Filing Process Archives - Page 2 of 3 - Better Call Dave

April 20, 2019October 19, 2020

Best Way to Pay for a Bankruptcy is a Tax Refund

By David J. Kelly, Minnesota Bankruptcy Attorney

The Minnesota bankruptcy filing statistics are out for the month of March. Year over year, March of 2019 shows 70 fewer bankruptcy filings than there were in March of 2018. In March of 2018 there were 998 bankruptcy cases filed in Minnesota, but this year in March 2019 it was only 928. March has always been the month in which the greatest number of case are filed – in my opinion that’s because people have tax refund money they can use to pay their lawyers. Why is it down this year? My best guess is it”s those lower tax refunds everyone has been talking about. I see my clients having bigger pay checks because their withholding is less, but they are also having lower tax refunds. Since tax refunds are considered to be an asset, a lower refund can be a good thing once the bankruptcy case is filed.

September 11, 2018October 13, 2022

Recent Increases for the Minnesota State Exemptions

By David J. Kelly, Minnesota Bankruptcy Attorney

If you’ve been reading any of my musings, you know that when you file a Chapter 7 bankruptcy, ownership of all your stuff is temporarily and theoretically transferred to a trustee appointed by the court. I say “theoretically” because normally the trustee doesn’t get to keep any of it, or at least gets to keep very little. The reason why the trustee can’t keep your assets is that – with the help of somebody like me – you are going to claim all or most of your stuff as exempt. There are two sets of exemptions in Minnesota to choose from: the federal exemptions and the Minnesota state exemptions. The federal exemptions tend to be much better than the Minnesota state exemptions, except in one area: equity in a homestead. If you own your home and you have more than just a little equity in your home, the Minnesota state exemptions are for you.

Several of the Minnesota exemptions are indexed for inflation. The resulting increases are only applied every few years. 2018 was one of those years. The new indexed numbers went into effect on July 1st. For example: the household goods exemption increased from $10,300 to $10,800; for wedding rings the exemption increased from $2,817.50 to $2,940 in value; for life insurance proceeds it increased from $46,000 to $48,000; and the tools of the trade exemption went from $11,500 to $12,000. The most significant increase in my opinion was the homestead exemption which went from $390,000 of equity to $420,000 of equity.

For more info about exempting your property so the bankruptcy trustee can’t have it, look at my exemption page. For a rant about what’s wrong with the Minnesota state exemptions, please take a look at my post Minnesota State Exemptions Still Leaking Like a Sieve. You might also want to take a look at this video:

May 3, 2018July 15, 2022

Minnesota State Exemptions Still Leaking Assets Like a Sieve

By David J. Kelly, Minnesota Bankruptcy Attorney

When you file a Chapter 7 bankruptcy, ownership of all your assets all the way down to your socks passes to a trustee appointed by the court. The only way to avoid losing your shirt and most everything else you own is to claim the assets as exempt. If you qualify to use the federal exemptions, it is very likely that everything you own will be exempt and you will keep all your assets. That’s the result I always want to see – my client gets rid of his or her debts but keeps all his or her stuff.

The only problem with the federal exemption list is that it has a low number for the amount of homestead equity which can be exempted. If someone has more equity than can be protected by the federal exemptions, the only other choice is to use the state exemptions. The Minnesota state exemptions will protect up to $$390,000 of equity in a homestead, but other than that those exemptions leave a lot to be desired. They are hopelessly out of date in many respects.

For example, the only electronics clearly allowed as being exempt are a radio, a phonograph and television receivers. Notoriously, computers are not exempt. Neither are cell phones, tablets, game machines, printers, monitors or any other device that isn’t a TV, radio or phonograph.

There’s no exemption for jewelry, unless it’s a wedding ring that was actually present at the wedding ceremony. There’s no exemption for guns, sporting goods such as bicycles or exercise equipment, or collectibles of any kind. Household furnishings, clothing and appliances are exempt, but a riding lawn mower is not considered to be an appliance. Money in your checking account or savings account is not exempt unless it can be traced to a pay check from employment which was deposited within the last 20 days. There’s no exemption for any kind of a tax refund which may be owing or which may have accumulated as of the date of filing the bankruptcy. Bankruptcy trustees routinely present my clients with a form which signs over their tax refunds.

Several weeks ago two bills were introduced at the state legislature in St. Paul to try and correct some of this. One of them added exemptions for the following, all of which currently are absent from the exemption list:

Computers, tablets, printers and cell phones as part of the household goods exemption
Jewelry up to a value of $2,817.50 – replacing the existing wedding ring exemption
A new section exempting $3,000 of tools, snow removal equipment and lawnmowers
A wild card exemption which could be used for up to a $1,250 value of property not fitting into any other exemption; and
Health savings accounts (HSA) and medial savings accounts up to a value of $6,500.

When I heard last week that the legislature had passed an amendment to the exemption statute, I got quite excited. I thought it must be the bill I just described above. I was quite disappointed to learn that it was another bill which only added one provision: an exemption for health savings accounts and medical savings accounts up to a value of $25,000. It’s nice that the amount of the exemption is so high, but I almost never see anyone with an HSA which has any more than a few hundred dollars in it.

So except for the new exemption for the HSAs, we are still stuck with all the same old problems with the Minnesota state exemptions. Oh well, at least the antique radio in my office is exempt.

March 18, 2017September 21, 2020

Nothing is More Expensive Than A Cheap Bankruptcy Lawyer

By David J. Kelly, Minnesota Bankruptcy Lawyer since 1976

Recently I had a bankruptcy case where a seemingly small and innocent circumstance turned up after the case was filed. It seemed normal to my client at the time and certainly not dishonest in any way. It wasn’t illegal, immoral or fattening. It just happened, however, to be one of those things which can run afoul of some of the more nonsensical provisions of the bankruptcy code.

I could have just said well that’s too bad and let things land wherever. Fixing the situation was probably beyond the scope of what I had signed on for in my retainer agreement. Many of the larger law firms, particularly the mills that crank out large volumes of cases for cheap, would have just let it go. Lawyers don’t promise that everything will be perfect; we don’t promise that nothing will go wrong. Sometimes it’s just too bad, isn’t it?

But that kind of approach is just not how I do things. I really care about the outcome of my work and I really care about my clients. I just could not let it go. It would, and actually did, keep me awake at night. I started asking my client more questions, started asking for more documentation, more history. I explained that there was a problem, but I was aware of two or three exceptions, loopholes if you like, and I was determined to find one that fit.

I found what I was looking for and put it together for presentation to the bankruptcy trustee. When I was finished, the trustee agreed with me that the issue was settled in my client’s favor and the case should proceed in the usual boring way.

On a forum at AVVO.com, Las Vegas bankruptcy attorney Dorothy Bunce said it best in answer to a question about how to find a cheap bankruptcy lawyer:

“If you have $70,000 in debt, why do you care ‘how much does it cost?’ Talk about being penny wise and pound foolish. Whatever the bankruptcy attorney charges, if the attorney takes care of you and eliminates as many of your debts as legally possible, protects your assets, and answers your questions, price is immaterial. When “how much” is someone’s first question to me, I get rid of them as soon as I can because they are telling me they don’t value what I do and will have to learn the hard way that NOTHING IS MORE EXPENSIVE THAN A CHEAP LAWYER.” Quoted with Ms. Bunce’s permission.

That sure as heck says it all.

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

February 4, 2017February 4, 2017

The Minnesota Bankruptcy Responsibility Forms

In fall of 2010 the bankruptcy judges in the Minnesota were getting upset. Their phones were ringing with calls from people who had questions that should have been answered by their lawyers; but these people were complaining that their lawyers would not return the calls.

At about the same time the judges started hearing complaints from the trustees about lawyers not showing up for the hearings (meeting of creditors). It didn’t take long for them to figure out that there were a large number of new lawyers on the scene who didn’t know what they were doing. Just out of law school, they were trying to pay their student loans by jumping into what was at that time a booming bankruptcy market. Worse than that, however, many of these lawyers had been hired by fly by night petition preparation mills who were asking them to just sign off on bankruptcy petitions which had been prepared in India or who knows where. So although there was a lawyer’s name on the bankruptcy case, it had actually been prepared by an automated service. This resulted in many cases being filed on behalf of clients who had never actually talked with or met the person who supposedly was their lawyer.

Lots of things were going wrong with these cases. This made it harder for everyone in the system. In an effort to remedy the situation, our judges created and began to require the use of the following “responsibility forms.” Although I was embarrassed for my profession – that it had come to this – when they first came out, I can now see that they have some value. I reproduce them here. Please note that the form for Chapter 7 is slightly different than the one for Chapter 13. Now that it’s been over six years since all that happened, it may be old news; but both the lawyer and the client are still required to sign these forms at the time a case is filed.

By the way, usually when I discuss these forms with my clients, I refer to them as “the dummy checklist.” If it weren’t for some real dummies, we would not need them.

NOTICE OF RESPONSIBILITIES OF
CHAPTER 7 DEBTORS AND THEIR ATTORNEYS
This Notice lists certain responsibilities of debtors and their attorneys. Nothing in this document changes, limits, or in any way alters the debtor’s or the debtor’s attorney’s obligations under the Bankruptcy Code, the local and national rules, or any rule of professional responsibility.

UNLESS THE COURT ORDERS OTHERWISE:

I. Before the case is filed, the attorney for the chapter 7 debtor shall, at a minimum:

A. Meet with the debtor to review and analyze the debtor’s real and personal property, debts, income, and expenses and advise the debtor on whether to file a bankruptcy petition;

B. Explain the various bankruptcy and non-bankruptcy options, the consequences of filing under chapters 7, 11 or 13 and answer the debtor’s questions;

C. Explain to the debtor how the attorney’s fees are paid;

D. Advise the debtor of the requirement to provide to the trustee the most recently filed tax return(s) at least seven days prior to the scheduled meeting of creditors. In addition, advise the debtor of the requirement to attend the meeting of creditors and identify the documents the debtor must bring to the meeting;

E. Advise the debtor that providing false information in the bankruptcy schedules or false testimony at the meeting of creditors or other hearing or trial may expose the debtor to criminal prosecution and denial of discharge;

F. Advise the debtor of the necessity of maintaining liability, collision, and comprehensive insurance on vehicles securing loans or leases;

G. Timely prepare and file the debtor’s petition, plan, schedules, statements, certificates, and other documents required to commence a case, and review them for accuracy contemporaneously with the filing.

II. After the case is filed, the attorney for the chapter 7 debtor shall, at a minimum:

A. Ensure that the debtor is adequately represented by an attorney at the meeting of creditors;

B. Prepare, file, and serve any necessary amendments to the petition, schedules, and statements;

C. Promptly respond to the debtor’s questions throughout the case;

D. Consider and advise the debtor concerning the debtor’s options to buy, sell or refinance real or personal property and assume or reject executory contracts or unexpired leases;

E. Prepare and file a proof of claim for a creditor when appropriate to protect the debtor’s interest;

F. Fully advise the debtor of the legal effect and consequences of proposed reaffirmation agreements and any defaults thereunder and, where appropriate, negotiate alternate terms with secured creditors, ensure that any agreement is fully and properly completed and filed and appear at any hearing, if required;

G. Advise the debtor in motions for relief from the automatic stay, file objections when appropriate, and appear, when required, at any hearing;

H. Prepare, file, and serve responses to motions for dismissal of the case;

I. Advise the debtor of the requirement to complete an instructional course in personal financial management and the consequences of not doing so;

J. Represent the debtor in connection with any audit request; and

K. Represent the debtor in bringing and defending any and all other matters or proceedings in the bankruptcy case as necessary for the proper administration of the case.

III. The attorney shall comply with Local Rule 9010-3 and represent the debtor in bringing and defending all matters in the bankruptcy case until a substitution of attorneys is filed or an order is entered allowing the attorney to withdraw.

Unless otherwise agreed, the attorney has no responsibility to represent the debtor in adversary proceedings. However, if an adversary proceeding is filed against the debtor, the attorney will explain to the debtor the estimated cost of providing representation in the adversary proceeding, the risks and consequences of an adverse judgment, and the risks and consequences of proceeding without counsel, as well as the sources, if any, of possible pro bono representation.

IV. Before the case is filed, the chapter 7 debtor shall:

A. Fully disclose, review and analyze with the attorney the debtor’s real and personal property, all debts, income, expenses and all other financial information needed to properly complete the schedules and statements;

B. Prior to and throughout the case respond promptly to all communications from the attorney;

C. Prior to and throughout the case, timely provide the attorney with full and accurate financial and other information and documentation the attorney requests, INCLUDING BUT NOT LIMITED TO:

1. A Certificate of Credit Counseling and any debt repayment plan;

2. Proof of income received from all sources in the six-month period preceding filing, including pay stubs, social security statements, workers’ compensation payments, income from rental property, pensions, disability payments, child and spousal support, and income from self-employment;

3. The most recently filed federal and state income tax returns, or transcripts of returns, as well as any other returns requested by the attorney, the trustee, the court, or a party in interest;

4. A government-issued photo identification and proof of social security number, such as a social security card or W-2;

5. A record of interest, if any, in an educational individual retirement account or a qualified state tuition program;

6. The name, address, and telephone number of any person or state agency to whom the debtor owes back child or spousal support or makes current child or spousal support payments, and any and all supporting court orders, declarations of voluntary support payments, separation agreements, divorce decrees, or property settlement agreements;

7. Any insurance policies requested by the attorney;

8. Vehicle titles for all cars, trucks, motorcycles, boats, ATVs, and other vehicles titled in the debtor’s name;

9. Legal descriptions for all real property, wherever located, owned by the debtor or titled in the debtor’s name, or in which the debtor has any interest whatsoever, including but not limited to, a timeshare, remainder interest, or life estate;

10. Documents relating to any inheritance to which the debtor is entitled or may be entitled;

11. Information relating to any foreclosures, repossessions, seizures, wage garnishments, liens, or levies on assets which occurred in the preceding 12 months or continues after the filing of the case;

12. Information and documents relating to any prior bankruptcies filed by the debtor(s) or any related entity;

13. Any changes in income or financial condition, such as job loss, illness, injury, inheritance, or lottery winnings before or during the case;

14. Information and documents relating to any lawsuits in which the debtor is involved before or during the case or claims the debtor has or may have against third parties;

15. Information relating to any seizure of tax refunds by the IRS or Department of Revenue;

16. All information or documentation needed to respond to any motion or objection in the bankruptcy case;

17. Any tax returns, account statements, pay stubs, or other documentation necessary to timely comply with requests made by the United States Trustee or the Chapter 7 Trustee or any audit requests.

D. Cooperate with the attorney in preparing, reviewing, and signing the petition, schedules, statements, and all other documents required for filing a bankruptcy case.

V. After the case is filed, the chapter 7 debtor shall:

A. Timely and promptly comply with all applicable bankruptcy rules and procedures;

B. Appear punctually at the meeting of creditors with recent proof of income, a government-issued photo identification card, proof of social security number, and copies of all financial account statements covering the date the bankruptcy petition was filed;

C. Contact the attorney before buying, refinancing, or contracting to sell real property and before entering into any loan agreement until the debtor receives a discharge;

D. Keep the court, the trustee, and the attorney informed of the debtor’s current address and telephone number; and

E. Complete an approved debtor education course and provide the certificate of attendance to the attorney for filing.

VI. The chapter 7 debtor’s attorney shall, both before and after the case is filed, comply with all applicable professional and ethical rules and shall exercise civility in dealings with all entities with which the attorney comes in contact. The attorney shall also advise the chapter 7 debtor to likewise act in a civil and courteous manner, to dress in a manner appropriate for a federal proceeding and debtors shall do so.

Signatures. By signing this acknowledgment, the debtor and the attorney certify they have read it and understand what is required of the debtor and the attorney in this bankruptcy case.

A fully executed copy of this document must be filed with the petition commencing the bankruptcy case of the debtor(s).

NOTICE OF RESPONSIBILITIES OF
CHAPTER 13 DEBTORS AND THEIR ATTORNEYS

This Notice lists certain responsibilities of debtors and their attorneys. Nothing in this document changes, limits, or in any way alters the debtor’s or the debtor’s attorney’s obligations under the Bankruptcy Code, the local and national rules, or any rule of professional responsibility.

UNLESS THE COURT ORDERS OTHERWISE:

I. Before the case is filed, the attorney for the chapter 13 debtor shall, at a minimum:

A. Meet with the debtor to review and analyze the debtor’s real and personal property, debts, income, and expenses and advise the debtor on whether to file a bankruptcy petition;

B. Explain the various bankruptcy and non-bankruptcy options, the consequences of filing under chapters 7, 11 or 13 and answer the debtor’s questions;

C. Explain to the debtor how the attorney’s and trustee’s fees are paid;

D. Explain what payments will be made directly by the debtor and what payments will be made through the debtor’s chapter 13 plan, with particular attention to mortgage and vehicle loan payments, as well as any other claims with accrued interest;

E. Explain to the debtor how, when, and where to make the chapter 13 plan payments;

F. Explain to the debtor that the first plan payment must be made to the trustee within 30 days of filing the case;
G. Advise the debtor of the requirement to provide to the trustee the most recently filed tax return(s) at least seven days prior to the scheduled meeting of creditors. In addition, advise the debtor of the requirement to attend the meeting of creditors and identify the documents the debtor must bring to the meeting;

H. Advise the debtor that providing false information in the bankruptcy schedules or false testimony at the meeting of creditors or other hearing or trial may expose the debtor to criminal prosecution and denial of discharge;

I. Advise the debtor of the necessity of maintaining liability, collision, and comprehensive insurance on vehicles securing loans or leases;

J. Timely prepare and file the debtor’s petition, plan, schedules, statements, certificates, and other documents required to commence a case, and review them for accuracy contemporaneously with the filing.

II. After the case is filed, the attorney for the chapter 13 debtor shall, at a minimum:

A. Ensure that the debtor is adequately represented by an attorney at the meeting of creditors and make every effort to obtain confirmation of the plan;

B. Prepare, file, and serve any necessary amendments to the petition, schedules, and statements;

C. Respond to any objection to plan confirmation and, where necessary, prepare, file, and serve a modified plan, and appear, as required, at any hearing;

D. Prepare, file, and serve post-confirmation documents necessary to modify the plan;*

E. Promptly respond to the debtor’s questions throughout the case;

F. Prepare, file, and serve necessary motions to buy, sell, or refinance real or personal property;*

G. Prepare and file a proof of claim for a creditor when appropriate to protect the debtor’s interest;

H. Object to improper or invalid claims when appropriate to protect the debtor’s interest;*

I. Advise the debtor in motions for relief from the automatic stay, file objections when appropriate, and appear, when required, at any hearing;*

J. Consider and advise the debtor concerning lien avoidance and, if appropriate, prepare, file, and serve necessary motions to avoid liens on real or personal property;

K. Prepare, file, and serve responses to motions for dismissal of the case;*

L. Advise the debtor of the requirement to complete an instructional course in personal financial management and the consequences of not doing so;

M. Prepare, file, and serve the Chapter 13 Debtor’s Certifications Regarding Domestic Support Obligations and Section 522(q) and the Certificate of Debtor Education immediately after completion of plan payments;

N. Represent the debtor in connection with any audit request;* and

O. Represent the debtor in bringing and defending any and all other matters or proceedings in the bankruptcy case as necessary for the proper administration of the case.

IV. Before the case is filed, the chapter 13 debtor shall:

B. Prior to and throughout the case respond promptly to all communications from the attorney:

C. Prior to and throughout the case, timely provide the attorney with full and accurate financial and other information and documentation the attorney requests, INCLUDING BUT NOT LIMITED TO:

1. A Certificate of Credit Counseling and any debt repayment plan;

3. The most recently filed federal and state income tax returns, or transcripts of returns, as well as any other returns requested by the attorney, the trustee, the court, or a party in interest;

4. A government-issued photo identification and proof of social security number, such as a social security card or W-2;

5. A record of interest, if any, in an educational individual retirement account or a qualified state tuition program;

7. Any insurance policies requested by the attorney;

8. Vehicle titles for all cars, trucks, motorcycles, boats, ATVs, and other vehicles titled in the debtor’s name;

10. Documents relating to any inheritance to which the debtor is entitled or may be entitled;

12. Information and documents relating to any prior bankruptcies filed by the debtor(s) or any related entity;

13. Any changes in income or financial condition, such as job loss, illness, injury, inheritance, or lottery winnings before or during the case;

14. Information and documents relating to any lawsuits in which the debtor is involved before or during the case or claims the debtor has or may have against third parties;

15. Information relating to any seizure of tax refunds by the IRS or Department of Revenue;

16. All information or documentation needed to respond to any motion or objection in the bankruptcy case;

17. Any tax returns, account statements, pay stubs, or other documentation necessary to timely comply with requests made by the United States Trustee or the Chapter 13 Trustee or any audit requests.

D. Cooperate with the attorney in preparing, reviewing, and signing the petition, schedules, statements, and all other documents required for filing a bankruptcy case.

V. After the case is filed, the chapter 13 debtor shall:

A. Timely and promptly comply with all applicable bankruptcy rules and procedures and with the terms of the chapter 13 plan;

C. Make all required payments to the Chapter 13 Trustee, and to such creditors as are being paid directly, and inform the attorney if required payments cannot be made;

D. Contact the attorney before buying, refinancing, or contracting to sell real property and before entering into any loan agreement;

E. Keep the court, the trustee, and the attorney informed of the debtor’s current address and telephone number;

F. Complete an approved debtor education course and provide the certificate of attendance to the attorney for filing;

G. Pay all required domestic support obligations;

H. Cooperate with the attorney to complete and sign the Chapter 13 Debtor’s Certifications Regarding Domestic Support Obligations and Section 522(q) immediately after making the final plan payment.

VI. The chapter 13 debtor’s attorney shall, both before and after the case is filed, comply with all applicable professional and ethical rules and shall exercise civility in dealings with all entities with which the attorney comes in contact. The attorney shall also advise the chapter 13 debtor to likewise act in a civil and courteous manner, to dress in a manner appropriate for a federal proceeding and debtors shall do so.

Signatures. By signing this acknowledgment, the debtor and the attorney certify they have read it and understand what is required of the debtor and the attorney in this bankruptcy case.A fully executed copy of this document must be filed with the petition commencing the bankruptcy case of the debtor(s).

* Local Rule 2016-1(d)(2) provides that an attorney who performs these services after confirmation of the plan may request additional attorney’s fees and expenses in connection with such services.

June 11, 2016June 11, 2016

Motorcycles, Boats or Horses Can be Toxic to your Chapter 7 or Chapter 13 Minnesota Bankruptcy

I recently posted on Google Plus about how certain things tend to be toxic to a possible bankruptcy. The most common one I see is a Harley Davidson. Other items in this category would include boats and horses, especially if they are fancy and not paid for. This statement resulted in questions being asked about exactly what I meant. If the problem is that a Harley, a boat or a horse are assets which would be lost in a Chapter 7 bankruptcy, then wouldn’t it be better for them to not be paid for. If they weren’t paid for, after all, they wouldn’t be much of an asset.

My answer was that such items make a bankruptcy difficult whether paid for or not. If they are paid for, they are assets that very likely would be lost in a Chapter 7 or would increase the required payments in a Chapter 13.

If they are not paid for, you have a situation where the Debtor will want to tell the bankruptcy trustee that he or she can’t afford to pay debts, except that somehow they CAN afford to keep paying for the Harley, the boat or the horses. This does not play well. The only thing to do if they really need the bankruptcy is to sell or surrender before filing, or state in the bankruptcy petition an intention to surrender the items after the case is filed.

Many have been the times when I have had a potential client disappear never to be heard from again when I said that the Harley has to go. There’s a whole subculture where any kind of misery is preferable to giving up the Harley. Boats are usually a bit easier to let go, but horses are also very hard to give up.

One exception might be a case with a 100% Chapter 13 plan. That would be a plan where 100% or the unsecured debts are to be paid. Since the bankruptcy trustee can’t ask for more than 100%, the Debtor would have more wiggle room when it came to something like keeping a motorcycle. Even then the trustee would not like it, but more than likely the trustee could not prevent it. I see very few cases where the payout is 100%. Most people who can afford to do that don’t need a bankruptcy.

This post is for general information purposes only, is not legal advice and does not create an attorney-client relationship. I am a Debt Relief Agency. I help people file for relief under the federal bankruptcy code.

July 3, 2015

Why Everything Has to be Disclosed when Filing Bankruptcy

I recently noticed a familiar name and face in an article in the Star Tribune. The headline was “Minneapolis Bankruptcy Trustee Smelled a Rat and Got the Goods on Jewelry Store Owner,” an article by reporter Randy Furst. The article describes a situation where a gentleman, Daniel Rohricht, apparently closed his jewelry store, went out of business and filed Chapter 7 bankruptcy. This was about four years ago. The debts listed in the bankruptcy came to over $250,000.

Mr. Rohricht claimed that all the jewelry was gone, having all been sold. The bankruptcy seemed to go well. One of our local bankruptcy trustees, a lawyer named Nauni Manty, was appointed as the trustee handling the case. Ms. Manty knows a lot about jewelry and the jewelry business, but there was no evidence that anything was being hidden. It is the trustee’s job to find assets for the creditors. But after doing what investigation she could, she accepted a settlement of $17,500 from Mr. Rohricht. The settlement agreement stated, however, that if Ms. Manty became aware of any undisclosed assets, the deal was off and they were back to square one.

Years passed, but Ms. Manty did not forget Mr. Rohricht. Eventually she got wind that he had purchased a store in Wisconsin and had gone back into business. She was able to prove that the jewelry and precious stones that he was hauling into the new store were items he had hidden in 2009 prior to filing his bankruptcy. To make a long story short, he recently pled guilty to concealing assets and is now facing federal prison and a very large fine.

It’s not unusual that I will run into a person who has something he or she doesn’t want to disclose in their bankruptcy case. They tend to believe firmly that it is something nobody would ever find out about. That’s what Mr. Rohricht thought too. I get asked why whatever it is must be disclosed. Here’s why. My understanding is that every year in Minnesota on average two or three people are convicted of bankruptcy fraud. It’s never happened to any client of mine, and I really want to keep it that way.

This post 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.

October 10, 2014October 20, 2014

Don’t be Tricked by Misleading Bankruptcy Attorney Fee Advertising

Plan ahead before you sign the marriage license.

A lot of the advertising about attorney fees for bankruptcy is misleading – even tricky. Today I checked on a Google ad and the web page it leads to which says a certain law firm will file a bankruptcy after a payment toward the attorney fee of only $99. I found this to be not exactly accurate.

The web page says that $99 toward the attorney fee, along with the court filing fee and counseling program fees, would be all one would have to pay prior to filing. It was a slick web page, obviously done at considerable expense, where I found the following statement:

“You only have to pay the court filing fee of $335 and the credit report / credit course fees of $65 and an attorney fee of $99 to file.” It also said: “Only $99 Down, No Co-Signer Needed, File Now/Pay over Time, Affordable Payment Plans” in big blue letters.

I wondered how can these people can be doing this. I could never cover my office rent, malpractice insurance, phone and internet bills and office supplies if I didn’t charge a lot more than that. So I went to the bankruptcy court web site and ran a search for actual cases they had filed. This is not free, so I didn’t look very far. All I did was check the last two cases this law firm filed to see what the attorney fee had been. Attorney fees have to be disclosed on the bankruptcy petition. What I found was that for the last two cases they filed, both Chapter 7s, their fee was $990. And the court filings also said they had received all of the $990 before filing the case. That’s lower than what I would usually charge, but it’s a lot more than $99.

Now one thing you should understand about attorney fees in a Chapter 7 bankruptcy is this. If the attorney does not collect his or her fee prior to filing, any part of the fee that is still owing is just another debt in the bankruptcy case. The attorney is just another creditor. The attorney, like all the other creditors, is under an immediate court order requiring that he or she do nothing to try to collect. It is illegal and unethical for the attorney to collect anything from the client once the case is filed. That’s why you may see references to a co-signer in some advertising. The lawyer can still try to collect the fee from a co-signer as long as the co-signer is not his bankruptcy client. This of course puts the bankruptcy lawyer in the position of being a bill collector. I don’t EVER want to be a bill collector.

I went back to the web page thinking it must be referring to Chapter 13 bankruptcy only. When it comes to paying attorney fees after the case is filed, a Chapter 13 bankruptcy is a very different animal from a Chapter 7. If you file a Chapter 13 bankruptcy it is possible to pay part of the attorney fee through the Chapter 13 payment plan. I hit Control F to search the page and typed “13” into the search box. No mention of “13” or “Chapter 13” appears anywhere on the page. The page seems to be talking about Chapter 7. The only filing fee the page mentions is $335, which is the Chapter 7 court filing fee. The court filing fee for a Chapter 13 is slightly lower.

When I look at their web page I can see that it is very slick, and at the bottom is the name of a web development company that designed the page. I can remember a few years back when I hired a person to redesign my page. The person I hired started adding all sorts of new key words and content, which was submitted to me for review. There was a whole lot of it, and it was hard to keep up with what the designer was doing. Is it possible that the web designer wrote up this stuff while the law firm was not paying attention? It could happen. I’m now back to doing all my own web design work. I found that having my web page in the hands of a professional design and marketing person was scary.

So maybe they just have a busy marketing person who they can’t keep up with. Maybe it’s not entirely the law firm’s fault. But I do want to suggest to you that you should be very wary when you see something like this and don’t be taken in by it. If it seems to good to be true, it probably is.

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

Dave Kelly, Kelly Law Office, Minnetonka, MN 952-544-6356

August 14, 2014August 14, 2014

Avoid Having your Bank Accounts Seized when you File Bankruptcy in MN

I don’t know what banks and credit unions are doing in other parts of the country. I speak here only of what I have seen and heard about here locally in Minnesota, and specifically just the Twin Cities area. Here in Minnesota, in the Twin Cities area, there is a substantial danger that your savings and checking accounts will be seized or frozen by your bank or credit union when you file a personal bankruptcy. I have always believed it to be a despicable thing to do. Some banks and credit unions are worse than others at doing this. When you choose a lawyer to handle your bankruptcy case, you might want to make sure that he or she is a person with enough experience to be aware of this problem and how to head it off before it happens.

The problem is this. If the bank or credit union is one or your creditors, you can expect that institution to seize your accounts as soon as they are notified of the bankruptcy. If this is not planned for it can result in quite a surprise – checks bouncing, a debit card that has stopped working, and the evaporation of money you thought you had. There are some banks that are worse than others when it comes to this problem. They might freeze your account even if they are not a creditor, especially if your account has a fairly large sum of money – something in excess of $3,000. I don’t want to mention them bank by name here, but I believe I did mention one in this video.

You should expect your bankruptcy attorney to coach and advise you as to how this is to be avoided. What I tell my clients is that if they have an account with a bank or credit union which they owe money to, that account should be closed well in advance of the filing of the bankruptcy case – whether it’s a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. If you don’t close that account, the bank or credit union will claim a right of setoff against your money in the account, which is a fancy way of saying that they will seize the money. There are certain banks where all accounts should be closed if at all possible, whether you owe them money or not. Once they seize the money you won’t get it back – or at least usually won’t.

So the thing to do is to close all such accounts before you file your bankruptcy case. It takes planning of course. I’m not saying you should try to live without a checking account. What you need to do is open an account at a bank which is NOT one of your creditors, and get all your automatic deposits and automatic withdrawals up and running with the new account before we file your bankruptcy case. I believe that the best banks to use for this purpose are the small neighborhood banks – for example a bank with a name that starts with “State Bank of …” or “Citizens Bank of …” The process of getting the new account set up and getting the auto deposits and auto payments moved over to and set up at the new bank may take a few weeks, but I consider this to be part of the normal planning and preparation that goes into making your case as painless as possible.

June 28, 2014

What if You Have a Rental Property and Need to File Bankruptcy?

Here’s a video I posted at YouTube where I comment about how rental properties should be dealt with in a personal bankruptcy. I talk primarily about Chapter 7 personal bankruptcy, but I also get into Chapter 13 bankruptcy to some extent. Unless it is properly handled, the filing of a bankruptcy may result in the property being taken away from you. It’s complicated and you would be well advised to find and consult a good lawyer about the exact situation you have with your rental property. The video is only three and a half minutes long, and only scratches the surface if it even does that.

These days it has become common for families to have a former home that they could not sell. Maybe they outgrew the old house, or maybe they had to move because of their employment. Not being able to sell the old place, the best they could do was to rent it out. It seems as if most of the time these places have a negative cash flow, although not always.

When the time comes to look into filing a personal Chapter 7 or Chapter 13 bankruptcy, the rental property can become quite a problem. Typically the trustee will not find it acceptable to say on your budget sheet that you intend to continue to pay the expenses of a property that is losing money.

Even if the place has a positive cash flow, trying to keep it in a bankruptcy situation tends to be more trouble than it’s worth. The extra income might be just enough to disqualify you from filing a Chapter 7 bankruptcy, especially if you have stopped paying the mortgage on the property.

The best way to hang on to a rental property, if that is something that you really want to do, may be to do a Chapter 13 bankruptcy instead of a Chapter 7. For that to work you would need to have the equity in the property not amount to much and to have it producing a positive cash flow.

Unless it is properly handled, the filing of a bankruptcy may result in the property being taken away from you. It’s complicated and you would be well advised to find and consult a good lawyer about the exact situation you have with your rental property.

This is for information purposes only and is not legal advice. Neither the video nor these comments create an attorney-client relationship. Please consult the attorney of your choice concerning the details of your case. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.