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November 20, 2014November 20, 2014

Questions Your Bankruptcy Trustee will Ask at the Meeting of Creditors

In most of my discussions with clients, the focus is on getting the bankruptcy petition filed. Sometimes I am surprised to be asked by a client whether he or she will have to go to court. This question always surprises me, because the answer is of course we have to make a court appearance. I tend to thing everybody knows that, but obviously they don’t know about it if I don’t talk about it. Filing a Chapter 7 or Chapter 13 bankruptcy petition is not like filing a tax return, where you file it and you’re done. There’s a lot more to it than that.

After the bankruptcy petition is filed, you will receive a notice from the court of the scheduling of a hearing called the meeting of creditors. The section of the bankruptcy code that requires it to take place is Section 341, so sometimes you will hear this hearing referred to as “the 341.” The rules require that it be held no less than 20 and no more then 40 days after the case is filed. It usually takes place about 30 days after filing. Here’s a video I posted at YouTube recently where I discuss what the trustee will be asking at this hearing.

Most attorneys have a handout listing the questions you can expect. The trouble with such handouts is that every trustee has their own favorite questions and even special interests. We have one trustee who seems to ask extra questions about whether somebody is going to die and leave you something. Another trustee is very interested in jewelry and actually is known to carry a jeweler’s eye glass in her purse. Some trustees always want copies of the car titles, while others don’t seem to care about them. The questions in a Chapter 7 case will tend to be more focused on assets, while those in a Chapter 13 will have more about income and expenses.

Many of my clients expect that they will be given a chance to explain why they filed a bankruptcy. They wish they could explain the series of events that led them to need a bankruptcy. In my experience, the trustee almost never asks anything about that and probably does not what to hear about it. Some of the questions may include something like the following:

Are you still living at the same address that is stated in your petition?
Have you read all the papers that you filed with the court?
Did you sign them?
Are they true and correct?
Are you personally familiar with what your papers contain?
Do you have any additions or corrections you wish to make at this time?
Did you list all your debts?
Did you list all your assets?
Have you filed for bankruptcy before? When? What kind of bankruptcy? Were you discharged?
Do you have a domestic support obligation?
Have you sold or given anything away to a close friend or relative in the past six years? Some trustees may ask for a shorter period of time. If the answer is yes, there will additional follow-up questions.
Have you paid over $600 to any unsecured creditor within the 90 days before you filed your bankruptcy?
Have you operated a business any time in the past six years?
When did you purchase your home? What was the purchase price? How did you set the value of your home? These are only asked if you own your home.

I start coaching my clients about what questions to expect almost as soon as I get hired. Then as we go through the process of preparing the petition, I can give a better idea as to what to expect based on the details of the case. If you have a good lawyer, he or she will be making sure that you are prepared for everything that might be asked at this meeting of creditors. Usually I just call it the “hearing,” because the last thing you are likely to see at the meeting of creditors is a creditor.

This post is for general information purposes only and is not legal advice. It does not create an attorney-client relationship. You need to talk with your own lawyer about this. The questions that one can expect vary from one part of the country to another, even though it’s set up under federal law. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.

Dave Kelly

Kelly Law Office
11900 Wayzata Blvd. #116E
Minnetonka, MN 55305
952-544-6356
http://www.mn-bankruptcy.com

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

October 7, 2014May 2, 2023

Close any Extra Bank Accounts Before you File Personal Bankruptcy

When it comes to what bank accounts you have open at the time of filing a personal bankruptcy, the adage “keep it simple” certainly applies. In either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, the trustee is going to want to see a statement for every bank account that you have open on the day the case is filed. The more bank accounts you have, the more complicated that can get. It seems as if every time I have a case where my client has more than three bank accounts, that client has trouble getting the required statement for at least one of them.

If the bank is also one of the creditors which you have listed in your case, you might find them particularly uncooperative when you try to get a statement. I was making a video on another subject when I made a few parenthetical remarks about how, before filing personal bankruptcy, you should close as many bank accounts as possible.

There are enough other things that can go wrong in any bankruptcy case, without having to worry about not being able to get a statement from some obscure bank that has no offices nearby and which has shut down your on line access. In this video I explain that prior to filing a bankruptcy case, it is prudent to close as many of your bank accounts as possible. It’s best to go into your bankruptcy case with only has one bank account – a checking account at a bank or credit union which is not a creditor.

Your bankruptcy lawyer should know where the best places to bank are from a bankruptcy perspective. Some banks and some credit unions are more bankruptcy friendly than others. We have one bank in particular in the Twin Cities Minnesota area which will freeze your accounts when they find out you filed a bankruptcy, and they tend to do that whether you owe them money or not. That bank of course is to be avoided. 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 20, 2013

Those Troublesome Timeshares

A vacation timeshare can become like a stone around your neck. I would say if you are thinking of getting one, don’t.

A while back I heard from some people I had done a Chapter 7 bankruptcy for in 2006. After hearing nothing for years, out of the blue they were being sued for dues and maintenance fees by a timeshare company. The vacation timeshare was owned at the time of filing the bankruptcy. My clients were asking me the obvious questions: Wasn’t that taken care of when we filed the bankruptcy? How can they be suing us now?

Timeshares are unusual animals and a bankruptcy discharge might not apply to the maintenance fees and ownership association dues which accumulate AFTER the filing of the bankruptcy. Any fees owing from before the filing of the bankruptcy would, however, ordinarily be discharged.

When it comes to fees which accumulate after the filing, the reason they might not be dischargeable is a provision among those that Congress added to the bankruptcy code in 2005, Section 523 (a) (16). If you go here you can see it, just scroll down to (16). This was written mostly to apply to condo and homeowner association fees, but it also says “in a share of a cooperative corporation … for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation or such lot …”

Some timeshares involve real estate ownership and are a version of a condominium or townhouse setup. Others are cooperatives that own the property and the customer gets a membership in the coop. If you have either of these, you are probably liable for the fees which are accumulated AFTER the bankruptcy filing and continue to accumulate until you are no longer an owner. This is or can be a terrible spot to be in, because many of these places have quit trying to take back the units when they are not being paid for. Most of them are worth little or nothing and can’t be sold. A timeshare owner might be stuck with it indefinitely.

However, if you merely have a contract that gives you a license to use the facilities during a certain time, without any sort of ownership of the property, then liability for the fess would probably not continue after the bankruptcy filing. The bankruptcy should kill it for good. So exactly how the timeshare is set up makes a big difference. I have looked over many stacks of timeshare documents, some of them even in foreign countries. Those papers tend to be very hard to wade through, very hard to figure out. I can read and write, and I even went to law school, but sometimes it can be hard to figure which category a certain timeshare setup belongs in.

If you have a timeshare of any kind and are considering bankruptcy, be sure to tell your lawyer all about it. If you can sell it before filing the case, you probably should. Make your best effort to figure out whether it has a market value and what that is. Provide your lawyer with all the paperwork you may have about it. Make sure it is properly listed and properly described in your bankruptcy petition, and make sure that whoever is running the organization gets notice of your bankruptcy filing.

Then cross your fingers, hold your breath, or better yet – pray a lot. Hope the darn thing goes away.

As with any other financial matter, if you are considering a bankruptcy, don’t make any serious moves without consulting your attorney first.

This post is for general information purposes only and is not legal advice. It does not create an attorney-client relationship. If you need legal advice, please consult the attorney of your choice.

July 7, 2013July 7, 2013

Paying Off Student Loans with Credit Cards – Bad Idea

Here’s a link to an interesting article from creditcards.com discussing possible consequences of paying off student loans with credit cards. I’ve never met anybody who tried it, or at least admitted trying it. The trouble with replacing old debt with new debt is that any debt you run up right before filing a bankruptcy is very likely to be considered fraud. The creditor gets to object and can prevent the discharge of that particular debt.

Also watch out for paying tax debt with credit cards. The 2005 law says that if you transfer a tax debt to a credit card, it remains non-dischargeable.

http://www.creditcards.com/credit-card-news/paying-off-student-loans-credit-cards-bad-idea-1282.php

June 27, 2013

Moving to New Location Today

Anyone who has spoken with me over the past few months knows that I have been moaning and complaining about how my landlord was selling out to a developer and the building containing my office is scheduled to be torn down. My beautiful office being destroyed. It saddens me.

As of this morning, however, the moving truck is on its way and I hope to be unpacking at my new location as of late this afternoon. The telephone and internet man is not coming until tomorrow morning, however, so that means that communications via my land line may be disrupted for a while. If you need me the best bet will be to call my cell – 612-735-3797.

The new location will be 11900 Wayzata Blvd. #116E, Minnetonka, MN 55305. This is on the frontage road on the north side of 394 between Hopkins Crossroad and Ridgedale Drive. It’s about a block east of the Staples store. The office complex is called Marsh Run.

As many of you know, my old office had a patio and a back yard – something that an office would not ordinarily have. For an office it was wonderful, and I loved it. I didn’t think I would ever find any kind of an office space even close when it came to an amenity like that. But I have managed to find something that has some similarity in that regard. The new office actually has a deck that overlooks a little pond. As far as the view goes, it is actually better than the old office.

I’m going to be pretty distracted with moving and getting unpacked for the next few days; but taking care of my clients and taking care of business has priority. Everything that needs immediate attention will be taken care of. As I said, if you need me just call my cell: 612-735-3797.

April 11, 2013

Payday Loans – NO NO NO NO NO

I see on my Google Plus page that an outfit called “Get Payday Loans” has added me to their circles – or something. Usually I would add them back, but I just can’t do it. From where I sit payday loans are about the most evil thing on the planet. They are very addictive. Once a person gets started, they are drawn into debt and will have the devil of a time getting out.

I have never done a study or looked at any statistics on this subject. However, I have dealt with these in numerous bankruptcy cases, so I have some opinions based on what I myself have seen – at least what it looks like to me. For one thing, it looks to me as if the rates they charge are very high. Another thing I seem to be seeing is that some of the banks seem to like these things – I suspect because they charge a fee to set them up on a customer’s checking account so that when the pay check is deposited, the money automatically disappears to the lender.

I believe that anything which is automatic – happening painlessly behind the scenes without drawing full attention to itself – makes it easier to get deeply in debt.

So no, I’m not adding “Get Payday Loans” back.

April 4, 2013April 4, 2013

What to Bring to the First Meeting at My Offce

For me the starting point for most bankruptcy cases is a call from the prospective client. If you are reading this that could be you. Before anything else I like to do a screening over the phone. This can be done in about fifteen minutes, sometimes maybe a bit longer. No need to be afraid of me. I’m easy to talk to. There’s no fee for the phone conversation. If the information from the phone conversation indicates that bankruptcy is appropriate, whether that be a Chapter 7 or a Chapter 13, the next thing I want to do is meet face to face in my office for a more serious consultation. For this I will charge a small consultation fee, which I will have quoted in the phone conversation. I will credit the consultation fee against my fee for the case if we decide to go ahead. If I suggest that you come in for a consultation, it’s because I’m already fairly certain that it is a case I would accept.

There are four batches of information that I would ask you to bring when you come:

Forms. There are two forms on my web site, the bankruptcy questionnaire and the monthly expense sheet. Please print these two forms and fill them out in pen and ink. Pencil is OK too. Then bring them with you when you come. Some of the questions, especially on the first form, are hard to answer. If you can’t figure out the question, leave it blank and we’ll talk about it when you come in. Complete the expense sheet to the best of your ability, and we’ll go over those numbers when you come in too. Remember that things you charged on a credit card count as an expense as well as the things you paid for in cash or by means of your checking account.
Tax returns. I’d like to see your state and federal tax returns for the past two calendar years, along with your W2s and any similar supporting paperwork. At the time of writing this post, that would be the returns for 2011 and 2012. If you filed for a Minnesota property tax refund or Minnesota rent credit, I’d like to see that return for the past two calendar years as well. If you file separate returns for your corporation or LLC, bring them along as well.
Pay stubs and income information for the past seven months. I need to see the last seven months of pay stubs from your your job and from the job of your spouse. If you don’t have them, get them from your employer or from your employer’s web site. By seven months I mean the six previous months plus the month we are in. If you don’t have pay stubs because you are self employed, I need a spread sheet showing your gross income and your business-related expenses for that same seven month period. If you don’t have pay stubs because you are unemployed, I need detailed info on what unemployment benefits you are receiving and what taxes are being withheld from your benefits if any. If you are receiving child support or spousal maintenance, I would want dates and amounts received during that seven month period. If you are on Social Security or Social Security Disability, provide me with details of how much you received gross in the past seven months and what if anything was withheld from that. If there is any kind of income coming in from anywhere, I need to know about it.
Details about your debts. I want to see every piece of paper you have describing each and every debt. Include your credit cards, car loans, mortgages, tax debts, student loans and any fines and penalties you owe. I usually can’t make the student loans go away, but I still need to know all about them. You probably intend to keep paying your mortgages and car loans, but we need to list them anyway. Some of your tax debt may be dischargeable, but even if it isn’t we need to list it all. Be sure to include nasty letters from lawyers and collection agencies. Eventually we will be checking your credit report, but for the first meeting the information you have handy about your debt will probably be enough.

As you might have gathered by this point, that consultation in my office is usually quite thorough. I should be able to give you an opinion concerning your situation that will be worth the trip. Figure on spending an hour and a half – more if we are planning on running a means test.

April 4, 2013

Tax Season is Upon Us

Well, tax season is upon us. I am hearing from quite a few folks who have returns ready to file but don’t have the money that they are required to pay in. What I usually say is that in most circumstances it is better to file the return without paying than it is to delay filing. If you file your return without paying, the taxes you owe might be dischargeable in a bankruptcy three years from now; but if you don’t file the return, chances are that the taxes would never be dischargeable in bankruptcy.

Another reason to file is that tax filings are required to be up to date prior to the filing of a Chapter 13 bankruptcy. And for Chapter 7 bankruptcy it is best to have them up to date. It is possible to file a Chapter 7 without having the tax filings all finished, but it is not a good idea. In any bankruptcy case you are required to list all your assets and all your liabilities. A tax refund is an asset, and if you owe taxes that certainly is a liability. Either way, without the taxes done, you don’t know what you have and you can’t provide the full information that is required in the bankruptcy petition.

Some situations may call for something different, but most of the time it’s best to file on time even if you can’t pay on time. The IRS and the Minnesota Department of Revenue are usually fairly easy to work with when it comes to setting up payment plans.

March 20, 2013

Keeping Your House in a Chapter 7 Bankruptcy

Can the lien of the second mortgage be removed from my house? - Bankruptcy

Of all the questions I get asked, “can I keep my house” could be the most frequent. I have a long article about it on my site, probably too long. For one thing, the web page covers both Chapter 7 and Chapter 13. For another thing, the article covers the topic of letting the house go as well as keeping it. Here I’d like to just say a few simple words about keeping your house – the house you are living in – when you file a Chapter 7 bankruptcy.

So here I’m assuming that you are filing a Chapter 7 and you want to keep your house. If you have any equity in the house, that equity will have to be claimed as exempt in order to keep the bankruptcy trustee from taking the house away from you. In most cases claiming the house as exempt it easy. If the equity doesn’t exceed $10,000 for a single person or $20,000 for a married couple, we can claim the house as exempt under the federal exemptions. If the equity is more than that, it would be best to use the Minnesota state exemptions which allow for up to $390,000 of equity.

Once we are satisfied that your equity is protected as exempt, the next issue is the mortgages. We have to list those in the bankruptcy petition like any other debt, and that means that your personal obligation to pay them should eventually be discharged. I say mortgages in the plural, because most of my clients seem to have two – a first and a second. Some people I talk with seem to think that if their mortgage obligations are discharged, then the house is free and clear. That is not the case. The mortgage liens remain on the house even though the debt or debts themselves are discharged. Ths means that if you want to keep the house long term after filing a Chapter 7 bankruptcy, you need to plan on continuing to pay the mortgages.

This is a bit of a simplication, and for more detail read my keep my house page. But what it usually comes down to is being able to claim the equity as exempt and being able to keep making the payments.