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

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.

Dischargeability of Debt and Objections by Creditors

When debtors meet with me and tell me that they want to file for bankruptcy, I ask them questions about their debts, assets, and their financial affairs over the last few years. I also ask is how long ago they last used their credit cards. If they tell me that the credit cards were used within 90 days prior to the filing, I ask them to provide me with their credit card statements and information with regard to what was bought. All of this information helps me to assess whether I am likely to see potential objections from creditors with regard to dischargeability of one or more debts.

According to 11 U.S.C. §523(a)(2), a debt is presumed to be nondischargeable if a Debtor charges more than $600 for luxury goods on a credit card with in 90 days, or takes cash advances of more than $875 within 70 days of filing for bankruptcy. This presumption can be rebutted, but the burden is on the debtor to prove that the purchases did not involve luxury goods or services.

Another reason a creditor may object to the discharge is fraud and misrepresentation of debtors’ assets or income in order to obtain credit. If debtors misrepresent their financial condition in order to obtain a loan or credit line, and the creditor relies upon such misrepresentation when agreeing to extend credit, the creditor can object. For example, if the debtor earned $15,000 a year, but stated on the credit card application that he was earning $50,000 per year in order to get get approved, this would be a material representation likely to result in objections being filed.

Hiding an asset or failing to disclose it in a bankruptcy proceeding are also grounds to challenge a debtor’s discharge. For example, if you own an investment property, especially one with equity, which could not be protected under the Bankruptcy Code, and fail to inform the bankruptcy court of this asset, then a creditor may challenge debtor’s right to a discharge pursuant to 11 U.S.C. §727. Under such circumstances, a debtor may also get charged criminally.

Finally, the transfer of assets to family members or others just before filing bankruptcy can cause a creditor to challenge the bankruptcy case. It is particularly a problem if the asset transferred would not have been fully exempt in Chapter 7 Bankruptcy, and the transfer was made with the intent to deprive a creditor of a benefit. If the debtor does this, either the bankruptcy trustee or any creditor who might have received a benefit from the sale of this asset may allege you committed a fraudulent transfer of an asset. The Federal look-back period under 11 U.S.C. §548 and New York’s look-back period is six years.

In view of the above, I always advise my clients to stop using any credit cards at least 90 days prior to filing for bankruptcy, disclose all their assets, and be honest with regard to any financial transactions.

Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Creditors’ Chain of Title

It is fairly common for Chapter 7 and Chapter 13 debtors to have credit cards that went into default some time ago. It is also common for credit card issuers to sell of delinquent credit card accounts.

In Chapter 7 and Chapter 13 Bankruptcy, all creditors are notified of the bankruptcy filing and can file claims. It is common for a new entity to file a proof of claim as successor or assignee of the original credit card issuer, but often such proof of claim does not include any evidence that the claim was, in fact, assigned. This situation is commonly referred to as a missing chain of title, missing proof that the claim has been legally transferred or assigned to the new owner.

Here in Rochester, United States Bankruptcy Court Judge John C. Ninfo II has issued several decisions addressing this issue. In one of them, In re Doherty and In re Benedetti, he held that in Chapter 7 Bankruptcy, the successor creditor was obligated to prove it was the legal holder of the claim.

In Doherty, Chapter 7 Bankruptcy Trustee filed his objection to the successor creditor’s claim arguing that (1) successor creditor was not scheduled as a creditor in the petition; (2) although the debtors had scheduled the creditors that the successor creditor alleged originally held the claims, there was no breakdown in the proofs of claim to support the amounts alleged to be due,which differed from the amounts the debtors had scheduled; and (3) there was no assignment or bill of sale produced to demonstrate that the successor creditor was the current holder of any of the claims that were alleged to have been sold and assigned to it.

Judge Ninfo held that the successor has failed to produce a chain of title from the alleged original holders of the claims to it by either a series of assignments or bills of sale, or by any other acceptable proof of ownership. As a result, he disallowed successor creditor’s claims, since there was no proof that it was a proper creditor entitled to file a proof of claim under Section 501 of the Bankruptcy Code.

This issue can be extremely important in Chapter 13 Bankruptcy cases where it may impact duration of the plan as well as the amount of money paid by debtors under the plan. In Chapter 7 Bankruptcy, this issue becomes particularly significant in asset cases, i.e., situations where debtors have nonexempt assets that the bankruptcy trustee may sell to pay the creditors.

If you are 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.

Adversary Proceedings In Bankruptcy

For most part, filing either Chapter 7 Bankruptcy or Chapter 13 bankruptcy is an administrative process. The bankruptcy lawyer gathers information, prepares and files the petition. In Chapter 7 bankruptcy, the debtor attends a brief hearing conducted by a trustee. In Chapter 13 Bankruptcy, the debtor also has to attend a confirmation hearing. However, in some cases an “adversary proceeding” is filed.

An adversary proceeding is essentially a case within a case. It is a lawsuit within either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy case about an issue related to the bankruptcy case. There are many other situations in which adversary proceedings arise. In other instances, the debtor brings the adversary proceeding to bring a claim or to obtain a determination from the court. The Bankruptcy Rules of Procedure specify the situations in which parties must file adversary proceedings.

There are three parties in the bankruptcy court case who can file an adversary proceeding. Those parties are the creditor, the trustee (either the Chapter 7 Bankruptcy trustee, Chapter 13 bankruptcy Trustee, or the United States Trustee), and the debtor. Each adversarial proceeding is heard by the United States Bankruptcy Judge for the district where the bankruptcy is filed. For the cases filed here in Rochester, the adversary proceeding cases are heard by Hon. John C. Ninfo, II.

When a creditor files an adversary proceeding, it is usually because the creditor is claiming that the debt owed to the creditor should not be discharged in the bankruptcy. Usually the creditor will argues that it is only that particular creditor’s claim that should not be discharged since it falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving. Alternatively, the creditor may argue that the filing of the bankruptcy case was done in bad faith and the debtor is not entitled to the discharge altogether. These kinds of adversary proceedings are not common.

Another kind of adversary proceeding is filed by the Chapter 7 Trustee, Chapter 13 Trustee, or the United States Trustee. A trustee may argue that the schedules were not filled out accurately and were intentionally fraudulent. A trustee may file a motion to dismiss the bankruptcy case if paperwork is not filed timely, improperly, or if the debtor misses a court date without a good reason. A trustee may file an adversary proceeding seeking to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to reverse a transfer of real property. The United States Trustee may file an adversarial proceeding to force the debtor to move from Chapter 7 Bankruptcy to Chapter 13 bankruptcy, if the U.S. Trustee believes that the filing of the bankruptcy petition was done in bad faith. The U.S. Trustee may also file an adversary proceeding to dismiss the case, if the U.S. Trustee believes the filing of any bankruptcy petition was done to abuse the bankruptcy system.

Finally, a debtor may file an adversary proceeding against a creditor. The debtor may recover damages for a creditor’s actions taken in violation of the U.S. Bankruptcy Code, or violated the automatic stay, or the discharge (such as contacting the debtor after the bankruptcy is completed).

Mere fact that an adversary proceeding is filed does not mean that the party filing it will prevail. The bankruptcy judge will hear the case and will determine each party’s rights. It is the job of the bankruptcy attorney to advise the party as to the likelihood of success in an adversary proceeding, but the case will be decided by the bankruptcy judge .

The following is an example of a situation where an adversary proceeding is filed. The debtor obtained a large cash advance prior to filing. That cash advance was used to prevent a foreclosure or recover a vehicle after a repossession. However, the credit card issuer is likely to object claiming that the cash advance taken out only a few months prior to filing bankruptcy and argue that the debt is nondischargeable since it was either fraudulent or the money was borrowed in anticipation of the bankruptcy filing.

The litigation would commence with a filing or a complaint. An answer would serve, and the parties would engage in discovery. If the parties were unable to resolve their dispute during pretrial proceedings, there would be a trial.

Should You Use Credit Cards Once You Decided to File Chapter 7 or Chapter 13 Bankruptcy

If you are contemplating filing Chapter 7 or Chapter 13 bankruptcy, you should stop using your credit cards. Once you’ve decided to file for bankruptcy, any credit card use after that point will be highly scrutinized by both the credit card issuer and the bankruptcy trustee, and is likely to be viewed with a great deal of suspicion. The reasons for this are obvious. If the debtor decides that he is seeking to eliminate his credit card debt through Chapter 7 bankruptcy, or pay a lesser amount though a Chapter 13 filing, then incurring additional credit card debt can be considered fraudulent. Specifically, the credit card issuer will make an argument that the additional debt was incurred without intention to repay, then the discharge can be objected to. Also, the issuer will also look at all of the transactions to verify that the money was not spent on such things as vacation trips, or that other unnecessary spending didn’t take place. If a credit card issuer learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt.

Also, if the bankruptcy trustee, or United States Trustee, learn that the debtor intentionally ran up his credit cards before filing, then either trustee can seek to have the debtor’s discharge denied or move to have the case dismissed. There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud, which is a criminal offense.

While consumer Chapter 7 bankruptcy allows the debtor to eliminate all credit card debts and get a fresh new financial start, the debtor should not jeopardize his ability to seek bankruptcy protection by engaging in self-serving or foolish behavior. There is simply no reason to create problems for the upcoming bankruptcy filing. Therefore, don’t use your credit cards once you’ve decided to file bankruptcy.

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.

Chapter 7 Bankruptcy and Denial of Discharge for Willful or Malicious Injury

One of the limitations on receiving a discharge in a Chapter 7 bankruptcy is that the debtor cannot discharge any debt for willful or malicious injury.

Section 523(a)(6) of the Bankruptcy Code precludes the discharge of a debt “for willful and malicious injury.” As noted by the United States Supreme Court in Kawaahua v. Geiger, 523 U.S. 57, 61 (1998), the “word ‘willful’ in (a)(6) modifies the word ‘injury,’ indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury.” For the same reason, nondischargeability under this section will attach only to injuries that are malicious. In the Second Circuit, the Court of Appeals set the standard for “willful and malicious injury” in its decision in Navistar Financial Corp. v. Stelluti (In re Stelluti), 94 F.3d 84 (1996). The Court concluded that “[t]he term ‘willful’ in this context means ‘deliberate or intentional,’” and that “[t]he term ‘malicious’ means wrongful and without just cause or excuse, even in the absence of personal hatred, spite, or ill-will.” Id. at 87 (citations omitted).

In a recent case, In re Alessi, Judge Bucki held that the deliberate failure to abide by the terms of the contract, amounted to willful and malicious injury. In Alessi, the debtor, Mrs. Alessi, not only failed to pay a debt, but a failure to pay from funds that the debtor had agreed specifically to earmark for that purpose. The uncontroverted facts showed that the funds resulting from a real estate transaction were accessible and not otherwise encumbered, that the debtor knew of her obligation to turnover the funds, and that through his counsel, Mr. Alessi made timely demand for payment, even though not obligated to do so. The resulting injury was willful, in that Ms. Alessi deliberately and intentionally refused to turn over the sale proceeds. By violating a contractual provision for use of committed funds, Amy Alessi inflicted a wrongful financial loss without just cause or excuse. Hence, she caused an injury that was malicious within the meaning of section 523(a)(6).

Thus, if you are a debtor, you may have an obligation to follow through on the contracts where the funds are specifically designated for a given purpose. If you fail to do so, you may be denied a discharge.

Chapter 7 Bankruptcy and Objections to Discharge

You have filed a Chapter 7 bankruptcy. You and your lawyer went to the meeting of the creditors. Everything seemed to be in order. Then your lawyer calls you, and tells you that one of your creditors has filed an adversary proceeding in your Chapter 7 case, objecting to discharge of its debt. So what exactly is taking place?

If a creditor determines that an objection with respect to discharge of its debt is warranted, the creditor will file an Objection to Discharge of its particular debt. This filing begins what is known as an adversarial proceeding in the bankruptcy court. An adversarial proceeding is simply a law suit within the bankruptcy, seeking to declare a particular debt as non-dischargeable. The debtor responds to the complaint, evidence is gathered and supplied to both sides, and a hearing is held in front of the bankruptcy judge who decides the case. Here in Rochester, Hon. John C. Ninfo, II, would hear the case. Typically, neither the bankruptcy trustee nor the U.S. Trustee are involved in the adversarial proceeding.

A creditor may object to the discharge of its debt in a number of different situations. An unsecured creditor may object using Section 523(a)(2) of the Bankruptcy Code, which contains several different types of non-dischargeable debt. The debt under that section may not be dischargeable because it is: (1) $500 owing to a single creditor for the purchase of “luxury” goods within 90 days prior to filing of the bankruptcy; (2) $750 owing to a single creditor for a cash advance (i.e. balance transfers are cash advances) obtained within 70 days prior to filing of the bankruptcy; or (3) for money obtained under false pretenses, false representation, or actual fraud. There are also additional reasons to declare a debt non-dischargeable.

With respect to situations (1) and (2), the applicable rules are known as as the per-se rules. That means that the creditor need not prove debtor’s intent (i.e. fraud), and needs to show only that the transactions meet the criteria stated. Situation (3) means that the debtor made the charges/cash advances knowing that he/she was going to file bankruptcy, or made the charges/cash advances while insolvent and/or could not have had a reasonable expectation to pay back the debt, or made false representations in obtaining credit resulting in the debt he/she is trying to discharge at this time.

If the creditor is successful in having a debt declared non-dischargeable, the debtor will owe that debt until it is paid, with all accumulating interest, and the debtor can never discharge that debt.

The following is a brief description of procedural issues applicable to the objections. The complaint must be filed on or before 60 days from the first date set for the creditors meeting (also know as 341 meeting). Typically, a creditor has less than 90 days after receiving notice of the bankruptcy case to file a complaint. A creditor must act promptly to determine there are grounds to object to discharge.

Even if a creditor files an objection to discharge of its debt, the rest of the bankruptcy will proceed normally. The debtor will recieve the discharge on time, and most of the time, the discharge will be received before the hearing in the adversarial proceeding.

Once the adversarial proceeding is filed, the debtor has a number of options with respect to the creditor’s claim. The debtor can agree to repay all or a portion of the debt by signing a reaffirmation agreement. A typical reaffirmation agreement results in the debtor paying 50% of the debt over 12-18 months. The next option is fighting the objection. The debtor will have to be able to either fight the objection on his/her own or pay an additional retainer to the attorney to fight the claim.

The way that a creditor proves its case, is by showing to the court that the debtor was in financial distress at the time the objectionable transactions were made. Therefore, the debtor’s financial history will be disclosed through the discovery process, usually for a period of 12 months prior to the challenged transaction, and from the date of the transaction to the date of filing. Since an adversarial proceeding is a civil matter, both parties may call witnesses, and the debtor may be called to testify by either side. A creditor’s theory of the case in an adversarial proceeding is usually that no reasonable person could have expected to be able to pay off the debt, at the time that debt was taken out.

If the creditor wins, a judgment is entered, declaring the debt non-dischargable. This judgment can ultimately be used in New York State court, or elsewhere, to obtain a money judgment that can then be used to garnish wages, restrain bank accounts or conduct other collection activities. That judgment will not be dischargeable in any subsequent bankrupcies and can only be extinguished by payment or by New York’s statute of limitations, presently 20 years. Even if the creditor prevails, the debtor is not responsible for the creditor’s attorney’s fees and costs.

If the debtor wins, the debt is discharged, and, under appropriate circumstances, the creditor will have to pay debtor’s attorney’s fees and costs.

Thus, if an adversarial proceeding is brought, the debtor must choose between either settling or fighting. The cost to defend an adversarial proceding is usually substantial. Therefore, it should be compared to the cost of settling the case. If the proposed settlement reduces the debt and the payments are affordable, especially if the settlement amount is less than the cost to defend, the debtor should consider settlement.

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.