Clients want to file a chapter 7 bankruptcy to clear up credit card debt and get a fresh start. Credit union customers are shocked to learn that their credit cards with a local credit union are tied together with their car loans at the same credit union. Credit unions frequently use “cross-collateralization.” This means that your car or house not only secures your car note or house mortgage but also your credit card debts at the credit union. Normally, when you borrow a large sum of money from a bank, you give a lien on the item known as collateral. So if you borrow money to purchase a vehicle, the lender keeps the title top the car until you pay off the loan. If you default on the car loan, then the bank could enforce its lien by taking it back. A loan with a credit union to purchase a vehicle works differently with a cross-collateralization clause. This provision has the effect of making your vehicle the collateral for all present and future loans with the credit union. So if you have a vehicle loan with your credit union and a credit card, the credit union can take back your car even if you just stop paying on the credit card. In bankruptcy, the credit union has two secured loans; the vehicle loan and the credit card. That means, if you want to keep the vehicle in a Chapter 7 bankruptcy, you have to reaffirm the vehicle loan AND the credit card. If you don’t reaffirm the credit card, then the credit union could repossess the vehicle. You could still get rid of personal liability on both the credit card and vehicle loan, but would no longer have a car to drive. One alternative to this dilemma is to redeem the vehicle. The Bankruptcy Code lets debtors in Chapter 7 pay the secured creditor the fair market value of the vehicle in one lump sum – the present value of the car. This is a good option when the vehicle is worth much less than the total amount of debt securing the vehicle. If the vehicle is newer this is likely not a good option. Most debtors in bankruptcy will not have enough cash to make a lump sum payment. Sometimes we can actually refinance the debt using a tool called “redemption financing”. If the vehicle loan was signed more than 910 days before the bankruptcy was filed, you can file a Chapter 13 and propose to pay the fair market value of the vehicle over the term of the plan, either 3 or 5 years, at a little over the current prime interest rate. The remaining balance on the vehicle loan and credit card would be paid a small percent of the balance as an unsecured creditor in the plan. As with most things in bankruptcy, it is helpful to have an attorney guide you through the process and determine the best course of action for dealing with the credit union. To avoid this situation in the future, I always advise my clients not to have more than one loan, whether secured or unsecured, with a credit union.

Chapter 7: Time To File? David Siegel: When would somebody want to file a Chapter 7 bankruptcy as opposed to not filing at all? What is the reason why someone would file a Chapter 7? Jesse Barrientes: I guess there are a lot of different reasons. One would be for example if somebody filed a+ Read MoreThe post Bankruptcy & The Right Time To File appeared first on David M. Siegel.

Baby Boomers are signing up for reverse mortgages at record levels.  They’ve taken out $15.3 billion worth in 2013, an increase of 20 percent from the year before. Baby boomers who have saved nothing for retirement  – almost 77 million of whom are going to retire fuel growth in reverse mortgages. Just because boomers are getting reverse mortgages, it doesn’t mean that they are getting out of their debts.  Bankruptcy remains the best and surest way to eliminate debt and secure a retirement free from hounding debt collectors. If you are thinking about a reverse mortgage, call us at Lakelaw 847 249 9100  to discuss how it fits into your overall scheme.  Remember that these are high-fee loans. Remember that you will lose all equity in your house.  Remember that you’ll have nothing to pass on to your loved-ones and nothing to show for your years and years of hard work. Just because Henry Winkler looks so sincere in TV ads hawking reverse mortgages doesn’t mean that its the right thing for you.  Ask us to tell you the whole truth about reverse mortgages.  You may be able to keep possession of your house but from an economic standpoint, it won’t be yours – it will be the bank’s.  Don’t forget this.    

Effective June 1, the filing fees increase to: Chapter 7  $335.00 Chapter 13: $310.00 Chapter 11: $1,717.00 Chapter 12: $275.00 Chapter 9: $1,717.00 Chapter 15: $1,717.00 Adversary complaint $350.00

In the last article I touched briefly on whether or not you could continue to make payments on property used as collateral without having to reaffirm the debt with the lender. To understand your options with regard to personal property used as collateral, I will be using the example of a car loan.The post What To Do With Property Used As Collateral During Your Bankruptcy appeared first on Tucson Bankruptcy Attorney.

  Larry E. Kelly who served as U.S. Bankruptcy Judge for the Western District of Texas from 1986-2007, passed away on March 19, 2014.    Chief Bankruptcy Judge Ronald B. King announced the news to the bar. It is my sad duty to inform you that Judge Larry Kelly passed away this morning before 7:00 a.m.   I am in Waco today and he was too sick to see me yesterday, but I was planning to try again today.  Needless to say, we have suffered a big loss.   Larry was such a huge part of our court since 1986 when he began his tenure as a bankruptcy judge and became chief judge in 1988.   He retired from the bench in February, 2007, but practiced law and taught at Baylor until last fall and actually finished grading his final exams two weeks ago.Judge Kelly's obituary can be viewed here.   His funeral will be on Saturday March 22, 2014 at 10:00 a.m. at First United Methodist Church of Waco, 4901 Cobbs Dr, Waco, TX 76710.A short article that I wrote at the time of Judge Kelly's retirement in 2007 appears below.   I plan to write more after the memorial service.Judge Kelly’s tenure spanned a period of great change in the Western District.    When Judge Kelly was appointed in 1986, judicial pay was low and the hours were long.   As one of only two bankruptcy judges, Judge Kelly along with Judge Ayers covered a territory larger than most states.     During the tumultuous 1980s, business bankruptcies made up 20% of the docket with the attendant demands on court time.During his years on the bench, Judge Kelly handled many large and notorious cases in the Austin Division.    These included former Governor John B. Connally, homebuilder Nash Phillips/Copus, Inc., Circle C Joint Venture, Mr. Gattis, Inc. and Great Hills Baptist Church.   He also tried the litigation over the failed merger between El Paso Electric Company and Central & South West Corporation.   Judge Kelly was a colorful presence on the bench.   His trademark phrase of “Let me tell you where I’m at” was used to speed resolution of cases.  When offering advice on how something could be done better, he often prefaced his remarks with “In my twelve years of practice …” (a phrase which became less frequent as his time on the bench eclipsed his years as a practicing attorney).    Judge Kelly encouraged lawyers to a higher standard of practice and was concerned about how the bankruptcy system was viewed by the general public.  He would often comment about how a particular situation would look to the folks in “Warshington,” a concern which became more prominent as bankruptcy reform was in the spotlight for nearly ten years.    He took great pains to insist that disclosure statements actually contain meaningful information and that plans set out the mechanics of how they would work.   He expressed great frustration with lawyers who would submit ambiguous pleadings and orders and then ask the court to decide what they had meant.   He is rumored to have commented that Larry Kelly the lawyer would not have fared well in front of Larry Kelly the judge.   Judge Kelly’s most lasting contribution will likely be his emphasis on technology.   He pushed and prodded the Western District into being the first district in the nation to go live with electronic filing in 2001.     He also was one of the first bankruptcy judges to use video court to better serve his far-flung divisions.     Judge Kelly’s retirement marks the end of an era.   It has been 17 years since the last vacancy on the Western District Bankruptcy bench.       

Protecting Your Assets In A Chapter 7 Bankruptcy Filing There are two main goals in filing a chapter 7 bankruptcy. The first goal is to eliminate as much debt as possible in order to get a fresh start. The second goal is to protect either all or as much of your personal property as possible+ Read MoreThe post Protecting Your Assets In A Chapter 7 Bankruptcy Filing appeared first on David M. Siegel.

David Siegel: Hello, welcome.  My name is David Siegel.  Thanks for joining me.  Today were going to be talking about Chapter 7 bankruptcy.  Once again, my co-host as always is Jesse Barrientes.  Jesse, welcome to the show. Jesse Barrientes: Thank you, Dave. David Siegel: How are you doing today? Jesse Barrientes: Excellent, how about yourself? David Siegel: I’m doing+ Read MoreThe post What Is Chapter 7 Bankruptcy In A Nut Shell? appeared first on David M. Siegel.

The settlement agreement, fully executed, provided explicitly that the obligation was not dischargeable in bankruptcy. So why did plaintiff’s counsel have to  prosecute the claim again when the defendant filed bankruptcy? Because the terms of the  settlement agreement didn’t track the elements of  the bankruptcy code’s elements for non dischargeable debts. Done properly, the agreement would have been entitled to collateral estoppel.  Little more than the filing of the nondischargeability complaint would have been required to preserve the claim from discharge. But just reciting the result you want doesn’t get the job done in bankruptcy court. Three exceptions to discharge The bankruptcy code lists a long string of debts that simply can’t be wiped out in bankruptcy. But in that list of debts that are not dischargeable in bankruptcy, three categories are called out for special treatment. Debts incurred by fraud or other forms of rank dishonesty Debts for breach of fiduciary duty, larceny or embezzlement Debts for willful and malicious injury To be excepted from discharge, the creditor asserting a claim based in one of these theories must file a timely adversary complaint, challenging the discharge of the debt.  11 USC 523(c).  Then the creditor has to prove that the debt is really what he claims. Labels don’t carry the day Plaintiff bears the burden to show that the facts surrounding the debt fit the bankruptcy definition of the exception.  The fact that state law denominated it as fraud, breach of fiduciary duty, or a willful tort isn’t sufficient. The first judge before whom I appeared as a newly fledged bankruptcy lawyer used to complain that, under our state law, everyone was a fiduciary to those around him.  However, the bankruptcy exception to discharge covered only express trusts and defalcation.  So a state law judgment for breach of fiduciary duty may not spare the claimant from proving up his case in bankruptcy court. We saw that play out when the Supreme Court recently held that “defalcation” required an intentional wrong.  The creditor held a state court judgment for breach of fiduciary duty grounded, not in any financial loss to the trust, but for self dealing. So, you are not home free as plaintiff’s counsel by getting a judgment that calls the challenged behavior fraud, etc. Make it truly non dischargeable Nor, as I said at the top, is it sufficient to get an agreement in writing that the debt will not be dischargeable in bankruptcy.  That doesn’t prove that the conduct in question squares with the bankruptcy definition of a non dischargeable debt. You need to establish the operative facts, by agreement or in judicial findings of fact, to be spared a trial in bankruptcy court. If you are alleging non dischargeable fraud,  you’ll need facts adding up to the following: the debtor made a representation; the debtor knew at the time the representation was false; the debtor made the representation with the intention and purpose of deceiving the creditor; the creditor relied on the representation; and the creditor sustained damage as the proximate result of the representation. In re Apte, 96 F.3d 1319, 1322 (9th Cir. 1996);  In re Kirsh, 973 F.2d 1454, 1457 (9th Cir. 1992). Your settlement agreement must then have the defendant admit that he made a representation to induce the behavior; that he knew at the time it was false, etc. Then you have undisputed facts entitling you to summary judgment in your non dischargeability action. Image courtesy of Flickr and HeyThereSpaceman.  

  The Bankruptcy Court for the Western District of Arkansas, Judge Taylor, had suspended a debtor's attorney from practicing for six months, and entered a $1,000 sanction against the attorney, for conduct relating to a debtor's post-petition arrearage on a domestic support obligation.   In re Young, 497 B.R. 922 (W.D. Ark., 2013).  When the bankruptcy was filed, the divorce order awarding alimony was on appeal.  The appeal was resolved in favor of the spouse, and the bankruptcy case remained pending without confirmation for two years following that, with numerous amended plans and with a budget showing $1,100/month in alimony payments that were not being paid.  The trustee had filed objections that he had not received proof that the alimony payments were current post-petition.  The final amended plan stated that the Debtor believed he was current on post-petition alimony payments, which appeared to resolve the trustee's objection and resulted in confirmation of the plan.  Prior to confirmation the debtor's attorney filed a Complaint and and Amended Complaint for sanctions alleging a stay violation for attempts to collect prepetition alimony.    The Bankruptcy Court cited Rule 9011(b).  Once an attorney files a pleading or paper with the court, he or she certifies:to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,—(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for extension, modification, or reversal of existing law or the establishment of new law;(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.      The Bankruptcy Court found that the modified plans providing for payment of the post-petition alimony as a prepetition priority debt violated Rule 9011 as being filed for an improper purpose, and the term that the Debtor would 'continue' post-petition alimony payments inferred that the debtor had been making post-petition payments, which counsel knew he had not.  The court also examined an amended Schedule E showing $9,300 as an unsecured priority claim when she knew it was post-petition alimony.  However, the Court found that schedules were not subject to Rule 9011.  The Court found that the Complaint and Amended Complaint violated Rule 9011 that the conduct related to collection of prepetition alimony, and that the reason the wife had not been paid was that no claim had been filed, were both incorrect and the result of studied calculation.  The Court found the most egregious violation to be in the final amended plan when the statement was made that the debtor believed he was current on all post-petition domestic support obligations that were due after the filing of his chapter 13 plan.   The Court found this to be an attempt to manipulate the language of the plan to defeat the express purpose of §1325(a)(8) for the improper purpose of obtaining confirmation of the chapter 13 plan.    The 8th Circuit BAP affirmed these findings and sanctions in In re Young, 2014 WL 944846 (8th Cir. BAP, March 12, 2014).  The appellate court noted that an attorney must make a reasonable inquiry into whether there is a factual and legal basis for a claim before the filing of such.  The established standard for imposing sanctions is an objective determination of whether a party's conduct was reasonable under the circumstances.    The court determined that Cruz had to have known that the Debtor failed to make his required postpetition alimony payments, so Cruz amended the Debtor's schedules and his plan to treat the alimony debt as prepetition priority debt and to state that the Debtor would “continue” to pay his postpetition alimony outside of his plan. In addition, the plan involved the filing of a false certification regarding payment of postpetition domestic support obligations to obtain confirmation. Meanwhile, Cruz allowed the Debtor to maintain an expense on the Debtor's Schedule J for postpetition alimony payments, thus excluding that amount from the calculation of the Debtor's payments to creditors under his plan. Therefore, the bankruptcy court found that Cruz promoted confirmation of a plan that excluded the alimony amount from the funds available to creditors, while affording priority payment to the same alimony debt, at the expense of other creditors. Sanctions shall be “limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.” FED. R. BANKR.P. 9011(c)(2). In addition, sanctions entered on a court's initiative may be in a nonmonetary form or in the form of an order to pay a penalty into the court. FED. R. BANKR.P. 9011(c)(2).    The appellate court only reversed and remanded for a separate hearing on sanctions awarded for testimony made by the counsel at the hearing on the order show cause as to the prior conduct, indicating that a separate hearing and notice was required to award sanctions for that conduct.