Archive for the ‘Basics’ Category

Can I still file under the new law?

Friday, August 14th, 2009

The short answer is: YES, Most Likely You Can Still Get a Bankruptcy!

In 2005 The United States Congress passed the The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This act is also called “BAPCPA” and “New Law”. Many people have the mistaken belief that they can no longer get a bankruptcy because of this law. This is not true.

If you could qualify before, you probably still qualify. Once in a while there is an unfortunate person who is prevented from filing by the insanity of this new law. However, it is more likely that you will qualify.

For most people, the impact of the new law was just to make bankruptcy more expensive, more administratively difficult, and add a few more steps. Because of the new test to see if you qualify for bankruptcy, you really should get a bankruptcy lawyer. A lot of lawyers who practiced bankruptcy before 2005 could not figure out the new law and they stopped practicing bankruptcy or only take the simplest cases. You really need to have a bankruptcy expert who is familiar with BAPCPA. All of our attorneys have to be expert in the new law. That is why if there is any way that you can qualify, our lawyers will see it.

Bankruptcy Expert David Waltzer’s Thoughts On What Happened in 2005
In 2005 The United States Congress passed the The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Most people for many different reasons would say the Act was either an abomination of logic or at best a pretty big failure. George Bush was proud of it though. Go figure.

The stated goal of the act was to prevent abuse of bankruptcy. Rates of bankruptcy filings were increasing dramatically. Congress could have interpreted this increase in bankruptcy filings as an indication that:

  1. we must be heading for hard times as a nation
  2. creditors are so aggressive that they are driving good, honest people to bankruptcy
  3. if more people are filing bankruptcy, well; there must be a lot of fraud and abuse of the bankruptcy laws.

Guess which one they picked? Yup. Number 3. It was exceedingly dumb, or if you are more cynical, it was exceedingly corrupt.

Either way, the result was that the bankruptcy filings took a temporary hit while everyone figured out how to function under the new law, and soon after people started filing bankruptcy by the millions. The myth of the throngs of fraudulent abusive bankruptcy filers was soon exposed for the myth it was. It seems that the only thing the law did was cost hard-working Americans billions of dollars for no reason, and thoroughly demonstrate that most people filing bankruptcy are good honest debtors in need of government protection.

Chapter 13 Bankruptcy

Friday, August 14th, 2009

Before I go further, I have to state that whatever your financial difficulty, it is strongly advised by the judges, trustees and anyone who is knowledgeable about the Chapter 13 bankruptcy process that you get an excellent bankruptcy attorney to handle your case.

Chapter 13 Bankruptcy is a ‘repayment’ plan. Sometimes it is referred to as a “wage-earner’ plan or a “mini-reorganization”. You pay something back to your creditors for a period usually between 36 and 60 months. There are basically Three kinds of people who need chapter 13 bankruptcy. High-Earners; House-Savers; Asset-Havers.

High Earners (Income is Too High For Chapter 7 Bankruptcy)

If your income is too high for chapter 7 bankruptcy, your bankruptcy attorney might be able to put you into a chapter 13 plan. The extra money you have in your budget every month will be paid to a bankruptcy trustee according to a bankruptcy plan. This plan is usually three or five-years long (36 months to 60 months) depending on several factors.

So, if you have $200 left in your budget, you pay $200 per month to your bankruptcy trustee for 5 years. (Total of $12,000). If you owe $30,000 of debt, this is a GREAT Solution for you!

The second kind of person who needs chapter 13 is someone who is behind on a the mortgage payments for a house, and wants to save the house.

House Savers
House savers are people who through some sort of hardship got behind on their mortgage payments. They want to keep their home but they need time to catch up with the the unpaid back mortgage payments (called mortgage arrears). Sometimes the banks are so aggressive that they make it impossible for people who could otherwise afford their mortgage to stay. Chapter 13 bankruptcy is for these people.

Helpful Example:
Lets say your monthly mortgage payment is $3,000 and you are six months behind on payments ($18,000). Your bank is giving you some impossible catch-up plan where you have to pay $5,000 per month for nine months. You cant afford it. Chapter 13 is your solution. So long as you can afford it, you can pay your regular mortgage and pay the $18,000 arrears over a FIVE YEAR PERIOD. That means you pay your mortgage and you pay an extra $300 per month in a chapter 13 plan. You can get caught up and keep your home.

Now imagine you also have $30,000 in credit card debt, but you can only afford to pay $300 per month in your plan. You might ALSO be able to totally eliminate your credit card debt in addition to saving your home!

Chapter 13 can be a home run : )

Asset Havers (You have a Valuable Asset That Could Be Lost in Chapter 7 Bankruptcy)

The best example is jewelry, though this principal applies to cars, homes, cash and any other kind of asset. If you have assets you are taking a dangerous risk if you do not hire a really good bankruptcy attorney to make sure you don’t lose what you have.

Though we have Bankruptcy Lawyers in New Jersey, California, Florida and other states, let me give a New York Bankruptcy Law example.

In New York, you can have a wedding ring worth $5000 and it is totally safe. This is so becaue you have a law that protects your ring. This is called a bankruptcy exemption. The exemptions are different from state to state. For instance, New Jersey Bankruptcy Law permits you to protect a ring worth more than $10,000 in certain instances! But, let me proceed with the New York example (where you can only have a ring worth $5000)

So, Imagine you have a ring worth $25,000 and it is owned free and clear. If you file Chapter 7 bankruptcy, you will definitely lose your ring. So, chapter 7 bankruptcy might not be the option for you. But, imagine that you have $100,000 of debt? What are you going to do?

If you can afford $333 per month, you file chapter 13 bankruptcy. If you file chapter 13 bankrutpcy, you will pay back at least the amount your creditors would get if you had filed chapter 7 and the ring were taken by the bankruptcy trustee.

So, $25,000 minus $5000 (your exemption) equals: $20,000. You have to repay $20,000. $20,000 over five years (60 months) is $333 per month. Now you can keep your ring, get rid of your $100,000 debt and have peace and financial recovery!

For More information on Chapter 13, I found the Federal Website Most Helpful. The Text Below is Copied from the US Courts Website. Read below or click here to go to that site.

Chapter 13

Individual Debt Adjustment

The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)

  1. Background
  2. Advantages of Chapter 13
  3. Chapter 13 Eligibility
  4. How Chapter 13 Works
  5. The Chapter 13 Plan and Confirmation Hearing
  6. Making the Plan Work
  7. The Chapter 13 Discharge
  8. The Chapter 13 Hardship Discharge


A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” (1) If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. $1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, what may be included in chapter 13 repayment plan and how it is confirmed, making the plan work, and the special chapter 13 discharge.

Advantages of Chapter 13

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Chapter 13 Eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $336,900 and secured debts are less than $1,010,650. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. Id.

An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

How Chapter 13 Works

A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at They are not available from the court.)

The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee. Normally the fees must be paid to the clerk of the court upon filing. With the court’s permission, however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 1307(c)(2).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

  1. A list of all creditors and the amounts and nature of their claims;
  2. The source, amount, and frequency of the debtor’s income;
  3. A list of all of the debtor’s property; and
  4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household’s financial position.

When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b).

Filing the petition under chapter 13 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. 11 U.S.C. § 362. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. § 101(8).

Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition.11 U.S.C. § 1322(c). The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.

Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a joint petition, they both must attend the creditors’ meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors’ meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either during or shortly after the creditors’ meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting.

In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed file a proof of claim.11 U.S.C. § 502(b)(9).

After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor’s chapter 13 repayment plan.

The Chapter 13 Plan and Confirmation Hearing

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 15 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.

There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. (3) Secured claims are those for which the creditor has the right take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plan.11 U.S.C. § 1322(a).

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any arrearage is made up during the plan. The debtor should consult an attorney to determine the proper treatment of secured claims in the plan.

The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected “disposable income” over an “applicable commitment period,” and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor’s assets were liquidated under chapter 7. 11 U.S.C. § 1325. In chapter 13, “disposable income” is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor’s gross income. If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B). The “applicable commitment period” depends on the debtor’s current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size – and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. § 1325(d). The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.

Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). If any secured loan payments or lease payments come due before the debtor’s plan is confirmed (typically home and automobile payments), the debtor must make adequate protection payments directly to the secured lender or lessor – deducting the amount paid from the amount that would otherwise be paid to the trustee. Id.

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 25 days’ notice of the hearing and may object to confirmation. Fed. R. Bankr. P. 2002(b). While a variety of objections may be made, the most frequent ones are that payments offered under the plan are less than creditors would receive if the debtor’s assets were liquidated or that the debtor’s plan does not commit all of the debtor’s projected disposable income for the three or five year applicable commitment period.

If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan “as soon as is practicable.” 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan or the modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2).

Occasionally, a change in circumstances may compromise the debtor’s ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be modified either before or after confirmation. 11 U.S.C. §§ 1323, 1329. Modification after confirmation is not limited to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. 11 U.S.C. § 1329(a).

Making the Plan Work

The provisions of a confirmed plan bind the debtor and each creditor. 11 U.S.C. § 1327. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor’s ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327.

A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan. In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 1307(c). The court may also dismiss or convert the debtor’s case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony), or fails to make required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521.

The Chapter 13 Discharge

The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge. A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid; (2) has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor’s district has determined that such courses are available to the debtor). 11 U.S.C. § 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor’s homestead exemption. 11 U.S.C. § 1328(h).

The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. §§ 1328, 523(c); Fed. R. Bankr. P. 4007(c).

The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).

The Chapter 13 Hardship Discharge

After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a “hardship discharge.” 11 U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor’s failure to complete plan payments is due to circumstances beyond the debtor’s control and through no fault of the debtor; (2) creditors have received at least as much as they would have received in a chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C. § 523.

Chapter 7 Bankruptcy

Friday, August 14th, 2009

A Summary
Who is eligible?
What Kinds of Debts Will Chapter 7 Eliminate?
What Happens To The Debt?
What Are The Consequences of Bankruptcy?
I Still Don’t Know If Bankruptcy is The Best Thing For Me…

A Summary

Chapter Seven Bankruptcy is the most famous bankruptcy. It is the kind of bankruptcy that instantly wipes out most debts, especially Credit Card Debt, Foreclosure Debt, Business Debt, Repossession Debt and much more. Chapter 7 Bankruptcy instantly stops Wage Garnishments and Bank Levies (also called bank freeze), law suits, foreclosures and all other creditor actions. Chapter 7 is also called a “straight bankruptcy”, or liquidation, or ‘fresh start bankruptcy’. The other most common kind of bankruptcy is Chapter 13. Chapter 13 is a repayment plan. Nobody who could do a Chapter 7 would want to do a Chapter 13 or a Debt Settlement plan.

Who is eligible for Chapter 7 Bankruptcy?

If you live in, own property in or have a business in the United States, You are allowed (if you qualify) to file for Chapter 7.
Chapter 7, as with other bankruptcy chapters, is not available to individuals who have had bankruptcy cases dismissed within the prior 180 days under specified circumstances.

You can only file Chapter 7 Bankruptcy once every 8 years. (before the new law, you could file every 7 years, but unfortunately it is now 8 years)

When You file Chapter 7 bankruptcy, you basically go to the government and say (with a lot of formal legal jargon) three things.

  1. I have no way to repay my creditors.
  2. I have no assets that I can sell to repay my creditors (don’t worry, because of the bankruptcy exemptions, it is very possible that you can still say this in truth if you have has house, car, and other general possessions)
  3. I borrowed the money honestly, with intent to repay it, but things didn’t work out that way and now I am stuck

Once you file the papers, (called petition and schedules) the government wipes out your dischargeable debts. You are left with either NO debts, or just the debts (like student loans) that are not wiped out by bankruptcy.

When you get your discharge, you are free. Bankruptcy discharge stays on your credit report for up to 10 years for most purposes. You can learn more about this by clicking on the blue link Consequences of Bankruptcy. The importance of the effects of bankruptcy on creditworthiness is sometimes overemphasized because by the time most debtors are ready to file for bankruptcy their credit score is already ruined.

What Kinds of Debts Will Chapter 7 Eliminate?

The legal term for ‘elimination’ of debt is “discharge”. Debts are either dischargeable or not dischargeable.
Dischargeable Debts Include (and there are many more that are not listed here)
Credit card debt
Debt from repossessions
Debt from personal loans
Business loans
Debt from old utilities, closed and cancelled telephone accounts
Back rent for an old apartment (where you don’t live any more)
Debt from law-suits and judgments not involving fraud
Some Tax Debt (most people don’t understand this)
Some Debt from overpayments of unemployment insurance, and other social services
Many other kinds of debts!!

INTERESTING NOTE: Did you know that with Chapter 13 you can get rid of even more kinds of debt? Sometimes you can even get rid of your second mortgage on a house you keep!

You should speak with an expert bankruptcy lawyer to be sure whether your debt is dischargeable or not.

Non-Dischargeable Debts (ones you can not get rid of in Chapter 7 Bankruptcy)
Student Loans
Debt from Fraud (Misinformation on mortgage applications is not necessarily fraud)
Debt from sales tax or employee withholdings
Debt from fines (parking, speeding, or other violations)
Debt from child support or alimony obligations
Debt (most of the time) that you are obligated to pay by a divorce agreement or order.

You should speak with an expert bankruptcy lawyer to be sure whether your debt is dischargeable or not.

Most incorrect information on a mortgage application is NOT fraud because it was encouraged if not entered by the mortgage side of the contract. For this reason, many such loans were actually called “Liar Loans”. That reckless practice by the lenders and brokers is a big reason for the recent recession!

What Happens To The Debt?

Your Dischargeable Debt is totally wiped out. The creditors never get paid. The law says that part of the risk of being in the ‘lending business’ is the risk that borrowers will not be able to repay the loans. This law protects the little guy from predatory creditors.

Of course if after your bankruptcy you decide to pay your credit cards or other creditors you are free to do so. However, you are totally free of any obligation to do so. What you can not do is have secret agreements to repay some creditors. If you are caught doing that it creates enormous legal problems for you.

I Still Don’t Know If Bankruptcy is The Best Thing For Me…

It is not easy to know. There are a lot of complicated things that even many lawyers don’t understand. Of course everyone knows about the risk with a bad or low-rent lawyer, that the bad advice causes you to lose your property or get in trouble. However, there is another risk. The risk that you DO qualify for bankruptcy and the lousy lawyer doesn’t know that you do (because he is not a bankruptcy expert or he only handles the very simplest cases) It is very important that you get expert advice from the best possible expert in bankruptcy and other debt solutions. To know for sure if you are eligible for Chapter 7 bankruptcy, you should contact my office. We have New York Bankruptcy Lawyers, New Jersey Bankruptcy Lawyers, California Bankruptcy Lawyers, Florida Bankruptcy Lawyers and Pennsylvania Bankruptcy Lawyers. You can speak with me any time by calling the number above or sending an email.

Costs and Consequences of Bankruptcy

Friday, August 14th, 2009

The Costs and Consequences of Bankruptcy Positive Consequences of Bankruptcy (you will be surprised…) The Negative Effects of Bankruptcy

Introduction from Attorney Waltzer

Usually, when people ask me about the consequences of bankruptcy, they want to know the bad stuff. I am happy and eager to tell them ALL of the risks of bankruptcy. However, what is interesting is that people ALSO don’t know about all the benefits of bankruptcy. Most people know that it gets rid of debt. But did you know that Bankruptcy can actually Improve Your Credit Score? Below is a list of the good and bad consequences of bankruptcy. This, and some expert bankruptcy advise will help you to know if bankruptcy is the solution for you.

Watch Out For The Misinformation Campaigns
The consequences of filing bankruptcy are often very misunderstood. There are a lot of companies and organizations that put a lot of misinformation about bankruptcy out there. Some of these mis-informers are intentionally misleading people. Some of them are just misinformed themselves and repeating bad information.


1. Elimination of Debt
Bankruptcy will Eliminate Some or All of your Debt This consequence doesn’t need much explanation. You probably know that bankruptcy can get rid of the following:
credit card debt,
debt from repossessions,
debt from personal loans,
business loans,
back rent for an old apartment (where you don’t live any more)

But, did you know that bankruptcy can sometimes also get rid of these debts?
Tax Debt
Your Second Mortgage
Debt from overpayments of unemployment insurance, and other public services
Debt from law-suits and judgments not involving fraud

2. Improving Your Credit Score
Of course you have heard the stories about bankruptcy hurting your credit score. But the truth is that many people who file bankruptcy already have the worst credit. Bankruptcy cant make it much worse. However, for these people, if they didn’t file bankruptcy, it would take ten years or more to repay their debts and restore their credit score. With bankruptcy, they eliminate the debt, and can start rebuilding credit immediately. What this means, is that for many people, if you look at the long term, bankruptcy is surely the fastest way to recovering your credit. Don’t be fooled by the misinformation campaigns and myths.

You can read more by clicking the blue link to the Wall Street Journal Smart Money article that bankruptcy can help you to restore your credit score more quickly than if you struggle along with an impossible debt.

3. Peace of Mind, Peace of Life, Time to Focus on Family and Dreams
The most important and least discussed consequence of bankruptcy is that it eliminates a lot of stress. The stress of debt destroys families and destroys lives. The American Institute of Stress has a lot of information and links on how ‘stress’ kills us. However, you don’t have to look far to see that the number one cause of stress is money. Debt is a killer. Imagine the peace of not dealing with creditor calls. Having more time and money to invest in your future and your children’s future. This is the real reason more people should file bankruptcy. Right now millions of hard-working honest Americans are literally killing themselves to dig out of a debt-pit that is really a death-trap. Bankruptcy was created by congress to save these people from such a painful and futile existence.


  1. You can not file bankruptcy again for 8 years. This, to me, is the most important consequence. You are basically using your “get out of jail free” card. If you think you will have a big medical expense or otherwise run into hard times in the next few years. You should think about whether this is the best time for you to file. Likewise, if you think you will do better in the following years, and make more money, you should file right away while you still can.
  2. Bankruptcy can be listed on your credit report for up to 10 years. This is the most misunderstood consequence of bankruptcy. That fact that bankruptcy I “listed” on your credit report does not mean that it ruins your credit for 10 years. Many people with a bankruptcy on their credit report get very good credit much more quickly than if they didn’t file bankruptcy. Having filed bankruptcy, by itself, will not prevent you from getting good credit in the near future (within a couple years). It will not prevent you from qualifying for a car-loan or mortgage either. Most clients get credit card offers only months after they finish the bankruptcy!
  3. Bankruptcy can hurt your credit score in the short run. It sometimes helps your credit score too. It all depends on how your credit and income are at the time you file. Either way, as I explain above, bankruptcy will not prevent you from rebuilding your credit and getting cards in the near future after your discharge.

Personal Finance

Debt Management

Declaring Bankruptcy Can Improve Your Credit Score

By Aleksandra Todorova |Aleksandra Todorova Archive |Published: January 22, 2007

THE DECISION OF whether to file for bankruptcy protection is not an easy one. Among the numerous concerns, one that is typically front and center is the worry that your credit rating will be so damaged that securing a loan — even at a lousy rate — will be darn near impossible.

But here’s some surprising news: In many cases, the damage done to one’s credit score isn’t nearly as bad as expected. Over the long run, obtaining a score high enough to make you eligible for very competitive rates isn’t out of the question.

Part of the reason why your score isn’t likely to suffer all that much is that most folks seriously struggling with debt aren’t exactly maintaining a top-notch score to begin with. “In virtually every instance, the consumer will already have repayment problems such as late payments, very high balances, charged-off accounts or collection accounts,” says Rod Griffin, a spokesman for Experian, one of the three major credit bureaus. For details on what goes into a credit score, click here.

In light of this, some consumers may even see a slight boost in their credit scores after filing bankruptcy, according to John Ulzheimer, president of Educational Services, a consumer credit education group. Why? To start with, your credit report is largely wiped clean when you declare bankruptcy. Your high balances are removed as are any late payments or records of unpaid debts. Instead, the accounts included in the bankruptcy will be marked as “Included in Chapter 7 Bankruptcy” or “Included in Chapter 13 Wage Earner Plan,” depending on which type of bankruptcy you filed. Both types of bankruptcy affect your credit score in the same way, according to Ulzheimer. Granted, you aren’t likely to see a big jump — but if you’ve just been scraping by, your score isn’t likely to fall much further.

That said, a bankruptcy could help your score over the long term, as well. Here’s why: When calculating scores, the formulas developed by Fair Isaac (the company that calculates the most widely used credit score, known as the FICO score) are set up to grade someone’s credit standing as compared with that of consumers in a similar financial position. To do that, Fair Isaac divides consumers into 10 groups, using what it calls “score cards.” It then ranks the consumers in each group based on the others in the group. One of these score cards is bankruptcy filers. (For competitive reasons, Fair Isaac doesn’t release what constitutes all 10 groups.)

In other words, when you file bankruptcy your score is determined based on how you do compared with other bankruptcy filers, explains Fair Isaac spokesman Craig Watts. The reason? Fair Isaac has found this to predict credit risk better. “It’s a much fairer comparison,” he says. “You’re not compared with people with rosy, perfect reports.”

Declaring Bankruptcy Can Improve Your Credit Score (page 2)

As a result, credit scores can run the gamut among bankruptcy filers. “In that population, you’ll find some consumers who have very good FICO scores, some who have very bad FICO scores, and in between,” Watts says. (Fair Isaac doesn’t have statistics on the average FICO score for bankruptcy filers.) Granted, you won’t be able to bring your score up to the perfect 850 as long as your bankruptcy stays in your report, but with good credit management after filing, a score in the 700s isn’t impossible.

Then again, your credit score alone shouldn’t affect whether or not you decide to file bankruptcy. “You have to be realistic about your ability to get back on your feet financially,” says credit expert Gerri Detweiler, author of “The Ultimate Credit Handbook.” Most experts would still say that if you can dig your way out of debt without declaring bankruptcy, that’s a better way to go, since, among other things, you may be forced to sell certain assets — in some states even your home or car — to meet the bankruptcy filing requirements. (This can be the case with Chapter 7 bankruptcy, but not Chapter 13.) Another issue: Given the tougher new bankruptcy rules, you may not even be able to declare bankruptcy.

That said, if your debt payments are crushing you, bankruptcy will give you a much-needed fresh start. And with a few clever credit repair strategies, your score could be back in the 700s within two or three years.

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Bankruptcy Myths, and Facts

Friday, August 14th, 2009

A List of The Myths

  1. The Failure Myth (that bankruptcy is your fault)
  2. The Myth That Bankruptcy Will Ruin Your Credit (and your ability to get a house or car) For 10 Years
  3. The Myth That You will Lose Your Stuff
  4. The Myth That You “Cant File Bankruptcy Any More Because of the New Law”
  5. That Myth That Married People Can’t File Bankruptcy Individually (Without Involving Your Spouse)

Where Do the Myths and Lies Come From?

A List of The Top Five Bankruptcy Myths

There are many more myths, but these are the most important to understand.

1. The Failure Myth (that bankruptcy is your fault)
Find out more about “Why You Are Not the Problem“. However, the short explanation is that even if you made some mistakes, the fact that you are in this situation is because of much bigger problems than anything you have done. Nobody wants to file bankruptcy. Though the ‘anti-bankruptcy’ fanatics like make it seem another way, the truth is that less than 1% of people who file bankruptcy are abusing the system. Almost everyone who files bankruptcy is honest, hard working and good. They are there because even though they tried hard, the job market, or job loss, or the medical problem, or the unexpected expense, the divorce or the crazy interest rates, were just more than a person can handle. At Waltzer Law Group we don’t just want to help you with bankruptcy. We want you to keep your dignity. We want to help you understand that even if you have things you can do better, you should not feel badly because of your hardship. It might also make you feel better to click on the blue link to see the list of famous, brilliant and beautiful people who also filed bankruptcy.

2. The Myth That Bankruptcy Will Ruin Your Credit (and your ability to get a house or car)or 10 Years
Special Note about This Myth From Attorney David Waltzer.

This might be the most famous and terrible myth out there. The debt negotiation companies, credit card companies and debt consolidation companies LOVE this myth becaue it scares a lot of people away from bankruptcy (and scares them into wasting money on debt negotiation). However, it is a total lie.

Bankruptcy will not prevent you from getting a really good credit score (even above 700) in less than two years after your discharge. Bankruptcy will not prevent you from getting a good low rate on a car or a house even as soon as two years after your bankruptcy!
My clients do it all the time. They are always amazed how quickly their credit score recovers.

So, what is the ‘ten year’ thing you keep reading about?
Here is the Trick. Most People think that having a bankruptcy listed on your credit report automatically means that your credit will be bad or ruined. People assume that if bankruptcy is listed on your credit report, you will not be able to buy a car, buy a house or get another loan. This could not be more wrong.

It is true that bankruptcy can stay listed on your credit report for up to ten years. That is where the “Ten-Year” number comes from. However, after a little while, it is almost meaningless. Most people who filed bankruptcy improve their credit within months. Sometimes, bankruptcy can even IMPROVE your credit score.

Special Note Regarding This Myth From Attorney David Waltzer.
Thank you for visiting my site. There is so much confusing information out there, particularly about this issue. I want to remind the reader that when it is best for our client, my firm does EVERY KIND OF DEBT SOLUTION (debt negotiation, debt advisement, etc). Like everyone else in the industry, we make more money with a debt-negotiation or debt-settlement case than with a bankruptcy case. The difference is that we don’t advise our clients to do what makes us the most money. We advise our clients to do what is BEST FOR THE CLIENTS. The truth is that if you qualify, bankruptcy is usually better for your bank account, better for your credit score, better for your family, and better for your life. Don’t believe the ‘scare-tactics’ out there.

3.The Myth That You will Lose Your Stuff
Most people who file bankruptcy do NOT lose their stuff. To be sure, you need to consult your bankruptcy attorney. What you can keep depends on the state where you live and on what things you have. Many of my clients get Chapter 7 Bankruptcy even though they have houses or apartments, and they get to keep their houses and apartments! Many of my clients can keep their cars and household belongings too. The Bankruptcy Law provides Bankruptcy Exemptions that work like an invisible shield and protect specific amounts of your stuff. Don’t guess. Speak with an expert bankruptcy lawyer and be certain.

4.The Myth That You “Cant File Bankruptcy Any More Because of the New Law”
So many of my clients believe that they cant get bankruptcy anymore because of the law change in 2005. The truth about bankruptcy is that if you need a bankruptcy, most likely you CAN get a bankruptcy now. It is a little bit more expensive than it used to be, and there are a couple of extra hoops-you must jump through, and having a bankruptcy lawyer is much more important now than it used to be. So, it is a little harder. Don’t lose heart. Almost everyone who could get a bankruptcy before 2005 can get a bankruptcy now. The crazies that tricked congress into imposing the terrible 2005 laws on the American people scared our congress people with tales of ‘bankruptcy abuse’. However, almost five years later, it turns out that the new laws didn’t impact how many people were able to file bankruptcy. The bankruptcy filing rates are the same or higher now as they were before 2005. What does that show? It shows that the ‘dishonest debtor’ was mostly myth. The law doesn’t stop honest debtors and since most people in bankruptcy are honest debtors, the law hasn’t done much of anything but make everyone suffer a little more. If you need bankruptcy, you can most likely get bankruptcy.

5.That Myth That Married People Can’t File Bankruptcy Alone (Without Involving Your Husband or Wife)

This is another myth that scares a lot of people who need bankruptcy. Assuming you otherwise qualify for bankruptcy, you can ABSULUTELY file bankruptcy alone, even if you are married. The bankruptcy official might want to see evidence of your spouse’s income (just to make sure he or she is not a super-millionaire) but your bankruptcy will not have anything to do with your husband or wife. It will not impact your husband or wife’s credit. In New York and New Jersey it doesn’t even matter if your husband or wife has a lot of assets. The assets will be safe (so long as they REALLY belong to your spouse). Speak with a bankruptcy expert. Any of our bankruptcy lawyers can give you sound advice as to how you can file bankruptcy and leave your spouse out of it.

Where Do the Bankruptcy Myths and Lies Come From?
There are more myths about bankruptcy than I can list here. Most of the myths and lies and misinformation come from four sources:

1-people with good intentions who just don’t understand the facts (they rely on information they heard or read on a dishonest website). This is like the rumor mill.
It might even be your friend or trusted family member. The person might be thinking about how the law used to be 20 years ago. Or the person might just have been misled by a website or someone he knows. It is really difficult when a father or mother or sister or brother tells you something that is wrong. Don’t blame them. It is not their fault. Hundreds of millions of dollars are spent every year trying to mislead them. Even good, smart people can fall victim to these multi-million-dollar campaigns of lies.

2-credit card companies that want to scare you away from bankruptcy because they want you to keep paying interest.

3-debt-negotiation/debt and credit card consolidation companies that mislead people. Debt negotiation and debt consolidation companies want your money. They can make more money if you go to them. Case for case, people make a LOT more money by selling debt-negotiation and debt consolidation than by selling bankruptcy. These companies have a financial incentive to scare you away from bankruptcy, even if bankruptcy is much better for you!

4- Yucky writers and financial advisors who want fame and fortune. They try to sound smart by saying ‘hard-sounding’ things. They want to build a fan base by saying controversial things. They don’t care about the truth, even though some of them have sites saying “The Truth” about this or that. Some of these writers are making money from big companies that pay them for their lies. They are evil and they hurt thousands of people with their confusing and dishonest information.

What is Bankruptcy?

Friday, August 14th, 2009

Bankruptcy Definition
Why does Bankruptcy exist?
How does Bankruptcy work?
What is the Bankruptcy lawyer’s role?

Bankruptcy Definition

The term “Bankruptcy” describes a set of laws that give people who need it relief from creditor attacks. Sometimes, “Bankruptcy” is used to describe the state of a person or company. For instance “I am in bankruptcy” or “I am bankrupt”. Other times it describes the legal system for giving people a way out when they have no way to repay creditors.

Wikipedia( describes bankruptcy as follows:
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor (“involuntary bankruptcy”) in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a “voluntary bankruptcy” that is filed by the insolvent individual or organization).

Why Does Bankruptcy Exist?

There are two rationales for bankruptcy. One is kindness/morality/humanity. The other is economic sense.

Kindness, Morality and Humanity

There are many reasons bankruptcy exists. One reason is kindness. The basic idea is that sometimes things happen to people that make it impossible for them to repay their debts. It could be loss of income, illness, economic downturn, death of a spouse, injury or even just an increase of the cost of living. Your Bankruptcy Lawyer can explain the statistics, but every year millions of people find themselves unable to pay their debts. Most civilized societies have come to the conclusion that if someone really can’t pay a debt, it is cruel to make him a slave or punish him. We should be forgiving. That is the moral basis for bankruptcy.

The moral background of bankruptcy goes back to biblical times and pre-biblical times. In western religion there has always been custom of forgiving people debts every seven years. This notion of debt-forgiveness is in Jewish, Christian, Moslem, Hindu, Buddhist and Secular traditions. We see it in the Old Testament, the New Testament, the Catholic traditions (Jubilee) and many other ways.

Economic Sense

There is also an economic reason why bankruptcy exists. If people don’t have a way out of their debt when there is an emergency or inability to pay, they will be much less likely to take credit cards or loans. Imagine that you want to take a loan to start a business. If your society cuts off your hands or puts you in jail for not repaying your loan, would you take that risk? Probably not. However, if you know that if things don’t work out you will get a fresh start with bankruptcy, you will take the risk.

This kind of careful risk taking is GOOD for the economy. Our government decided that it is better to encourage people to start businesses, go to school, buy a car and do other things that require credit. In this way, we expand the economy. Yes, many people don’t have the success they dreamed of. Yes, many people don’t pay the loans and go bankrupt. But for every one of those people, there are more that create wealth in the society. Thus, the existence of a “way out” like bankruptcy was a good idea for the American economy.

A Simple Explanation of How It Works

Bankruptcy Laws
Bankruptcy is a set of laws created by the United States Congress for the economic and moral reasons described above. There are also state laws. The Federal Bankruptcy Laws apply in all states that don’t create their own bankruptcy laws. All bankruptcies in all states are governed and overseen by the USDOJ (United States Department of Justice). The USDOJ has a US Bankruptcy Trustee (United States Bankruptcy Trustee) for each region of the United States. The US Bankruptcy Trustee oversees a panel of local ‘panel trustees‘. The panel trustee is the ‘gatekeeper’ of your bankruptcy case.

The Process
When you file bankruptcy, you submit a bunch of papers to the court. These papers are called your “Petition and Schedules“. The papers document your inability to repay your debts. They show that you don’t have enough income to repay your debts and that you don’t have any assets you can sell to repay your debts. They show much more than that, but your bankruptcy attorney will be the best person to explain the details. Once you file your case with the court get interviewed by a panel trustee. His job is to make sure you are not hiding any assets, that you did not run up your debts fraudulently, and that you have not lied about your inability to repay creditors. This meeting is called a 341(a) exam or “meeting of creditors”. Click on the blue link to learn more about that meeting!

The Discharge
Once your meeting of creditors is closed, and your panel trustee approves your bankruptcy, you are eligible to get a discharge of your debts! That means, all your debts that can be discharged, are discharged. At that point, you are done and ready to enjoy your fresh start.

Remember, you can only file bankruptcy once every eight years. So, make sure you do it right, and only when necessary. Your bankruptcy lawyer can advise you whether or not this is the best time for you to file bankruptcy.

Other Questions That people might Have:
What is Credit Counseling?
What are the Consequences of Bankruptcy?
What does it do to my credit?
How can I speak with an expert bankruptcy attorney right away?