M is for Matrimonial Property Obligations and the Discharge in Bankruptcy

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

    M by BigBlue Meanie                    There are two main types of domestic support obligations (‘DSO”) defined in the bankruptcy code. The first kind of DSO encompasses things such as child support payments and alimony. (To simplify, let’s just call this type: “support“). The second type of DSO comes from the distribution of property in divorce; in Pennsylvania the statutes refer to this as “equitable distribution“, which is the terminology I will use here. The latter usually consists of the spouse’s equitable share of the equity — as adjudicated by the courts or agreed to in a property settlement agreement, which also must be court approved in Pennsylvania — in the marital residence but can also include joint bank accounts and other valuable items.

In the general definitions within the Bankruptcy code 11 USC Sect.. 101(14 a-c), both support and equitable distribution appear as DSO’s, misleading one to think that perhaps the two will be treated identically in bankruptcy. However, while this is true of a Chapter 7, it is otherwise for a Chapter 13. The difference in treatment as between the two different kinds of domestic support obligations only become apparent when one looks at how they are treated those portions of the Bankruptcy Code dealing specifically with the discharge of these specific categories of debt.

At first glance in 11 USC Sect. 523(a)(5) and 11 USC Sect. 523(a)(15), the sections of the Code dealing with equitable distribution, it appears that these two subsets of domestic support obligations are treated the same. That is to say, neither support nor equitable distribution obligations appear to be discharged in bankruptcy, meaning specifically that in both a Chapter 7 bankruptcy these debts survive the bankruptcy and remain obligations of the debtor and alternately in a Chapter 13, they both must be paid in the plan and/or any amount left over so survives.

However, 11 USC Sect. 1328(a)(2) changes the picture radically, at least insofar as discharge after completion of a Chapter 13 Plan is concerned. (Note that virtually anyone who has a regular income can elect a Chapter 13 filing as versus a Chapter 7.) This provision essentially states that once all the plan payments are made and the debtor complies with its other requirements, the DSO types not listed in the statute will be discharged: one of the provisions so listed is 11 USC Sect. 523(a)(5), which again deals with with support debts. However, whether by design or inadvertence, Congress conspicuously excluded from that list 11 USC Sect. 523(a)(15), which again pertains to equitable distribution obligations.

Thus, unlike support, which cannot be discharged either in a Chapter 7 or a Chapter 13, the proceeds of an equitable distribution can be discharged to the extent that the ex-spouse still owes same once the Chapter 13 plan payments have been otherwise completed. A clever bankruptcy lawyer, knowing this, will to the extent possible, draft a plan which, perhaps by favoring secured and other priority unsecured debt in order and amount of payment, provides for less than all of the equitable debt to be discharged, which has the effect of excusing the debtor spouse from his or her remaining equitable obligations, even though ironically these were awarded to the creditor spouse by a court of law. The (alas little appreciated) lesson for the family lawyer representing the creditor spouse is to require all equitable debt to be paid up before the property settlement agreement is authorized, so as to avoid eventual loss of some or all of their equity in a potential Chapter 13 bankruptcy.

©Christopher C. Carr, Attorney at Law 2009, All Rights Reserved

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

Others blogging on M include:

  • Bill Balena,      CLevand Bankruptcy lawyer tells us that M      is for Mistakes .
  • Omaha and Lincoln,      Nebraska Bankruptcy Attorney, Ryan D. Caldwell says M is for Means Test.
  • Marin County      Bankruptcy Lawyer, Cate Eranthe blogs M is for Means Test, a popular topic.
  • New York Bankruptcy      Lawyer, Jay S. Fleischman agrees M is for Means Test too.
  • Colorado Springs bankruptcy      Attorney Bob Doig says M is for Meeting of Creditors.
  • Northern California      Bankruptcy Lawyer, Cathy Moran believes M is for Modify & also for Monthly Income.
  • Hawaii Bankruptcy      Lawyer, Stuart T. Ing says M is for Mortgage Arrears.

Picture credit: Bigbluemeanie

“W” is for Wages are not always safe from creditors in Pennsylvania

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

Single W by CarbonNYC age garnishment is not legal in Pennsylvania. So your paycheck is safe and sound, right?

Your employer has just deposited your paycheck into your bank account and you write a check to pay your mortgage, “knowing” there is now plenty of money in there to cover it and nobody can get it. But the check comes back “NSF”. It bounced and for the life of you, you cannot figure out why!  But then there’s that innocent little check you cashed a while back for $1.19 and now it’s coming back to haunt you. Read on to see what happened…

Well, while your wages may be safe from direct garnishment this may be cold comfort indeed because, your bank accounts are not protected in this way.  In Pennsylvania, a bank account levy is allowed under Section 9607 – Title 13 – COMMERCIAL CODE  only after judgment is awarded.  But once armed with a judgment your creditors can take your entire bank account – if they can find it. If a legal judgment has been entered against you in Pennsylvania, the holder of that judgment can satisfy it in whole or in part with money in your bank accounts simply by obtaining a court order against your bank.

And how can creditors gain access to this information in this day and age of “privacy protection”? Well one way is through you via what is called “discovery in aid of execution”.  That is, under the PA Rules of Civil Procedure you can be required by subpoena to submit to questioning under oath regarding your assets and accounts.

But most collectors cannot be bothered to go through proper legal channels…that costs legal time and money. Instead they will resort to various underhanded schemes to find your accounts. One of the most successful routines they use is to trick debtors into cashing small checks they send them, say, for $1.19 (see above).  Accompanying the check will be a fake letter saying “we made an error in your account in your favor and so here’s $1.19 back”. When you cash the check the collector will see a copy of it in his bank statement and he can tell exactly where you do your banking.  That is enough to allow him to get what is called a “Seizure Order” against that bank. You may never even figure out how he got you but for a mere $1.19 (which he just tacks back onto your account) he typically seizes several hundred dollars. (The typical collector’s commission is between 40-50% of every dollar he collects.) The lesson is simple – don’t cash small checks your creditors send you.

Here is another far more important lesson: If you get served with a debt complaint, you definitely want to get a lawyer involved right away not only because not only can he defend you against it (either with a bankruptcy filing or outside bankruptcy) but also because a creditor judgment (that’s the key word of this blog if you haven’t guessed) can ALSO result in a lien against your home which will have to be satisfied before you can sell, whether or not you later go bankrupt. See my blog on the complex topic of Liens.

Now back to the exciting conclusion of this blog: except for a few minor exceptions such as the Commonwealth’s  statutory exemptions and payments received from Social Security, the entirety of all of your bank accounts may be subject to garnishment by a creditor who has obtained a judgment against you. And this applies to your hard earned wages as well, once they have been paid to you, as they become available to garnishment once they are on deposit in your personal checking account.It is important to recognize (i) that this is not a one shot deal, it can happen again and again until the debt is satisfied and (ii) that the one sure way to protect your bank accounts and the wages on deposit in them is to avail oneself of the automatic stay in bankruptcy to protect your assets. The stay is one really important reason why people in financial distress opt to seek the protection of the bankruptcy court!

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

 

I also provide Mortgage Modification Services.

Other attorneys playing the bankruptcy alphabet game:

  1. Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
  2. Bay Area Bankruptcy Lawyer Cathy Moran
  3. Northern Ohio Lawyer Bill Balena
  4. Jay Fleischman New York Bankruptcy Lawyer

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved.  See Disclaimers.

J is for “Judgment” Lien and its Impact upon Homeowners.

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

1.      What Is a Judgment vs. a Lien and how do they arise in Real Estate?

When you owe money and are unable to pay, the creditor, unless it is the IRS, must take you to court before levying upon your back accounts or garnishing your wages. Typically the creditor will sue you in municipal court or in common pleas court in Pennsylvania if the amount of the claim is larger than $12,000 (up to 15,000 for Philadelphia County real estate matters). When a lawsuit is initiated against you, you will be served with a Complaint. If you do not respond (by answer or other responsive pleading) within a set period of time or appear at the hearing set for your case, a default judgment will be issued against you. This judgment will be recorded by the court.

In Pennsylvania, a judgment is an automatic lien on real property owned by the defendant in the county in which the judgment is located. The lien of a judgment lasts for 5 years, 42 Pa. C.S.A. Sec. 5526, and execution must be issued against personal property within 20 years after entry of the judgment, 42 Pa. C.S.A. Sec. 5529. In addition, via a mechanism called a writ of execution liens can be transferred to other counties in Pennsylvania where the debtor owns property. A lien on real property means that the debtor cannot sell the property until all liens are paid. However, a judgment lien can only be arise in real property. If the debtor does not own real property within the applicable jurisdictional limits, the judgment lien cannot attach to anything and all the creditor has is a recorded judgment. What is the use of this?  Well, the creditor can then use this judgment to pursue garnishment where available or levy upon your Pennsylvania bank accounts. However, wage garnishment is prohibited in Pennsylvania except for certain obligations such as support.  It is critical for homeowners to respond to all lawsuits by bringing them immediately to the attention of their attorney as in this way an ordinary unsecured debt such as a unpaid credit card debt can become a lien against your home. (See final comment below.)

The filing of a bankruptcy will stay a foreclosure and the underlying debt can be discharged in a bankruptcy except for certain obligations such as domestic support obligations (DSO’s) which are non-dischargeable under Section 11 USC. 523(a) (5) of the Bankruptcy Code. (But see my blog on the effects of a Chapter 13 bankruptcy on DSO’s for further valuable information for homeowners facing support issues.) Even if these steps are taken the lien of the prior judgment will typically continue (in some some cases they can however be completely or partially removed as discussed below) and may cause difficulties for homeowners. To avoid the continuing negative financial consequences they can create, the judgment will need to be removed where possible.

2.      REASONS TO HAVE A LIEN/JUDGMENT REMOVED:

When a creditor who has obtained a judgment but the debtor subsequently files a bankruptcy, the debt underlying the judgment is discharged through the bankruptcy. However, the lien of the judgment itself will remain and will be effective against any real property in the county and will interfere with the sale of the property. A lien on real property means that the debtor cannot sell the property until all liens are paid. Understandably, a title company will refuse to clear the title for a home when the property has a judgment lien against it until the title insurer receives proof that the lien has been satisfied or discharged and this can defeat or delay a sale of the property. A lien can of course be satisfied through payment but a typical homeowner files bankruptcy precisely because they can no longer pay their mortgage.

Even if you do not own real estate, while no creditor can collect upon the judgment, it will still continue to exist on the county record. The judgment will be reported to credit bureaus as active, thus continuing to impair your credit for up to 7 years, which is the length of time a judgment can remain on your credit.

3.      WHICH JUDGEMENTS AND LIENS IN REAL ESTATE MAY/MAY NOT BE DISCHARGED BY BANKRUPTCY AND HOW IS THIS DONE?

Certain types of debt cannot be discharged through a bankruptcy. For example, back child support cannot be discharged through a bankruptcy.

The lien of a judgment which was entered before the bankruptcy was filed will appertain against real property of the debtor for at least 5 years after entry of the judgment in the county. (See above).  However, to the extent the lien impairs an exemption the lien will be subject to removal once the debt has been discharged.

The homestead exemption in bankruptcy applies to property used as your residence. As of early 2012, the federal homestead exemption is $21,625 (if both spouses file, this is doubled). State homestead exemptions vary a great deal. In some states, like Florida, there’s no limit, while in other states, like New York, the limit is $50,000 to $150,000, depending on where in the Empire State you reside.  In Pennsylvania, for example, the federal exemption may be elected. So, if you have a house with $50,000 worth of equity you are entitled to a federal exemption with your spouse of $43,250.00. If you only owe $50,000 on the property, you can petition the court and have the judicial lien removed up to the exemption amount.  The lien for the remaining $6,750 will remain on the books. Unfortunately however, few homeowners in this day and age of declining home values have sufficient equity in their homes to claim equity impairment sufficient to remove liens following bankruptcy. (See final comment below.)

This process only works when you have claimed a valid exemption relating to your principal residence in the bankruptcy proceeding and the underlying debt has been discharged. If these conditions are met, the bankruptcy court will, upon motion made by your attorney, remove the lien to the extent it impairs your homestead exemption.

A debt must have however been included in the bankruptcy for it to have been discharged.  If the creditor was not listed and the debt existed before the case was filed, the case may need to be reopened and the creditor added. (This topic will be treated in greater detail in my blog under construction with the working title: “U is for the Unlisted Creditor in the Bankruptcy Alphabet”.)

If you are involved in a Chapter 13 bankruptcy, which is the usual case for homeowners, you cannot receive a discharge until your plan has been completed which can take up to 60 months. A judgment cannot be removed if a discharge has not been issued. You will have to wait until your plan is completed before you will be able to remove any judgments issued against you and begin to clear your credit.

Once the discharge has been obtained, clearing a listed judgment (but not the judicial lien if you have non-exempt real estate in the county: see above) may be as simple as having your lawyer send a notice of discharge in bankruptcy to the clerk of the court of the county in which the judgment was recorded with a copy to the creditor.

Clearing debt off your credit report however can require the additional help of a credit specialist.  Certain lawyers can assist you with credit repair.

4.      CONCLUSION: DO NOT HIDE YOUR HEAD IN THE SAND:

Obviously these rules are very complicated and, while I have illustrated with examples drawn mainly from Pennsylvania where I practice, vary from state to state and even within state boundaries.  There is however one sure fire way to keep a lien from arising on your real property in Pennsylvania and elsewhere.  Never allow a judgment to be entered against you before you have the oportunity to file bankruptcy. Instead, seek the advice of a competent bankruptcy lawyer as soon as you see the first sign of a law suit looming on your horizon and start planning for a bankruptcy filing to preempt the filing of a judgment.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law, 2012, All Rights Reserved. See Disclaimers.

 Other bankruptcy attorneys discussing the Letter “J” include:

I is for “IRA” in the Bankruptcy Alphabet Game (New IRA Exemption )

Cast Iron Capital Letter I (North Scituate, RI) is for “IRA” (and 401k’s) in Bankruptcy. How they can help (or hurt) you.

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

The 2005 amendments to the U.S. Bankruptcy Code added a broad new category of property that may be excluded from bankruptcy to the extent that such funds are deposited by the debtor in a tax exempt fund. As part of an overall initiative by Congress to expand the bankruptcy protection of tax exempt investment vehicles, one can now exempt up to one million dollars in an IRA account and such amount may be increased “if the interests of justice so require”.

Section 522 (d) 12 of the Bankruptcy Code states, in pertinent part:

For assets in individual retirement accounts described in section 408  or 408A  of the Internal Revenue Code of 1986, other than a simplified employee pension under section 408(k) of such Code or a simple retirement account under section 408(p) of such Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8)  of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.

This new provision of the Bankruptcy Code is important for asset protection and planning purposes. An IRA (other than a “sep” pension or “simple” account) can now be used to shelter funds that would otherwise not be exempt under a state or federal exemption and could thus be eligible for distribution to creditors. Such funds would simply be contributed by the debtor (from say a non-qualified savings account or a tax refund) to a qualified plan, up to the annual aggregate limit imposed by law (for 2011: $5,000 if under 50 years of age and $6,000 if over 50), on or before the date of the bankruptcy filing.

It is important to note as well that this protective coverage is afforded not only for money in qualified funds but also to rollovers from a plan so long as the distribution is again deposited into a qualified plan within sixty days. Thus, perhaps as an unintended byproduct of the rollover provisions, individuals can make emergency IRA withdrawals to meet very short term needs but this strategy should only be pursued in situations where the funds withdrawn are certain to again become available before the sixty day deadline (from say an income tax refund or maturing CD). Otherwise, there will be a “double whammy” effect: not only will such withdrawn funds then be taxable income to the debtor (who may possibly be assessed IRS penalties as well) but the shelter from creditors in bankruptcy discussed above would not be available.

We have talked a lot about IRA’s but what about the employer sponsured plans, the 401k?  Well there are advantages for the debtor here as well: The law allows you to  pay your creditors and still can save for your retirement.  In fact, the more you puy into the plan subject to plan limitations, the less you have to pay them.

When you file a Chapter 13 you can reduce income on both schedule I and on the means test by the amount you contribute to qualified retirement plans. In general this means payroll deductions for both 401k contributions and loan payments. Your plan payment can be unacceptably high, if you are in an excess income situation. But if you max out your contribution, this will result in a dollar for dollar reduction in your plan payment. That is, iyou have the opportunity to turn the tables: instead of making a high monthly payment to your unsecured creditors and a correspondingly lower retirement contribution, you are minimizing the amount they receive by providing for the future of you and your family.  What could be better than that?

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

 

I also provide Mortgage Modification Services.

Other lawyers in the bankruptcy alphabet game:

Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: I is for involuntary petition too.

New York Bankruptcy Lawyer, Jay S. Fleischman : I is for Income.

Marin County Bankruptcy Attorney, Catherine Eranthe claims I is for Income as well.

Northern California Bankruptcy Lawyer, Cathy Moran: I is for IRS.

Colorado Springs Bankruptcy Attorney Bob Doig: I is for In Forma Pauperis (he speaks Latin).

Big Island Bankruptcy Attorney, Stuart T. Ing: I is for Independent Contractor.

Michigan Bankruptcy Lawyer, Christopher McAvoy:I is for income Tax Refunds.

Los Angeles Bankruptcy Attorney, Mark J. Markus: I is for Insiders.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Photo by

The H in the Bankruptcy Alphabet is for “Honesty” and Fraud Avoidance.

190864341_12cca04722_t[1] is for Honesty

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

Every potential bankruptcy client needs to understand that it is in his/her best interest to be entirely honest in their dealings with their lawyer, the trustee and the courts.  Not only may the debtor harm themself by failing to disclose material information but they may also potentially face severe criminal penalties.[1]  The United States bankruptcy laws require the debtor to disclose all income and assets to the bankruptcy court and the court is empowered under applicable federal statutes to uphold the integrity of the system and the participants in it. The theory and practice of these disclosures, is that if accurate and complete, the bankruptcy trustee and the court are able to determine what, if anything, the debtor can afford to repay to the creditors.

The bankruptcy disclosure form which every debtor is required to sign WARNS as follows:

Bankruptcy Crimes and Availability of Bankruptcy Papers to Law Enforcement Officials

A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury, either orally or in writing, in connection with a bankruptcy case is subject to a fine, imprisonment, or both. All information supplied by a debtor in connection with a bankruptcy case is subject to examination by the Attorney General acting through the Office of the United States Trustee, the Office of the United States Attorney, and other components and employees of the Department of Justice.

WARNING: Section 521(a)(1) of the Bankruptcy Code requires that you promptly file detailed information regarding your creditors, assets, liabilities, income, expenses and general financial condition. Your bankruptcy case may be dismissed if this information is not filed with the court within the time deadlines set by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court. [2]

Oftentimes the debtor will unintentionally hurt their case by “shading” the truth based upon an inaccurate understanding of the bankruptcy laws.  For example, a debt may not be listed on the petition because the debtor does not wish to reveal it. However, a debt that is not disclosed cannot be discharged in bankruptcy.

One of the great unfounded fears in all of bankruptcy is that the debtor will “lose all their assets in bankruptcy”.   Thus, a debtor may fail to reveal an asset which might have been partially or completely exempt and thus unnecessarily face the complete loss of the asset (see below).   There are generous exemptions available for many assets especially under the federal statutes and the laws of states like Pennsylvania where I practice law allow debtors to elect these, instead of the far less generous state exemptions. Other states like Florida have homestead exemptions which allow a debtor domiciled in Florida to completely shield their primary residence.

One article provides the following example of this temptation in action  and how the result of yielding to it easily can be detected:

“Because cash is difficult to track down, it may be tempting to pile up as  much cash as you can before bankruptcy and then “forget” to include the cash on  your financial  statement that you file with the bankruptcy court. Be forewarned that the  bankruptcy code imposes significant civil and criminal penalties on debtor’s who  intentionally provide false information to the bankruptcy court. Because the  bankruptcy trustee will have access to all your recent history of earnings, bank  statements and other financial records, there is a strong likelihood that the  trustee will be able to tell if you have attempted to siphon off cash before  filing your bankruptcy petition.”

It is thus essential that the debtor reveal all debts, assets and income sources to the lawyer who can then properly advise the debtor on legal protections and issues. If there is any question for example as to whether an item is an asset, the debtor should disclose it and let the lawyer decide how to properly treat it in the petition. Some writers have indicated that such proactivity can help to show that the debtor did not have the requisite intent to commit bankruptcy fraud.

One consequence of failing to disclose income or assets is that the debtor may be denied a bankruptcy discharge and remain liable for all debts under Section 727 of the Bankruptcy Code. Its provisions permit the court to dismiss the debtor’s case for dishonesty on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, or refusing to cooperate with the trustee. Not only may the court deny the dishonest or uncooperative debtor a discharge under Section 727 but any assets turned over during the case will still be sold by the bankruptcy trustee so that the debtor loses the property without any concomitant bankruptcy benefits.

As is indicated above, the most serious consequence for the debtor of dubious honesty is the prospect of being charged with criminal bankruptcy fraud.  Most bankruptcy fraud first comes to the attention of the bankruptcy trustee during the course of the bankruptcy or as a result of “whistle blowing” by neighbors, creditors, or ex-spouses. The IRS under the Internal Revenue Service Criminal Investigation’s Bankruptcy Fraud Program and the US Trustee are the most active in investigating fraud.  The Department of Justice Trustee Program encourages individuals to report bankruptcy fraud to the US Department of Justice for further potentially criminal action. The IRS also maintains a whistle blower award program.

The IRS appears to use the Bankruptcy Fraud Program to make examples of egregious miscreants, especially where a case also involves tax fraud or evasion, and consequently has an extremely high conviction rate. For example in 2011, 83% of those who had been charged with bankruptcy fraud are now serving time. In virtually all these cases, the individual was also required to make substantial financial restitution and also were required to serve a period of supervised release.

In addition, just because your bankruptcy is discharged, don’t think that you are off the hook. Individuals who file for relief under Chapter 7
or Chapter 13 of the Bankruptcy Code are subject to audits by the U.S. Trustee.  For further information visit the U.S. Trustee site.

The moral of the story? You are filing bankruptcy to get a fresh start. You have little to fear and everything to gain from the process if you are honest and adopt a policy of full disclosure.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality Chester County Bankruptcy Practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Carr, who has over 30 years if diversified experience as an attorney, concentrates his practice on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!

 


[1] The criminal sanctions can include sentence of up to five years in prison and fines up to $250,000.

[2] Source

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  


I also provide Mortgage Modification Services.

For other articles in the nationwide bankruptcy ABC’s series check out these attorneys:

  1. Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: H is for Hearing.
  2. New York Bankruptcy Lawyer, Jay S. Fleischman: H is for Household.
  3. Northern California Bankruptcy Lawyer, Cathy Moran: H is for House, no not the doctor.
  4. Colorado Springs Bankruptcy Lawyer Bob Doig: H is for Homestead.
  5. Los Angeles Bankruptcy Attorney, Mark J. Markus: H is for House
  6. Hilo Bankruptcy Attorney, Stuart T. Ing: H is for Household Size.
  7. Cleveland and Lorain Count Bankruptcy Attorney, Bill Balena: H is for Honesty

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Photo by Arenamountanus

G in the Bankruptcy Alphabet is for “Garnishment”: Will Bankruptcy Help?

By Christopher C. Carr, Esq. Chester County bankruptcy attorney. Tel: 610-380-7969 Email: cccarresq@aol.com Web: christopherccarrlaw.com

G takomabibelot 2657676353_a57f4042a9_t[1] is for for “Garnishment”: Will Bankruptcy Help?  In addition to the obvious monetary loss for the debtor/garnishee, a garnishment can negatively impact employment, because the employer will see that the employee is having credit issues[1] and also is presented with the added administrative burden of complying with periodic court orders. Can you put a stop to it with a bankruptcy?

A.      Garnishment For Ordinary Consumer Debt:

In most states, garnishment for ordinary consumer debt is permitted. Most US states allow wage garnishment for consumer debt with the exception of Pennsylvania, South Carolina, North Carolina and Texas (depending upon the debtor’s circumstances).

The automatic stay in bankruptcy (Section 362 of the U.S. Bankruptcy Code) is a fundamental consumer protection.  It halts most creditor actions against you, including collection proceedings from the moment your case is filed with the bankruptcy court, including wage garnishment for consumer debt.  A garnishment of wages is considered a collection proceeding under the bankruptcy code.  As a result, a creditor that attempts to garnish wages violates the debtor’s rights to an automatic stay under the Bankruptcy Code.

The automatic stay generally protects you against garnishment until the end of your case whether closed, discharged or denied.   If the bankruptcy discharge is granted and the case is closed then the automatic stay becomes permanent in the form of the discharge injunction. Article Source: http://EzineArticles.com/3689006 by Jay Fleishman, Esq.

B.      Garnishment For Unpaid Domestic Support:

However, garnishment for is a creature of a different stripe altogether, All US states allow income garnishment for tax arrearages and child support and in some states even spousal support (alimony) may be garnished as well. These are termed domestic support obligations (DSO’s).  DSO’s cannot be discharged or modified in either a Chapter 7 or Chapter 13 bankruptcy, pursuant to 11 USC. 523(a)(5). However, the impact a bankruptcy will have on support payments differs as between a Chapter 7 or a Chapter 13.

A Chapter 7 bankruptcy filing is useless against the collection, enforcement, or payment of DSO’s. Thus the automatic stay in effect does not exist in a Chapter 7.

However, in contrast, a Chapter 13 proceeding can actually work to protect the debtor against DSO enforcement actions, including wage garnishments, because all property acquired by the debtor is property of the bankruptcy estate. Thus, all actions to collect or enforce DSO’s usually will be halted by the filing of a Chapter 13 bankruptcy. Support payments may be temporarily stopped until the plan payment details are worked out as well. For more information on DSO’s and how they are impacted by bankruptcy, see my article “D” is for Domestic Support Obligation.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

 

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law, 2011, 2012, All Rights Reserved

Visit the sites of these other lawyers for their pespectives on the letter G:

Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell says G is for General Unsecured Creditor.

New York Bankruptcy Lawyer, Jay S. Fleischman who says G is for Garnishment.

Maui Bankruptcy Attorney, Stuart Ing who talks about Garnishment too.

Northern California Bankruptcy Lawyer, Cathy Moran says G is for Guaranty.

Colorado Springs Bankruptcy Attorney Bob Doig says G is for Goals.

Los Angeles bankruptcy attorney, Mark J. Markus says G is for Gifts.

Jacksonville Bankruptcy Attorney, Monica D. Shepard has an article that says G is for Guilt.

Tagged as: Automatic Stay In Bankruptcy, bankruptcy, creditor, debt, Christopher Carr  Bankruptcy Lawyer, Philadelphia Bankruptcy Attorney,  Philadelphia Bankruptcy Lawyer, stay, garnishment


[1] Nowadays a credit check is routinely done before a job is offered so credit is obviously of heightened concern to employers.

“O” in the Bankruptcy Alphabet is for “Options” to Bankruptcy

By Christopher C. Carr, Esq. Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com Website:westchesterbankruptcyattorney.org

Green O from Dave Q  O is for Options or Other Alternatives to/in Bankruptcy.

If you are behind on bills or can’t afford your mortgage payments, filing a consumer bankruptcy is certainly one option to consider. You can read my Rocket Lawyer blog:  Filing Bankruptcy: Pros and Cons to learn more about the types of bankruptcies. However, some people do not wish to file bankruptcy for a variety of reasons and there are certainly circumstances under which filing a consumer bankruptcy is NOT advisable. Supra Lawyer lists 7 such reasons.   For those clients who cannot or will not declare bankruptcy,  there are alternatives not requiring a bankruptcy filing , including:

  • Debt Settlement (AKA Debt Management): Debt Settlement offers a structured debt repayment plan, whereby you pay only a portion of the original debt. This is not the same as debt consolidation where one big debt simply replaces a lot of little ones. Oftentimes, you pay a budgetable fixed sum every month for from 3-5 years and the servicer uses that fund to settle with the creditors as it builds up. It is important however, to ensure that you are dealing with a reputable organization before “investing” with any such entity.  (The FTC has recently revised the Telemarketing Sales Rule to encompass debt settlement companies which will hopefully bring some regulation to this industry.)
  • Mortgage Modification (including Home Affordable): If you own a home and do not wish or need to file a Chapter 13 Bankruptcy, a mortgage modification may be a better option than bankruptcy as the filing of the HAMP Application will also avoid mortgage foreclosure while in consideration by the Lender. The government is attempting to streamline this process and, as the name implies, make monthly rates far more affordable for those who qualify by requiring banks which took bailout money to offer the Home Affordable Loan (HAMP). Others have joined the program voluntarily seeking to take advantages of the financial incentives being paid by the government. However, the program has been moving very slowly to date because it has been left up to the banks to administer. For those who do not qualify because of income or other reasons or because their bank simply does not offer a HAMP, there are usually conventional programs offered by the lenders, typically with less favorable terms. There are also special programs available for those who have Fannie Mae or Freddy Mac backed loans.
  • Debt Settlement & Mortgage Modification: a potent combination for the in debt home owner may well be to combine a debt settlement program to reduce unsecured debt with a mortgage modification to reduce monthly mortgage payments, as these in combination can resolve most of the pressing debt issues for many homeowners.
  • Other Programs: There may be other alternatives for homeowners, especially for those who cannot take advantage of any of the above programs and are willing to enter into a short sale or deed in lieu of foreclosure and exit gracefully from their homes. In addition, there may be short or long term aid available to eligible homeowners at the state or local level, such as the Act 91 (HEMAP) program in Pennsylvania. (Unfotunately, word is that there is no longer funding available under this program which was partially federally funded.)
  • Bankruptcy as a Last Resort: Properly speaking, bankruptcy is not always a last resort.  In fact, consumer bankruptcy can be used by eligible persons not otherwise in need of a “fresh start” to effect such things as stripping off junior mortgages; reducing high auto payments: removing a large debt load or dealing with a significant arrears on a residence.  However, it is important to recognize that the eligible debtor who has tried and failed to utilize one or more of the above programs, may still avail themselves of bankruptcy as a last resort, to save their home, car and/or seek protection from their creditors. In addition, in certain circumstances a bankruptcy working in combination with one of the other above options, for example a Chapter 7 bankruptcy in concert with a mortgage modification, may be a potent option. In addition, a debtor who is current on their mortgage payments under most circumstances may exercise the “retain and pay” option to keep their home, under Section 521 (a) (2)  of the Bankruptcy Code which remains largely intact after the 2005 amendments to the Bankruptcy Code.

The key point is that each debtor’s situation is unique and deserves special consideration. Further, because the process is hardly ever as smooth as it is supposed to be because of the complexities and pitfalls involved, it is advisable to consult a competent and compassionate attorney who has experience in bankruptcies and/or in negotiating modifications to guide you through the process and help you properly complete the paperwork.

Law Offices of Christopher C. Carr, MBA,  P.C., is a quality bankruptcy and debt relief practice, located in  Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester,  Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!  

I also provide Mortgage Modification Services.

©Christopher C. Carr, Attorney at Law 2009, 2012, All Rights Reserved