The Clients’ Fear of the Meeting of Creditors…Is It An Interrogation?

The Clients’ Fear of the Meeting of Creditors…Is It An Interrogation?

The average client who comes into the office has no idea how the bankruptcy process works.  They are entering unknown territory and many fear not only the filing of a bankruptcy in general, but also the actual process involved.  Bankruptcy involves going to court!  There will be judges!  There will be a lot of stress!

Attorneys, in their day-to-day work in the profession, prove another hurdle for clients because we speak a foreign language.  We see the inner-workings of cases.  We know the lingo.  We speak in terms of Debtors and Creditors or Discharge and Exemptions.  The problem is…our clients do not.  We inadvertently add to the anxiety if we don’t educate those that we represent.

The one thing that tends to strike fear into the hearts of clients almost universally, in my practice, is the 341 Meeting of Creditors.  It sounds imposing when you detach yourself from years of practice, doesn’t it?  As attorneys, we see this and think nothing of it.  We see it as a routine hearing.  But what about the clients?  A client who has not been informed as to what the Meeting of Creditors actually is tends to have an intense fear of the hearing.  To them, it sounds menacing.  Are my creditors all going to be there?  Are they going to block my bankruptcy?  Are they going to interrogate me?  Will the “judge” interrogate me?  These are all questions that I have heard in my years of practice.

People hire a bankruptcy attorney to help reduce stress, not to make things more stressful.  This is why I always inform the client of what to expect in the process when the case is signed and filed.  I prepare the client for the 341 Meeting of Creditors by first, frankly, making fun of the name of the hearing.  It’s really more imposing than it sounds.  In the hundreds of 341 meetings that I have attended while representing clients, I have only had a handful in which a creditor actually showed up.  It’s a rarity.  It’s not a panel of your creditors waiting to attack you.  It is the rare case that creditors show up and want to question a Debtor.

I explain the process to the clients.  The 341 Meeting of Creditors is not an interrogation.  I explain that it is not before a judge.  The Chapter 13 and/or Chapter 7 341 Meeting of Creditors is before a Trustee.  That Trustee, I explain, acts more as a gate-keeper.  They are there to ensure that everything is accurate.  Questions are asked to verify things that we placed in the petition and to confirm the accuracy of the petition, or to advise of any changes that are needed, on the record.  The Trustee is there to ensure that the bankruptcy, as filed, is fair to all parties.  They ensure that creditors do not overstep their bounds, but at the same time they also ensure that all creditors are treated fairly by the filing.  I inform the clients that this is why it is important to provide the best, most accurate information to me during the preparation of the case.  A good bankruptcy attorney will have prepared the case in the best possible manner with the information given to them by the client.  If all has been prepared correctly and all information given during preparation is complete and accurate, the actual hearing is a very short ordeal.

I find that explaining how this hearing works tends to deflect many of the anxieties of clients.  It is always nice to hear a client leave the meeting with you only to say “that was it?”  Careful preparation of the case, followed by a short education in layman’s terms about the process, make the 341 Meeting less feared.

The Honest Debtor. Who is the average bankruptcy filer? Is it normal to file bankruptcy?

The Honest Debtor. Who is the average bankruptcy filer? Is it normal to file bankruptcy?

A wide variety of people file for bankruptcy protection every year.  The high profile businesses and wealthy filers catch a lot of attention, and often create backlash from people who think bankruptcy is unfair to creditors, or to others who they think can manage their finances and less.

However, according to a report by the Institute for Financial Literacy’s Center for Consumer Financial Research, the average 2007 bankruptcy filer was between 35 and 44 years old, white, married, employed and earning less than $30,000 a year, with a high school diploma with some college.

The average filer, according to the federal reserve, typically owed more than one and a half times their annual income in credit card and similar debt.  Additionally, states that make it easiest for creditors to garnish wageshave the highest numbers of bankruptcy.  Most bankruptcy filers have recently lost a job, half have had a serious health problem, and less than 9% have not suffered either a job loss, a health problem, or divorce.

While many, especially creditors, attack bankruptcy as unfair and harmful, a way to get out of obligations owed to them, the facts show that most people who file bankruptcy are honest debtors who have simply suffered one two many hardships.  Additionally, more than half of filers have had a friend or relative file bankruptcy, which may mean that more people would file if they were familiar with the option.  While bankruptcy is not right for everyone, it is a viable option for many.  The best thing to do if you are considering bankruptcy is to speak to a qualified bankruptcy attorney in your area in order to discuss your options.

Who is a Bankruptcy Trustee?

Who is a Bankruptcy Trustee?

The idea of a bankruptcy trustee is alien to most people, having never become involved in a bankruptcy.  Even those who have filed for bankruptcy personally are often unaware of the full rights and responsibilities of a trustee.  What is a trustee?  Who appoints him?  What do they do?  Is the trustee a judge? Is there a difference under the various bankruptcy chapters?

A Bankruptcy trustee is an individual in charge of administering an estate in bankruptcy.  They are appointed by the United States Trustee and United States Department of Justice or by the creditors in a specific case, usually off of a list that includes bankruptcy attorneys.

In Chapter 7, the bankruptcy trustee gathers the debtor’s non-exempt property of the estate, manages the sales of this property and the proceeds of such sales, and distributes the proceeds.   Additionally, the Chapter 7 trustee attends creditor meetings, determine what assets may be exempt, and even cancel certain creditors’ rights if he finds them to be fraudulent.  In Chapter 13, the trustee’s duties are more extensive.  He must receive the debtor’s monthly payments, distribute the funds to the debtor’s creditors, and maintain vigilance over the plan for years.

The bankruptcy trustee is in the position of making sure that the interests of the creditors are maintained in accordance with the laws of the Bankruptcy Code.  In different jurisdictions, such trustees have established differing practices regarding the types of debts and payments they avoid and other procedures of the court.  Because of this, it is important to speak to a qualified bankruptcy attorney, who is capable of guiding your case with the specific knowledge of individual trustees in your jurisdiction. Before making any decisions in relation to filing bankruptcy please contact a competent bankruptcy attorney.

Assessing Your Financial Situation Pre-Bankruptcy

Assessing Your Financial Situation Pre-Bankruptcy

Often, people wait too long to file bankruptcy.  Considering bankruptcy to be a last resort is probably a wise thing to do, and there are often many things an individual can do to prevent bankruptcy.  However, waiting too long can mean that bankruptcy protects less of your assets than it might otherwise be able to, and can be too late for valuable planning with aqualified attorney.  So what can you do to assess your financial circumstances, and determine whether or not bankruptcy is right for you?

Whether a debtor files for bankruptcy or not, he needs to assess the reasons for his financial difficulties.  It is important to write down where money is going every month.  Is the hardship caused by a one-time event such as divorce or bankruptcy, or is it just the slow creeping of credit card debt?  Is your home too expensive? Is it worth less now that it was once?

If your issues are caused by poor cash planning, try to remedy that with a strict budget.  Figure out how much you absolutely need to spend on the bare minimum, and how long it would take to get out of debt by following a reasonable budget.

Options for debtors to consider alongside bankruptcy are debt relief, debt settlement, walking out on an underwater mortgage, or better financial planning.  Before you take money out of a 401k or an IRA in order to pay mounting bills, talk to an attorney, who can help you assess the advantages and disadvantages of doing so.

Whether a debtor files for bankruptcy will depend on a lot of things – how much an individual has in the way of assets, what the cause of the financial problems are, whether he can come to terms with his creditors by negotiating, how poor his credit is, how badly he wants to keep certain assets.  Every situation is different, so it is imperative that anyone considering bankruptcy talk to a qualified attorney about their particular situation before making any final decision.  Coming with knowledge of your financial case will help the process go more smoothly.

Can I File Bankruptcy Twice?

Can I File Bankruptcy Twice?

Bankruptcy is a delicate legal process requiring skill and experience in order to avoid the many pitfalls inherent in the legal process. To get you through the process and navigate smoothly through the world of bankruptcy, you need an expert bankruptcy lawyer, that is, a lawyer who specializes in bankruptcy law. Otherwise, you may have your bankruptcy dismissed. Quite often, I get a call from a new client whose bankruptcy was dismissed, asking me, “can I file bankruptcy twice?”

Unless there is a court order barring you from filing again, sure you can file twice. You can file three times, or four times. However, you may not get the same bankruptcy protectionsin your second filing as you enjoyed in your first bankruptcy filing.

If it is your first bankruptcy in a one year period, the bankruptcy automatic stay lasts until either you get a discharge or a creditor obtains relief from the bankruptcy automatic stay.

If it is your second bankruptcy filing in one year, the bankruptcy automatic stay lasts only 30 days, and then terminates, unless you get a court order extending the bankruptcy automatic stay.

If it is your third bankruptcy filing in one year, there is no bankruptcy automatic stay, unless you ask the court to impose one and the court grants your requests.

If there is no bankruptcy stay, or if the bankruptcy stay terminates after 30 days, that means that foreclosure activity will resume. So if you are planning to file a bankruptcy tostop foreclosure of your home, your bankruptcy filing may not be of much help if it is a repeat bankruptcy filing.

Another thing to consider is that you can only get a discharge ever so often, depending upon the type of bankruptcy that you filed in your first bankruptcy, and the type of bankruptcy that you are filing in your second bankruptcy. The rules in this area are complex and are beyond the scope of this post. If you are filing a repeat bankruptcy, make sure your attorney is aware of your prior bankruptcy so that he or she can assess your eligibility for a discharge. If you can’t get a discharge, you may have no reason to file bankruptcy.

The Liquidation Analysis/Best Interests of the Creditors Test for Chapter 13

The Liquidation Analysis/Best Interests of the Creditors Test for Chapter 13

When considering a Chapter 13 Bankruptcy, one of the first questions that every debtor wants to know is how much their monthly Chapter 13 Plan payment will be. As with most legal questions, the answer is that it depends.

One of the ways to determine how much this payment will be is to perform a Chapter 7 Liquidation Analysis test.  This is also known as the “Best Interests of the Creditors Test.” 11 U.S.C. S 1325(a)(4) contains the language of the liquidation analysis. This test ensures that your creditors cannot get any less money towards what they are owed in a Chapter 13 bankruptcy than if your non-exempt assets were liquidated in a Chapter 7 Bankruptcy. (For a more detailed explanation of the exemptions allowed in Bankruptcy, please see our article entitled, “What are California’s Bankruptcy Exemptions?”) It is designed to balance the interests of the creditors with those of the debtor by making sure that no less than what should be paid out in a Chapter 7 case will be paid out in a Chapter 13.

In practice, how does this work? Well, for example, imagine a debtor who has a home worth $400,000, a mortgage on that same home for $500,000, a car also worth less than the amount owed, and nominal household goods and furnishings such as clothes, household electronics, and furniture. In this instance, if you were filing Chapter 7, the bankruptcy exemptions would most likely allow you to keep the belongings that you do have, and your unsecured creditors would not receive anything. Applying this to Chapter 13, this same analysis would not require that your unsecured creditors be paid anything to cover your non-exempt assets.

However, consider another scenario where you have everything listed above, but also have a bank account or brokerage account worth $30,000, yet you are only allowed to exempt $20,000. In this case, under the liquidation analysis, you’d have to pay out a minimum of $10,000 over the thirty-six to sixty month duration of your Chapter 13 plan to the unsecured creditors.  A plan that fails to propose at least this much is likely to be objected to by the Chapter 13 Trustee and is not likely to be confirmed.

While this isn’t the only factor to be considered in determining a Chapter 13 Plan payment, this is a key piece of analysis necessary to make an accurate determination of what the payments will eventually become.  Determining the applicability of the Best Interests of the Creditors Test in a particular situation is complex, and it underscores the importance of obtaining good advice from an experienced bankruptcy attorney.  Retaining a qualified bankruptcy attorney in Fremont or elsewhere to represent your bests interest is the only way to ensure that your Chapter 13 plan will get confirmed at the best possible monthly payment.

Want a Successful Discharge? Things NOT to do Before a Bankruptcy

Want a Successful Discharge? Things NOT to do Before a Bankruptcy

Things you shouldn’t do right before filing for bankruptcy

If you’ve made the decision to file for bankruptcy, you’re making the choice to get back on track to financial stability. If you know you’re going to file soon, there are a few things you should remember not to do, as they will damage your bankruptcy case and your eligibility for a discharge.

Don’t max out your credit cards

Even though it might feel like swift justice to buy as much as possible on your credit cards days before filing for bankruptcy, it is very dishonest and reflects poorly on your character. The minute you think you’re going to file for bankruptcy, you should stop using your credit cards. If you go on a spending binge just prior to filing, there’s a big possibility your debt will not be discharged. In one portion of the bankruptcy code, debt exceeding $500 for luxury goods or services incurred within 90 days of filing is considered nondischargeable. Creditors might even look farther back, so stop using your credit cards all together.

Don’t pay off debt to your relatives

Once you make the decision to file, you might think it’s a good idea to begin paying back people close to you like family or friends. While it’s a nice gesture, it’s also the wrong thing to do. All debt is supposed to be considered equal, so if you pay money to relatives, it will be considered a preferential payment. There is something called a “look back period” when your payments are analyzed by a trustee for preferential treatment. If you pay back family members, but not other creditors, your family might have to give the money back to you. Talk to your attorney about your previous repayments if you’ve paid back a friend or family within two years of filing.

Don’t “give” all your assets away

An often heard refrain when filing bankruptcy is to give all your assets away or put them in someone else’s name. When you file for bankruptcy, you will have to list all the property you transferred out of your name or sold. You are allowed to sell your assets with the exchange of money, but “giving” something like a car to your friend as a gift prior to filing will be seen as a fraudulent transfer. If they deem something to be a fraudulent sale you made to get it out of your hands, the item will be put back in your name and possibly sold.

Don’t take out extra mortgages or money from 401 K to pay debt

Certain assets are exempt from the hand of bankruptcy including your 401 K. A bankruptcy court will not take your 401 K to distribute among creditors, so you shouldn’t do it either. Paying back items like credit cards or certain loans with this money doesn’t make sense because those debts will be discharged in bankruptcy court.

Don’t wait too long

Finally, if you know you need to file for bankruptcy, don’t delay the process. If you are even considering filing for bankruptcy, you should seek the advice of a professional bankruptcy attorney who will go over the best options with you. The longer you wait, the more time it will take for your life to get back on track. Rebuilding credit also takes time, so you should file as soon as possible. Again, don’t hesitate to consult with a bankruptcy attorney today.

Characteristics of a Good Bankruptcy Attorney

Characteristics of a Good Bankruptcy Attorney

If you’re faced with the unfortunate task of filing for bankruptcy, there’s nothing more important than having a highly qualified Arizona bankruptcy attorney by your side. Not only do reliable bankruptcy attorneys help seamlessly guide you through the process, but they can also make sure you get the full benefit of your bankruptcy. These are the traits to look for in a good bankruptcy attorney.

Specialization/Education

While you might think the attorney you’re seeing is specifically a bankruptcy attorney, that’s not always the case. Although attorneys often practice in multiple areas, you should make sure they have experience and training in bankruptcy before hiring them. Likewise, there are many attorneys who have not passed the bar in Arizona because it is too difficult. That’s why it’s critical to check their credentials and certify they are actually attorneys.

Experience

The number of years someone has been a bankruptcy attorney doesn’t necessarily translate into automatic success, but it’s a good starting point. Experience reveals that the attorney has been through the proceedings enough times to understand the process. The longer they’ve been a bankruptcy lawyer, the more likely they have seen a case similar to yours and will help you make the right decisions. Although this is a characteristic of a good bankruptcy attorney, it doesn’t mean you should always avoid newer attorneys either.

Effective communication skills

An important attribute of a good bankruptcy attorney is their ability to communicate clearly and effectively. This is the person who will be handling your crucial financial information, so it’s vital they relay everything that happens in a timely manner. If you have questions or concerns, they should be able to respond quickly with lucid answers. One way to figure out whether an attorney is an effective communicator is to ask questions during your consultation.

Amenable temperament

The last thing you should feel when meeting with a bankruptcy attorney is intimidated and apprehensive. A bankruptcy attorney doesn’t necessarily have to kowtow, but they should be amenable to your needs. If you are the kind of person who needs to take everything slowly and have each item thoroughly explained, they should accommodate you. While it’s great to have someone who’s eager to get to the facts, they shouldn’t be overly aggressive toward you.

Organized

A disorganized bankruptcy attorney is evidence of a larger problem that usually doesn’t translate into success. When attorneys have their documents and information organized, they are more likely to keep track of your situation, needs and requests. Because bankruptcy involves so much paperwork, an organized Phoenix bankruptcy attorney is likely a good one.

Professional

Finally, make sure the attorney representing you is professional. This is a key trait because not only does their professional demeanor increase the productivity of your relationship, but it usually transfers over to relationships with judges and creditor attorneys. A professional manner is typically an indication that the attorney has formed or will form judicious connections with everyone involved in your case.