Bankruptcy is very nuanced and detail oriented area of law. Many, many practitioners get into bankruptcy because they think it is easy, and many get out when the see the vast complexity of the practice area. Below are a series of recommendations designed to make the bankruptcy process as smooth as possible for filers in chapter 7 or chapter 13 consumer bankruptcy cases.
The harassment by creditors and debt collectors for money is a driving force of bankruptcy cases. The calls are relentless, and the stress and pressure to pay – even when you may have no money to pay with – are crushing. Half of what my office does is get you out of debt. I call this the shield as I shield you from the debts and give you an opportunity and forum to move forward with your life. The other half of what I do is to enforce your rights after you file bankruptcy, and in some cases, even before filing bankruptcy. I call this the sword. I use this sword to defend you against unscrupulous creditors who routinely fail to follow the bankruptcy rules. The sword is the ability to file lawsuits against your creditors and demand them to cease and desist their awful conduct and to demand for you money for their ongoing harassment. It seems counterintuitive that your bankruptcy attorney may end up paying you settlements from your creditors during a bankruptcy, but it happens in many of my cases. Be sure to thoroughly understand the bankruptcy process I describe below and report any creditor violations to my office immediately.
In some cases, you may have claims against the incessant calling of debt collectors through the Telephone Consumer Protection Act (TCPA). We will discuss this potential for your case when we meet with you to discuss your case. Most of my clients are unaware that there are additional remedies available for these violations.
When you file bankruptcy, you are granted a temporary court order (that typically lasts for the duration of your bankruptcy) called the ‘stay’ – think of this as a stay away order. “Debt collector – stay away from me!” Violations of this order are considered contempt of court (just like in court TV show Law and Order) and are called stay violations. Any creditor contact to you as a bankruptcy filer during the bankruptcy is illegal with very few exceptions. To contact you directly, a creditor must ask for relief of the bankruptcy court to be allowed to contact you. This rarely happens. If a creditor calls you after filing bankruptcy without this court permission, this is a violation of the bankruptcy court’s prohibition of contact, and we are there for you as part of every bankruptcy to stop the calling. In some cases, we may be able to recover money for you.
Things to look for and notify me of immediately after I file your case include:
1. Suing you after filing bankruptcy.
2. Failing to stop a garnishment.
3. Calling you and sending you collection letters after filing.
4. Filing false proofs of claims or mortgage related documents in your bankruptcy.
There are many, many more violations. If ANY creditor contacts you in any way or takes action against you after filing, be sure to report it to my office. Not every case is actionable; but many are. Be sure to get the full benefit of your bankruptcy fresh start by reporting these violations to my office.
After the bankruptcy case discharges, the ‘stay’ order is converted into a permanent ‘stay away’ order called a discharge injunction. This is the court order that eliminates the debts FOREVER – or in perpetuity – as lawyers like to say. Just like during bankruptcy, creditors are prohibited from contacting you after the bankruptcy case is discharged to demand money on any of the debts that were discharged in the bankruptcy case. So if you are collected upon even years after the bankruptcy discharge for debts the discharged eliminated, you must let us know. In many cases, these are valuable claims. After all, you had to follow the rules of bankruptcy to get out of debt; the creditors should be compelled to follow the rules as well. Be sure to get the full benefit of your bankruptcy fresh start by reporting these violations to my office.
In addition to the injunction violations, after your case is discharged, my office sends notice to the large credit reporting agencies. They are obligated to make the correct bankruptcy notations on your credit reports. If they don’t, you may have rights against these creditors under the Fair Credit Reporting Act (FCRA).
1. Make sure you list all of your creditors in the bankruptcy petition.
2. Make sure your income and expense information is as accurate as possible.
3. Make sure you provide ALL income information over the seven (7) months prior to filing. This is crucial and used for the means test. ALL income potentially applies to this analysis, including second jobs, income from law suits, tenants, shared expenses, alimony, support, and self-employment income.
4. Make sure you provide information on ALL your assets you own, and ALL assets you may have sold or transferred in the past 4 years.
5. Make sure you provide detailed information on all payments or transfers of money or property you may have paid to family members in the past two (2) years.
6. Thoroughly read all of the documents you sign at the attorney’s office. YOU are signing these under penalty of perjury; not the attorney. The attorney’s job is to do a reasonable investigation into your debts and assets and do everything possible to ensure that your paperwork is as thorough as possible; but at the end of the day, it is YOU that sign the paperwork. If you have ANY questions about this, my office will clarify any issues before filing if you ask.
7. Lien information must be provided prior to filing of the case.
8. Make sure you disclose divorces and closed businesses you may have owned. The biggest problem areas in bankruptcy are from angry ex-spouses and angry ex-business partners.
9. In general – be as thorough as you can on the questionnaire and paperwork requested, and ask as many questions as you need to so that you understand the process, your rights, and your responsibilities as your case progresses.
1. COURT FILING FEE PAYMENT PLAN: If you are on a filing fee payment plan for the court filing fee ($335.00 for Chapter 7 / $310.00 for Chapter 13), make SURE you pay these fees timely with your filing. The court WILL DISMISS YOUR CASE if you fail to pay the filing fees. In the event your case is dismissed for non-payment of filing fees, the cost to reopen the case is often over $700.00. Be sure you are well aware of your filing fee payment plan. The court generally DOES NOT HAVE A GRACE PERIOD and will dismiss your case WITHOUT NOTICE for nonpayment of the filing fee.
2. CASES WITH DEFICIENCIES OR MISSING DOCUMENTS: In some cases, your case may be filed on an emergency basis. This is typically done to stop garnishments, foreclosures, or car repossessions. Filing on an emergency basis will generate an ominous looking court order indicating this office has seven to fourteen (7-14) days to complete the filing. To complete the filing, you must:
• Quickly provide to my office the paperwork we requested to complete the case.
• Show up at this office on the date and time schedules to sign the remaining paperwork.
• Failure to follow through with this will result in the dismissal of your case.
3. SECOND ONLINE COURSE IN PERSONAL FINANCIAL MANAGEMENT: Make sure you take the second online course in Personal Financial Management. This is due after filing but before the close or discharge of your case. This is available at www.cricketdebt.com. Use attorney code 568096. You will need your case number to complete this course. It is required prior to discharge in ALL bankruptcy cases. If you do not complete this course, the case will close without discharge. It will cost approximately $500.00 to reopen the case to file the completion course. DO NOT USE A VENDOR OTHER THAN CRICKETDEBT. CRICKETDEBT IS SYNCED WITH YOUR CASE TO FILE THE COMPLETION CERTIFICATE WITH THE COURT. OTHER VENDORS WILL NOT DO THIS FOR YOU.
4. SCHEDULING THE MEETING OF CREDITORS AND PROOF OF IDENTITY REQUIREMENT: Immediately calendar your 341(a) meeting of creditors on your personal calendar, arrange off work, and plan to arrive 20-30 minutes early to check in. Make sure your bring along photo ID and proof of your social security card number. If you do not know which documents will satisfy this requirement, please view the following website accurate as of 10/8/2017.
5. MEETING OF CREDITOR ADDITIONAL DOCUMENT REQUIREMENTS: Provide to my office fourteen (14) days before your hearing the following documents that REFLECT THE DAY YOU FILED THE CASE. We typically DO NOT HAVE THESE DOCUMENTS as there is often a five to ten (5-10) day delay from the time you signed the paperwork until it is filed with the court.
• Bank statements that reflect the day of filing.
• Pay stubs that reflect the day of filing.
• Other paperwork that this office may request. Typically we have all of the documents other than updated pay stubs and bank statements, but not in every case. It is your responsibility to ensure we have these documents.
NO ASSETT CASE DESIGNATION – This means the court will not take an interest in your personal assets. This is typical in the majority of chapter 7 cases. You must ensure the course in personal financial management is complete, the court filing fee payment plan is paid, and in the event there is an attorney fee balance, you have made arrangement for payment with this office.
ASSETT UNDETERMINED DESIGNATION: This means the court wants to investigate further whether it believes you will have assets it can collect. You must cooperate with the investigation as the case progresses.
ASSETT CASE DESIGNATION – This means the court is taking an interest in some type of property your own to liquidate and pay some portion of your debts. The trustee in your case will work with my office and you directly to complete the requirements of the case. You will know going into the case what assets this office thinks you have that may be at risk. But please note, after filing, I typically cannot ‘unfile’ a case in chapter 7. This means if the court plans on taking your property, you are obligated to cooperate. You must pay to the trustee whatever the arrangements agreed upon require. Often times this means turning over property or entering into a payment plan. Failure to follow through with this will result in non-discharge, a revocation of the discharge, or in extreme cases, further prosecution by the court. In addition, you must ensure the course in personal financial management is complete, the court filing fee payment plan is paid, and in the event there is an attorney fee balance, you have made arrangements for payment with this office.
CAR REAFFIRMATION / SECURED DEBT REAFFIRMATION: In some cases, clients want to retain and pay for vehicles or debts for secured property (like professional tools or jewelry) after the bankruptcy is discharged. To do so, you must complete a reaffirmation agreement, have it filed with the court, and attend a hearing approximately three (3) weeks before your case closes. At the hearing, the judge will explain that you have the right to surrender the property and turn over the collateral; or, if the judge approve the agreement, it will be a NEW DEBT just like it never went through bankruptcy. You must attend this hearing. In many cases, the attorney DOES NOT appear at the hearing. You will be notified about the hearing via US Mail and you MUST attend to keep the collateral. In addition, you must make post filing payments and to the extent required, keep the property insured.
GET FAMILIAR WITH THE PLAN, ORDER CONFIRMING PLAN, AND TRUSTEE MANUAL: Read your Chapter 13 plan in its entirety and read it often. This plan dictates your entire case. Read the order confirming the Chapter 13 plan. This is the order that binds everyone (you, the creditors, the trustee, and the court) to the plan. Sometime there are small changes to the plan listed in this order. Lastly, read the trustee Chapter 13 manual. If at anytime during the case you do not have these documents, email my office and we will send your copies of these. I recommend reading the once a month for the duration of your case. Within a year or so of filing, if you follow this advice, you’ll know exactly what is going on and what to expect.
KEEP COSTS DOWN: My goal during the Chapter 13 case is to keep your legal fees low. But sometimes over the years, your case requires extra work to stay on track. If that is the case, we will submit a bill for court review, and the court will approve these additional fees. This is called a supplemental fee application. You will get a copy of this is and when it is filed with the court. Be sure to contact my office if you have questions about the bill. To keep the attorney fees as low as possible:
1) Always make your trustee payment.
2) Pay the court filing fee if on a payment plan.
3) Take the second education course.
4) Send to my office signed and dated copies of your tax returns each year until discharge.
5) If you get a refund, be prepared to pay it to the trustee.
6) Make sure my office ALWAYS has your mail and email address, and current phone number on file.
7) Notify my office immediately if you change jobs or have a windfall of income.
8) Notify my office immediately if you call behind on trustee payments or mortgage payments.
9) Read the trustee manual and notify me about anything that is covered in this manual.
MONTHLY TRUSTEE PAYMENT FOR DUATION OF CASE (typically 36-60 months): Your first payment is due to the trustee one (1) month after filing (not one month after the hearing). You must pay this either through the TFSBillpay.com portal (this is the recommended method of payment if your trustee allows it), via a wage deduction by your employer, or via cashier’s check or money order. Payments are due monthly through the duration of your case. Failure to make payments will result in the dismissal of your case. This monthly trustee payment typically runs for thirty-six to sixty months (36-60) months after filing of your case.
MISSED TRUSTEE PAYMENTS: If you recognize you will fall behind on the court payment, or you have already fallen behind on the court payment, contact my office immediately to discuss what options you have.
TAX RETURN AND REFUND REQUIREMENTS: You must file and pay your personal income taxes each year by April 15 (or October 15 with an extension filed) during your bankruptcy. [NOTE: Depending on the timing of filings, this could require up to seven (7) years of tax returns if the cases is filed toward the end of a year and the case is a sixty (60) month case.]
• Your Chapter 13 plan will indicate what you must do with tax refunds during your case. In most instances, you must turn these taxes over to the trustees in addition to your plan payment.
• In the event you fail to do so, your Chapter 13 case will fail.
• DO NOT SPEND ANY TAX REFUND YOU RECEIVED DURING THE BANKRUPTCY WITHOUT GETTING WRITTEN AUTHORIZATION EITHER FROM YOUR TRUSTEE OR ATTORNEY ON WHERE TO SEND FUNDS.
• The court will not accept responses such as “I didn’t know about this” or “I asked the trustee, but they never responded, so I figured I could spend the money.” The number one issue with Chapter 13 cases failing is failure to properly file tax returns and pay the trustee the tax refunds owed during the life of the case.
• You can, however, adjust your withholding so you receive no refunds during the case. If you do not receive a refund, you do not need to turn it over to the trustee.
• If you owe taxes, you must pay the taxes each year. Failure to do so is considered taking on new debt during bankruptcy and can lead to the dismissal of your chapter 13 case.
CHANGES DURING THE CASE / INCREASED INCOME: If you have a change in jobs, a change in income, if you move, if you receive a windfall (personal injury settlement, inheritance, large gifts, etc.); you must notify this office immediately. Increased income may affect the plan payment. Failure to notify this office and the trustee regarding increased income WILL negatively affect your case, up to and including the trustee moving to dismissal of your case.
NEED TO GO IN TO DEBT: Do not go into debt during your Chapter 13 without obtaining trustee and court approval. This could occur for emergency home repairs, the need to purchase a new vehicles, or emergency travel or medical treatment.
REQUIREMENT TO PAY MORTGAGE DURING THE CASE: In most cases, if you are keeping your home, you MUST continue to make mortgage payments during the case directly to the lender. You must also pay Homeowner’s Association or Condo Association Fees, and any property taxes not paid by your lender. Further, if you stop paying your mortgage during the bankruptcy for any reason, you MUST notify your attorney and schedule a time to discuss this so it may be resolved with the court. Failure to pay the mortgage during a Chapter 13 when you have pledged in your Chapter 13 plan that you will do some may lead to dismissal or case closing without a discharge.
HOMEOWNER’S ASSOCIATION / CONDO ASSOCIATION: You are required to pay your ongoing HOA of Condo association fees after filing. You must pay these payments directly to the association. In some cases, arrearages of these fees are paid out of the monthly plan payments; however ALL CURRENT AND FUTURE DUE HOA AND CONDO FEES MUST BE PAID by you above and beyond the trustee payment and mortgage payment. If you are surrendering the property, you MUST continue to pay HOA or Condo fees until foreclosure.
REQUIREMENT TO KEEP VEHICLES INSURED: If you are paying for your vehicle within the Chapter 13 plan, you MUST maintain insurance on the vehicle.
REQUIREMENT TO PAY PROPERTY TAXES: You must pay ongoing property taxes for real estate you are keeping. This will typically be paid by your mortgage company escrow if it is included in your mortgage payment, otherwise it is our responsibility.
MISSED CREDITORS: If for any reason you identify that you failed to include a creditor on your bankruptcy (for any reasons which include that you didn’t know about the creditor, you believed the debt was paid, or simple inadvertence) you must notify this office immediately. In some instance, creditors who were not notified of the Chapter 13 bankruptcy (or the Chapter 7 bankruptcy) may NOT have their debts discharged. This could result in their balances owed even AFTER the case is discharged.
SALE OR PURCHASE OF HOME / REAL ESTATE: You may purchase and sell real estate within Chapter 13, but you must obtain court and trustee approval. THIS IS AN ARDUOUS PROCESS AND OFTEN REQUIRES SIXTY TO NINETY (60-90) NOTICE TO THE COURT AND TRUSTEE. If you plan on doing this, start the process as EARLY as possible. Further, immediately contact your title company to review if there are any title defects on your real property. For instance, it seems to be that many lenders / mortgage agents do not check title for unresolved liens until two (2) weeks or so before closing. If there IS an unresolved lien that this office can address, it takes, generally, forty-five (45) days OR MORE to resolve. Many closings have been cancelled or rescheduled due to this sloppy procedure by the mortgage lenders and closing agent. Do not get caught in this trap.
This transaction could significantly impact your Chapter 13 plan length, as well as the amount you must pay creditors. Potential changes include: (1) you may be required to pay more than your anticipated amount to other creditors – up to and including 100% of your debts as well as additional attorney and trustee fees. To determine how much you must pay the trustee, you must request and receive from the trustee an official notice of case payoff. This will be based on your anticipated HUD closing statement, case balance, estimated trustee fees, and estimated additional attorney fees. DO NOT MOVE FORWARD WITH A REAL ESTATE TRANSACTION WITHOUT HAVING THE WRITTEN FORMAL ESTIMATE FOR CASE PAYOFF FROM THE TRUSTEE IN YOUR HAND. Note: YOUR CASE LEDGER (available at NDC.org) DOES NOT INCLUDE ESTIMATED TRUSTEE AND ATTORNEY FEES (2) the case may continue after your real estate transaction closes for a number of reasons (3) you may not receive your portion of funds from the closing (if any) at the time or manner the usually occurs with a transaction outside of bankruptcy. Bottom line: make sure you thoroughly read this disclosure, your plan and order confirming plan, your real estate documents, this disclosure, the trustee’s disclosure, the additional disclosures this office provides during the case and, before moving forward with a real estate transaction in Chapter 13, it is typically best to meet with your bankruptcy attorney.
STEP UP PAYMENTS REQUIREMENTS: In some plans, your monthly payment increases occasionally during the life of the plan. You must ensure these increase payments are made. Failure to make the increase plan payments may result in dismissal or a case closing order without a discharge.
PEROSNAL FINANCIAL MANAGEMENT AFTER BANKRUPTCY: How to hit a home run after the bankruptcy and never be my bankruptcy client again.
Here are very direct, very linear things to do, generally, in order, from RIGHT NOW moving on, to get the best future result from your bankruptcy.
1. Create and stick to a written budget.
2. Stick to cash purchases.
3. Review your income and spending DAILY for 365 days by writing down each and everything you spend or earn. (I promise you you’ll be shocked at what you find.)
4. Have a weekly finance meeting – alone or with your spouse and/or another trusted person.
5. Educate yourself and change your mindset about how things actually work in the world v. how we wish things would work.
6. Don’t deviate from your plan without good reason; and then only after sufficient reflection that the change makes sense. You’ll find all suggestions lead down the same road initially. If they don’t; its likely a fad. Fads don’t work with money.
7. Get advice from other’s who are financially successful and only get advice from others who are successful.
8. If you are married and have kids, put together a will. If you don’t plan for the future, the government will do it for you.
9. Review your life insurance options.
Many clients ask me for resources on this information. Here is some recommended reading and further information:
Mindset by Carol Dwyck. WHY READ THIS BOOK? This book will show you how you can live a life in motion and develop a growth mindset.
Slight Edge by Jeff Olsen. WHY READ THIS BOOK? This book will show you, very directly, how life’s big victories (such as debt free living) are made up of often very small daily decisions and actions.
The Five Second Rule by Mel Robbins. WHY READ THIS BOOK? This book with give you a formula to get moving when you are stuck, plain and simple.
Total Money Makeover by Dave Ramsey. WHY READ THIS BOOK? This book will show you how to get on a cash budget, how to use an envelope system, and how to pull it together.
Discipline Equals Freedom by Jocko Willink. WHY READ THIS BOOK? This book will show you how to get it done, no matter what the mental or physical block is. No holds barred suggestions to get up and get moving in life and avoid stagnation, perfectionism, failure to start, and failure to follow through.
Entreleadership by Dave Ramsey. WHY READ THIS BOOK? This book will show you how to develop a winning strategy to grow your small and medium sized business. It has concrete examples of how to develop a small business beyond just working for yourself with no employees.
Retire Inspired by Chris Hogan. WHY READ THIS BOOK? This book shows your retirement plan is just a number. Once you hit that number, you are there. It provides a goal to reach, and a path to get there.
Think and Grow Rich by Napolean Hill. WHY READ THIS BOOK? This book for many gets the wheels of self-empowerment moving. Classic book on empowerment.
Tools of Titans by Tim Ferris. WHY READ THIS BOOK? This is like a tool box of what other successful people from all walks of life did to become successful, in their own works. Great examples of what other people did and do to thrive.
There are many, many more options. I think this is a great start.