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Archive for the ‘Bankruptcy Procedure’ Category

Preparing for Personal Bankruptcy in Texas

December 31st, 2020 at 10:50 pm

TX bankruptcy lawyer, Texas chapter 7 attorney, The decision to file for personal bankruptcy is not one that is easily made. Moreover, the days, weeks, and months following the decision can also be difficult, as there may be feelings of fear or concern. Then there is still the stress of preparing for the bankruptcy process. The following may be able to help alleviate some of that stress and provide guidance on how to find the assistance you need.

Start by Contacting an Attorney

While there are many steps to take during the bankruptcy process, your first should be to contact an experienced bankruptcy lawyer. Not only does this help you prevent missteps during the bankruptcy process, but it can also expedite the next steps. By contacting a lawyer, you can get you on your way to less stress from the creditor calls and collection letters.

Cancel Your Automatic Payments

If you are like most consumers, you have automatic payments that are drafted from your account. Some might be for subscriptions while others might be with creditors, all should be eliminated. This can help you start to step forward and manage your debt more responsibly. It also gives you more control over what you are paying in the weeks leading up to the bankruptcy filing.

Start Working on Your Budget Now

Although you will have opportunities to develop a sound budget, the best time to implement one is right at the start. A budget gives you the power to start watching what you are making and what you are paying out. Ultimately, this helps you determine which bankruptcy option may be most suitable for your situation. Further, it gives you the chance to start practicing the skills you will need during and after the bankruptcy process has ended.

Watch Out for Frozen Funds, Seizures, and Repossessions

While the bankruptcy process does stop the collection process, there is still a lot that can happen up to the date you file. For example, your creditors may attempt to freeze your bank account to gain access to your funds. Further, it is important to understand that bankruptcy does not guarantee you will be able to keep certain assets that are on a lien. Mortgages, car payments, and other loans with collateral are all prime examples of assets that could be seized or repossessed.

Why Choose Our Experienced San Antonio Bankruptcy Lawyer?

With more than 20 years of experience, the Law Offices of Chance M. McGhee is a firm you can trust to assist your bankruptcy concerns. We provide not just counsel for the process, but also guidance for the future. Our skilled Texas bankruptcy attorney will give you the tools you need to make the most of your fresh start. Learn more about how we can assist with your case by calling 210-342-3400. Free consultations are available.

 

Source:

https://www.kiplinger.com/slideshow/credit/t025-s001-things-to-know-before-filing-for-bankruptcy/index.html

Debunking Four Common Bankruptcy Myths

December 3rd, 2020 at 11:56 am

mythsThere are many negative perceptions about bankruptcy. On one hand, some of these perceptions are well-deserved. After all, there are some potential drawbacks to filing. Yet there are also some major misconceptions about bankruptcy—some of which could keep someone from filing when they really should. The following information is designed to debunk these bankruptcy myths. It may even help you decide what your next step should be, and if bankruptcy might be the right solution for you.

Myth 1: Bankruptcy Ruins Your Credit Forever

True, your credit can take a hit after filing for bankruptcy, and it may be difficult to obtain new lines of credit once the process starts, but bankruptcy does not completely ruin your credit. If anything, it gives you a clean slate to start over. It is also usually less damaging than continuing to make late payments on your debts. If you are still a little apprehensive about filing, talk to a qualified bankruptcy attorney for a comprehensive analysis of your financial situation.

Myth 2: You Lose All Your Personal Property

Many people think you have to give up everything in bankruptcy, but this is not always the case. In fact, bankruptcy is designed to help protect some of your possessions from creditors. Furthermore, you may be able to keep some of your unprotected items by agreeing to continue paying on them. Do not expect to keep it all, just do not expect to lose it all either.

Myth 3: Everyone Will Know You Filed

This common bankruptcy misconception really has two components. The first is that, because bankruptcy is a public record, everyone will know that you filed. The second hinges on the first and involves a fear of being labeled a “bad person.” Neither is true. While it is true that your bankruptcy is a public record, those that are most likely to access the information are those that might extend credit to you in the future. Secondly, bankruptcy is not as rare as it used to be. In fact, around one million people and businesses file each year. Filing does not make you a bad person. It just means you got in over your head and need help finding a way out.

Myth 4: The New Laws Make Filing Impossible

The reformation to bankruptcy laws in the early 2000s has caused many to believe that they could not file – that bankruptcy could only be granted to a select few. Rest assured: these new laws were not put in place to restrict those that need bankruptcy relief. Instead, they were implemented to deter those who might try to commit bankruptcy fraud from filing. If you are truly concerned about your eligibility, contact a skilled experienced bankruptcy lawyer for guidance.

Contact Our Experienced San Antonio Bankruptcy Lawyer Today

At the Law Offices of Chance McGhee, we advocate for those who are drowning in debt and struggling to find a way out. We offer comprehensive services and craft creative solutions to help our clients get their financial lives back on track. Committed to your best interests, we pursue the option that is most beneficial for you. Get started today by scheduling your free consultation with our knowledgeable Texas bankruptcy attorney. Call 210-342-3400 for an appointment.

 

Sources:

http://www.uscourts.gov/services-forms/bankruptcy

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

Common Myths About Bankruptcy in Texas

September 29th, 2020 at 9:52 am

Texas bankruptcy lawyer, TX chapter 7 attorneyAt our firm, we help clients every day with questions and concerns about the bankruptcy process under the U.S. Bankruptcy Code. Our experience has shown us that bankruptcy proceedings are often misunderstood, and unfortunately, misinformation abounds among those considering filing for bankruptcy. If you are thinking about bankruptcy as an option for your situation, it is very important for you to fully understand the potential advantages and disadvantages, as well as what might happen after the proceedings are complete. With this in mind, here are three of the most common myths about bankruptcy, along with the truth about each one.

Myth # 1: My Employer Will Be Notified That I Filed for Bankruptcy

Financial struggles are embarrassing for many people, and the reasons are understandable. As a result, it might be humiliating for you if your employer were to be notified of your bankruptcy filing. The good news is that this myth—albeit common—is just that: a myth. The bankruptcy process does not involve any employer notification whatsoever unless you happen to owe a formal debt to your employer somehow—in which case your employer would be notified, but as a creditor. Bankruptcy filings are public record, which means they could technically be published by the press, but it is unlikely that your employer would have much interest in searching through such publications.

Myth # 2: I Will Never Get Credit for a for a Major Purchase Again

Filing for bankruptcy can certainly have a negative effect on your credit rating, but the effects are temporary. Your bankruptcy will not bar you from ever having the ability to secure credit for major purchases like a home or automobile. For most bankruptcy filers, the credit approval needed to secure a home loan would be possible in about two to three years from the date of their bankruptcy filing. Obtaining approval for car loans and credit cards generally take less than two years. What is most important in re-qualifying for credit is making sure that you are rebuilding your credit properly in the period following your bankruptcy filing.

Myth # 3: I Do Not Have Enough Debt to Qualify for Bankruptcy

The bankruptcy process does not require any minimum amount of debt for a party to be able to file a petition for bankruptcy. While it is not prudent to initiate the process of bankruptcy without a reasonable amount of debt, what constitutes a “reasonable amount of debt” can vary widely from one situation to another. If you can demonstrate that your ability to manage your debt is severely diminished, it is likely that your bankruptcy petition will be accepted by the court. Keep in mind that if you are filing for Chapter 7 bankruptcy protection, you will need to undergo a means test to determine your ability to pay your debts.

Speak with a New Braunfels Bankruptcy Lawyer

The finances of many hardworking individuals have been severely impacted by the COVID-19 lockdown of the last few months. If you are in an unmanageable financial situation due to debt, filing for bankruptcy may be an option. Contact a knowledgeable San Antonio bankruptcy attorney to learn more about the different types of bankruptcy protection that might be available to you. Call 210-342-3400 for a free consultation with the Law Offices of Chance M. McGhee today.

 

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics

https://www.nerdwallet.com/article/finance/rebuild-credit-after-bankruptcy

What Does the Texas Bankruptcy Process Look Like?

February 14th, 2020 at 4:33 pm

BankruptcyTexas bankruptcy attorney, TX chapter 7 attorney, TX bankruptcy process, is the legal process of determining whether or not a person or business is actually unable to pay their debts and if their debts should be discharged. For individuals, there are two main types of bankruptcies — Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, typically the filer has their debts discharged or forgiven at the end of the process. In a Chapter 13 bankruptcy, the filer’s debts are reorganized and a repayment plan is entered for three to five years to pay off as much of the debt as possible.

According to statistics from the Judiciary Data and Analysis Office, the most common type of bankruptcy that is filed is Chapter 7 bankruptcy, which made up around 60 percent of all bankruptcy filings in 2017. If you are thinking about filing for a Chapter 7 bankruptcy, it is important that you understand the process.

Before You File

The first step in the bankruptcy process is to get a firm grasp on your financial situation. You should gather all of your documents that are needed for bankruptcy now so that you can look at the whole financial picture and because you will also need them as proof when you go to file. You will need documents such as:

  • A copy of your credit report
  • Tax returns from the past two years
  • Proof of income from the past six months
  • Bank, retirement and brokerage account statements
  • Valuations of any real estate you own
  • Title and loan information on your vehicles, if you own any

Preparing and Filing Your Documents

The most time-consuming portion of the bankruptcy process is just filling out the forms needed to actually file. This is where an attorney would come in handy. There are around 70 pages of information that you must fill out, much of it requiring a lot of calculations and writing down repetitive information. Your attorney would be able to do most of this legwork for you, making sure that calculations and information are correct and preventing any delays in filing. If you file the forms yourself, you must go to the courthouse in person, file the forms with the clerk and pay the $335 filing fee. If you hire an attorney, he or she will do this for you.

Credit Counseling Requirements

As a requirement of filing for bankruptcy, you will also have to complete two counseling courses. The first one is a credit counseling course and should be completed before you file. The second course is centered around debt education and must be completed after you file, but before your creditors’ meeting.

Meeting of Creditors

The final step in the process is attending your 341 Meeting or your Meeting of Creditors. The point of this meeting is to ensure that all of your information on your forms is correct and that you are not hiding any assets or income that could be used to repay your debts. A majority of the time, creditors’ meetings only last about five minutes and end with your debts being discharged and your bankruptcy complete.

Our Knowledgeable San Antonio, TX Bankruptcy Attorneys Can Help

Though it is not required to have an attorney when you file for bankruptcy, it can greatly help your case by preventing mistakes you might not even know you are making. At the Law Offices of Chance M. McGhee, we can help you get your life back on track and file for bankruptcy. Call our Boerne, TX bankruptcy lawyers today at 210-342-3400 to set up a free consultation.

 

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/process-bankruptcy-basics

https://upsolve.org/learn/how-to-file-bankruptcy-2019/

https://www.uscourts.gov/news/2018/03/07/just-facts-consumer-bankruptcy-filings-2006-2017

 

When Should I Delay Filing for Bankruptcy?

October 31st, 2019 at 7:14 pm

bankruptcyDeclaring bankruptcy can get you out of a less-than-favorable financial situation when you are in need, but your circumstances will dictate which type of bankruptcy you are eligible for and how much the bankruptcy will help you. Once you have figured out that you want to file for bankruptcy, you must then determine when your most opportune time to file is. In certain situations, you may want to delay filing for bankruptcy. Delaying your bankruptcy can sometimes allow you to keep more of your money, protect a friend or family member’s money or even increase your chances of qualifying for a Chapter 7 bankruptcy. Here are a few situations in which you may want to consider delaying filing for bankruptcy.

You Paid Money Owed to a Family Member Too Close to Filing

If you pay certain creditors $600 or more prior to receiving a discharge, your bankruptcy trustee could demand the money back from the creditor. This is called a preference because you have put that creditor in a better position than your other creditors. The preference period for most creditors is 90 days prior to filing for bankruptcy. For “insiders,” such as friends or family members, the preference period is one year prior to filing for bankruptcy.

You Recently Transferred or Gifted Money or Property to Someone

If you give away or gift property or money and get nothing in return, you could also face allegations of fraudulent transfer. Even if the property or money was a gift given with good intentions, you can still face these allegations if you file for bankruptcy less than two years after you give or transfer the property or money.

Your Income Has Decreased or You Expect Your Income to Decrease

If you want to file for a Chapter 7 bankruptcy, you will have to pass what is called the means test. The means test compares your income to the median income in your state. If you fail the means test, it will be extremely difficult for you to qualify for a Chapter 7 bankruptcy, if you can even qualify at all. If you know that you currently make too much to qualify, but that you will not be making as much in the future, you should wait to file for bankruptcy.

Our New Braunfels, TX Bankruptcy Attorney Can Advise You When to File

Like many things in life, timing is everything when it comes to bankruptcy. Even just a few days’ time can mean the difference between discharging certain debts and being forced to repay them. If you are unsure of when the best time to file for bankruptcy is, you should contact our skilled San Antonio, TX bankruptcy lawyer today. At the Law Offices of Chance M. McGhee, we will examine your case and advise you as to when you should file for bankruptcy so you can benefit from it the most. Call our office today at 210-342-3400 to schedule a free consultation.

 

Sources:

https://www.thebalance.com/what-is-chapter-7-bankruptcy-316202

https://www.law.cornell.edu/uscode/text/11/547

https://www.law.cornell.edu/uscode/text/11/548

What Does a Bankruptcy Trustee Do?

September 16th, 2019 at 4:40 pm

trusteeThe most common types of bankruptcies that are filed in the United States are Chapter 7 and Chapter 13 bankruptcies. There are many differences between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, mainly in the way that the debts are handled. While these two types of bankruptcies differ greatly in many aspects, they do have one thing in common — they both utilize a bankruptcy trustee.

If you have thought about getting a bankruptcy or you have done research about getting one, you have probably come across the term — but do you know what a bankruptcy trustee is? It is important to understand the role of the trustee if you are getting a bankruptcy or considering one.

What Is a Bankruptcy Trustee?

A bankruptcy trustee is a person who works on a bankruptcy case to act as the middleman between the debtor and the creditors. The trustee is not an employee of the bankruptcy court, but rather an independent contractor who is hired to prevent the court itself from having to collect and/or distribute property. Trustees are also responsible for reviewing all financial information that is submitted by the debtor to ensure it is accurate and true.

Trustees in a Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, or liquidation bankruptcy, your non-exempt assets are liquidated or sold so that you can repay as much of your debt as possible before the rest of it is discharged. A trustee in a Chapter 7 bankruptcy is responsible for determining which of your assets are non-exempt and using the money from those to repay your debtors.

Trustees in a Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, you reorganize your debts so that you can come up with a three- to five-year repayment plan to pay back all or most of your debts. In this type of bankruptcy, your trustee is responsible for overseeing the repayment plan. He or she will collect your payment each month and distribute it to your debtors.

Questions About the Bankruptcy Process? A San Antonio, TX Bankruptcy Attorney Can Help

Making the decision to file for bankruptcy is a serious one. Your credit score will be affected and the bankruptcy will appear on your credit report for a number of years. Ultimately, the bankruptcy trustee can affect your bankruptcy case for the good or the better, which is why it is important to understand their role in your bankruptcy case. If you are thinking about filing for bankruptcy, you should talk with a knowledgeable Boerne, TX bankruptcy lawyer. At the Law Offices of Chance M. McGhee, we can help make sure your bankruptcy process is smooth and as stress-free as possible. Call our office today at 210-342-3400 to schedule a free consultation.

 

Sources:

https://www.investopedia.com/terms/b/bankruptcy-trustee.asp

https://www.creditkarma.com/advice/i/bankruptcy-trustee/

https://www.thebalance.com/who-is-a-bankruptcy-trustee-316199

Fraudulent Transfers Around the Holidays

November 26th, 2018 at 8:00 am

Giving a gift, including selling for much less than an asset is worth, may be a fraudulent transfer—treated as hiding assets from creditors.

 

Most people filing bankruptcy have neither a need nor the desire to hide anything from their creditors. There’s no need because most people’s assets are already protected through state and federal laws. There’s no desire because most people are honest and want to follow the law.

Yet anybody considering bankruptcy should still have some understanding of the law of “fraudulent transfers.” That’s because it could cause you problems even if you thought you were being honest and fair. As you’ll see this may more likely happen during the gift-giving holiday season.

“Fraudulent Transfers” Explained

A “fraudulent transfer” is essentially a debtor giving away—transferring—an asset to avoiding giving creditors that asset’s value. This can be done with bad intentions, but also without any such intentions.

If you give away something (for example, as a holiday gift), or sell something for much less than it’s worth, then under certain circumstances your creditors could require the recipient to surrender it to the creditors. That would usually not be a good result because you’d prefer that the person be able to keep your gift.

The gift or sale in a “fraudulent transfer” can be challenged in either state courts or bankruptcy court. In a bankruptcy case the bankruptcy trustee would act on behalf of the creditors to “avoid” (undo) the transfer.

The Two Kinds of “Fraudulent Transfers”

There are two kinds of fraudulent transfers.

The one based on “actual fraud” requires the actual intent to harm a creditor or creditors. It occurs when a debtor gives a gift or makes a transfer “with actual intent to hinder, delay, or defraud” one or more creditors. Section 548(a)(1)(A) of the U.S. Bankruptcy Code.

The one based on “constructive fraud” does not require the actual intent to harm a creditor. It occurs when a debtor gives a gift or makes a transfer receiving “less than a reasonably equivalent value in exchange, in which the debtor “was insolvent on the date that such transfer was made.  . .  , or became insolvent as a result of such transfer.” Section 548(a)(1)(B) of the Bankruptcy Code. Although the debtor does not intend to defraud anybody, the transfer can be undone under certain circumstances.

Legal and Practical Considerations

Most people filing bankruptcy will not be accused of a fraudulent transfer for a number of reasons:

1) Most people simply don’t give away their assets leading up to filing bankruptcy.

2) Gifts to charities are largely exempt.

3) The bankruptcy system doesn’t care about minor gifts or transfers.

4) Even in circumstances that a transfer could be challenged, the trustee has to consider the cost and practicality of undoing the transfer.

1) Debtors Don’t Generally Give Away Assets

Most people considering bankruptcy usually need pretty much everything they own. So they aren’t going to be giving it away or selling it for less than it’s worth.

Furthermore, the assets that people own when filing bankruptcy are usually fully protected. So there’s no motivation to transfer them away.  These protections are usually through property “exemptions,” or through the special advantages of the Chapter 13 “adjustment of debts.”

2) Gifts to Charities Are Essentially Exempt

The Bankruptcy Code creates a big exception for transfers made “to a qualified religious or charitable entity or organization.” Charitable contributions are exempt if they do “not exceed 15 percent of the gross annual income of the debtor.” The amount of contributions can total an even higher percentage “if the transfer was consistent with the practices of the debtor.” Section 548(a)(2).  

3) Minor Gifts Are Not a Problem

The bankruptcy system doesn’t worry about relatively minor gifts or transfers. This effectively means a gift or gifts given over the course of two years to any particular person valued at $600 or less. The Bankruptcy Code itself does not refer to that threshold amount. But the Statement of Financial Affairs for Individuals, which is one of the official documents you and your bankruptcy lawyer prepare and file at court does so.

This document includes the following question #13:

Within 2 years before you filed for bankruptcy, did you give any gifts with a total value of more than $600 per person?

The next question (#14) is very similar:                                            

Within 2 years before you filed for bankruptcy, did you give any gifts or contributions with a total value of more than $600 to any charity?

4) Cost and Practicality of Avoiding the Transfer

Even when a gift or other transfer arguably qualifies as a “fraudulent transfer,” the trustee has to seriously consider the costs in attorney fees and other expenses to try to undo that gift or transfer. At the very least the costs have to be weighed against the amount likely to be gained for the creditors.

This is particularly true when there’s a meaningful risk that the transfer would not qualify as a “fraudulent transfer.” Or the transfer may qualify but the transferee has disappeared or a judgment against him or her is uncollectable.

 

Can You File Bankruptcy Without Your Spouse?

June 15th, 2018 at 6:02 pm

bankruptcyMany people mistakenly believe that if you are married and filing for bankruptcy, you must do so jointly. You have several options after determining that bankruptcy is the right choice. If you are unmarried, you will file independently. If you are married, you may file jointly or as an individual. Both spouses may also choose to file bankruptcy separately, at the same time. Strategically, one option may suit your situation better than the others, depending mainly on location, debts, and assets.

Texas and the Other Community Property States

Texas, along with nine other states, is a community property state. Meaning, any assets or property acquired during marriage belongs equally to both spouses, even if only one spouse’s name is on the contract. The assumption is that all decisions are made together, rather than individually, and both parties are contributing their fair share. Any items owned before the marriage are excluded from the community property, as are any items inherited or given only to one spouse after the union began; this is separate property.

More Property Is at Risk

If you choose to file bankruptcy without your spouse, more property is at risk in community property states than in common law states. In a common law state, only the separate property owned by the filing spouse becomes a part of the bankruptcy estate. In Texas, any community property not covered by exemptions is at risk for seizure. In some cases, filing for bankruptcy together doubles the amount of the exemptions, allowing spouses to keep more items.

The Affected Debts

In a community property state, there, fortunately, is no such thing as community debt. Each spouse has separate obligations for accounts solely in their name, as well as any held jointly. If one spouse files independently, their individual accounts, as well as their joint accounts, are dischargeable. The non-filing spouse experiences what is known as a “phantom discharge” or “community discharge.” Any community property co-owned by both parties becomes off-limits to discharged creditors, including wages. However, because the non-filing spouse did not file, their separate property is unprotected and at risk of seizure to satisfy the debt for joint accounts.

What Is Right for You?

Navigating the avenues of bankruptcy is often confusing and stressful for filers. Attorney Chance M. McGhee has over 20 years of experience assisting clients just like you begin their journey to a better financial future. If you have questions about how to file or wonder about the best option for your situation, a New Braunfels bankruptcy attorney is here to give you the answers you need. At the Law Offices of Chance M. McGhee, we are dedicated to helping you through the process. Call us today at 210-342-3400 for your free consultation.

The Surprising Benefits: Reinstating Your Driver’s License Suspended for Unpaid Tickets

May 24th, 2018 at 7:00 am

You may be able to reinstate your license in spite of one or more unpaid traffic tickets. It mostly depends on the traffic laws violated. 

 

We’re deep into a series of blog posts about powerful, less familiar benefits of bankruptcy. One important one is getting your suspended driver’s license reinstated. Whether you can get your license reinstated through bankruptcy depends a lot on the reason for the suspension. Last week we covered suspensions for not paying a judgment from a motor vehicle accident while driving uninsured or underinsured. Today we cover suspensions for not paying one or more traffic tickets.

License Reinstatement Depends on Discharge of the Traffic Ticket(s)

Our last blog post showed how bankruptcy reinstates a license suspended because of an unpaid debt from an accident. These suspensions usually come from not paying a court judgment or debt from an uninsured motor vehicle accident. Usually such a debt can be legally written off (“discharged”) through bankruptcy. After bankruptcy takes away the reason for the suspension, the driver’s license can be reinstated.

It works about the same way with traffic tickets. If your license was suspended for not paying traffic tickets, a bankruptcy can sometimes discharge what you owe on those tickets. That could enable you to reinstate your license.

Not Available Under Chapter 7

Chapter 7 (“straight bankruptcy”) doesn’t work with traffic ticket suspensions. Chapter 7 doesn’t discharge “a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit.” See Section 523(a)(7) of the U.S. Bankruptcy Code.  A debt owed for a traffic ticket is a “fine” or “penalty” that you owe to the state, city or other local “governmental unit” whose police issued it to you. Because Chapter 7 doesn’t discharge traffic tickets, it cannot reinstate a driver’s license suspended for nonpayment of those tickets.

Need to File Under Chapter 13

However, Chapter 13 is different. It may be able to discharge the debt from your tickets. That’s because Chapter 13 does NOT exclude “a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit” from discharge. See Section 1328(a)(2) of the Bankruptcy Code. That Subsection lists the kinds of debts that Chapter 13 does not discharge. It refers to some but not all of the kinds of debts that Chapter 7 cannot discharge. The kinds of debts listed do NOT include the “fine” and “penalty” one referred to above—Section 523(a)(7). This means that Chapter 13 CAN discharge such “fines” and “penalties,” including certain traffic ticket debts. Since Chapter 13 can discharge traffic tickets, it may enable you to reinstate your license suspended for that reason.

Traffic Crimes vs. Violations or Infractions

Whether Chapter 13 can discharge the ticket debt depends on the nature of the law(s) you violated. Neither Chapter 7 nor Chapter 13 can discharge criminal fines or restitution. So the traffic ticket(s) must not be for a crime, but rather for a traffic violation or infraction. It can’t be for a misdemeanor or felony.

Chapter 13 specifically excludes from discharge “any debt… for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime.” See Section 1328(a)(3). So did your license suspension came from breaking a traffic law requiring you to pay restitution or a criminal fine? If so that restitution or fine could not be discharged in bankruptcy, thereby not enabling your license to be reinstated. But if your ticket(s) are from traffic violation(s) or infraction(s), those could be discharged and your license reinstated.

This Can Be Unclear and Feel Arbitrary

What’s the difference between a dischargeable non-criminal traffic violation or infraction and a nondischargeable criminal fine?  This is often not clear.  None of these words are defined in the Bankruptcy Code. Whether breaking a traffic law is considered non-criminal or criminal can be quite arbitrary. It can turn on the coincidence of the words used in your state’s statutes or your local jurisdiction’s ordinances.

Generally, the more serious a violation of the traffic laws, the more likely that violation would be considered criminal. On one extreme, parking tickets are most likely not criminal. On the other extreme are serious violations that would likely be considered criminal, such as reckless driving, hit and run, and evading arrest. Your bankruptcy lawyer has experience with your local and state jurisdictions’ laws to advise you in making this crucial distinction.

License Reinstatement Procedure

Assume that Chapter 13 would discharge your particular traffic ticket debts. Under Chapter 13 the discharge of your debts does not happen until the end of the 3-to-5 year case. You may or may not have to wait that long to reinstate your license. It depends on local procedures.

Those procedures involve a number of authorities—the state or local court imposing the traffic fine, the state motor vehicles department reinstating your license, and the bankruptcy court discharging the traffic fine debt.

Conclusion

So, no question, this is complicated. Your bankruptcy lawyer will help in two huge ways. First, he or she will advise you whether you will be able to reinstate your license. If so, second, your lawyer will be aware of policies and practices of each of the authorities (or can research this), and guide your case through them efficiently. Then your license will be reinstated as quickly as possible.

 

Surprising Bankruptcy Benefits: Make Creditors Return Your Money

March 26th, 2018 at 7:00 am

Bankruptcy doesn’t just stop garnishments and other collections. Sometimes you can make a creditor return money it recently took from you.

 

Bankruptcy’s “automatic stay” is one of the most immediate and powerful benefits of bankruptcy. It immediately stops almost all creditor collection actions against you, your income, and your assets. See Section 362 of the U.S. Bankruptcy Code.  

But it does not go into effect until the moment you file your bankruptcy case. What if a creditor garnishes or otherwise gets your money right BEFORE you file bankruptcy?

Sometimes the creditor can be forced to give up such recently received money as well.

The Law of Preferences

This happens through the surprising and easily misunderstood law of “preferences.”

This law says that if a creditor takes money (or some other asset) from you within the 90 days before you file your bankruptcy case, the creditor may need to pay it back. It has to do so if keeping that money results in that creditor receiving a greater share of its debt than the rest of your creditors would get out of your bankruptcy case. See Section 547(b) of the Bankruptcy Code.

That second condition would often be met, especially in a consumer Chapter 7 “straight bankruptcy case.” So, most money grabbed by an unsecured creditor within 90 days before your bankruptcy filing can be “avoided.” The creditor can be forced to return it.

For example, let’s say an aggressive unsecured medical debt collector garnishes your checking account. You’ve just deposited your paycheck and the creditor grabs $2,000. You owed $5,000 so this creditor just got paid 40% of its debt. Then you file your Chapter 7 case a day after the creditor garnished your money. Assume you owe a total of $75,000 in general unsecured debts. If in that Chapter 7 case—as in most—all your assets were “exempt” (protected), those debts would receive nothing. So, the garnished $2,000 would be a preferential payment that could be reversed. That’s because it happened within 90 days before filing and resulted in the creditor getting 40% instead of nothing.

(There are a number of other conditions and exceptions to a preference, but they often don’t apply to consumer cases. However, preference law can sometimes get quite complicated. You need to talk with your bankruptcy lawyer to find out if you really have an avoidable “preferential payment.”)

The Principles behind Preference Law

Preference law serves two principles important to bankruptcy.

First, bankruptcy law tries to discourage overaggressive creditors. The risk that a creditor would have to return money grabbed just before the debtor files bankruptcy is supposed to be a disincentive for such a money grab.

Second, a lot of bankruptcy law focuses on maintaining fairness among creditors. Similarly situated creditors should be treated the same. No playing favorites unless there is a legally appropriate reason to do so.  (On such reason would be if the debt is secured by collateral).

This fairness means that legally similar creditors need to be treated the same not just during your bankruptcy case but also shortly before the filing of your case. The period of fairness extends a bit before the bankruptcy filing so that overly aggressive creditors aren’t favored. Any available money or assets are spread among all the creditors more evenly and thus more fairly.

A Preference Benefitting You

It’s all well and good to punish a creditor for grabbing money from you shortly before you file bankruptcy. But what good does it do you if that money just goes to your Chapter 7 trustee?  The trustee would just distribute that money among your other creditors, right?

Generally, yes. But in many circumstances this preference money helps you very directly. Next time we’ll show you how.

 

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