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A Creditor’s Precautionary Motion about the Automatic Stay

February 26th, 2018 at 8:00 am

A creditor might file a motion to avoid violating the stay, or to get permission to take some action other than collect a debt.   

 

In the last three blog posts we’ve covered five reasons why creditors ask for “relief from the automatic stay.” The first one is by far is the most common.  Creditors ask for “relief from stay” to take back collateral, or to establish payment and other terms that you must meet to avoid losing the collateral.

The other four reasons were to get permission to finish a lawsuit or other proceeding to determine:

  1. whether you owe any debt to the creditor
  1. the amount of that debt, assuming you owe something
  2. whether you owe a debt which can be paid by insurance (instead of you personally)
  3. whether the debt you owe can be discharged (written off) in bankruptcy     

Today we cover two more reasons that a creditor may ask the bankruptcy court for “relief from stay.” These tend to be precautionary—arguably the creditor or other party could act without bankruptcy court permission. But because of the risks of potentially violating the automatic stay the party first asks for permission.

So, a party could file a motion for relief from stay

  1. to get a court determination whether the creditor’s intended actions would violate the automatic stay
  2. to get permission to take some other action against you not involving collecting a monetary obligation

Penalties for Violation of the Automatic Stay

When a creditor or other party learns that you’ve filed a bankruptcy case, it knows that it can no longer take collection action against you to collect any debt. If it does take such action it would likely be in violation of federal law and may have to pay damages.

The U.S. Bankruptcy Code (at Section 362(k)(1)) says that

an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

In other words there can be significant financial penalties for taking action against you in violation of the automatic stay.

1. Avoiding Violation of the Automatic Stay

The problem is that sometimes it’s not crystal clear whether a certain action by a creditor would violate the automatic stay or not. Bankruptcy Code Section 362 about the automatic stay has 8 subsections about the kinds of actions that bankruptcy stays (stops). It has 28 exceptions about the kinds of creditor actions that the automatic stay does not stop. The entire code section contains about 6,500 words—lots of potential for confusion.

So how does a creditor or other adversary of yours avoid the potentially serious penalties for violating the stay? It can file a precautionary motion for relief from stay to put the issue before the bankruptcy court. The creditor/adversary doesn’t act against you until after getting the court’s determination that it is acting legally.

For example, assume that you file a bankruptcy case while you are in the midst of a divorce. Your ex-spouse wants to finish the divorce proceeding regardless of your bankruptcy filing. The Bankruptcy Code says it’s not a violation of the automatic stay to finish a divorce proceeding. However it IS a violation to the extent that “such proceeding seeks to determine the division of property that is property of the estate.”  (Section 362(b)(2)(A)(iv).)

So your ex-spouse may file a precautionary motion to find out if the property to be divided is included in “property of the [bankruptcy] estate.” He or she wants to know how to go forward with the divorce without violating the automatic stay.

Note that you can simply not respond to such a motion if you’re fine with the action your adversary proposes. Then the bankruptcy judge will likely give the adversary the clarification it needed. If you don’t object your adversary will more likely get what it is requesting.

But if you do want to object, you respond through your bankruptcy lawyer to the creditor’s motion. The judge then decides whether the creditor’s proposed action would be a violation of the automatic stay. And if it would be a violation, the court usually also decides whether the adversary is still entitled to relief from stay to proceed with his or her action.

2. Permission to Take Action Other Than to Collect a Debt

Similarly, a creditor may ask for relief from stay to take some action separate from collecting its debt. It is essentially asking to take some action other than debt collection, and wants to be sure it can.

When you enter a contract with a creditor, you often have contractual obligations beyond just paying the debt. For example, if you’re behind on rent payments on an apartment when you file bankruptcy, you owe a debt. The landlord cannot pursue you on that debt because of your bankruptcy filing. But it may want to evict you so that it can rent it to another tenant. So the landlord could file a motion for relief from stay to get permission to evict you. That motion would make clear that the landlord is NOT asking for or getting permission to collect the back rent. It’s just asking for permission to proceed with an eviction-only lawsuit. If the landlord succeeded in that motion, the court’s order granting the permission would also be limited to the eviction proceeding, and would not allow collection of the back rent.

(There are special rules about the automatic stay involving residential rentals. So be sure to discuss this with your bankruptcy lawyer if it pertains to you. Also, see Section 362(b)(22 and 23) of the Bankruptcy Code and our recent blog posts about this.)

 

Why Filing for Chapter 7 Bankruptcy May Be the Answer for You

September 22nd, 2014 at 8:29 am

Chapter 7 BankruptcyLet’s face it: bankruptcy is a daunting prospect. Many first-time filers feel stressed, anxious and even overwhelmed at the idea. The truth, however, is that bankruptcy comes with many benefits: no more calls from creditors and no more worrying about losing your home, to name two.

When most individuals think of bankruptcy, Chapter 7 comes to mind. That is because it is the most common type of bankruptcy.

According to UScourts.gov, Chapter 7 allows for an immediate stop of wage garnishments, home foreclosure, phone calls from creditors and repossessions. A trustee will evaluate your assets to see if liquidation is an option, but in most cases, filers can keep their properties.

Ultimately, very few creditors appeal the results of creditors’ meetings. The bankruptcy process ends with the court wiping away or discharging eligible debts.

It is important to note, however, that the court cannot discharge all types of debt. Ineligible debts include school loans, child support and employee tax debts.

Another advantage of Chapter 7 is the relative speed of the process. In fact, it usually takes less than six months from the time you file for Chapter 7 bankruptcy to become relieved of debt.

There is a tradeoff, of course. Filing for bankruptcy means you cannot apply for credit for up to 10 years. Still, filers enjoy the relief that comes with having a plan and seeing the light at the end of the tunnel.

If you are considering filing for bankruptcy in San Antonio, Texas, we can help. Chance M. McGhee is a San Antonio bankruptcy attorney. He will sit down with you, examine your situation and help you determine if filing for bankruptcy would be the right solution.

Mr. McGhee will also explain the pros and cons of Chapter 7 bankruptcy so you are aware of how the process works. To schedule a consultation, please call our office at 210-342-3400.

Qualifying for Chapter 7 Bankruptcy

September 4th, 2014 at 10:35 am

Chapter 7 bankruptcyIn order to qualify for Chapter 7 bankruptcy, the U.S. Bankruptcy Court requires a person to pass a “means test.” This means test will determine if your Chapter 7 bankruptcy should be dismissed or if you should actually be filing for Chapter 13 bankruptcy.

In order to pass the means test, the courts look at your income for the prior six months before you filed for bankruptcy and then doubles that figure. That amount must be below the median level for the state you live in. In Texas, the annual median income is as follows:

  • Single person household: $41,960
  • Two person household: $57,121
  • Three person household: $60,440
  • Four person household: $69,570
  • Add $8,100 per person over four

If your income falls below the median, then you should have no problems qualifying for Chapter 7 bankruptcy. If it goes above, then a qualified bankruptcy attorney can go over what other options you may have.

If you have an occupation that you earn more money or where your monthly income fluctuates, then the time of year you file could make all the difference in whether or not you will meet the means test and qualify.

Teaching is a perfect example of this type of occupation. Teachers typically work ten months per year, from September until June. During the summer vacation months of July and August, they do not draw paychecks. September could be the best time for a teacher to file bankruptcy, since the court does not count checks for the month you file in. This means that the teacher’s checks for the months of March through August will be used to calculate the means test. Since July and August are “checkless” months, this means only four months of income will be used for the calculation and could make a difference in qualifying for Chapter 7.

If you are struggling with debt problems in the San Antonio, Texas area due to job loss, medical issues, or any other reason, seek help from a experienced San Antonio bankruptcy attorney today. Contact the Law Offices of Chance M. McGhee for all of your bankruptcy needs, and to start the process of financial relief and recovery.

What Are Debt Collectors Allowed to Do?

June 27th, 2014 at 7:00 am

bankruptcy attorney, certified letter, contact debtors, debt collection, debt collectors, San Antonio bankruptcy lawyer, Texas bankruptcy attDebt collectors are only allowed to do so much when trying to acquire money owed from their debtors. And while there are times when debt collectors will go beyond what they are legally permitted to do, having an understanding of what is permitted can help to be determine whether or not a collector has gone too far.

Method of Contact

According to the Office of Consumer Credit Commissioner (OCCC), various creditors use independent debt collection agencies to acquire money owed. With that said, debt collectors are permitted to contact debtors via phone, mail, in-person, telegram, or fax. But, they should not contact debtors prior to 8:00 a.m. or after 9:00 p.m., unless given consent from the debtor. Also, debt collectors should not contact debtors at work, especially if the collector knows the employer does not approve of these contacts.

If you are in debt, and are working with a bankruptcy attorney, a debt collector must contact the attorney about your debt and not you. Debt collectors can contact third parties, but only to find out where you live, what your phone number is, and where you work. They are not permitted to contact third parties more than once.

Within five days of contact, you must be provided with notice regarding how much money you owe, to whom you owe the money, and what you must do if you believe you do not owe any money.

How to Stop Contact

You can stop debt collectors from contacting you by sending in a certified letter to the creditor. The letter must tell the creditor to stop contacting you. This will not get rid of the debt that you owe, but it will end the contact from the creditor and their collectors. Also, make sure you keep a copy of the letter for your records. The only form of contact the creditor can make following the letter is to let the debtor know the letter was received.

If you or a loved one has been contacted by a debt collector, contact a Texas bankruptcy attorney who can help you deal with the situation.

Debt Coping: What to Do When a Child Passes Away

March 31st, 2014 at 12:45 pm

student loan debt, San Antonio bankruptcy lawyer, San Antonio bankruptcy attorney, Texas lawyerGoing through the process of grieving a child is devastating for any parent. However it can be even more challenging to move on when private student loan debt follows that individual after the child has passed away.

While most federal student loan debt is wiped out when a person passes away, private lenders may try to go after family members. If you are trying to cope with this situation, you may have a way out: bankruptcy.

Just ask Francisco Reynoso of California. His son died in a car accident in 2008, but Reynoso was on the line for six figures of student loan debt for which he had cosigned. With an income of just $21,000 per year, Reynoso was trying to grieve the loss of his child while avoid collection calls and demands from private lenders.

Some of the debt had been transferred to private investors outside of the original lender, making it difficult to identify which company was connected with each debt. Reynoso wasn’t even sure whether it was possible to negotiate settlements because he did not know who had taken over the loans.

Ultimately, he felt backed into a corner, unable to meet the payment demands. He decided to go through bankruptcy so that he could finally wave goodbye to the loans and lenders and instead focus on grieving his son and healing.

Parents taking on co-signing responsibilities are likely not concerned about having to make these massive payments in the future because they expect the child to get a job after graduation, rather than expecting them to pass away.

A child who passes away may leave behind big private student loan debt that is impossible for parents to pay off. In these cases, bankruptcy can provide a way out and a fresh start. If you would like to know how the process can help you, contact a Texas bankruptcy attorney today.

The Negative Physical Impacts of Financial Stress

February 20th, 2014 at 12:35 pm

financial stress bankruptcy 462446523Many may have anxiety when thinking about bankruptcy and it’s possible impacts, but it’s important to realize that constant financial stress in your life can lead to negative ramifications, too. When you’re dealing with a mountain of financial problems, that influence can rub off on your physical well-being.

If you have been feeling like you’ll never get on top of the finances, you need to consult with a bankruptcy attorney to learn more about your options.

If you’re short on cash, you’re more likely to put off getting treatment or medications for an existing health problem. This can build up, and when coupled with the worrying associated with being behind on your bills, can start to cause chronic health issues for you. You might be avoiding medical treatment because you have past due bills, too, or even feeling guilty because you can’t afford to invest in some kind of care, like braces, that your children might need. This can manifest as anxiety in your everyday life.

In a recent study, people were asked whether they thought their physical health had been affected by financial stress. Nearly half of all survey respondents indicated that they felt “stressed out” as a result of their financial woes. Others indicated health issues like headaches, depression, back pain, ulcers, appetite disorders, weight gain, or even insomnia.

If you’re currently struggling to make minimum payments and trying to keep creditors off your back, this is not a long term solution. You need help, and consulting with a bankruptcy attorney can be a valuable opportunity.

When you feel like you’re stuck between a rock and a hard place financially, it’s time to re-evaluate the situation to determine whether there’s a better approach. Bankruptcy may be the fresh start you need, giving you time to get back on your feet and approach your life with a new plan.

Continued stress and anxiety associated with worry over financial problems can cause you physical pain and problems. Contact a Texas bankruptcy attorney today for more information.

Can Anyone Stop my Personal Bankruptcy?

December 23rd, 2013 at 4:51 pm

bankruptcy petitionFiling for bankruptcy is a great financial tool for people who have accrued too much debt to handle responsibly.  Maybe you lost your job and do not want to lose your house.  There are several kinds of bankruptcy for which a person or a business can file.  A chapter 7 can eliminate credit card balances, unpaid medical bills, tax penalties and other unsecured debt.  On the other hand, a chapter 13 allows you to repay a portion of your debts if you have the means to do so and have the rest forgiven.

While this seems beneficial to anyone with unmanageable debts, there are ways that your bankruptcy might not discharge your debts.  During a required meeting with your creditors, objections may be raised as to prevent you from eliminating some or all of your debts.

There are two kinds of objections that creditors can typically file against your bankruptcy discharge.  The first kind is an objection to the discharge of a specific debt. This kind of objection will not change the ruling about your other debts but will only affect the ability to discharge a specific debt.

The other type of objection that can be raised is regarding all of your debts.  This kind of objection is used if there is some sort of fraud suspected in the bankruptcy filing.  Typical types of fraud during bankruptcy include providing false information on your petition for bankruptcy, transferring property to someone before filing, committing perjury during the bankruptcy hearing among other mistakes.  The penalties can be severe for committing bankruptcy fraud.  You can be responsible for all of your debts, be unable to include these debts in other bankruptcies and even be sentenced to prison.

As much as bankruptcy is a tool to get a fresh start financially, there are also things to avoid.  Committing fraud is a serious offense so be sure to provide all debts and financial information to your bankruptcy attorney.  Contact an experienced bankruptcy attorney in San Antonio today to begin your petition to file for bankruptcy.

What is a Chapter 20 Bankruptcy?

December 13th, 2013 at 3:24 pm

piggy bankA Chapter 7 bankruptcy is a common form of bankruptcy because it excuses the filer from all eligible debts.  It is commonly referred to as a liquidation bankruptcy because debts are eliminated by the sale of property and other assets. Creditors are repaid through the proceeds of those transactions.

A Chapter 13 is also called the wage-earner’s bankruptcy.  If someone is earning an income but cannot keep up with past due payments, then a Chapter 13 bankruptcy can give them time to pay those debts. There is a repayment plan that last from three to five years and is based on each person’s income.

Occasionally there are cases when nether Chapter of bankruptcy is appropriate. While a Chapter 20 bankruptcy is not a term found in the bankruptcy code, it is a common strategy to get a fresh start.  It is the process of filing two bankruptcies right after each other to resolve difficult financial situations.  The approach is filing for Chapter 7 protection and then for Chapter 13.

The Chapter 7 bankruptcy lets you eliminate dischargeable debts which does not include child support, taxes, or student loan debts.  If your debts are too high to qualify right away for a Chapter 13 bankruptcy, the Chapter 7 bankruptcy can eliminate enough to become eligible.  That can allow you to focus the majority of your income on debts that cannot be discharged.

The disadvantages of a Chapter 20 filing is you can’t receive a discharge during the Chapter 13 part of the process.  It is also possible that a bankruptcy trustee will object to your Chapter 20 bankruptcy.  They can claim that your Chapter 13 filing is in bad faith.  If that happens, you will be responsible for providing proof that it is necessary given your situation.

If you are concerned about making your monthly credit card payments or losing your family home, then bankruptcy might be an option for you.  Talking to a legal professional can show the benefits of each Chapter based on your situation.  Contact an experienced bankruptcy attorney in San Antonio today.

Which First, Divorce or Bankruptcy?

September 29th, 2013 at 8:00 am

courtMoney is a major source of tension for any marriage.  It may not be the cause of a divorce but financial arguments can add to the stress on any couple.  Especially if that pressure is compounded by bills that are not being paid and calls from creditors.  As much as financial troubles can be the cause of divorce, divorce can also be the cause of bankruptcy.

Given this close relationship to two of the most stressful events that might occur in life, it is important to plan ahead.  The first consideration is which you should do first, file for divorce or for bankruptcy.

The fees for filing for bankruptcy are the same regardless if you apply separately or together.  That means you can potentially save money if you file with your soon to be ex-spouse.  It should be mentioned to your bankruptcy attorney that you will divorce soon, that way there is no conflict of interest.

The next step is to consider what type of bankruptcy to file for, Chapter 7 or Chapter 13.  Since a Chapter 7 bankruptcy means that you sell your property and assets to repay your debts.  This is an easy and quick bankruptcy to complete before divorcing your partner.  Chapter 13 is a long term repayment program.  This would be difficult to complete without your spouse in the same household.  A Chapter 13 bankruptcy should be filed individually after the divorce is finalized.

If you need a restart financially, it makes more sense to file for bankruptcy before filing for divorce.  One of the major sticking points in divorce is the division of property.  By filing jointly, you may be eligible for more exemptions because you are still married.  But assets are not the only thing that gets divided, but debts do too.  If you are looking for a new start both in your finances and your love life, then contact a knowledgeable bankruptcy attorney in San Antonio today.

A 341 Meeting in Texas: Bankruptcy Basics

September 22nd, 2013 at 10:58 am

Deciding whether or not to file for bankruptcy can be one of the most important decisions a family makes. Some families put off the process as long as possible hoping to avoid the stigma that comes with filing for bankruptcy, but in many cases it’s the easiest, simplest, and most effective way to recover from financial insolvency. Following the financial crisis of 2008, from which many Texans are still recovering, bankruptcy became a more important option than ever.

But it’s a complicated process, one that has many different steps and processes depending on which type of bankruptcy the debtor is filing. Though local rules govern each bankruptcy court, the overall procedure of filing bankruptcy is overseen by Federal Rules under the Bankruptcy Procedure, set forth by the U.S. Court system and laid out in the U.S. Bankruptcy Code. There are two main types of personal bankruptcy: Chapter 7, in which the debtor liquidates his assets and his debts; and Chapter 13, in which the debtor goes through a debt reorganization process. In a Chapter 7 filing, the debtor never appears in court, and only sees the judge if an objection is raised in the case. In a Chapter 13 filing, the debtor will likely appear before a bankruptcy judge only at a plan confirmation hearing.

The debtor, in fact, has very little formal dealing with the bankruptcy filing at all. Usually, the only meeting at which a debtor must be present is the “meeting of creditors, which is usually held at the offices of the U.S. trustee,” according to the U.S. Court website. This meeting is informally known as a “341 meeting.” It is section 341 of the Bankruptcy Code that requires a debtor to answer questions to creditors about both assets and debts.

According to publication released by Dallas and Ft. Worth trustees, a 341 meeting in Texas is pretty simple for the debtor. Attendees will be asked to state their appearances, and the meeting process will be explained to the debtor. The debtor will be sworn in, and all personal information (as well as prior filings) will be verified. Clients MUST bring “valid proof of identity and social security number.” Though the meeting is pretty straightforward for a debtor, but the process cannot be completed effectively without an experienced bankruptcy lawyer.

If you or someone you know is considering filing for bankruptcy, don’t go through it alone. Contact a dedicated Texas bankruptcy attorney today.

 

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