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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.
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.
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.
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?
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.
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.
Often, debtors come to the bankruptcy lawyer's office after already having made costly mistakes that could easily have been avoided, including:
- Borrowing against a home to pay down credit cards. Now the debtor has turned what, in many cases, was unsecured debt, which could have been wiped out completely, into secured debt that the debtor must pay off or lose the house. Worst yet are predatory loans where the payments are so onerous as to make foreclosure almost a certainty.
- Borrowing against a 401K plan. The debtor takes a loan out against a 401K plan and then finds he can't make the payments. If the debtor defaults, a distribution of the full loan proceeds will be declared for that tax year. The debtor will now have a tax liability (that cannot be discharged) equaling about a third to a half of the loan taken out to pay debt that was probably dischargeable in the first place.
- Moving debt around to take advantage of low-interest credit card offers. If the debtor files bankruptcy within a short time after this transfer, lenders left "holding the bag" often move in court to block the discharge claiming fraud for incurring the debt when the debtor knew he would not be able to pay it back.
- Playing the "ostrich." Unable to face his or her financial problems, the debtor avoids getting help. For persons with back tax debts, the delay permits interest on priority taxes (that you must pay off) to build and also gives the IRS time to file a tax lien, again making what may have been a dischargeable tax debt into secured debt the debtor must now pay off.
- Getting help from the "one trick pony." When shopping for help, pay attention to 1) the range of solutions, and 2) the effectiveness of the solutions the debt professional offers. Ask questions of the following persons you approach for help:
- Credit counselors. How much of my debt will be completely wiped out? Will I have to pay income taxes for the debt that is wiped out? (You probably will, especially if the creditor reports "cancellation of debt" income for you to the IRS.) How much will I have to pay in total? How many months will it take to be debt free? How much total principal and how much total interest will I pay? Will my interest rates go up?
- Accountants and enrolled agents. For debtors with tax debts, be aware that neither one of them can offer the bankruptcy option unless they have a license to practice law. Usually they will offer only an offer in compromise, which may not be the best option for your case, or an installment agreement which is almost no relief at all. Ask: Would this tax debt be dischargeable in bankruptcy? Are you making a guarantee that my offer will be approved? What amount will be accepted as an approved offer by the IRS? How long will it take? As for an installment agreement, it's just that: Pay over time while interest and penalty charges continue to grow.
- Attorneys who practice only Chapter 7 bankruptcy. This is a bit like going to a doctor who can prescribe only one type of medicine. Your specialist should be able to perform a full diagnosis and then prescribe a range of treatments. Ask: Does the attorney prepare, file and represent debtors in Chapter 13 or Chapter 11? What are the local Chapter 13 trustee's preferences as to the type of plans he or she will accept? How much of his or her practice is devoted to bankruptcy? How long has he or she been practicing this area of the law? For tax problems, does the attorney practice before the IRS? What options does he or she offer?
If you think you may be facing a debt problem, get some advice. The earlier, the better.
Our tax and bankruptcy law firm serves Virginia, Maryland and DC. Call us.
Without question just the thought of having to file bankruptcy, Chapter 7, Chapter 13 or a Chapter 11 is very stressful. It is an emotional roller coaster ride before you actually make a decision. When anyone is facing the unknown, coupled with the hearsay gossip about bankruptcy that is almost invariably wrong, it is no small wonder that your stress mounts. During financial hardship the pressure grows from the demands of creditors in the form of harassing phone calls, demand letters, pending lawsuits as well as the strain to keep a roof over your head, the utilities on and enough food on the table to feed your family.
Financial hardship can also increase the strain on a marriage, partnership or with your significant other. This type of situation can and often does lead to divorce, separation or the end of the relationship. There are several things a person needs to both consider and understand when faced with these foregoing challenges. First and foremost what is more important – protecting your family or worrying about how you are going to get your creditors paid. Secondly, bankruptcy does not cause divorce, the blame and shame of financial pressure does. Bankruptcy can remove financial strain that causes the emotional day to day turmoil on you and your family. In order to understand your options clearly it's important to seek the advice of a competent consumer bankruptcy lawyer.
Abraham Lincoln, a lawyer by profession, was exactly on the mark when he said: "A lawyer's advice and time are his stock in trade." That's what we sell -- our time (as well as our knowledge).
Now put that together with another old, but very true, saying: "You get what you pay for." So. . . when you go for cheap, you are bound to get less of that lawyer's time and attention. I have explained how this works before here in a prior blog posting about cheap lawyers and bankruptcy mills.
I state the foregoing (if you will indulge me in a little legalese) as an introduction to the present rant. Excuse me while I spout.
This the second time in a week that I am doing a consultation answering legal questions for former clients of a bankruptcy attorney who bills himself as the "#1 Bankruptcy Filer" in his state. (Although that statement connotes he's the best in quality (an advertising assertion, which, by the way, may run afoul of the state bar association professional ethics rules) actually it just means his office happened to file more cases than anyone that calendar quarter).
It's annoying, to put it mildly, and infuriating, to be more precise. I'm spending my time, doing a free consultation and clarifying issues that should have been explained by the attorney they paid to do the case.
It points up something that you need to take into account when you hire your bankruptcy attorney: Make sure he or she, or knowledgeable staff, is available and competent to answer your questions. This is the intangible that represents the real value when you hire a legal adviser.
Don't be one of those who calls around asking: "How much do you charge?" You'll get a low, low price and nobody there to provide you with a key component of the service: counseling. It's not for nothing that attorneys are also referred to as "counsel."
Don't get short-changed. The attorney and staff, while sometimes not immediately available, should eventually be able to answer your questions -- before you have to go elsewhere.
Call our law firm if we can help you.
Now, I certainly don’t blame you for wanting to get rid of these offers. It is amazing how many we get each week. I used to think that I was something special to get so many credit card companies wanted me to enroll. I’ve learned the error of my thinking the hard way and I definitely should have removed the temptation long time ago.
But, fortunately, it’s actually pretty easy to stop receiving these offers. You have two choices. You can opt out of receiving them for five years or you can opt out of receiving them permanently.
To opt out for five years call 1- 888-5–opt-out or visit www.optoutprescreeen.com.
To opt-out permanently, you have to go online to www.optoutprescreeen.com and you will have to mail back a signed permanent opt out election form. They actually make it harder to get rid of them permanently.
When you call or visit the website, you have to provide information such as home telephone number, name, social security number, and date of birth. If you don’t want to call or go online, you can also send letters electing to opt-out permanently to the major consumer reporting companies, Experian, TransUnion, Equifax, Innovis Consumer Assistance in Pittsburgh.
Also, don’t forget that the government has set up a national do not call registry as a way to reduce telemarketing calls to your house. Go to www.donotcall.gov to or call 888-382-1222.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.