Exemptions – Page 3 – Rochester Bankruptcy and Debt Relief

Creditor Can’t Contact Debtor After the Bankruptcy Is Filed

When you file your bankruptcy case,the creditors must stop calling you. They can’t continue garnishing your wages. They must stop all collection activities because every bankruptcy case protects the debtor with the “automatic stay.” The automatic stay prohibits creditors from taking actions against you, unless they obtain a permission from the bankruptcy court.

While there are some exceptions, primarily for matters involving marital obligations, otherwise known as “domestic support obligations”, for most people and most debts, bankruptcy provides real relief.

If creditors keep calling you, mailing you, garnishing your wages or taking other actions against you, call your lawyer immediately. Regardless of whether the creditors acted with or without the knowledge of your filing, a bankruptcy lawyer make them stop. Also, regardless of whether the creditors acted with or without the knowledge of your filing, the creditors may be liable for actual and even punitive damages as well as attorneys fees.

Section 362 of the US Bankruptcy Code states that § 362. Automatic stay states that the filing of a petition in bankruptcy operates as a stay “applicable to all entities, of the commencement or continuation, of any action against the debtor.” Section 362(k) states that an individual injured by any willful violation of a stay shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

So what’s a willful violation of a stay? The creditor needs to know that you have filed for bankruptcy. It must take an action to collect against the debtor after that stay is in effect. The creditor doesn’t need to willfully violate the stay, it needs to willfully take the action. That means the creditor needs to send out the collection letter after that creditor knows of the stay.

Here in Rochester, Judge Ninfo addressed the issue of willful violation of automatic stay in In re Engel, holding that mailing of a billing statement after the bankruptcy was filed was a willful violation of automatic stay. In Engel, the creditor was listed in bankruptcy schedules and was also contacted by the debtor’s attorney who demanded that the creditor stop any and all contact with the debtor. Even after the debtor’s attorney notified the creditor, the creditor mailed two additional billing statements. While the creditor claimed that the contact with the debtor was an unintentional mistake, the court found that the creditor’s actions were intentional and ordered a hearing on damages.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

Workers Compensation and Chapter 7 Bankruptcy

If you file a Chapter 7 bankruptcy, what happens if you have a pending workers’ compensation claim? Generally, if you file for bankruptcy in New York, any money received as certain public benefits is usually exempt. However, workers’ compensation claims can result in significant lump-sum awards and a bankruptcy trustee may file an objection to the debtor claiming such award as exempt.

Here in Rochester, Judge Ninfo dealt with a similar situation in In re Herald, and his decision resolved these issues in Western New York. In order to resolve this issue in favor of the debtor, Judge Ninfo had to find that worker’s compensation award fell within the scope of §282.2(c) of New York’s Debtor Creditor Law, which exempts benefits received as a result of “disability, illness or unemployment benefit.”

After analyzing the legislative history of §282 of New York’s Debtor Creditor Law, Judge Ninfo concluded that the legislative intent was to exempt workers’ compensation proceeds. He further noted that in some situations this may give a debtor a head start, as opposed to a fresh start, where the debtor will receive a significant award after the bankruptcy filing, but found that any such award to be exempt nonetheless.

Thus, if you have a workers’ compensation case pending or your are receiving worker’s compensation payments, you can file a Chapter 7 bankruptcy and keep the award when you receive it. It is important to tell your bankruptcy lawyer about it in advance, so that the workers’ compensation claim is listed as exempt on your bankruptcy petition.

Chapter 7 Bankruptcy and Tax Refunds

If you file a bankruptcy case between January and April, you may be expecting a tax refund. Your Chapter 7 bankruptcy trustee may try to take your tax refund from you. Tax refunds are probably the largest single type of asset which debtors lose in bankruptcy. In New York, the tax refund may protected by your cash exemption up to $2,500, if you are not claiming a homestead exemption.

If only one spouse is filing for bankruptcy, and they file a joint tax return, Rochester Chapter 7 trustees usually take position that one half of the refund belongs to the trustee, subject to the applicable exemption.

In addition, here in Rochester, some of the Chapter 7 trustees frequently ask for a copy of the debtor’s income tax return for the year the bankruptcy is filed in. This request may make place early in the year, even though the tax return would not be filed several months later. The trustees’ goal is to see whether or not a portion of the income tax refund can be pro rated from the beginning of the year to the date of filing bankruptcy. If this prorated portion of the income tax refund is large enough, the trustee may make a demand that a portion fo the refund be turned over to the trustee.

One way of dealing with these issues is to wait to file your bankruptcy until after the tax refund was spent on family necessities. It is important to disclose the tax refund to your lawyer and the trustee, since a bankruptcy trustee can simply write to the Internal Revenue Service and have it send the tax refund directly to the trustee, and a deliberate failure to disclose information can be a basis for a denial of discharge.

Removing Judgments After the Bankruptcy

If a creditor obtains a judgment against a debtor, that judgment, if filed, becomes a lien against any real property owned by the debtor. Any such judgment lien against real property can be removed from the property, if the lien impairs an exemption you claim in your bankruptcy. In New York State, you can only remove a judgment lien against your personal residence. Debtor’s bankruptcy attorney usually files a motion pursuant to section 522(f) of the Bankruptcy Code. A typical motion includes a number of attachments such as a copy of the deed, mortgage, current mortgage statement, a recent appraisal of the property, and copies of the judgment filed in the local County Clerk’s office.

Typically, the debtor is faced with the following situation. The debtor owns a home with the total equity of less that New York’s homestead exemption, which is currently $50,000 for a single debtor and $100,000 for a married couple filing jointly. What a $50,000 homestead exemption means is that the debtor can have up to $50,000 of equity in the residence ($100,000 for a married couple) and your home will not be taken or threatened by the bankruptcy trustee or other creditors. If there are judgments against the debtor, they are viewed as impairing debtor’s exemption in the property and gives the debtor the right to remove them.

If you do not own a residence when you file your bankruptcy, you do not need to set aside the judgment in the County Clerk’s office, but the underlying debts are discharged regardless whether the judgment is removed. This may become a a problem if you purchase (or inherit) real property after your bankruptcy. In that situation, even though there is no actual lien against the newly acquired property, it may appear that there is to someone searching the Clerk’s office. This is because they will see a judgment against you, and they will see that you own the property. Without knowing about the intervening bankruptcy and the discharge of the debt that underlies the judgment, they could draw the conclusion that the judgment was in fact a lien against the property.

The problem often surfaces if there comes a time that you want to borrow against, or refinance the property. Most lenders are sophisticated enough to recognize that any pre-bankruptcy judgments are usually discharged and a typical judgment search, or a title search, in Monroe County will include a check of the Bankruptcy Court’s records. It is also the reason to keep a copy of your discharge after the bankruptcy so that the lender can have easy verification that the bankruptcy resulted in a discharge.

If you are dealing with debt problems in Rochester, New York; Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

Car Ownership and Bankruptcy

I am often asked what happens to the debtor’s car if he or she is forced to file for bankruptcy. The answer to that questions depends on whether the car is owned by the debtor outright, is being financed, or is leased.

If the car is owned outright, and its value is less than the value of New York’s vehicle exemption, currently limited to $2,400, then the debtor can keep the car without any bankruptcy related consequences. This is true for the debtor filing either a Chapter 7 or a Chapter 13 bankruptcy. If the value of the car is greater than the allowed exemption, in a Chapter 7 case, the bankruptcy trustee can demand that the debtor turn the car to the trustee. Subsequently, the trustee would have the vehicle sold at an auction, and the debtor would be repaid the value of his or her exemption, and the rest of the money would be paid to the creditors. If a car is jointly owned by a debtor and someone else (such as a spouse), then the debtor will only be entitled to 1/2 of the equity. If debtor and a spouse file a joint bankruptcy petition, they can “double up” or stack their exemptions (i.e., $4,800 in one vehicle owned by them jointly, or $2,400 in two vehicles total). If the car is financed, the relevant value is the value of the equity in the vehicle, that is the difference between the market value of the vehicle and the amount owed to the lender.

When filing Chapter 7 bankruptcy, you have three options for handling a car loan. You can reaffirm your loan with the lender. That means that you agree to continue making regular payments on your car. In exchange, as long as your are making payments on the loan, your lender will not repossess the car. Whether you sign a reaffirmation agreement is strictly voluntary. Another option, although rather rare, is redemption. The debtor agrees to make one lump payment to the lender representing the car’s fair market value, regardless of what is owed on the loan. Any amount owed on the car in excess of its current value can be discharged as part of the bankruptcy. The final option is to surrender the car if you cannot afford to continue making payments. Any debts associated with the car will be discharged.

In Chapter 13, a debtor can keep his or her car even if the equity is greater than the allowed exemption amount, as long as the value of equity in excess of the exemption is distributed to creditors through the chapter 13 plan, i.e., satisfying the good-faith test. Chapter 13 bankruptcy can effectively halt car repossession and will allow the debtor to repay any arrears on the loan over the life of the Chapter 13 plan. In addition, in a Chapter 13, the amount the debtor will pay may depends on how long ago the car was purchased. If the car was purchased in the last 910 days (30 months), the debtor must usually pay the full amount owed, regardless of the car’s current value. However, under appropriate circumstances, the interest rate on the loan may be reduced by the bankruptcy court. If the car was purchased more than 30 months ago, the debtor is likely to have to pay the lender the amount representing the car’s present value over the life of the repayment plan. The amount representing the car’s value is treated as secured debt, and the remainder of the debt is treated as unsecured. This is particularly significant where the car is upside down, i.e., the amount owed significantly exceeds the car’s value. Those situations may result in significant savings to the debtor.

If the debtor is leasing a car, he or she has two options. The debtor can reaffirm the lease and keep the car, while continuing to make payments. Alternatively , the debtor can reject the lease, return the car, and discharge any debt associated with the lease.

If you are dealing with debt problems in Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation.

Bankruptcy Basics – The Process of Filing and Completing Chapter 13 Bankruptcy

Chapter 13 has helped many to resolve their debts and save their homes from foreclosure. The following is a short description of a typical process that someone filing Chapter 13 bankruptcy goes through, from the initial meeting and until a discharge is received.

The initial stage of a Chapter 13 bankruptcy usually involves meeting with your bankruptcy attorney and discussing the case. The attorney will typically ask you to prepare a bankruptcy questionnaire, in which you will be asked to list your income and expenses, assets and liabilities, and describe your financial dealings over the past few years. Once the questionnaire is completed, your bankruptcy lawyer will be able to review and identify various exemptions applicable to your assets, determine whether certain of your debts are dischargeable or not, and will try to do bankruptcy planning to preserve as many of your assets as possible.

Your next step will be taking the credit counseling course. Under the bankruptcy law, you must complete the course before your bankruptcy petition can be filed with the bankruptcy court. The course must be taken from an authorized provider and can be done in person, over the telephone or internet. You will also have to provide your bankruptcy attorney with copies of your pay stubs for 60 days preceding the filing, and a copy of your most recent tax return.

Once the above steps are completed, your petition will be prepared and filed with the bankruptcy court. Concurrently with the petition, a copy of your credit counseling certificate and copies of your paystubs will be filed. Once the bankruptcy petition is filed, the automatic stay begins and protects you from all collection activities by your creditors. The automatic stay will last until the end of your bankruptcy case, unless it is lifted by the bankruptcy court. Your petition will include a repayment plan pursuant to which your disposable income will be used to repay creditors.

Within 45 days of your filing, a meeting of the creditors, also known as 341 hearing, will take place. You will have to come to the bankruptcy court in Rochester, if you reside in Monroe County, and answer the questions posed to you by the bankruptcy trustee. The trustee will typically ask you questions about your financial affairs, your income, expenses, assets and liabilities. You also may have to answer questions from your creditors who have the right to appear at the hearing. You will have to swear under oath that the information you provided in your petition is complete and accurate. After the hearing the trustee will issue a report to the bankruptcy court stating whether he recommends that your repayment plan be confirmed.

A typical Chapter 13 plan involves using your disposable income to repay all or a portion of your debts to the creditors over the next three to five years. The plan provides a repayment schedule that you’ll comply with to catch up on your past-due balances while staying current with other payments. Filing of a Chapter 13 bankruptcy can stop foreclosure and allow you to repay any mortgage arrears over the duration of your plan. Your plan can include such debts as mortgage and other secured and unsecured loan arrears and any other debts. You must make your first payment (as part of the repayment plan) within 30 days of filing your petition. If such payment is not made, the court may dismiss your case.

Within 45 days after the meeting of the creditors, you will have to complete the financial management course. If you will not complete it, you will not become eligible for discharge. The course is designed to help you make the most of your bankruptcy and includes tips on saving, managing money and handling credit.

Within 30 days after the 341 hearing, your confirmation hearing will be scheduled. On that date, you will appear with your attorney before Hon. John C. Ninfo, United States Bankruptcy Judge for the Western District of New York, who will make the ultimate decision whether to approve your Chapter 13 bankruptcy.

Once the plan has been approved, the trustee will typically enter a wage deduction order pursuant to which, all or a portion of your plan payments will be taken out of your wages and paid directly to the bankruptcy trustee. The trustee, in turn, will be making the payments to your creditors. You are required to make your final payment under the plan within five years of filing your petition. After doing so, you will receive your bankruptcy discharge and officially be out of Chapter 13 bankruptcy.

You will not be eligible for Chapter 13 bankruptcy protection if you had filed for bankruptcy in the past four years, so make sure you tell your bankruptcy lawyer whether you had past bankruptcy filings.

New York Bankruptcy Exemptions

If you are filing Chapter 7 bankruptcy in New York, your property becomes a part of bankruptcy estate, which will be administered by the bankruptcy court. In Chapter 7, certain property is exempt and you can keep it. Federal bankruptcy exemptions are not available in the State of New York.

Under New York law, you can exempt or protect certain property from creditors when you file bankruptcy. After filing for bankruptcy, this property is safe. There are some limits on certain exemptions such as equity that you have in a home or in a vehicle. The difference between the cost of the item and the amount owed on the item is the definition of equity. If the item, such as home or vehicle, secured by a loan and payments made on time, the equity is protected by your exemptions. A debtor must generally pay the trustee the value of the non-exempt property to keep the property. If you choose to keep the property, continual timely payments ensure protection of the property through bankruptcy.

The following lists most important New York exemptions applicable in Chapter 7 Bankruptcy cases:

Homestead

Real property, including mobile home, condominium, or co-op, up to $50,000 per filer.

Personal Property

Clothing, furniture, refrigerator, TV, radio, sewing machine, security deposits with landlord or utility company, tableware, cooking utensils and crockery, stoves with fuel to last 60 days, health aids (including service animals with food), church pew or seat, wedding ring, bible, schoolbooks, pictures; books up to $50; domestic animals with food to last 60 days and up to $450; watch to $35; spendthrift trust fund principal; 90% of trust fund income if not created by debtor; college tuition savings program trust fund; recovery for injury to exempt property up to 1 year after receiving. Exemptions cannot exceed a total of $5,000 including tools of trade and limited annuity.

Burial plot up to 1/4 acre without a structure on it.

Savings and loan savings up to $600.

Motor vehicle up to $2,400; lost future earnings recoveries needed for support; personal injury recoveries up to 1 year after receipt; wrongful death recoveries for a person you depended upon for support.

IN LIEU OF Homestead exemption, the lesser of the following: up to $2,500 cash or up to $5,000 after exemptions for personal property taken

Wages

90% of earned but unpaid wages received within 60 days of filing for bankruptcy; 90% of earnings from milk sales to milk dealers; 100% for a noncommissioned private, officer or musician in the U.S. or N.Y. state armed forces.

Pensions

Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000 per person.

ERISA-qualified plans, Keoghs and IRAs needed for support.

Public Benefits

Unemployment benefits; veterans’ benefits; Social Security; aid to blind, aged, and disabled; crime victims’ compensation; home relief, local public assistance; public assistance; worker’s compensation.

Tools of Trade

Professional furniture, books, instruments, farm machinery, team and food for 60 days, up to $600 total; arms, swords, uniforms, equipment, horse, emblem and medal of a military member.

Alimony and Child Support

Alimony and child support.

Insurance

Annuity contract benefits due to the debtor if he or she paid for the contract up to $5,000, if purchased within 6 months of filing for bankruptcy and not tax-deferred.

Life insurance proceeds left at death if policy prohibits use to pay creditors.

Disability or illness benefits up to $400 per month; life insurance proceeds, dividends, interest, loan, cash, or surrender value if beneficiary is not the debtor or if the debtor’s spouse has taken out the policy.

Miscellaneous

Business partnership property.

To keep non-exempt property, a debtor must generally pay the trustee the value of the non-exempt property.

The exemptions are also relevant if you are filing a Chapter 13 bankruptcy since your bankruptcy has to pass the “good faith” test. The good faith test involves making sure that unsecured creditors will be paid at least as much under Chapter 13 bankruptcy, as if a Chapter 7 bankruptcy had been filed. Generally, this involves valuing of all the nonexempt property the debtor owns.