Massachusetts Bankruptcy Lawyer

The deadline for objections to a debtor’s discharge in a Chapter 7 bankruptcy is usually a time period of approximately two months after the date of the creditors’ meeting. This means that the debtor would have to wait at least this minimum two month period in order to thereafter receive an order of discharge from the court. A creditors’ meeting successfully resulting in a trustee’s report of no distribution (the debtor has no non-exempt assets and has not transferred property out of their estate) is a good indication that there would not be objections to discharge expected.

Chapter 7 bankruptcy debtors are required to list the value of their personal property on their petition, as theirs is a “no asset” case. Debtors often have questions about how to value “used” items of property that would have depreciated in amount after purchase. Bankruptcy attorneys are currently required to provide any clients they meet with as a mandatory disclosure the BAPCA required notice of instructions for providing the required information [s. 527(c) of the Bankruptcy Code]. These instructions provide further guidance specifically for personal property that serves as the collateral for a debt listed on the petition. The value would be “determined based on the replacement value of such property as of the filing date of the bankruptcy case without deduction for selling or marketing costs.” The instructions actually guide debtors to either retail stores selling such used items or “if you can’t find a store that sells similar items in similar condition, the next best source for an objective appraisal is probably eBay or a similar online market.”

The public has been eager for “financial reform” in the wake of a severely weakened real estate market and a slowdown in economic growth so sudden that many institutions within and associated with the financial industry required government assistance. Mortgage applicants will now be required to be on more solid footing, as lenders will now be required to fully document a borrower’s income before agreeing to provide a mortgage loan. Lenders will also be required to determine that borrowers can otherwise repay their loans. While it is unfortunate that homebuyers wound up in situations where they could not afford their loans, with these reforms it is unlikely there will in the future be the wave of debtors facing a mortgage deficiency after foreclosure or short sale. It is also likely that certain credit accounts might be given preference by retail merchants for the lower transaction fees associated with them. This will hopefully give consumers more choices and perhaps encourage debtors to keep their accounts in good standing.

Among the exceptions to debts allowed to be relieved through a bankruptcy filing are student loans, debts owed to the government and family court-ordered payments. However, a recent Colorado state ruling may allow more leniency for the latter. According to the Colorado Supreme Court in Weis v. Weis, No. 09SA216, June 7, 2010 (Lawyers USA No. 993-1977), a contempt action against a spouse who had agreed to pay a share of joint debts did not qualify as an exception to the automatic stay provisions of the Bankruptcy Code as either a criminal action or an action to collect a “domestic support obligation.” The debtor in this case had in fact filed a Chapter 13 petition which would have required her to enter into a repayment plan for her debts owed, but the court refused to find an exception to the automatic stay as there were not funds outside of the bankruptcy estate available to cover these amounts.

Insurance protects the various affairs of our lives. Our usually mandatory automobile policies ensure that an accident would not require the purchase of a new vehicle. Health policies allow us to receive medical care at restricted costs. Our homeowners’ policies protect valuables against damage or theft. Policies on our lives provide for our loved ones and also serve as a valuable investment resource for the insured. Unfortunately, our financial affairs are not so neatly regulated. Even with a job and without splurging, many of us find ourselves facing an unaffordable level of debt. Most often, the level of debt arises because we have been extended credit for a house or card account we cannot possibly afford given our means. Unexpected circumstances can also throw our finances off balance. A period of unemployment without steady income might require over-reliance on credit cards. A medical condition might make good use of health coverage, but even if provider charges are written off over covered insured amounts, such conditions might require time off work and frequently result in large amounts of uninsured expenses. It is easy to get into such debt but more difficult to find the resources to successfully deal with it. The under-regulated debt settlement industry thrives off consumers who are looking for “easy” fixes to avoid the supposed shame and temporary credit damage caused by a personal bankruptcy filing. These people would be pleasantly surprised to know that even the restrictions under the current bankruptcy law allow liberal amounts for household income by localilty to qualify for bankruptcy. Moreover, means testing is available for over-income households who still face too high a level of debt. Property exemptions are limited, but the material possessions of another era have increasingly in an era of overwhelming debt given way to a more spartan lifestyle.

How does the bankruptcy process work?

As soon as you bring me the paperwork that I requested I will prepare your bankruptcy petition. Once I have the paperwork ready, you will come in, review your petition and sign. After this is ready and your payment is complete I will file your petition online. For example, if your paperwork is ready and I file on June 15th 2010 then the trustee will look back for a period of 90 days prior to that, approximately March 15th through June 15th 2010. If during that time you have paid more than $600 to any single creditor you will need to report this on your petition. This does not have to do with using your credit cards, but it has to do with paying your credit card bill.

Also, it is bankruptcy fraud to continue using your credit card once you know you are filing bankruptcy.

Let’s say as an example you had a credit card for which you have been making payments of $300 each month in order to try to pay it off, then (as an example) March through June you would have paid the credit card company a total of $900. In this case, prior to the June 15th filing date you would have paid over $600 in the past 90 days and this needs to be reported on your bankruptcy.

When do we have to stop using the credit cards that we want included in the brankruptcy?

I would advise you to stop using credit cards as soon as you possibly can. More importantly as I have said above, you need to stop paying your credit card bills ASAP.

Do they literally look 90 days back from the filing date or is that more of a generalization?

No, it is not a generalization. But it refers to whether you actually paid any of your credit card balance in the past 90 days.

A recent article, might give pause to those debtors considering “alternatives” to bankruptcy. While the industry bills itself as offering “debt settlement,” in fact the settlement of outstanding balances owed on credit accounts is actually in the hands of the credit companies. These companies may reject the payments made by a debt consolidator as inadequate and pursue their remedies, including lawsuit, against the consumer. In fact, there is no agreement between the debt settlement agent and the credit company, just a promise to make regular payments out of the customer’s account. Since these companies are for-profit, their fees take priority before they attempt repayment of consumer debts. And since repayment is in their control, they may satisfactorily negotiate some accounts while failing to adequately contribute towards the others. The saddest aspect of this industry is that its customers may “drop out” after attempted settlement and file bankruptcy in order to deal with their debt, what they were trying to avoid doing in the first place.

Discovery requests for document production by the local U.S. Trustee’s Office should be responded to in as thorough and timely a manner as possible. However, these investigations prior to the deadline for objections to discharge into a debtor’s financial affairs are generally triggered by unusual circumstances as reported on the bankruptcy petition. An over-median household income and a seemingly excessive amount of debt relative to time of filing income might cause the U.S. Trustee’s Office to make further inquiry into the reasons for so much debt and attempts made to repay these amounts. Debtors through their counsel should generally produce what documents they can along with a sworn affidavit explaining the circumstances causing the high debt relative to income level and why a bankruptcy filing was necessary in their case.

Short sales are increasingly common these days, but while the sale itself should not trigger scrutiny of a debtor’s property by the court, the circumstances surrounding the sale might be of interest. Particularly if the sale is to someone known personally to the debtor, like a relative of friend, even if full market value is paid for purchase, the debtor should be ready to produce upon request the HUD settlement statement for the transaction showing little proceeds if any to them from the sale and the appraisal obtained by the buyer in refinancing. While it is not a prohibited transfer, the court may want further details about a real estate agent’s involvement and commission.

Going through their credit report allows bankruptcy debtors to determine to whom they owe money to. However, a party who is ordered to be paid restitution as a result of a criminal court action might not appear on the credit report. This restitution might be a wage deduction listed on the Schedule J of monthly expenses, but it would also need to appear listed as an unsecured priority creditor on Schedule E. Unsecured priority claims are not dischargeable and would include domestic support obligations; wages, salaries, and commissions; claims for death or personal injury while debtor was intoxicated as well as total court-ordered restitution amounts. Such restitution would be classified as taxes, customs duties, and penalties owing to federal, state, and local governmental units as set forth in 11 U.S.C. s. 507(a)(8), even if actually payable to a private entity.

Disclaimer: This does not constitute legal advice. Please contact a bankruptcy attorney in your jurisdiction for question specific to your situation.