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

Advertisements

N is for Negative Impact of Bankruptcy on Credit and How to Overcome it.

N by procsilas in Bankruptcy is for the Negative Impact of Bankruptcy on Credit and How to Overcome it.

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

Most people are aware that filing bankruptcy can hurt their credit and it is well known that this can take its toll for up to ten years. But then why is it that the credit card apps start arriving again just a few weeks after a discharge in bankruptcy? Is it really true that a bankrupt is doomed to being deemed uncreditworthy for ten years? We will explore these questions below but first a bit of background.

The information contained within your credit report is generally governed by the Fair Credit Reporting Act. This federal law specifies how long a bankruptcy can appear on your credit report. This in turn varies based on type of bankruptcy as well as disposition of the case. Chapter 7 and 11 bankruptcies will appear on the report for up to 10 years from the filing date. Non-discharged or dismissed Chapter 13 and 12 bankruptcies also appear on a credit report for up to 10 years. Discharged Chapter 12 and 13 bankruptcies can remain on the report for up to seven years.

Does this mean that your credit will be impaired for 7 or 10 years? Does it mean you will not be able to purchase critical items on credit?    Certainly not, at least for the debtor who learns from past errors.

Note that the period starts running from the date of filing not discharge so, for example, if you filed a a Chapter 13 bankruptcy petition 4 years ago and completed a 3 year plan 6 months ago, you only have three years to go. And during this time, you will, with persistence, be able to get credit for the things you really need (see below.)

You can begin to rebuild your credit rating immediately upon the date of your discharge order.  In a Chapter 7 this will be granted 3-4 months after your petition is filed, typically.   If you are in a Chapter 13 your plan payments will be reported even while still in bankruptcy.

Don’t even think about hiring a “Credit repair” agency. The money you might pay them can actually be used directly to repair your credit in the one way the experts agree really works.  The crucial thing you can do to rebuild your credit quickly and at no added cost is to pay all your bills on time. No exceptions.  It is not uncommon to see former clients who have rebuilt their ratings within 2 to 3 years after a bankruptcy. Their secret?  They paid their mortgage and car loans ON TIME and didn’t miss a payment. Some ideas: Send the checks EARLY in case the mail is delayed. Set up an emergency fund, perhaps in a short term CD, say with your tax refund to give yourself the “float” needed to make the payments in case you are short one month and then replenish it in flush months. Have the mental discipline to reserve it just for this purpose! If worse comes to worse, borrow against your IRA, 401K at work, life insurance policy  or pension.

As an example, a recent Chapter 7 client finished his case; obtained his discharge order and exactly 30 months later (2 years and 6 months), purchased a new home and obtained a competitive mortgage rate for a 30 year fixed mortgage.

You will be able to get a new credit card after your bankruptcy case has been completed.   It is true that you are likely to be rejected once or twice, but you should be able to obtain approval for a small credit card as long as you are persistent. Your best bet may be to talk to that friendly bank manager you have known for years. And you may need to ask more than once.

There are also ways to surrender that car you are driving now and its high rate loan and purchase a new car even while in bankruptcy, believe it or not.  You will pay a somewhat higher interest rate but rates are at historically low levels now anyway.

You will also be able to obtain student loans, for yourself or for a child, the Bankruptcy Code (11 U.S.C. Section 525) specifically prevents the government from discriminating against individuals on the grounds that they have filed for bankruptcy relief.  I have yet to hear of anyone being denied a student loan on bankruptcy grounds.

There are in addition certain “tricks of the trade” that a competent and compassionate bankruptcy attorney can impart to you once you have retained him or her which will speed up the process of restoring your credit even further.   Be sure to ask!

In conclusion, your payment history will be crucial after (and in a Chapter 13 even during) a bankruptcy discharge, because prospective lenders really will  be looking  to see that you have paid attention to the mandatory debtor counseling sessions and have well and truly learned the lesson of how to use credit responsibly. It often will be easier to rebuild credit after a bankruptcy discharge because you will no longer have debts that hopelessly exceed your credit limits.  In this way and in general (certainly, not in every individual case) over the long haul, the consumer bankruptcy laws prove their worth. This writ large then is why the “fresh start” offered to debtors by our system of bankruptcy is a necessity to a healthy capitalistic system.

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!


I also provide Mortgage Modification Services.

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

Other Bankruptcy Lawyers writing on the letter N include:

California Northern Bankruptcy Court  Marin County Bankrupttcy Lawyer, Cate Eranthe http://marin-bankruptcy-law.com/803/bankruptcy-a-to-z-n-is-for-california-northern-bankruptcy-court/ NACBA Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/813 Naked New York Bankruptcy Lawyer, Jay S. Fleischman http://www.consumerhelpcentral.com/bankruptcy-alphabet-naked/ Negative Notice Jacksonville Bankruptcy Attorney J. Dinkins G. Grange http://jacksonville-bankruptcy-grange.blogspot.com/2012/02/n-is-for-negative-notice-local-rule.html Never Cleveland Bankruptcy Attorney William Balena http://ohiobankruptcysource.com/?p=2418 No Asset Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-no-asset-case.html No Asset Report Honolulu Bankruptcy Lawyer, Stuart T. Ing http://www.bankruptcyhi.com/2012/01/n-is-for-no-asset-report/ Non-exempt Property Miami Bankruptcy Attorney, Dorota Trzeciecka http://dorotatrzeciecka.com/2012/02/05/bankruptcy-a-z-n-is-for-non-exempt-property/ Nondischargeable Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/bankruptcy-a-z-n-is-for-nondischargeable.html Nondischargeable Northern California Bankruptcy Lawyer, Cathy Moran http://www.bankruptcysoapbox.com/bankruptcy-alphabet-n-for-nondischargeable/ Nondischargeable Debt Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/16/bankruptcy-alphabet-n-is-for-nondischargeable-debt.aspx Notice Colorado Springs Bankruptcy Attorney Bob Doig http://springsbankruptcylaw.com/?p=1227 Notice San Francisco Bankruptcy Attorney, Jeff Curl http://www.jclawgroup.com/blog/bankruptcy-alphabet-n-is-for-notice/ Notice Taylor, Michigan Bankruptcy Attorney, Chris McAvoy http://downriverbankruptcy.com/n-for-notice-creditors/#axzz1mtGwtQjh Notice of Rights to Claim Exemptions Charlotte Bankruptcy Attorneys, Collum & Perry http://www.collumperry.com/firm-news/notice-of-rights-to-claim-exemptions Numbers and New Bankruptcy Laws Los Angeles Bankruptcy Attorney, Mark J. Markus http://www.bklaw.com/bankruptcy-blog/2012/03/numbers-and-new-bankruptcy-laws/ Non-Attorney Bankruptcy Livonia Michigan Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/n-is-for-non-attorney-bankruptcy-livonia-michigan/

“U” IS FOR UNLISTED CREDITORS

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

U by StriaricNLISTED CREDITORS IN A “NO ASSET” CHAPTER 7 BANKRUPTCY CASE

You filed your “no asset” chapter 7 bankruptcy and thought you obtained a discharge from all your past debts.  But you unintentionally omitted a trade creditor from your petition and that creditor has been calling daily demanding payment in full and threatening suit, claiming it was never notified of the bankruptcy.  You are wondering now whether you must pay the claim and if not what you can do to stop the calls and demands.

  • DO NOT PAY OR AGREE TO PAY THIS DEBT WITHOUT FIRST CONSULTING WITH LEGAL COUNSEL

Most jurisdictions have adopted a “no harm , no foul” rule , whereby  a debt will be discharged in the bankruptcy case, even if the debt is not listed in the bankruptcy and the creditor is not notified of the bankruptcy, if the following apply:

  1. The Court never set a deadline for creditors to file a proof of claim. This is the case in virtually all no asset cases.   In a no asset case the unlisted creditor is not harmed, because there was no distribution for the creditor to receive.  However, if the court did set a deadline for filing proofs of claim, then the obligation to the creditor is not discharged if the creditor was not listed in the bankruptcy and did not otherwise receive notice of the bankruptcy in time to file a proof of claim.  It is the setting of a deadline for the filing of a proof of claim that is the key.  Ironically, it does not matter whether the creditor would not have received any distribution from the trustee on the claim. Nor does it matter that no distribution was made by the trustee to any creditors. It is also irrelevant that a distribution was made by the trustee, but the omitted creditor would not have been paid anything even if a proof of claim had been timely filed, for example  if the distribution all went towards administrative costs and priority claims. In any of these instances, the debt survives the discharge.
  2. The creditor does not have the type of claim for which the creditor could have filed a lawsuit in the bankruptcy court to have the debt declared not discharged, such as for fraud or intentional injury.
  3. The creditor does not have the type of claim which is never discharged in bankruptcy, such as child support, spousal maintenance, most taxes, etc.
  • DEALING WITH THE OMITTED CREDITOR:

The biggest difficulty is often convincing an omitted creditor that its claim was discharged and that the post-discharge injunction of 11 USC §524 prohibits collection efforts. Typically, this will require the assistance of competent counsel.  At a minimum the creditor should be sent a legal letter advising of the law and the applicable court rulings in your jurisdiction.

The bankruptcy courts will not normally allow a closed case to be reopened for the purpose of listing an omitted creditor, since the matter  is considered moot,  butthe debtor may re-open the bankruptcy and request sanctions against a creditor that refused to stop collection efforts, in violation of 11 USC §524.   In addition, since the creditor is attempting to collect on an invalid debt, the harassment may also constitute one or more violations of the Fair Debt Collection Practices Act and/or applicable state consumer protection, especially if it continues after receipt of the lawyer’s letter.Again however, this is a matter you should bring up with your local counsel.

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 Blogging on the Letter U Include:

U.S. Trustee Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell http://bankruptcyblog.caldwell-lawfirm.com/2011/11/23/bankruptcy-alphabet-u-is-for-u-s-trustee.aspx Unauthorized Practice of Law Cleveland Bankruptcy Attorney Bill Balena http://ohiobankruptcysource.com/?p=2601 Underwater Jay Fleischman, bankruptcy attorney in New York City http://www.consumerhelpcentral.com/bankruptcy-alphabet-underwater/ Underwater Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein http://www.morethanbankruptcy.com/u-underwater.html United States Trustee Maui Bankruptcy Attorney, Stuart Ing http://www.bankruptcyhi.com/2012/02/u-is-for-the-united-states-trustee/ Unsecured Cathy Moran, Bay Area Bankruptcy Lawyer http://www.bankruptcysoapbox.com/bankruptcy-alphabet-2/ Upside-Down Vehicles Wisconsin Bankruptcy Lawyer, Bret Nason http://nasonlawfirm.com/archives/962 Unlisted Asset Allen Park, Michigan bankruptcy lawyer, Christopher McAvoy http://downriverbankruptcy.com/unlisted-undervalued-assets-bankruptcy/#axzz1uLBcDSOL Unsecured Creditor Livonia Bankruptcy Attorney, Peter Behrmann http://www.livoniamichiganbankruptcy.com/u-is-for-unsecured-creditor-in-bankruptcy/

 

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!


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

Photo by Striatric

T in the bankruptcy Alphabet is for the Missing Tax Refund

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

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

T 5309561982_8b35ba89ec_t[1] So you filed a Chapter 7 bankruptcy and then filed for a tax refund for the same year. YOUR REFUND NEVER ARRIVES. Surprise Surprise! The bankruptcy trustee had it directed to him. A trustee’s primarily job is to represent your unsecured creditors and he/she can submit a request for your federal tax refund on behalf of the bankruptcy estate and distribute the funds to them.

Think about it, when you file for bankruptcy what is the no. 1 thing the trustee is interested in?  Your INCOME of course. And what is a tax refund really but INCOME that you let Uncle Sam hold for you (interest free). The trustee under most circumstances is entitled to it.

Could this have been avoided? The answer is most certainly “yes” with a little planning. Unless an emergency bankruptcy has to be filed to save a home from Sheriff’s sale or a car from repossession, most clients have a good deal of time between the time they come in to meet with me for the first time and filing. A good bankruptcy lawyer will examine your most recent tax return to see if your refund is too high. If so, I will advise you to immediately reduce your payroll tax deduction (by increasing your exemptions on your W-4 withholding form which you have the right to do at any time.) This will put money in your pocket NOW and you can likely show a tax refund small enough so that your trustee will not even bother with it.

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 Blogging on the Letter T  Include: .

  1. Omaha and      Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell T is for Transfers.
  2. Bankruptcy      Lawyer Jay S. Fleischman T is for Trustee.
  3. Kauai      Bankruptcy Attorney, Stuart T. Ing T is for Taxes.
  4. San Mateo      County Bankruptcy Lawyer Cathy Moran T is for Tension.
  5. Metro      Richmond Consumer and Bankruptcy Attorney Mitchell Goldstein T is for Thirteen.

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

Photo by Jetheriot

P is for Property of the estate: The key to when a lien can be stripped by the bankruptcy court.

p from toofar north

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

When you inherited that property from your father who died in Texas, it had a second lien which was completely under water and impairs an exemption but you had no liability for the underlying home equity loan so it can’t be stripped in your Chapter 13 bankruptcy, right?  Wrong. Let’s see why.

To be “strip eligible”, a secured claim has to be an “allowed claim”. Section 506(a)(1) of the US Bankruptcy Code provides:

An allowed claim of a creditor secured by a lien on property in which the estate has an interest … is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property…”,

The relevant inquiry then for lien stripping is not does the “debtor” owe the debt but does the estate have an interest in the property to which the lien attaches?  For that to happen all that is required is that the subject property be in the estate created when the debtor declares bankruptcy. Here are 3 examples to better illustrate the point:

  1. Simple Inheritance Scenario. Suppose the debtor inherited a parcel of real property from her deceased father subject to a lien in favor of his creditors. In the debtor’s bankruptcy case, a lien securing the father’s promise to pay the Bank of Armadillo is just as strip eligible as if the debtor rather than her deceased father were herself the borrower. As long as the property which is collateral for the debt is properly before the court, the lien is subject to stripping.
  2. Co-Beneficiary Scenario. Take the same case but now we have two debtors, each a co tenant and heir with a sibling in the same inherited house (a duplex). Both halves of the house are subject to the BOA lien. If only one debtor files bankruptcy, only that co-tenant’s interest in the house is property of the estate, and the court can only strip the lien from the half of the property because only half is in the bankruptcy estate.
  3. Husband & Wife (certain states only) Scenario. Somewhat the reverse fact pattern is a very common one in Pennsylvania, where I primarily practice law. This can happen for example because the original owner, say the wife, upon marriage deeds the property into husband and wife form, which under Pennsylvania is called “tenancy by the entireties” and serves to protect the marital property from the creditors of the individual marriage partners. The husband is now on title to the property while the wife, the original owner, remains the only one liable on the note. If both spouses file for bankruptcy,, the real estate comes into the bankruptcy estate. Once again, it’s strippable simply because the collateral is property of the estate without reference to the locus of the debt.

Because bankruptcy is essentially “all about the debtor and his or her debts”, it is a common mistake to overlook liens that could have been stripped because the debts do not happen to “belong” to the debtor. This then is another illustration of how competent counsel, by properly identifying and claiming this benefit for you, can save you far more than any legal fee you might have to pay.

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 Blogging on the Letter P Include:

  • Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell: P is for Plan.
  • New York Bankruptcy Lawyer, Jay S. Fleischman: P is for Pay Advice.
  • Colorado Springs Bankruptcy Attorney Bob Doig: P is for Preferences.
  • Maui Bankruptcy Attorney, Stuart Ing: P is for Preference.
  • Southgate, Michigan Bankruptcy Lawyer, Christopher McAvoy: P is for Pride.
  • Cleveland Bankruptcy Attorney, Bill Balena: P is for Phone Call
  • Wisconsin Bankruptcy Lawyer, Bret Nason:  P is for Property of the Estate
  • San Mateo Bankruptcy Lawyer, Jeff Curl:  P is for Priority Debt
  • Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein:  P is for Privacy
  • Jacksonville Bankruptcy Attorney, J. Dinkins G. Grange:  P is for Payment

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

Photo by Too Far North

“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: