Should I Stop Using Credit Cards If I'm Going to File Bankruptcy?

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Generally speaking, yes. It is not mandatory to stop using your credit cards before filing for bankruptcy but you should use them wisely and, ideally, you should stop using them. If charges to your credit cards have been made to purchase luxury items within 180 days prior to you filing the bankruptcy you would need to wait to file.  Examples of luxury items would be charging a vacation, purchasing jewelry, dining at an expensive restaurant, or maxing out a credit card within months before filing bankruptcy.  If a client does make such charges and does not wait to file the bankruptcy the Trustee could exclude the debts from the bankruptcy or make the client pay it all back.  The creditors will most likely suspect fraud if large purchases are made 180 prior to filing.  This also includes cash advances on credit cards as well.

Credit Card Use Before A Bankruptcy

Once a client anticipates that they will have to file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy the best idea would be to stop using your credit cards.  Bankruptcy laws allow the reviews of all questionable purchases for potential fraud.  In the event that you have committed a fraudulent conveyance or misrepresentation on your credit cards, some creditors may try to sue you in bankruptcy court for the remaining balance.  In the event that you do use your credit cards you should only use them for small purchases that are deemed necessities.  Examples are groceries, gas, and other items that are used on a day-to-day basis.

But again, your best bet is to stop using the credit cards as soon as you think bankruptcy will be a possibility.

What to Expect at the Creditors’ Meeting

Whether you are filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you will be required to attend a creditor’s meeting (also known as a 341 Meeting of Creditors). The Court schedules the date and time of your creditors meeting after your bankruptcy has been filed and a bankruptcy Trustee has been assigned to your case.

Will I Lose My Retirement If I File for Bankruptcy?

Generally speaking, no. However, there are always exceptions.

Most retirement plans are ERISA qualified, which stands for Employee Retirement Income Security Act of 1974. This law was enacted to protect your retirement accounts from risky investments by your employer or plan administrator. If the plan is ERISA qualified, then your bankruptcy Trustee cannot seize your retirement money to pay your creditors.

Can My Employer Fire Me If I’m Injured at Work?

No, your employer cannot fire you simply because you have been injured at work and filed a workers’ compensation claim. Any employer who uses retaliatory action such as terminating you from your job due to an injury sustained on the job could be violating a North Carolina law known as the Retaliatory Employment Discrimination Act, also known as “REDA”. If an employer violates this law by terminating you because of your injury on the job, you should contact a workers’ compensation attorney immediately. In this event, you can bring a court action against the employer and seek damages from the employer. The court may order you to be reinstated to your old position and order that you be compensated for your for lost wages, benefits, and seniority.

Can I Sue My Employer if I’m Injured at Work?

As an employee, you cannot sue your employer for a work related injury. If the injury has occurred within the scope of your employment, you must claim your injury through the workers’ compensation system. The workers’ compensation system was set up as a form of insurance for both you and your employer. The system is looked at as a “no fault system” which means that injuries are viewed as an unavoidable aspect of work relationships and there is no need to prove that your employer or a certain person caused your injury.

Will I Have to go to Court for My Workers’ Compensation Case?

Emergency & Hospital Sign | Workers' CompensationNot technically. However, you may have to go in front of the group who hears workers’ compensation claims in North Carolina called the Industrial Commission. Workers’ Compensation is a unique area of law. Unlike other areas of the law, if you have a workers’ compensation claim you do not go in front of a jury or even a traditional judge. The current workers’ compensation laws were developed to keep claims of injured workers out of the court.

One of the main reasons that the Workers’ Compensation Act keeps work injury claims out of the traditional court system is to increase efficiency in handling injured workers’ claims. Someone injured in a car accident or by a medical doctor may have to wait years until their case goes in front of a judge or jury. The government understood that someone working to provide for their family cannot go that long without a reliable income. Therefore, when someone is injured on the job in North Carolina they have their workers’ compensation case go in front of one of the Industrial Commission’s Deputy Commissioners if it does not settle beforehand at mediation. The Deputy Commissioner is similar to what most people think of as a judge in regular court.

This hearing in front of one of the Deputy Commissioners of the Industrial Commission will be very similar to a trial, though. We will present your case to the Deputy Commissioner using exhibits, witness testimony and they will eventually hear from your treating physician by way of depositions.

The Deputy Commissioner will review all of the exhibits and testimony, including the treating physician’s deposition, and make a determination on compensability.

Can I File Bankruptcy for Someone Else If I Have a Power of Attorney For Them?

Situations often arise where a potential bankruptcy client is hospitalized, out of town or out of the country, or otherwise unable to sign the necessary paperwork or appear at the necessary court dates for a bankruptcy filing. Often, these potential bankruptcy clients have a valid Power of Attorney document allowing a loved one to sign important papers on their behalf. The question is, can a loved one use a Power of Attorney to file a bankruptcy on behalf of another person?

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Generally, most Power of Attorney documents are drafted using standard language that includes real property transactions, banking transactions, insurance transactions, etc. Most Power of Attorney documents do NOT, however, include “bankruptcy transactions.” In North Carolina, and in many other courts, the Bankruptcy Court will only accept a Power of Attorney if the Power of Attorney document specifically names “bankruptcy” as an included transaction. In other words, if the document does not say the word “bankruptcy filings and related matters” or similar language, then the Bankruptcy Court will not accept the Power of Attorney and the bankruptcy will be dismissed.

Mother and Daughter | Power of Attorney

An example of this would be the following case: An elderly couple has fallen behind on their mortgage payment. They have lived in their house for almost fifty years and have refinanced a few years ago. Due to circumstances involving hospital stays and nursing home stays, the couple has been unable to make their mortgage payment and the house is in foreclosure. In order to save their home they are considering filing for a Chapter 13 bankruptcy. The couple’s daughter is the Power of Attorney for both the mother and the father. The mother’s Power of Attorney document specifically includes the words “bankruptcy filings” but the father’s Power of Attorney does not. The daughter, as the Power of Attorney for both her mother and father, files a joint bankruptcy petition on their behalf in order to save the home. It is likely in this case that the father would be dismissed from the bankruptcy because the language in his Power of Attorney document did not include the word “bankruptcy.”

If you or a loved one is considering bankruptcy and/or considering having a Power of Attorney document created, it is important to include bankruptcy in the Power of Attorney document. You will need to speak with the lawyer preparing the Power of Attorney document to ensure that the necessary language is included.

If the Power of Attorney document has already been created and does not include the proper language, there are a couple of options. First, a new Power of Attorney document could be created that includes the proper language. Second, you could speak with a bankruptcy lawyer about how the bankruptcy could be filed without a Power of Attorney. This option would require the presence and competence of the actual debtor.

Who is a Bankruptcy Trustee and What Do They Do?

A trustee is an individual appointed by the federal government in charge of overseeing bankruptcy proceedings. Chapter 7 bankruptcy and Chapter 13 bankruptcy trustees are usually bankruptcy attorneys or accountants.

Regardless of whether you file a Chapter 7 or Chapter 13 bankruptcy, a trustee will be appointed to your case. The trustee’s main function is to ensure that the debtor complies with rules and regulations, and is not being deceitful or committing fraud.  The appointed trustee will examine the bankruptcy filing to make sure there is no fraud involved. The trustee may request additional documents from the debtor in order to verify the information in the bankruptcy petition is accurate and truthful. If the trustee suspects fraud, he/she may seek to have the case dismissed.

Guilford County Courthouse | Duncan Law, PLLC

The role of the trustee differs under different chapters of the Bankruptcy Code. Examples of specific duties of a Chapter 7 trustee and Chapter 13 trustee are as follows:

Chapter 7 Trustee

The Chapter 7 trustee’s primary role is to look at any property and assets listed in the bankruptcy and determine which assets (if any) are not protected. The trustee is looking for anything of value that he/she can sell to pay back your creditors. The trustee oversees the process of selling any assets and equally distributing the proceeds to your creditors.

Chapter 13 Trustee

A Chapter 13 bankruptcy consists of paying back all or part of your debts over three to five years. The Chapter 13 trustee is responsible for reviewing your repayment plan and will oversee this repayment process making sure everything goes according to plan. In a Chapter 13 you will be required to send a payment to the trustee every month. One of the main duties of a Chapter 13 trustee is to ensure the debtor makes their monthly payments so he/she can disburse those payments to the creditors according to the debtor’s confirmed plan.

How Often Can I File Bankruptcy?

Writing a Check | Bankruptcy InformationHow often you can file a bankruptcy depends on a few things:  what type of bankruptcy you filed in the past, when you filed your previous bankruptcy, and were you discharged or dismissed from your previous bankruptcy.

If you filed a Chapter 7 bankruptcy and wish to file another Chapter 7 bankruptcy, you must wait 8 years from the original bankruptcy filing date to file again, 11 U.S.C. § 727.

If you filed a Chapter 13 bankruptcy and received a discharge, you must wait at least 6 years from the original bankruptcy filing date to file Chapter 7 bankruptcy, 11 U.S.C. § 727.  There are a couple of exceptions to this clause, but I’d recommend contacting a bankruptcy attorney to see if you qualify.

I speak to people each day that call just asking for advice on how to save a home because they have filed a Chapter 7 previously and don’t think that they can file a bankruptcy again until the 8 years have passed.  You can indeed file again within the 8 years, but you will need to file a Chapter 13 in order to save your home.  You would have to wait at least 2 years from the date that you filed the Chapter 7 in order to file a Chapter 13.

Now, let’s say that you have filed a Chapter 13 already and you received a discharge, but, again, have hit hard times and need to file a Chapter 13 again.  You can!  You’ll have to wait 6 months, and sometimes there are limitations to the law in which you would need to discuss those limitations with your attorney.

Lastly, let’s say that you were dismissed from your Chapter 13 bankruptcy and you need to re-file a Chapter 13 again, there is no time limit, but again, there are some limitations to the law, in which you will need to discuss with your attorney.

Below is a table for easy reference:

Type of Previous BankruptcyWant to File Timeframe Before Filing
Chapter 7 with DischargeChapter 78 years

(11 U.S.C. § 727(a)(8))

Chapter 13 with DischargeChapter 76 years but may be an exception if creditors paid more than 70% in Chapter 13

(11 U.S.C. § 727(a)(9))

Chapter 13 with DismissalChapter 7Immediately, no timeframe unless Court made special provision in Chapter 13 case
Chapter 7 with DischargeChapter 13At any time but discharge may not be granted

4 years to receive a discharge in the Chapter 13

(11 U.S.C. § 1328(f)(1))

Chapter 13 with DischargeChapter 13At any time but discharge may not be granted

2 years to receive a discharge in the Chapter 13

(11 U.S.C. § 1328(f)(2))

Chapter 13 with DismissalChapter 13At any time unless the Court has set limitations; however, there may be limited or no automatic stay, so it is important to seek legal counsel

(11 U.S.C. § 362(c))

Can I Convert from One Type of Bankruptcy to Another?

The easy answer to the question of whether or not you can convert from one type of bankruptcy to another is: “Yes, most of the time.”  Don’t you love those qualifiers?  The best way to explain the “most of the time” is to provide examples of when you can and cannot convert a bankruptcy.  However, to avoid making this too complex, we will not address converting if you have been in a previous Chapter 7 bankruptcy, since filing limitations will be addressed in another blog.

Conversion from/to Bankruptcy Status


Example

Can I Convert?

Chapter 13 bankruptcy to Chapter 7 bankruptcyI am in a Chapter 13 bankruptcy but I’ve lost my job.  With my household income, I can’t afford to keep my house and/or car.Yes, you can convert to Chapter 7 bankruptcy and surrender or give up your house and/or car.  This will eliminate the payments to the Chapter 13 Trustee but you will no longer be able to keep the house or car.  However, this approach allows you to obtain a fresh financial start.
Chapter 13 bankruptcy to Chapter 7 bankruptcyI am in a Chapter 13 bankruptcy and my income has not changed.  I’m just tired of making the bankruptcy payments to the Chapter 13 Trustee!Maybe (you knew this was coming)

No, If your income has not changed and you were required to file Chapter 13 bankruptcy because you did not qualify for Chapter 7 bankruptcy under the Means Test.  You will most likely not qualify to convert to Chapter 7 bankruptcy in this example, but  each bankruptcy case must be looked at individually.

Yes, If you were not behind on your house or car and your income allowed you to file Chapter 7 initially.  In this case, you filed Chapter 13 because you wanted to pay something back to your creditors.  In this example you should qualify to convert to Chapter 7 bankruptcy.

No, If you filed Chapter 13 bankruptcy because you were behind on a house or car payment, you cannot convert to Chapter 7 and keep your house or car unless you have brought your payments current or modified your loans.

Chapter 7 bankruptcy to Chapter 13 bankruptcyI am currently in a Chapter 7 bankruptcy and have gotten behind on my house or car payment.Yes, as long as you have enough income to make the Chapter 13 payments along with your other monthly expenses.

No, if you do not have enough income to make the Chapter 13 plan payments along with your other monthly expenses.  You must qualify to file a Chapter 13 bankruptcy by demonstrating you have income household income to make the

As with all bankruptcy issues, you should consult your bankruptcy attorney to determine if you qualify to convert your bankruptcy.