November 22, 2017

Process – Bankruptcy Basics

Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.

Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a “municipality” may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee’s disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers’ Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act (“SIPA”). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer’s property is protected, up to $500,000 per customer.

The bankruptcy process is complex and relies on legal concepts like the “automatic stay,” “discharge,” “exemptions,” and “assume.” Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman’s terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.

Reprinted from http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/process-bankruptcy-basics

CONTEMPLATING A BANKRUPTCY AFTER DIVORCE

Oftentimes Bankruptcy and Divorce go hand-in-hand.  If you are in the process of getting divorced, it would be wise to consult a consumer attorney to analyze your financial circumstances, ensuring all of your obligations will be accounted for in the Divorce Decree/Separation Agreement, and to determine if you can handle paying them once you go back to a single income after the divorce.  Bankruptcy may be a safe option once you are divorced if you find you cannot afford living on a single income.

If you will be taking the bulk of the debt once you separate and do not have the income to support it, you may consider filing for bankruptcy and starting over all together once the divorce is finalized.  Here are some topics that often arise from divorce when contemplating a bankruptcy or may lead you to file for bankruptcy after your divorce:

  1. Who will take the marital home and pay its related expenses?

If you are getting a divorce and taking over possession of the marital home, along with taking over the related expenses, especially the mortgage(s) on the home, be sure to have your Divorce Decree state the terms of this transfer accurately.

Also, making a budget before the divorce is final will help you determine if you will be able to afford to stay in the home.

If it is determined that you can, in fact, afford to live in the home after the divorce, then make sure the proper documents are recorded on the Land Records after the transfer.  This will give you a paper trial you may need to provide in your bankruptcy case later on.

  1. Will you be responsible for credit cards in your ex-spouses name?

If so, make sure the Divorce Decree/Separation Agreement spells out all debt you will be taking responsibility for once the divorce is final, along with the last four digits of any account numbers.  Once the divorce is final, be sure to contact each company in writing and have the accounts switched into your name.  Wait at least six weeks and then review your credit report(s) to ensure accurate reporting, so as not to inadvertently leave off a debt you are responsible for on your Bankruptcy petition, among other things.

  1. Will you be ordered to pay alimony or child support?

Keep in mind, that these particular types of “debts” are allowable deductible expenses in your Bankruptcy case; this means that they are taken into consideration when qualifying for Bankruptcy.  Also, it is important to note that court-ordered Alimony and Child Support are what is known in the Bankruptcy realm as “priority debts” and cannot be discharged in most cases.  (Taxes and loans involving the government are also included in the priority category.)  It is vitally important to have all obligations in this category fully defined and explained in your Divorce Decree/Separation Agreement, as you will likely be fulfilling these obligations regardless of ever filing for Bankruptcy.

Filing for bankruptcy after a divorce is not the end of the world.  In fact, it may be the best thing that ever happened to you, and will help you to move on and start fresh.

The Brunner Test

 

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Did you know Student Loans are discharge-able in Bankruptcy?  Well, they are but only if you meet three strict requirements: (1) Poverty, (2) Persistence and (3) Good Faith. It’s called the Brunner Test. Basically it means if you can prove an “undue hardship” you can eliminate Student Loan Debt in Bankruptcy. As you may know, I filed for Bankruptcy on May 28, 2009. (If you do not know the story, please read it here). I did not have circumstances that rose to the level of an undue hardship (a very high standard that very few can reach), but I was drowning in debt, including student loan debt. So, I strategically filed for Bankruptcy to relieve myself of the debts that were discharge-able so I could actually afford to pay my student loans. (If you don’t like to read, you can watch me tell the story here.) You, too, can strategically design your own financial future in the same way using the tools and resources available to you through Bankruptcy. Let’s talk about it more at a free consultation. (Source: Nolo.com)

Gain Financial Freedom in your Pursuit of Happiness!

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Every year I re-read the Declaration of Independence and meditate on the amazing freedoms I enjoy (and sometimes admittedly, take for granted). This year I have been studying the history of Bankruptcy in America and came across this wonderful book called Republic of Debtors: Bankruptcy in the Age of American Independence by Bruce H. Mann.

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After reading a bit of this book, I realized how incredibility blessed we are to have the laws that allow us to file Bankruptcy with ease of process, and without judgment or fear. It wasn’t always that way and not everyone who suffered from crushing debt was given that second chance. It took years and a lot of legislation to get the laws where they are today; the laws that protect debtors from their creditors.

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I believe the secret to happiness is the freedom of choice. When you choose to take the first step to get out of debt you begin on the road to financial freedom. Bankruptcy will help you keep your home, relieve you of unsecured debt, keep your utilities on and give you the freedom to start over. It was the best thing that ever happened to me (read my personal Bankruptcy story here) and was my own declaration of independence.

We’re Moving!

We are packing up and moving down the street…

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…to 50 Cherry Street, Milford, CT 06460.

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The new office will be open for business on February 1, 2017.  To schedule a free consultation, please call us at 203-713-8877.  Thank you!

My Gift to You and Yours!

 

Everyone over the age of 18, especially parents of young children, need a simple Will, Living Will and Power of Attorney (these documents together are formally called an “Estate Plan”).

Estate Planning can be given as a gift to others and/or it makes a great New Year’s Resolution for yourself.

As a mother, and an attorney, the importance of planning for the future is at the top of my list!

Therefore, my gift to you this holiday season is 25% off all estate planning packages for the month of January 2017.  Please feel free to share this with your friends and family.

The process of making an Estate Plan is as easy as 1-2-3: First we talk, then I create the documents and lastly, you come in to visit me and sign them.

To arrange a free consultation in person or over the phone, call our office at 203-713-8877.

Have a Safe and Happy Holiday!

With much love & gratitude,
Theresa Rose DeGray
Attorney at Law

PS: Stay tuned for lots of exciting announcements, information, seminars, videos, blogs and much more in 2017!

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Minimum Continuing Legal Education (MCLE)

Notice to All Members of the Connecticut Bar and Authorized House Counsel

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Effective January 1, 2017, new Connecticut Practice Book Section 2-27A will require, with certain exceptions set forth in the rule, all members of the Connecticut Bar and attorneys certified to be Authorized House Counsel (AHC) in Connecticut to complete a minimum of twelve hours of continuing legal education each year, at least two hours of which shall be in ethics and professionalism.  Certification of compliance with the MCLE requirement will be done during the following year’s online registration process (e.g. the attorney or AHC will certify his or her 2017 compliance when registering in 2018).

The Commission on Minimum Continuing Legal Education has been established to aid attorneys and AHCs in understanding the rule and complying with it.  The Judicial Branch has also established a dedicated MCLE website at http://www.jud.ct.gov/MCLE/, where attorneys and AHCs can view the MCLE rule, FAQs developed by the Commission, forms, and a videotaped seminar conducted on November 7, 2016 regarding MCLE.  An attorney or AHC who watches the videotaped seminar may take 1.5 hours of MCLE credit in ethics/professionalism that can be carried over to the attorney’s or AHC’s 2017 twelve hour MCLE requirement.

Unlike many other states, Connecticut does not certify courses or providers. Connecticut lawyers are urged to independently review Practice Book §2-27A and make their own determination that a course qualifies for credit towards their MCLE requirement taking into consideration the delivery and content requirements of the rule.  If a course has been approved for CLE credit in another jurisdiction, then it automatically meets the content and delivery requirements in Connecticut, subject to the caveat that credit hours are awarded in Connecticut based on “actual instruction time” (e.g., 60 minutes of instruction time equals one credit hour of Connecticut CLE).

If after visiting the MCLE website and reviewing the information provided there, an attorney or AHC has a question about the MCLE rule, the attorney or AHC may contact the Commission at MCLE@jud.ct.gov for further information.

3 Essential Tips for Hiring the Best Probate Lawyer

Last week, I talked about some of the benefits of hiring a probate attorney. If you’re sold on the idea of hiring a probate attorney to help you through the Will or probate process, but you’re not sure how to go about hiring the best attorney, this post is for you! I’ve come up with some great tips to follow when hiring a probate lawyer that will ensure that you find the best probate lawyer for you.

  1. Ask the right questions. Once you have a few free consultations set up, you want to ask the right questions during these consultations, to make sure that you fully understand the attorney’s qualifications. Ask questions such as:
  2. Find lawyers that offer free consultations. If you’re like me, you don’t like making impulse buys. You want to do your research and figure out who the best attorney is for you. The good news is that you can actually do this! If you find lawyers that offer free consultations, you can meet with several lawyers before deciding which one you want to retain. At no cost to you, you can get your questions answered and get a feel for the lawyer you’re meeting with and decide if you want to retain that lawyer or not.
    • How long have you been a probate lawyer? You want to find a lawyer that has experience in the field so that you know he or she has worked with cases similar to yours. Experience can make a lawyer a valuable asset.
    • Do you have any client testimonials? Client testimonials, whether on file or on a website, can give you the information that you need from people who have been in your shoes. If you see reviews from many satisfied customers, the lawyer is probably effective and efficient.
    • What would you do in _____ situation? Test out a situation and see how the lawyer responds. Especially if there are uncommon aspects to your probate process or Will, see how the lawyer would handle that situation.
    • What do you charge? If the attorney beats around the bush or won’t give you a straight answer, they might have hidden fees. If a lawyer is upfront and honest about their fees, you can probably trust the quote that they give you.
  3. Check out the reputation. Client testimonials are great ways to get a feel for customer satisfaction, but they’re not the only way. Sometimes, lawyers will only show you the best reviews that they get, not necessarily the reviews that give the most accurate picture of customer satisfaction. For this reason, you should consider asking friends or coworkers for suggestions of probate lawyers that they have used in the past. This feedback will probably be honest and it will come from people that you can trust.

Finding the right probate lawyer can be a difficult process, but it doesn’t have to be! If you follow these tips, you will be able to find the right lawyer for you! To set up your FREE consultation with me, click here!

5 Must-Read Tips for Creating Your Will

Creating your Will is probably not an exciting experience. Facing your mortality and the task of splitting up your assets can seem depressing, however, it is an extremely necessary thing to do to ensure that in the event of an accident your family will be provided for and your wishes can be carried out. Here is a list of 5 things to keep in mind when drafting your Will so that you can avoid some common mistakes.

  1. Don’t forget the executor and a backup executor. The executor of your Will is very important, as he or she will distribute your assets and be in charge of your estate after you pass. Don’t leave this job up to chance – you should carefully decide who you want to take on this role. To be safe, you should also appoint a backup executor to make sure that you will have someone you trust representing your interests no matter what. For help determining your executor or executors, you should check out this post.
  2. Specify your beneficiaries. You should be clear about who you are leaving what in your Will. For example, if you have several children, specify by name who will receive what aspects. Also consider the fact that “children” can be confused with godchildren or stepchildren once you are gone. Be as specific as possible when naming your beneficiaries so that there will be no confusion in the future. Also, if you specifically leave someone out of your Will, such as a child or spouse, you might want to include the reason why so that the executor doesn’t assume that this is a mistake and name these people as beneficiaries anyway.
  3. Update your Will. Things change over time. It is important that you update your Will to include new children and assets or to remove people such as an ex-spouse. When you experience any major life change – whether personal or financial – you should update your Will.
  4. Provide for the “what-ifs”. Consider situations such as a beneficiary dying or unexpected debt that has to be taken care of. Including these scenarios will ensure that executing your Will goes as planned.
  5. Don’t forget about the IRS. You shouldn’t necessarily assume that your estate won’t be a part of the estate tax system. You should provide for this possibility when writing your Will.

While drafting a Will is not necessarily a cheerful event, it is necessary. Your Will is an important document because you can’t be sure of how long you will live or how people will interpret your assets after your death. If you have wishes as to how your assets will be divided, you shouldn’t take any chances. Write them down in your Will and make sure that your beneficiaries get what they deserve. For help drafting your Will, you should look to a lawyer. Lawyers have experience with Wills and will probably think of important aspects of the Will that you might forget. Having some guidance in this process can ensure that everything goes smoothly. For help drafting your Will, you can contact me here.

Back To School Shopping On A Budget

Back to school shopping is no doubt a pain for all parents. If you’re watching your finances, school supply shopping can be even more difficult. However, back to school shopping on a budget can be a breeze if you do it right. Below are some tips every parent should incorporate into their August-September back to school shopping for their children.

  • Set a budget. Go into the back to school shopping season with a specific budget. Let your children know what the overall budget is and that there will be no going over it.
  • Make a list! Get a list of supplies that your children need from each of their teachers. Before you go out and purchase everything, go through your home and look for things you may be able to cross off the list. Look at what school supplies your children have left from the previous year and what things you may be able to reuse. Also separate the list into needs and wants. Get all of the essentials for your child and in order to keep under budget, consider skipping some of the “wants” on the list.
  • Don’t go right to Staples for your child’s school supplies. Get things like pencils and pens from your local Dollar Store.
  • Buy your child a bookbag that will last! Brands like L.L Bean and Jansport have a lifetime guarantee on all their bags so buy one that your child can use year after year so you will definitely get your money’s worth.
  • Reuse! Buy your children plastic folders instead of cardboard and such. The plastic will be reusable for years after the purchase as long as your children take care of them.
  • Look through your children’s closet and see exactly what they need so you may plan ahead. Avoid shopping in August for clothes. If you can, wait until mid September or around that time in order to hit the sales that go on after stores think that everyone in town has already completed their back to school shopping. Alternatively, your family can go clothing shopping for fall clothes at the beginning of the summer in order to take advantage of some deals.
  • Try shopping at local thrift stores or outlet malls. Some thrift stores sell name brands for cheap and outlets always have good deals on clothes and shoes.

 

Back to school shopping no longer needs to be a dreadful, money-sucking event that happens at the end of every summer. If you use these helpful tips, you will succeed in getting all the supplies your children need, but also stay well under your budget.

This firm is a debt relief agency. We help people file for bankruptcy relief amongst other things, under the Bankruptcy Code.