Category: Bankruptcy laws

bankruptcy move consumer bankruptcy

I moved recently. How might that affect a bankruptcy case?

There are two ways in which moving to a new home might affect a bankruptcy case, and they both relate to the exemptions that are available in Chapter 7 and that govern the liquidation analysis that a Chapter 13 plan must satisfy.
Unlike prior law, BAPCPA allows a debtor to use the bankruptcy exemption scheme of the state where the debtor has been domiciled for the 730 days (roughly 2 years) immediately preceding the petition date. Someone who moved from another state within the preceding 730 days must use the exemptions provided by the state in which the debtor was domiciled for a greater part of the 180 days preceding the 730 days than in any other state. Some states allow a bankruptcy debtor to elect the state’s own exemption scheme or a uniform scheme provided in the Bankruptcy Code itself, but many states do not. To further complicate matters, some state exemption schemes do not apply to non-residents. If the result of looking back 730 days and the greater part of the 180 days preceding the 730 days is that a debtor would be entitled to no exemptions, BAPCPA allows the debtor to use the Bankruptcy Code exemptions.
BAPCPA does not spell out what happens when some of the relevant state’s exemptions (such as those for personal property) apply but others (such as a homestead exemption) do not. Only judicial decisions or legislative amendments can clarify this matter.
The second way in which moving affects a bankruptcy case relates to homestead exemptions. Some states have homestead exemptions that exceed $125,000. BAPCPA eliminates the excess over $125,000 for any interest acquired within the 1215 days (roughly 40 months) preceding the petition date. There is an exception when the debtor owned a home in the same state longer ago than 1215 days and rolled the proceeds of selling that home over into a new home within the 1215 days. According to the plain meaning of BAPCPA, someone who moves more than once within the same state would have their homestead limited to $125,000. At least one bankruptcy judge has rejected this argument; in that judge’s view, a debtor is allowed to rollover the proceeds of more than one sale without losing the benefit of the state’s homestead exemption.
(Reviewed 11.14.08)

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bankruptcy creditors consumer bankruptcy

Are there new requirements concerning the addresses for creditors?

In cases filed on or after October 17, 2005, any notices that the Debtor is required to provide to creditors must use an address designated by the creditor and must include the Debtor’s account number with that creditor. In general, one should use the address specified by the creditor for receiving notices. That address is often different from the address to which one makes payments. In situations where the creditor cannot communicate with the Debtor within the 90 days preceding a petition (for example, because the Debtor has sent an FDCPA “cease communication” letter), the address and account number specified in two communications is the right one. Finally, a creditor may register an address with any bankruptcy court (even one geographically far away).
Debtors are not required to give notices to creditors in most cases. The court clerk gives notice of case filing (including announcement of the dates for the first meeting of creditors and of other deadlines in the case) and of any discharge that eventually enters. It remains important to provide correct addresses on the schedules and matrix, however, because the Bankruptcy Noticing Center used by the clerk’s office will not have a registered address for every possible creditor and cannot correct every misspelling in a creditor’s name.
(Reviewed 11.14.08)

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bankruptcy unpaid support consumer bankruptcy

What happens to unpaid child support and alimony in the new bankruptcy law?

BAPCPA elevates domestic support obligations to top priority in an “asset” case under Chapter 7, where there are funds available to pay creditors. Domestic support obligations are not dischargeable. The law no longer distinguishes between debts for alimony or support (which were also not dischargeable under prior law) and debts arising from property settlements (which were sometimes dischargeable under prior law); both kinds of debt are not dischargeable.
It remains true that a Chapter 13 plan must provide for full payment of priority debts, including arrearages in domestic support obligations. Furthermore, to obtain a discharge in a Chapter 13 case, the debtor will have to certify that all post-petition domestic support obligations have been met.
Finally, case trustees in both Chapter 7 and Chapter 13 cases are now obligated to make certain disclosures to a domestic support creditor, such as an ex- or separated spouse, including the debtor’s most recent known address at the time of discharge.
(Reviewed 11.14.08)

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bankruptcy disaster relief consumer bankruptcy

Is there any relief for victims of disaster (i.e., Katrina) under the new bankruptcy provisions?

The US Justice Department trustee program in early October, 2005 lifted some of the more restrictive requirements of the new law to take into account the hardships experienced by victims of the hurricanes in the Gulf Coast Area (i.e., Katrina). Relaxed are the new rules to provide paperwork (i.e., tax returns, pay stubs, income and expense data) and to attend mandatory credit counseling courses.
Under the new law, those with income at or above their state’s average income are channeled into a Ch. 13 repayment plan unless they can show special circumstances that even partial repayment is not possible. Their income loss, expense increase and other adverse effects of the hurricanes are special circumstances and taken into account for purposes of the means test.
The Justice Department’s release is at http://www.usdoj.gov/ust/eo/public_affairs/press/docs/pr20051005.htm.
(Reviewed 11.14.08)

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bankruptcy doc requirements consumer bankruptcy

Under the new bankruptcy law, what are the new documentation requirements?

As enacted, BAPCPA requires debtors to file copies of all payment advices (i.e., pay stubs) from employers for the 60 days preceding filing. Many districts are promulgating local rules and procedural orders directing debtors not to file these advices with the petition but, instead, to turn them over the case trustee prior to the first meeting of creditors.
BAPCPA also requires debtors to deliver to the case trustee, not later than 7 days prior to the first meeting of creditors, a copy of the debtor’s most recent federal income tax return or a tax transcript. The debtor must also furnish a copy to any creditor who makes a request at least 15 days prior to the first meeting. Many consumer bankruptcy attorneys obtain a MFTRA-X transcript from the IRS and redact at least the first 5 digits of the debtor’s social security number. This kind of transcript contains substantially less personal information than a full return.
The Judicial Conference has designed new forms to permit individuals who have primarily consumer debts to meet the new requirement that they disclose their monthly net income-a defined term under BAPCPA with a complicated definition. The forms are labeled B22A for Chapter 7 cases, B22B for Chapter 11 cases, and B22C for Chapter 13 cases. The most frequent cause for dismissing pro-se cases in the early days after October 17, 2005, has been failure to file this form.
A Chapter 13 debtor must file with the IRS all tax returns due within the 4 years preceding filing. These returns must be turned over to the case trustee and any interested creditor, but only upon request. Some consumer bankruptcy attorneys plan to resist creditor requests for copies of these tax returns except upon a showing of need and an order from the court.
The United States Trustee’s office has announced that it will not file enforcement motions against debtors who cannot produce the new documents due to natural disasters. In practice, this means that victims of the 2005 hurricanes who can’t locate their pay stubs will still be able to file.
(Reviewed 11.14.08)

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bankruptcy credit counseling consumer bankruptcy

Credit counseling and other educational requirements under the new bankruptcy law are required of debtors. What do they entail?

Individuals may not file under any chapter of Title 11 unless, within 180 days prior to filing, they have received an individual or group briefing from an approved nonprofit budget and credit counseling agency. To obtain a discharge in a Chapter 7 or Chapter 13 case, an individual must in addition attend a post-filing instructional course concerning personal financial management offered by such an agency.
The pre-filing briefing outlines opportunities for available credit counseling and assists the individual in performing a related budget analysis. The briefing is expected to last about 90 minutes and to cost about $50, but agencies may not charge individuals who cannot afford to pay. The agency will provide a certificate evidencing completion of the briefing, and the debtor should file that certificate along with the bankruptcy petition.
The pre-discharge course is expected to last longer, perhaps as long as 4 hours, and to cost more. Agencies may not charge a fee to debtors who can’t afford to pay. Upon completion of the course, the debtor will obtain a certificate and file it with the court as an exhibit to the new Form B23.
When a married couple files a joint petition, both must obtain the pre-filing briefing and pre-discharge instruction. According to the new bankruptcy law, an individual should be able to satisfy the pre-filing and pre-discharge education requirements in person, over the telephone, or over the Internet. Very few agencies who offer just Internet counseling and training have been approved, however.
Debt management plan. Some budget and credit counseling agencies will prepare a debt management plan as part of the pre-filing briefing. The plan, if one is created, must also be filed along with the petition.
A debt management plan may not be the best choice for a personal bankruptcy debtor because, generally speaking, it will provide only for reduced interest on credit card payments without reducing the amount of principal that the debtor must repay. Neither can a debt management plan eliminate debts without the creditor’s agreement.
There is also a fear amongst consumer bankruptcy attorneys that some credit counseling agencies may receive kickbacks from credit card lenders that will affect the objectivity of any plan proposed by the agency.
Waiver of requirement: There are a few situations under the new bankruptcy law where it is possible to obtain a temporary or permanent waiver of the education requirements. The requirement can be waived altogether if the Bankruptcy Judge determines, after a hearing, that the debtor is unable to complete the requirement because of incapacity, disability or active military duty in a combat zone. Incapacity refers to severe mental illness that prevents the debtor from making rational decisions about financial matters. The disability would have to preclude the debtor from participating, after reasonable effort, in person, over the telephone, or over the Internet. Accordingly, very few debtors will qualify for a waiver by reason of incapacity or disability. The law does not provide any exception for individuals having limited proficiency in English, and the United States Trustee has (so far, anyway) taken the position that the debtor must furnish any required translator at the debtor’s own expense.
A temporary waiver of the pre-filing briefing can be obtained if exigent circumstances prevent the debtor from obtaining the briefing within 5 days after asking any one agency. The debtor must obtain the briefing within 30 days after filing, but the court can allow an additional 15 days for cause. Because of Hurricane Katrina, the United States Trustee’s office has waived the pre-filing counseling requirement in the Southern District of Mississippi and in all the districts of Louisiana. This waiver would not apply to Katrina victims filing in other judicial districts.
The requirement for pre-filing credit counseling may affect a debtor’s ability to file a skeleton petition on short notice in order, for example, to halt a threatened foreclosure. There is no case law as yet concerning whether a debtor can, for example, file before 5 days have elapsed after the debtor attempted to obtain the required briefing.
Failure to either obtain the required pre-filing briefing or to request a waiver for a documented and acceptable reason will result in the Bankruptcy Judge dismissing the case. There is no case law yet concerning whether such a dismissal might affect a debtor’s right to obtain a discharge in a subsequent case.
List of approved agencies: In most judicial districts, the United States Trustee program within the Department of Justice must approve nonprofit budget and credit counseling agencies. In the few districts that are not part of the United States Trustee program, the Bankruptcy Administrator handles approvals.
You can find a list of approved agencies online at your own Bankruptcy Court’s web site-http://www.XXXb.uscourts.gov, where “XXX” is, insert the state and district (for example, “gas” for Southern District of Georgia or “ma” for District of Massachusetts).
(Reviewed 11.14.08)

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jail bankruptcy consumer bankruptcy

Can I be sent to jail for filing bankruptcy?

No.

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