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.

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.

25% Off Estate Planning / Reminders & Announcements

For the month of January 2017, all Estate Planning Packages are 25% off.  They include a Will, Living Will and Power of Attorney.  Also, we are announcing that we are moving from 74 Cherry Street to 50 Cherry Street, Milford, CT as of February 1, 2017, and we will be starting a new Blog/Vlog Series in February 2017 regarding the entire Chapter 7 Bankruptcy process!!

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.

How To Get A Credit Card If You Have Bad Credit

It’s a bit of a catch-22, isn’t it? In order to build your credit, you need to have and use a credit card. But in order to qualify for many credit cards, you need to have good credit. What are you supposed to do when you know that your credit is bad, and you fear that you won’t be able to get a credit card and bring up your credit score? Luckily, all is not lost! You can still qualify for many credit cards even if you have a low credit score. Just follow these tips on getting a credit card with bad credit.

  1. Find out your credit score. You might have a rough idea of what your credit score is, but you won’t be able to truly determine what credit cards you should and should not apply for until you know your credit score. You can get a free credit score report online. Once you know your score, you can plan accordingly.
  2. Know what you qualify for. If your credit score is 600 or above, you will probably be able to qualify for an unsecured credit card. If your credit score is below 600, you will most likely only qualify for a secured credit card. A secured credit card will require that you have the equivalent of your card’s limit available to the card issuer. An unsecured credit card doesn’t carry this requirement.
  3. Shop around. Just because you have a low credit score does not mean that you should be paying outrageous interest and fees. Do some research to determine what the most practical, reasonable credit card is for you. Make sure that you also find a credit card that comes from a reputable bank. Avoid credit cards that have high interest rates, don’t offer a grace period for interest, and that have expensive monthly fees.
  4. When you find the card you want, apply for that card only. You should apply for credit cards one at a time. If you have poor credit, you don’t want to be juggling multiple credit cards. If you are approved for your first choice, stick with this card. If you are denied, apply for your second choice.
  5. When you get a credit card, make your payments responsibly. If you are approved for a credit card, don’t make the company regret accepting your application! Make sure that you make all of your payments on time and that you do not overextend your line of credit. With online payments and credit card apps for phones, staying on top of your credit card has never been easier!

These are my top tips for getting a credit card, even if your credit is less than perfect. For additional advice to help you improve your credit, you can contact me here. I am happy to discuss your situation during a free consultation!

5 Easter Ideas On A Budget

Holidays can be a lot of fun, but they can also get expensive! As Easter approaches, you are probably interested in making some festive food and partaking in fun activities with your children, but you might not be sure if you can afford it. Luckily, Easter is a holiday with many opportunities to save money. For some cheap Easter ideas that your family is sure to love, read on!

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  1. Dyeing hardboiled eggs. This is a classic Easter activity, and it is a resourceful one at that! At 1-5 dollars per dozen – depending on the type of eggs you buy – eggs are a cheap and filling meal. High in protein and good cholesterol, eggs make for a healthy breakfast, so you can feel confident serving them to your family. On top of the money-saving and health benefits, coloring Easter eggs is a classic activity to do with your kids. For a few extra dollars, you can pick up an Egg Decoration and Dye kit. You and your kids can have fun decorating Easter eggs, which will double as a delicious breakfast. Total cost: $3-7.
  2. Easter egg hunt. Another classic Easter activity, you can save a lot of money by reusing plastic eggs and putting small presents in each. Plastic egg packets only cost a few dollars per dozen, and you can fill them with loose change, candy, stickers, special coupons, stick-on tattoos, glow sticks, fruit snacks, etc. Once you invest in the eggs, you will be able to reuse them for years to come. In all, you can create an incredible hunt for your kids for around $10.
  3. Deviled eggs. Another great use for your decorated Easter eggs is to turn them into deviled eggs. This is a simple and easy recipe. All that you need are hardboiled eggs, mayonnaise, mustard, sweet relish, and paprika. You can make a dozen deviled eggs for around $3. Bring them to a party or share them with the family – deviled eggs are always a crowd pleaser!
  4. Easter bunny project. You and your kids can use old paper towel tubes, paint, markers, stickers, and more, to create a cute Easter bunny family. Use whatever you have in your house to create a fun, free activity that you can do with your family. Total cost: free!
  5. Host a potluck arts and crafts party. Invite the kids in the neighborhood or your child’s classmates over for an arts and crafts party. Have each child bring their own activity to contribute to the party – this will provide tons of different ideas for the kids to do at little cost to you. Total cost: $10 to provide some snacks and basic craft resources for the kids.

These are just five ideas for Easter food and fun, but the possibilities are endless. Start with these activities, which will be easy on your wallet, and expand from there.

Happy Easter!

Chapter 7 Bankruptcy Series Part Four: Credit Counseling

Once your Means Test is complete and it is determined that you are a qualified candidate for a Chapter 7 Bankruptcy, I will the instruct you to complete a Credit Counseling Course which is the next step in the bankruptcy process.  The completion of a Credit Counseling Course is required by the Bankruptcy Code.1 I will give you a list of credit counseling agencies approved by the United States Trustee and answer any questions about the course you may have before you start. 

After you select an approved agency, you can take the course in person, or, more conveniently, online or on the telephone in the comfort of your own home.  The course takes approximately one hour in total to complete. 

[Quick Tip: If you take your credit counseling course online (versus in person or on the phone) you can start it and stop it as many times as you need to, like a DVD.  This is usually more convenient for people who have jobs and children!] 

The course customarily consists of an introductory briefing, a budget analysis (some call it a “mini-means test”) and at the conclusion of the session, you will be given a final briefing on your options in bankruptcy as well as non-bankruptcy alternatives.  The class is rather straightforward and nothing to be nervous about. 

Most approved agencies charge $30 to $50 for an individual and may give a discount to a married couple.  It is important to note that the credit counseling course must be done within the 180 days before the day you file your petition and may not be done on the day you file.  There are few exceptions to the credit counseling requirement (e.g. exigent circumstances, etc.) but failure to comply with the credit counseling requirement, unless otherwise ordered by the Bankruptcy Court, could result in a dismissal of your case.  

Upon completion of the course you will be given a “Certificate” of completion.  You can also instruct the agency to deliver a copy of the certificate to my office via e-mail or fax, or you can send me a copy yourself.  Your certificate will ultimately be delivered to the Bankruptcy Court upon filing of your Bankruptcy Petition along with an “Exhibit D” called the “Individual Debtor’s Statement of Compliance with Credit Counseling,” which you will sign under oath stating that you completed the course within the required time period before your filing and completed it with an approved agency.   

The next step in the Bankruptcy process is to return to my office for the signing and filing of your Bankruptcy Petition.  In our next installment of this Chapter 7 Blog Series I will explain each section of a typical Chapter 7 Bankruptcy Petition so you will have a preview of what you will be reading and signing before we meet again. 

For more information on Credit Counseling or for a Free Consultation, please contact Consumer Legal Services, LLC, the Law Offices of Attorney Theresa Rose DeGray, at 203-713-8877.

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1See 11 U.S.C. § 109(h)

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Chapter 7 Bankruptcy Series Part One: Initial Consultation

When you find yourself in debt and want to learn what your options are, the best thing to do is to find a local law firm that offers free initial Bankruptcy consultations.  I offer free initial consultations at various locations around the state of Connecticut (including Milford, Shelton, Hartford and other various locations) and will strive to find a convenient time and place to meet with you.  I have day, evening and weekend appointments available and will even skype with you! 

An initial consultation with a lawyer is a great opportunity for many reasons.  When you meet with me for the first time you will be treated with respect, dignity and compassion.  I understand the hardship you are facing and will give you my full attention.  The meeting will be an opportunity for you to interview me, just as much as it is an opportunity for me to interview you.  Always remember, when you hire an attorney, they work for you, and you must feel comfortable with them as you will have to trust your attorney to guide you through each and every step of the Bankruptcy process. 

During our consultation I will ask pointed questions that are focused on painting a picture of your financial circumstances.  This inquiry will include questions pertaining to your income, assets and debts.  Through your answers I will be able to analyze your financial circumstances and offer you options. 

Next I will show you various disclosure statements that I am required to give to you by the United States Bankruptcy Court under the Bankruptcy Code1.  These documents will explain the Bankruptcy process, the difference between the various chapters of Bankruptcy, what a Discharge is and what credit counseling services are, among other important things.  You will be asked to sign these documents, acknowledging that you received them. 

Finally, if I determine that you are a likely candidate for Bankruptcy and you are interested in hiring me to file your Bankruptcy Petition, I will conclude my presentation by guiding you through a checklist of documents I will need from you to perform a Means Test.  A Means Test is a formal assessment used to determine if you qualify for Bankruptcy.  Do not be alarmed, it is not a test like the SATs and does not require you to pencil in any bubbles!  On the contrary, you will gather the documents and my staff and I will prepare the test for you as part of our package services. 

Throughout the consultation and especially at the end, I will ask you if you have any questions.  I will be happy to answer all of your questions and you should not hesitate to ask any question or ask for clarification if something is unclear. 

At the conclusion of the initial consultation I will give you a folder with all of my contact information and copies of all the documents you read and signed during the meeting.  A follow-up appointment will be made with you for either a telephone conference or an in-person meeting to go over any further questions you may have and to help you with the gathering of your documents. 

The next part of this series will go into more depth about the specific documents you will gather so that we will be able to analyze your financial circumstances and prepare your Means Test.  

To schedule your initial consultation with Attorney Theresa Rose DeGray, please call 203-713-8877.

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111 U.S.C. §§ 101-1532

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Vlog: What is Bankruptcy?

Do you feel like a zombie walking through life not sure how to pay your next bill?
Let me unmask the myths behind Bankruptcy and give you some basic knowledge
about a process that can give you the fresh start you need.

Bankruptcy is a legal process in which you ultimately receive debt relief. The two main types of Bankruptcy are Chapter 7 and 13. In a Chapter 7 Bankruptcy, all of your unsecured debt, like credit card and medical debt, is completely discharged and you are no longer responsible to pay it. In a Chapter 13 Bankruptcy, you pay back some of your debt and some of it gets discharged eventually. In order to qualify for Chapter 7 Bankruptcy you must pass a Means Test. A Means Test compares your income to a median income for your state and household size. If you feel like you are drowning in debt and you don’t know how to pay the bills coming in the mail every day, or how to stop those harassing calls you get multiple times a day, please hang up on your bill collectors, and call me to schedule a free and confidential consultation at your convenience. As a bonus, I will perform your Means Test for free to see if you qualify to file Chapter 7 Bankruptcy to get the fresh start that you deserve.

Contact Attorney DeGray for more information.

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