Student Loan Dischargability in Bankruptcy

 

Clients frequently inquire as to whether their private and government backed student loans can be discharged in bankruptcy. Sadly for them, it is almost impossible to discharge federal student loans in bankruptcy given certain changes in the way they are structured today.  

The so called Brunner Test (named after the seminal case on the topic), which contains the standards used in bankruptcy courts to determine whether a student loan can be discharged, specifies that in order for discharge to occur, all of the following must be true:

  1. based on current income and expenses, the debtor cannot maintain a “minimal” standard of living for herself or her dependents if forced to repay the loans;
  2. additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loans; and,
  3. the debtor has heretofore made a good faith effort to repay the loans.

Yes, you can try to prove undue hardship, under these tests, but it is now, for all practical purposes, almost impossible to do and this is why. First, under the various special repayment schemes: income based repayment, pay as you go, income sensitive repayment; you can have a zero dollar ($0) monthly payment assuming your income is low enough.  At the end of the term of these programs (20 to 25 years), any remaining student loan balance will be forgiven. So how can anyone successfully argue that a zero (or very low) monthly payment with the prospect of loan forgiveness creates an undue hardship? Secondly, now that the Dept. of Education has a workable administrative process for a disability discharge, if you are declared 100% disabled by the social security admin, you can discharge your federal student loan.  Thus, people who once would have been able to show Brunner hardships because of disability no longer need to do so.  those people don’t need bankruptcy for their student loans.

So, if you have both significant private student loans and federal loans and are a good candidate for a bankruptcy hardship discharge, you include both classes of debts in the case.   (Note:  The bankruptcy must be filed (either a 7 or 13) then an adversary proceeding (2nd lawsuit) against the student loan lenders must be filed.) Assuming you can win on undue hardship, the court is likely to only discharge the private student loans because these do not have the programs discussed above attached to them.

If you are not already on one, you need to get on a specialized repayment program.  I suggest that you visit the following site to find out more information.

            https://studentaid.ed.gov/repay-loans/understand/plans/income-driven

Also, it is recommended that you discuss this issue with a seasoned bankruptcy lawyer.  I am Christopher C. Carr, Esq., a Chester County Bankruptcy Lawyer who can assist you with these and all other matters relating to bankruptcy and debt relief.. Call me at 610-380-7969 today!

341 Meeting Readiness

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By Attorney Christopher Carr, a Chester County bankruptcy attorney.

Tel: 610-380-7969 Email: cccarresq@aol.com WHAT IS THE 341 MEETING OF CREDITORS? Regardless of whether you file a Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will be required to attend a “Meeting of Creditors” or a 341 hearing as attorneys call it. THIS IS A MISNOMER….IT IS NOT REALLY A HEARING! It has that name because it is held under oath (see below.) It is scheduled about 30‐45 days after your case is filed. Though it is called a “Meeting of Creditors,” creditors rarely attend. But the Trustee is there and HE represents the creditors! You, your attorney, and the trustee attend this meeting. It can seem quite intimidating if you do not know what to expect, but the 341 hearing is actually a fairly informal meeting designed to help the Trustee better understand what’s happening in your bankruptcy. A NOTE ON TIMING OF TRUSTEE PAYMENTS FOR CHAPTER 13 CLIENTS: Remember that your first payment to the Trustee is due THIRTY (30) DAYS AFTER YOUR PETITION IS FILED, irrespective of when the 341 is held.  WHAT TO EXPECT:  There will be a pile of Bankruptcy Information Sheets at the front of the room. Take one and read it.  You will be asked if you did (see below.) You will sit at a desk or table with your bankruptcy lawyer and the Trustee. Other people will be in the room with you, generally other bankruptcy filers and their lawyers. You will be asked first off to state your name and address and verify your identity by providing your social security card and drivers license. IF YOU DO NOT HAVE YOUR ORIGINAL SOCIAL SECURITY CARD AND SECOND FORM OF ID, THE MEETING WILL NOT BE HELD AND EVERYONE’S TIME WILL HAVE BEEN WASTED SO DON”T LEAVE IT AT HOME OR EXPECT A COPY TO DO. BRING THAT TATTERED ORIGINAL AND IF YOU DON”T HAVE ONE ORDER IT FROM THE SS OFFICE. The meeting will be recorded. The Trustee will start a tape recorder going. You will be sworn in; i.e. raise right hand solemnly swear and affirm to tell the truth. Dress is business casual for you. Be well groomed. I will be in my “lawyer suit” as will the Trustee, but you are not expected to wear one.  Be on time.  It may appear that I am running late but that is because I have a better idea of when the 341 will start than you do! Try to relax! WHAT CAN THE TRUSTEE ASK AT THE 341 MEETING? The trustee will ask you some basic questions about your bankruptcy.  Here are some of the common questions that trustees ask during the meeting. They are in no particular order. These are not all of the questions that the Trustee could ask, and he/she will not ask every question on this list. In other words, this is a very generic list. The items that are almost always asked are highlighted.

  • Did you sign the petition and the schedules your attorney is showing you?
  • Have you read the bankruptcy information sheet?
  • Did you review the bankruptcy petition and each of the schedules and the statement of financial affairs (SOFA). Is the information correct? The answer is always an assured “YES” because you will have typically signed the documents in my office and we will have gone over all of them in detail at that time.
  • Are there any corrections that need to be made to the Schedules?  There should be none.  See my piece on the importance of full disclosure within the Bankruptcy  Petition.
  • Did you list all income, assets, and debts on the Schedules? The answer is always an assured “YES” because you will have typically signed the documents in my office and we will have gone over all of them in detail at that time.
  • Have you filed all your taxes? Are the tax returns you supplied to the trustee true, correct and complete, including all schedules and W2s? (Typically we will have filed these beforehand.)
  • Are you entitled to any tax refunds?  This one is VERY popular around tax time. You and your Attorney should have discussed this one and its ramifications before the 341.
  • Have you previously filed bankruptcy? If so when?
  • Why are you filing bankruptcy?  You can be a bit creative here but see below.
  • Do you expect to receive an inheritance or property?
  • Are you a party to any law suits?
  • Do you have any domestic support obligations?
  • Have you have sold, transferred, or given away any property in the prior four years?
  • How long have you lived in Pennsylvania?
  • What do you plan to do with your house, cars, or other personal property?
  • Are you employed? What do you do?
  • How much do you earn?
  • Is your employment the same as when you filed?
  • Do you own your own home?
  • Do you own any motor vehicles? What are these?
  • Please provide appraisals for your cars and home. (Typically we will have filed these beforehand.)
  • Please provide insurance declaration pages for your home if owned and cars. (Typically we will have filed these beforehand.)
  • Do you have any retirement funds (IRA, Roth IRA, 401K etc.)?
  • Does anyone owe you money?
  • Is anyone holding money for you?

GENERAL TIPS AND CAVEATS: It is normal to be a bit nervous going into the 341 but just answer the questions put to you fully and honestly and be courteous to one and all! Do not over answer, the Trustee does not need to hear your life story. All of you financial information should be properly presented in the bankruptcy petition and there is no sense in trying to hide something from the Trustee. If you are uncooperative it may motivate the Trustee to investigate or scrutinize your petition further which will only mean more time and effort for you and your attorney. Always remember that the Trustee may act friendly but he is NOT your friend.  He represents the unsecured creditors and his job is to maximize their return from the bankruptcy (not your own). He gets paid a commission on assets he recovers from Debtors for them. I am on a first name basis with the Trustee but that does not mean we are friends! The time to report undisclosed assets, that big tax refund, debts to family or friends, that new job or the 1000 shares of Google.com or that partnership you forgot about is NOT at the 341. If you wear a big diamond ring to the 341 and didn’t disclose it, expect trouble! Other than that type of thing you have nothing to worry about! Should you have concerns about such matters you should be asking me about them NOW! See my piece on the importance of full disclosure within the Bankruptcy Petition.

 

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!  

Not Legal Advice. Copyright © 2010, 2014 by Christopher C. Carr, Esq., All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.

Web:westchesterbankruptcyattorney.orgBlog: christophercarrlaw.wordpress.com Member: National Association of Consumer Bankruptcy Attorneys, Phi Beta Kappa & Beta Gamma Sigma.*************************************** “WE SAVE HOMES”

This is a Federally Designated Debt Relief Agency which is proud to assist individuals in need in filing for bankruptcy protection.


[1] Up to ½ hour.

Prepared 2‐25‐2014.

HOME SURRENDER: CAN THE MORTGAGE COMPANY BE FORCED TO TAKE BACK MY HOME IN A BANKRUPTCY (or why dispossession is not nine tenths of the law)

 

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

Using bankruptcy to rid oneself of a home that has become unaffordable and/or is now worth far less than it once was is called “surrender” in bankruptcy parlance and is governed by the US Bankruptcy Code.  This procedure is nearly as commonly used as is bankruptcy to stop a foreclosure so that a home can be retained.  We practitioners are using it much more frequently since the housing market is in decline.  Why is that?

Well, the question whether to keep a home when filing bankruptcy is usually answered by comparing the amount of the home’s monthly mortgage payments with the income the debtor is able to devote to housing payments.  Also key in today’s real estate market place is a comparison of the home’s appraised value[1] as compared with the amount still owed by the home owner. Where the home is worth significantly less than the amount owed, the home is said to be “under water”.  If the payments are no longer affordable and/or the property is under water, the debtor will likely choose to surrender the home as part of either a Chapter 7 or Chapter 13 bankruptcy filing.

However, in practice property “surrender” is often more problematic for the homeowner[2] than it would at first blush seem.  Foreclosure means the involuntary transfer of a property in a public sale or what is commonly called in Pennsylvania and many other states a “Sheriff’s Sale” because the County Sherriff will typically sell properties by the hundreds at public auctions held in the Pennsylvania counties following advance notice of the sales published by these officials. The requirements for these notices are very precisely defined in the relevant state statutes. These sales are usually conducted monthly and the sale ENDS the legal ownership and responsibility of the debtor.  Sounds pretty straightforward does is not?  However, in reality, mortgage companies are often slow to foreclose on homes that are surrendered to the lender in bankruptcy, leaving the home vacant, and yet still technically under the ownership of the bankruptcy debtor, for months or even years after the bankruptcy was filed.  It is often said that “Banks are not in the business of owning homes” but like most generalizations this statement is not always true.  The mortgage company may prefer to retain the home in its “inventory” rather than to sell it and take a huge loss that it must report to its shareholders in its public filings, perhaps hoping for a “better day” when the housing market starts to show improvement and it can then sell at at least a breakeven. Not only that but during the hiatus it does not need to legally bear these costs and liabilities.  Rather the mortgage company or its serviather the mortgage company or its servicer can keep the unsuspecting homeowner paying long after he/she has moved on simply by “sitting on” the property virtually indefinitely.

Many homeowners (and even some bankruptcy lawyers, unfortunately) will intuitively believe that their real estate is now legally the property of the bank because it has been “repossessed” (and they have been disposed) even though no actual sale has yet occurred. They may drop or reduce important coverage’s or fail to insure the property at all and find themselves liable in a slip and fall case for example for the full amount of the damages with no insurance coverage at all.

The purpose of any bankruptcy is to provide to the debtor a fresh start but the slow-to-foreclose mortgage company will routinely create fresh liability for the homeowner/ debtor, who will be held liable for post-bankruptcy homeowners association fees, property assessments, other ownership related financial obligations (but not the monthly mortgage payments, the personal obligation for which the debtor was discharged in the bankruptcy), if and as applicable.  The debtor may even be cited and fined repeatedly by the municipality and/or other governmental agencies if the grass is not cut, there becomes an accumulation of junk or hazardous materials on the property (albeit without any participation by the debor), and so forth.

However, a ruling handed down by a Hawaii bankruptcy court this month approved one strikingly clever resolution to the problem.  This Chapter 13 decision, In re Rosa, No. 13-00630 (Bky. Hawaii July 8, 2013), approved over the objections of the trustee a Chapter 13 plan which contained a provision designed to force play the situation by in effect arranging to convey the home back to the first mortgage holder. That is, In the Rosa case, the debtor’s Chapter 13 plan ingeniously stated that title to the real estate “shall vest in City National Bank/OCWEN Loan Service upon confirmation, and the Confirmation Order shall constitute a deed of conveyance of the property when recorded at the Bureau of Conveyances.”    The Chapter 13 trustee objected, arguing that“surrender” under the bankruptcy law did not transfer ownership of the surrendered property until the lender actually foreclosed.

The court disagreed with the trustee and pointed out that here, the debtor had gone beyond merely “surrendering” the property in the Chapter 13 plan.  Rather, the Plan unequivocally stated that confirmation of the Plan by the court would automatically transfer ownership to the lender, and that the order confirming the plan could be recorded like any other deed or conveyance.  While the Plan was drafted by the debtor (or more likely his/her attorney), the lender had been properly served with this plan and it had the opportunity to and had not objected to the Plan in court.  The Plan was therefore confirmed giving effect to this provision.

The result of this strategy for this particular debtor was the complete avoidance of the ills caused by the foot dragging Mortgage Company and its servicer, noted above.  One would think that a majority of the bankruptcy courts and jurisdictions, when presented with this issue, will adopt the new Hawaii precedent as it tends to remedy such evils without placing any undue burden upon or depriving the lender of any of its due process rights, in the eyes of this commenter at least. Perhaps we will even see the Eastern District of Pennsylvania or one of its 3 subdivisions adopting the new rule.

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


[1] There are several on line services such as Zillow.com for example that purport to provide property values.

[2] Note that this term used in this context is not inaccurate or imprecise…these persons are still in the eyes of the law owners of the properties they once occupied.

Gamblers & Bankruptcy

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

Why do some people already in dire economic shape gamble?  Prudence suggests that they should not do so but gamblers are notoriously imprudent. Well ironically they often do so because they foolishly believe that they can gamble their way out of debt.  Other gamblers think they can win enough money to pay back their gambling debts– debts they may have rung up on their credit cards, money owed to casinos or riverboats, loan debt, and even home equity debt all associated with gambling problems–but quite the opposite happens. You only end up creating more gambling debt to repay. And even if you actually did win enough money to pay off your debt, you would most likely gamble that money away too, thinking if you won once you could win again. GA and other organizations can help to cure the addiction but the debt that persists is a slippery slope tempting the gambler to return to the game of choice and chance.  So oftentimes it is necessary to cure the debt problem to alleviate the addiction. And there is only one way to effectively do so, a Chapter 7 (or 13) bankruptcy, which if successful can wipe the slate clean in one fell swoop.  Thus, Bankruptcy may be the only option for dealing with gambling debt.

If you owe bookies or loan sharks, you may be forced to borrow money from a friend or family member to pay the gambling debt, especially if you’re being threatened with reprisals if you do not pay up . But borrowing money from a loved one, while perhaps better than having your legs broken, may not be such a good idea because all such debts will be discharged in a Chapter 7 bankruptcy leaving them high and dry.

I tell such clients that they should pay some of the money they are gambling away to me instead.  Gambling is risky and the “odds are stacked in favor of the house” but I am a sure thing, or nearly so.  What stands in the way of a fresh start in Bankruptcy for the gambler?

  1. Fraud: Gambling debt, including debt incurred from casinos or charged on credit cards and loans, can be discharged in bankruptcy. It’s important to know that any creditor can object to the bankruptcy filing by claiming you incurred the debt under false pretenses or through fraud. For example, if you took out a credit card cash advance knowing you didn’t have the money to repay the advance when you borrowed it, the creditor can ask the court not to discharge the debt. Creditors owed gambling debts may file “adversary proceedings” to challenge the dischargeability of their debts under Bankruptcy Code section 523(a)(2)(A) provides an exception to discharge for debts obtained by “false pretenses, a false representation, or actual fraud.”  These suits, historically filed by casinos, are rare today. They are expensive, cast the casino and its entire industry in a bad light and with the rise of legalized gambling, are no longer favored by the courts.  The gambler’s creditor has the burden to prove that the gambler actually committed fraud, in other words that you had the intent not to repay the debt when incurred and that is barring some lucky (or more likely stupid) admission, very difficult to do.
  2. Reporting Requirement: All gambling losses within the previous year must be reported on the Statement of Financial Affairs which is part of every bankruptcy filing.  This is required so the bankruptcy trustee and court can determine whether any fraud was involved in the bankruptcy filing.  Bankruptcy trustees have broad powers to avoid transfers which appear fraudulent because they are transfers for which the debtor received “less than reasonably equivalent value,” which is the basic benchmark for determining fraud under the Bankruptcy Code. This requirement may pose obvious difficulty for the gambler who has been dealing with loan sharks who may act aggressively to keep from having their names become a matter of public record.
  3. Luxury Debts: However unlikely it is that the casino will win an adversary action, there is another bar standing in the way of clearing very recent gambling debt. Bankruptcy Code section 523(a)(2)(C) makes a debt non-dischargeable if the debts was for a “luxury good or service” over $1,225 and purchased within 60 days of the filing of the bankruptcy.  That section also precludes discharge of cash advances over $1,225 obtained within 60 days of the filing of the bankruptcy.  In most cases, the exception can be avoided by simply waiting the requisite 60 day period of time
    to file the bankruptcy.  However, this may not be as easy as it sounds for the compulsive gambler. Often the lawyer must demand a turnover of all credit cards, etc. so that the problem is cut off at the source.
  4. Chapter 13: Impossibility of fulfilling the plan because of compulsive gambling:  oftentimes a gambler who is behind in house or car payments because of money diverted to gambling will have no choice but to file a Chapter 13.  This requires a 3-5 year plan wherein the gambler promises to repay some of his debts.  But the plan must be funded by the gambler’s income and little threatens income as effectively as compulsive gambling.  Thus, may trustees and courts (tipped off by the required gambling disclosures…see above) will closely scrutinize such a plan and may demand that the gambler be under the treatment of a psychiatrist and/or regularly attending GA meetings before they will give it the go ahead. A clean recent bank and/or credit card statement(s), not showing large withdrawals, can also be very helpful in showing that the gambler has the self control needed to suceed with a plan in a Chapter 13.

It is clear that the cure of the gambling addiction and its economic fallout go hand in hand.  One cannot easily be repaired without the other. We are experienced in dealing with the problems of and in counseling gamblers and would be happy to discuss the issues facing you or a loved one challenged by this affliction.

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 legal 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!  


Now that you Have Your Bankruptcy Discharge: 10 (actually 11) Things to Do to Make the most of it!

 

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

So You Finally Got that Bankruptcy Discharge
Congratulations!
You’re on your way to a fresh start.
Now you’ve got more to do? See why below:
1. Check debts that didn’t get discharged: Child or spousal support, student loans, or taxes for years for which you did not file a return (unless the IRS exceptions are met) are not dischargeable in bankruptcy. The discharge order will not tell you which debts survive and which do not, nor will the Court provide this information so you may continue to require the services of a knowledgeable bankruptcy lawyer to help you to assess this.
2. Verify lien balances: The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.
3. Reset Banking Priveleges: Online banking and automatic bill pay may have been disabled while you were in bankruptcy but can be restarted at your request now..
4. Do Some Record Keeping: Save your bankruptcy papers and keep a copy of your discharge paper handy: You’re likely to encounter efforts by buyers of to collect debts that have been discharged in your case, or so called “zombie debt”. You need to be able to show that the debt was discharged in your case. Creditors with notice of the bankruptcy, and likewise those who buy up their worthless accounts and try to collect on them, were discharged (unless they fall within Rule #1 above). The services of a knowledgeable bankruptcy lawyer may be necessary to stop these collectors, or even under some circumstances to sue them for unfair practices and potentially turn the tables by collecting from them, including your legal fees.
6. Join a credit union: Credit unions are owned by their members. They are in the business of extending credit to members (hence the name, “Credit Union’: “Credit” stands for what they do and “Union” for the members they lend to) and the profits from such loans flow to members. Rates are almost always lower and terms better than the commercial banks, savings and loans and private lenders. Start out with a savings or checking account. Sooner or later you will probably need a car loan or even a home loan. Joining now will give you the longevity that adds credibility to a credit union.
7. Maintain insurance coverage: Even though you may have elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liability insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title until someone else goes on title. Post bankruptcy claims arising from property you’re trying to offload can potentially ruin the fresh start.
8. Get a credit report: Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The bankruptcy history can properly remain on your credit for up to 10 years, but you are entitled to a showing that you now owe nothing on all discharged accounts (but see Factor #1 above) This is crucial because your debt to income ratio (“DTI”),one of the primary if not THE primary factor lenders look to in extending credit. Getting erroneous entries corrected may be facilitated using the services of a knowledgeable bankruptcy lawyer. You are entitled to a truly free credit report annually from each of the 3 major credit bureaus which you can get by clicking here and credit experts recommend that you check it at least once a year.
9. Budget and Learn to Spend Within Your Means: Studies have shown that people who go bankrupt only do so ONCE in their lives. WHY? Well debt relief is only one side of the coin. On the flip side are the lessons people take from bankruptcy. So, like these now money wise people, take advantage of the fresh start that bankruptcy has provided, and make lifestyle changes so that it does not happen again. Follow Rule # 10 below and stop using trade credit (AKA: Credit Cards). Get a debit card instead and be you own bank, there is no interest that way!
10. Use credit Wisely. Once Lenders see that you have received a discharge, they may well start sending you “preauthorized” credit card applications. However, if you start to load up on credit again, you will soon be right back where you started. So the rule of thumb is to have just one credit card that you keep in a drawer somewhere for emergencies; If you do use it, make it “free credit”, that is: plan to pay it all back in the same month as incurred so that you are not left carrying a balance ant interest. That way you are living within your means. See Rule # 9 above. The only other credit to use generally speaking is for major purchases such as car or home loans.
11. Build up a reserve for emergencies and start saving again. Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.
Since you no longer have trade credit, it will be easier to devote some of your income to savings…follow the rule “Pay yourself first”. Experts recommend a reserve of 6 months salary and at least a 10% savings rate. Contributions toward your IRA or 401K at work count as you can withdraw these funds (with penalty if applicable) in an emergency.
If you follow these rules, you are more likely to take full advantage of your fresh start and not ever be back to see your friendly local bankruptcy lawyer!

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!  

The Telltale Signs of an Email Fraud

Edited by Jenny Greenhough of Rocket Lawyer | August 10, 2012

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Rocket Lawyer Guest contributor Christopher C. Carr , Esq., MBA on how to spot a fraudulent client or transaction in your inbox. Slightly reedited for this blog publication.

                       

 

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

Don’t let a fraudster pull the wool over your eyes.

As discussed in my prior post, attorneys need to stay on alert for collection scams. Even for a savvy attorney, it’s easier to become an unwitting target of fraud than you may realize. For example, publicizing a big win in a lawsuit on your website may indeed bring you new clients, but some of them may actually be intent on profiting from a fraud perpetrated against your firm.

These scams can take on many guises. For example, a few weeks ago I got a very sophisticated scam letter. This time it was purportedly the representative of a Japanese law firm wanting local representation for litigation against debtors in the US. I immediately asked for his bona fides and he wrote back pretending to be insulted by my lack of trust. I then wrote back and explained that I had been taken in before and had lost some $2,000 in such a scheme and had thus adopted a policy whereby my firm holds all payments until final payment is issued to my bank by the depository bank on any settlement check (not just provisional payment because the check can still bounce until honored by the depositary institution).

Needless to say, I never heard from my Japanese “colleague” again.

Reading the signs

Let’s look at some if the identifying marks of this trade:

  1. Typos and other language errors: Note the punctuation errors and idiomatic problems in the text above. These are harbingers of this type of fraud and may actually be intentional for the purpose of hiding the true identity of the author from the authorities. However, the message will virtually always contain typos or non-idiomatic English usage, suggesting that the drafter is not even employed by the institution they claim to represent.
  2. No logos/Crude or Incomplete Logos: Another dead giveaway is a suspiciously “plain” appearance. But don’t use this as your only guide. I have recently begun seeing fake PayPal and even some bank items bearing an authentic looking logo.
  3. International debt collection: The message will nearly always solicit your assistance to collect a debt purportedly owed by some American commercial entity or ex-spouse of a foreign national.
  4. Different names: The account you are supposed to credit with the payment will not be in the same name as your client. There may be some excuse like “it’s my mother’s account and she has a different last name than mine.”
  5. Urgency: Anyone who pressures you to pay them however gently or subtlety should be immediately suspect; it means they’re trying to get paid before you receive notice of final payment.
  6. Slow build-up: Sometimes the scammers take a different route: they actually pay a couple of checks for smaller amounts to lull you into a false sense of security. Then they float a big rubber check with a reason like: “We are in a cash flow crunch, would you please pay us early just this once because you are holding up a lot of our money.” If you fall for it, the check bounces and they are never heard from again.
  7. Righteous indignation: When you express doubt about their claims or start asking questions, they respond as if they’re offended. In actuality, they’re trying to make you doubt your own better judgment.
  8. Reality check: As always if it seems to be too good to be true, it probably is!

So how do you test for legitimacy?

If you see any of the telltale signs above or anything else that makes you suspicious, make sure you:

  • Check their IP address. It should be in the same location as they claim.
  • Ask them to wait until you are notified of final payment. Just watch for the “slow build-up trick”.
  • Ask for their ID. Make sure it’s legitimate, and do some in depth Internet research as well to see if the company they claim association with is legit and has a real address where they say it is.

If you use caution, common sense, and follow the tips above, you should be able to spot a scammer without too much trouble. The old adage applies:  IF IT SEEMS TOO GOOD TO BE TRUE, IT MOST LIKELY IS. Otherwise, you and your family or coworkers could find yourself the victim of a home-shattering or firm-busting fraudulent transaction.
About the Author

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!  


Mr. Carr blogs regularly on debt and bankruptcy topics at https://christophercarrlaw.wordpress.com/.

Related articles

Don’t Let a Scam Put Your Solo or Small Firm Out of Business

Don’t Let a Collection Scam Put Your Solo or Small Firm Out of Business

This Article and a companion piece first appeared on RocketLawyer.com,  Edited by Jenny Greenhough| July 27, 2012

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

 

ROcket Lawyer Guest contributor Christopher C. Carr , Esq., MBA describes a debt collection scheme that nearly took him in and what attorneys can learn from his experience.

Wolf in sheep's clothingSometimes clients aren’t as they appear.

A single fraudulent transaction can easily wipe out the entire bank account of a small firm and expose the firm and members of the firm to lawsuits in the matter of just a few days.  A few years back I was taken in by a fraud scheme, and suffered what was luckily a much smaller loss, so when another scam came in through my email a year ago, I knew how read the signs.

In this most recent case, I would have been defrauded to the tune of $180,000 by a collection scheme that came in through my email. A supposed British subject hired me to collect $600,000 owed her under a very real looking promissory note from her ex-husband, a West Chester, Pennsylvania resident. I even got her to sign a fee agreement. The background of their relationship and source of the debt is beyond the scope of this article; suffice it to say that their ruse was very detailed and convincing.

These two had a relationship alright, but it wasn’t the one they told me about.

When I contacted him by email threatening suit, the correspondent in the fraud (the supposed ex) hemmed and hawed a bit (to make it look realistic) but ultimately agreed to pay a large installment on the debt. A Fed Ex pack duly arrived a few days later containing a check written on a Nova Scotia bank. I called the bank and verified that he was a customer of the bank but they would not tell me his balance for reasons of privacy.  I then deposited the check in my bank and watched my “available balance” soar.  The fee letter required me to remit the proceeds less my fee by wire to an account in the UK.  Had I done so, I and my bank would have been left holding the bag for hundreds of thousands. So I waited.  I ultimately got a notice from my bank that the check had been dishonored upon presentation to the Nova Scotia bank, which took about 10 days from the time of my deposit.

The couple perpetrating the international fraud obviously counted on this “float” period where I had funds in my account that did not really exist. Clearly their check was written on a foreign bank to try and extend this time as long as possible.

I contacted the local police who took a police report but nothing ever came of it. Although I didn’t suffer any loss in this instance, there would have been little or no insurance coverage for such a loss, had it occurred.

The only traceable elements of this scam typically are:

  • The account (and routing information) into which the proceeds are to be paid
  • The IP address of the defrauder (where the computer or other device is located in the world). It cannot be cloaked and can be checked using a free service available via the internet.

This information can be of use in detecting fraudulent activity as to avoid detection and apprehension these people will rarely be where they say they are.  This should be a dead giveaway.

What do you need to do ethically if a client attempts to defraud your or others? My blog on a related topic may provide some answers.

My advice is to fellow attorneys is to stay on alert when it comes to transferring large sums of money.  Never take anything for granted, and you won’t get taken to the cleaners.

About the Author

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!  


Mr Carr is licensed in Pennsylvania and Ohio and is admitted to the US District & Bankruptcy Courts for the Eastern District of Pennsylvania & the Middle District of Pennsylvania. 

WWW: http://www.westchesterbankruptcyattorney.org/
Bankruptcy Blog: https://christophercarrlaw.wordpress.com/

Attorney Carr may also be reached to schedule an appointment at 610-380-7969 or via email at cccarresq@aol.com.

Z is for “Zealous”, How far can your Lawyer go in representing you in Bankruptcy?

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

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

“Have Gun, Will travel”

Have_Gun%E2%80%93Will_Travel

Richard Boone as Paladin

Z is for Zealous.

Subsection 2 of the preamble to the Pennsylvania Rules of Professional Conduct: (“RPC”) “A Lawyer’s Responsibilities” states thatas advocate for his/her clients, “a lawyer zealously asserts the client’s position under the rules of the adversary system”.

Sounds simple enough but of course, the RPC nowhere gives any guidance as to the meaning of the word “Zealous”. Encarta defines the term simply as: “actively and unreservedly enthusiastic”. It is a sort of “boundary” term in the law in that we come to understand what it means more by understanding what we as lawyers serving bankruptcy clients can and cannot do in its name.  So let’s approach it from that angle.

A prerequisite for zealous representation is competence: RPC Rule 1.1 states that a lawyer shall provide competent representation to a client. Competent representation requires the legal expertise, skill, thoroughness and preparation reasonably necessary for the representation. In the bankruptcy context this means that a lawyer must have studied and understood the aspects of the Bankruptcy Code that are implicated in any representation.  Even if this requirement is met in general, should he or she not be well versed in a particular sub-area, there is a duty to seek the assistance and mentoring of another attorney who has the requisite skill set. For example, the implications of divorce for bankruptcy are so complex and localized/varied to the laws of each of the several United State as to be beyond the ken of most bankruptcy lawyers and equally so for most divorce specialists…cross disciplinary expertise must often be sought to answer these questions.

However, it is clear that the lawyer who is competent is not thereby necessarily zealous.  Zealous representation, which is not defined in the RPC, serves for most as the benchmark for excellence. Perry Mason may not have had all it its legal points correct but it does stand in the eyes of the public as the more dinified epitome of this attribute. For those who consider law practice more a profession than a business, it evokes the image of a crusader for justice. To others, however it suggests a fanatical, “no-holds-barred” advocate, willing to do anything for a client (for a fee). A hired gun… Have gun, will travel. 

Thus, being overly “zealous” clearly can land a lawyer in deep trouble.  Some attorneys have attempted to use it to justify unacceptable conduct even though it may have disciplinary or malpractice liability consequences (or both).  For example, we bankruptcy lawyers frequently are asked clients for advice on what might be called “pre-bankruptcy asset protection planning.”  While the ethical dangers associated with advice in this area are very real [See, for example, Ohio Rules of Professional Conduct (“ORPC”) Section 8.4(c), prohibiting a lawyer from engaging in conduct involving fraud], the consequences can reach beyond the realm of ethics and involve actual criminal liability for both transgressing client and counsel. This will reach to knowingly assisting a client who wishes to perpetrate a fraud on the bankruptcy court.  See my blog on the topic of Bankruptcy Fraud for more information. For example, in a recent West Virginia case a bankruptcy lawyer was criminally indicted for advising his clients to transfer a mobile home to a relative before bankruptcy so as to attempt to “remove” the asset from the reach of the Trustee in Bankruptcy.

Thus while lawyers clearly have an obligation to advance their clients’ cases with competence and enthusiasm, they also have an obligation as officers of the bankruptcy court they serve to refrain from knowingly counseling or assisting a client to commit a crime or fraud. RCP 1.2 (d).

Picture credit: Wikpedia:  http://en.wikipedia.org/wiki/Have_Gun_%E2%80%93_Will_Travel

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

Picture credit: Wikpedia:  http://en.wikipedia.org/wiki/Have_Gun_%E2%80%93_Will_Travel

How Do Creditors Manage to Find Debtors with Such Seeming Ease?

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

One of the prime indicators that someone may need to file bankruptcy is when they start to get bombarded by calls and letters from creditors.

Well, just how do creditors manage to locate debtors? Especially in our mobile society where that have moved to a different city or even state, with no forwarding address.

  1. Social Media: Think creditors (and others) are not monitoring the information you post publicly?  Think again, virtually any information you might post, such as where you work, live, shop, etc., can unwittingly provide vital clues as to your whereabouts.
  2. Credit Card Applications: This is one of the most fruitful resources for your creditors. Not only is your residential address and contact information listed, so are references, contacts and acquaintances that creditors can use to track you down if you have relocated. Banks, credit references or relatives may also be detailed on the application and these also can provide promising leads.
  3. Relatives, Friends, Acquaintances, Neighbors, Etc.  These types of contacts are still acceptable if done properly. Collection agents may contact any number of people to get information on you, though there are some restrictions as to how/when they can do this under the Federal Fair Debt Collection Practices Act (FDCPA) and correlative state laws regarding debt collection, such as Pennsylvania’s Fair Credit Extension Uniformity Act.
  4. Self supplied information such as Phone Numbers. If a collection agency has or obtains your phone numbers, they may be able to then get your address using a reverse lookup. This is one reason why creditors will so frequently ask if they can add a phone number to your information on file.
  5. Voter Registration Forms: Any time you register to vote in a new area, that information can potentially be accessed by your creditors. Even if you move, your old county retains these records.
  6. Department of Motor Vehicles: These records are available to registered collection agencies in many states across the country. So when you get your license and register your car  in that new state, you may be automatically giving them the information they need to find you.
  7. USPS Change-of-Address forms: Many major credit agencies receive change of address forms when you move from your previous location. They may also take the initiative to check with the post office themselves.  Obviously, this is one of the best ways for creditors to track you down because you thereby tell them exactly where you are going.
  8. Skip Tracers:  Creditors also employ skip tracers.   These are professionals whose job it is to locate a person’s whereabouts for any number of purposes. The term “skip” refers to the person being searched for, and is derived from the idiomatic expression “to skip town”, meaning to depart (perhaps in a rush), leaving minimal clues behind to “trace” the “skip” to a new location. Records that “skiptracers” use may include phone number databases, credit reports (including information provided on a loan application, credit card application, and in other debt collector databases), job application information, criminal background checks, utility bills (electricity, gas, water, sewage, phone, Internet, and cable), social security, disability, and public tax information.  Much of this information is not available or not easily obtainable by the general public or comes from data bases that are not widely known.  Source: Wikipedia: http://en.wikipedia.org/wiki/Skiptrace

Once credit agencies do locate a debtor, their contacts are supposed to be in conformity with the Federal Fair Debt Collection Practices Act (FDCPA) and correlative state laws regarding debt collection, such as Pennsylvania’s Fair Credit Extension Uniformity Act (PFCEUA), both of which prohibit debtor harassment.  (The PFCEUA extends the requirements of the FDCPA to direct creditors.) However, many collectors are now evading the law by setting up shop in foregn countries and then calling in to the US.

©Christopher C. Carr, Attorney at Law 2012, 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.

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