consulting with a lawyer concerning bankruptcy Archives - Better Call Dave

December 30, 2022February 24, 2023

Eight Deleted Five Star Google Reviews

By Dave Kelly, Minnesota Bankruptcy Attorney

Now What? My Reviews are Disappearing!

After going for a couple of years without any of my Google reviews disappearing, I noticed that some were being removed starting November 15, 2022. As soon as I saw that a purge was in progress, I attempted to create a printout of all my reviews so I would have a record of what was disappearing. After the smoke settled, I went to review the printout. To my disappointment I saw that I had only captured the first couple lines of each review. Except for one, which I had already reproduced in full on my reviews page, the full text of the missing reviews was irretrievably gone. In total since November 15th I have lost nine reviews. What follows is a summary of the opening lines from eight of those reviews which I regret, except for one, is all I managed to preserve:

“Honestly, I don’t even know where to start with my review because there were so many incredible things about my experience with david Kelly. He came into my life during an extremely stressful time and managed to make me feel 90% better….”
“I definitely recommend anyone going through bankruptcy to go with Dave Kelly as their lawyer. He was professional in answering our questions and gave us a straightforward and thorough overview of the bankrupty process. ..”
I cannot express how satisfied and appreciative I am with the work of Dave. I started my online search for a great attorney and that is what I found. Dave’s website and YouTube videos were extremely helpful and very thorough. I have to say …..”
“David is a fantastic attorney. I had previously spoke with one of the larger firms in the area and did not like the way they moved the cases through very quickly and did not seem very personal to talk with. I felt like the larger firm only ….”
“Dave worked on my Chapter 13 bankruptcy with me. Filing for bankruptcy was one of the least comfortable things I’ve ever had to do. Bankruptcy was not something I came to lightly, I tried everything I could think of on my own before I …..”
“I was very lucky to get a lawyer that was Professional as well as someone who really cared about helping me out. I don’t believe that anyone wants to get a bankruptcy ever. It a little embarrassing, even in bad times that you can’t pay your ….”
“He was very professional and understanding of my situation. He was never pushy and always communicated very well. He never made me feel stupid or ashamed for filing and also made it very welcoming and comfortable. I’d highly recommend David to anyone who is considering filing. You won’t be disappointed.”
“David has the experience and decades of knowledge and proven results that got me through the process (with ease) of my chapter 7 bankruptcy.”

Quirky Standards and Requirements

Over the years I have lost well over 100 reviews which disappeared into Google’s bit bucket. Sadly they had all given me five stars. They can’t be retrieved. They are gone forever. Google seems to have very strict standards as to what reviews it allows to be posted. Some reviews are only there for a day or two before Google deletes them forever. Others can stay up for several months or even a couple of years before they disappear.

A couple of clients have given me five stars and posted simply “Thank you Dave.” Google didn’t like that and instantly removed their reviews, almost before I had a chance to notice. Another client kept having his review removed because he could not refrain from putting in too many superlatives about how great he thought I was. Webster defines “superlative” as an “exaggerated expression especially of praise.” What Google seems to be looking for in a review is a simple, toned down statement of what your experience was.

Most Common Reason Reviews Disappear

The reasons a Google review may disappear are certainly many. But the single most common reason seems to be lack of activity on the reviewer’s Google account. If you set up a Google account, use it to post a review, and then use that account for nothing else ever, the folks at Google will delete the account for inactivity after a year or two. Once the account is deleted, the reviews posted with that account are gone as well.

Only Speculation

I can only speculate as to why the reviews are gone. My comments about superlatives and everything else above is just a guess. I’ve been complaining to Google. All I get is an automated response that doesn’t really tell me anything. Words like heartless and cruel come to mind. All I can say is that it s painful to see this happening. These were people who I knew and cases I cared about.

September 20, 2022October 12, 2022

Children’s Bank Accounts At Risk in Chapter 7 Bankruptcy

By Dave Kelly, Minnesota Bankruptcy Lawyer

Recently a potential client made a hasty exit from my office after I explained that the accounts that had been set up for the children could be at risk in a Chapter 7 bankruptcy. What kind of account you set up for your children, how much you put in it and when can all make a big difference. I feel a blog post on this subject coming on. At least one post, maybe two. If you have bank accounts for your children, be sure you tell your lawyer about them.

Please note that in this article I am talking only about Chapter 7 bankruptcy. Chapter 13 bankruptcy is a whole other topic. Some of the problems described here could be more easily resolved in a Chapter 13.

529 College Savings Accounts

A 529 savings account may be the safest way to save money for your children’s college. Much like a 401K, the money you put in should be tax deductible. Such accounts are not always protected when you file bankruptcy. You have to look at how much you deposited and how long ago that was.

Any amount deposited more than two years before filing the bankruptcy should be protected. Funds that were deposited between two years and one year before the filing date are protected up to $6,425. Any more than that belongs to the bankruptcy estate and probably will be claimed by the bankruptcy trustee. AND any amount deposited within one year before filing the bankruptcy is not protected at all. Again, that amount will be claimed by the bankruptcy trustee.

Uniform Transfer to Minors Act (UTMA) Accounts

These are accounts set up under state law. The account is in the child’s name and is held under the child’s social security number. In your bankruptcy papers it would typically be listed under property held for another. The law requires, however, that an adult be named as the custodian of the account. The adult will manage the account until the child turns 18, then the money can be claimed by the child. How safe or unsafe the money in one of these accounts is depends on when the money was put in and by whom.

As a general rule, if the money in the account came from Grandma or some other third party, it should be safe. Because it never was your money. It would be best if you had records that can prove it never was your money. If you put the money in and now you want to file a bankruptcy, there could be a problem. Minnesota has a fraudulent conveyance statute that has a six year look back period. If that was money that you could have used to pay your debts but you put it in the child’s account instead, the bankruptcy trustee might be able to claw it back out of that account.

Joint Savings Account with Your Child

Of the accounts I am talking about here, this could be the most difficult kind. Your name is on the account along with the child, so how do your prove it’s not yours. For one thing it has to be listed in the bankruptcy petition along with all the other accounts your name is on. If the money did come from you, there is the same “fraudulent conveyance” problem I mentioned above. If the money came from a third party, however, like Grandma, I hope you have good records to prove that. Minnesota does have a statute that says money in a joint account belongs to the person who deposited it. If the money never was yours and you can prove it, the account is probably safe. It would help if the amount is relatively small. The larger the balance, the more likely it is that the trustee would try to make an attempt to grab it.

What if the Money in the Account is from Social Security?

Some children receive a Social Security benefit because their parent has died or or disabled. This money, however, is supposed to be available to the child’s custodian to pay for the child’s living expenses. Social Security money is generally exempt and can’t be touched. But it better be in an account where you can prove that’s what it is. Assuming you are the child’s custodian, it would be best if you were using at least some of it for the child’s expenses. If you just bank the whole thing and never touch any of it, you could appear to not be making your best efforts to avoid bankruptcy. The trustee might not be able to touch the money, but I fear the trustee could object that the case is not being filed in good faith. No such objection has ever happened in any case of mine, but I can’t promise it would never happen if the facts were lined up as I just described.

Conclusion

I have had many cases involving children’s savings accounts fly through with no problem. But as you can see, there are a lot of ifs, buts and maybes concerning these accounts. Don’t assume you know what to do or how to handle these. You need to have the accounts reviewed by an experienced lawyer well in advance of any bankruptcy filing.

Better call Dave. 952-544-6356.

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.

August 22, 2015August 22, 2015

Losing Ground on Payday Loans? Perhaps Bankruptcy is the Answer

If you’ve been reading my stuff, you know I’ve said this before. My clients are good people. Prior to giving up and deciding to come see me, they have tried just about everything and anything to avoid bankruptcy. Among the various desperate measures many have tried is the payday loan. What is a payday loan? It’s one of the worst, most despicable, predatory schemes ever devised by the greedy and clever.

How does a payday loan work? Well, it’s aimed of course at people who are employed and who as a result have a regularly scheduled payday. It can be done at a storefront or on a web site. These days most of the payday loans I see have been done on line. One starts by providing bank account information along with employment information. This includes the amount of a typical paycheck and when it is ordinarily received. One site I just looked at claims to be able to approve the loan within two minutes. Typically the amount will be about $500, but sometimes it can be more. The money will be deposited into the borrower’s checking account within a day or less.

The borrower doesn’t have to repay the loan until after his or her next paycheck is deposited into the checking account. What can be the harm? At about the time the pay check from the borrower’s job is deposited into his or her account, the whole loan is automatically repaid by an automatic withdrawal, with interest – lots of interest. One site I just reviewed states that the annual interest rate will run somewhere between 261% and 1304%. At first it doesn’t seem that bad. For example, at an annual rate of 300% the interest on a $500 loan over two weeks is “only” about $58.

The trouble is that once a person starts doing this, it can become very addictive. As soon as it’s been done it once, when payday comes there’s a big hole missing from the paycheck as soon as the automatic payment of the loan is made. So what’s the obvious temptation? Do another one, of course, to make up for the missing money. Pretty soon it’s not hard to start taking multiple payday loans from the multiple web sites that are available for this purpose. Then the extremely high interest, rate which didn’t look so bad at first, can really becoming quite a burden. It can become a treadmill of dependency on these loans. It can interfere with one’s ability to eat, pay rent or buy gasoline. Much like the psychology involved in the slot machines at a casino, somebody has figured out just exactly what is required to keep people coming back and paying in. Usually if I see one payday loan it means my client has been at it for a long time. It may only be one loan, one loan at a time that is. Sometimes it’s two or three or four at a time, enough to entirely consume each paycheck.

Even after my client has hired me to do a bankruptcy, and after I have advised the client that this is the point at which they should stop paying many of their debts, there is a tendency to assume that this advice somehow does not apply to the payday loan. It can be a surprise when I say, “it’s your account and it’s your bank and you can stop that automatic withdrawal any time you want” I have had a few clients leave my office in a rush to try to make it to the bank in time to stop the next withdrawal.

The StarTribune recently published a feature article about payday loans and one of the big businesses in Minnesota that makes them. According to the article the average interest rate customers in Minnesota pay for a payday loan is 277%. Sounds like theft to me, but Minnesota is among 36 states which allow it. If you find yourself going nowhere and losing ground on this payday loan treadmill, it’s probably time to call me for a free over the phone screening as to whether you qualify for a Chapter 7 or Chapter 13 bankruptcy.

This post is for general information purposes only, is not legal advice, and does not create an attorney-client relationship. Nothing on this site is intended to be a substitute for retaining a competent attorney. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.

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

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.

May 15, 2014

Who Owns and who gets to keep the Tax Refunds in a Chapter 7 or Chapter 13 Bankruptcy?

Well, tax season is finally over or at least winding down. Most of my clients have already received their 2013 state and federal income tax refunds. The Minnesota property tax refund and Minnesota rent credit refund won’t be sent, however, until later in the year. Who owns the tax refunds is always a big issue in any kind of personal bankruptcy, whether it’s Chapter 7 or Chapter 13. This is because refunds not yet received are considered an asset, even the tax refunds for this year that won’t be received until next year. Most people don’t ordinarily think of these as assets, because they may be way out of reach at least for now. But the Chapter 7 and the Chapter 13 bankruptcy trustees definitely count them as assets.

In a Chapter 7 bankruptcy the starting point in answering the above question is that the bankruptcy trustee owns the refunds. This can be said because upon the filing of a Chapter 7 bankruptcy, ownership of everything – all the Debtor’s assets right down to his or her socks – is transferred to the trustee. My job as a lawyer representing the Debtor is to keep the trustee from being able to keep as much of the assets as possible by claiming those assets as exempt. Anything that’s exempt can’t be kept by the trustee. When you see the term “no assets case,” that means it’s a case where all of the assets were exempt so that the trustee was not able to keep anything. Most of the Chapter 7 cases I file fall into this category. The ownership only passes to the trustee in theory, and then it comes right back to my client. A relatively painless process.

In a Chapter 13 bankruptcy there is no passage of ownership to the trustee, but the trustee takes the assets into account when determining what the payments are to be in the Chapter 13 Plan. If there are any non-exempt assets, the payment plan must provide enough so that the unsecured creditors receive an amount equal to at least the amount of the non-exempt assets. This is referred to as the “best interests of the creditors rule.” When we know there are going to be non-exempt assets, sometimes a Chapter 13 can be preferable. This is because it is usually easier to keep an asset and make some monthly payments than it is to give up the entire asset.

When it comes to tax refunds as you can see, the key to happiness in a Chapter 7 or Chapter 13 bankruptcy is to be able to claim them as exempt. This can often be easier said than done. First of all, if you are claiming the Minnesota State exemptions, there is no exemption for tax refunds. There just was a case where the Debtor was claiming that the property tax refund was “relief based on need” and therefore exempt under the Minnesota state exemptions, but the court said no; so there remains no exemption under the Minnesota state exemptions for any kind of tax refunds, at least not that I know of.

Luckily most of my clients qualify to use the Federal exemptions. Under the federal exemptions, each Debtor has what we call a wild card exemption under which up to $12,725 of anything can be claimed as exempt. When the parties are married and filing a joint case, each of them has a wild card (also called the catch all) exemption of up to $12,725. It is often said that a married couple claiming the federal exemptions gets to double their wild card. This is absolutely not true, and you really have to be careful about that kind of thinking.

When a married couple file a joint Chapter 7 or 13 case and claim the federal exemptions, the Debtor has a wild card exemption and the Co-Debtor has a wild card exemption – but that exemption does not double. I often find myself pulling out a note pad and making a “his” and “her” column to try to keep track of this. Assets owned by “him” and claimed as exempt under the wild card go in one column and assets owned by “her” and claimed as exempt under the wild card go in the other. Joint assets can be equally divided between the columns. Neither column can total over $12,725. And beware: a lot of stuff you may think of as joint may be looked upon differently by the trustee.

When the assets include tax refunds, the question arises as to which of the two columns the tax refunds belong in. Years ago I assumed that if the tax return was joint, then the refund should be split evenly between the spouses for purposes of claiming it as exempt. Turns out this is not how the 8th Circuit Bankruptcy Appeals Panel sees it. In the case of In re Carlson decided in 2008, they decided that the tax refunds have to be prorated between the spouses based on the each spouse’s income. So if one spouse earned 80% of the income, then 80% of the refunds gets attributable to that spouse. If one of the spouses is not working, then all the refunds belong to the spouse who works. This can obviously be a problem if allocating it that way runs one spouse’s wild card exemption above the magic $12,725 level.

It’s complicated. Not properly claiming the exemptions for the tax refunds is one of the most common mistakes made by people who file their own case without a lawyer. Most of the time I can manage to claim all of the tax refunds as exempt so my clients can keep them, but sometimes I just can’t get it all. For one thing, there are always other assets in addition to the refunds for which the wild card exemption is needed.

This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. Please consult the attorney of your choice concerning the details of your case.

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.

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.