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Written by: Robert DeMarco
United States Bankruptcy Laws – The Chandler Act and the Bankruptcy Reform Act of 1978
The Bankruptcy Act of 1891, while amended from time to time, was not substantially revised until the passage of the Chandler Act of 1938. The Chandler Act replaced § 77B of the Bankruptcy Act of 1898 with Chapter X corporate reorganizations, and added chapters XI (arrangements and compositions for corporations, partnerships, and individuals), XII reorganization procedures for non-corporate entities engaged in real estate, and XIII (wage earner plans). The purpose of the Chandler Act was to encourage and facilitate bankruptcy reorganization in order to avoid unnecessary or premature liquidations.
The Bankruptcy Act of 1891 was not repealed until the passage of the Bankruptcy Reform Act of 1978. The Bankruptcy Reform Act of 1978, as amended, serves as the basic structure for the Bankruptcy Code of today. Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, amended by Bankruptcy Amendments and Federal Judgeship Act, Pub. L. No. 98-353, 98 Stat. 333 (1984), and by Bankruptcy Judges, United States Trustees and Family Farmer Bankruptcy Act, Pub. L. No. 99-554, 100 Stat. 3088 (1986), and by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106. When the current Bankruptcy Code was passed in 1978, it became the first such statute to be passed in Congress that was not in a direct response to a financial crisis or panic
The Bankruptcy Reform Act of 1978 remains similar to the Bankruptcy Reform Act of 1891, although improvements have been made. The Bankruptcy Reform Act of 1978 resulted in a complete overhaul of the administrative functions of bankruptcy. Bankruptcy Courts were created in lieu of referees, The Office of the United States Trustee was established and the structure of the Bankruptcy Code was altered to reflect a more streamlined process. The reorganization chapters of the Bankruptcy Reform Act of 1978 were condensed to form the current chapter 11, chapter XIII has become chapter 13 and liquidations (or straight bankruptcies) are now addressed under chapter 7.
The Bankruptcy Reform Act of 1978 also seeks to encourage greater use of Chapter 13, the mode of relief allowing for the readjustment of the debts of individuals with regular income (the old “wage-earner” chapter expanded – chapter XIII). Congress had hoped that creditors would receive greater dividends under a Chapter 13 plan than they would under a chapter 7 liquidation. Congress also hoped that debtors would emerge with better credit. In so doing, Congress rejected any form of compulsory Chapter 13, but offered lieu certain enticements to the chapter 13 debtor (the old carrot on the stick approach that resulted in the first discharge in 4 & 5 Anne, c. 4, sec. VIII (1705)) such as: (1) the “super discharge” of some debts that would not be dischargeable in under chapter 7; and (2) the protection of co-debtors from joint creditors. Subsequent amendments have made Chapter 13 less favorable to debtors by weakening the discharge and requiring compliance with a “disposable income” test as a prerequisite to plan confirmation. Moreover, Bankruptcy Courts may dismiss a Chapter 7 case where it is determined that the granting Chapter 7 relief would be a “substantial abuse” of the liquidation process, thereby leaving the debtor with the choice of dismissal or chapter 13.
DATED: July 10, 2013
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“All this has happened before, and all of it will happen again.” - Pythia
According to a July 8, 2013 story in the Los Angeles Times, we’re starting to rack up our credit cards again – in a big way.
In fact, the story indicates that credit cards and other revolving credit alone rose at a 9.3% annual rate in May.
I know we’ve got a short societal memory but I thought it would take awhile longer for America to forget one of the worst economic meltdowns of all time.
Bear Stearns, hobbled by subprime mortgages, went under in March 2008.
Lehman Brothers filed for Chapter 11 bankruptcy in September 2008.
The unemployment rate went from 5.0% in January 2008 to 9.9% in December 2009. As of June 2013, we’re still at 7.6%.
America went through a prolonged period of belt-tightening, and only now are some folks getting back to the workforce. And if you’re one of the people who have been without work for awhile, I get the desire to get yourself a little treat.
It’s been a long time since you went on a vacation, bought some new clothes, or went out for a meal.
But before you dig into the wallet for that piece of plastic, consider this – if you wait just a month or two, you might have some cash to spend.
You can buy that pair of shoes once and pay for it once. No interest, finance charges, or bills in the mail.
You can grab a meal out with your family, put some bills on the table at the end and walk out rather than paying for those burgers for the next year.
This way, when the next downturn happens (and it will), you’ll be less likely to suffocate on your debts. And won’t that be the best gift of all?
Image credit: mutantlog
All Of This Has Happened Before was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
You may be asking yourself, “Why do I need to hire an attorney to file bankruptcy?” You may also think, “I’ve done some research and I’ve seen the forms to fill out. It seems simple enough.” The answer is: Bankruptcy isn’t as easy as a process as you may think. Time and again, we have […]
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for July 09, 2013 As Detroit teeters on bankruptcy, creditors are left holding the bag Hoover owner vacuums up Oreck at bankruptcy auction Tootie Pie files for bankruptcy
Many refer to bankruptcy as being a powerful financial tool that can help eliminate or restructure your finances. When you are considering filing for protection, you should know what debt is eligible for discharge since all debts cannot be wiped out. Certain debts, such as credit card and medical bills, may be wiped out in [...]
Have you made all your payments under your Chapter 13 plan? You can still lose your discharge—unless you file your §1328 Certification. Why is that? You cannot get a chapter 13 discharge if you were one of the people who caused the housing crisis back in 2007 and 2008. Or if you’ve been convicted of [...]The post Chapter 13: Don’t get disqualified at the finish line appeared first on Robert Weed.
You are allowed to pay off debts that you’ve discharged in a bankruptcy case. Whether it’s smart to do so, however, is another matter altogether.
If you’re thinking about filing for bankruptcy, you probably feel guilty about it.
No matter how many times I remind you that bankruptcy is a legal and contractual matter rather than a moral one, you’re probably going to wish there was another way.
That’s likely the reason why so many of my clients tell me that they’re going to repay their creditors someday.
After all, that’s what Mark Twain did after he went broke.
Here’s why you should give that some thought.
If A Debt Is Discharged, They Can’t Force You To Pay
Once a debt is wiped out in bankruptcy, the creditor can’t force your to repay the debt.
No phone calls, no letters, not even a birthday card that casually mentions something like, “Now that you’re probably getting some money for your birthday, remember that debt?”
If a creditor contacts you at all after the debt is wiped out, you can sue and collect money damages. Yes, the court takes it very seriously when a creditor disobeys a court order telling it to leave you alone.
There’s No Positive Impact On Your Credit Report
Once a debt is discharged, the creditor is not allowed to report any account activity to the credit reporting agencies.
That’s why your mortgage company doesn’t report your post-bankruptcy payments on your credit.
If you make a payment, the creditor can’t report it. You get no brownie points for sending in a check.
You’re Hobbling Your Chances At Financial Recovery
If you file for bankruptcy it’s because you don’t have enough money to go around. Once your case is over, you’ve got the ability to save some money for a rainy day.
That savings will reduce the chances of you having to file for bankruptcy again in the future. That money will also help you save for retirement, unexpected medical expenses, and a host of other events.
If you send that money to a creditor, you’re right back where you started. Broke and hobbled.
Doesn’t make much sense, does it?
The Debt’s Been Sold, Anyway
Most credit card companies sell their debts to other companies when you’re 180 days past due (that’s when they “charge off” the debt).
The debts are also sold when you file for bankruptcy (yes, people buy accounts that are uncollectible due to bankruptcy).
If you send money to, say, Chase it’s not going to stay there for long. It will end up in the hands of some debt buyer who you’ve never heard of.
To the debt buyer, it’s free money. Kind of like finding loose change in the sofa cushions.
Once again, it doesn’t help you at all.
There Are Still Other Debts To Pay
Even after bankruptcy, you’ve still probably got some debts to pay.
Any debt that’s not discharged in Chapter 7 bankruptcy must be repaid.
If you owe money to a relative or close friend, you don’t need to repay the debt but it will likely make for a less stressful relationship.
Why not focus on those debts you need to pay, then rebuild your own finances?
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Will Paying Debts After Your Bankruptcy Discharge Give You More Than Peace Of Mind? was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
We often forget about the emotional toll that being in debt takes on us.
Once, about a decade ago, I was in debt. Deep, deep in debt.
My credit score was wrecked, and my credit cards were all worthless pieces of plastic.
For years, I struggled to get out of debt. It cost me a lot of money, but that was a drop in the bucket compared to the other costs associated with being in debt.
The Emotional Costs Of Being In Debt
My debt problems were caused by a rapid expansion of my practice that came to a screeching halt as the nation felt the aftereffects of 9/11.
I was young, exceptionally inexperienced in running a business of any sort, and had begun doing work that I didn’t find compelling. My staff was bloated, my systems inefficient, and my energy too low to care about the financial aspects of the practice.
When it fell apart, I felt like an idiot. I’d been duped by the promise of the American Dream, and now I was an absolute failure.
My wife was in school pursuing her career goals, and I was selling used compact discs online to pay the rent.
Each morning I looked in the mirror and hated the failure I saw reflected back at me.
Every night I tossed and turned for hours before falling asleep. Once sleep came, it was filled with nightmares.
Debt Slavery
When you’re in debt, you’re a slave to your financial problems. You work to pay your debts, cut costs so you have more money to pay debts, and all of your activities reflect that reality.
You’re not free anymore because no matter what you do, the benefits flow to someone else.
That loss of control over your financial destiny beats you down over time. You’re wearier than you would be otherwise, and your nights are bereft of rest.
Climbing Out
My financial problems came and went well over a decade ago, and I climbed out of the hole only by making some significant changes in my life and my practice.
I recognize that those changes may not be within your reach, and that my situation was a little different.
I was able to slash my business costs to the bone.
My income rose because I was more focused on a single type of work – consumer bankruptcy law – that I enjoy. That enjoyment was reflected in the quality of the work I did, and in the satisfaction my clients felt at the end of the case. That translated into more referrals.
My wife finished school and got a job.
I regained control by deciding to live without credit cards no matter how good my financial situation became.
You Get A Choice
I didn’t file for bankruptcy when I was in debt. I knew my options, worked them all as hard as I could, and made some really hard choices when it came to my financial problems.
You have choices as well.
You can choose to remain in debt slavery.
Or you can find another path.
Which way will you go?
Image credit: Collin David Anderson
The Emotional Costs Of Being In Debt was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
Written by: Robert DeMarco
United States Bankruptcy Laws – The Nelson Act
It would not be until 1898 that the next federal bankruptcy statute would pass Congress and become law. The Bankruptcy Act of 1898, Nelson Act, ch. 541, 30 Stat. 544, amended by Chandler Act, ch. 575, 52 Stat. 840 (1938), repealed by Act of Nov. 6, 1978, Pub. L. No. 95-598, 92 Stat. 2549. With the arrival of the Bankruptcy Act of 1898 came permanent federal bankruptcy legislation. As was often the case with bankruptcy legislation, the driving force behind the 1898 Act was creditors. Local creditors, via the “National Convention of Commercial Bodies of the United States,” pushed for a federal bankruptcy law throughout much of the 1880s and 1890s. Many believed federal bankruptcy legislation would put an end to the perceived interstate discrimination amongst creditors under various state insolvency statutes. Southern and western states opposed the notion for fear of governmental intrusion and the negative impact upon farmers. The 1898 Bankruptcy Act, as is the case of most legislation, represents a compromise of both positions.
Initially, the Bankruptcy Act of 1898 authorized the filing of voluntary bankruptcy petitions by any person who owes a debt, except a corporation. In 1910 the Bankruptcy Act was changed and amended, and the language used in the Bankruptcy Act of 1867 was restored thereby allowing corporations to file voluntary petitions for relief. 36 Stat. 839, Sec. 4 (Comp. St. Sec. 9588). The act extended eligibility for voluntary bankruptcy to “[a]ny person except a municipal, railroad, insurance, or banking corporation. . . .”
As a condition precedent to the filing of an involuntary petition under the Bankruptcy Act of 1898, creditors needed to present evidence of an act of bankruptcy, such as: (1) fraudulent conveyance or concealment of property; (2) preferential transfer, (3) suffering or permitting any creditor to obtain a lien through legal proceedings; (4) fraudulent or collusive assignment for the benefit of creditors; or (5) a written admission of inability to pay debts and willingness to be adjudged insolvent. A sixth was added in 1903: appointment of a receiver while insolvent. Under the 1898 Act, creditors retained the authority to elect trustees and the federal District Courts remained the courts of bankruptcy. The commissioners under earlier Acts and the registers under the Bankruptcy Act of 1876 were replaced by “referees” (the predecessor of today’s bankruptcy judges).
DATED: July 9, 2013
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Written by: Robert DeMarco
United States Bankruptcy Laws – The Nelson Act
It would not be until 1898 that the next federal bankruptcy statute would pass Congress and become law. The Bankruptcy Act of 1898, Nelson Act, ch. 541, 30 Stat. 544, amended by Chandler Act, ch. 575, 52 Stat. 840 (1938), repealed by Act of Nov. 6, 1978, Pub. L. No. 95-598, 92 Stat. 2549. With the arrival of the Bankruptcy Act of 1898 came permanent federal bankruptcy legislation. As was often the case with bankruptcy legislation, the driving force behind the 1898 Act was creditors. Local creditors, via the “National Convention of Commercial Bodies of the United States,” pushed for a federal bankruptcy law throughout much of the 1880s and 1890s. Many believed federal bankruptcy legislation would put an end to the perceived interstate discrimination amongst creditors under various state insolvency statutes. Southern and western states opposed the notion for fear of governmental intrusion and the negative impact upon farmers. The 1898 Bankruptcy Act, as is the case of most legislation, represents a compromise of both positions.
Initially, the Bankruptcy Act of 1898 authorized the filing of voluntary bankruptcy petitions by any person who owes a debt, except a corporation. In 1910 the Bankruptcy Act was changed and amended, and the language used in the Bankruptcy Act of 1867 was restored thereby allowing corporations to file voluntary petitions for relief. 36 Stat. 839, Sec. 4 (Comp. St. Sec. 9588). The act extended eligibility for voluntary bankruptcy to “[a]ny person except a municipal, railroad, insurance, or banking corporation. . . .”
As a condition precedent to the filing of an involuntary petition under the Bankruptcy Act of 1898, creditors needed to present evidence of an act of bankruptcy, such as: (1) fraudulent conveyance or concealment of property; (2) preferential transfer, (3) suffering or permitting any creditor to obtain a lien through legal proceedings; (4) fraudulent or collusive assignment for the benefit of creditors; or (5) a written admission of inability to pay debts and willingness to be adjudged insolvent. A sixth was added in 1903: appointment of a receiver while insolvent. Under the 1898 Act, creditors retained the authority to elect trustees and the federal District Courts remained the courts of bankruptcy. The commissioners under earlier Acts and the registers under the Bankruptcy Act of 1876 were replaced by “referees” (the predecessor of today’s bankruptcy judges).
DATED: July 9, 2013
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