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Should You Continue Your Vehicle Lease During Bankruptcy?Protecting your motor vehicle is often a priority during your bankruptcy. In a Chapter 7 case, different rules apply when you are leasing a vehicle. Monthly lease payments may be cheaper than loan payments, but you do not actually own the vehicle. Chapter 7 bankruptcy filers must decide whether they will assume or reject their vehicle lease.

Assuming the Lease

Filing for bankruptcy puts an automatic stay on your vehicle lessor’s attempts to repossess your leased vehicle. The bankruptcy trustee technically has 60 days to claim your lease, but this is rarely done because the trustee would need to find someone else who would be willing to pay more than you to lease the car. You should decide whether you want to assume the lease before that deadline. You can keep the vehicle by assuming the lease, but:

  • You will be responsible for continuing payments under the lease contract;
  • The lessor can reject your request to assume the lease and try to repossess the vehicle (but that rarely happens); and
  • The lessor can repossess the vehicle if you cannot keep up with payments.

Chapter 13 bankruptcy can help you keep your leased vehicle if you are behind on lease payments because you can include the payments in your long-term repayment plan.

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Actions to Avoid Before Filing for BankruptcyThere are several actions you can take to help prepare yourself to file for bankruptcy. However, it is also important to understand what you should not do. Creditors will examine your financial activity leading up to your bankruptcy to spot instances of potentially fraudulent activity, which they can attempt to use to hold you liable for your entire debt. Other actions may be legal but needlessly drain resources that your bankruptcy could have protected. Here are four things you should not do before filing for bankruptcy:

  1. Incurring Large Debts Right Before Filing: It is extremely rare for individuals to run up their credit cards in order to prevent paying by filing bankruptcy. However, it is fraudulent to incur debts that you have no intention of paying. Once you have consulted with a bankruptcy attorney, you should avoid using any credit cards. A creditor may accuse you of fraud if you use credit to purchase luxury goods or services within 90 days of the date of your bankruptcy filing.
  2. Attempting to Hide Assets: Intentionally omitting assets during bankruptcy can cause your case to be dismissed. Selling or transferring assets right before bankruptcy might be fraud, and a bankruptcy court may cancel the transfer or dismiss your case. You should consult with your bankruptcy attorney before you sell any assets.
  3. Repaying Creditors in Advance: Bankruptcy has a process for prioritizing which creditors must be repaid. Paying back an unsecured creditor immediately before bankruptcy is unnecessary and potentially a waste of assets. It is possible that the bankruptcy would not require you to repay that creditor in full. You may have been able to save that money or used it to pay a debt that you cannot discharge (such as your student loan obligation or certain taxes) or your secured obligations that must be paid in order to keep the collateral (such as mortgage and car payments).
  4. Withdrawing from Retirement to Pay Debts: You may feel tempted to borrow money from your retirement account in order to repay creditors without filing for bankruptcy because your debts are a more immediate concern than saving money for your retirement. Not only are you stealing from your future income, but you may pay a penalty for making an early withdrawal from your retirement account and you lose the benefit of compounded interest over time. Bankruptcy exemptions allow you to protect your retirement money. You can clear your debts while keeping your retirement intact.  And this will be critical in your retirement years. 

Contact a Denton County Bankruptcy Attorney

Hiring a bankruptcy attorney is vital towards using the process to best clear your debts. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can guide your decisions leading up to and during your bankruptcy. To schedule a free consultation, call 214-618-2101.

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Senior Can Use Bankruptcy to Protect Assets from CreditorsDebt has become an increasing problem for senior citizens, who do not have the same income stream to keep up with their payments as they did when they were still working. Several factors are contributing to the rise of senior debt, including:

  • Increasing health care costs;
  • Social security no longer being sufficient income to meet daily, necessary expenses; and
  • Retirement accounts depleted by the recent recession.

Your debts can pile up because of your reduced retirement income and increased need for doctor visits and medical treatments. Rather than depleting your retirement savings to pay off your debts, you should see whether filing for bankruptcy may help. Bankruptcy laws protect many of the assets that senior citizens need. 

Social Security

Your Social Security benefits during a Chapter 7 bankruptcy case are protected from your creditors, as long as you keep that money separate from other funds. Social Security money is vulnerable to a bank levy if it is co-mingled with other money in a bank account. This includes mixing it with money you receive from your retirement accounts. The best way to avoid this is to create a separate bank account for your Social Security income. In Chapter 13 bankruptcy, the Social Security benefits you receive each month are not considered part of your income used to determine your repayment plan.

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Monitoring Proof of Claim Filings After BankruptcyCreditors must file a proof of claim in order to receive payments as part of a bankruptcy case. This practice occurs in Chapter 13 bankruptcy cases and Chapter 7 cases in which there are assets available to be distributed. As of Dec. 1, 2017, the Federal Rules of Bankruptcy Procedure enacted new rules regarding filing a proof of claim:

  • It clarified that secured creditors are required to file a proof of claim; and
  • It shortened the deadline for a non-governmental creditor to file a proof of claim from 90 days to 70 days.

Both of these changes are meant to favor the debtor in a bankruptcy case. The shortened deadline may allow a Chapter 13 bankruptcy filer to know sooner what claims the creditors have in the case. Debtors must monitor proof of claim filings to determine whether they need to contest a filing.

Reasons to Contest

Debtors can file a written objection to a proof of claim. Reasons for objection may include:

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Why Delaying Bankruptcy Can Be CostlyPeople who are heavily in debt may worry about the cost of filing for bankruptcy, but delaying an inevitable bankruptcy is often costlier. Bankruptcy is neither a sign of failure nor the ruin of your personal finances. Yet, some people let these misconceptions prevent them from filing for bankruptcy when it may be their best option. While there may be some immediate costs to bankruptcy, it is a chance for people to clear their debts and start anew. There are several reasons why waiting to file for bankruptcy can make your situation more difficult:

  1. Quality of Life: The pressure of repaying debts can affect your standard of living and personal health. Some debtors save money by forgoing necessary expenses, such as food and medical treatment. The stress can be harmful to a person’s mental and physical health. Bankruptcy protects the money you need to pay for basic living expenses and gives an eventual resolution to your stress.
  2. Risk of Litigation: You may be content to slowly repay your debts, but your creditors may not display the same patience. By filing a lawsuit against you, your creditor is seeking immediate compensation for the debts you owe through mechanisms such as attaching your bank accounts. You still have time to file for bankruptcy, but the lawsuit puts you on the defensive and requires you to act quickly.
  3. Wasted Assets: Filing for bankruptcy allows you to protect key properties through the various exemptions available. Your home, vehicle and other properties of a certain value can all be exempt from your creditors. However, people who avoid bankruptcy may choose to sell important properties to help with repayment. If they eventually file for bankruptcy, it will be too late to exempt and save properties that have already been sold.
  4. Rising Debt: Some people try to avoid bankruptcy because they believe they can get by with their own repayment plan. However, keeping up with debt payments can be difficult if you lack the financial resources. Making minimum payments may prevent immediate default, but will allow interest rates to accumulate on the debts. If a Chapter 13 bankruptcy is filed, you will be facing a larger debt that may have to be paid in full, depending on your repayment plan.

Deciding on Bankruptcy

It can be difficult to know when is the right time to file for bankruptcy. Bankruptcy is an option you should at least consider if you are feeling overwhelmed by your debts and are unsure of how to repay them. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can advise you on how bankruptcy could help your financial situation. To schedule a free consultation, call 214-618-2101.

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Four Ways to Contest a Credit Card LawsuitCredit card companies use lawsuits as a means of forcing clients to pay for outstanding debts. If the court rules in favor of the company, the company can place a lien on the debtor’s real property or seize non-exempt personal property (think toys – motorcycles, dirt bikes). However, many judgments in favor of credit card companies are default judgments because the defendant cardholder does not respond to or contest the lawsuit. If you choose to contest the lawsuit, the credit card company will bear the burden of proving that you owe the debt. There are several ways to contest a lawsuit from a credit card company:

  1. Statute of Limitations Expired: In Texas, a credit card company has four years to file a lawsuit against you for lack of payment, starting from the date of your last payment. If it has been longer than four years, the statute of limitations has expired.
  2. Improper Service of Lawsuit: The credit card company must serve you notice of the lawsuit it has filed against you, either in person or by certified mail. If the server cannot find you, the company may request service by publication. If all attempts to serve you fail, the company may receive a default judgment. However, the company must make a good faith effort to find you.
  3. Violation of Fair Debt Collection Practices Act: The FDCPA protects consumers from abusive or misleading practices by credit card companies and related debt collectors. You can file a countersuit, claiming that the creditor violated your rights under the FDCPA.
  4. Debt Already Paid: A credit card company may come after you for a debt you have already paid. You can dispute the lawsuit by providing documentation that you have already paid the debt, either in full or in part. The lawsuit cannot demand more money than what you actually owe unless it is interest on the loan, court costs, or attorney fees.

Contesting Credit Card Debt 

There are multiple positive outcomes you can obtain by responding to a lawsuit from a credit card company. You can receive a favorable ruling from the court if the statute of limitations has expired, or you can convince the company to settle out of court for less than what you owe. However, you must respond quickly once you have received notice of the lawsuit. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can guide you through your response to the lawsuit and represent you in your case. Schedule a free consultation by calling 214-618-2101.

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Making Sure to Include All Creditors in a Bankruptcy FilingFailing to list all of your creditors during your bankruptcy case might mean that you cannot discharge the debt, especially if you intentionally omit a creditor. If the case is ongoing, you can amend your bankruptcy Schedules to include an additional creditor. However, fixing your mistake is trickier if you have already completed your bankruptcy and your debts have been discharged. You may be responsible for the debt to your missing creditor.

Chapter 7 and No-Asset Cases

If you discover a missing creditor after a Chapter 7 bankruptcy case, your liability may depend on whether you had a no-asset case. In a no-asset bankruptcy, the trustee does not liquidate any assets because they are all exempt, and your debts are still discharged. So, a bankruptcy court may rule that the debt from an omitted creditor in a no-asset case is already discharged because the creditor would not have received money from the bankruptcy. Most Chapter 7 cases in Texas are no-asset cases. However, this ruling does not apply if the creditor has a debt that is considered non-dischargeable, such as child support, alimony or certain taxes. 

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Discharging Student Debt Through Bankruptcy Is Difficult, But Not ImpossibleThere is a common misconception that filing for bankruptcy will not allow you to discharge your student loan debts. Discharge is not impossible, but it is very difficult. You must file a separate action, called an adversary proceeding, in which you argue that continuing to pay for your student loans would cause you undue hardship. If your case is successful, the court may partially or fully discharge your student debt. However, some courts have stricter definitions of undue hardship than others.

Brunner Test

Most federal courts use the Brunner test to determine undue hardship. The court may decide that your student loan debt qualifies for discharge if:

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Important Differences Between Secured, Unsecured Creditors during BankruptcyOne way to categorize creditors when filing for bankruptcy is as secured or unsecured. The distinction between them can be important for both your creditors and yourself:

  • Secured creditors have a lien on your property that they can use as collateral if you are unable to repay your loan. Common examples include home loans, car loans, and tax liens;
  • Unsecured creditors do not have a lien that they can claim on your property. Credit card debt, payday loans, and medical bills are often categorized as unsecured debts; and
  • Some unsecured debts are priority debts that must be paid in full, regardless of bankruptcy protections. Child support, spousal support, student loans and some tax debts are common examples.

Secured creditors generally receive priority in being compensated during bankruptcy proceedings. How creditors are compensated depends on whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Secured Creditors in Chapter 7

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Passing the Chapter 7 Bankruptcy Means TestBefore you file for Chapter 7 bankruptcy, you should first determine whether you will qualify by using the means test. People often think of passing a test as a huge obstacle to achieving their goals. However, a bankruptcy means test is unlikely to prevent you from filing for Chapter 7 bankruptcy if you need the advantages that come with this form of bankruptcy. You may be at greater risk of not qualifying for Chapter 7 bankruptcy because you were not thorough enough in documenting your income and expenses. An experienced bankruptcy attorney will conduct the means test for you and tell you whether the results suggest that you will qualify for Chapter 7 bankruptcy.

Meaning of the Test

The means test was created to prevent people from using Chapter 7 bankruptcy when they have sufficient disposable income, based on certain allowable expenses, to make a meaningful payment on their unsecured debts. Chapter 7 bankruptcy is advantageous in some situations because:

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Second Bankruptcy and Five Steps to Prevent the Need for ItFederal bankruptcy law includes waiting periods that determine how soon a person can file for bankruptcy again after the initial filing. The length of the waiting period depends on the type of bankruptcy that was previously filed and what type of bankruptcy is being sought:

  • After filing for Chapter 7 bankruptcy, you are required to wait eight years before filing for Chapter 7 again, if you want a discharge in bankruptcy;
  • You can immediately file for Chapter 13 bankruptcy again after your first Chapter 13 bankruptcy case is completed, but you must wait two years before being able to discharge your debt again;
  • You must wait four years after filing for Chapter 7 bankruptcy to file for Chapter 13 bankruptcy; and
  • You must wait six years after discharging your debt under Chapter 13 bankruptcy to file for Chapter 7 bankruptcy unless you repaid at least 70 percent of the claims.

While some situations allow you to immediately file for a second bankruptcy, you may need to ask the court to extend the automatic stay protections. You may want to take steps to mitigate your chances of needing a second bankruptcy. There are several ways you can increase your financial security after bankruptcy:

  1. Adhering to a Budget: Closely examine your monthly income compared to your necessary expenses. You should live within the means of your budget and keep any borrowing to a minimum.
  2. Cautious with Credit: If you need to pay for something with a credit card, keep the expense to a level that you can repay that month. That way, you can rebuild your credit score with less risk.
  3. Creating Additional Income: A new job, second job or promotion within your current job can all increase your monthly income, which in turn will increase your financial flexibility.
  4. Selling Assets: We all have stuff. You should explore how valuable your stuff would be if sold. The additional money could be used for a savings account or to pay off debts.
  5. Building an Emergency Fund: Unexpected expenses can cause financial hardship. Find a portion of your monthly income than you can contribute towards an emergency fund. By having savings, you may not need to borrow money when unexpected expenses occur.

Second Bankruptcy

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Your Rights Against Creditor HarassmentFacing overdue debts is stressful enough without harassing behavior by creditors and the debt collection agencies they employ. Both Texas and federal law protect consumers from debt collection harassment. Unfortunately, debt collectors still use aggressive practices that cross legal boundaries. Taking financial action, such as filing for bankruptcy, can stop contact from debt collectors. However, you can also hold creditors accountable for their harassment.

Illegal Behavior

Creditors and debt collection agencies use harassing and abusive methods because they know people are too intimidated to stand up for themselves. Debt collectors do not have the right to harass or defraud you. The Texas Debt Collection Act defines illegal practices by debt collectors as including:

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Posted on in Bankruptcy

Clearing IRS Debts Through BankruptcyThe coming new year means another year of federal income taxes that are due. If you are unable to pay your taxes, the IRS can be a troublesome debt collector. The IRS can send you a levy notice when it believes you are neglecting or refusing to pay your taxes. You have 30 days to respond and contest the levy, otherwise the IRS can start seizing your property and garnishing your wages. Filing for bankruptcy can put a hold on the levy and give you additional means to repay your debt. In some instances, you may be able to discharge part of your tax debt. However, the IRS has guidelines for clearing debts by using chapter 7 or chapter 13 bankruptcy.

Chapter 7

Chapter 7 bankruptcy involves selling off non-exempt assets and using the money to repay creditors. The advantage when filing for Chapter 7 bankruptcy is the possibility of discharging your income tax debt. Your debt may be eligible for discharge if:

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Roadblocks to Discharging Debt After BankruptcyOne of the most powerful tools in filing for Chapter 7 or Chapter 13 bankruptcy is the ability to discharge your debt. After you have completed the conditions of your bankruptcy, the court may clear you of your remaining debt obligations and prohibit your creditors from continuing collection efforts. Because this represents a loss to them, your creditors may search for reasons why you should still be liable for the remainder of your debt. Discharge is not guaranteed as part of bankruptcy. You must follow the correct procedures and make a good-faith effort to repay your debt.

Requirements

There are several steps needed to qualify for debt discharge, and missing any one of them may cause a court to deny your request. The requirements include:

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Using Exemptions to Protect Your Assets During BankruptcyPeople who file for bankruptcy have several exemptions at their disposal to protect their properties from seizure by creditors. Texas residents can use either the federal property exemptions or the Texas property exemptions, but not both. Many residents choose the Texas exemptions because they are considered more favorable. With Texas’ property exemptions, bankruptcy filers may be able to keep valuable assets, such as their homes and vehicles.

Homestead

Texas’ Homestead Exemption provides broad protection for the primary residence of a person filing for bankruptcy. A home of any value may qualify, as long as the property is:

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Collin County bankruptcy attorneyI recently read an article on forbes.com about bankruptcy, and it has been niggling in the back of my mind ever since. The author is not a bankruptcy lawyer, but there he is on the Internet pontificating about the three most important things you need to know about filing for bankruptcy.

He noted that bankruptcy isn’t free, saying that this is a “surprise” to many people. I’m not sure why anyone would have an expectation that filing for bankruptcy would be free. People don’t go to the store and expect to get their groceries for the week for free. They don’t go to the hospital for surgery and expect the surgeon and the hospital to thank them for coming in and provide services for free.

The article goes on to say that most lawyers charge by the hour. While this is true for many lawyers, it is not necessarily the case for consumer bankruptcy lawyers. Most charge a flat fee, which is typically a small percentage of the debts that are discharged and the assets that are protected. Furthermore, unlike other areas of the law, there is oversight of the fees that bankruptcy lawyers charge, because those fees are disclosed as part of the bankruptcy filing (in two different places) and must comply with the local rules of the bankruptcy court.

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Frisco, Texas bankruptcy 341The short answer…absolutely not!  

So what are those numbers, and what do they mean to a person who has filed for bankruptcy?

341 is actually a section in the Bankruptcy Code (the federal law that covers bankruptcy) and the shorthand term for the first meeting of creditors in a bankruptcy case. Don’t get fooled by the word first. In fact, don’t get fooled by the word creditors either. In a consumer bankruptcy case, there typically is just one meeting, and by and large, the creditors don’t attend these meetings, with the possible exception of a disgruntled former spouse.  

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Posted on in Bankruptcy

Frisco bankruptcy attorney

Before a debtor can file for bankruptcy, they must complete a certified credit counseling course. What is this required course, why do you need it, and how can you make it work to your advantage? The following information explains and provides some important details on how an attorney can assist you through the bankruptcy process.

What is Pre-Bankruptcy Credit Counseling?

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Frisco bankruptcy lawyerOnce you have decided that bankruptcy is the right option for you, you must then decide which type of bankruptcy you would like to file. In some cases, the decision is based on your circumstances. In others, it is a matter of personal preference. Learn more about the types of bankruptcy available to individuals and small businesses, including how to determine which one may be most appropriate for you, with help from the following information.

The Basics: Chapter 7 versus Chapter 13

At first glance, all forms of bankruptcy might appear the same. However, there are some distinct differences between Chapter 7 and Chapter 13. For example, Chapter 7 bankruptcy discharges most forms of secured debt, meaning the debtor is no longer responsible for them. Another major difference is how assets are retained during each bankruptcy process. For example, if a borrower is making payments on a vehicle, the creditor may still repossess the car if a Chapter 7 bankruptcy is filed. In Chapter 13, the debtor may be permitted to keep the vehicle if they continue to make the agreed upon payments.

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National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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