Debts that Survive a Chapter 7 BankruptcyThere are certain debts that are discharged regardless of whether a Chapter 7 or a Chapter 13 is filed. Discharged means that you will no longer be responsible for repaying them once the bankruptcy is over. In a Chapter 7 you will not have to repay any portion of the debts unless there are unexempt assets that the trustee divides among your creditors. In a Chapter 13 the repayment plan will most likely provide for some portion of the debts to be paid back. If you complete the plan successfully, the remaining unpaid debt will be discharged.Regardless of which chapter of bankruptcy you file, certain debts will be discharged with exempt of the portion paid back as mentioned above. These types of debts include credit cards, medical bills, some lawsuit judgments, obligations under leases and contracts, personal loans and promissory notes.In a Chapter 7 there are many debts that are not dischargeable that may be dischargeable in a Chapter 13. If a debt is not dischargeable, that means you owe them after your bankruptcy is over. There are certain debts that the bankruptcy does not affect at all; meaning that you will continue to owe them just has if you had never filed bankruptcy.Domestic Support ObligationsDomestic support obligations are child support, alimony and other debts in the nature of alimony, maintenance, or supportIn order for this debt to be nondischargeable, the domestic support obligation must have been established in a separation agreement or divorce decree, an order of a court or a determination by a child support enforcement agency.Other Debts Owed to a Spouse, Former Spouse, or ChildYou cannot discharge any debt that you owe to a spouse, former spouse, or child that was incurred in the course of a divorce or separation agreement.While the bankruptcy may get rid of your liability to the creditor, you are still liable to the ex-spouse if the creditor goes after him or her for the payment.Fines, Penalties, and RestitutionCertain tax debtsDischargeability of debts can be an complicated issue and should not be determined by this non-exhaustive list of some of the debts that are not discharged, If you are considering bankruptcy, contact our office for a free consultation to meet with one of our attorneys to determine if bankruptcy is right for you. 

What is a Chapter 7? What is a Chapter 11? What is a Chapter 12? What is a Chapter 13?What is a Chapter 7?Chapter 7 is the most popular type of bankruptcy. In a Chapter 7 bankruptcy, you must fully disclose your property, debts and financial activities over the several years prior to the filing of the bankruptcy.  Typically three months after the case is filed, you receive a discharge of most of your debts with exception of certain nondischargeable debts.What is a Chapter 13?Chapter 13 is a reorganization for individuals. The individual can include sole proprietors and independent contracts but cannot include entities such as corporations or limited liability companies. Along with all of the documents required in a Chapter 7, you also propose a 3 or 5 year plan under which you typically must repay certain types of debts in full and usually some portion of your unsecured debt. Chapter 13 can be used to pay off missed mortgage payments over the life of the plan. Typically Chapter 13 is not the bankruptcy of choice because of the length of time before receiving a discharge and the extra legal fees involved. However, 10% to 15% of people who file under Chapter 7 are required to convert to a Chapter 13 bankruptcy because they have sufficient income to fund a Chapter 13 plan and at least partially pay back some of their creditors.    What is a Chapter 11?                A Chapter 11 Bankruptcy is typically for financially struggling businesses; used as a reorganization of their financial affairs. However, individuals may also qualify to file a Chapter 11. Individuals who consider Chapter 11 usually have debts in excess of the Chapter 13 bankruptcy debt limits or if the Debtor has substantial non exempt assets.  Chapter 11 fees can be cost prohibitive and are very complicated. You definitely need an attorney if you are going to file a Chapter 11. If you are considering filing a Chapter 11, contact an attorney that specializes in Chapter 11 bankruptcies.What is a Chapter 12?Chapter 12 is very similar to Chapter 13. However, you be eligible for Chapter 12, at least 80% of the debts must have arisen from the operation of a family farm. If you believe that Chapter 12 may be what you need, contact an attorney that specializes in Chapter 12 bankruptcies. If you are considering any type of bankruptcy, contact a bankruptcy attorney today. 

Debts that Survive a Chapter 13 BankruptcyThere are certain debts that are discharged regardless of whether a Chapter 7 or a Chapter 13 is filed. Discharged means that you will no longer be responsible for repaying them once the bankruptcy is over. In a Chapter 7 you will not have to repay any portion of the debts unless there are unexempt assets that the trustee divides among your creditors. In a Chapter 13 the repayment plan will most likely provide for some portion of the debts to be paid back. If you complete the plan successfully, the remaining unpaid debt will be discharged.Regardless of which chapter of bankruptcy you file, certain debts will be discharged with exempt of the portion paid back as mentioned above. These types of debts include credit cards, medical bills, some lawsuit judgments, obligations under leases and contracts, personal loans and promissory notes.Debts that survive a Chapter 13 bankruptcy no matter what include:Domestic Support ObligationsCriminal PenaltiesCertain TaxesIntoxicated Driving DebtsDebts Arising from Willful or Malicious ActionsDebts or Creditors You Do Not ListDebts that are discharged in a Chapter 13, not Chapter 7 include:Marital debts created in a divorce settlement (unless they are determined to be support)Debts incurred to pay nondischargeable tax debtsCourt feesCondo fees incurred after the bankruptcy filing dateDebts for loans from a retirement planDebts that could not be discharged in a previous bankruptcy due to failure to received dischargeYou can convert from one chapter of bankruptcy to another. When you convert, you are then subject to the dischargeability rules of the chapter to which you converted, not the chapter you started out in. There are many reasons you might convert from one chapter to another. Reasons include: inability to complete a Chapter 13 plan, abuse found by the court of a chapter 7 requiring conversion to a Chapter 13. You may also convert because it is determined that some of your debts are only discharged in a Chapter 13 and not a Chapter 7.Dischargeability of debts can be an complicated issue and should not be determined by this non-exhaustive list of some of the debts that are not discharged. If you are considering bankruptcy, contact our office for a free consultation to meet with one of our attorneys to determine if bankruptcy is right for your situation. 

How Will the Bankruptcy Affect Me? I am Filing Bankruptcy: Will I Lose My Job? No employer may fire you because you filed bankruptcy. In addition, an employer cannot discriminate against you in other terms and conditions of employment; reducing salary, demoting you, or taking away responsibilities because of a bankruptcy. However, if there are other valid reasons for taking these actions, then the bankruptcy will not protect you. Simply put, if an employer wants to take action against you, they can as long as there are other valid reasons such as incompetence, tardiness, or dishonesty.How does my Employer Find out About the Bankruptcy?Typically if you are filing a Chapter 7, your employer rarely finds out. However, if you have been sued and are having your wages garnished, your employer is notified. The bankruptcy stops that garnishment, so again your employer is notified in order to stop the garnishment. If you file a Chapter 13, your employer typically will receive notice. In a Chapter 13 plan it is likely that the Judge will order that your Chapter 13 plan payments be deducted from your paychecks and sent directly to the trustee. In order to accomplish this, your employer or at least the payroll department is notified of how much money to withhold and where to send the funds.Do I have to do a wage order for my Chapter 13?The simple answer is that is depends. You may not like the idea of the wage order, however the order will make the plan easier to complete. The success rates of Chapter 13 cases is higher where the Debtor has a wage order for their Chapter 13 plan payments over Debtors who pay the trustee themselves. The very obvious explanation is that it is hard to spend money that you never see meaning that if you employer is deducting the payment from your check and mailing it directly to the trustee then you are not tempted to use a portion of the money for other purposes.Can Bankruptcy Effect Child Custody?There is no reported evidence of a parent losing custody because of a bankruptcy. Bankruptcy and divorce are so often related these days that one often times follows the other. Family law and bankruptcy are being to overlap in many ways requiring bankruptcy attorneys and Judges to know more about family law and vice versa.  However, keep in mind that bankruptcy does NOT relieve you of child support or alimony obligations.  

The lives of business bankruptcy clients are peopled with a less than obvious cast of creditors.   You need to flush them out and get them in line before the case is filed. Near miss I had a close call, or rather my client had a close call, this week when some new information just slipped out. Thankfully, it was prepetition. The client, a very bright entrepreneur,  thought that the wrongful death suit pending against him could not be included in his bankruptcy until a judgment was rendered.  And he was pushing to file immediately! BINGO, we had the name of another creditor for the filing. Now, I ask you, how could he have neglected to mention a wrongful death complaint, even if his involvement was as the employer of the accused driver?  That has to be another story. But further discussion brought out the fact that he had some further, related exposure to the customers of his business. The homeowners on whose job the driver was working were the beneficiaries of an indemnity clause in the contract between client’s business and the homeowners.  More BINGO’s. Narrow focus or bad assumptions on the part of the client,  one or the other just about torpedoed this case. Unseen spectors Another instance of entrepreneurial myopia stands out among my war stories. Client had run several, big dollar businesses, now closed. Highly anxious to file, and brings me a list of four credit cards as the sum total of his debts. It doesn’t seem to add up.  I ask, is this all?  Anyone else?  Are you sure? He kept denying that there was anyone else who needed to be included in the schedules.  I kept prodding and he was starting to get testy. Finally, at wits end, I asked him if there was anyone out there in his business past who wanted to sue him? Sure, he admitted, and reeled off six more names of former partners, investors, and other unhappy associates. BINGO! Add to your patter Whether you flush out these creditors by interview, document review, or questionnaire, you need to find the creditors beyond the ones who send monthly bills to the debtor. In your cross hairs should be Potential liabilities not yet the subject of suit Guaranties Warranties Indemnity agreements Unhappy customers Disgruntled partners, employees, or investors Can you add to this list of less than obvious creditors for a business bankruptcy?

Handling Creditor Claims, Distributing Property and the Discharge   After the meeting of creditors, the trustee will begin to sell or convert to cash any of your property available in a Chapter 7 bankruptcy. While this is happening, the trustee handling your bankruptcy case will evaluate the claims made by your creditors. A claim is [...]

     The First Circuit affirmed a decision sanctioning a student loan creditor when they resumed collection efforts after the chapter 13 discharge in a case where the debtor's objection to their claim was sustained.  In re Hann, 2013 WL 1277132 (1st Cir., 2013).  In the chapter 13 the Debtor objected to the $54,756 claim filed by ECMC asserting inadequate documentation, conflicting statements from the creditor, and that she had paid more than the original loan amounts.  The creditor did not appear at the hearing on the objection, but the Debtor testified extensively regarding the payments made on the account and her attempts to reconcile her accounting with the creditors.  After further submission of an affidavit detailing her accounting records, the claim was allowed in the amount of $0.     After entry of the discharge, ECMC resumed collection efforts, and continued after Debtor's counsel advised that they were in violation of the discharge.  Debtor then filed an adversary proceeding seeking declarative and injunctive relief, contempt, actual and punitive damages, and fees.  ECMC argued that since the student loan debt was non-dischargeable, the court did not adjudicate on the balance due on the loan.  The Bankruptcy Court rejected this argument finding an adjudication on the merits that the balance owed on the student loan was $0.  The BAP affirmed.   ECMC acknowledges that a claim disallowance order can dissolve an underlying nondischargeable debt if it is based on a factual finding that the debt has been repaid.  The creditor disputes that the bankruptcy court in fact made such a finding of fact.   Since the order did not state that ECMC is owed nothing, but simply said the claim is allowed in the amount of $0, ECMC states it is not an adjudication of the underlying debt.     The 1st Circuit noted that it would be better if the trial court specified that the basis of the disallowance was that the debt was paid in full, but a review of the underlying record shows that the basis of the order was the Court's finding that the Debtor had repaid the loan.  The Debtor explained, during her testimony and in her subsequent affidavit, that she “believe[d] the student loan claims were paid in full prior to the commencement of the Chapter 13 proceeding.” She submitted materials appearing to support that belief. Her arguments and documentation went unrebutted.  ECMC also complained of the sanctions awarded. It alleged inadequate notice and opportunity for hearing in the adversary matter.  However, since the Debtor specifically requested sanctions under §105, and since the trial court gave ECMC 14 days to object to the affidavit of fees and costs; and considered the objections filed, the trial court satisfied the notice and hearing requirements.   Finally, ECMC argues that it cannot be sanctioned for doing something that was not clearly proscribed by the Bankruptcy Court's order, alleging that the order was not clear and unambiguous.  But the Bankruptcy Court did not sanction ECMC based solely on the order,  it was ECMC's entire course of conduct that led the BAP to conclude that ECMC had abused the bankruptcy process.  ECMC filed a proof of claim against Hann, ignored the claim objection process, and then resumed its efforts to collect on the underlying debt without attempting to verify whether the debt had survived the bankruptcy. ECMC also ignored an effort by Hann's counsel to explain that the claim order had settled the issue. At the very least, ECMC—having sat out the claim objection process—could have sought a clarification from the court after Hann's counsel asserted that the Claim Order had indeed extinguished the debt.    This case highlights both the importance of having explanatory language in the proposed orders submitted to the Courts (which might have avoided the issue), and of having a complete record on appeal for the appellate courts.

From 1989 to 2007, Judges Larry Kelly and Frank Monroe occupied the bankruptcy bench in Austin, providing a period of judicial continuity rivaled only by their colleagues in San Antonio (Judges Leif Clark and Ronald King served at the same time from 1988 to 2012).   Effective today on April 1, the Austin bar will be welcoming its third new judge in six years as Judge Craig Gargotta moves to San Antonio and Judge Tony Davis takes the bench.   Here is an introduction to the newest jurist to oversee Austin insolvency proceedings.Judge Tony Davis spent his time as a student and a young practitioner in three very different locales.    He received a B.A. in economics and mathematics from the University of Minnesota at Morris in 1980, was awarded a J.D. from the University of Virginia School of Law in 1983 and then was admitted to the Oklahoma bar.   He spent his early years as an associate with Conner & Winters in Tulsa before making his move to Baker Botts, LLP.    Immediately prior to taking the bench, Judge Davis was a partner in the Houston office of Baker Botts.    One of the most challenging cases that he worked on was the Asarco case, which involved nearly $6.5 billion (with a B) in environmental claims.    According to the Judge on that case:Debtors' counsel, lead  by Tony Davis with Baker Botts, initiated and ultimately set in place a procedure for pre-trial, discovery, mediation and trial schedule for the estimation of the environmental claims that would have resulted in Court orders or settlements in months instead of years even if all such claims had to be estimated to a final judgment. This incredible process required Debtors' counsel to prepare for multiple-tracked sites teams of environmental and bankruptcy lawyers toward mediation, trial or settlement of each site, yet coordinated such that overlapping legal issues, overlapping facts and experts, could be efficiently implemented.In re ASARCO, LLC, 2011 Bankr. LEXIS 2880 at *26-27 (Bankr. S. D. Tex. 2011).Some of his other noteworthy cases include representing Ralph S. Janvey, the court appointed receiver in the Stanford International Bank, Ltd. case and representing the Russian Federation in the short-lived bankruptcy of Yukos Oil Company.  (The Yukos case involved a Russian company which moved its offices to the home of its CFO in Houston and paid a retainer to Fulbright & Jaworski to qualify for bankruptcy in the United States.   The case was dismissed after about three months).    Thus, he has experience chasing fraudsters and oligarchs and cleaning up the financial fallout from environmental claims.    According to Bill Stutts, who worked with Judge Davis at Baker Botts, described his former colleague as “measured and thoughtful,” stating:He started practice in bankruptcy in Oklahoma during the oil-patch bankruptcies of the 1980's.   He is known to be measured and thoughtful, and rarely (if ever) rash.  Responsibility and an expectation that others will be responsible can be hallmarks of his approach to the practice.  He is pretty well organized (I don't want to over-sell his work habits too soon), having even found some time during practice to write published law review articles.  I believe that he really and honestly views his upcoming service on the bench to be just that-- service. Mr. Stutts also characterized Judge Davis as a voracious learner and said that by the time he handles his first chapter 13 hearing, he will have studied until he knows as much as or more than anyone else in the room.In a 2009 interview, Judge Davis stated that the Bankruptcy Code had already seen “excessive reform.”   He said:If anything, bankruptcy law has seen excessive reform. The Bankruptcy Code, as originally enacted in 1978, has been and continues to be such a remarkably flexible and efficient way to conduct a financial restructuring under court supervision that it is the envy of the commercial world.   Since it was enacted, however, a number of special interest groups have succeeded in carving out special interest legislation to address or protect unique issues that apply to specific industries. These numerous amendments have somewhat increased the complexity of the Bankruptcy Code but, fortunately, have not materially impaired the Bankruptcy Code’s overall effectiveness.Law 360, Q & A with Baker Botts’ Tony Davis, which can be found here.            When asked what advice he would give a young lawyer, he said:Seek and take on responsibility — responsibility for understanding the facts and issues involved in the case, responsibility for advising clients, and responsibility for preparing for and conducting in-court hearings and out-of-court negotiations. Accepting and discharging responsibility is the surest way to develop the professional growth you need to be an accomplished and successful lawyer.This is good advice for lawyers of any age.   

You definitely have the ability to keep your house and car in a Chapter 7 if you are current on your payments, provided you do not have significant nonexempt equity in those properties.  Most people who come to see me for a Chapter 7 and who may be homeowners do not have significant equity.  It+ Read MoreThe post Can I keep my house or car if I am current on my payments in a Chapter 7? appeared first on David M. Siegel.

There are some cases under Chapter 7 where I will file a case prior to being paid in full.  Those cases involve wage garnishments, bank citations or other court appearances required that would be a burden to the debtor and would actually hinder the debtor’s ability to pay the law firm in the long run. + Read MoreThe post As an attorney, will I file a case before being paid in full? appeared first on David M. Siegel.