The Law Office Of David C. Hill Bremerton & Port Orchard, Washington(WA) message-50x50 call-50x50 blog lecture

Welcome to my blog

 

I have included various articles and links regarding bankruptcy nd estate planning that may be interst to clients and othr practitioners.

 

The information contained in these blogs and this site is for educational purposes only and may not be construed to providing legal advise.  Always consult  with an attorney with  regarding to this or any other legal information provided to you.

By lawofficeo50159619, Apr 6 2016 09:42PM

Frequently I get the question, when should I file my bankruptcy petition? Sometimes that is an easy question at other times it requires a little more thought.

For most people, timing is a matter of personal choice. Generally, if there are no pending legal deadlines, the individual can file when it is most convenient. However if there are critical deadlines, such as a pending foreclosure or lawsuit, timing becomes much more critical. The following are some examples of timing issues:

1. Pending foreclosure: once a foreclosure has commenced, there are critical deadlines that come into play. If you want to save the home, you must file the bankruptcy petition before the foreclosure sale date. While I have filed cases as late as one minute before the scheduled foreclosure auction, I do not recommend waiting that long. There are a lot of things that must be done before the case can be filed and a rush filing carries with it a substantial risk of critical error. If your case is subsequently dismissed because of these errors, you may be limited in your ability to file a new case that will prevent the foreclosure.

2. Pending lawsuit or garnishment: once a lawsuit is filed you have a very limited time to respond. If you fail to respond a judgment can be entered against you and forest collection through garnishments can commence. While a properly timed bankruptcy petition will terminate any pending garnishment, your attorney may have a fight with the collection agency to recover the garnished funds. In the meantime your financial situation is now gotten worse because of the garnishment.

3. Suspended drivers license: if your license has been suspended due to financial matters, such as an uninsured motorist accident or unpaid traffic fines, a well-crafted bankruptcy petition can allow you to reinstate your license. Although I’ve had clients who have continued to drive on suspended licenses for years, I do not recommend ignoring the license suspension. Not only do you risk additional traffic fines and potential jail, but you might need frequent chiropractic adjustments to deal with the next strain you get from constantly looking over your shoulder.

4. Change in income status: this factor became more of an issue after the Bankruptcy Reform legislation of 2005. Your ability to file a Chapter 7 or a favorable Chapter 13 is based upon what referred to as the Means Test. This test compares your income for the prior six months with the average income for your size family. If your income is above the median, you may be prevented from getting a Chapter 7 discharge or your Chapter 13 Plan payment will be higher than you can reasonably afford. If you have experienced a substantial income increase recently, you may want to file while the average income is still low. On the other hand, if you have just been laid off from a high income position, you may want to wait a few months so that the means test average is more in line with your current financial circumstances. Although there are ways around the Means Test burden, your case is much easier if those do not need to be explored.

5. At risk assets: in bankruptcy you are allowed to exempt or protect certain property, based upon value. If the value of your property exceeds the exemption limit or if you have property that cannot be exempted, that property can be seized by the Chapter 7 trustee. However, sometimes you can convert the “at risk” property into safe assets. Any such conversion should be done well ahead of filing your case and only after consultation with your bankruptcy attorney. There is a right way and a wrong way to convert property.

You should discuss the timing issue with your bankruptcy attorney. Your attorney can counsel you and assist you in determining the best time to file your case. However, it is always important for you to act early. Give your attorney and let time to prepare the documents and file your bankruptcy in a way consistent with your objectives. Please don’t expect to meet with the attorney on Thursday afternoon and assume he can put everything together and file your case before the 10 AM Friday morning foreclosure sale!

By lawofficeo50159619, Jan 28 2015 01:21AM


Once an individual or couple realize that bankruptcy is the only option to deal with their financial situation, they must then decide whether to choose Chapter 7 or Chapter 13. For most people, Chapter 7 is the preferred alternative. A Chapter 7 can generally be completed in roughly 4 months. By contrast a Chapter 13 normally will run a minimum of 36 months and could extend to 60 months. A Chapter 7 does not involve a payment plan and generally does not require the individual to surrender assets to trustee. By contrast, a Chapter 13 requires a regular payment to a trustee for the full term of the plan.


Given the burdens of a Chapter 13, why would anybody choose that over a Chapter 7? I have found that there are generally about seven reasons to consider Chapter 13.


1. Prior bankruptcy: Chapter 13 is available if a prior Chapter 7 was filed within the last 8 years. The issue is whether a discharge is needed. If so, the prior Chapter 7 must have been filed more than 4 years ago or Chapter 13 must have been filed more than 2 years prior to the present case.


Why would you file if you are not seeking a discharge? A Chapter 13 can do two things even if the debtor is not entitled to a discharge. First, it can force the creditor into a payment plan that might either reduce or eliminate interest and penalties going forward. Second, it will allow the debtor to strip off a wholly unsecured junior mortgage that was personally discharged in a prior Chapter 7.


2. Non-dischargeable debts: certain debts are not dischargeable in Chapter 7, but are dischargeable in Chapter 13. Those debts include noncriminal court fines, willful and malicious injury claims to property, and divorce related debts, other than child-support or alimony. In addition, a Chapter 13 can bind the IRS to a payment plan over a period of up to five years, which will stop the running of interest and penalties. Chapter 13 is an effective way to deal with past due domestic support obligations. The Support Enforcement agency will generally abide by a Plan if the debt is paid in full. Criminal fines can also be paid through a Chapter 13 Plan. In Washington, this becomes effective way of reinstating a drivers license.


3. At risk assets: One of the most common reasons people file Chapter 13 is to prevent foreclosure. A Plan should provide for a cure of the arrears over the life of the Plan. In addition, Junior mortgages can be eliminated if there is no equity to support them.


Car loans can be modified in a Chapter 13, but the extent of the modification will depend upon when the car was purchased. .


Although the rules protecting or exempting assets are quite generous, occasionally a client will have assets that cannot be exempted. The debtor is generally entitled to retain those assets in a Chapter 13 so long as the unsecured creditors receive equivalent value over the life of the Plan.


4 Means Test: If the debtor has a positive disposable monthly income the debtor may be required to file chapter 13. One of the quirks of the Code is that the Means Test is different in several areas between Chapter 7 and 13. For instance, voluntary contributions to retirement plans and retirement loan payments are deductible on the Chapter 13 Test, but not on the Chapter 7 Test. See my discussion of the Means Test in my other blog. There is a qualifier regarding retirement plans that I will discuss in a future blog.


5. Security clearance: Some employers are very touchy about bankruptcy. This is especially true with the military. If a debtor has a secret or top secret clearance, his clearance may be revoked if he files Chapter 7. However, generally the military will not revoke the security clearance if the debtor files Chapter 13.


6. Co-signor protection: The automatic stay of debt enforcement applies only to the debtor in Chapter 7. However, that stay may extend to individual no-filing co-debtors in Chapter 13.


7. Moral choice: Some people have a problem walking away from their debts and feel a moral obligation to pay their creditors. I never discount this as a reason to file Chapter 13. The advantage of a Chapter 13 for them is that they can pay their creditors in a manner they can afford and bind the creditors to the Plan.


In summary, Chapter 13 is a good debt solution in the appropriate case. Your attorney can help you weigh the advantages and disadvantages of this option and contrast it with Chapter 7.


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