lawyer – Rochester Bankruptcy and Debt Relief – Rochester, NY Bankruptcy Attorney

Importance of Providing Accurate Information in Your Bankruptcy Petition and Schedules

I have previously written how important it is for debtors to provide their bankruptcy attorney with accurate and complete information. Debtors have an absolute obligation under the Bankruptcy Code to disclose their assets, liabilities and income to the bankruptcy court. Once in a while, a debtor may forget a creditor or overlook an old debt. Not every debt appears on the credit report either. When a debt is omitted from the bankruptcy petition, under the Bankruptcy Code, there are several possible solutions.

Initially, if the debtor realizes that a debt was overlooked during the bankruptcy, the debtor is required to file amended schedules and identify the creditor. If this happens, the bankruptcy attorney should be notified and he will amend the schedules.

If a pre-bankruptcy debt is discovered after the bankruptcy case has been closed and discharge granted, there are a couple of possible options. In some situations, it will be necessary to request that the bankruptcy court reopens the bankruptcy case and discharge the debt. In other situations, especially in no asset Chapter 7 Bankruptcy cases, the debt is considered discharged as a matter of law, even though it wasn’t listed in the schedules. Finally, some types of debt, such as student loans, cannot be discharged under most circumstances, and will survive the bankruptcy.

The bankruptcy courts expect the debtor to provide a full and complete disclosure of both assets and liabilities. In Chapter 7 Bankruptcy asset cases and Chapter 13 Bankruptcy cases, an omission matters a great deal since listed creditors receive payments through the bankruptcy court. If a debtor deliberately fails to list a creditor, that debt is likely be declared non-dischargeable and will survived the bankruptcy. Under appropriate circumstances, courts have denied debtor a bankruptcy discharge because of the debtor’s intentional failure to list all debts or revoked already issued discharge.

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.

Do Both Spouses Have to File for Bankruptcy Together?

While most married people think that if they file for Chapter 7 bankruptcy or Chapter 13 Bankruptcy, they must do so with their spouse. That is not true.

Whether one spouse or both file a bankruptcy petition, it’s their choice. It is not uncommon for one spouse to have most of the debt in his or her name only, in which case an individual filing would more appropriate. However, if both spouses are have a significant amount of debt, they should file together.

Sometimes I meet with only one spouse because the other spouse is is not willing to file for bankruptcy. In these situations, one spouse to file the bankruptcy petition and obtain necessary relief from the bankruptcy court.

There are also some additional issues that need to be considered. Initially, if only one spouse is filing and the couple is residing together, the other spouse’s income may be relevant for the purpose of household income as reflected on Schedule I, resulting disposable income reflected on Schedule J, and that spouse’s income may also be relevant for the means test.

As far as the means test, it is necessary to determine whether there is a presumption that there is enough disposable income available to give unsecured creditors sufficient payment under a Chapter 13 bankruptcy plan, such that permitting a Chapter 7 could be considered an abuse of discretion. But even if the means test is passed, and no presumption of abuse arises, or, alternatively, if this is a non-consumer bankruptcy and the means test is not even required, abuse can still be found given the totality of the circumstances. The income and assets of the non-filing spouse are important in both those considerations. If the debtor has legal rights to share in the income and assets of a non-filing spouse or even if the practice has been between spouses to share income and assets regardless of legal rights, the bankruptcy law tells us that the debtor’s access to the non-filing spouse’s income and assets has to be considered in deciding whether the bankruptcy court would permitting a Chapter 7 bankruptcy filing.

An experienced bankruptcy attorney can analyze each consumer’s financial situation and suggest whether a married couple should file an individual or a joint petition.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including 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 Rochester, NY, bankruptcy lawyer.

Do Divorce Settlements Survive Bankruptcy?

I have previously written about interplay between divorce, family court proceedings and bankruptcy, as well as other issues involving interplay between bankruptcy and family law. One issue that is highly significant in situations where one of the former spouses is about to file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is whether the bankruptcy trusee will seek to undo a divorce settlement agreement.

With bankruptcy filings being so common, and divorce being a major reason for seeking bankruptcy relief, divorce lawyers are frequently concerned as to whether a divorce settlement will be upheld in a bankruptcy proceeding.

There are valid reasons to be cautious since if a debtor transfers a valuable asset to a spouse (or soon-to-be ex-spouse) prior to filing for bankruptcy, and the debtor-spouse does not receive reasonable value in return, then the transfer may be deemed to be a “fraudulent transfer.” In such a case, the bankruptcy trustee can sue the person who received the asset to recover it for the bankruptcy estate, so that all creditors can share in its value. As with any other situations involving fraudulent transfers, the debtor must have been insolvent at the time of transfer.

In order to demonstrate that a transfer was not a fraudulent transfer, the party who received the transfer would have to show that there was “reasonably equivalent value.” It is common for a divorcing spouse to settle the divorce case by giving the other spouse valuable assets such as an interest in real estate, bank accounts, investments, or other personal property. In those situations, both parties do not want a bankruptcy trustee to try to set such transfers aside.

There was a time when some of the bankruptcy courts have held that innocent spouses who received such a transfer were no different from any other party who received a large transfer without sufficient consideration. However, a case decided by the United States Circuit Court of Appeals in June of 2009 will give many divorcing spouses a greater degree of certainty that a trustee will not be able to set aside a divorce settlement.

The decision in Bledsoe v. Bledsoe, 569 F.3d 1106 (9th Cir. 2009) this issue by addressing when a bankruptcy court may avoid a transfer made pursuant to a state-court divorce decree. The Circuit Court affirmed that decision and held that a trustee can only set aside a matrimonial settlement if he alleges and proves “extrinsic fraud.” The Court also held that a divorce decree that follows from a regularly conducted, contested divorce proceeding conclusively establishes “reasonably equivalent value” in the absence of fraud or collusion. Since the Second Circuit has not addressed this issue, Bledsoe is valid law in the bankruptcy courts in New York. At the same time, the bankruptcy court, here in Rochester, New York, and elsewhere, will always review the totality of the facts.

In order for a divorce settlement to be upheld by the bankruptcy court, it must be ratified by the matrimonial court. That means that any transfer should be accurately described in a stipulation of settlement. In addition, the stipulation must be specifically referred to and incorporated in the judgment of divorce. It is not enough that the parties merely stipulate to a settlement; the court must specifically approve the settlement. In a typical judgment of divorce, this is accomplished by stating that the stipulation survives the judgment of divorce and is not merged into it.

Can You Be Fired For Filing Bankruptcy?

Many people who file for bankruptcy in New York have fears about their relatives, friends, neighbors and employers discovering that they have filed for bankruptcy. They try to hide this fact from everyone. Many people who would greatly benefit from filing for bankruptcy under either Chapter 7 or Chapter 13 are reluctant to do so is because the perception among some people is that it is shameful to file for bankruptcy. I spend a considerable amount of time explaining to my clients that there is nothing shameful about filing for bankruptcy.

A lot of people are scared that their employers would find out that they filed for bankruptcy. They are afraid that their employers might fire them from their jobs if employers find out about their bankruptcy filing. They try as much as possible to hide their filing for bankruptcy because of this sense of insecurity.

The debtors should not be concerned since federal law prohibits employers from discriminating against them or from terminating their employment solely because of the debtor’s bankruptcy filing. Specifically, the bankruptcy code’s non-discrimination provision, 11 U.S.C. section 525(b), states as follows:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title … solely because such debtor … is or has been a debtor under this title…. 11 U.S.C. sec. 525(b).

One caveat to the above provision is that the Bankruptcy Code prohibits discrimination solely on the basis of the bankruptcy filing. It will not protect an employee who is having other employment-related problems.

The reality now is that a great number of people in Rochester, New York, or elsewhere in Western New York, have filed or are filing for bankruptcy. For a business having employees who file for bankruptcy is simply a fact of life. In many respects, it is better for the employer to have an employee file for bankruptcy, so that the employee is not spending time answering phone calls from the debt collectors, or that employer does not have to waste time garnishing employer’s wages. In today’s economy, bankruptcy is a reality that everyone is facing, and so companies would rather not do anything that would appear to be a form of discrimination against their employees.

Should You Hire a Bankruptcy Lawyer?

Some of the major reasons why people who know they need to file for bankruptcy, but postpone doing so, is fears about filing either Chapter 7 or Chapter 13 Bankruptcy, and concern about paying the legal fees.

Some debtors consider filing bankruptcy on their own. However, this can be a major mistake and can create additional problems. As I have written about previously, bankruptcy involves a number of procedural and substantive steps and tests that have to be satisfied before the bankruptcy court can grant a discharge.

In both Chapter 7 and Chapter 13 bankruptcy cases, the debtor must appear before a court-appointed trustee for a 341 hearing. The bankruptcy trustee who conducts the hearing is not someone who is there to help the debtor. His role is just the opposite. The trustee is charged with investigating the debtor and his financial circumstances to determine if there are any assets available for thee benefit of creditors. Meeting with an experienced bankruptcy attorney will enable the debtor to have his or her financial situation reviewed and assets protected in advance to the extent possible.

What debtors may not realize is that certain types of financial transactions that may have taken place years before filing can have a major impact on the debtor’s bankruptcy. For example, if any significant assets were given away or if real estate was transferred, this may amount to what is known as a fraudulent conveyance or a preference, and may result in significant litigation in the bankruptcy case. Usually, a bankruptcy lawyer will review these issues before a bankruptcy petition is filed in order to mitigate the risk.

While the bankruptcy petition is written in plain English, it is a difficult document to prepare for someone who is not familiar with the Bankruptcy Code. A complete petition in a Chapter 7 Bankruptcy in New York, including all of the various forms and schedules runs in excess of 40 pages. The petition requires preparing numerous schedules and budgets. The debtor must list appropriate information about his debts, assets, income and expenses.

The Statement of Financial Affairs includes numerous questions that must be answered. All of the debtor’s creditors must be listed not only in a schedule of debts (segregated in three separate categories) but also in a special format called a Matrix. Such listing must include creditors’ names, addresses, account numbers, dates when any debts were incurred and their purpose.

When Congress passed BAPCPA in 2005, it imposed many new requirements. The most significant of those requirements is a complex and complicated means test, as well as the requirement for mandatory credit counseling. The Chapter 7 trustee as well as the Office of the U.S. Trustee reviews each and every petition to make sure all of the requirements under the new law are properly met. The means test is complicated, and the debtor’s failure to properly prepare the bankruptcy means test can create significant problems as the United States Trustee can seek to have the bankruptcy case dismissed.

The debtor must also choose which Chapter of bankruptcy to file. If a debtor is seeking to stop foreclosure and cure mortgage arrears, a Chapter 7 Bankruptcy filing won’t be helpful. At the same time, a Chapter 13 Bankruptcy filing is likely to result in a 3-5 years payment plan.

There are self-help books that explain how a debtor can prepare and file his petition and complete the process. However, there are many traps for the unwary that even attorneys who do not regularly practice bankruptcy often create problems for their clients.

Every bankruptcy trustee I know in Rochester, New York, has expressed concern about those debtors who file bankruptcy without an attorney because these debtors often make serious procedural and substantive mistakes. Self-representation by pro-se debtors in bankruptcy matters can end up being a mistake, and result in further financial problems for the debtor.

Eviction, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

I often receive phone calls from people in Rochester and elsewhere in Western New York who are facing a potential eviction involving a commercial or residential lease. Usually the debtors do not know what their bankruptcy options are and are seeking advice how to proceed.

A bankruptcy filing by the tenant, either residential or commercial, immediately stops any pending eviction proceedings as a result of an “automatic stay.” Automatic stay, as I have written previously, is a mandatory injunction that arises by operation of law without the need for a hearing or order of the Bankruptcy Court. The automatic stay stops all of creditor’s efforts to pursue collections, litigation or judgment enforcement. The automatic stay protect the debtor and the property of the debtor’s bankruptcy estate. However, with respect to leases, it is critical to know at what stage the eviction proceedings are.

In the case of a lease, whether commercial or residential, the critical issue is whether a writ of eviction has already been issued from the landlord-tenant court. There is a significant body of case law holding that once a writ of eviction has issued from the landlord-tenant court the interest of the tenant in the lease has terminated. As result, if the lease is considered to be terminated by the bankruptcy court, the tenant can be evicted and the automatic stay will not stop the eviction. Thus, if a bankruptcy is being considered to prevent to postpone the eviction, it is critical for the debtor to contact a bankruptcy lawyer as soon as the eviction petition is served.

For a tenant who files for bankruptcy, the available options depend upon what chapter (type) of bankruptcy the debtor may be filing.

If the debtor is filing Chapter 7 bankruptcy, it may provide a delay in being evicted, and discharge the tenant from any liability under the lease. At the same time, the filing will not allow the debtor to either cure the default or give extra time to make payments under the lease.

For an individual debtor who has a lease, and has not kept up with the payments, Chapter 13 bankruptcy can provide the opportunity to cure the arrears (past due rent) over time. In a Chapter 13 bankruptcy, the arrears can be paid over a 5 year period, depending on the terms of the plan. If the tenant doesn’t stay current with post-bankruptcy rent, the landlord can seek “relief from the automatic stay” from the Bankruptcy Court to permit the landlord to move forward to evict the tenant in state court.

Do Debtors Meet Bankruptcy Judge During Their Chapter 7 Bankruptcy?

I am often asked whether the debtors here in Rochester will get to meet the Bankruptcy Court Judge during their 341 meeting, otherwise known as the meeting of the creditors. My usual response to this question is no, since the bankruptcy court judges are barred by law from attending the meeting of the creditors.

While the meeting of creditors is open and the public can attend it, the bankruptcy judge assigned to the case may not do so. While it seems counterintuitive, the reasons for this is to avoid any perception of bias on the part of the judge. Prior to 1979, when the current version of the bankruptcy code became effective, a bankruptcy court judge was able to attend the meeting of creditors. However, the Congress decided that it was necessary to prohibit judges from attending the meeting.

Accordingly, Bankruptcy Code section 341(c) provides that “the court may not preside at, and may not attend, any meeting under this section.” Although the local meeting of creditors is held in the Rochester Federal Courthouse, it is not a court hearing and the trustee presiding over the meeting is not a judicial officer. I tell the debtors that in most Chapter 7 consumer bankruptcy cases, the debtor will never appear before the judge assigned to the case.

If I am asked the same question about the Chapter 13 bankruptcy case, my answer will be the opposite since as a part of any Chapter 13 bankruptcy, the debtors will have to attend a confirmation hearing which, in Rochester, will be presided by Judge Ninfo.

Chapter 7 and Chapter 13 Bankruptcy, Recent Move by the Debtor and Applicable State Exemptions

Periodically, I see debtors who have moved recently to Rochester, New York, or nearby, from another state who wish to file either Chapter 7 Bankruptcy or Chapter 13 bankruptcy. The critical issue in those situations is to determine what state’s bankruptcy exemption laws, if any, will apply.

Under BAPCPA, which passed in 2005, the initial question is how long the debtor has resided in the present state of residence. If the debtor has lived in the same state for the two years prior to filing, then New York’s exemptions will apply. However, if the debtor has moved to New York from another state during the prior two years, then the following rules will apply.

If the debtor resided in the same state for at least 730 calendar days continuously (two years) prior to the filing of the bankruptcy petition, then the debtor can use that state’s exemptions. If the debtor did not live in the current state continuously for at least 730 days, then the debtor must pick the state in which he lived most of the time during the 180 days prior to the 730 days. In other words, the state that must be selected is where the debtor lived most of the time between 2 and 2 ½ years before filing.

If no state qualifies using the above rules (i.e., the debtor has lived in abroad) or if the 180-day state requires current residency or being a domiciliary to use its exemptions, then the debtor must use the federal exemptions. The default rule will only apply if the debtor did not live in any state during the 180 day period that began 730 days before filing, or if the state requires current residency or domiciliary. Under some circumstances, it is advantageous to the debtor to use the federal exemptions since they are typically more generous than New York’s exemptions.

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.

Small Business and Chapter 7 Bankruptcy

In the last few months, I have received a number of calls from owners of small businesses who want to file Chapter 7 bankruptcy, primarily due to credit card debt, but want to continue to operate their businesses. In most of these cases, the business owner have used personal credit cards to fund business operations. Since the time the credit cards were used, the business improved, and is now profitable or would be profitable where it not for the payments on credit card debt.

Unfortunately, in this type of situation, filing bankruptcy comes with a price. If you own a small business and are incorporated, the shares of that business are assets of the bankruptcy estate. Further, any accounts receivable of the business are an asset of the business that belong to the shareholder. Thus, if the shareholder files Chapter 7 bankruptcy, the bankruptcy trustee will treat the shares in the business, value them, and will try to sell them

Except in the case of a personal service business that has no significant inventory, receivables or any valuable assets, other than the experience and labor of its owner, the bankruptcy trustee will demand that the owner cease operating the business, and produce its records, value its assets and disclose other information related to the business to the trustee. As a result, a Chapter 7 bankruptcy filing is likely to result in the business being shut down, and its owner being forced to start over. Once the bankruptcy is completed, a new corporate entity can be formed and, assuming that the owner is able to resume operations and the business can be profitable, operations can be restarted.

Besides Chapter 7 bankruptcy, there are other options. Under appropriate circumstances, an owner of a small business can file a Chapter 13 bankruptcy assuming that the business is being operated as a sole proprietorship, and, if the business is large enough, Chapter 11 bankruptcy may be an option. In a Chapter 13 filing, it is usually difficult to predict what the cash flow of the business will be like and, therefore, it is difficult to come up with a bankruptcy payment plan.