automatic stay – Rochester Bankruptcy and Debt Relief

Timeline of Chapter 7 Bankruptcy Case

Typical debtor(s)’s Chapter 7 bankruptcy case begins once a Petition is filed with the Bankruptcy Court. If the debtors are married, they may file a joint Petition. Debtor’s petition includes schedules listing assets, creditors, income, expenses, executory contracts, leases, and co-debtors. The Schedules are customarily filed along with the Petition. The Declaration Regarding Payment Advices and Credit Counseling Certificate are also usually filed along with the Petition. The filing fee is paid at the time of filing.

After filing Chapter 7 Bankruptcy, the following events take place.

Immediately:

Automatic Stay Order will be issued which prohibits creditors from sending you letters, calling you, or taking any additional collection and/or legal action against debtor(s). Garnishments on bank accounts and paychecks must stop.

Bankruptcy Trustee will be assigned to your bankruptcy case and Meeting of Creditors will be scheduled.

The date to complete Financial Management Course is scheduled.

Approximately 15 days after bankruptcy case filing:

The Bankruptcy Clerk will mail debtor(s) and creditors the Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines, which provides the date set for your meeting of creditors and other important deadlines.

Within 30 days of bankruptcy case filing:

Statement of Intention must be filed, informing the court if debtor(s) plan to keep any collateral property or if you intend to submit it to your creditors. The Statement of Intention is usually filed along with the Petition, but debtor(s) can change his/her position on these issues.

14 days before 341 Meeting:

Debtor(s) most recent tax returns, paystubs, real estate documents, vehicle related documents, and other financial information are due to the Trustee 14 days before the date first set for the 341 meeting.

Approximately 4 weeks after bankruptcy case filing:

Meeting of Creditors, often referred to at a 341 meeting, will be held.

30 days after your 341 Meeting:

Deadline for the Bankruptcy Trustee or your creditors to object to your exemption claims.

Debtor(s) must perform his/her intentions as stated in the Statement of Intentions. Debtor(s) will need to surrender the property, reaffirm the debt, or redeem property for the allowed secured claim.

45 days after 341 Meeting:

Debtor(s) must have completed his/her Financial Management Education Course and filed a certificate of completion within 45 days of the first date set for the 341 meeting.

60 days after 341 Meeting:

Creditors must object to discharge of debts that were obtained by false pretenses, a false representation, or actual fraud; debt from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny; and debt for willful and malicious injury. This deadline applies to objections to discharge of: consumer debts owed to a single creditor of more than $500 for luxury goods or services obtained within 90 days before a Chapter 7 bankruptcy. Creditors must also object within 60 days of the original 341 date for debts involving misconduct including transfer, destruction or concealment of property; concealment, destruction, falsification or failure to keep financial records; making false statements; withholding information; failing to explain losses; failure to respond to material questions; having received a discharge in a prior bankruptcy case filed within the last 6 years.

Trustee must determine if debtor(s) bankruptcy case should be dismissed due to abuse or debts discharged.

Reaffirmation agreements, if relevant, must be filed with the court.

More than 60 days after 341 Meeting:

Debtor(s)’s discharge will be filed by the Bankruptcy Clerk. However, at this point in time, the discharge is not absolute or final. The trustee can ask that the discharge be set aside if the debtor does not turn over non-exempt property, if the debtor fails to perform other duties, or if there were other matters pending which would result in the denial of the discharge.

90 days after 341 meeting:

All creditors (except for government entities) must file their proofs of claim if they wish to share in the payments from debtor(s)’s bankruptcy case if any assets are available for liquidation.

180 days after bankruptcy case was filed:

Government agencies or units must file a proof of claim within 180 days of the bankruptcy case filing.

Debtor(s) no longer risk losing property acquired or become entitled to after the bankruptcy case is filed as a result of inheritance, bequest, devise, property settlements involving divorce, or beneficiary on life insurance. Any inheritance that debtor(s) become entitled to after the bankruptcy case is filed is at risk of being liquidated by the Trustee if debtor(s) become entitled to it within 180 days of filing.

Final Decree will be entered by the Court officially closing the bankruptcy case. The Final Decree is often received near the time of the Discharge if your bankruptcy case is a no-asset bankruptcy case. If the Trustee is liquidating non-exempt assets, the bankruptcy case will remain open to allow the Trustee to distribute the funds to creditors and file a final report.

The above represents a typical timeline for a Chapter 7 Bankruptcy case.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or 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 Rochester, NY, bankruptcy lawyer.

Bankruptcy and Eviction

If you are behind on the rent and are hoping to buy some time, or wipe out the obligation to the landlord altogether, under appropriate circumstances, Chapter 7 or Chapter 13 bankruptcy may be a solution. Filing for bankruptcy will usually wipe out the balance due for past due rent as of the date on which the case is filed. Rent for any period after the case is filed won’t be discharged. If the filing of the case is done correctly, you may also be able to buy some more time in the place before you have to move out.

The filing of a bankruptcy petition stops all efforts at collection, including an eviction proceeding. This automatic stay remains in effect until a creditor makes a request to the court and that request is granted, or until the case is closed or dismissed, or when your discharge is granted. Once the Chapter 7 or Chapter 13 bankruptcy case is filed, the eviction action has to stop as soon as the bankruptcy case is filed. Stopping the eviction means the debtor will get some extra time before having to move out.

However, there an exception to the above rule. If there a judgment for possession of the property due to failure to pay rent that was issued before the bankruptcy is filed, it is an exception to the automatic stay. This exception to the automatic stay will not apply if the debtor’s attorney did all of the following:

Specially marked the petition indicating a judgment of possession has been obtained on the rental property;

Provided the name and address of the landlord that obtained the judgment;

Filed with the petition and served on the landlord a certification under penalty of perjury that, under the applicable landlord-tenant law, there are circumstances under which debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession;

Along with the petition, deposited with the Clerk of the Bankruptcy Court any rent that would become due during the 30-day period after the filing of the bankruptcy petition; and

Within 30 days of the filing of the petition, filed with the bankruptcy court and served on the landlord a further certification (under penalty of perjury) that the entire monetary default has been cured.

If the tenant is being evicted because of a reason aside from failure to pay the rent – for example, conduct causing a health and/or fire risk; use of illegal drugs on property – then there is also an automatic exception from the automatic stay.

This exception applies only to residential property in which debtor resides, if debtor is “endangering” the property or using, or allowing to be used, illegal controlled substances on the property. In order for this exception to apply, the landlord must file with the court, and serve on debtor’s attorney, a certification under penalty of perjury that such an eviction action has been filed, or that debtor, during the 30-day period preceding the date of the filing of the certification, have endangered property or illegally used or allowed to be used a controlled substance on the property.

If such a certification is filed then debtor is required to file an objection with the court and serve such objection on the landlord within 15 days of the landlord’s certification. The court will hold a hearing, and debtor will have the burden of proving that the landlord is incorrect.

Creditors’s Responsibilities After Bankruptcy Filing

On the bankruptcy petition is filed, the bankruptcy automatic stay is in effect in Chapter 7 and Chapter 13 bankruptcies, and virtually every type of collection activity is called to a halt. The bankruptcy court enters an order under 11 U.S.C §362, which prohibits nearly all creditors from taking any type of collection action.

What happens if the bankruptcy automatic stay is violated? If a creditor violates the automatic stay by accident, it must return the money or stop the collection action as soon as it learns about the bankruptcy. However, if the stay violation is done by the creditor on purpose, and if it is considered a “willful” violation, and substantial penalties can apply. In the event of an intentional violation of the bankruptcy stay, the Bankruptcy Code provides strong remedies for the debtor. After a willful stay violation, the debtor can recover not only the money or property that was wrongfully taken, but may also be entitled to attorney fees and even punitive damages.

Since automatic stay applies to all collection activities, with some very limited exceptions, even collections related to unpaid taxes must stop. A recent case of In re Voll, Case No. 13-31058 (N.D.N.Y. 2013), the bankruptcy court held that the New York State Department of Taxation and Finance committed a willful violation of the automatic stay after it had failed to vacate an income execution on debtor’s employer.

The following facts were undisputed. Prior to commencement of the case, the Department of Taxation served an income execution on debtor’s employer, which resulted in the weekly garnishment of debtor’s wages to satisfy a 2012 tax warrant. Subsequently, on June 7, 2013, debtors tiled Chapter 13 bankruptcy. On that same day, debtors’ counsel sent a letter to the Department of Taxation notifying it of the bankruptcy filing and requesting that the referenced income execution be lifted. Debtors scheduled the Department of Taxation as a creditor in their bankruptcy schedules and referenced the outstanding tax warrant. The Department of Taxation was properly listed at the address designated by the Department for receipt of all bankruptcy notices. On June 9, 2013, the Bankruptcy Noticing Center sent the Department of Taxation an official notice of commencement of the case, which the Department admits receiving on June 12, 2013.

Six days later, on June 18, 2013, the Department of Taxation mailed its release of the income execution to the debtor at her residence and to her employer at a post office box in Evansville, Indiana. The mailed release was the first and only document provided by the Department to debtor’s employer to cease the garnishment of Debtor’s wages. After mailing the release, the Department of Taxation took no additional actions.

Notwithstanding the Department being on notice of debtors’ June 7 filing and its issuance of the release; the garnishment of debtor’s wages continued from paychecks issued on June 14, June 21, June 28 and July 5, 2013. The Department was not aware of the continuing post-petition garnishment of debtor’s wages on its behalf until debtors tiled their motion seeking to find the Department in willful violation of automatic stay. Upon receipt of the motion, the Department promptly returned the funds improperly deducted from debtor’s post-petition wages.

The bankruptcy court found that the Department’s acts and omissions constituted a willful violation of the automatic stay. The court stated that it is creditor’s duty to ensure that the garnishment ceases, and that the Department, by waiting for six days before mailing the release to debtor’s employer and failing to make sure that the release was received and followed, had violated automatic stay.

The lesson from Voll is that creditors have their responsibilities once the debtors file for bankruptcy. They have to take affirmative actions to ensure that the automatic stay is not violated and they cannot passively thwart a federal injunction of which one has knowledge by sitting back and allowing acts that are enjoined to continue. When a debtor’s wages are subject to garnishment, the creditor must take immediate action to effectively address its termination.

Chapter 13 Bankruptcy, Co-Debtors and Automatic Stay

I am often asked if automatic stay in bankruptcy will protect debtor’s cosigner, otherwise known as co-debtors, from creditors. The answer to that question depends on a number of factors and the type of bankruptcy filed.

Typically, cosigner liability comes into being after debtor’s friend or relative was asked to cosign a loan, so that debtor could obtain credit. If the debtor is forced to file a bankruptcy sometime thereafter, the following is likely to occur.

In order for the automatic stay provided by 11 U.S.C. §1301 to protect the co-debtor, the debtor must file a Chapter 13 Bankruptcy. Further, the debt filed on must be a “consumer” debt. To be a consumer debt, the debt must have been for the personal, household or family use of the person you cosigned for. If the loan cosigned for was to obtain money for a business, there is no protection for the cosigner. Further, even if the debtor is paying this bill in their Chapter 13 bankruptcy plan, the creditor can still collect from the cosigner.

Further, the law specifically refers to co-debtors who are “individuals,” meaning people. So, if the co-debtor is a business entity, such as a corporation or LLC, the automatic stay does not protect the co-debtor. This can be important where an individual business owner is filing Chapter 13 Bankruptcy, but their business is not filing for bankruptcy protection.

Even if the debtor files a Chapter 13 Bankruptcy, the plan must adequately protect the creditor. “Adequate protection” in most cases means that, in most cases, that particluar creditor must be paid in full. If the plan does not pay the debt in full, then the creditor can ask the court to lift the automatic stay. Once the stay is lifted, the creditor can pursue the cosigner for the unpaid amount. The co-debtor is protected during the life of the bankruptcy, but once the bankruptcy is over, the co-debtor remains liable for the unpaid debt. For example, if the bankruptcy payment plan pays 25% of the debt, the co-debtor remains liable for the other 75% of the debt. For this reason, some bankruptcy payment plans provide for payment of joint debts in full in order to protect the co-debtor after the bankruptcy case is over.

A co-debtor stay is only available in a Chapter 13 Bankruptcy case. If the debtor files a Chapter 7 Bankruptcy, the automatic stay will not apply and once the debtor receives a discharge, the cosigner will be liable for the entire unpaid balance. Further, because of the discharge, cosigner will not be able to receive any money from the debtor. The co-debtor stay lifts at the end of the bankruptcy case, or when the case is dismissed, or when the case is converted to Chapter 7 bankruptcy or Chapter 11 Bankruptcy. After the stay is lifted, the creditor may pursue the co-debtor for payment of any unpaid portion of the debt.

If a creditor knowingly violates the automatic stay protecting the co-debtor, the Bankruptcy Court may hold the creditor in contempt of court, just as if the creditor had violated the automatic stay protecting the debtor. The Court may fine against the creditor and may award money damages to the injured party. Furthermore, any collections actions taken by a creditor in violation of the co-debtor stay are void and unenforceable.

Thus, it is usually a bad idea to cosign any debts. While the debtor may have every intention to pay the debt at the time it is incurred, this may not be true in the future. Co-signer has no control over repayment and oftern enough does not not know when the debtor defaults. Further, any late payments or missed payments will be reported on cosigner’s credit.

Bankruptcy and Personal Injury Lawsuits

Periodically I meet with debtors who either have a personal injury law suit pending, or may have a potential personal injury case. Personal injury lawsuit issues can complicate a bankruptcy since there are limitations on the debtor’s ability to receive a personal injury award, as well as different procedural hurdles imposed by the bankruptcy code.

Initially, personal injury lawsuits and causes of action are assets of Chapter 7 Bankruptcy estate. Under New York’s bankruptcy exemptions, the debtor can exempt the first $7,500 in net proceeds, but anything over and above that belongs to the bankruptcy estate and would be administered by the bankruptcy trustee. Since personal injury lawsuit or causes of action are assets, it is critical that the bankruptcy lawyer includes the debtor’s personal injury lawsuit or cause of action in the bankruptcy petition. If the debtor fails to include a potential cause of action in the bankruptcy petition, that may cause a dismissal of the personal injury action. According to New York cases, if a plaintiff in a personal injury lawsuit filed a Chapter 7 Bankruptcy petition but failed to list a potential cause of action for personal injuries, then the plaintiff lacks standing to bring the personal injury action.

If the personal injury case or cause of action is included in the petition, the bankruptcy trustee will decide whether the case is valuable enough to administer. The bankruptcy lawyer is expected to provide the trustee with copies of the pleadings. Most trustees will consider the right to sue for a relatively small injury as being of “inconsequential value to the bankruptcy estate” and may decide to abandon the trustee’s interest in the cause of action. Generally, if a personal injury case will not result in any significant non-exempt recovery, then the trustee will not care about administering it. If the trustee determines that the case has value in excess of the exemption, he may want to administer the personal injury claim as an asset of the bankruptcy estate.

The Bankruptcy Code requires that all attorneys who render services to a debtor must be approved by the court. A trustee may employ as special counsel under a contingency fee arrangement, any attorney who has represented the debtor in pre-petition litigation, when it is in the best interests of the bankruptcy estate and the attorney has no interest adverse to that of the debtor or the estate. Theoretically, the trustee can hire any attorney of the trustee’s choosing to represent the debtor in the personal injury lawsuit, and can even take the case away from the existing personal injury attorney.

The automatic bankruptcy stay imposed by Section 362 of the Bankruptcy Code does not stay any actions brought by the debtor. The automatic stay only acts to stay actions brought against the debtor including cross-claims, counter-claims and third-party claims.

The greatest unknown in a personal injury case filed by the bankruptcy debtor, is what interest the bankruptcy trustee will take in the case. Debtor’s bankruptcy attorney would do well to contact the trustee at the earliest opportunity to get an idea of the trustee’s intentions with respect to the personal injury lawsuit.

Top Ten Bankruptcy Myths

There are lot of myths and misinformation regarding debtors’ rights to file bankruptcy. In my practice, I see a lot of debtors who seek to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, who have heard a lot of rumors and incorrect information with respect to their rights and obligations when they file for bankruptcy relief. The following is a compilation of the typical questions, and correct answers to the questions I frequently hear from the debtors.

1. I will not be able to buy a house for ten years since I will not be able to obtain a mortgage.

Although Chapter 7 Bankruptcy will appear on your credit report for a period of ten years, you will be able to buy a house again much sooner than that, because the bankruptcy is likely to improve your credit rating. Chapter 13 Bankruptcy is likely to improve your credit sooner and is likely to disappear from your credit report much sooner as well.

2. I won’t be able to buy a car for ten years since I will not be able to obtain a car loan.

Although Chapter 7 Bankruptcy is likely to be on your credit report for a period of ten years, you will be able to borrow money to purchase a car again because because the bankruptcy is likely to improve your credit rating.

3. I won’t get a credit card or a good credit score for ten years.

Both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are likely to improve your credit rating. In my experience, although I do not recommend it, the debtors are able to obtain credit cards again within 1 to 2 years.

4. I won’t be able to get a student loan for myself or my children.

Since guaranteed student loans must be repaid, and cannot be discharged in bankruptcy, therefore, there is little concern that student loans will not be paid back. Any private lender may deny a student loan based on the debtor’s credit score, however most student loans are government backed.

5. My employer will fire me because I filed for bankruptcy.

While bankruptcy information is available as a public record, employer, or prospective employer, is not allowed to discriminate against you based on debtor’s decision to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. If a prospective employer asks you for a copy of your credit report, questions you about bankruptcy, most employers are prefer to know that the debtor no longer has any financial issues which may affect work performance. Discharging the debt is preferable to an employer as opposed to a situation where the debtor is receiving phone calls at work from collectors or a credit report that shows a pattern of irresponsibility. Further, in Chapter 7 Bankruptcy, employers are not notified of the filing. In Chapter 13 Bankruptcy, the employer is likely to be aware of the filing since here in Rochester, New York, the Bankruptcy Court requires a wage deduction order that is sent to the debtor’s employer and requires a portion of the wages to be remitted directly to the Chapter 13 Trustee.

6. I don’t qualify for chapter 7 bankruptcy because I own a house.

You can file for a Chapter 7 Bankruptcy even if you own a home. Most states, including New York, allow a homeowner a certain amount of equity in their residence. In New York, pursuant to its homestead bankruptcy exemption, a single filer can have $50,000 worth of equity in their residential property, and joint filers (husband and wife) can have $100,000 worth of equity in their property.

7. I will lose my car if I file for bankruptcy.

If the debtor has a financed car, and can afford the payments, the bankruptcy court will not take away the car, unless the amount of equity in the vehicle is considerably greater than New York’s vehicle exemption. Further, the lender is likely to ask the debtor to reaffirm the car loan. Most Chapter 7 Bankruptcy filers who have car loans, tend to reaffirm them.

8. I am not a citizen, and therefore I can’t file for bankruptcy protection.

You can qualify to file bankruptcy even if you are not a United States citizen. If you have the right to reside in the United States, have a social security number, and have filed income tax returns, you can file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy protection.

9. Bankruptcy can’t help because I have unpaid federal and state taxes.

Under appropriate circumstances, even taxes can be discharged in Chapter 7 Bankruptcy. Chapter 13 Bankruptcy can reduce debtor’s monthly payment to the IRS or New York Department of Taxation and Finance and allow for payments over the life of the plan, as long as five years, without interest.

10. My creditors tell me they will still sue to recover the money owed to them.

Once the bankruptcy is filed, the automatic stay, imposed by the bankruptcy law, protects you from any further attempts to collect a debt or any pending or future lawsuits. While secured creditors may ask for their property back if you do not continue to make payments, they must seek consent of the bankruptcy court before attempting to recover the property.

Bankruptcy, Bad Checks, Discharge and Criminal Liability

A bad check, hot check, NSF check, returned check, rubber check, worthless check, or whatever you want to call it, is a check which the bank will not pay because there is either no such checking account or insufficient funds in the account to pay the check. In Texas, writing a bad check is a misdemeanor or can be a felony depending on the amount of the bad check and the circumstances of the issuance of the check. No matter how nominal you think the check is, you can still get you charged with a crime. If you file for bankruptcy and have hot checks outstanding it might make your bankruptcy case a bit more complicated. For the most part, bad check debt is dischargeable in bankruptcy, but since each case is unique, you should obtain legal advice on your bad checks before filing bankruptcy.

If you live in Houston, Austin, San Antonio, Dallas, or anywhere in the State of Texas and need to file for bankruptcy & have bad checks, contact the Texas Bankruptcy Attorneys at The Law Offices Of R.J.Atkinson for a free initial consultation to determine the best option to deal with your bad checks in bankruptcy.

Keep in mind that every bad check and bankruptcy situation is different, so it is important to obtain legal advice for your particular case. The following are some frequently asked questions about bankruptcy and bad checks.

1. If I file for Bankruptcy, will it stop “Prosecution for my Bad Check?”

No. If the prosecution is by a District Attorney, Attorney General, or any law enforcement authority of the State for a criminal action, then it will not stop prosecution for a bad check. When you file a bankruptcy case, there is a stay against any attempts to collect a debt from you which extends to creditors holding or collecting on Bad Checks, Hot Checks, Dishonored Checks, NSF Checks, Bounced Checks, Worthless Checks, Rubber Checks, or whatever you choose to call them.

When a bankruptcy petition is filed, Bankruptcy Law imposes “the automatic stay” which is an injunction on all collection actions and which prohibit further collection efforts on debts that came about prior to the bankruptcy filing. This “automatic stay” is one of the primary reasons many people file for bankruptcy. Although the “automatic stay” is a very powerful part of Federal Bankruptcy Law, the “automatic stay” does not extend to proceedings by the State or any Federal governmental agency pursuant to its police powers. More specifically, any criminal prosecutions which enforce criminal laws are not subject to the automatic stay of bankruptcy. The Bankruptcy Court treats prosecutions of bad checks as criminal proceedings and not attempts to collect debt as long as the actual purpose of a bad check prosecution is to enforce criminal bad check laws. Since a bad check prosecution isn’t meant to pressure the debtor into paying a debt that could otherwise be discharged in a bankruptcy the automatic stay of bankruptcy will have no effect on bad check prosecutions which enforce criminal law.

2. I have written postdated checks to several payday loan companies over the last year. I have to file for Bankruptcy; can they come after me criminally for the “Bad Checks” or sue me?

No. The payday loan company doesn’t have the authority to charge you with a crime. Only the District attorney, Attorney General, or the State or any Federal governmental agency with police powers can charge you criminally. They can however, make a recommendation to the District attorney, Attorney General, or governmental agency with police powers that criminal charges should be brought against you. Whether or not that happens depends on the particular facts of your case. As for filing suit, they could file a lawsuit against you in the Bankruptcy Court as an “adversary proceeding” if the want to attempt to lift the stay. They would have to file a special motion in the bankruptcy Court to lift the “automatic stay”. In thousands of cases, this law firm has never seen this happen. Whether they file suit this way will depend on the facts of the case, I.E. how much is owed, how they are treated in your bankruptcy, when you wrote the checks, etc…

3. I wrote a postdated check to a payday loan company, if I file bankruptcy can they still deposit the check after I file?

Yes, but if they deposit the check after they receive notice of the bankruptcy filing, it could be construed as a violation of the automatic stay. It’s not uncommon for checks to be processed after a bankruptcy filing. Many auto drafts and other similar ACH debits can still go through if the money is there. You should address your bank accounts accordingly, and if you do file for bankruptcy, it’s important that all of your creditors receive proper notice of the filing. Despite the fact that the automatic stay stops collection actions, your bank account can still be debited and outstanding checks can still go through if creditors aren’t properly noticed. Although you may get the money back at some point if the creditor wrongfully takes the money from you, it will still take some time. Whenever you post date a check you are in essence representing that the check will be good on that date. If you write a post dated check to a payday loan company or anyone for that matter, and then later file for bankruptcy, it will ultimately end up in the bankruptcy court if that debt is included in the bankruptcy.

The bankruptcy court will have to sort through the facts and then consider whether there was an agreement between you and the payday loan company or other party to hold the postdated check. The bankruptcy court will also consider other factors, but primarily, whether or not you ever intended to pay on the postdated check. Obviously if the day or weeks before filing bankruptcy you went on a check writing spree to payday loan companies, knowing that there were no funds in your account and that you would be filing for bankruptcy, then the bankruptcy court could get the impression that you never “intended” to make good on the checks. Generally, it all comes down to intent and representation. If your intent was to make good on a postdated check when you issued it, then it may be difficult for a payday loan company to prove you never intended to pay. This is especially true if you previously had an ongoing relationship, or have gotten caught up in the payday loan cycle for the months or years preceding a bankruptcy filing. The whole payday loan business is predicated on postdated checks, so they have the burden as potential creditors in your bankruptcy case to prove your intent. As for representation, if you misrepresent or fraudulently make statements to induce a party to accept your postdated check, then you could have problems discharging the debt in bankruptcy. Everyone’s situation is unique so it is always good advice to seek competent legal counsel.

4. If I file for Bankruptcy, can I discharge the debts owed for bad checks?

It depends. Every case is different, so the facts of each case will dictate if a bad check will be treated as dischargeable or nondischargeable. Generally, so long as there wasn’t any fraud, false pretenses, or material misrepresentations made or conveyed in the actual writing of the check or checks, then the “debt” component from the bad check(s) is quite often dischargeable. That being stated, going on a bad check writing spree days or weeks before filing for bankruptcy filing could make it difficult to discharge such debt.

The Bankruptcy Code doesn’t allow you discharge and debts incurred or obtained by fraud, misrepresentation, or false pretenses. Where Bad Checks, Hot Checks, Dishonored Checks, NSF Checks, or Bounced Checks are concerned, it depends on the circumstances. Obviously if, for example, you had been doing business with a payday loan company for the 6 months prior to bankruptcy and you didn’t have money in your account for 3 months, then wrote a check for $1000.00, and filed bankruptcy the next week, it would be tough to prove that your actions weren’t fraudulent. Therefore, when an irate creditor comes to bankruptcy court in a chapter 7, 13 or 11 case where the creditor is holding the check issued by the debtor that was dishonored, the expectation may be that the debt is not dischargeable. Unfortunately, debt based on a bad check is not automatically and not even usually held to be non-dischargeable.

To succeed in getting a bankruptcy court to find a bad check debt is non-dischargeable, the creditor has the burden of proof to show fraud or false representation by the debtor.

5. How will the Bankruptcy Court decide if the Bad Checks I include in a Bankruptcy will be discharged?

Since every situation is different, there is no way to determine what the Bankruptcy Court will do to interpret the facts of any issue. However, Bankruptcy Courts have examined various things in prior cases to determine whether a bad check is dischargeable or not. Some of the things the Bankruptcy Courts have examined to determine bad check dischargeability are as follows:

Whether there was an agreement to hold a post-dated check.

The time between delivery of the check and the bankruptcy filing.

Did the person issuing the check obtain legal advice from an attorney about bankruptcy before writing the check.

How many bad checks were written and included in the bankruptcy.

The amount or amounts of the bad checks.

The debtor’s financial condition at delivery of the check.

Whether multiple checks were delivered the same day

Whether the person filing was employed when the bad check was written.

Whether the check was written on a closed account.

The financial sophistication of the debtor.

Whether life necessities or luxury items were purchased.

6. I wrote a hot check for $35.00 to the convenience store. Can they do anything if I file bankruptcy?

Sure they can. They can contact the district attorney and file a criminal complaint against you. However, having handled almost two thousand cases, my clients have rarely had problems with bad checks less than $300. That’s probably due to the length of time and hassle involved with pursuing criminal charges, especially when the person who wrote the bad check just filed bankruptcy. I have seen very angry holders of bad checks occasionally show up at creditors meetings and have received calls from a few district attorneys in other states wanting to work out a payment plans, but not for nominal amounts. Since writing a bad check in any amount is a crime, I advise all on my bankruptcy clients to pay anyone who may be holding a bad check.

7. I have to file Chapter 13 Bankruptcy to stop foreclosure, but I have about $1000.00 in hot checks out. Can I repay the checks in my bankruptcy and avoid criminal charges?

There is no way to know for sure. It may be possible to include repayment for the hot checks in your Chapter 13 Bankruptcy but its up to the district attorney as to whether you will be charged with a crime whether you include it in a Chapter 13 plan or not.

When you file bankruptcy, your creditors, which include any parties holding a bad check, are prevented from taking any attempts to collect from you. The Automatic Stay of bankruptcy automatically stops most legal actions against you, but filing bankruptcy will not stop criminal prosecutions against you. So, if you have written bad checks, the party to whom you wrote a bad check to could request to have you arrested and criminally prosecuted for a bad check. When a person who has written a Bad Check files for bankruptcy under any chapter under the Bankruptcy Code, it will not protect them from criminal prosecution and will not discharge their criminal liability for any restitution, costs and fines associated with the criminal prosecution & restitution.

At The Law Offices Of R.J.Atkinson we generally recommend that if at all possible you should attempt make bad checks good prior to your filing for Bankruptcy in order to avoid criminal prosecution on the checks. It isn’t always possible to take care of a Bad Check prior to filing for Bankruptcy since you may be facing a foreclosure, repossession, or other urgent motivating factor, but when the only option is to file Bankruptcy before taking care of a Bad Check, you should be aware that filing for bankruptcy will not stop criminal prosecution for a Bad Check.

If you have bad checks, hot checks, rubber checks, NSF checks, bounced checks, dishonored checks, or worthless checks and live in Houston, Austin, San Antonio, Dallas, or anywhere in the State of Texas and need to file for bankruptcy, contact the Texas Bankruptcy Attorneys at The Law Offices Of R.J.Atkinson for a free initial consultation. We may be able to help you with the bad checks before you file for bankruptcy and can help you determine how to deal with your bad checks in bankruptcy if the Texas Bankruptcy Means Test provides you are eligible to file.

What happens if prior to filing for bankruptcy, the debtor gives a bad check to someone? A bad check, Not Sufficient Funds check, or a bounced check, is usually a check which the bank will not pay because there is either no such checking account or there are insufficient funds in the account to pay the check. In New York, writing a bad check is a misdemeanor, punishable up to 90 days in jail for the first offense. To be charged criminally for issuing a bad check usually means that the check was issued with knowledge that it would not be paid by the bank. If you file for bankruptcy and have bad checks outstanding it might make your bankruptcy case more complicated. For the most part, bad check debts are dischargeable in bankruptcy, but each case is unique.

Sometimes, while the debt may be listed in the bankruptcy petition, the debtor may be charged criminally. The bankruptcy filing, and the automatic stay associated with it, will not stop a criminal prosecution. The automatic stay prevents any attempts to collect a debt from you which extends to creditors holding or collecting on that check. Although the automatic stay blocks all collection actions by the creditors, it does not extend to proceedings by the State or any Federal governmental agency pursuant to its police powers. More specifically, any criminal prosecutions which enforce criminal laws are not subject to the automatic stay of bankruptcy. The Bankruptcy Court treats prosecutions of bad checks as criminal proceedings and not attempts to collect debt as long as the actual purpose of a bad check prosecution is to enforce criminal bad check laws. Since a bad check prosecution isn’t meant to pressure the debtor into paying a debt that could otherwise be discharged in a bankruptcy the automatic stay of bankruptcy will have no effect on bad check prosecutions which enforce criminal law. If the debtor is found guilty of a crime of passing a bad check, the debtor may be liable for civil restitution, which is not likely to be found dischargeable by the bankruptcy court.

If no criminal charges are filed, the situation becomes clearer. The debt associated with a bad check is likely to be dischargeable, but its dischargeability will depend on whether there was any fraud, false pretenses, or material misrepresentations made in the actual writing of the check. If there was no fraud or misrepresentations involved, then the debt from the bad check is usually dischargeable.

Automatic Stay and Proceedings in New York Family Court

I have previously written about automatic stay in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy, and divorce, and domestic support obligations. While divorce is handled in the New York State Supreme Court, once in a while, a family court petition seeking child support or spousal support is filed against one of my bankruptcy clients in New York State Family Court. When this happens, usually I am asked whether the automatic stay prevent the filing or continuation of the family court proceedings. My answer to that question will depend on the type of bankruptcy filed.

While the debtors tend to believe that the automatic stay prevents creditors from proceeding with collection activities, it does not stop most family court matters. The Automatic Stay, in Chapter 7 Bankruptcy, which is governed by §362(a) of the Bankruptcy Code, will terminate any collection activities. However, one of the exemption included in §362(b) allows for actions in Family Court matters and also in Supreme Court involving domestic support obligations.

Specifically, Bankruptcy Code §362(b)(2)(A)(ii) provides:

The Automatic Stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding for –

the establishment of paternity,

the establishment or modification of an order for a Domestic Support Obligation such as child support,

the determination of child custody or visitation issues, or

the dissolution of marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest.

While the divorce can be granted in Supreme Court without first obtaining relief from the Automatic Stay, the marital property cannot be divided without obtaining such relief. The Automatic Stay also does not prevent the post-petition collection of Domestic Support Obligations such as alimony or child support.

from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in said property,

from automatic wage deduction orders created by a statute or judicial or administrative order,

from the interception of debtor’s federal or state income tax refunds, or

from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license.

Thus, there is no protection in bankruptcy court from the obligations imposed by a Domestic Support Obligation which can be brought in either the Family Court or Supreme Court. The above is true with respect to Chapter 7 Bankruptcy, however, in Chapter 13 Bankruptcy the answer is not the same.

The reason for this is the way Chapter 13 Bankruptcy treats debtor’s earnings after the filing of the bankruptcy petition. The property of the Chapter 13 Bankruptcy estate, which is broadly defined, specifically includes “earnings”. See 11 U.S.C. §541 [a] [6]; §1306 [a]. Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate pursuant to 11 U.S.C. §1306 [a] [2]. Thus, the claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings in Family Court.

Mistakes to Avoid When Filing For Chapter 7 or Chapter 13 Bankruptcy in New York

While bankruptcy appears to be a straight forward process, there are many pitfalls for the unwary. Some actions taken by the debtor before filing Chapter 7 or Chapter 13 bankruptcy in New York, may result in serious consequences. Here are some areas where mistakes are commonly made

1. Debts owed to family and friends. I would strongly recommend that you don’t try to pay back the debts owed to family and friends in anticipation of your bankruptcy filing. A trustee in a bankruptcy case can reach back and undo any such transactions that took place within one year prior to your bankruptcy filing. The concept is known as preference. It is intended to prevent debtors from favoring some creditors over other creditors by transferring assets to a third party and then claiming they have nothing left. While you may not be aware of preference, and your actions are responsible and just, they are likely to be undone by the bankruptcy trustee.

2. Disclose your financial affairs to your bankruptcy lawyer. Always be honest with your lawyer about your assets and your financial transactions. I am on your side and am able to help you, but I need to know everything that has taken place in order to take full benefit of the bankruptcy law. I can’t do that unless I have all the information available. Also, if I am not aware of certain facts, and if they come to light during the case or even after your discharge that you’ve withheld information or hid assets, you’ll not only lose the assets that were hidden, but the entire discharge can be undone. This means all of the bankruptcy protection created by your bankruptcy is lost and creditors can once again pursue you.

3. Don’t withdraw your retirement money. Sometimes, this is the easy route out of financial difficulties since the debtor may think that he or she may need more cash on hand if you’re getting ready to file for bankruptcy. However, since retirement plans such as IRAs and your 401(k) are actually protected from creditors by bankruptcy exemptions in New York. If you take the cash out and try to keep it, it will become part of the debtor’s estate. Additionally, you’ll owe pay taxes on the money you withdraw.

4. Don’t disregard pending lawsuits against you. While the automatic stay will protect you from any pending actions, once the bankruptcy is filed, any lawsuits pending prior to the filing should not be allowed to go into default. Lawsuits, if permitted to go into default have consequences and may result in adverse finding that may be difficult to undo during the bankruptcy. Do not treat law suits the same way as creditors. While the creditors will primarily call you and send you letters, lawsuits can have serious consequences that can be implemented before you file. Therefore, make sure that you, or your attorney, respond to any pending actions.

Of course, the most important step in all of this is to make sure you’re working with a knowledgeable, experienced and trustworthy bankruptcy lawyer. A good bankruptcy lawyer will help you successfully navigate the bankruptcy process and help ensure that you avoid all of the potential problems.

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 New York bankruptcy lawyer.

Bankruptcy and Utility Bills

In many bankruptcy cases, the debtors are not just behind on their mortgages, credit cards and other debt, but also behind on their utilities, including gas and electric, cable and telephone bills. If the debtor is filing a Chapter 13 bankruptcy, the remedy is simple – any outstanding bills incurred prior to the filing, will be paid over the term of the plan. Things are less simple in Chapter 7 bankruptcy.

The utility company cannot shut off bankruptcy debtors’ utilities services if there are outstanding debts owed prior to the bankruptcy filing since that would violate automatic stay. In most circumstances, the services will continue, but the utility may request a security deposit. If the utility company turned off service prior to the bankruptcy filing, the debtor should provide proof of filing to the utility and request that the services be turned back on. The utility company must turn the debtor’s utilities back on since it is obligated to do so under the state law. Here is Rochester, before doing so, companies may require bankruptcy debtors to submit an initial deposit.

If the debtor fails to pay utility bills that come due after the filing, the utility provider generally can terminate service for nonpayment of post-petition utility bills. This applies to both Chapter 7 and Chapter 13 bankruptcies.