chapter 7 Archives - Page 6 of 9 - Better Call Dave

March 2, 2013

My Number is on a Billboard in Blaine??!!

I just received a call from someone who says that my office phone number (952-544-6356) is on a billboard on Central Avenue in Blaine, MN near the intersection with 89th St. Furthermore this caller indicated that it says the fee for filing bankruptcy is $860, which would be way below my usual fee even for the simplest case.

When I run a Google search for $860 bankruptcy in that neighborhood, I find references to a service which apparently is a paralegal outfit. Their Google Plus page says they have closed or moved. So did they put up my phone number so theirs would quit ringing or what?

If anybody else has seen this, I’d sure like confirmation that it’s actually there. Frankly, I’m not sure what I would do about it if it was.

January 22, 2013January 22, 2013

Seizure of Payments from a Reverse Mortgage

I’ve always been reluctant to accept a bankruptcy case where the Debtors have a reverse mortgage. When I review the paperwork involved with the reverse mortgage, it looks to me as if the homeowners are transferring a bit of the ownership of their home to the mortgage company every month. I have always wondered if that would be considered a fraudulent transfer by a bankruptcy trustee.

Now today I’ve learned, perhaps a bit late, that a New Jersey court is saying that the payments from a reverse mortgage can be garnished by creditors. That’s an idea I never thought of, but I am concerned that it might catch on. In a bankruptcy context this could mean that if a person with a reverse mortgage was to file a Chapter 7 bankruptcy, the bankruptcy trustee would be able to seize all the remaining payments on the reverse mortgage. The trustee could keep the file open and collect the money from the reverse mortage until all the unsecured debts and all the administrative expenses were paid. This is a frightening prospect.

When I see those TV commercials for reverse mortgages I cringe. Seems to me that the advertising is misleading. The folks I’ve met who have reverse mortgages don’t seem to have much of an understanding of what they got themselves into.

December 13, 2012November 11, 2022

What NOT to do while going Over the Fiscal Cliff

Most people I talk to have not heard of the “fiscal cliff.” Those who have believe it will not affect them. This includes a husband and wife I met with yesterday. But when I ran the numbers for them, based on a November 1st article in Forbes, I found that between the two of them their paycheck withholding should go up by about $438 per month. That is, the net take home pay for the two of them together will be $438 less per month starting January 2, 2012. That is just a few days from now. When I tried to warn them and suggested that they should be thinking about how they would deal with this, they blew me off. They are absolutely in denial about the prospect that this could ever happen. If we go over the fiscal cliff as scheduled, this should come as a heck of a shock.

My calculations assume, of course, that no steps will be taken to reduce the impact of the fiscal cliff.

From where I sit it looks like a majority of people are living right on the edge. For them a drop in take home pay like this will mean they no longer have the funds to pay their credit card debt. Often when people are in such a situation, they go to their employer and increase the number of exemptions they are claiming for withholding purposes on their paychecks. They claim more withholding exemptions than they should. Some increase the number of exemptions to the point that no taxes are being withheld at all, and for them all that is withheld is social security and medicare. This increases their take home pay, but it is at the cost of not having enough taken out to cover state and federal tax liability. The income which should have been withheld for taxes is then used to make payments on credit card debt. Often this is still not enough to get that credit card debt under control.

When it comes time to file their tax return, they find that they owe a tax debt which is too large for them to pay. Now on top of the credit card debt there is a substantial tax debt. Eventually they wind up in my office. I can help get rid of the credit card debt. But as long as the tax debt is less than three years old, there’s nothing I can do to help with the tax debt.

The worst creditors you can have are the IRS and the Minnesota Department of Revenue. In almost all circumstances, it is better to stop paying other debts before you stop or reduce the withholding of taxes from your pay check. Don’t fall for the temptation to unreasonably increase the exemptions you claim for withholding from your paycheck. That will work for a short time, and then you’ll really wish you hadn’t done that.

This post is for general information purposes only and should not be considered legal advice. You should consult the attorney of your choice concerning the details of our case. Reading or responding to this post does not create an attorney-client relationship. I am a debt relief agency helping people to file for relief under the federal bankruptcy code.

November 8, 2012November 8, 2012

New Median Incomes for Minnesota Bankruptcy – Again

Minneapolis Federal Courthouse, where Hennpin County Bankruptcy cases are filed — Minneapolis Federal Courthouse . If you live in Minneapolis or the Western Suburbs, this is where your bankruptcy hearing will be.

Whether you qualify for a bankruptcy and what type of bankruptcy you qualify for is largely a matter of what your household income is – gross annual income based upon and calculated from what happened over the past six calendar months. It seems to me that I just finished posting an update on these numbers, but that was in May and already new numbers have come out – effective November 1, 2012.A table showing the new numbers for Minnesota can be found on my Chapter 7 page. They are bad news for anyone who lives alone or in a two person household, since the median incomes for one and two person households have gone down this time. The median annual income for a family of one dropped by $496 per year and the median annual income for a family of two dropped by $738. For everyone else, those in households of more than two persons, the news is good. The annual median income for a family of three actually increased by $1,300. For a household of four it went up $409, and for household sizes above four it went up $409. These increases are of course per year increases, so even the largest – the one for a household of three – is only a bit above $100 per month.

I can’t explain why these numbers changed, or why there is such a difference from one size of household to another. I can only report that the change did take place. I have been watching these changes, which usually take place very six months, for several years now. It seems to me that they usually go up across the board. The fact that some have gone down this time and that the rest have not gone up by much – to me this seems to indicate serious weakness in the economy.

Whenever I am meeting with a client to go over bankruptcy possibilities, I have to explain that these median income tables are subject to change. If somebody qualifies now but is close to the edge, haste in getting the case filed might be advisable. If a person or couple is above the applicable median income, they may try doing the means test. Usually someone who is just a little bit above the median income can pass the means test and still file a Chapter 7. I have to caution, however, that above median Chapter 7 debtors are subject to much closer scrutiny by the US Trustee’s office than are those who are below the median.

Lots more can go wrong in a Chapter 7 bankruptcy when the income is above median, even if the Debtors do appear on paper to have passed the means test. Often it is safer for folks in these circumstances to file a Chapter 13.

September 15, 2012September 16, 2012

Minnesota Bill Collectors Going Out of Business?

Collection Agencies Going Out of Business? — Collection Agencies Closing Offices? Economy Worse then Expected?

Is the economy getting so bad that the bill collectors are going out of business? From where I sit it appears that at least two of the old tried and true bill collectors have moved out of Minnesota. When a bankruptcy case is filed, it is very important to be sure that all the creditors are being notified. The notices are sent out to the creditors by US Mail by a central noticing center which is operated by the court. When an address is bad or when a notice comes back in the mail in connection with one of my cases, I get notified of that right away by email from the clerk of court’s office. In cases where a collection agency has taken over an account, I always try to list both the original creditor and the agency in the bankruptcy papers. If the debt has also been referred to a lawyer, I list the law firm on the list of creditors too.

For as long as I can remember, Allied Interstate has been one of the big collection agencies in these parts. In recent times their office was within a few blocks of mine. They were located in that big, white office building on the northwest corner of the intersection of I-394 and Highway 169 known as the Interchange Tower. There was more than one occasion when I was about ready to go over there in person and yell at them. To me they were an institution, kind of like the federal government. It never occurred to me that they would not always just be there. In bad economic times, I would have assumed that their business would have just gotten all the better.

You might imagine how shocked I was to receive a notice, and then another notice, telling me that the address I was using for Allied Interstate was bad. Well, they had apparently been assigned a number of debts of a couple of my clients – so I had to find a new address for them. At first I assumed that they had just moved to a new location in their old neighborhood. As I almost always do when I have such a problem, I went to Google looking for a new address. There were no results for Minnesota except what I already had. I went to Bing. Same result. Next I tried to call all the phone numbers I could find for Minnesota locations of Allied Interstate. More shock – they were disconnected. Finally I stared trying locations outside of Minnesota. They had been a nation-wide operation. The first few numbers I tried were not being answered. Finally someone answered at an Allied Interstate office in Ohio. He said to use the following address:

Allied Interstate, PO Box 4000, Warrenton, VA 60197-6123

So I added that address to the list of creditors at the court web site for both of my cases, and it seems so far to have been a good address. Meanwhile a notice that I had sent to an Illinois office of Allied Interstate came back in the mail as well. One has the impression that this outfit is not doing so well.

Not long after this business with Allied Interstate, I received notice that an address I had been using for one of the bill collecting law firms was bad. They were it seemed to me a lot like Allied Interstate in that they had been around forever. To me they seemed to be one of the top law firms that over the years had driven many of my clients to my door. Their office had always been in St. Paul, but they sued people from all over the Twin Cities. Again I went to Google and several other sources. What I found or seem to have found is that they closed their St. Paul office and are now doing business from their home office in another state.

From day to day I see little indicators – including the above – that the economy is worse than anybody in the media outlets wants to admit.

This is for general information purposes only, is not legal advice, and does not create an attorney-client relationship. I am a debt relief agency, helping people file for relief under the federal bankruptcy code.

July 2, 2012July 2, 2012

Can Bankruptcy Stop Foreclosure?

Foreclosures continue to occur at an alarming rate in many parts of the country. Many homeowners who obtained subprime mortgages earlier in the past decade or who now find themselves unemployed or underemployed because of the depressed economy are unable or unwilling to make their monthly mortgage payments

State and federal programs for distressed homeowners to assist in loan modifications are available to some but you may not qualify. For others, a short sale transaction is a way to extricate themselves from a home whose value is less than the loan amount, but these can be complicated and may not work for any number of reasons.

As a result, many people facing overwhelming financial pressures turn to bankruptcy as a solution, but can a bankruptcy stop foreclosure?

The Foreclosure Process

Once you miss at least 3-4 consecutive mortgage payments and the lender has sent you notices warning you of possible foreclosure, the lender will generally begin the process to repossess your home. This can take several months and in some instances more than one year.

Minnesota is a non-judicial foreclosure state, meaning that there is usually no court action. When the foreclosure is done without court action, it is called a “foreclosure by advertisement.” Mortgages typically have a power of sale clause allowing an attorney to foreclose on your home. A lender may choose, however, to go to court in a judicial foreclosure to obtain a judgment of foreclosure.

If your home is taken, there are certain reporting and notice requirements before the lender can sell it at an auction conducted by the sheriff, usually at a greatly reduced price. In Minnesota, as long as it’s a foreclosure by advertisement, you are not subject to a deficiency judgment if the sale is for less than the loan amount. This means that most of the time, as long as there is only one mortgage, a homeowner in Minnesota can walk away from a house free and clear. If there is a second mortgage, however, watch out. These days the holders of second mortgages are suing people in large numbers after the first mortgage has foreclosed. Sometimes they don’t even wait for the first mortgage to foreclose if the payments are not up to date.

Accordingly, if you are facing foreclosure, can a bankruptcy stop the foreclosure or benefit you in some way?

Can a Chapter 7 Bankruptcy Stop a Foreclosure?

Whenever you file for bankruptcy protection under a Chapter 7, an automatic stay of all legal proceedings, including foreclosures, goes into immediate effect. A Chapter 7, if you qualify, allows you to discharge most if not all of your debt.

Unfortunately, the lender is allowed to file a motion to lift the automatic stay as it pertains to your property as the lender can otherwise suffer economic harm. In this instance, a Chapter 7 will only temporarily delay the foreclosure.

It is very difficult to fight the motion to lift the automatic stay. About the only practical way to stop the motion is to get the payments up to date or make arrangements to bring the payments up to date. In a Chapter 7 the automatic stay ends when the discharge is granted, usually around three months after the case is filed. This means that most of the time lifting the stay doesn’t mean much anyway, because the stay was going away by itself.

At the least, you may be able to save thousands of dollars while not making any mortgage payments and take the time to look for alternative housing. Once the foreclosure is stopped, many lenders are very slow to get it started again. While the automatic stay officially only stops things for about three months, you will very likely gain much more time than that.

Can a Chapter 13 Bankruptcy Stop a Foreclosure?

The other bankruptcy filing available to a homeowner is Chapter 13. Under this plan, you must submit a repayment plan that includes all your creditors and that is approved by the bankruptcy trustee. The automatic stay also goes into immediate effect once you file.

Unlike a Chapter 7, this chapter allows you to keep your home but you must have proof of sufficient income to not only maintain the current mortgage payments but to make up the arrearages over the life of the repayment plan. Many repayment plans are for the maximum 60 months. Under a Chapter 13, then, you may be able to stop the foreclosure so long as the indicated conditions are met.

In a Chapter 13 it might also be possible to do a lien strip. We’ll know for sure when the Eighth Circuit Court of appeals finally decides the Fisette case. A lien strip would benefit homeowners with multiple mortgages. It would eliminate payments on all mortgages except the first one. If your home’s value has declined and the first mortgage has secured all the home’s equity, if any, then the other mortgages would be considered unsecured debt and will be discharged.

In any case involving a foreclosure, consult with an attorney to explore all your legal options.

June 28, 2012September 13, 2022

How Much it Costs to File Bankruptcy

By Dave Kelly, Minnesota Bankruptcy Lawyer

I often receive phone calls where the first thing I hear is “how much does it cost to file bankruptcy?” It’s very hard for me to provide a simple answer. Bankruptcies aren’t like cans of beans which I keep here on a shelf already stamped with a price.

If the caller will let me ask a series of questions so that I can get an idea of what kind of case it would be, then I might be able to suggest what the fee would probably be. If the caller wants a number right away, the conversation usually ends fairly quickly. My fees are not the lowest in the area, and if that’s all someone is looking for, then I’m not the lawyer they want. All I can do in this situation is say “Can I ask you a few questions?” and see if they want to discuss it or not.

Lawyer fees in bankruptcy are a matter of public record. In every case the petition includes information on what the lawyer has charged. When it comes to Chapter 13 cases, it’s true that there is what is called the “no-look fee.” This is the amount that the judges have agreed a lawyer can charge without having to provide a detailed explanation. In Minnesota this has not gone up for a long time, and I often hear complaints from my colleagues that it is too low. Several lawyers I know make it their policy to provide a detailed billing for every Chapter 13 case so they can go higher than the no-look fee. For many of the more complicated cases, such as a case involving a lien strip, I can certainly see this might be an appropriate thing to do.

Personally, however, I have always so far just charged the no-look fee. Right now as of the date of this writing, the no-look fee in Minnesota is $2,500 for a below median Chapter 13 and $3,000 for an above median Chapter 13. The court filing fee is always additional. BUT in a Chapter 13 part of the lawyer’s fee can be put into the Chapter 13 Plan so that the client does not have to pay it before the case is filed. In most Chapter 13 cases, putting part of the attorney fee in the Plan just means that the creditors get that much less. So from the point of view of my client, the part that goes into the Plan might as well be free. The result is that in most of my Chapter 13 cases, I wind of asking for less before filing than I do in the Chapter 7s. The current court filing fees are $281 for a Chapter 13 and $306 for a Chapter 7. Whatever it is that I’m charging, the court filing fee has to be put on top of that.

For most of the Chapter 7 work that I do, my fees are lower than they are for the Chapter 13s. There’s a good reason for that: in the Chapter 13 case I am responsible for the case for between three and five years. Chapter 7s are over usually in a matter of months. My fees for the Chapter 7s are competitive, but not the lowest in town. I dare not say much more than that without having a specific situation in mind. Every case is so much different from every other case that I’ve never been able to come up with a one size fits all fee schedule. But I’m always glad to discuss my fee with anyone who can take a few minutes to chat about their situation on the phone, and for those chats on the phone I don’t charge a thing.

I should mention here that there is a counseling requirement that must be satisfied in both Chapter 7 and 13. There is one counseling course that must be done before filing, and another that must be done after filing. That’s two (2) courses that must be done before the process is complete. My clients can go anywhere they want for the counseling, as long as the agency has been approved by the US Trustee’s office. The agency I recommend charges $40 per course if I sign the client up for the course, and $10 more per course if the client goes there on their own. It can be done on line and over the phone without leaving home. I don’t get any sort of commission or referral fee from the counseling people, although they did send me some cookies one Christmas. When you count the before filing and the after filing courses together, this is another $80 of total cost.

I am not comfortable with filing anything with the court unless I have given it the proper amount of attention, so I know it’s done right and likely to go smoothly. I tell my clients that we are going to do the work in my office before filing the case, so that we don’t have to do a lot of extra work at the courthouse after the case is filed. By the time we get to the hearing, also known as the first meeting of creditors, I want the case to be the most boring and plain vanilla thing the Trustee has ever seen. If the Trustee almost falls asleep during the hearing, I did it right. My clients often say after the hearing, “is that all there is to this?” Most of the time at that point it is all there is, because I did all the sweating over the case before it was filed.

By the time I get to the courthouse, it is likely that I will have spent as many as 15 hours on a case, sometimes much more than that. I will have had at least four face to face meetings – often many more than that – with my client, probably a couple hours each time. Recently I checked my calendar and found that I had met with one client 11 times before the case was ready to file. A bankruptcy petition has somewhere in the range of 500 questions, and tends to run between 50 and 65 pages in length. These questions are answered under penalty of perjury. An incorrect answer can be a crime for my client. When I sign the petition, I also am certifying that everything in it is correct. I can be sanctioned, perhaps severely, if it’s not. A client asked me recently, after the case was completed, “Kelly how can you sleep at night with all this stuff to keep track of?” All I can say is that I sleep better when I know I’ve given it my best.

June 5, 2012February 4, 2022

Eligibility Requirements for Filing a Chapter 7 Bankruptcy Petition

If you are one of many people across the country who are suffering from more debts and obligations than your budget can seem to handle, you are probably thinking about seeking the protection of a Chapter 7 bankruptcy. Like most, you may also be wondering if there are specific rules or regulations that determine your eligibility to file a petition.

In order to file a petition for a Chapter 7 bankruptcy, you need to meet certain conditions defined within the bankruptcy codes. To begin with, your level of income must fall below a specific amount, and if so, you next have to pass another set of eligibility standards called the ‘means test’. However, the bankruptcy laws also state that the bankruptcy court can dismiss your petition if you have previously filed for bankruptcy during a specific length of time. The bankruptcy court can also dismiss your petition if feels you might be defrauding your creditors.

In previous bankruptcy laws prior to 2005, the judge presiding over the case could dismiss any Chapter 7 petition if you had enough disposable income to finance a Chapter 13 Bankruptcy repayment schedule to your creditors. With the new bankruptcy laws in effect, there are much clearer guidelines that determine if you will be allowed to remain in Chapter 7 bankruptcy, or if you might be required to petition for a Chapter 13. Only disabled veterans who have built up debts while on active duty, and people who have taken on too much debt because of a struggling business are allowed to submit an uncontested Chapter 7 petition.

These new guidelines for filing a Chapter 7 petition begin by determining how your ‘current monthly income’ amount compares to a standard or ‘median’ income level, and is it also based on your particular household size in your state. This amount is also calculated by averaging your total earnings during the previous six months prior to filing your petition. If your earnings happen to fall below or are equal to this median amount, you will certainly be able to qualify for a Chapter 7 petition.

On the other hand, if your earnings are above this median figure, then you must meet the next challenge by passing the ‘means test’ required in the up-dated bankruptcy guidelines. The means test is used to find out whether you have enough disposable income, after deducting living expenses and other debts like child support or alimony for instance, to repay your creditors over a three to five year repayment plan in a Chapter 13 petition. These guidelines were designed to keep people with higher levels of income from filing for a Chapter 7 bankruptcy.

The new bankruptcy laws also state that you may not file a Chapter 7 petition if you have already received a discharge of your debts in a Chapter 7 case within the previous 8 years, or in a Chapter 13 within the previous 6 years. In addition, you cannot file if either a previous 7 or a 13 was dismissed anytime within the previous six months because you violated a court order, you committed any fraudulent activities, or you dismissed your case because a creditor sought relief from the protection provided by the automatic stay.
Finally, the bankruptcy court can also have your case dismissed if it is felt you attempted to commit fraud against your creditors, or tried to conceal your assets or personal property from the bankruptcy court in order to avoid the liquidation process. The liquidation of your assets is necessary so that the court-appointed trustee on your case can repay as much of your unsecured debts as possible to your creditors.

It is important to remember that simply because you qualify under the means test guidelines does not mean you should automatically file a petition for a Chapter 7 bankruptcy. The test is only intended to confirm that you are eligible to file. Any decision to file for Chapter 7 bankruptcy should be made only after considering all other options and possible alternatives, and only after discussing these options with knowledgeable and qualified bankruptcy attorney.

If your would like to know more about Chapter 7 Bankruptcy and your Eligibility, Call David Kelly Today at: 952-544-6356

Or Fill Out Our Online Contact Form

April 8, 2011

Bankruptcy court NOT shutting down -at least not for now

I’ve been concerned all week over what to expect with the anticipated federal government shut down. The bankruptcy court is federal, so this shut down could affect me and my clients in a very direct way.

I went on line and tried to research it a bit around noon today. I found announcements that the Nevada bankruptcy courts were going to stay open, along with a statement from one of the bankruptcy judges in another state – Colorado if I recall correctly – stating that they would not be closing. In an interview a lawyer from New York said that they were going to try to keep essential services concerning life and property going, and the bankruptcy court would be in that category.

Then a few minutes ago the Minnesota bankruptcy court sent out the following email:

“In the event that a lapse in appropriations – sometimes referred to as a “government shutdown” – occurs on April 9, 2011, the United States Bankruptcy Court, District of Minnesota will remain open for business as usual, and hearings, trials and 341 meetings will be held without interruption. Applications, hearings and other matters may be scheduled with the Court as usual. Public access to the Court, in person and through the Court’s electronic filing system, CM/ECF, will not be affected.

If a lapse in appropriations continues after April 22, 2011, the Court will continue to conduct hearings and trial. As to continuation of services in the Clerk’s office, notice will be posted on the Court’s website at www.mnb.uscourts.gov.”

At least now I can tell my clients who are scheduled for hearing next week that we are still on and nothing has changed. I’m still a bit anxious about a few cases I was planning on filing toward the end of the month, however, for obvious reasons.

January 8, 2011

A Fresh Start for the New Year

I always keep an eye on the traffic to my web site. As the holidays approached last month, I could see that the traffic was dropping off significantly. On the Monday after Christmas, however, there was a sharp spike upward. Traffic stayed high all that week and then jumped even higher following the New Years weekend. The Tuesday after New Years Day was the highest traffic day I have had for months.

These traffic statistics plus the incoming phone calls and emails confirm that a lot of people are considering using the bankruptcy process to make a new start for the new year. That’s exactly what the bankruptcy laws were originally designed to do. Instead of putting you in debtor prison or turning you into a completely homeless person, you get to clear the slate of the old debts and start fresh – if you qualify.

The original version of the United States Constitution, the one they read this week on the floor of the House of Representatives, included the power to create a nationwide bankruptcy system. This is not a new idea. The founding fathers recognized bankruptcy as a thing of value, and wanted it to uniform for the whole country instead of being different in each state. When I was first out of law school back in the 1970s the process was extremely simple. A bankruptcy petition was less than 15 pages of material. There were few restrictions on who could file. The primary concern was whether there would be a lot of assets that could not be claimed as exempt. Since then every few years additional red tape and limitations have been added. Finally in 2005 there was a massive rewrite of the law which was so severe that we were wondering if the whole process may finally have been killed.

Well, if the intent was to completely remove bankruptcy as an option, it didn’t work. The American Bankruptcy Institute reports that bankruptcy filings jumped by 9% in 2010. Last week the Wall Street Journal carried a detailed article about the increase in filings. The article includes a graph showing bankruptcy filings between 2000 and 2010. On the graph one can see the spike in 2005 right before the effective date of the 2005 law, followed by a dramatic drop in filings, followed by a steady increase. When I saw news releases last summer stating that the first half of 2010 had broken some sort of a record for bankruptcy fillings, I commented that I didn’t think it could possibly have exceeded 2005. This graph shows I was right. Nevertheless, it is quite clear that filings are back up to pre-2005 levels.

So if you are considering such a fresh start, you certainly are not alone. I’d sure be glad to talk it over with you. I can do a screening over the phone which you give you a pretty good idea of what you qualify for. I don’t charge for those phone calls. If you just can’t seem to get ahead, you might want to look into it.