In Schwab v. Reilly, the Supreme Court has ruled that bankruptcy debtors are protected only up the value they claim exempt in their bankruptcy petitions.  A divided Supreme Court ruled that bankruptcy debtors do not exempt the full amount of an asset by claiming an exemption equal to the full scheduled value of the asset.  If it later turns out that the asset is worth more the amount scheduled in the bankruptcy petition, the trustee may assert the estate’s interest in the excess value even though the trustee did not object to the debtor’s claimed exemption in the full scheduled amount of the asset.

What this Supreme Court decision means for Georgia Bankruptcy Debtors is that debtors must be extremely careful when listing a value of an asset.  For example, lets say a person in Rome, GA wishes to file Chapter 7 and thinks their house is worth $100,000.00.  They owe only 95,000.00.  Thus, they have $5,0000.00 worth of equity in the house.  Let’s say this Rome person files Chapter 7 claiming only a $5,000.00 exemption.  The Chapter 7 trustee believes that the house is worth $110,000.00.  To the horror of the Rome debtor, the Trustee finds a buyer willing to pay this price.  In this scenario, the debtor will receive a check for $5,000.00 and the rest of the proceeds get used to pay their creditors.

In Schwab v. Reilly, the issue was valuation of catering equipment.  In this case, the debtor made a low estimate $10,718.00 for the value of the catering equipment and exempted all of the value.  The Chapter 7 trustee never filed any objections to the debtor’s valuation of the catering equipment.  Later on in the case, an appraisal revealed that the equipment was worth $7,000.00 more than what the debtor had listed in the bankruptcy petition.  At that point, the Chapter 7 trustee asked the Bankruptcy Court for permission to auction the equipment so that $7,000.00 difference could be used to pay creditors.  The debtor objected to sale on the basis that Rule 4003(b) requires a Chapter 7 Trustee to object to a debtor’s claimed exemptions within 30 days after the creditor’s meeting.  The Supreme Court ruled that the Chapter 7 had no duty to object because the exemption amounts were not in excess of the Bankruptcy Code limitations.

The lesson of this case is that any person who is considering filing bankruptcy in Georgia should understand is that you won’t get to keep an asset just because you make a low valuation of it.  If it turns out to be worth more than what you say in your bankruptcy petition, the Chapter 7 trustee may sell it.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

The reason the credit card scam letter you received in the mail sounds too good to be true is because it is too good to be true.  The letter falsely states that is is a “Balance Reduction Notification.”  The truth is there is no government funded program that will pay for your credit card debt.

Just this past week, I was helping my bankruptcy client in Rome, GA get prepared for her 341 Meeting of Creditors when she pulled out this scam letter. “Is this real?” she asked. “Should I cancel my Chapter 13 bankruptcy case and pursue this opportunity?”

On its face, the letter looked official. The scam company has a Pennsylvania Avenue address in Washington D.C. The company name makes it sound like they are a division of the United States Government. The letters says it is “Personal and Confidential.”  It states that a case number has been assigned to the recipient.

The scam letter states, “Your Revolving Consumer Debt and Credit Card Payments are eligible for hardship programs benefiting from the enactment of the Economic Stimulus Act of 2009.”  (FTC testifies on efforts to stop fraud).  The scam continues, “this program is not associated with bankruptcy, credit counseling, or debt consolidation; it has been specifically designed to assist consumers eliminate up to 50% of outstanding credit card debt and secure one low monthly payment.  This program is available for a limited time so please call as soon as possible.”

With a quick read of the letter, I immediately knew it was not real but I asked her to let me take it back to my office and do a little investigation.  After I got back to my Rome office, I googled the name of the company.  In the search results, there was story after story about the scam that this company is trying to pull off.

These scam letters really make me angry.  You may hear about the promises of these letters and think to yourself, “Who would ever actually believe this stuff?”  When people are under the stress of debt pressure, they are often easy prey for con artists.  What surprises me is how bold these crooks have become.  Using the United States mail system to perpetrate a crime will eventually land these con artists in jail.

If you receive a similar letter, let your bankruptcy attorney review it with you.  If your bankruptcy attorney agrees that its a scam letter, let him forward it to the United States Trustee.  In Georgia, the U.S. Trustee prosecutes these types of scams.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

6.  South Carolina Bankruptcy Attorney Blog

Anyone who owns a life estate can file bankruptcy.  However, there is a risk of losing the ownership of the life estate when you file Chapter 7 if the life estate is worth more than you are allowed to exempt in Georgia.  In contrast, you may be able to protect the life estate in a Chapter 13 even if it is worth more than your exemption allows as long as your are paying your unsecured creditors the difference over the life of your plan or if you are in a 100 percent Chapter 13 plan.  In order for you know your best option, you should meet with a bankruptcy attorney.

Most cases I have seen in Georgia that involve life estates have something do with family land.  In Georgia, family land is more than just an asset.  Family land is sacred.  No one wants to risk losing it.

I recently met with a client in my Dalton GA office who told me a story about a log cabin that has been in her family since the early 1840s.  I will refer to her as Ms. Dalton.  This beautiful cabin has been well maintained and has no debt on it.  Ms. Dalton has an uncle who currently lives in this cabin.  According the will of her mother,  the uncle may live in the cabin for the remainder of his life.  Upon his death, the cabin reverts to Ms. Dalton.

In the case of Ms. Dalton, the cabin had no mortgage on it.  She estimated that it was worth at least $100,000.  To make matters worse, her uncle was 80 years old and in bad health.  Based on her specific facts, I advised her to stay away from Chapter 7 bankruptcy.

If Ms. Dalton were to file Chapter 7, I think the bankruptcy trustee would have no problem finding a buyer for her life estate.  How much would you pay to own her interest?  If her uncle was only 20 years old, you probably would not be willing to pay very much.  Eighty years old and in bad health?  In the case of Ms. Dalton, Chapter 7 was not worth the risk of losing the family land.  Its a good thing she was honest and upfront with her bankruptcy attorney about everything.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

The cash exemption is often a major consideration for Georgia consumers who are considering filing for bankruptcy.  Especially during tax refund season, I often have clients who will ask, “How much of the cash in my bank account can I keep if I file bankruptcy?”

In Georgia bankruptcy cases, the answer to this question is a maximum of $5,600 for individuals and $11,200 for married couples (see GA Code 44-13-100).  However, if you have maxed out the exemption on your house, you will only be able to protect $600 for individuals and $1,200 for married couples.  Do you have more than $20,000 equity in your home in Georgia?  If the answer is yes, then you most likely are going to max out the exemption on your house.  To know for sure, we need to talk so that I can review your entire situation.

In situations where a person has too much money in their bank account, you may need to wait to file.  People in this situation may need to go ahead and catch up that utility bill, make that house payment, get the roof fixed, buy some tires for the car, pay the cell phone bill, catch up on the daycare bill or other household expenses.

Some Georgia consumers come into my office with the misconception that they can’t have any money in their bank account if they file bankruptcy.  This situation can be problematic in Chapter 13 cases.  While you are in Chapter 13, you cannot use any credit cards or incur any new debt without permission from the Bankruptcy Court.  As a consequence, if you file Chapter 13 while having no money saved in your bank account, you are going to be in a serious pickle when the car brakes down, the stove breaks, the roof starts leaking or some other emergency hits you from nowhere.  The best case scenario is to have at least a few thousand dollars in an emergency fund before you file bankruptcy.

Other Posts:

1.  Filing Bankruptcy in Georgia – You must know the value of your house

2. What is Chapter 13?

3. What is Chapter 7?

4. How much does it cost to file?

5.  Stop Foreclosure

When I meet with clients from the Northwest Georgia area, one of the first questions I usually get is, “Can I keep my tax refund if I file bankruptcy?”  For some, the answer is yes and for others, the answer is no.   Most people have plans for how they are going to spend those tax refunds long before they receive them from the IRS.  For some, its clothes for the kids.  For others, its car repairs, house repairs, catching up past utility bills and on and on.  A few weeks ago, I met with some clients in my Rome office who needed all of their refund to repair their roof.  In their case, everything worked out.

So can you keep the tax refund if you file bankruptcy?  The answer to this question is maybe.  First it depends on what type of bankruptcy case you are filing.  Second, it depends on how much of your Georgia Bankruptcy Exemptions have been used up on other assets.  Third, how much of your refund can be attributed to the Earned Income Tax Credit?

Lets say you file a Chapter 7 bankruptcy.  If you have a tax refund that you anticipate receiving before your case will be discharged, the tax refund must be exempted as an asset in your case.  Every case is different.  As a general rule in Georgia, if your tax refund is less than $5,000.00, we should not have a problem.  However, you must remember that every case is different.  If you have other assets that use up all of your Georgia Bankruptcy Exemptions, we may have a problem.  We will be able to tell if you have an issue before the case is filed.  If your tax refund is based entirely on the Earned Income Credit, you should be able to keep all of it. Make sure you explain to your bankruptcy attorney the amount of your tax refund that can be attributed to the Earned Income Credit.

If you file a Chapter 13, the trustee wants every extra dime you have to be paid toward your Chapter 13 case.  As a result, they want all of your tax refund that you receive during the applicable commitment period of the plan.  However, you can keep any amount of the refund that can be attributed to the Earned Income Tax Credit. Like I said above, you must disclose all tax refund information to your bankruptcy attorney in order for him to protect any of the tax refund money.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

I have friends who buy into this myth that people who file bankruptcy go out and run up their credit cards right before filing.  The truth is that almost no one does this and those few that do end up paying it all back.

In a Chapter 7 bankruptcy, you cannot incur debt with the intention of discharging it in your case.  Under section 523(a)(2)(A) of the Bankruptcy Code, a discharge under Chapter 7 “does not discharge an individual debtor from any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by…false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.”  11 U.S.C. 523(a)(2)(A).

A great example of a debtor getting nailed by the Bankruptcy Court for going into debt with the intention of wiping it out in a Chapter 7 is the case of Bucciarelli (Bankruptcy Case No. 07-13114).  In this case, the Bankruptcy Court in the Newnan Division of the Northern District of Georgia ruled that the debtor could not wipe out legal fees she incurred from her divorce proceedings because she incurred the debt with the intention of discharging it in her Chapter 7 case.

The facts of the case are summarized as follows:  In Bucciarelli, the Debtor filed her Chapter 7 case in December 2007.  In January 2008, she entered into a contract for legal representation in her divorce proceedings.  In addition, she signed a promissory note agreeing to pay her divorce attorney $25,000 for representing her.  The promissory note granted her divorce attorney a lien on her interest in her ex-husband’s 401k.  Her divorce case never actually went to trial.  Her divorce attorney billed her for $35, 625.  When the debtor did not pay her divorce attorney, she was sued in Georgia state court.  The Georgia state court proceeding was stopped because of her active Chapter 7 case.  In response, her divorce attorney filed an adversary proceeding against her to declare the debt nondischargeable.

In Bucciarelli, the Court noted, “To establish that a debt is excepted from discharge under section 523(a)(2)(A), the creditor must prove by a preponderance of evidence that:

(1)  the debtor made a false representation, other than an oral statement respecting the debtor’s financial condition with intent to deceive the creditor;

(2)  the creditor actually relied on the misrepresentation;

(3)  the creditor’s reliance was justifiable; and

(4) the misrepresentation caused a loss to the creditor.”

What sank the debtor in Bucciarelli was the testimony from her “friend.”  Her friend testified under oath that Bucciarelli told her that she incurred the legal fees from her divorce with no intention of ever paying it back.  The “friend” also testified that Bucciarelli told her that the purpose of her bankruptcy was to discharge all obligations arising from the the attorney fees in her divorce case.  The Bankruptcy Court took note that this same friend testified in the Debtor’s favor during the Debtor’s divorce proceeding.

Judgment was entered by the Bankruptcy Court in favor of the divorce attorneys against the Debtor.  The debt was ruled to be nondischargeable.

Other Posts:

1.  Personal Injury Lawsuits Must be Listed in Your Bankruptcy

2.  Can I have a checking account after I file bankruptcy?

3.  What is a discharge in a Chapter 7?

Yes, you can file a Chapter 13 bankruptcy in Georgia even if you are unemployed as long as you are receiving unemployment income. If you have zero income, you obviously won’t be able to file a Chapter 13 bankruptcy.

A great place to search for jobs for free in the Northwest Georgia area is craigslist.

One of the main reasons someone who is receiving unemployment chooses to file Chapter 13 bankruptcy in Georgia is to save their house from foreclosure by the mortgage holder. Any person in this type of situation must be able to show the bankruptcy court that they are able to make their future mortgage payments and a Chapter 13 payment.

In most of these types of situations, usually one spouse has a job and the other is receiving unemployment. I am hesitant to file these types of cases because once the unemployment runs out, the case is doomed to be dismissed by the trustee unless the family can make all future mortgage payments and all future Chapter 13 payments based only on the salary of the employed spouse. In most cases where once spouse is employed and the other receives unemployment, the only thing that will ultimately save the Chapter 13 case is when the unemployed spouse finds a job. I have seen a few cases of mine this year where the unemployed client was able to find a new job right before the unemployment was about to run out.

It is always an absolute joy for me to see someone stop a foreclosure and save their house. Not every case has a happy ending but those that do are fun to celebrate.

Another reason why someone who is receiving unemployment in Georgia may choose to file a Chapter 13 bankruptcy is to save an automobile from repossession If the only source of transportation gets taken back by the car creditor, finding a new job can be even more difficult. Georgia can get blazing hot in the summertime. Walking to a job interview is not a reasonable option in a high temperature and high humidity climate. For many people, saving the car means saving their livelihood.

I am amazed by how many of my clients love their car beyond reason. Some of them are petrified by the thought of their vehicle getting repossessed. I was meeting with a client in my Rome, GA office the other day who said that he would rather lose his wife than his car. I hope he was kidding.

To sum up, the biggest challenge to this type of Chapter 13 bankruptcy is that the person who files the Chapter 13 must find a new job before the unemployment runs so that the Chapter 13 case will not be dismissed.

Other Posts:

1. How to Stop  foreclosures in Georgia.

2. How to Stop Car Repossession.

3. What is Chapter 13?

After Bankruptcy, many clients wonder how fast they will have to move out of the house in cases where it is the intention of the debtor to surrender the house. In the Northwest Georgia area, it can be difficult to find the right place to rent. No one wants to rush out and sign a lease without having time to investigate the area. At the same time, a most debtors want to stay in their house as long as they can so that they will be able to save money for the future rent.

In a Chapter 13 and a Chapter 7, the automatic stay stops all creditor actions. Even in cases where it is the intention of the debtor to surrender the house, a mortgage company will file a Motion for Relief so that they may begin the foreclosure process. As a general rule, a hearing will be held in the Bankruptcy Court in Rome, GA approximately thirty days after the Motion for Relief is served on the debtor.

After the Motion for Relief is granted, the mortgage company will begin advertising your house for foreclosure in the local newspaper. In Georgia, a mortgage company must advertise your house in the legal organ of your county for four consecutive weeks before the foreclosure date. As a general rule in Georgia, foreclosures take place the first Tuesday of every month.

If your bankruptcy case was just filed in Georgia, you should have somewhere between two and three months before you have to move out. However, some mortgage companies may drag their feet before they start foreclosure I have seen some cases where the debtor stayed in the house rent free for one year before the mortgage company started foreclosure!

I have also seen a case where the debtor moved out of the house and then mortgage company called the debtor and begged them to move back in. In that case, the mortgage company reworked the loan and the debtors did in fact move back in. It doesn’t hurt to ask your mortgage company if they would be willing to do a loan modification.

If you decide to move out, make sure you give your new address and phone number to your bankruptcy attorney so that they will be able to keep you updated on your bankruptcy case.

Other Posts:

1. Can I Wipe Out HOA Fees?

2. Chapter 13- Mortgage Company Won’t Take My Payments

3. Can I Wipe Out My Second Mortgage in Bankruptcy?

4. Bankruptcy and the Taxation of My House by the IRS

Bankruptcy often follows divorce. I recently met with a bankruptcy client in my Rome GA office who went through a nasty divorce proceeding about two years ago. The judge in the divorce case ordered my client to sign his interest in a house with equity over to his now ex-wife. His ex-wife and his four children still live in this house.

After the divorce, my client had a tough time paying his child support and his living expenses. Hoping that his situation would improve, he incurred some credit card debt to make ends meet. Unfortunately for my client, things did not work out as he hoped. He lost his job and had to file bankruptcy.

His major concern was that if he filed bankruptcy, would a bankruptcy trustee try to take back the house away from his ex-wife? Would his property transfer be at risk as a result of the bankruptcy? As a general rule, the answer to this question is no. Georgia bankruptcy trustees do not try to overturn a divorce order unless there are extremely exceptional circumstances.

It is extremely important in every bankruptcy case to disclose all transfers of any type of property that has occurred within the last two years.

In the bankruptcy petition, statement of financial affairs question number 10 specifically requests the information. In this section, a bankruptcy debtor must disclose the date of the transfer, the recipient of the transfer, the relationship of the recipient to the debtor, the fair market value of the property in question, and the amount of any debt owed on the property at the time of transfer. I like to specify that the transfer was made pursuant to a divorce decree.

It is always a great idea to have your bankruptcy attorney review your order from the divorce court. If there any issues, you want to discover them before your bankruptcy case is filed.

Failure to completely answer all questions in the statement of financial affairs can land you in jail. At the very least, it will make the bankruptcy trustee suspicious of you and put your case under even more scrutiny.

Other Posts:

1. Should I tell my attorney everything?

2. How do I protect my assets in a bankruptcy?

3. Top Ten Myths About Bankruptcy

4. Personal Injury Lawsuits Must be Listed in your case!