rochester bankruptcy lawyer – Page 7 – Rochester Bankruptcy and Debt Relief

Second Mortgage In Chapter 7 and Chapter 13 Bankruptcy

It is common for someone who is about to file Chapter 7 Bankruptcy to have a pending or upcoming foreclosure action. It is also common for the debtors to have a house that is “under water”, i.e., to owe more on their first mortgage than their house is worth. It is also common for the debtors to have a second mortgage such as a standard mortgage, line of credit or a home equity line of credit. If the first mortgage exceeds the value of the home, it is clear that the second mortgage has no equity in the house to support it, and is fully unsecured.

Once the debtors or their bankruptcy attorney realize the above, the debtors have a choice to make. They can file a Chapter 7 Bankruptcy, assuming that they can pass the means test. If the debtors are eligible for Chapter 7 Bankruptcy, their personal liability under both mortgages can be eliminated. Then, the debtors can decide to pay the first mortgage only. They may also decide to take a calculated risk that the second mortgage holder would try to foreclose on its mortgage. But would the lender actually commence a foreclosure? Initially, unless the second mortgage holder acquires the first mortgage, it would end up with a house subject to a first mortgage that exceeds what the house is worth. That would likely make any such attempted foreclosure a money losing proposition. Also, if the first mortgage holder forecloses, that foreclosure would eliminate the second mortgage.

Another option that the debtors have is to file Chapter 13 Bankruptcy. While Chapter 13 will carry with it a repayment plan that may last as long as 5 years, it also allows for “lien stripping”, otherwise known as “Pond” motion. In Chapter 13 Bankruptcy, the totally unsecured mortgage is wiped away and no longer a lien on the debtors’ home. Then, the second mortgage is treated as unsecured debt that gets repaid in the bankruptcy in accordance with the terms of their repayment plan. According to bankruptcy courts’ decisions, the debtors have to receive a Chapter 13 discharge before the lien is stripped.

Most of the decisions addressing Chapter 7 Bankruptcies hold that the debtors cannot “strip” their fully second unsecured mortgage in a Chapter 7 Bankruptcy case.

One important reason for many debtors to stay in their house after Chapter 7 is that it may cost them less to pay the mortgage than to rent another place to live. The second mortgage becomes a lot less important since the debtors may be able to strip it right away in Chapter 13, and, if economic conditions don’t improve, the debtors might be able to strip it 4 years from the date they filed their chapter 7 case – when they are eligible for a discharge under Chapter 13.

Another option that may be available to some debtors is to have their mortgage recast under the new Home Mortgage Modification Program. In my experience, here in Rochester, lenders are willing to work with debtors to recast their mortgages. Assuming that the debtors have ability to pay their mortgage, and meet other financial requirements, their mortgage may be modified by their lender.

If you are 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.

Who Qualifies For Bankruptcy?

Do I qualify to file a bankruptcy? This is one of the most common questions I am asked as a bankruptcy lawyer when I meet with debtors who are hoping to obtain relief from their debts in bankruptcy court. My answer is usually yes, since almost everyone qualifies for bankruptcy under either Chapter 7 or Chapter 13 of the Bankruptcy Code.

I think that this question is often asked because of common myths and misinformation that people hear with regard to what bankruptcy is and what it does for the debtor. Unfortunately, there is much misinformation being passed around. It is rare that someone would not qualify for a filing under either chapter of the Bankruptcy Code. If there are horror stories, they typically arise out of situations where someone did not disclose accurate information to the bankruptcy court.

In order to qualify for a bankruptcy relief, the debtor needs to have a reason to file. The primary reason for most debtors is their inability to pay their debts. Whether or not the debtor owns assets is not a a consideration in qualifying to file for bankruptcy. Under New York’s bankruptcy exemptions, a single filer can protect $50,000 in home equity, $2,400 of equity in the vehicle, and there are other exemptions available for other classes of assets.

There are no minimal requirement as to how much debt a debtor must have before filing, nor does this debt has to be reduced to a specific figure. Also, if you are filing Chapter 13 Bankruptcy, you are not limited with respect to the property that you can own, but the amount of property may be a factor in the amount of payments under the plan. While there are maximum limits of the amount of debt that can be discharged under either Chapter 7 or Chapter 13, the vast majority of debtors will not even approach them. In Chapter 7, there are no maximum debt limits. As a result, that Chapter 7 Bankruptcy is available to the debtors regardless of how much debt they owe, and its availability is only limited by the means test. In Chapter 13, you may not have more than $1,010,650 in secured debt and $336,900 in unsecured debt.

Paying For a Bankruptcy

If you are thinking about filing bankruptcy, you are likely having serious financial problems. Eventually, you decide that you decide to have a consultation with a consumer bankruptcy attorney. During your consultation, you and the bankruptcy lawyer discuss the positives and negatives of filing bankruptcy and decide that you will be filing either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Then you ask the final question, how much will it cost me to file my bankruptcy case?

The attorney will tell you about his attorney’s fee and disbursements for filing fee, credit counselling and debtor education. Then you are likely to ask the following question: where can I get the money and when do I have to pay it?

Initially, lets talk about where that money can come from.

If you are filing a bankruptcy under either Chapter of the Bankruptcy Code, you are generally advised to stop making any payments on unsecured debt, such as credit cards, bank loans, past due medical bills, etc. Debtors are often advised to continue making payments for any asset that they are keeping, such as a car, house, pension loans, rent, etc. As a result, this is likely to improve their cash flow by freeing up the money that was being paid to the unsecured creditors.

If you are not working, or already stopped all payments to creditors, you may need to ask relatives or friends for partial or full payment of the fees and disbursements required in a bankruptcy. While those loans would generally be dischargeable, they can be repaid after the bankruptcy.

Most bankruptcy lawyers offer payment plans. On average, a bankruptcy takes several weeks to prepare and the payments can be spread over that period. Alternatively, you can request additional time prior to the filing while the bankruptcy petition is being prepared.

Paying for bankruptcy is also different depending on whether you are filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.

In Chapter 7 Bankruptcy, I cannot collect any money from the client against fees or disbursements after the filing of the bankruptcy. It is prohibited by the Bankruptcy Code. Therefore, all fees and disbursments must be paid prior to the filing of the petition.

In a Chapter 13 Bankruptcy, which results in a repayment plan, with payments of part or all of the debts paid through the bankruptcy court, a portion of the fee can be put into the Chapter 13 plan payment, making it easier on the client and expediting the filing of the bankruptcy petition.

Repaying Debts After the Bankruptcy

Sometimes I am asked by debtors if they can pay their creditors after they received a bankruptcy discharge. My answer to them is that there is nothing in the bankruptcy law that prohibits debtors from voluntarily paying their creditors, either those creditors that are important to you, or all of them. However, for me as a bankruptcy lawyer, it can be a bit difficult to understand since debtors typically file for bankruptcy protection because they cannot afford to pay their creditors. At the same time, I understand that under some circumstances debtors make a deliberate decision to repay someone.

In many different situations, debtors have creditors that are important to them. Those creditors may be family member who have loaned debtors money. Typically, debtors do not want to discharge the debt owed to close relatives. In those situations, my advice is to list the debt but, once the case is over, repay it voluntarily.

Another usual situation is where the debtor may have credit at a small, local store. Since it may be important for the debtor to have that access to such credit, the debtor may choose to pay that debt even after the bankruptcy case is over and the debt is discharged.

From the creditor’s side, once the bankruptcy is filed, the creditor may not contact the debtor to attempt to “persuade” him to “voluntarily” pay the debt. TIf any creditors does this, it would be viewed by the bankruptcy court as an attempt to collect a discharged debt in violation of the discharge injunction.

If the debtor decides to repay a debt after filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, he should be very careful about making payments on a discharged debt. If a creditor were to sue the debtor on a discharged debt in state court, the debtor could raise the fact that the debt was discharged in bankruptcy by raising it as an affirmative defense in state court litigation or he could remove the action to bankruptcy court and allow the bankruptcy court to enforce its discharge injunction. By making payments on a discharged debt, the debtor could create a “waiver” of the bankruptcy discharge on that particular debt.

Upcoming Changes to New York’s Bankruptcy Exemptions

As readers of this blog know, if a debtor is filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in New York, New York’s bankruptcy exemptions will apply. Unfortunately, those exemptions have not been updated in quite some time and are very limited as far as the values of protected assets is concerned.

There is a bill pending in New York State’s legislature that would substantially change the value of assets that could be protected in bankruptcy by changing the figures included in the Debtor and Creditor Law and CPLR which are the basis of those exemptions.

Specifically, this bill would increase the level of certain exemptions from the satisfaction of a money judgment. In addition to the increases, it would add one computer, one cell phone and one motor vehicle worth up to $4,000 to the list. If such vehicle was equipped for use by a disabled person, the limit would be $10,000. The money judgment exemption for the motor vehicle would not apply if the debt enforced is for child support, spousal support, maintenance or alimony.

It would increase the homestead exemption value of a home under Section 5206 of the CPLR from $50,000 to: $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state.

It would also amend Subdivision I of Section 282 of the Debtor and Creditor Law to increase from $2,400 to $4,000 the exemption for one motor vehicle in bankruptcy. If such vehicle was equipped for use by a disabled person, the limit would be $10,000 in bankruptcy. The bill would amend section 283 of the debtor and creditor law to increase the amount of the aggregate individual bankruptcy exemption from $5,000 to $10,000.

The bill would add a new section 285 to the Debtor and Creditor Law to permit debtors to choose either the current federal exemptions or the exemptions in New York Law. The New York State exemptions are listed in Debtor Creditor Law Art 10-A, Sections 282 and 283. Federal exemptions are enumerated in 11 U.S.C. 522(d). It will apply a Cost of Living Adjustment to be published by the New York Banking Department for the applicable exemptions in sections 5205 and 5206 of the CPLR and Section 282 and 283 of the Debtor and Creditor Law.

If those proposed amendments pass into law, the debtors living in Rochester, and Western New York, would be able to protect an additional $25,000 in home equity per filer and also benefit from an increase in the value of vehicle exemption.

More significantly, the debtors will be able to chose between the New York exemptions or the Federal exemption limits. At this time, New York does not allow debtors to make this choice. The ability to utilize federal exemptions will help those debtors who do not own a home more than anything else, because there is a wildcard exemption under Federal Rules. The wildcard exemption, 11 U.S.C. 522(d)(5), typically allows the debtor to exempt a substantial amount of cash, which is presently limited under New York’s exemptions to $2,500.

Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Immigration Status

Can my bankruptcy filing affect my immigration status? This is a question periodically asked by my clients. The answer to that question is actually depends on the particular circumstances of each case, but here are some of the issues that may be relevant.

There is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for naturalization. Additionally, there is no specific question on Form N-400, Application for Naturalization, related to bankruptcy. However, the debtor’s immigration status can be affected if he has not filed required tax returns or if he owes money to the IRS.

While reviewing immigration-related applications, the INS is usually checking to see if an individual seeking naturalization has evidence of “poor moral character” which could be grounds to deny an application. The filing of a bankruptcy petition as a consequence of financial hardship clearly does not rise to the level of “poor moral character.”

However, if you are facing any type of immigration issue and are about to file for either Chapter 7 or Chapter 13 Bankruptcy, you should disclose that fact to your bankruptcy lawyer at your initial consultation as well as discuss your potential bankruptcy filing with your immigration attorney.

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.

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.

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, 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.

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.