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Filing more than once

By Jonathan on October 1, 2011

I am often asked, “I filed a bankruptcy several years ago, but I’ve gotten into difficulty again. How soon can I file another case?” If you’ve tried to research this question on the internet, the explanations are often confusing. Sometimes there are complicating factors, but the following table will give you an easy-to-understand summary of the rules (sometimes summarized as the 2-4-6-8 rules.)

	You may file:	You may file:
If you received a discharge in a prior Chapter 7	a new Chapter 7after 8 years 11 U.S.C.§727(a)(8)	a new Chapter 13after 4 years (Time may be waived if you are not seeking a discharge, but only more time to pay your debts §1311 U.S.C.§28(f)(1)

	You may file:	You may file:
If you received a discharge in a prior Chapter 13	a new Chapter 7 after 6 years or immediately if, in the prior Chapter 13 you (A) paid 100% of your debts or (B) (i)you paid at least 70% and (ii) the plan was filed in good faith and you made your best effort 11 U.S.C.§§727(a)(9)	a new Chapter 13 after 2 years (Time may be waived if you are not seeking a discharge, but only more time to pay your debts §1311 U.S.C.§28(f)(1)

This does not answer related questions about prior bankruptcy filings, such as when the automatic stay is applied and for how long, but it does give you an overview that you may find useful.

As always, please feel free to call our office if you have any questions. We are here to help you.

Beware of “Emergency” or “2 Page” Bankruptcy Filings

By Jonathan on September 25, 2011

A typical Chapter 7 or Chapter 13 petition requires you to submit well over 50 pages of documentation, including:

your schedules – which includes a detailed budget, a list of all creditors including addresses and account numbers, a detailed list of assets with estimated valuations, detailed information about sales, transfers, losses and recent payments to creditors, information about your and your spouse’s income over the past 3 years
your plan (in a Chapter 13)
a credit counseling certificate
pay advices documenting income for the past 6 weeks

In my experience, even the most organized bankruptcy filers will need around a week to 10 days to put all this information together. For those less organized, it can take longer.

What happens, then, if you need bankruptcy protection immediately – perhaps to stop a pending repossession, wage garnishment or foreclosure? In such an instance, the Bankruptcy Code does allow you to file an “emergency” petition consisting of only the first two pages of your petition + the credit counseling certificate.

You then have 15 days to complete the remainder of the paperwork and get it filed. [Read more…] about Beware of “Emergency” or “2 Page” Bankruptcy Filings

Self-employment and Bankruptcy

By Jonathan on September 15, 2011

A question that often comes up is, “I’m self-employed and my business is losing. Should the business file bankruptcy or should I file as an individual or both?”

If you are a sole proprietor, you and the business are the same entity, in which case, if your income isn’t too high (i.e., you pass the Means Test), you may file under Chapter 7 individually, regardless of how much debt you have.

If your income is above Means Tests limits, whether you can file under Chapter 13 (so-called wage-earner’s plan) or Chapter 11 (business reorganization) will depend on how much secured and unsecured debt you have.

If you are under the debt limits ($360,475 in liquidated, noncontingent unsecured debts; $1,081,400 in liquid, noncontingent secured debts), you can file under Chapter 13. If you owe more than that, you may have to file under Chapter 11. (The definition of a “liquid, noncontingent” debt is beyond the scope of this blog, as is a discussion on ways to get around the limits).

The situation is a bit different if your business has been operating as a limited liability company or corporation. In this case, you and the business are separate legal entities, and the question is whether one or both should file. Unless you have personally guaranteed the company’s obligations, you could just decide to liquid the business, pay the creditors what you can from the proceeds and not file bankruptcy at all. Before you make this decision, you should consult with an attorney on how to do it properly, so you don’t do anything that could be construed as defrauding creditors.

If, on the other hand, you believe the business could eventually succeed if you just had a little “breathing room,” you could file a Chapter 11 reorganization plan to get the creditors off your back.

In any event, whether you should also file individually requires further analysis.

For example, when a lender requires a personally guaranty of a business loan, the loan agreement generally provides that insolvency of a guarantor is a default of the loan. If you are trying to keep the business afloat, this could do in the business.

As you can see, there are a lot of factors to consider when contemplating bankruptcy for yourself or your business. The best course is to seek professional advice to help you decide on the best course of action.

What can I do if I want to surrender my condo or house and the lender won’t foreclose?

By Jonathan on September 8, 2011

What if you surrender your home in bankruptcy but the lender does not foreclose?

These days, a lender may not move quickly to foreclose on your property after you have surrendered it, even if there is no longer an automatic stay in effect. The lender may be overwhelmed by volume, or the property has too little value, or the lender may want to avoid responsibility for maintenance, management, marketing, sales, taxes, insurance or condo fees.

Unless the lender forecloses, you still have an ownership interest, and may have some continuing liability, even though you have filed bankruptcy. Below is a discussion of some of those possible obligations, followed by a suggestion that may allow you to avoid them.

Property taxes: A property owner may be held personally liable for real estate taxes. Local taxing authorities don’t generally sue homeowners, but it is a possibility, especially as governments become more pressed to improve revenues.

HOA dues: Dues owed to homeowner associations (HOAs) are a different story. HOAs, especially hard-pressed condo associations, have been particularly aggressive in pursuing fees.

The Bankruptcy Code allows condo owners to discharge liability for pre-petition condo fees. However, that does not mean that an owner can continue living in the condo or rent it out and get a “free ride” at the expense of the other condo owners. To prevent condo owners from taking unfair advantage, Congress adopted Section 523(a)(16) of the Code, which prevents a debtor from discharging post-petition HOA fees as long as he or she has a legal, equitable or possessory interest in the property. Even if you surrender the property and move out, unless the lender forecloses you still have title and may still be responsible for post-petition condo fees (as well as continuing utility costs, assessments and real estate taxes).

Building Code violations: A vacant, abandoned home may give rise to dangerous or unsafe conditions in violation of building codes. It may be something as simple as an overgrown lawn or as serious as an attractive nuisance to children, occupation by drug users, or constituting a fire hazard. A Building Code violation may be punishable by a fine or even jail time.

What can you do?

Jingle mail? Just mailing the keys to the lender won’t relieve you of liability, since that doesn’t convey title.

Deed in lieu of foreclosure: Lenders generally do not like to accept a deed in lieu of foreclosure, since they would be getting the property subject to junior claims that could otherwise be wiped out by foreclosure. CAUTION: be wary of any overtures from the lender offering to consider a deed in lieu of foreclosure provided you fill out an application disclosing all your assets. This is a ploy to find possible sources of recovery if the lender decides to sue or to put pressure on you to pull money out of your 401(k). Don’t do it! Retirement funds are protected from creditors.

Deed the property and put the burden on the lender to deny ownership.

Here are some legal principles that will make it difficult and costly for a lender to deny ownership:

Recording a deed creates a presumption that an interest in real property has been conveyed. (If you send an unrecorded deed to the lender, the lender could just destroy it.)
Delivery creates a presumption of acceptance. (Proof of delivery puts the burden on the recipient to prove rejection.)
A presumption of acceptance is also created if the conveyance confers a benefit on the recipient.
Preserving the lender’s right to foreclose limits the ability of the lender to deny that the conveyance confers a benefit.

Remember, the lenders don’t usually want a deed in lieu of foreclosure, because then the lender’s title could be subject to other claims (such as a second mortgage), whereas a foreclosure would wipe out junior liens. To undercut a claim by the lender that your deed creates a burden and not a benefit, your deed could disavow an intention to merge the title with the lender’s security interest, and affirmatively state that the lender’s right to foreclose is preserved.

While there is no guaranty, a properly drafted, recorded and delivered deed will stack the cards in your favor by forcing the lender to go to court and publicly disavow an ownership interest. (If the lender disavows an ownership interest, the court could construe that as the lender’s consent to a sale and order the property to be sold by the trustee. See. In re: Pigg, http://creditorsrights101.files.wordpress.com/2011/07/pigg-opinion-bankruptcy-court.pdf

The steps to accomplish this goal are:

Prepare a deed of the property to the lender containing the special provisions mentioned above. You should seek the assistance of a knowledgeable real estate attorney, since an improperly drafted deed will defeat your purpose. Also keep in mind that if you have filed bankruptcy, you must get the trustee’s permission or wait until the trustee has relinquished his or her interest in the property.
Execute the deed. Again, proper form and correct execution is essential. Seek an attorney’s guidance.
Record the deed in the manner and place mandated by state law.
Have the recorded deed returned to you or your attorney.
Send the recorded deed to the best address you can locate for your lender and get proof of delivery. I recommend sending it by UPS or FedEx. I am wary of U.S. Postal Service registered mail, return receipt requested, because that green return receipt card has a way of disappearing before it ever gets back to the sender.

Converting from a Chapter 13 to a Chapter 7

By Jonathan on September 5, 2011

Sometimes people file a Chapter 13 bankruptcy case, even though they may qualify for a Chapter 7. Why would they do that? The usual reason is that a Chapter 13 case offers people who have fallen behind in their car or mortgage payments a way to keep their property.

Ordinarily, when you fall behind in your payments, the lender has the right to “accelerate” the loan, meaning that the only way to keep your property is to pay off the entire balance of the loan. Few people who have fallen behind are in a position to do that, but that may be your only choice in a Chapter 7 case. In a Chapter 13 case, however, you can keep your home (or car) by filing a plan that allows you to make small payments against the arrearage over the course of the plan period (as long as you also resume making the regular payments).

So why would someone who filed a Chapter 13 case want to convert to Chapter 7? Often is it because after filing their Chapter 13 case, people suffer additional difficulties. They may lose a job or suffer a cutback in hours, or they may fall ill and lose time at work or they may face unexpected medical bills. When this happens, they may decide that it is futile to try to hang on to their house, and that they would be better off converting to Chapter 7.

Recently a client who had been a Chapter 13 plan for three years told me he just could not keep up with the ongoing costs of repair on his old house. In order to provide safe and sanitary housing for his family, he was forced to stop making mortgage payments, abandon the house and rent an apartment. The irony is that he could have surrendered the house and filed a Chapter 7 in the first case. Even though he has stopped making the mortgage payments, the mortgage lender had not sought the court’s permission to foreclose, because it is continuing to receive arrearage payments under the Chapter 13 plan. This man was a prime candidate for conversion of his case to Chapter 7.

If you have filed a Chapter 13 bankruptcy case and your circumstances have changed, such as a loss of employment or a serious illness, causing you to conclude that it no longer makes sense to try to hang on to your house, your bankruptcy attorney can help you decide whether it would be advisable to convert to a Chapter 7 or perhaps to ask the Court for permission to revise your Chapter 13 payment plan.

How do Georgia Residents Protect Joint Tax Returns in a Joint Bankruptcy Filing?

By Jonathan on September 5, 2011

As a debtor’s attorney, one of my goals is to help my client protect as many of their assets as possible when filing for bankruptcy. The Bankruptcy Code allows us to shelter certain assets by declaring them as exempt.

Interestingly Georgia law, not federal bankruptcy law, determines which assets you may exempt in a case filed in Georgia (there are some limited exceptions to this for filers who have recently moved to or from Georgia). The Georgia exemption statute may be found at O.C.G.A. 44-13-100.

An asset that frequently needs to be protected is one’s federal and/or state income tax refund. Because your refund comes in the form of cash, it is not surprising that bankruptcy trustees will try to find a way to grab your refund. For this reason, I advise my clients to adjust their tax withholdings so that their future tax returns will not show either an overpayment (and thus a refund) or a liability (which will create future budget problems when the tax debt comes due).

If you have a refund due you for the past year, you can use the Georgia “wildcard” exemption to declare that refund as exempt – to a point. Under the Georgia exemption statute, you can use half of your unused real estate exemption for any property + you get an additional $600 wildcard exemption. Thus, an individual can declare up to $5,600 of his income tax refunds as exempt. [Read more…] about How do Georgia Residents Protect Joint Tax Returns in a Joint Bankruptcy Filing?