When can one modify a chapter 13 bankruptcy plan?

I recently had a chapter 13 client connect with me. They've been in their chapter 13 for awhile...6 or so. Their plan is confirmed. They've just been thrown a curve ball. His wife is a school teacher. She, in a year's time, will be taking a leave from work for a whole year....apparently unpaid. Obviously this will have an impact on their ability to continue making their plan payments so he's being proactive in contacting me to see how that will affect their bankruptcy case.

And the answer is....If in a chapter 13 case there is a change in income we can sometimes modify the chapter 13 plan to reduce the payments. That means drafting and filing a new plan, drafting and filing new income and expense schedules plus drafting, filing and scheduling a motion for the court to consider the modified plan based on the change in circumstances. That we do often enough...but, of course, there has to be enough income there to still fund a plan at minimum levels in order to meet statutory requisites and that can vary from one person's situation to the next depending on what they've got going on. If it doesn't work (not enough income)...then one can consider a chapter 7 case to see if that relief is available. The trustee cannot acquiesce to "hiatus" of payments for any duration be it long or short as the confirmed plan is set per court order and the trustee does not have that kind of authority...only the judge does. The thing to do is if there is a change that will impact your ability to make payments is connect with me when that event does occur or is certain in the relatively near future. At that point we can discuss your options to determine what the best way to handle that change in income will be..either a modified chapter 13 plan with an adjustment in the payment if possible or we'd also take a look at converting the case to that of chapter 7 if that makes more sense.

If you've got questions about chapter 7 or chapter 13 bankruptcy we'll be glad to help.

Attorney David D. Kingsbury

www.kingsburylawoffice.com

Individual or joint bankruptcy filing?

I have a lot of people who come in for consults with me and they are wondering if they have to file together or can one or the other file an individual bankruptcy case. If a joint case is filed there are actually two bankruptcy estates. Under 11 USC 302(a) an individual and his or her spouse may file a joint petition under Chapter 7. From a technical standpoint there are two separate bankruptcy cases/estates created. However, in almost every case the estates are consolidated under Bankruptcy Rule 1015(b) and administered as one case. The debtors will have their creditor's meeting scheduled for the same time and the same trustee will be appointed to administer both estates.

It usually makes sense to file a joint case when there are joint obligations on a significant portion of the debt. I've had some people fairly surprised to learn that they can't get rid of debt for their spouse if they file a bankruptcy on a creditor. Doesn't work that way...if the spouse has signed on the dotted line..then they are liable too and one person who is liable on an account is not going to get rid of the debt for the other because they've filed a bankruptcy case. On the other hand, if one spouse owes the lion's share of the debt and the other spouse is fairly debt free (meaning they haven't obligated themselves to pay on the debt)....then filing an individual case makes all kinds of sense. The court will always, as discussed in other posts, take the non-filing spouse's income into consideration when determining if the person that does file the bankruptcy case is eligible to file from an income standpoint. That's because the debtor and the non-filing spouse are seen by the court as an "economic unit". I usually get a "that's not fair", especially from people who may have just gotten married recently and where one has brought a lot of debt as baggage into the relationship. Whats "fair" hasn't got much to do with it. However, if the non-filing spouse has debt service of his or her own though that can be and should be factored in to the calculation so not all the income of the non-debtor always counts in an "ability to pay" analysis.

Only married persons can file a joint case. So boyfriend/girlfriend...even though it may feel like your married and you've got kids in common, have joint bank accounts or hold title to real estate together..plus any other trappings of a serious and permanent relationship without that marriage certificate you'd be looking at two separate bankruptcy filings as individuals...two filing fees, two attorney fees, two hearings and two separate discharge orders.

If you've got questions about chapter 7 or chapter 13 bankruptcy for personal or small business we've got the answers.

Kingsbury Law Office

www.kingsburylawoffice.com

Income for non filing spouse's count in Bankruptcy

I've had many, many clients come in for consults who aren't married but intend on filing an individual case. Perhaps they've been married for decades...maybe they just got married a couple of days ago. Sad news is...the spouse's income counts. That goes for no matter how long you've been married be it long or short...or even if all the debts are separate. "Whoa" they say...that's unfair...none of that debt is even his (or her's).....that's "not fair". Fairness my friends often has very little to do with how the law works.

Moral of the story...if you're single and thinking about getting married...and lots people determine they need to file a bankruptcy case so they aren't dragging a bunch of old debt into the relationship...talk to your bankruptcy attorney before you do anything about "tying the knot". Once you're married...then the income counts...no matter what.

If you've got questions about consumer or small business chapter 7 & chapter 13 bankruptcy we can help.

Kingsbury Law Office--Apple Valley and Rochester, MN
www.kingsburylawoffice.com
(952) 432-4388

Prohibited discriminatory treatment because of a bankruptcy filing

I got a message from a financial planner who often refers me clients. He had been speaking with someone who insisted he couldn't file a bankruptcy case because he had it (on "good" authority) that he would lose his state issued contractor's license. Sadly...another case of taking legal advice off of street corners...or worse, taking advice from an attorney poorly versed in the law.

11 U.S.C. 525 of the United States Bankruptcy Code which is entitled "Protection against discriminatory treatment" provides that a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate in respect to to employment against, a person that is or has been a debtor in bankruptcy. It provides the same protection if you are just related to someone who has filed bankruptcy....apparently a concern that the drafters of the statute wanted to address.

Another subsection of that provision also protects against discriminatory treatment in regard to student loans....any entity that grants student loans can't discriminate against someone because they've filed a bankruptcy or are related to someone that has done so. They could for some other legitimate reason, of course, but not because of a bankruptcy filing. That would go for the situation with the contractor who is worried about his license too. However...if everything else is good...then a bankruptcy won't be a detriment and the worry about losing his license (or a person worried about not getting a student loan) should not be a bona fide concern.

If you've got questions about chapter 7 or chapter 13 bankruptcy for consumers or small businesses we'd be glad to help.

www.kingsburylawoffice.com

Exceptions to the general rule for what property comprises a bankruptcy estate

For the most part property that a debtor acquires (or becomes entitled to acquire) after filing for bankruptcy is not something that is considered part of the bankruptcy estate administered by the trustee.

There are some exceptions though. Here's the deal....if the debtor receives or even has a right to receive property of a certain type within 180 days after filing for bankruptcy you must let your attorney know to make the assessment to determine if it can be exempted (protected) for you. Failing to do so could result in a revocation of discharge based on bad faith and non-disclosure of the asset. Not a good result for anyone. In pretty much every creditor's meeting I've ever attended (many thousands) the trustee will make an inquiry as to the potential for the debtor to acquire certain types of property within 180 days of filing their case and will also inform them that if they do...they need to let them know (the trustee assigned to the case) and also their attorney.

• an inheritance (applies if the person dies during the 180 days...as you have the right to inherit at that point...you don't actually have to have received the inheritance within the 180 days...could be years later.
• Life insurance proceeds.
• property received from a marital settlement agreement or divorce decree.

It's rare that these things crop up in an average case...but it does happen...it's happened in some of my cases over the years. It is more likely that the most or all of the types of assets listed above could be exempted in your bankruptcy depending on the value. Your attorney needs to make that analysis for you.

If you've got questions about chapter 7 or chapter 13 bankruptcy we'll be glad to help.

Attorney David D. Kingsbury

www.kingsburylawoffice.com

Failure to foreclose on real estate

I was just at a National Association of Consumer Bankruptcy Attorneys seminar in Colorado Springs this weekend. One of the conversations I had repeatedly over the course of the seminar was that bankruptcy attorneys all over the country are experiencing the same phenomenon…...lenders are taking forever to foreclose.

In a situation with homeowner association dues continuing to accrue that the debtor is still liable for that can be a real problem. Besides that problem specific to townhomes/condos there is also the issue of utility bills still in the homeowners name, issues with liability if someone was injured on the property, etc.

There can be a plus side…namely living there with no payment (with the exception of homeowners association dues) if a person is still living there and waiting out the foreclosure. That can be a good option but for those that want to move on in short order the reluctance of a lender to foreclose can be a real problem.

I was speaking with a bright attorney in Indiana who is now bringing suit against mortgage lenders for failure to foreclose...the theory being that the debtors are being denied the benefit of their bankruptcy discharge considering that they are saddled with what once was an asset but is now a liability and they can’t get rid of it even though they filed their bankruptcy and were issued a discharge because the lender refuses to cooperate. Novel argument…makes a lot of sense. I see enough of these situations in my practice from time to time that I will be contemplating the same type of suit for my clients caught in that predicament.

If you've got bankruptcy questions or need to file chapter 13 or chapter 7 for yourself or for your business we can help. Find us on the web at

www.kingsburylawoffice.com

HSBC to maintain its freeze on foreclosures in some areas for now

The nation's 12th largest mortgage servicer and 9th largest bank informed investors last Weds. that the moratorium on foreclosures that has been in place since sometime last autumn will continue for at least a number of months before it resumes foreclosing on defaulted loans. The moratorium came about due to government probes into illegal and faulty loan practices...such as "robo-signing" as it is popularly called when their employees would blindly sign many, many documents without checking the accuracy of the alleged defaults on the loans and other deceptive practices. In April it was one of 14 mortgage companies sanctioned by the Federal Reserve Bank and the Office of Comptroller of the Currency due to their erroneous and illegal procedures. More than 43 thousand home foreclosures were initiated in 2009 -2010. Considering the state of the economy and the housing market 2011 will be yet another banner year for this lender as well as others. The Obama administration and some state authorities are pushing for fines nearing the $30 billion mark in reaction to the past abuses to delinquent borrowers by HSBC and other lenders.