December 22, 2011
Five things you should definitely not do, when Financial disaster strikes
You just lost your job, you got divorced or you had a medical emergency. Your money is running out. You are in a panic. What do you do?
Most folks think Bankruptcy is the last thing they want to do. Maybe they are right. But, if you are in this situation, here are five things YOU SHOULD DEFINITELY NOT DO, when financial disaster strikes.
- DO NOT WITHDRAW MONEY FROM YOUR RETIREMENT ACCOUNT TO PAY DEBTS.
Virtually all retirement funds, IRAs 401Ks, pensions, etc. are protected assets when you file for bankruptcy. This means that the Court, the Trustee or your credits can not attach that money when you file Chapter 7. So, do not touch that money to pay your debts. Leave it in the bank. In fact, not only will you be giving up your retirement nest egg, but, depending on your age, you may also incur a 20% tax penalty for early withdrawal. The worst part is that the penalty tax in not dischargeable in bankruptcy.
- DO NOT TAKE LARGE CASH WITHDRAWS FROM YOUR CREDIT CARD
Any debts incurred within 90 days prior to filing bankruptcy are not dischargeable in bankruptcy. If you take money from your credit cards to pay off some other debt, you will be replacing dischargeable debt with non-dischargeable debt. Bad idea. Furthermore, any payment of more that $600 to any one creditor within 6 months of filing bankruptcy may be deemed a preferential transfer and disallowed by the Court.Paying off old debt with new debt is never a good idea. Talk to a bankruptcy attorney before you make any financial moves.
- DO NOT EMPLOY DEBIT CONSOLIDATORS
In most cases, credit consolidators do not work well for debtors. These companies charge a lot of money, most of it up front. The do not get creditors to reduce the amount owed. They merely get banks to give you more time to pay. Most of the clients end up filing bankruptcy, after depleting their life savings. These deals only work for debtors with high incomes, who have the ability to make large lump sum payments to creditors. If a debtor is already having difficulty meeting current expenses, a debt consolidator is not a viable solution.
- DO NOT TAKE OUT A SECOND MORTGAGE
Obtaining a mortgage today is difficult, especially for individuals with credit scores below 660. However, even if a debtor may qualify for a second mortgage, adding more debt may not be the best solution. A debtor must take a long, hard look at their household budget, current monthly expenses, as compared to monthly income. Taking out a second mortgage may merely add to one’s expenses and push you further in debt. Discuss your options with a financial adviser or a bankruptcy attorney before making this move.
- DO NOT BORROW MONEY FROM FRIENDS OR RELATIVES
When you file bankruptcy, you have to provide the Trustee with three to six months of bank statements, if you take a loan from a family member and deposit those funds in your bank account, the deposit will be a red flag to the Trustee. These funds may not be exempt from Bankruptcy. You will also be obligated to report this loan on your petition. Repayments to relatives of over $600 could also been deemed a preference transfer, and disallowed by the Trustee.
Before you make any of these transfers, consult a Bankruptcy attorney for guidance. An ounce of prevention can be worth more than a pound of cure.
Questions? Call or email me at 212 693-3737 or j.weinstein@jlwlawoffices.com for Free Consultation
December 2, 2011
You can sue and win big award if debt collectors keep calling after filing Bankruptcy
Once you file a Bankruptcy Petition, the law protects you from continued creditor harassment. The Federal Court awarded a debtor $63,000 in compensatory damages and $63,000 in punitive damages when a debt collector continued to harass a debtor after he filed Chapter 7 bankruptcy. This case, In Re Burch v. Bank of America decided on July 27, 2011 affirmed earlier court cases. But, this case awarded punitive damages in addition to compensatory damages.
The Bankruptcy code, Section 362 provides that the filing of a bankruptcy prevents the continuation of any act to collect or recover a claim against a debtor that arose prior to the filing.
To collect money damages against a creditor or debt collector, the party must prove the following
- The bankruptcy petition was filed
- Debtors are individuals under the automatic stay provision
- Creditors received notice of the petition
- Creditor’s actions were in willful violation of the stay
- The debtor suffered damages
For a creditor’s act to be willful, under section 362 (k), the creditor need not act with specific intent, but must only commit an intentional act with knowledge of the automatic stay. Listing the creditor in the bankruptcy petition satisfies this provision. In this case the creditor continued to harass the debtor after repeatedly receiving notice of the bankruptcy.
If you or anyone you know is a victim of continued harassment after filing a Bankruptcy Petition, you have a right to sue for money damages. The rewards are significant. It is time to turn the table and fight back against heartless harassing creditors. Your fresh start after bankruptcy could be a prosperous one.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
November 14, 2011
Congress Raises Filing Fees for Chapter 7, Chapter 13 Bankruptcy
As if times are not tough enough for bankrupt debtors, The US Bankruptcy Court just announced a cross the board increase in filing fees, effective November 1, 2011.
The fee for filing a Chapter 7 bankruptcy was increased $7 to $306 and the fee for filing Chapter 13 bankruptcy was raised from $274 to $281. Fees for Chapter 11, 12 and 15 were also raised.
In addition the filing fees for case reopening, case conversions and filing motions was also increased. For example, the cost of amending schedules on a bankruptcy petition was raised from $25 to $30. While these raises are small, they could add up. Amending schedules is required frequently on a petition, due to a number of factors, many beyond the debtor’s control. You must when the debtor’s income changes, he discovers additional debt or a Creditor files a notice of claim. Be sure to check the new schedule of fees before filing Petitions or amendments.
One bright spot, the Court has not touch the fee waiver program for low income debtors who qualify for a chapter 7 and chapter 13 bankruptcy.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
November 1, 2011
Benefits of the Wildcard Exemption in Chapter 7 Bankruptcy
You do not have to be flat broke to file Chapter 7 Bankruptcy. In fact, today you can retain more of your assets when filing Chapter 7, by electing to take advantage of the Federal “Wildcard” exemptions when you file New York Chapter 7 bankruptcy. Until recently, the Federal Exemptions were not available to New York residents.
Under New York Law, an individual filing Chapter 7 can only retain up to $5,000 of personal property, which includes only $2,500 in cash and securities. Any additional assets must be turned over to the Trustee, for distribution to creditors.
Now, a New Yorker can choose either the New York Exemptions or the Federal Exemptions when filing their Chapter 7 Petition. New York has a higher Homestead exemption, which is now $150,000 for a home owner.
But, if you do not own real estate, you should opt for the Federal Exemptions.
Under the Federal rules, you can apply up to 50% of the federal homestead exemption, which $21,625 plus an additional $1,150 to shelter cash from your creditors. You cannot mix and match, you have to go with either New York or the Federal Rules. But, for many debtors, the Federal Rules provide more flexibility and may help one qualify for Chapter 7 bankruptcy.
Be sure to check out the full list of Exemptions before you file Chapter 7.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
October 13, 2011
CONGRESS PLAN TO MAKE PRIVATE STUDENT LOANS DISCHARGEABLE IN BANKRUPTCY
Senators Dick Durbin, Al Franken and Sheldon Whitehouse have sponsored legislation to restore the ability for debtors filing for Chapter 7 bankruptcy to discharge private student loans.
This bill reverses a 2005 Law that made all students loans non-dischargeable in Chapter 7 bankruptcy except in cases of extreme hardship. The 2005 law was intended to safe guard federal investments in higher education, but that bill included private bank loans as well as federally insured loans.
Student loan debt was over $1 trillion in 2010, more than credit card debt. The new bill, The Fairness for Struggling Students Act of 2011 addresses this growing problem. Even the 56% of graduates who found jobs, cannot handle the heavy burden of repayment of the average debt of $24,000.00 per graduate.
This student loan bill is stalled in committee and without strong encouragement from constituents, Republican and Democrats, this bill will not pass. E-mail or call your congressperson today.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
September 22, 2011
How much of your debts do you have to pay back in a Chapter 13 Plan? The answer depends in two factors:
- Type of debt
- Amount of available income.
Debt is classified as either secured or unsecured. Secured debt includes home mortgages, home equity lines and car loans. If you want to retain you home or your car, you have to pay back 100% back of your secured debt. The Chapter 13 Bankruptcy Plan must include all arrears on secured debt and a percentage of unsecured debt. If you are current on your mortgage, you do not have to pay the principal in full. Only the arrears are included into the Plan.
Also, included in the Plan are the administrative expenses, such as Trustee commission and unpaid legal fees.
To determine the amount of unsecured debt that must be paid in the Plan, you must work backwards you calculate your available income
For example, your net monthly income is $5,000 and your monthly expenses are $4,600, your available monthly contribution to the plan would be $400 per month. If you are required to do a 60 months plan, your total contribution will be $24,000 to the Plan.
If your administrative and secured obligation are $14,000, your unsecured obligation under the plan is $10,000. If your total unsecured debt is $100,000 your total obligation to unsecured creditor would be 10% of your debt.
Chapter 13 Bankruptcy is a viable and attractive option to many individuals strapped with debt.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
September 22, 2011
Frequently, clients want to know if they can keep their car when they file a bankruptcy. Under chapter 13, generally a debtor can hold on to all their assets. Retaining assets is only an issue under Chapter 7 Bankruptcy.
As stated previously, the law provides a menu of “exemptions” that allows a debtor to hold on to various assets when he files. In January, 2011, the law changed to increase the vehicle exemption from $2500 to $4,000. This means that if your car is worth $4,000 or less, your car is protected from creditors. If your car is worth $20,000, but you have a note for $16,000 on the car, you can keep your car because your equity is only $4,000.
Now, if you owe more than the car is worth, there is another attractive option. When you file Chapter 7 Bankruptcy, you may apply for the refinance of your car under the 722 program. If you have enough income to cover the loan payments, you can get a loan modification for the book value of the car and the bank will reduce the total amount you owe and dramatically reduce your monthly car payments.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation
August 8, 2011
After interviewing hundreds of individuals contemplating file for bankruptcy in New York, I have collected a list of the biggest fears of filing. The good news is that in a vast majority of cases these fears are unwarranted.
The top five (5) lists include:
- Fear of losing one’s job.
- Fear of destroying one’s credit for seven (7) years.
- Fear of harming the credit of the non – filing spouse.
- Fear that bankruptcy will make a debtor ineligible of qualifying for a student loan in the future.
- Fear that one will never be able to buy a house if he files for bankruptcy.
I. Clearly, the loss of a job or harming one’s chances of getting a new job is the fear most frequently cited. With few exceptions, one need not be concerned about losing a job due to filing a bankruptcy. Chances are your employers will never know you filed for bankruptcy.
The exception is if you are currently having your wages garnished by your employer. Since filing bankruptcy will stop the garnishment, your employer must be notified to stop the program.
As for a bankruptcy disqualifying a job applicant, most employers do not care if you filed for bankruptcy. The exception is if an applicant is seeking a position in the financial advisory or banking industry. In these industries, the applicant’s credit rating may be a concern, and a bankruptcy may hinder one’s chances.
II. The second most frequently cited concern is how bankruptcy will affect one’s credit in the future. Today bankruptcy will only impact your credit for a short term. twenty years ago if someone filed for bankruptcy, banks would blacklist a borrower for seven (7) years. Today, the primary focus is on one’s credit score. After being discharged from bankruptcy, the debtor can take steps to rehabilitate his/her credit score. By paying all bills on time, avoiding late payments and charge backs, overtime a debtor can significantly improved his/her credit score to an acceptable level. If you take an aggressive approach, the restoration of your credit can be achieved in no more than one to three years, but certainly less than seven years.
III. Many debtors expressed concern that their spouse with good credit could be hurt by the debtor filing bankruptcy. Again, not true. As long as the spouse of debtor filing bankruptcy is not a co – debtor, the filing will not impact on her credit rating. However, if the spouse is a co – debtor, 100% of the obligation of the debt will fall on the shoulders of the non – filing spouse.
IV. How will filing affect the ability of the debtor to obtain student loans in the future? The ability to obtain student loan post – filing bankruptcy will depend upon the financial institution, as there is no set policy.
Student loans are not dischargeable in bankruptcy. Thus many banks are not concerned if a debtor filed bankruptcy. However, even with government issued loans, the student will have to submit a credit report. If the applicant’s credit score is below the acceptable range, the application may be rejected. Due to the uncertainty and varied policies among loan issuing banks, I suggest not filing bankruptcy, if you can avoid it, if you plan to seek a student loan in the near future.
V. The fifth most frequently note of concern is the fear of is not being able to buy a home post filing. A bankruptcy in your credit history is no longer a fear bar for obtaining a mortgage. Today credit scores rule. Anyone with sufficient income and a satisfactory credit score over 680 will likely be approved for a home mortgage. I have seen many people who have filed bankruptcy obtain a bank mortgage within one – two years after their bankruptcy has been discharged.
In conclusion, for those considering filing for bankruptcy, and have fears of the consequences, you should contact your bankruptcy attorney. You may find your fears unfounded. Perhaps bankruptcy is the best solution for you.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737
August 1, 2011
The Dodges filed Chapter 11 Bankruptcy in Federal Court last month. How can a Team worth over $500 Million Dollars go broke?
Fact is that Dodgers are not broke. They have a billion dollar contract with the Fox Network pending the approval of Major League Baseball.
Bud Selig, the commissioner, refused to ratify the Dodgers Fox contract because Mr. Selig, apparently, does not like the way Frank McCourt is operating the Dodgers baseball team.
According to news reports, Frank McCourt has an ultra extravagant lifestyle and spends millions of dollars on swimming pools and houses.
Mr. Selig claims that Mr. McCourt does not follow the rules of MLB and he is draining money generated from the Dodgers and converting those funds for his personal use.
The key legal question is: what happens when private contract agreements – between MLB and an individual owner—conflict with federal bankruptcy rules? The answer is Federal bankruptcy rules trump MLB.
In the end, the Bankruptcy Court will most likely allow the Dodgers to enter into the contract with Fox News, and that influx of cash will allow the Dodgers to exit Chapter 11 Bankruptcy, with the federal judge declaring “Play Ball”.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737.
August 1, 2011
Chapter 13 Bankruptcy can help you get back on your feet financially. But there are five principles you must know, before you file to prevent surprises and new problems down the road.
Chapter 13 is designed for individuals with debts and who have houses or other assets they want to preserve. If assets or debts are jointly held by husband and wife, you can file one joint petition to cover both spouses.
Whereas, under Chapter 7 bankruptcy, if you qualify, you can write off or walk away from all of your debts. Under Chapter 13 bankruptcy, you must establish a Chapter 13 Plan to pay back all or part of you debt.
Principle 1:
Under Chapter 13, you must pay back 100% of you secured debt. An example of secured debt is your home mortgage. If you are behind in your mortgage, you have to include 100% of your arrears in your Chapter 13 Plan.
The good news here is that you may not have to pay back any or all of you unsecured debts. Unsecured debt includes credit cards, medical bills and personal loans not secured by real estate. The amount required to pay back will depend on your available income.
Principle 2:
Duration of Chapter 13 Plan is either Three years (36 months) or Five years (60 months). This timetable depends on your mean income by family size. If your income exceeds the mean income as established by the US Bureau of Labor Statistics, then you may be required to establish the longer 60 months plan. This would depend on the size of your debt as well as your total family income. Make sure you calculate your Chapter 13 Plan before you file your Petition.
Principle 3:
Non-dischargeable debt may be included in a Chapter 13 Bankruptcy. You are probably aware that certain debts, such as taxes and student loans are non-dischargeable under Bankruptcy. But you can include these debts in your Chapter 13 Plan. The net effect may be beneficial as you be able to reduce the amount of your unsecured debt includable in you Chapter 13 Plan. In fact, a Chapter 13 Plan may be confirmable with as little as 5-10% of unsecured debt included in ones plan.
Principle 4:
Annual reviews could cause your Chapter 13 Plan to be revised downward or upward, pending on the change in your income.
Whether you initially establish a three years or five year Plan, you are required to submit tax returns, W-2s and paystubs, upon request by your Chapter 13 Trustee. If you benefit from a significant increase of your income, compared to your income at the time of your filing, the Trustee may compel you to revise your Plan. Naturally, this would only apply to you if your approved Plan is less than 100%. A 100% Plan is a Plan whereby you are paying back 100% of your debt.
Conversly, if you experience a drop in your income you may make a motion to modify your plan downward, to pay your creditors a lower amount. A downward modification would only be approved, if the revised Plan is deemed feasible by the Court. To be feasible, secured creditors would have to be paid 100% of all arrears and non-dischargeable debt must be paid in full, as well as all administration expenses if your income changes. Inform your Bankruptcy attorney if your income should fall to see if you can benefit from these changes.
Principle 5:
Generally your Federal and State Income Tax Refunds must be turn over to your Bankruptcy Trustee, in most situations. The exception to this turnover requirement is if your initial plan covers 100% of your outstanding debt.
Thus, in most cases all future Tax Refunds go to the Trustee while during the life of your Plan. If you anticipate receiving tax refund at the end of the year, you should be aware that while your Chapter 13 Plan is in effect, you may be required to surrender both Federal and State returns to the Court Trustee. Prior to filing a Chapter 13 Petition and Plan, you should consult with your attorney to ascertain the tax implication of filing a Chapter 13 Petition. A taxpayer does have some control over the size of a Tax refund. A good bankruptcy attorney can assist you in preventing loss in income at the end of the year.
For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737.
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