What Happens If The Bankruptcy Court Dismisses My Case?

Written by Peter Mullison, Colorado Bankruptcy Attorney

Yes, your bankruptcy case can be dismissed. It doesn’t happen often, but it can happen.

Maybe your attorney missed a deadline. Maybe you didn’t show up at the meeting of creditors or provide the trustee with a copy of your tax return. Maybe the United States Trustee filed a motion to dismiss your Chapter 7 bankruptcy because you made too much money to qualify for Chapter 7. While focusing on the reason why can help you avoid mistakes in the future, the more important question is what happens next and how the dismissal affects you if you decide to file again.

Remember that when you file bankruptcy, a protective order is put in place. This protective order prevents creditors from taking any action to collect a debt from you. Foreclosures have to stop. Garnishments have to stop. Lawsuits (except divorces and criminal proceedings) have to stop. Once your case is dismissed, unfortunately, that protective order evaporates. Creditors – who you haven’t paid at least since you filed your case – will want their money. The phone calls will start again, lawsuits can be filed, and paychecks can be garnished. It also means that any property that the trustee has (a tax refund, for example) must be returned to you.

The good news is that you can file a new bankruptcy petition. Depending on why your case was dismissed you may have to wait 180 days before you re-file. And, generally, having your earlier case dismissed has no effect on your new case. Section 349 of the Bankruptcy Code states that, “the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title.” However, if your case was dismissed for your failure to abide by an order of the court or if you asked the court to dismiss your case, you’ll want to wait 180 days from the dismissal date to re-file.

If you’re served with a motion to dismiss, you should contact your bankruptcy attorney immediately to talk about what the next steps should be. You can either fight the dismissal or prepare to re-file after the court enters its dismissal order. In either case, you should know what the consequences are.

If you have questions about bankruptcy, we hope you’ll schedule a free, no-obligation consultation. You can learn about whether bankruptcy is your best option and whether you want to work with us. Schedule your consultation online or call 303.331.3403 to meet with a bankruptcy lawyer today.

New Median Income Amounts For Bankruptcy Means Test Effective May 1, 2012

Written by Peter Mullison, Colorado Bankruptcy Attorney

The US Trustee has updated median income numbers that bankruptcy filers must use to see if they qualify for Chapter 7 bankruptcy.

For Colorado, the median income numbers are:

-Household Size of 1: $48,856

-Household Size of 2: $64,402

-Household Size of 3: $71,438

-Household Size of 4: $82,427

Add $7500 for each household member more than 4.

Calculating income to see if a filer qualifies for Chapter 7 is critical. If a filer is under, then he passes the first part of the income test for Chapter 7. If he is slightly over, his attorney will have to complete the means test to see if there is still any way for him to file Chapter 7.

If you have any question about whether you qualify for Chapter 7 bankruptcy, schedule a free, no-obligation consultation with a bankruptcy attorney. You can schedule your consultation with our online system or just call 303.331.3403.

These numbers are effective May 1, 2012 and subject to change from time to time.

Can I Afford A “Zero Down” Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

You’ve probably heard the ads on the radio. Maybe you’ve seen them on television. You’ll even find them on craigslist. Attorneys who offer to file your bankruptcy with no money down. “Zero down! Call now! Only 17 people can get this deal! Only 11 appointments left!”

It makes sense, right? Anyone who is thinking about bankruptcy is having a hard time making ends meet. The last thing they can find funds for is a bankruptcy attorney. So, how does zero down bankruptcy work?

First, let’s go back to the distinctions between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 will eliminate all dischargeable debts about 90 days after your attorney files your petition and it doesn’t require you to pay anything back. In fact, if you still owe your bankruptcy attorney any of his fees, he can’t collect. That bill gets discharged just like the rest of your debts.

Chapter 13 bankruptcy requires you to pay back a certain amount of your debt based on a calculation that takes into account your take home income and allowable monthly expenses. You won’t get a discharge of any of your debts for three to five years. And Chapter 13 allows you to pay your attorney fees over those three to five years.

There are two primary reasons why someone would file Chapter 7 instead of Chapter 13 bankruptcy: he makes too much money to qualify for Chapter 7, or he’s trying to get caught up on a secured debt, usually his mortgage.

So, that’s how zero down bankruptcy works. The attorney takes someone who could file for Chapter 7 bankruptcy and squeezes them into a Chapter 13, with the result being that the only person benefiting is the lawyer who steered him into a Chapter 13 bankruptcy. Is that really in anyone’s best interest, besides the attorney? What happens if, say, a year into the Chapter 13 bankruptcy you can no longer make your payments? Two things: your case gets dismissed and your creditors can come after you for any money you still owe and your bankruptcy attorney has already made a huge chunk of money off your case. No problem, though, because the same attorney will file a Chapter 7 bankruptcy for you. Of course, that’s going to cost you.

Now, just for fun, let’s take a look at ads like this. One attorney is claiming that he only has a certain number of appointments available to help people who want to file bankruptcy with no money down. Funny thing is, the number of slots never changes. I don’t understand attorney tactics like this. Bankruptcy is supposed to provide relief from lenders and creditors who use sharp tactics to get people to borrow money. Attorneys who offer zero down bankruptcy and use advertisements like this can hardly claim to be much different from creditors who prey on people who are struggling financially.

Of course the bottom line is that you’re looking for financial relief right now. And zero down bankruptcy means you’ll get the protection of the bankruptcy court sooner than later. But does it make sense to file Chapter 13 and be stuck under the scrutiny of the bankruptcy court and trustee for three years or more when you could get relief from your debts in 90 days in a Chapter 7? Instead, consider some other options. You could wait a few months to save enough to pay attorney fees for a Chapter 7. Maybe you could ask a family member or friend with help to pay the fee. If your income is low enough, you might even qualify for free legal services from a non-profit agency.

If you’d like to find out if Chapter 7 bankruptcy is an option for you, we hope you’ll schedule a free, no-obligation consultation with an attorney to learn more. We don’t offer zero down bankruptcy, but we do offer honest answers and diligent advocacy to make sure that you get the fresh start you need as soon as possible. You can schedule your consultation online or call 303.331.3403.

Can I File Bankruptcy After My Car Has Been Repossessed?

Written by Peter Mullison, Colorado Bankruptcy Attorney

My clients don’t plan to file bankruptcy. My clients usually come to me after several years of trying to make ends meet. They’ve gone through a divorce, become unemployed, or had to deal with a medical emergency for which they were uninsured. Eventually, they have to make choices about which bills they’re going to pay. They have to decide between keep a roof over their family’s heads or paying off credit card debt. Sometimes they have to decide that they can no longer make their car payment. Unfortunately, letting a lender repossess a car doesn’t mean they won’t want any money.

More than once I’ve gotten a call from someone after a recovery company has towed their car away and they’ve gotten served with a lawsuit from their lender looking to them to pay up. When a lender repossesses a car, they’ll put it on the auction block and try to resell it. When they get paid, they’ll apply what they get to the amount you still owe on your loan. If there’s anything left to pay, they’ll come after you for the rest. And they’ll add other costs, like storage, and auction and repossession fees. You might be left owing just as much as before they took your car. If you can’t pay them this deficiency, you can expect to see a summons for a lawsuit sooner than later. Once they get judgment, and they will, they can garnish 25% of your paycheck and vacuum out your bank account.

Bankruptcy can stop them from trying to collect this money from you. The second your bankruptcy attorney files your petition, the lender has to stop all collection activity. They can’t call you and they can’t sue you to get what they think you owe. If they’ve already sued you and gotten judgment, they can’t garnish your paycheck or your bank account.  Bankruptcy will allow you to discharge (eliminate) credit card debt, medical bills, car loans, mortgages, and other common types of debt. Keep in mind that bankruptcy won’t get rid of alimony, child support, court restitution, some income taxes, and few other things.

If you’ve been trying to make ends meet and have felt like your financial life is out of control, bankruptcy can put you back in the driver’s seat. We offer free consultations which are no-obligation and completely confidential. You can use our online scheduling system to make an appointment that is convenient for you or call 303.331.3403 to talk with a bankruptcy lawyer.

What Happens If I Don’t Turnover Property To The Bankruptcy Trustee?

Written by Peter Mullison, Colorado Bankruptcy Attorney

“Am I going to be able to keep my property?” has to be in the top five questions that every person who comes in for a consultation asks me.

The answer? It depends, but in most cases, yes. The Bankruptcy Code allows people who file bankruptcy to protect a certain amount of property. These rules, called “exemptions,” are usually sufficient to cover the property that most people own. While each state gets to decide what their exemptions cover, Colorado has exemptions that cover a bankruptcy filer’s home, household goods, clothing, jewelry, vehicles, and tools of the trade, just to name a few.

For most of my clients, these exemptions are enough to protect their property. If they have any property that isn’t covered by these exemptions, we may be able to convert it to protected property before we file their bankruptcy petition. If they have an extra vehicle, for example, that isn’t covered by the vehicle exemption, they can sell the car and use the proceeds (appropriately, of course) before they file. Or they can purchase property that is exempt.

Sometimes it isn’t possible to protect everything. One of the most common piece of non-exempt property is the tax refund. If you file bankruptcy before you get and spend your tax refund, you’ll likely lose it to the bankruptcy trustee. Things get even more complicated if you file before the end of the year before you’ve filed your return. During the last several months of any year, bankruptcy trustees will start asking to see my clients’ tax returns that they file before next April’s deadline. If they’re due a refund, the trustee can have a portion of that refund, calculated by how much income they earned before they filed bankruptcy.

Say for example you file in October 2012. The bankruptcy trustee will want to see your tax return for 2012. He’ll calculate that he’s due approximately 75% of any tax refund you’re due. At the meeting of creditors he’ll ask you to sign an agreement by which you agree to turn this part of your refund over to him. Then he’ll submit the agreement to the court and ask the court to sign an order to enforce your agreement?

So, what happens if you don’t turnover your tax refund (or any other property for which the trustee has gotten a court order)? The trustee will likely send you a semi-polite letter reminding you of your court-ordered obligation to turn the property over. If you fail to do so, then the trustee will ask the court to deny or revoke your bankruptcy discharge, based on Section 727(a)(6)(A) of the Bankruptcy Code, which states that the court may deny discharge based on a debtor’s refusal “to obey any lawful order of the court”.

Once the court denies or revokes your discharge, your creditors will be all over you like flies on honey. The phone calls will start and soon you’ll be served with the lawsuits that you avoided when you filed bankruptcy.

The best course of action is to abide by the agreement you entered into with the trustee. An experienced bankruptcy attorney can make sure you’re prepared for that and can help you avoid, to the extent possible, having to turnover any property.

If you’re thinking about bankruptcy and have questions about whether your property is protected, schedule a free consultation with a bankruptcy attorney to learn more. You can call 303.331.3403 to schedule your appointment or use our online scheduling system.

 

Can The Trustee Make Family Members Give Back Money I Gave To Them Before I Filed Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

One of the reasons you should consider hiring an attorney to guide you through the bankruptcy process is that it can be a minefield. Just like you wouldn’t attempt a Class IV rapids or scale Mt. Everest without professional help from an experienced guide, filing bankruptcy without an attorney has the potential to get a person into danger.

A prime example of one of the perils of filing bankruptcy without an attorney are what can happen if you’ve given any money to family members within the year prior to filing.  When your attorney completes your petition, she will have to include any such payments on the Statement of Financial Affairs (the “SOFA”). The bankruptcy trustee will scrutinize your SOFA since Section 547(b) of the Bankruptcy Code provides that:

the trustee may avoid any transfer of an interest of the debtor in property—

(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;

(4)made—

(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and

(5)that enables such creditor to receive more than such creditor would receive if—

(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.

What that means is that the trustee can force whoever you gave this money to to turnover those funds. Then he’ll distribute those funds to the rest of your creditors who make a claim (after taking out some for his commission, of course).

If you have made these kinds of payments, you have some choices to make: you can file now and disclose the payment and see what the trustee does. If the amount is relatively small, say a few hundred dollars, it’s possible that the trustee won’t want to spend any time pursuing his claim. If the trustee does think that it’s worth his time, he may offer the option of either letting you settle it, or he will go after your family member. Naturally, you’ll want to talk to this family member before you file to give him or her the heads up that the trustee might be contacting them.

Your attorney can also try to argue with the trustee that these funds fall under the exception listed in Section 547(c)(2) of the Bankruptcy Code, which states that a trustee may not avoid a transfer:

to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was—

(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or
(B) made according to ordinary business terms
Keep in mind that this exception is not as useful as it appears. Several courts have held, for instance, that a loan from a family member is not a debt incurred in the “ordinary court of business or financial affairs of the debtor.” Your other option is to wait until one year and one day from the time you made the payment before you file. In that case, you don’t have to disclose the payment. Of course that could present other problems, especially if you have creditors breathing down your neck.
If you have questions about bankruptcy and payments to family members, you should consider talking with a bankruptcy attorney. Our consultations are free, confidential, and require no obligation to retain us. If we don’t think we can help you, we’ll refer you to another attorney. You can schedule a free consultation online or just call 303.331.3403.

Should I Tell My Creditors That I Am Going To File Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

One of the last questions I always seem to get at my first consultations with any prospective client is, “What do I tell my creditors?”

Most of my clients don’t retain me at their first consultation. In fact, our policy is to not enter into a retainer agreement until after that first consultation so that potential clients can decide if bankruptcy is their best option and whether we are the best law firm for them. We don’t want them to feel pressured into making a very difficult and personal decision. Also, it may take time for someone to come up with the attorney and court fees for filing bankruptcy.

What that means is that it could take some time between when someone meets with me for the first time and when we file their bankruptcy petition. If you’ve stopped paying your credit cards, you’ve probably already started getting phone calls from insistent debt collectors. When I was representing creditors, I can’t tell you how often someone would tell me that they were considering filing bankruptcy or had talked to a bankruptcy lawyer. Until they actually filed bankruptcy, I had to pursue my client’s claim against them. The lawsuit was going to move forward until I got the notice of their bankruptcy filing.

If you’re answering their phone calls, keep in mind that you are under no obligation to do so. Unless you’re prepared to set up a repayment plan, I’m not sure there is any real reason to talk to them. Not talking to them won’t affect your legal rights, and unless you plan on paying them back, talking to them will do about as much good as banging your head against the wall.

Keep in mind, though, that whether you do or don’t talk to your creditors, they can and will pursue legal action if you aren’t paying your debt. Only paying the debt or filing bankruptcy will get them to stop.

If you’re struggling to make ends meet and have questions about whether bankruptcy is your best option, consider scheduling a free consultation with a bankruptcy attorney today. You’re under no obligation to retain us and an attorney can give you straight forward information about how bankruptcy will affect you and answer all of your questions.

Do I Have To Include Social Security Payments On The Means Test When I File Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

One of the things that you’ll learn during a initial consultation with a bankruptcy attorney is whether or not you’ll be able to file Chapter 7 or Chapter 13 bankruptcy. Given that Chapter 7 will eliminate all dischargeable debts within about 90 days from filing and doesn’t require the debtor to repay any discharged debts, Chapter 7 is often the better option. Unfortunately, an individual can’t simply choose which chapter he will file.

In order to qualify for Chapter 7, we have to look at your last six months of income. We’ll total all of your income, and divide that number by six to get a monthly average. Then we take your monthly average and multiply it by twelve (12) to get your annual income. Your annual income must be below the median income for your household size.

If your annual income is below the median income for your household, then we’ll take a look at your monthly take home pay and compare it to your monthly expenses to make sure that there isn’t too much money left over at the end of the month, which could force you into Chapter 13 or exploring other repayment options, like debt consolidation.

But if your annual income is over the median income for your household size, we have to complete the means test. The means test requires greater scrutiny of your income and expenses. You’ll be able to include some expenses and not other, as well as include some income sources and not others.

Fortunately, social security income is excluded from calculation of income for means test purposes. This can be especially important if one spouse works while the other is receiving social security benefits or if a child of one of the filers is receiving benefits.

Keep in mind, however, that even if leaving social security benefits off the means test will allow you to pass the test, you still have to include social security income in the calculation I mentioned above that looks at your monthly take home income and expenses. Again, if there is too much money left over at the end of the month, you might be forced to file Chapter 13.

As you can imagine, filing bankruptcy involves more than just plugging in numbers or filling in blanks. Consider sitting down with a bankruptcy attorney for a free consultation to see if bankruptcy is your best option or if you have any concerns that you might not be able file bankruptcy.

What Debts Are Not Discharged In Chapter 7 Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

When you file Chapter 7 bankruptcy, all of your dischargeable debts will be eliminated about 90 days after your attorney files your bankruptcy petition. When the discharge order enters, you are no longer legally liable for those debts.

Notice I emphasized the word “dischargeable”. If you are considering bankruptcy, it’s important to know that bankruptcy does not eliminate all kinds of debts. While most consumer debts, like credit cards, medical bills, and other loans will be discharged, there are exceptions. One of the things you hire a bankruptcy attorney for is to learn whether or not your debts will be discharged.

Section 523(a) of the Bankruptcy Code gives a complete list of debts that will not be eliminated in a Chapter 7 bankruptcy.  Below is a summary of  Section 523(a) and debts that won’t be discharged:

  • Certain taxes;
  • Debts for money, property, or services that were obtained by false pretenses, false representations, or fraud;
  •  Consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before filing;
  • Cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before filing;
  • Debts that aren’t listed on your bankruptcy petition;
  • Debts for fraud while acting in a fiduciary capacity, embezzlement, or larceny;
  • Domestic support obligations (alimony or child support);
  • Debts for willful and malicious injury to another person or property;
  • Court ordered restitution;
  • Students loans except where the debtor can show undue hardship;
  • Debts for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance;
  • Debts which should have been listed in a prior bankruptcy, or where the debtor waived discharge, or was previously denied discharge;
  • Debts to a spouse, former spouse, or child of the debtor and not a domestic support obligation that are incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;
  • Homeowners association dues that arise after the bankruptcy petition has been filed;

Section 523(a) covers a few other things that I didn’t include, but these are the most common kinds of debts that won’t be discharged in a Chapter 7 bankruptcy. Keep in mind, though, that Chapter 13 bankruptcy will discharge some of these debts, like debts to a former spouse that are not in the nature of a domestic support obligation.

The best way to learn if your debts will be discharged is to talk with a bankruptcy attorney. Our consultations are free and require no obligation. After your consultation you’ll know whether your debts are dischargeable and what the bankruptcy process involves and how much it will cost.

 

Top 3 Reasons My Clients File Bankruptcy

Written by Peter Mullison, Colorado Bankruptcy Attorney

I’m always a little surprised by the questions I sometimes get when I tell people I’m a bankruptcy attorney. People ask things like, “Isn’t bankruptcy like stealing?” ” Do your clients go out and run up their credit cards on big screen TVs before they file?”

None of these things are true, but unfortunately bankruptcy carries with it many misconceptions. I’d even bet that if you’re thinking about bankruptcy, you’ve thought some of these things yourself. I have yet to have someone come to me just because they’ve run up credit card bills for unnecessary things. Instead, they’ve found themselves facing an unexpected situation and have gotten to the point where they can no longer make ends meet.

Here are the top three reasons why my clients file bankruptcy:

Unemployment – The employment market is just not as stable as it once was. Even my clients who thought they were insulated from unemployment, people with technical degrees and graduate degrees, have found themselves caught off guard. Although they’re eligible for unemployment benefits, they’ll only get a fraction of what they were earning. Suddenly, they don’t have the income they need to pay their debt and are struggling to pay necessities like their mortgage and food expenses.

Medical Expenses – Many of my clients don’t have health insurance, or they’ve been struck with medical expenses while they were unemployed and uninsured. If you’ve ever taken a trip to the emergency room, or even the dentist, you know how quickly medical expenses can add up. And don’t expect one bill from just the hospital. You’ll get bills from the doctor, the radiologist, the lab, and who knows who else. Before you know it, you’ve lost track of just what you owe. These out-of-left-field expenses leave my clients struggling to get a handle on their expenses. The last thing my clients want is to leave these doctors and nurses on the hook for all the help they’ve gotten. But if it comes down to paying these bills or providing for their families, oftentimes the best option for my clients is to file bankruptcy and get a fresh start. Keep in mind that timing can be crucial. If you incur more medical bills after you file, those bills won’t be discharged by your bankruptcy. You’ll have to wait several years before you can file again. You may want to wait to file until you’ve gotten health insurance and don’t have to worry about more medical expenses.

Divorce – Divorce can be one of the hardest things a person can go through. My clients who are going through, or have gone through, divorce are experiencing a great deal of loss, both emotional and financial. Debt which seemed reasonable when there was a two-income household now seems insurmountable. Divorce and bankruptcy also requires consideration of timing. While the general recommendation is to file bankruptcy before the divorce, it can sometimes be beneficial to wait until all the property issues have been resolved. Also, special considerations can arise if you promised to pay your ex-spouse’s debts as part of your divorce.

If you are going through a divorce, have been unemployed, or recovering from unexpected medical issues, you may want to consider scheduling a consultation with a bankruptcy attorney. Our consultations are free and require no obligation. If we don’t think bankruptcy is your best option, or if we don’t think we’re the best law firm for your needs, we’ll tell you.

← Previous Entries

Next Entries →