Some of the harsh results of the bankruptcy means test might be reduced by the recent Supreme Court decision in Jan Hamilton, Trustee vs. Stephanie Kay Lanning.  In this case, the Supreme Court has held that bankruptcy judges don’t have to apply a “mechanical approach” to means testing in Chapter 13 bankruptcy cases.  Bankruptcy judges can take a forward looking approach and consider the realities of a debtor’s income.  This case is good news for any consumer who is considering filing bankruptcy in Georgia.

In Lanning, the debtor received a one time buyout payment from her former employer during the six month period that preceded her Chapter 13 bankruptcy case.  As of result of this buyout, her income for the six month period was greatly inflated as compared to the future income she expected to receive.  The Chapter 13 trustee argued that the means test should be applied mechanically and the buyout from her employer should be taken into account when calculating her future Chapter 13 payment.  The trustee argued that the proper way to calculate projected disposable income was simply to multiply the number at the end of the means test by sixty months.  The problem with this approach is that debtor was never going to receive another buy out from her employer but yet her Chapter 13 payment was going to be calculated as if she were going to keep receiving this payment.

Fortunately, the Supreme Court decided that bankruptcy judges do not have to ignore reality when calculating Chapter 13 payments for a debtor.  In Lanning, the Court states that the “arguments in favor of the mechanical approach are unpersuasive.”  The Court continued, “a court taking the forward-looking approach should begin by calculating disposable income, and in most cases, nothing more is required.  It is only in unusual cases that a court may go further and take into account other known or virtually certain information about the debtor’s future income or expenses.”

Georgia consumer bankruptcy expert Jonathan Ginsberg predicts that “judges will use the rationale of Lemming to reduce some of the harsh results of the means test and help debtors improve their chances at success in Chapter 13 ”

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

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?

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!

When you are in a Chapter 13 bankruptcy and the mortgage company refuses to accept your mortgage payment, you need to call my office and set up an appointment with me as soon as you can.  We must make sure that your mortgage payment is accepted.

Sometimes, when a person files a Chapter 13 bankruptcy, a mortgage company might refuse to accept electronic payment over the phone.  This does not mean that they won’t accept a physical check from you.  The best way to do it is to mail the check to the mortgage company return receipt requested.  This way, you have proof as to when you mailed the payment so that they can’t try to stick you with late fees.

If they refuse to accept your check that was sent in the mail, we must find out why they are refusing it.  Refusing your monthly payment is what a mortgage company usually does right before they are getting ready to foreclose on your house.

At the beginning of your Chapter 13 case, a mortgage company will sometimes make the mistake of ignoring that fact that you are under bankruptcy protection and that the past mortgage payments are included in the Chapter 13 plan.  If this happens, I want to educate them with a written letter.

I’ve had some clients in the past who had their mortgage payments sent back to them and then they spent the money.  A few months later, the mortgage company filed a Motion for Relief from the Automatic Stay and wanted to charge my client attorneys fees for the filing the motion.  Even though the mortgage company created the problem by sending the money back to the client, they wanted to be paid attorney fees for the motion because the client was not able to bring the payments current.

Don’t allow yourself to put in this predicament.  If they mortgage company sends back the payment to you, don’t spend the money!  Save your proof that the mortgage payment was rejected.  Call my office and lets make sure the mortgage company accepts your payment without trying to penalize you.

Other Posts:

1.  The Automatic Stay

2.  Can I Wipe Out My Second Mortgage in Chapter 13?

3.  Mortgage Scams

4.  Bankruptcy and the taxation of my house by the IRS after foreclosure /a>

Whether you file a Chapter 13 bankruptcy or a Chapter 7 bankruptcy, you must disclose in writing on your bankruptcy petition any lawsuit or potential lawsuit that you may have against anyone.  If you fail to do so, you will lose your right to recover any money at all from the defendant.

In the case of Donna Barger vs. City of Cartersville GA, Ms. Barger lost her right to recover any money from the City of Cartersville.  The facts of of the case are as follows.  Donna Barger was a personnel  director for the City of Cartersville.  In November 2000, she underwent back surgery for a ruptured disc.  After she was able to return to work, she was demoted.  As a result of the demotion, Ms. Barger had a valid claim against the City of Cartersville for violation of the Family Medical Leave Act, the Americans with Disability Act, and the Age Discrimination in Employment Act.  Since the demotion resulted in a drastic drop in income, Ms. Barger was forced to file Chapter 7 bankruptcy.  She told her bankruptcy attorney and the trustee about the claim at her 341 meeting of creditors.  However, the claim was never listed on her petition.  Furthermore, the case states that “when the trustee asked Barger about the case, she told him that the discrimination suit merely sought reinstatement of her position as Personnel Director.”  The case states that she filed her bankruptcy petition on September 4, 2001 and did not list her discrimination suit as an asset.

In February 2002, Ms. Barger sent the City of Cartersville a copy of her bankruptcy discharge order.  In response, the City of Cartersville moved for summary judgment on the basis of judicial estoppel.  In June 2002, the District court dismissed Barger’s discrimination case by entering summary judgment against her.

Don’t let this happen to you.  When you review your bankruptcy petition, you must make sure you list every asset you have including any potential right to sue any person or any entity.  It is absolutely imperative that you review every single page of your bankruptcy petition before your case is filed.  If you become involved in a lawsuit or have a potential claim after your case is filed, you must contact me as soon as possible and sign an amendment to your bankruptcy petition.

Related post:  Should I tell my Bankruptcy Attorney Everything?

Related post:  How do I protect my assets in a chapter 13 or a chapter 7?

Just because you file a Chapter 13 or a Chapter 7 bankruptcy does not mean that you can’t have a bank account in Georgia.  However, if you have no bank account at all before your case is filed, it is possible that you may have difficulty opening a new one after bankruptcy.  When you file, your case is a matter of public record.  Banks can check to see if you have filed bankruptcy before they allow you to open an account with their institution.

If you have a checking account with a bank that you owe money for a loan, credit card or any other type of debt, I would recommend that  you close that account and open a new one with an institution that you don’t owe any money to before you file.  Under Georgia law, a bank has a right to setoff.  This means that if you have $100 in an account with Rome GA Bank, that bank can take your $100 as soon as you file a bankruptcy if you owe Rome GA Bank any money.  If money has been seized through this type of setoff after the bankruptcy case is filed, we cannot get the money back after you file your case.  The money is gone.

If you decide to open a new bank account before you file, make sure you don’t forget to change any direct deposit orders as well.  Nothing is worse than having your entire paycheck seized by a creditor bank because you forgot to change the order.  Get some type of confirmation from your payroll department that the change order has been received and processed.

I recently met with a client in my Dalton office who works for a large carpet company.  My client completely forgot to close her bank account and open another one with a bank that she owed no money.  After we filed the case, her paycheck was directly deposited into her bank account.  Since she had a credit card with this same bank, they seized a good chunk of money.  Don’t let this happen to you.  Plan carefully before you file.

You must take a credit counseling class before you file any Chapter 13 or a Chapter 7 bankruptcy. If any person files a Chapter 13 or Chapter 7 bankruptcy without having first completed a United States Trustee certified Credit Counseling Class, the case will be subject to dismissal.  It is absolutely imperative that the class be completed BEFORE the filing date.

I recommend Hummingbird Credit Counseling.  You can find them on the internet at www.hummingbird.org.   The Hummingbird website states that their staff is available to speak with you from 7 am to 11 pm Monday through Friday.  On Saturday and Sunday they are available from 10 am to 6 pm.   Before you begin your session with Hummingbird, it is a good idea to have your paycheck and your monthly bills in front of you.  After you enter your financial information into the website, you will receive an analysis of your situation. After you have read the analysis, you must call a Hummingbird Credit Counselor at 1-800-645-4959 before you can receive your certificate. Since I am a registered user with Hummingbird, you do not need to pay them. We include their cost in your filing cost.

Section 109(h)(1) of the Bankruptcy Code states, “Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) and individual or group briefing (including a briefing conducted by telephone or on the internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.”

Please take your credit counseling class before you meet with us to sign your bankruptcy petition.  If you are refiling a Chapter 13 and have taken the class within the last 180 days, you will not need to take the class again.

Other posts:  What is Chapter 13?

Other posts:  What is Chapter 7?

You can stop a student loan garnishment in a Chapter 13 if you plan on paying the entire student loan through your Chapter 13 plan.  With few exceptions, student loans cannot be wiped out in a Chapter 13 or a Chapter 7 bankruptcy.

In addition to being protected from being wiped out in bankruptcy, the student loan creditor can garnish your wages without having to file suit against you.  They can send a letter to the payroll department of your employer that may read something like this,

“Pursuant to authority granted to XYZ Student Loan Corporation by Federal Law (20 U.S.C. 1095a; 34 C.F.R. section 682.410(b)(9), you, the employer of a student loan borrower are hereby ordered to withhold wages from the employee’s disposable pay.  The Federal Law expressly preempts all state laws governing garnishment of wages.”

The letter will also most likely contain a warning to your employer that may read something like this,

“If you the employer fail to comply with this Order, pursuant to 20 U.S.C. 1095(a)(6), XYZ Student Loan Corporation may sue you the employer in state or federal court to recover from you the employer any amount that you the employer failed to withhold, as well as attorney fees, litigation costs, and at the court’s discretion, punitive damages.”

This is not the kind of letter that your employer would like to receive.

Call me today at 706-295-0030 for your free consultation so we can review your entire economic picture and see if we can come up with a plan that works for you.  We are a debt relief agency that helps people obtain relief from their creditors by filing bankruptcy.

If you are in a Chapter 13 case in the Northern District of Georgia, you can dismiss your case at any time.  Your attorney will file a document with the court called a voluntary dismissal.

Personally, I think it is a terrible idea in most cases to voluntarily dismiss a Chapter 13 bankruptcy.  First, you might be banned from refiling a case for a period of six months if you voluntarily dismiss your Chapter 13 after a Motion for Relief has been filed.  Here is an example of a nightmare scenario.  A person living in Dalton, Georgia has a house and misses six mortgage payments while the case is active.  This person then decides to quit their Chapter 13   Unfortunately, the mortgage company files a Motion for Relief exactly one second before the voluntary dismissal is entered.  Mortgage company then proceeds to begin foreclosure proceedings in Dalton, Georgia.  This person then decides to refile a Chapter 13 to save the Dalton house from foreclosure   Under Section 109(g) of the Bankruptcy Code, this person cannot refile their Chapter 13 bankruptcy case for a period of 180 days from the date of the voluntary dismissal.  In other words, goodbye house.

Another reason to stay with your Chapter 13 is that if you dismiss your case, any creditor that was garnishing your wages is free to restart the garnishment as soon as your case is dismissed.  If you throw in a Section 109(g) limitation on your ability to refile and you could be in for a painful six months.

Also, if you dismiss your Chapter 13, your car creditor is free to come and repossess your vehicle as soon as your case is dismissed.  All of your bankruptcy protection ends as soon as your case is dismissed.

Any person who is wishing to voluntarily dismiss their Chapter 13 should meet with an attorney and have her go over every single aspect of their case so that there are no unpleasant surprises.

In contrast to Chapter 13, a person in a Chapter 7 bankruptcy cannot quit the case without permission from the Bankruptcy Court.