Can I keep my credit cards in Bankruptcy?

The Bankruptcy Code requires a debtor to list all creditors in her bankruptcy schedules.  However, a “creditor” is typically defined as someone to whom the debtor owes money.  Specifically, 11 U.S.C. § 101(10)(a) defines a creditor as an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.”

So, if the debtor has a credit card with a zero balance, the issuer of that card is NOT a creditor, and therefore, the debtor need not disclose her bankruptcy to that credit card company.  However,  that’s not the end of the story.  Card issuers write very one-sided credit card agreements that seem to get modified all the time.  The Terms and Conditions always include the following language:

“Default – You and your Account will be in default of this Agreement if:  . . . you become insolvent, assign any property to your creditors, or go into bankruptcy or receivership . . .

Cancellation of your Account – We may cancel your Account or suspend your ability to use the Account at any time, with or without any specific reason and with or without prior notice to you as permissible by applicable law.”

               So, even if a debtor has a zero balance credit card, the issuer has the absolute right to cancel it.  But how does the credit card issuer know that a debtor filed bankruptcy if the debtor does not give the issuer notice of the bankruptcy?  The answer comes from modern-day technology.

Credit card companies use sophisticated systems, like Automated Access to Court Electronic Records (AACER), to provide virtually instant data of new bankruptcy filers.  They compare multiple pieces of debtor information with their account holder databases.  If enough pieces of a debtor’s data match an active account, the credit card issuer assumes a match. 

Once the credit card company has a match, does the card issuers always close the credit account?   The answer is usually, but not always.  I am aware of occasions in which the debtor used a zero balance credit cards after the bankruptcy filing.  Perhaps in those instances the card company made a decision to keep the account open or maybe it simply failed to make a match.  In either case, it is important to know that, despite not listing a zero balance credit card in the bankruptcy schedules, the credit card can get cancelled.

Typically, this is a short-term issue.  For the vast majority of people, once the bankruptcy is over, the credit card companies will inundate the freshly discharged person with pre-approved credit card applications.   It seems that the credit card companies, even those which were wiped out in the bankruptcy, want the discharged debtor to quickly get back into debt.  Use caution.  Debtor cards with the VISA or MASTERCARD emblem work just like credit cards, with the added benefit that the client will have a better chance of avoiding unwanted debt.  Call us for more information. 

Chapter 13 – The Final Chapter

When your Chapter 13 was filed five years ago, the goal was to complete the plan and receive a discharge.  A “discharge” is the legal determination that essentially all of your unsecured debts that remain after the plan are simply wiped out.  With a discharge, the collection companies and bill collectors that once harassed you may no longer contact you or elicit payment for those debts from you.

So, what must occur to receive a discharge in a Chapter 13?

Like so many of the bankruptcy processes, the answer will vary from bankruptcy court to bankruptcy court, even in the same state.  The answer may also vary depending on the particularities of the case.  For instance, if you own a home and were using the Chapter 13 to eliminate or “strip” a junior mortgage, then extra steps may be required to ensure that removal of the lien is actually recorded with the county recorder’s office – this may be a challenge if the junior lien holder is out of business or sold the loan to any lender.  Your attorney may wish to work with a title company on this issue to ensure that public record reflects the elimination of the lien.

Under current bankruptcy law, you may also get a statement, signed by the court, that your mortgage is up to date. This is a great thing to have if you started the Chapter 13 when you were behind on your house payments.  Without that determination, the lender will often come back after the Chapter 13 plan is over and claim that you have other charges that have not been paid, like “attorney’s fees incurred to review the bankruptcy” or “property valuation charges.”  It is certainly better to have the court resolve those issues before closing the case rather than fight with the lender after the fact.

There is much to consider before the case is closed.  At Speckman Law Firm, we work with our clients throughout the process.  Near the end of the case, we re-visit the reasons for the filing and cover with the client the steps that must be taken before the case closes.  Paying that extra attention to the client’s case not only makes the process smoother, it better ensures that the client received all of the benefits afforded by the Chapter 13 bankruptcy.  A discharge and the closing of your bankruptcy is a great thing. We make sure it is done right.

CAN YOU JUST WALK AWAY FROM THAT BAD CAR LOAN?

Bankruptcy may be something that you believe you can avoid.  After all, you don’t owe too much money or you believe you can manage your debts – except for your car.  So what to do? Well, perhaps your plan is simply to voluntarily surrender the car to the finance company. No need to file bankruptcy, right? Wrong!

A car lender which believes that it is not going to get paid wants to get its collateral back as quickly as possible - with as little fuss as possible. Sometimes this leads to the finance company telling the borrower - “don’t worry, the car will be sold and you’ll get a credit for the sale price.” To be sure, the finance company does not want to pay the “repo man” to chase around the borrower, so the lender will often make it sound as though it is sympathetic with your situation or even trying to help you.  What is left out of the message is that the vehicle will be sold at an auction, yielding a very low sale price. 

Voluntary surrender is a repossession and is a default of your credit agreement. Repossession is repossession, whether done in the middle of the night by a tow truck, or voluntary turnover by the borrower.  It will not only harm your credit rating, but it will result in a repossession sale of your car no matter how the lender gets it, and usually for much less than you could have sold it for yourself …and you will owe the lender the deficiency balance, which is the difference between the price it sold for and the balance on the loan.

If you believe that you can no longer afford your car payments, if you feel your car is worth less than you owe, or you simply need time to get caught up on a few missed payments, bankruptcy may be the right answer.  Depending upon what YOU want, you may be able to surrender the vehicle without any risk of a deficiency.  You may be able to lower your payments or the balance you.  You may be able to “re-purchase” the car for its current market value, no matter how much you owe.  Or, you may be given time to get caught up.  Bankruptcy is a power tool and it is designed to help good people stabilize their financial situation – including car loans.

Do yourself a favor. 

Call Speckman Law Firm before you loose your car to the Repo-Man.  If your car is taken, you may wind up having to file bankruptcy to get rid of the deficiency balance; you might as well explore how bankruptcy may be able to allow you to keep the car.

619-696-5151

Did You Co-Sign A Loan?

Having a co-signer is a good way to get more credit.  However, there is a dark side – especially when it comes to filing bankruptcy. There are several ways to address these types of debts, but careful planning is required before embarking on a bankruptcy.

Becoming a co-signer is easy and at one time often meant that the borrower(s) received better loan terms - after all, the bank received another target to go after if the loan was not paid.  Nowadays, a co-borrower often does little to enhance the ability to obtain credit and in fact can hinder the process.

Co-signed obligations receive special treatment in bankruptcies.  For instance, there are several unique disclosure requirements that must be satisfied.  From the standpoint of the law, your co-obligor has a right to know that you filed bankruptcy.  Why? Because s/he is now a creditor of yours.

Seem strange? The reason your family member or friend is now your creditor is due to the fact that s/he is still obligated on a loan for which you were equally liable.  So, to the extent the co-signer pays more than “her share” she would have a claim against your bankruptcy estate. Put differently, while your bankruptcy may result in a discharge for you, the co-signer’s obligation will survive and s/he would still be liable for the obligation.  

There is good news. In the context of a Chapter 13 bankruptcy, a recent appellate court decision held that a debtor may be permitted to pay the full amount of co-signed obligation through the Chapter 13 plan, while not paying the full amount of other unsecured obligations.  This is a rare exception to the rule that a debtor may not discriminate as between unsecured creditors.  Moreover, a Chapter 13 provides a special co-debtor stay — similar to the automatic stay — which protects your co-signer like you from collection efforts while the plan is going forward.

Another critical issue is how that co-signed debt was being paid prior to bankruptcy. If the court considers your co-signer an “insider” then a bankruptcy trustee might be empowered to get the money paid on that obligation back on the theory that the creditor received preferential treatment. That’s correct - the trustee could take back payments made to the bank within 90-days prior to the bankruptcy filing.  The trustee could also go after you co-signer for a year’s worth of payments — because you “preferred” your co-obligor by paying this obligation rather than paying other creditors.

There are important pre-bankruptcy steps we will generally take to help ensure that the client’s former payment on a co-signed debt does not raise the interest of the trustee.  As well, we will explore various scenarios of discharging a co-signed obligation and how those options may impact the other responsible obligors. Working intelligently, we find the best solutions for our clients. 

Bankruptcy laws are very powerful, but these laws can also be complicated – especially for the unwary.  Hiring skilled counsel is the first step to securing the life changing benefits that a well-managed bankruptcy offers.  

Call us today for a free confidential consultation with Attorney David Speckman.

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An Overview of Liens in Bankruptcy

Liens come in many different forms. Some common examples of liens include purchase money security interests, pledges, mortgages, deeds of trusts, and judicial liens - which is a type of non-consensual that arises when a creditor sues and gets a judgment.  An execution lien prevents one from passing clean title on the effected property without first satisfying the lien. It can also lead to a forced “sheriff’s sale” of your property, including one’s house in some circumstances.  It is important to identify such liens before filing a bankruptcy so that a property analysis can be completed.  For instance, Section 522(f) of the Bankruptcy Code allows you to eliminate a judicial lien if it impairs a valid bankruptcy exemption. The lien may also be eliminated in many instances by filing a Chapter 13 bankruptcy, even if the property has no equity.  It is important that you work with counsel who understands the complexities of lien avoidance. 

 At Speckman Law Firm, we have eliminated millions of dollars in unwanted liens. 

We can help you eliminate yours as well.

For More Information or to schedule a free consultation with David L. Speckman, visit our website below!

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HOW TO CHOOSE A BANKRUPTCY ATTORNEY

Most people must at some point interview for a job.  As the interviewee, you come prepared to answer questions and make a case why you are the right person for the job.

Naturally, the pressure is on the interviewee to make the right impression and convey important facts into the conversation as well as to project competence and confidence.

Now, turn the table.  How would you like to be the one conducting the interview?  That is the case when you are considering which attorney to hire to represent you in a bankruptcy, or any case.  The decision to hire is yours.

The challenge of course is that you may not know the details of the bankruptcy process or about the legal field.  Chances are that much of what you have been told or read on the internet is wrong or does not fit with your unique situation.  This is, after all, your situation, not your neighbor’s or that of the hypothetical client.  You need someone who can customize the representation to fit your particular needs.

To be sure, lawyers are not interchangeable.  One lawyer is not necessarily as good as another.  Price is almost always the poorest basis on which to choose an attorney.  Any single error in the process can have lasting consequences, impacting your financial wellbeing for years to come. 

A well-managed bankruptcy begins long before any forms are completed or schedules are filed with the court.  The process begins with understanding the client’s situation, goals and challenges and then taking the appropriate steps to ensure the best outcome possible for the client.  To be successful, one must have an attorney working for his/her benefit - someone who takes the time to listen to the client, develop a winning strategy and explain that strategy to the client.

Here is a checklist one might consider when evaluating a prospective bankruptcy lawyer.

1.       Is the lawyer’s practice focused on representing consumer’s in bankruptcy?

2.      Did the lawyer ask about your goals in filing?

3.      Did you have an opportunity to speak with the attorney – and did he listen to you?

4.      Dis the attorney explain your choices and the legal process in plain English?

5.      Were you comfortable asking questions and disclosing the difficult and messy situations in your financial life?

6.      Did you get real and unrushed face time with the lawyer?

The hiring of an attorney is a big decision.  You may well have a professional relationship with the individual for many years.  Be sure that you hire the best person you can and someone whom you believe will always be there for you. 

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Is Pride Preventing You From Speaking With A Bankruptcy Attorney?

For many, bankruptcy is not a pleasant option to consider.  Neither is simply ignoring the financial problem one faces. Oddly many are more likely to simply struggle with their debt rather than take the proactive role consulting with a bankruptcy lawyer.

The irony is that the bankruptcy option may be easier, and certainly less problematic than simply ignoring the problem.

·  The first misconception to overcome: Bankruptcy is about failure. Bankruptcy is about renewal. Business ventures fail and are liquidated in bankruptcy. But people go into it for a fresh start. They may have fallen upon hard times and are unable to pay debts back. That’s the cause but the point of the process is to get one back on his/her feet.

· The second misconception: Bankruptcy is a punishment. Even though they have done nothing wrong, some expect that their creditors, the trustee, or the judge will ridicule or torment them. In actuality, bankruptcy is more like closing a loan, where someone simply verifies the information provide.  Truly, if you do your part, the system will do its part to get you through safe and sound.

· The third misconception: You’re the only one. Let’s do some basic math. In almost every year going back about 20 years, more than one million cases have been filed – and many of those involved a husband & wife.  To be sure, you already know someone who has filed bankruptcy – and I sure that they are glad they did.

Today, right now, thousands — possibly millions — of folks just like you are doing something foolish to avoid calling someone just like me, a bankruptcy lawyer. They might be about to cash out their 401(k) or IRA account, even though I can save it for you. They might be hiring a debt settlement company to negotiate ridiculously unlikely deals with creditors who will sue before the end-game is played. They might even be considering taking cash out of their home by way of a new mortgage.

And today, right now, millions of Americans believe that they are doing just fine financially, mostly because they’re keeping up on the minimum payment on all their debt.  The reality is that every day that goes by their chances of getting out of debt grow slimmer and slimmer.

It takes courage to talk to speak with a bankruptcy attorney – just as is takes courage to speak with a surgeon about a health problem. But deep down you know it really is not going to get better, right? If your debts are now keeping you from important things — like your kids’ education, replacing your car, or being able to retire — or even critical things — like your health care — then why haven’t you already called a bankruptcy lawyer? And if your answer is that you’re afraid or you’re too proud to “ever do that” then think again. Fear and pride are hard to eat sometimes. It might just be time to find out what you don’t know. 

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