of an experienced bankruptcy attorney to find out if filing bankruptcy is right for you. Call us today, and we will provide a free consultation and determine what course of action is right for you.


4 years 9 months ago

Bankruptcy is an essential component of a capitalistic society. The alternative to a Bankruptcy Code is a Debtor’s Prison.  In 1833 our Country abolished federal imprisonment for unpaid debts. Further, without a Bankruptcy Code coupled with other federal laws our society would be dominated by a few holding all the wealth of our country, i.e. the winners of a giant monopoly game.bankruptcy, chapter 7, help,
All of us run the risk of making financial mistakes or are subject to external forces - illness, divorce and/or surviving the existing recession, that resulted in an unmanageable financial crisis. There had to be a method to resolve these financial situations by allowing individuals a new beginning.  Congress established Chapter 7 of the Bankruptcy Code as one method to accomplish this goal.  The stated public policy of Chapter 7 is “a fresh start for an honest debtor”.  Further each state developed exemption laws, property that creditors could not seize to satisfy a debt.  Texas has always encouraged taking financial risks and as a counterbalance developed the most liberal exemption laws in the country.  The purpose of the exemption law is to allow people to keep enough property to kick off the concept of a fresh start.
To demonstrate the necessity for a Bankruptcy Code all one has to do is look at Greece.  Greece is in dire financial crisis with no real way to resolve their financial problems except by knuckling under the demands of the European Common Market Countries.  The situation for Greek citizens continues to go downhill.  Unemployment continues to rise, wages and pensions have been slashed as Greece implements the demands of its creditors and the demand of the Common Market.  There seems to be no way for this country to get any solid footing in order to recover because only through growth of its economy can any country recover. 
Chapter 7 allows an individual to be relieved of most of his/her existing debts as well as keep enough property to allow a person to have a fresh start with a reasonable degree of success.  Chapter 7 of the Bankruptcy Code is one element of our society that allowed the United States to become the envy of other nations in the world.


4 years 9 months ago


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Most experts agree that financial difficulties rate highly among the leading causes for divorce.  Not surprisingly, when couples are dissolving their marriage they will often seek my advice regarding bankruptcy.  I often hear from clients who are referred by a family law attorney.  I also sometimes see clients after a family court judge has advised them to seek counsel from a bankruptcy attorney.   This article explores a few of the most frequently asked questions involving bankruptcy law as it pertains to marital dissolution.
The first and most common question that arises is whether or not bankruptcy removes an obligation to pay child or spousal support.  The answer pure and simple is that bankruptcy does not remove these obligations.  Bankruptcy Code Section 523(a)(5) excepts from discharge debts owed to a spouse, former spouse, or child of the debtor if such debt is in the nature of alimony, support, or maintenance and is in connection with a separation agreement, a determination made under state or territorial law by a governmental unit.  In fact bankruptcy often helps a party meet their support obligations in freeing up needed resources by removing other burdensome debts.
This brings us to the second most common question.  The question is whether or not bankruptcy discharges an obligation to pay property settlement obligations, spousal indemnities to pay common debts, or orders to reimburse for the other spouses attorney’s fees.   This is a much more complicated question.  First, the answer to the question depends on which chapter of bankruptcy is filed.  In a Chapter 7 bankruptcy, 11 U.S.C. § 523(a)(15) excepts from discharge any debt that is to a spouse, former spouse or child of the debtor; that is in connection with a separation agreement, divorce decree, order of a court or record or determination made in accordance with state or territorial law by a governmental unit; and is not a support obligation.  In other words, property settlements obligations are not within the gambit of Chapter 7 discharge.
On the other hand, 11 U.S.C. § 523(a)(15) is not applicable to a discharge in a Chapter 13 case under 11 U.S.C. § 1328(a)(2).  Even with a Chapter 13 one must be careful to distinguish an obligation to make a non-support related payment from the mere division or partition of community property.   A spouse or former spouse fully retains the right to their share from the division of the community property.  This is not affected by a bankruptcy discharge.
Another consideration is that it is often the case that if both spouses agree to file bankruptcy, regardless of chapter choice, that an obligation to indemnify for the payment of third party debts is either avoided altogether or becomes moot upon the bankruptcy discharge of both spouses.  So if both spouses obtain bankruptcy discharges, many times neither spouse will have to pay for the third party debt.  This can amount to a win-win situation for both spouses.  As a result it is often prudent for one spouse to offer to pay for the bankruptcy of the other.
The last common question for discussion has to do with the relative timing of bankruptcy relative to their divorce.  Specifically, many clients ask whether it is advisable that they wait until the divorce is finalized before filing for bankruptcy.  While there is no easy hard and fast answer to this question, several key points should be considered.  The first key point has to do with urgency.  If one needs to stop a wage garnishment or a pending foreclosure it probably is not advisable to wait.  On the other hand waiting for a finalized divorce decree along with an attendant Marital Settlement Agreement (MSA) and order thereon might favorably affect property exemptions, controversy over what is and is not property of the debtor’s bankruptcy estate, and qualifications under the means test.  Qualifications under the means test might affect whether the client can file a Chapter 7 bankruptcy or not and what the client is required to pay into a Chapter 13 bankruptcy plan.   Each case will be unique and the pros and cons will need to be carefully weighed by an experienced bankruptcy attorney.   With bankruptcy the timing of a case is crucial, so an early evaluation is recommended to insure the best outcome in a given case.  Also, certain planning opportunities may require timely and close cooperation of the client’s family law and bankruptcy law attorneys.
For advice specific to the facts of your case please contact Attorney Raymond Schimmel at (619) 275-1250 or visit my website at http://endbillcollections.com/


2 years 11 months ago

Most experts agree that financial difficulties rate highly among the leading causes for divorce.  Not surprisingly, when couples are dissolving their marriage they will often seek my advice regarding bankruptcy.  I often hear from clients who are referred by a family law attorney.  I also sometimes see clients after a family court judge has advised them to seek counsel from a bankruptcy attorney.   This article explores a few of the most frequently asked questions involving bankruptcy law as it pertains to marital dissolution.
The first and most common question that arises is whether or not bankruptcy removes an obligation to pay child or spousal support.  The answer pure and simple is that bankruptcy does not remove these obligations.  Bankruptcy Code Section 523(a)(5) excepts from discharge debts owed to a spouse, former spouse, or child of the debtor if such debt is in the nature of alimony, support, or maintenance and is in connection with a separation agreement, a determination made under state or territorial law by a governmental unit.  In fact bankruptcy often helps a party meet their support obligations in freeing up needed resources by removing other burdensome debts.
This brings us to the second most common question.  The question is whether or not bankruptcy discharges an obligation to pay property settlement obligations, spousal indemnities to pay common debts, or orders to reimburse for the other spouses attorney’s fees.   This is a much more complicated question.  First, the answer to the question depends on which chapter of bankruptcy is filed.  In a Chapter 7 bankruptcy, 11 U.S.C. § 523(a)(15) excepts from discharge any debt that is to a spouse, former spouse or child of the debtor; that is in connection with a separation agreement, divorce decree, order of a court or record or determination made in accordance with state or territorial law by a governmental unit; and is not a support obligation.  In other words, property settlements obligations are not within the gambit of Chapter 7 discharge.
On the other hand, 11 U.S.C. § 523(a)(15) is not applicable to a discharge in a Chapter 13 case under 11 U.S.C. § 1328(a)(2).  Even with a Chapter 13 one must be careful to distinguish an obligation to make a non-support related payment from the mere division or partition of community property.   A spouse or former spouse fully retains the right to their share from the division of the community property.  This is not affected by a bankruptcy discharge.
Another consideration is that it is often the case that if both spouses agree to file bankruptcy, regardless of chapter choice, that an obligation to indemnify for the payment of third party debts is either avoided altogether or becomes moot upon the bankruptcy discharge of both spouses.  So if both spouses obtain bankruptcy discharges, many times neither spouse will have to pay for the third party debt.  This can amount to a win-win situation for both spouses.  As a result it is often prudent for one spouse to offer to pay for the bankruptcy of the other.
The last common question for discussion has to do with the relative timing of bankruptcy relative to their divorce.  Specifically, many clients ask whether it is advisable that they wait until the divorce is finalized before filing for bankruptcy.  While there is no easy hard and fast answer to this question, several key points should be considered.  The first key point has to do with urgency.  If one needs to stop a wage garnishment or a pending foreclosure it probably is not advisable to wait.  On the other hand waiting for a finalized divorce decree along with an attendant Marital Settlement Agreement (MSA) and order thereon might favorably affect property exemptions, controversy over what is and is not property of the debtor’s bankruptcy estate, and qualifications under the means test.  Qualifications under the means test might affect whether the client can file a Chapter 7 bankruptcy or not and what the client is required to pay into a Chapter 13 bankruptcy plan.   Each case will be unique and the pros and cons will need to be carefully weighed by an experienced bankruptcy attorney.   With bankruptcy the timing of a case is crucial, so an early evaluation is recommended to insure the best outcome in a given case.  Also, certain planning opportunities may require timely and close cooperation of the client’s family law and bankruptcy law attorneys.
For advice specific to the facts of your case please contact Attorney Raymond Schimmel at (619) 275-1250 or visit my website at http://endbillcollections.com/


4 years 9 months ago

Samuel Clemens' (or Mark Twain, under his better-known pen name) complaint about the reports of his death having been greatly exaggerated is apt also for what most people think about bankruptcy: It's NOT the end of your life.

An essay by a high-tech entrepreneur and his personal bankruptcy that was published recently in the Washington Post makes this point very well.

I won't bother to comment on it, because the author himself does a masterful job of describing how his own financial problem developed, his bankruptcy filing, and the changes in his attitude about bankruptcy as he launches another new start-up company.

I commend it to anyone who is considering filing and still has doubts.

The author also makes some very good points about "boot-strap" financing a business and living debt-free.

If you want to discuss your situation personally, the initial consultation is free at our tax and bankruptcy law firm.


4 years 9 months ago

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
There has been a lot of misinformation on the Internet about folks not being able to file Chapter 7 bankruptcy. Well I am here to tell you that people can and are filing Chapter 7.
One of the big changes that occurred when Congress amended the Bankruptcy Code in 2005, was requiring debtors seeking to file bankruptcy to file a Statement of Current Monthly Income and Means Test Calculation, commonly referred to as the Means Test. In order to qualify for filing Chapter 7, a debtor’s net income has to fall below the state median income. The Bankruptcy Code utilizes the IRS standards when determining what the state median income is. To determine if a debtor “passes” the Means Test, the starting point is to find the median income for the state the debtor resides in, determine the household size, and analyze the proper deductions that can be taken on the Means Test for a client or prospective debtor. There are many deductions that can be taken on the Means Test including healthcare costs, payments to your mortgage lender, and vehicle expenses. All vehicle deductions on the Means Test are not available to every debtor after a 2011 Supreme Court decision, that you can read about here. If you are considering filing for bankruptcy it is important to hire an experienced bankruptcy attorney who knows what deductions can be taken on the Means Test. Lawyers who are unfamiliar with deductions on the Means Test may mistakenly take deductions that are not allowed, file Chapter 7, and ultimately have the bankruptcy dismissed by the U.S. Trustee for being an above median income debtor.
People still qualify for Chapter 7 bankruptcy. The first step in finding out if you qualify is to have an experienced bankruptcy attorney “run” a means test for you. If you are thinking about filing bankruptcy and want to find out if you qualify for Chapter 7, contact us today. I can assist you and determine if you qualify to file Chapter 7, and also explore other options if bankruptcy is not right for you.


4 years 9 months ago

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
One of the advantages debtors receive when they file for bankruptcy is creditors can no longer seek to collect money from them. At the time a bankruptcy case is filed, an automatic stay of protection is put into place under Sec. 362 of the Bankruptcy Code, which prevents creditors from contacting debtors trying to collect on outstanding debt. When a creditor fails to abide by the Automatic Stay, the bankruptcy court has the ability to levy sanctions against the creditors for failing to abide by the Stay. Oftentimes a creditors will normally stop contacting debtors after receiving a phone call from the debtor’s attorney advising the creditor of the bankruptcy case information. When the creditor continues to violate the Stay, the debtor’s attorney can file a motion with the court and seek sanctions, including punitive damages and attorney fees.
This same principle applies after a debtor receives a discharge. Once a debtor receives a discharge, creditors are forever barred from attempting to collect a debt that was included in the bankruptcy. The same rules apply if a creditor violates the discharge injunction as if they violate the Automatic Stay. Usually, once put on notice, creditors will cease collection activity. It may take several attempts and some sternly worded letters, but creditors usually stop harassing debtors.
Then there are the exceptional cases.
Recently, Bank of America allegedly called a debtor over 30 times to collect a debt that was included in the debtor’s bankruptcy. Thirty phone calls is probably excessive in anyone’s book. Apparently a bankruptcy judge in the Middle District of Florida Ft. Myers Division also thought 30 phone calls was excessive. He sanctioned Bank of America for violating the discharge injunction and made the bank pay $12,500.00 for the debtor’s attorney fees and additional sums for the debtor’s emotional distress according to the Huffington Post.
The Automatic Stay and Discharge Injunction are no joke. If creditors fail to abide by the Bankruptcy Code, they may find themselves on the other side of the collection process.
Here is the link to the article on the Huffington Post.


4 years 9 months ago

By: Marshall G. Reissman Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
Many clients want to know what happens at the Meeting of Creditors. Clients find this situation to be very stressful, basically because the client has no idea what the trustee will ask, what the meeting will be like, or how long the meeting will last. I will describe a basic Meeting of Creditors and then post questions directly from the Chapter 7 Trustee Handbook issued by the United States Department of Justice, which oversees the U.S. Trustee program.
A typical Meeting of Creditors will generally last around 10 minutes. The trustee will inquire about the debtor’s assets, income and expenses. The meeting, at least in Tampa, are held in one of three large rooms. The trustee will call debtors up individually, place them under oath, and record their statements. The trustee will ask questions about the information contained in the bankruptcy petition the debtor filed. A debtor should be aware that if there are any irregularities in the petition, the meeting can take much longer. If the trustee does not believe a debtor is being forthright, the trustee may have the debtor return for further inquiry. However, this is usually the exception, not the rule.
I am listing questions directly from the Handbook for Chapter 7 Trustees published by the U.S. Department of Justice, Executive Office for United States Trustees. While these questions are expansive, they are not meant to be exhaustive. The questions are provided for informational purposes only and to provide prospective debtors and debtors who have not attended a meeting of creditors an idea of what the Trustee might ask.
Required Statements/Questions
1. State your name and current address for the record.
2. Please provide your picture ID and social security number card for review.
a. If the documents are in agreement with the § 341(a) meeting notice, a suggested
statement for the record is:
“I have viewed the original state of ________ drivers license (or
other type of original photo ID) and original social security card
(or other original document used for proof) and they match the
name and social security number on the § 341 (a) meeting notice.”
b. If the documents are not in agreement with the 341(a) meeting notice, a suggested
statement for the record is:
“I have viewed the original social security card (or other original
document used for proof) and the number does not match the
number on the § 341(a) meeting notice. I have instructed the
debtor (or debtor’s counsel) to submit to the court an amended
verified statement by [date], with notice of the correct number to
all creditors, the United States Trustee, and the trustee, and to file
with the court a redacted copy of the notice, showing only the last
four digits of the social security number, and a certificate of
service.”
c. When the documents do not match the petition, the trustee shall attempt to
ascertain why, and shall report the matter to the United States Trustee.
d. If the debtor did not bring proof of identity and social security number, the trustee
shall determine why.
3. Did you sign the petition, schedules, statements, and related documents and is the
signature your own? Did you read the petition, schedules, statements, and related
documents before you signed them?
4. Are you personally familiar with the information contained in the petition, schedules,
statements and related documents? To the best of your knowledge, is the information
contained in the petition, schedules, statements, and related documents true and correct?
Are there any errors or omissions to bring to my attention at this time?
5. Are all of your assets identified on the schedules? Have you listed all of your creditors
on the schedules?
6. Have you previously filed bankruptcy? (If so, the trustee must obtain the case number
and the discharge information to determine the debtor(s) discharge eligibility.)
7. What is the address of your current employer?
8. Is the copy of the tax return you provided a true copy of the most recent tax return you
filed?
9. Do you have a domestic support obligation? To whom? Please provide to me the
claimant’s address and telephone number, but do not state it on the record.
10. Have you read the Bankruptcy Information Sheet provided by the United States
Trustee?
SAMPLE GENERAL QUESTIONS
(To be asked when deemed appropriate.)
1. Do you own or have any interest whatsoever in any real estate?
If owned: When did you purchase the property? How much did the property cost?
What are the mortgages encumbering it? What do you estimate the present value of the
property to be? Is that the whole value or your share? How did you arrive at that
value?
If renting: Have you ever owned the property in which you live and/or is its owner in
any way related to you?
2. Have you made any transfers of any property or given any property away within the last
one year period (or such longer period as applicable under state law)?
If yes: What did you transfer? To whom was it transferred? What did you receive in
exchange? What did you do with the funds?
3. Does anyone hold property belonging to you?
If yes: Who holds the property and what is it? What is its value?
4. Do you have a claim against anyone or any business?
If there are large medical debts, are the medical bills from injury?
Are you the plaintiff in any lawsuit?
What is the status of each case and who is representing you?
5. Are you entitled to life insurance proceeds or an inheritance as a result of someone’s
death?
If yes: Please explain the details.
If you become a beneficiary of anyone’s estate within six months of the date your
bankruptcy petition was filed, the trustee must be advised within ten days through your
counsel of the nature and extent of the property you will receive.
6. Does anyone owe you money?
If yes: Is the money collectible? Why haven’t you collected it? Who owes the money
and where are they?
7. Have you made any large payments, over $600, to anyone in the past year?
8. Were federal income tax returns filed on a timely basis? When was the last return
filed?
Do you have copies of the federal income tax returns? At the time of the filing of your
petition, were you entitled to a tax refund from the federal or state government ?
If yes: Inquire as to amounts.
9. Do you have a bank account, either checking or savings?
If yes: In what banks and what were the balances as of the date you filed your petition?
10. When you filed your petition, did you have:
a. any cash on hand?
b. any U.S. Savings Bonds?
c. any other stocks or bonds?
d. any Certificates of Deposit?
e. a safe deposit box in your name or in anyone else’s name?
11. Do you own an automobile?
If yes: What is the year, make, and value? Do you owe any money on it? Is it insured?
12. Are you the owner of any cash value life insurance policies?
If yes: State the name of the company, face amount of the policy, cash surrender value,
if any, and the beneficiaries.
13. Do you have any winning lottery tickets?
14. Do you anticipate that you might realize any property, cash or otherwise, as a result of a
divorce or separation proceeding?
15. Regarding any consumer debts secured by your property, have you filed the required
Statement of Intention with respect to the exemption, retention, or surrender of that
secured property? Please provide a copy of the statement to the trustee. Have you
performed that intention?
16. Have you been engaged in any business during the last six years?
If yes: Where and when? What happened to the assets of the business?
In cases where debtors are engaged in business, the following questions should be considered:
1. Who was responsible for maintaining financial records?
2. Which of the following records were maintained?
a. Cash receipts journal
b. Cash disbursements journal
c. General journal
d. Accounts receivable ledger
e. Accounts payable ledger
f. Payroll ledger
g. Fixed asset ledger
h. Inventory ledger
i. General ledger
j. Balance sheet, income statement, and cash flow statements
3. Where are each of the foregoing records now located?
4. Who was responsible for preparing financial statements?
5. How often were financial statements prepared?
6. For what periods are financial statements available?
7. Where are such financial statements now located?
8. Was the business on a calendar year or a fiscal year?
9. Were federal income tax returns filed on a timely basis? When was the last return
filed?
10. Do you have copies of the federal income tax returns? Who does have the copies?
11. What outside accountants were employed within the last three years?
12. Do you have copies of the reports of such accountants? Who does have copies?
13. What bank accounts were maintained within the last three years?
14. Where are the bank statements and canceled checks now located?
15. What insurance policies were in effect within the last year? What kind, and why?
16. From whom can copies of such insurance policies be obtained?
17. If the business is incorporated, where are the corporate minutes?
18. Is the debtor owed any outstanding accounts receivable? From whom? Are they
collectible?
19. Is there any inventory, property, or equipment remaining?


4 years 9 months ago

By: Ceara L. Riggs, Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
On February 9, 2012, State Attorneys General and five of the nation’s largest mortgage servicers reached a $25 billion settlement. Super. But what does this mean for those who have already been foreclosed upon, for those currently facing foreclosure, and for those who are maybe two or three payments behind and fear that foreclosure is just around the corner?
First, if you’re loan is a Freddie Mac or Fannie Mae loan, it means that not much changes for you. But that’s only about half of the nation’s borrowers. But it also means that law firms, like The Reissman Law Group, know how to protect your rights and have a proven track record of protecting your property and your rights in these typical foreclosures.
But if your loan is held by Ally/GMAC, Bank of America, Citi, JPMorgan Chase, or Wells Fargo, there’s a lot of good news coming your way that turns the tables on these banks!
For Borrowers seeking modification of their loan, servicers are now required (it’s bold and underlined for a reason) to collectively work off up to $17 billion in principal reduction and provide other forms of loan modification relief. So if you who owe more on your house than it’s worth, which I’d imagine is more than one person reading this, the courts have finally heard you! And these aren’t just empty promises, the courts have given the banks 2 years – just two years – to reach 75% of these targets.
So what? What if the banks don’t do provide this so-called “required” loan modification? For once, there’s an answer – servicers that miss settlement targets and deadlines will pay substantial cash penalties. It goes without saying that principal reduction is in everyone’s best interest!
But what if the bank doesn’t want to give me a principal reduction? The simple is, they don’t have to. But, if they don’t disperse at least 75% of the money set to go to borrowers, then they’re facing substantial cash penalties. Plus, it just make common business sense when you know the numbers. Think about it. Each foreclosure costs a bank, on average, about $60,000. Would you rather spend $60,000 on attorney’s fees, court costs, and other filing fees or would you rather reduce a person’s loan by $30,000 and pocket the other $30,000? Really? So, no, the servicers aren’t required to incur losses, but in a typical case, a modification tied to this settlement will result in more of a financial return for an investor than a foreclosure.
Plus, principal reduction isn’t the only option – The Reissman Law Group has been following the development of the court’s order  and we know that there are other options that the banks are willing to consider regardless of whether you are current on your mortgage payments, have fallen behind a year and a half, or even if you have already lost your home to foreclosure.
If you think this is just another bailout by the federal government that doesn’t carry much weight, think again! This isn’t just another law from Congress, this is a federal court order, meaning, if the banks don’t do what they’re required to do, in the time they’re required to do it, the State Attorney Generals and the US Department of Justice can seek redress. And if that wasn’t enough, independent monitors have been appointed to oversee the carrying out of the agreement and the lender’s compliance with the order, as well as given the authority to impose significant penalties if the banks violate the court order.
Sounds pretty good so far, doesn’t it? But, for Floridians, it gets even better because Attorney General Pam Bondi has taken the court’s order a step further – she has separately negotiated an agreement with three of the largest servicers to ensure that a guaranteed portion of the total $25 billion settlement goes directly to Florida borrowers. To be clear, Florida will be getting nearly 1/3 of the total settlement – a whopping $8.3 billion.
For more information, including the complete text of the settlement which each bank, visit www.nationalmortgagesettlement.com
If you believe you could benefit from the court’s order (and unless you win the $590 million lottery this week, just about everyone could benefit from this order), give us a call (727-322-1999) to set up a free consultation to discuss your options.


4 years 9 months ago

 I read a blog today, as well as the written opinion of the Court, concerning what is called a "fee-only Chapter 13 plan". While I agree with the ruling of the Court I completely disagree with the blog and was shocked that a lawyer would take such an action as a matter of course. A summary of the facts are:
 A potential client approached a bankruptcy lawyer about filing a Chapter 7 which the client clearly qualified for however, the client did not have the funds to pay the Chapter 7 fee. It is not clear whether the potential client had any money or simply did not have enough money to pay the lawyer in full. It is also not clear what the legal fees were qoted for the Chapter 7 bankruptcy. Finally it is not clear what other facts, if any, existed that would have made the filing reasonable, which is why the case was reversed.
I'll make the assumption that the Chapter 7 fee was between $800 to $1,500 plus filing fees. Inasmuch as the client did not have the funds the lawyer suggested that the client file a Chapter 13 bankruptcy. The fee for a Chapter 13 case was $2,900 plus filing fees. The legal fees would be deferred and paid in installments by the Chapter 13 Trustee. The Chapter 13 payment would be roughly $100 a month for 36 months.  A chapter 7 bankruptcy is over in approximately four (4) months while this Chapter 13 case will take three (3) years. The result was the lawyer got paid, the Chapter 13 Trustee received his commission and there was nothing paid to creditors. The Bankruptcy Court and the Federal District Court threw the case out as having been filed in bad faith and the case was appealed to the Federal Circuit Court. The Circuit Court reversed the lower Court's ruling that the bankruptcy court could not, out of hand, dismiss the case without first examining the facts. The bottom line to the ruling is that the Bankruptcy Court must review the facts before concluding whether or not a case was filed in bad faith. I want to make clear this case did not occur in Texas where I practice.
 Very few lawyers want to extend credit to a client filing Chapter 7 because the legal fees still owed on the Chapter 7 filing date are discharged and any payment made by the client to the attorney post-filing is strictly voluntary. I believe that I am one of the few lawyers that will allow a client to make payments, get the case started, but not file the case until the case has been paid in full. In almost all cases allowing a client to make weekly or monthly payments usually, but not always, fixes the above problem. Barring some type of situation that required a case to be filed immediately there is no reason for the above fact pattern to take place. If the client could make $100 a month payments to the Chapter 13 Trustee, the client could have made those payments to the lawyer. The result would have been accomplished in for a lot less money and in a lot less time.
 What the Appeals Court said, in my opinion, was that merely filing a Chapter 13 case so a lawyer can get paid is not going to fly unless there exists facts of a compelling nature that would have required the attorney to advise his client to file a chapter 13. For example, if the client’s wages were being garnished by a creditor holding a significant claim might well justify the filing of a Chapter 13 immediately. Therefore, the Bankruptcy Court was required to look at the facts before concluding a case was filed in bad faith, rather than summarily dismissing a case. From my point of view the ruling is standard text book law and there is nothing remarkable in this ruling. The case certainly does not stand for the principal that a fee only chapter 13 case is acceptable.  In fact the course was very clear when it said fee only plans should only be used in exceptional circumstances, noting that they may be "vulnerable to abuse by attorneys seeking to advance their own interests without due regard for the interests their clients".
 On a more personal note, I have a hard time justifying this practice except in very limited circumstances. In fact I never have attempted to accomplish such a thing. Not everything about the practice of law is about money. On numerous occasions I have cut my fees when I concluded that it was appropriate.
 


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